##### 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
    
    COMMISSION FILE NUMBERSeptember 28, 2007
    
    1-11781
 DAYTON SUPERIOR CORPORATION
  DELAWARE
    
    31-0676346(State or other jurisdiction of
    
    (I.R.S. EmployerIncorporation or organization)
    
    Identification No.)7777 Washington Village Dr., Suite 130Dayton, Ohio
    
    45459(Address of principal
    
    (Zip Code)executive offices)
 937-428-6360
  
 
 þ o
  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 1A. Risk FactorsItem 6. ExhibitsSIGNATURESINDEX OF EXHIBITSEX-10.1EX-31.1EX-31.2EX-32.1EX-32.2    Table of Contents  
 Part I.  Financial Information
 
 Item 1  Financial Statements
 
 September 28,
    
    
    December 31,2007
    
    
    2006ASSETSCurrent assets:Cash and cash equivalents
    
    $
    62
    
    
    $
    26,813Accounts receivable, net of allowances for doubtful accounts and
sales returns and allowances of $5,228 and $5,430
    
    
    79,579
    
    
    
    71,548Inventories
    
    
    72,612
    
    
    
    58,396Prepaid expenses and other current assets
    
    
    6,686
    
    
    
    5,907Prepaid income taxes
    
    
    479
    
    
    
    320Total current assets
    
    
    159,418
    
    
    
    162,984Rental equipment, net of accumulated depreciation of $69,749 and $63,469
    
    
    68,286
    
    
    
    63,766Property, plant and equipment, net of accumulated depreciation of
$60,732 and $57,932
    
    
    51,918
    
    
    
    45,697Goodwill
    
    
    43,643
    
    
    
    43,643Intangible assets, net of accumulated amortization
    
    
    3,131
    
    
    
    5,062Other assets
    
    
    1,951
    
    
    
    483Total assets
    
    $
    328,347
    
    
    $
    321,635LIABILITIES AND STOCKHOLDERS DEFICITCurrent liabilities:Revolving credit facility
    
    $
    17,900
    
    
    $
    Current maturities of long-term debt
    
    
    167,053
    
    
    
    2,551Accounts payable
    
    
    30,113
    
    
    
    40,883Accrued compensation and benefits
    
    
    13,853
    
    
    
    18,001Accrued interest
    
    
    6,531
    
    
    
    6,234Accrued freight
    
    
    4,747
    
    
    
    4,849Other accrued liabilities
    
    
    8,999
    
    
    
    9,111Total current liabilities
    
    
    249,196
    
    
    
    81,629Other long-term debt, net of current portion
    
    
    157,585
    
    
    
    319,899Deferred income taxes
    
    
    11,318
    
    
    
    11,354Other long-term liabilities
    
    
    8,360
    
    
    
    10,297Total liabilities
    
    
    426,459
    
    
    
    423,179Stockholders deficit:Common stock, $0.01 par value, 100,000,000 shares authorized,
19,066,212 and 18,773,283 shares issued and outstanding, 754,476
shares unvested
    
    
    191
    
    
    
    188Additional paid-in capital
    
    
    206,464
    
    
    
    201,602Loans to stockholders
    
    
    (1,077
    )
    
    
    (2,268
    )Accumulated other comprehensive loss
    
    
    (215
    )
    
    
    (981
    )Accumulated deficit
    
    
    (303,475
    )
    
    
    (300,085
    )Total stockholders deficit
    
    
    (98,112
    )
    
    
    (101,544
    )Total liabilities and stockholders deficit
    
    $
    328,347
    
    
    $
    321,635
 
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##### Table of Contents



Three Fiscal Months Ended
    
    
    Nine Fiscal Months EndedSeptember 28,
    
    
    September 29,
    
    
    September 28,
    
    
    September 29,2007
    
    
    2006
    
    
    2007
    
    
    2006Product sales
    
    $
    112,327
    
    
    $
    107,852
    
    
    $
    309,677
    
    
    $
    300,535Rental revenue
    
    
    14,707
    
    
    
    16,275
    
    
    
    44,211
    
    
    
    44,428Used rental equipment sales
    
    
    3,789
    
    
    
    7,514
    
    
    
    13,473
    
    
    
    18,224Net sales
    
    
    130,823
    
    
    
    131,641
    
    
    
    367,361
    
    
    
    363,187Product cost of sales
    
    
    82,394
    
    
    
    80,589
    
    
    
    226,160
    
    
    
    226,992Rental cost of sales
    
    
    8,784
    
    
    
    9,600
    
    
    
    25,129
    
    
    
    26,330Used rental equipment cost of sales
    
    
    581
    
    
    
    2,243
    
    
    
    3,214
    
    
    
    5,435Cost of sales
    
    
    91,759
    
    
    
    92,432
    
    
    
    254,503
    
    
    
    258,757Product gross profit
    
    
    29,933
    
    
    
    27,263
    
    
    
    83,517
    
    
    
    73,543Rental gross profit
    
    
    5,923
    
    
    
    6,675
    
    
    
    19,082
    
    
    
    18,098Used rental equipment gross profit
    
    
    3,208
    
    
    
    5,271
    
    
    
    10,259
    
    
    
    12,789Gross profit
    
    
    39,064
    
    
    
    39,209
    
    
    
    112,858
    
    
    
    104,430Selling, general and administrative
expenses
    
    
    26,677
    
    
    
    26,750
    
    
    
    79,837
    
    
    
    75,648Facility closing and severance expenses
    
    
    140
    
    
    
    96
    
    
    
    591
    
    
    
    373(Gain) loss on disposals of property,
plant, and equipment
    
    
    217
    
    
    
    (439
    )
    
    
    478
    
    
    
    (1,775
    )Income from operations
    
    
    12,030
    
    
    
    12,802
    
    
    
    31,952
    
    
    
    30,184Other expenses:Interest expense
    
    
    11,682
    
    
    
    12,743
    
    
    
    34,996
    
    
    
    37,364Interest income
    
    
    (47
    )
    
    
    203
    
    
    
    (227
    )
    
    
    176Other expense (income)
    
    
    (214
    )
    
    
    (46
    )
    
    
    119
    
    
    
    108Income (loss) before provision for
income taxes
    
    
    609
    
    
    
    (98
    )
    
    
    (2,936
    )
    
    
    (7,464
    )Provision for income taxes
    
    
    223
    
    
    
    244
    
    
    
    454
    
    
    
    459Net income (loss)
    
    $
    386
    
    
    $
    (342
    )
    
    $
    (3,390
    )
    
    $
    (7,923
    )Basic net income (loss) per common
share
    
    $
    0.02
    
    
    $
    (0.03
    )
    
    $
    (0.19
    )
    
    $
    (0.80
    )Average number of shares of common
stock outstanding
    
    
    18,311,736
    
    
    
    9,917,316
    
    
    
    18,273,146
    
    
    
    9,917,316Diluted net income (loss) per common
share
    
    $
    0.02
    
    
    $
    (0.03
    )
    
    $
    (0.19
    )
    
    $
    (0.80
    )Average number of shares of common
stock and equivalents outstanding
    
    
    19,302,123
    
    
    
    9,917,316
    
    
    
    18,273,146
    
    
    
    9,917,316
 
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Nine Fiscal Months EndedSeptember 28,
    
    
    September 29,2007
    
    
    2006Cash Flows From Operating Activities:Net loss
    
    $
    (3,390
    )
    
    $
    (7,923
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation
    
    
    18,482
    
    
    
    18,974Amortization of intangibles
    
    
    133
    
    
    
    485Stock compensation expense
    
    
    2,062
    
    
    
    653Deferred income taxes
    
    
    (36
    )
    
    
    Amortization of deferred financing costs and debt discount
    
    
    5,229
    
    
    
    4,280Amortization of deferred gain on sale-leaseback transactions
    
    
    (1,217
    )
    
    
    (2,618
    )Gain on sales of rental equipment
    
    
    (10,259
    )
    
    
    (12,789
    )Loss on sales of property, plant and equipment
    
    
    837
    
    
    
    32Changes in assets and liabilities:Accounts receivable
    
    
    (7,589
    )
    
    
    (19,172
    )Inventories
    
    
    (14,013
    )
    
    
    (8,451
    )Prepaid expenses and other assets
    
    
    (2,324
    )
    
    
    (867
    )Prepaid income taxes
    
    
    (156
    )
    
    
    116Accounts payable
    
    
    (8,025
    )
    
    
    257Accrued liabilities and other long-term liabilities
    
    
    (4,859
    )
    
    
    2,978Net cash used in operating activities
    
    
    (25,125
    )
    
    
    (24,045
    )Cash Flows From Investing Activities:Property, plant and equipment additions
    
    
    (13,944
    )
    
    
    (7,282
    )Proceeds from sales of property, plant and equipment
    
    
    37
    
    
    
    21Rental equipment additions
    
    
    (19,483
    )
    
    
    (15,988
    )Proceeds from sales of rental equipment
    
    
    13,473
    
    
    
    18,224Net cash used in investing activities
    
    
    (19,917
    )
    
    
    (5,025
    )Cash Flows From Financing Activities:Borrowings under revolving credit facility
    
    
    83,324
    
    
    
    113,175Repayments of revolving credit facility
    
    
    (65,424
    )
    
    
    (82,625
    )Repayments of other long-term debt
    
    
    (1,118
    )
    
    
    (1,616
    )Financing costs incurred
    
    
    (659
    )
    
    
    Changes in loans to stockholders
    
    
    1,191
    
    
    
    186Issuance of shares of common stock
    
    
    808
    
    
    
    Net cash provided by financing activities
    
    
    18,122
    
    
    
    29,120Effect of Exchange Rate Changes on Cash and Cash Equivalents
    
    
    169
    
    
    
    263Net increase (decrease) in cash and cash equivalents
    
    
    (26,751
    )
    
    
    313Cash and cash equivalents, beginning of period
    
    
    26,813
    
    
    
    Cash, end of period
    
    $
    62
    
    
    $
    313Supplemental Disclosures:Cash paid for income taxes
    
    $
    413
    
    
    $
    208Cash paid for interest
    
    
    29,243
    
    
    
    32,358Property, plant and equipment and rental equipment additions in accounts payable
    
    
    2,560
    
    
    
    1,630Rental equipment acquired under capital lease
    
    
    
    
    
    
    1,200Reclassification of common shares due to expiration of put option
    
    
    
    
    
    
    1,754
 
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Three Fiscal Months Ended
    
    
    Nine Fiscal Months EndedSeptember 28,
    
    
    September 29,
    
    
    September 28,
    
    
    September 29,2007
    
    
    2006
    
    
    2007
    
    
    2006Net income (loss)
    
    $
    386
    
    
    $
    (342
    )
    
    $
    (3,390
    )
    
    $
    (7,923
    )Other comprehensive gain:Foreign currency
translation
adjustment
    
    
    98
    
    
    
    (7
    )
    
    
    766
    
    
    
    263Comprehensive income
(loss)
    
    $
    484
    
    
    $
    (349
    )
    
    $
    (2,624
    )
    
    $
    (7,660
    )
 
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##### Table of Contents



Dayton Superior Corporation and Subsidiary
Notes to Condensed Consolidated Financial Statements
(Amounts in thousands, except share and per share amounts)
(Unaudited)
 (1)
    
    Condensed Consolidated Financial StatementsThe interim condensed consolidated financial statements included herein have been prepared by
Dayton Superior Corporation and its wholly-owned subsidiary (collectively, 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 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, 2006. The interim results may not be indicative of future periods.As discussed in Note 8, the Company obtained a commitment from a lender to provide new credit
facilities consisting of a $150,000 revolving credit facility and $100,000 term loan facility
to refinance the existing revolving credit facility and the Senior
Second Secured Notes. The commitment expires January 25, 2008. This commitment is subject to customary conditions, including
an absence of certain material adverse changes in the business and a minimum Adjusted EBITDA,
as defined.The Company currently expects to consummate the financing
described in the commitment and to refinance the existing revolving credit facility and the Senior Second
Secured Notes before the expiration of the commitment. In the event the Company does not
consummate this financing commitment, the Companys financial resources may be insufficient to
satisfy its current debt obligations. Such circumstances may have a material adverse effect on
the Companys business, financial condition and results of operations. The condensed
consolidated financial statements do not include any adjustments relating to the recoverability
and reclassification of recorded asset amounts or amounts and reclassification of liabilities
that might be necessary should the Company be deemed to be unable to
continue as a going concern.(2)
    
    Accounting PoliciesThe interim condensed 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, 2006. While the Company 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 28, 2007 and
December 31, 2006:
 September 28,
    
    
    December 31,2007
    
    
    2006Raw materials
    
    $
    17,319
    
    
    $
    14,095Work in progress
    
    
    3,503
    
    
    
    2,282Finished goods
    
    
    51,790
    
    
    
    42,019Total Inventory
    
    $
    72,612
    
    
    $
    58,396
 (c)
    
    Income (Loss) Per Share of Common Stock  Basic income (loss) per share of
common stock is computed by dividing net income (loss) by the weighted average number of
vested shares of common stock outstanding during the period. Diluted income (loss) per
share is computed by
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dividing net income (loss) by the weighted average number of shares of common stock and
common stock equivalents outstanding, if dilutive, during each period. The Companys common
stock equivalents consist of unvested shares, warrants, and stock options, and their effect
is calculated using the treasury stock method. The reconciliation of average number of
shares of common stock outstanding to average number of shares of common stock and
equivalents outstanding for the three months ended September 28, 2007 is as follows:
 Average number of common shares outstanding
    
    
    18,311,736Shares of unvested common stock
    
    
    754,476Assumed exercise of dilutive warrants
    
    
    231,770Assumed exercise of dilutive stock options
    
    
    4,141Average number of common shares and equivalents
    
    
    19,302,123
 For the three months ended September 29, 2006, the nine months ended September 28, 2007, and
the nine months ended September 29, 2006, common stock equivalents of 1,262,595, 997,958,
and 765,297, respectively, were not included as their effect would have been anti-dilutive.(d)
    
    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 complied with the provisions of Interpretation No. 48 as of January 1, 2007. The
Company files income tax returns in the United States, Canada, and various state, local,
and provincial jurisdictions. The Company is subject to U.S. Federal income tax examination
for 2003 through 2005, and in other jurisdictions for 1999 through 2006. Use of net
operating losses from years prior to these may re-open the examination period for those
prior years. The Company recognizes interest and penalties as a component of provision for
income taxes. Due to the Companys net operating loss and related valuation allowance, the
adoption of Interpretation No. 48 did not have a material impact on the condensed
consolidated financial statements. The amount of unrecognized tax benefit from uncertain
tax positions as of January 1, 2007, was not material and no material changes occurred
related to the unrecognized tax benefit for the three and nine months ended September 28,
2007. The Company does not expect any material changes in its uncertain tax positions for
the next 12 months.In September 2006, the FASB issued Statement of Financial Accounting Standard (SFAS) No.
157, Fair Value Measurements. This Statement defines fair value, establishes a framework for
measuring fair value in accordance with 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.
Statement No. 157 is not expected to have an impact on the Companys consolidated financial
statements.In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets
and Financial Liabilities. This Statement permits entities to choose to measure many
financial instruments and certain other items at fair value. The objective is to improve
financial reporting by providing entities with the opportunity to mitigate volatility in
reported earnings caused by measuring related assets and liabilities differently without
having to apply complex hedge accounting provisions. The Company will be required to comply
with Statement No. 159 as of the first annual period that begins after November 15, 2007.
Statement No. 159 is not expected to have an impact on the Companys consolidated financial
statements.
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(3) Credit Arrangements
   Three fiscal months ended
    
    Nine fiscal months endedSeptember 28,
    
    September 29,
    
    September 28,
    
    September 29,2007
    
    2006
    
    2007
    
    2006Revolving Credit Facility:Average borrowings
    
    $
    20,591
    
    
    $
    76,140
    
    
    $
    12,233
    
    
    $
    70,033Maximum borrowing
    
    
    27,050
    
    
    
    81,700
    
    
    
    27,050
    
    
    
    81,700Weighted average
interest rate
    
    
    10.4
    %
    
    
    8.2
    %
    
    
    13.3
    %
    
    
    7.9
    %
   September 28,
    
    
    December 31,2007
    
    
    2006Senior Second Secured Notes, interest rate of 10.75%
    
    $
    165,000
    
    
    $
    165,000Debt discount on Senior Second Secured Notes
    
    
    (1,865
    )
    
    
    (3,208
    )Senior Subordinated Notes, interest rate of 13.0%
    
    
    154,729
    
    
    
    154,729Debt discount on Senior Subordinated Notes
    
    
    (3,481
    )
    
    
    (4,746
    )Senior notes payable to seller of Safway,
non-interest bearing, accreted at 6.0% (secured) to
14.5% (unsecured)
    
    
    7,662
    
    
    
    7,286Debentures previously held by Dayton Superior
Capital Trust, interest rate of 9.1%, due on demand
    
    
    1,035
    
    
    
    1,063Capital lease obligations
    
    
    1,558
    
    
    
    2,326Total long-term debt
    
    
    324,638
    
    
    
    322,450Less current maturities
    
    
    (167,053
    )
    
    
    (2,551
    )Long-term portion
    
    $
    157,585
    
    
    $
    319,899
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(4) Stock Option Plans
  Granted and outstanding
    
    
    726,543Granted and exercised
    
    
    122,998Available for granting
    
    
    817,663Total
    
    
    1,667,204
  Accounting for Stock-Based Compensation
  WeightedWeighted
    
    Unvested
    
    Average Grant-
    
    AggregateNumber of

    
    
    Average Exercise
    
    Number of
    
    Date Value Per
    
    IntrinsicShares
    
    Price Per Share
    
    Shares
    
    Share
    
    ValueOutstanding at
December 31, 2006
    
    
    859,445
    
    
    $
    11.93
    
    
    
    592,790
    
    
    $
    3.02
    
    
    $
    293Granted
    
    
    17,872
    
    
    
    12.00
    
    
    
    17,872
    
    
    
    0.70
    
    
    
    (30
    )Vested
    
    
    
    
    
    
    
    
    
    
    (17,872
    )
    
    
    0.70Exercised
    
    
    (20,641
    )
    
    
    8.74
    
    
    
    
    
    
    
    
    
    
    
    (65
    )Expired
    
    
    (20,592
    )
    
    
    12.49
    
    
    
    Forfeited
    
    
    (109,541
    )
    
    
    12.51
    
    
    
    (109,541
    )
    
    
    3.30Outstanding at
September 28, 2007
    
    
    726,543
    
    
    $
    11.92
    
    
    
    483,249
    
    
    $
    2.96
    
    
    $
    8
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(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 28,
    
    
    September 29,
    
    
    September 28,
    
    
    September 29,2007
    
    
    2006
    
    
    2007
    
    
    2006Service cost
    
    $
    171
    
    
    $
    175
    
    
    $
    515
    
    
    $
    526Interest cost
    
    
    205
    
    
    
    188
    
    
    
    616
    
    
    
    563Expected return on plan assets
    
    
    (243
    )
    
    
    (207
    )
    
    
    (729
    )
    
    
    (621
    )Amortization of prior service cost
    
    
    3
    
    
    
    3
    
    
    
    7
    
    
    
    10Amortization of net loss
    
    
    20
    
    
    
    33
    
    
    
    58
    
    
    
    99Net periodic benefit cost
    
    $
    156
    
    
    $
    192
    
    
    $
    467
    
    
    $
    577
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Symons Postretirement BenefitsFor the three
    
    
    For the three
    
    
    For the nine
    
    
    For the ninefiscal months
    
    
    fiscal months
    
    
    fiscal months
    
    
    fiscal monthsended
    
    
    ended
    
    
    ended
    
    
    endedSeptember 28,
    
    
    September 29,
    
    
    September 28,
    
    
    September 29,2007
    
    
    2006
    
    
    2007
    
    
    2006Service cost
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Interest cost
    
    
    7
    
    
    
    7
    
    
    
    22
    
    
    
    21Expected return on plan assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of prior service cost
    
    
    6
    
    
    
    6
    
    
    
    18
    
    
    
    18Amortization of net loss
    
    
    (2
    )
    
    
    (3
    )
    
    
    (6
    )
    
    
    (8
    )Net periodic benefit cost
    
    $
    11
    
    
    $
    10
    
    
    $
    34
    
    
    $
    31
  (6) Segment Reporting
       Three Fiscal Months Ended
    
    
    Nine Fiscal Months EndedSeptember 28,
    
    
    September 29,
    
    
    September 28,
    
    
    September 29,2007
    
    
    2006
    
    
    2007
    
    
    2006Product sales
    
    $
    112,327
    
    
    $
    107,852
    
    
    $
    309,677
    
    
    $
    300,535Rental revenue
    
    
    14,707
    
    
    
    16,275
    
    
    
    44,211
    
    
    
    44,428Used rental equipment sales
    
    
    3,789
    
    
    
    7,514
    
    
    
    13,473
    
    
    
    18,224Net sales
    
    
    130,823
    
    
    
    131,641
    
    
    
    367,361
    
    
    
    363,187Product cost of sales
    
    
    82,394
    
    
    
    80,589
    
    
    
    226,160
    
    
    
    226,992Rental cost of sales
    
    
    8,784
    
    
    
    9,600
    
    
    
    25,129
    
    
    
    26,330Used rental equipment cost of sales
    
    
    581
    
    
    
    2,243
    
    
    
    3,214
    
    
    
    5,435Cost of sales
    
    
    91,759
    
    
    
    92,432
    
    
    
    254,503
    
    
    
    258,757
 11




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##### Table of Contents



Three Fiscal Months Ended
    
    
    Nine Fiscal Months EndedSeptember 28,
    
    
    September 29,
    
    
    September 28,
    
    
    September 29,2007
    
    
    2006
    
    
    2007
    
    
    2006Product gross profit
    
    
    29,933
    
    
    
    27,263
    
    
    
    83,517
    
    
    
    73,543Rental gross profit
    
    
    5,923
    
    
    
    6,675
    
    
    
    19,082
    
    
    
    18,098Used rental equipment gross profit
    
    
    3,208
    
    
    
    5,271
    
    
    
    10,259
    
    
    
    12,789Gross profit
    
    $
    39,064
    
    
    $
    39,209
    
    
    $
    112,858
    
    
    $
    104,430Depreciation Expense:Product sales (property, plant,
and equipment)
    
    $
    1,654
    
    
    $
    1,239
    
    
    $
    4,228
    
    
    $
    3,784Rental Revenue (rental equipment)
    
    
    4,207
    
    
    
    5,534
    
    
    
    12,145
    
    
    
    14,227Corporate
    
    
    788
    
    
    
    314
    
    
    
    2,109
    
    
    
    963Total depreciation
    
    $
    6,649
    
    
    $
    7,087
    
    
    $
    18,482
    
    
    $
    18,974
 (7) Provision for Income Taxes
  (8) Subsequent Events
  12




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion should be read in conjunction with our condensed consolidated financial
statements and the related notes included elsewhere in this document. This discussion contains
forward-looking statements that involve risks and uncertainties. See Risk Factors included in
our Form 10-K for the year ended December 31, 2006 for a discussion of important factors that could
cause actual results to differ materially from those described or implied by the forward-looking
statements contained in this discussion. Please refer to Cautionary Note Concerning
Forward-Looking Statements included elsewhere in this document.
 Overview
  
    
    infrastructure projects, such as highways, bridges, airports, power plants and water
management projects;
    
    institutional projects, such as schools, stadiums, hospitals and government buildings;
and
    
    commercial projects, such as retail stores, offices, and recreational, distribution and
manufacturing facilities.
   13




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##### Table of Contents



Results of Operations
  Three fiscal months ended

    Nine fiscal months endedSeptember 28,
    
    September 29,
    
    September 28,
    
    September 29,2007
    
    2006
    
    2007
    
    2006Product sales
    
    
    85.9
    %
    
    
    81.9
    %
    
    
    84.3
    %
    
    
    82.8
    %Rental revenue
    
    
    11.2
    
    
    
    12.4
    
    
    
    12.0
    
    
    
    12.2Used rental equipment sales
    
    
    2.9
    
    
    
    5.7
    
    
    
    3.7
    
    
    
    5.0Net sales
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0Product cost of sales
    
    
    73.4
    
    
    
    74.7
    
    
    
    73.0
    
    
    
    75.5Rental cost of sales
    
    
    59.7
    
    
    
    59.0
    
    
    
    56.8
    
    
    
    59.3Used rental equipment cost of sales
    
    
    15.3
    
    
    
    29.9
    
    
    
    23.9
    
    
    
    29.8Cost of sales
    
    
    70.1
    
    
    
    70.2
    
    
    
    69.3
    
    
    
    71.2Product gross profit
    
    
    26.6
    
    
    
    25.3
    
    
    
    27.0
    
    
    
    24.5Rental gross profit
    
    
    40.3
    
    
    
    41.0
    
    
    
    43.2
    
    
    
    40.7Used rental equipment gross profit
    
    
    84.7
    
    
    
    70.1
    
    
    
    76.1
    
    
    
    70.2Gross profit
    
    
    29.9
    
    
    
    29.8
    
    
    
    30.7
    
    
    
    28.8Selling, general and administrative
expenses
    
    
    20.4
    
    
    
    20.3
    
    
    
    21.7
    
    
    
    20.9Facility closing and severance expenses
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.2
    
    
    
    0.1(Gain) loss on disposals of property,
plant, and equipment
    
    
    0.2
    
    
    
    (0.3
    )
    
    
    0.1
    
    
    
    (0.5
    )Income from operations
    
    
    9.2
    
    
    
    9.7
    
    
    
    8.7
    
    
    
    8.3Interest expense
    
    
    8.9
    
    
    
    9.7
    
    
    
    9.5
    
    
    
    10.3Interest income
    
    
    
    
    
    
    0.1
    
    
    
    
    
    
    
    0.1Other expense (income)
    
    
    (0.2
    )
    
    
    
    
    
    
    
    
    
    
    Income (loss) before provision for
income taxes
    
    
    0.5
    
    
    
    (0.1
    )
    
    
    (0.8
    )
    
    
    (2.1
    )Provision for income taxes
    
    
    0.2
    
    
    
    0.2
    
    
    
    0.1
    
    
    
    0.1Net income (loss)
    
    
    0.3
    %
    
    
    (0.3
    )%
    
    
    (0.9
    )%
    
    
    (2.2
    )%
 Comparison of Three Fiscal Months Ended September 28, 2007 and September 29, 2006
 Net Sales
  Three fiscal months endedSeptember 28, 2007
    
    
    September 29, 2006($ in thousands)
    
    Net Sales
    
    
    %
    
    
    Net Sales
    
    
    %
    
    
    % ChangeProduct sales
    
    $
    112,327
    
    
    
    85.9
    %
    
    $
    107,852
    
    
    
    81.9
    %
    
    
    4.1
    %Rental revenue
    
    
    14,707
    
    
    
    11.2
    
    
    
    16,275
    
    
    
    12.4
    
    
    
    (9.6
    )Used rental equipment sales
    
    
    3,789
    
    
    
    2.9
    
    
    
    7,514
    
    
    
    5.7
    
    
    
    (49.5
    )Net sales
    
    $
    130,823
    
    
    
    100.0
    %
    
    $
    131,641
    
    
    
    100.0
    %
    
    
    0.6
    %
  14




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##### Table of Contents



Gross Profit
     Operating Expenses
   Other Expenses
  Income (Loss) Before Income Taxes
  15




---



##### Table of Contents



Provision for Income Taxes
  Net Income (Loss)
  Comparison of Nine Fiscal Months Ended September 28, 2007 and September 29, 2006
 Net Sales
  Nine fiscal months endedSeptember 28, 2007
    
    
    September 29, 2006($ in thousands)
    
    Net Sales
    
    
    %
    
    
    Net Sales
    
    
    %
    
    
    % ChangeProduct sales
    
    $
    309,677
    
    
    
    84.3
    %
    
    $
    300,535
    
    
    
    82.8
    %
    
    
    3.0
    %Rental revenue
    
    
    44,211
    
    
    
    12.0
    
    
    
    44,428
    
    
    
    12.2
    
    
    
    (0.5
    )Used rental equipment sales
    
    
    13,473
    
    
    
    3.7
    
    
    
    18,224
    
    
    
    5.0
    
    
    
    (26.0
    )Net sales
    
    $
    367,361
    
    
    
    100.0
    %
    
    $
    363,187
    
    
    
    100.0
    %
    
    
    1.1
    %
    Gross Profit
   16




---



##### Table of Contents



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




---



##### Table of Contents



Liquidity and Capital Resources
   Nine fiscal months endedSeptember 28,
    
    
    September($ in thousands)
    
    2007
    
    
    29, 2006Capital expenditures:Additions to rental equipment
    
    $
    19,483
    
    
    $
    15,988Additions to property, plant and equipment
    
    
    13,944
    
    
    
    7,282Proceeds from sales of used rental equipment
    
    
    (13,473
    )
    
    
    (18,224
    )Proceeds from sales of property, plant and equipment
    
    
    (37
    )
    
    
    (21
    )Net additions to rental equipment and property, plant, and equipment
    
    $
    19,917
    
    
    $
    5,025
    September 28,
    
    
    September 29,($ in millions)
    
    2007
    
    
    2006Net loss
    
    $
    (3.4
    )
    
    $
    (7.9
    )Non-cash adjustments
    
    
    15.2
    
    
    
    9.0Subtotal of net loss and non-cash
adjustments
    
    
    11.8
    
    
    
    1.1Changes in assets and liabilities
    
    
    (36.9
    )
    
    
    (25.1
    )Net cash used in operating activities
    
    $
    (25.1
    )
    
    $
    (24.0
    )
  18




---



##### Table of Contents



($ in thousands)
    
    AmountSenior Second Secured Notes, interest rate of 10.75%
    
    $
    165,000Debt discount on Senior Second Secured Notes
    
    
    (1,865
    )Senior Subordinated Notes, interest rate of 13.0%
    
    
    154,729Debt discount on Senior Subordinated Notes
    
    
    (3,481
    )Senior notes payable to seller of Safway, non-interest bearing,
accreted at 6.0% (secured) to 14.5% (unsecured)
    
    
    7,662Debentures previously held by Dayton Superior Capital Trust,
interest rate of 9.1%, due on demand
    
    
    1,035Capital lease obligations
    
    
    1,558Total long-term debt
    
    
    324,638Less current maturities
    
    
    167,053Long-term portion
    
    $
    157,585
  
    
    $164.5 million increase in the current portion of long-term debt and $17.9 million
increase in the revolving credit facility, due to maturities of the Senior Secured
Notes and the revolving
 19




---



##### Table of Contents



credit facility being within twelve months,
    
    $26.8 million decrease in cash and cash equivalents from the normal seasonal cash
outflow from operating and investing activities, offset by
    
    $8.0 million increase in accounts receivable due to the higher net sales in the
third quarter of 2007 relative to the fourth quarter of 2006,
    
    $14.2 million increase in inventories due to higher finished goods levels to improve
customer service, and material cost inflation,
    
    $10.8 million decrease in accounts payable primarily due to non-recurring payables
at December 31, 2006, for initial public offering issuance costs, financing costs, and
consultant fees, and
    
    $4.1 million decrease in accrued compensation and benefits due to the payment of
incentives and discretionary retirement contributions, and
    
    $1.0 million of other changes.
     Commitments
  Seasonality
  20




---



##### Table of Contents



Inflation
  Stock Collateral Valuation  Senior Second Secured Notes
   21




---



##### Table of Contents



DaytonSuperiorCanada, Ltd.Net Income
    
    $
    278Provision for Income Taxes
    
    
    205Income before Provision for Income Taxes
    
    
    483Interest Income
    
    
    (78
    )Income from Operations
    
    
    405Depreciation Expense
    
    
    880Adjusted EBITDA
    
    
    1,285Multiple
    
    
    7.6Estimated Fair Value
    
    $
    9,766
   Critical Accounting Policies
  Forward-Looking Statements
  22




---



##### Table of Contents




    
    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; and
    
    labor disturbances.
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk.
    23




---



##### Table of Contents



Item 4. Controls and Procedures.
     
 Part II.  Other Information
 
 Item 1A. Risk Factors
  Our revolving credit facility expires in July 2008 and our Senior Second Secured Notes mature in
September 2008.
 
    
    Increase our vulnerability to general adverse economic and industry conditions;
    
    Require us to dedicate a substantial portion of our cash flow from operations to
payments of principal and interest on our indebtedness, thereby reducing the
availability of our cash flow for operations;
    
    Limit our flexibility in planning for, or reacting to, changes in our business and
the industry in which we operate; and
    
    Have a material adverse effect on our business, financial condition and results of
operations.
 
 Item 6. Exhibits
 See Index to Exhibits following the signature page to this report for a list of Exhibits.
 24




---



##### Table of Contents



SIGNATURES
  DAYTON SUPERIOR CORPORATIONDATE: November 13, 2007
    
    BY:
    
    /s/ Edward J. PuisisEdward J. PuisisExecutive Vice President and Chief Financial Officer
 25




---



##### Table of Contents



INDEX OF EXHIBITS
 Description
 Exhibit No.
    
    Description(10
    )
    
    Material Contracts10.1
    

Commitment Letter between General
Electric Capital Corporation and Dayton Superior Corporation
    
    **(31
    )
    
    Rule 13a-14(a)/15d-14(a) Certifications31.1
    

Rule 13a-14(a)/15d-14(a) Certification of President and
Chief Executive Officer
    
    **31.2
    
    Rule 13a-14(a)/15d-14(a)
Certification of Vice President
and Chief Financial Officer
    
    **(32
    )
    
    Section 1350 Certifications32.1
    
    Sarbanes-Oxley Section 1350
Certification of President and Chief Executive Officer
    
    **32.2
    
    Sarbanes-Oxley Section 1350
Certification of Vice President
and Chief Financial Officer
    
    **
 
 **
    
    Filed herewith 26