##### 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
April 1, 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)
 Registrants telephone number, including area code: 937-428-6360 NOT APPLICABLE 
 
 Indicate by mark whether the registrant (1) has filed all reports required by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.   YES  þ   NO  o Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of
the Act).   YES  o   NO  þ 4,571,885 Common Shares were outstanding as of May 16, 2005




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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 2. Unregistered Sales of Equity Securities and Use of ProceedsItem 6. ExhibitsSIGNATURESINDEX TO EXHIBITSEX-31.1 Certification 302 - CEOEX-31.2 Certification 302 - CFOEX-32.1 Certification 906 - CEOEX-32.2 Certification 906 - CFO    Table of Contents  
 Part I.  Financial Information 
 Item 1  Financial Statements Dayton Superior Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
As of April 1, 2005 and December 31, 2004
(Amounts in thousands)
(Unaudited) April 1,
    
    
    December 31,2005
    
    
    2004ASSETSCurrent assets:Cash
    
    $
    
    
    
    $
    4,504Accounts receivable, net of allowances for doubtful accounts and
sales returns and allowances of $4,115
and $5,375
    
    
    69,568
    
    
    
    68,031Inventories
    
    
    65,471
    
    
    
    59,389Prepaid expenses and other current assets
    
    
    7,271
    
    
    
    8,392Prepaid income taxes
    
    
    555
    
    
    
    365Deferred income taxes
    
    
    5,465
    
    
    
    5,465Total current assets
    
    
    148,330
    
    
    
    146,146Rental equipment, net of accumulated depreciation of $41,577 and $38,756
    
    
    68,468
    
    
    
    69,662Property, plant and equipment
    
    
    119,845
    
    
    
    118,385Less accumulated depreciation
    
    
    (60,992
    )
    
    
    (58,927
    )Net property, plant and equipment
    
    
    58,853
    
    
    
    59,458Goodwill
    
    
    107,643
    
    
    
    107,643Intangible assets, net of accumulated amortization
    
    
    6,570
    
    
    
    7,185Other assets
    
    
    3,157
    
    
    
    4,044Total assets
    
    $
    393,021
    
    
    $
    394,138LIABILITIES AND SHAREHOLDERS DEFICITCurrent liabilities:Current maturities of long-term debt
    
    $
    2,490
    
    
    $
    2,455Accounts payable
    
    
    20,815
    
    
    
    21,086Accrued compensation and benefits
    
    
    8,927
    
    
    
    12,700Accrued interest
    
    
    7,810
    
    
    
    6,746Accrued freight
    
    
    3,817
    
    
    
    3,722Other accrued liabilities
    
    
    4,741
    
    
    
    4,154Total current liabilities
    
    
    48,600
    
    
    
    50,863Revolving credit facility
    
    
    73,975
    
    
    
    58,800Other long-term debt, net of current portion
    
    
    316,813
    
    
    
    316,389Other long-term liabilities
    
    
    23,896
    
    
    
    23,616Total liabilities
    
    
    463,284
    
    
    
    449,668Shareholders deficit:Common shares
    
    
    116,037
    
    
    
    116,024Loans to shareholders
    
    
    (2,712
    )
    
    
    (2,767
    )Treasury shares, at cost, 36,747 shares in 2005 and 2004
    
    
    (1,184
    )
    
    
    (1,184
    )Cumulative other comprehensive loss
    
    
    (1,249
    )
    
    
    (1,137
    )Accumulated deficit
    
    
    (181,155
    )
    
    
    (166,466
    )Total shareholders deficit
    
    
    (70,263
    )
    
    
    (55,530
    )Total liabilities and shareholders deficit
    
    $
    393,021
    
    
    $
    394,138
 The accompanying notes to consolidated financial statements are
an integral part of these consolidated balance sheets. 2




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Dayton Superior Corporation and Subsidiaries
Consolidated Statements of Operations
For The Three Fiscal Months Ended April 1, 2005 and April 2, 2004
(Amounts in thousands)
(Unaudited) Three Fiscal Months EndedApril 1, 2005
    
    
    April 2, 2004Product sales
    
    $
    71,089
    
    
    $
    75,291Rental revenue
    
    
    10,130
    
    
    
    9,429Used rental equipment sales
    
    
    4,563
    
    
    
    4,397Net sales
    
    
    85,782
    
    
    
    89,117Product cost of sales
    
    
    55,149
    
    
    
    58,834Rental cost of sales
    
    
    8,501
    
    
    
    8,149Used rental equipment cost of sales
    
    
    1,223
    
    
    
    1,527Cost of sales
    
    
    64,873
    
    
    
    68,510Product gross profit
    
    
    15,940
    
    
    
    16,457Rental gross profit
    
    
    1,629
    
    
    
    1,280Used rental equipment gross profit
    
    
    3,340
    
    
    
    2,870Gross profit
    
    
    20,909
    
    
    
    20,607Selling, general and administrative expenses
    
    
    23,014
    
    
    
    22,666Facility closing and severance expenses
    
    
    250
    
    
    
    472Loss on disposals of property, plant, and
equipment
    
    
    61
    
    
    
    59Amortization of intangibles
    
    
    142
    
    
    
    248Loss from operations
    
    
    (2,558
    )
    
    
    (2,838
    )Other expensesInterest expense
    
    
    12,141
    
    
    
    11,893Loss on early extinguishment of long-term debt
    
    
    
    
    
    
    842Other expense
    
    
    (10
    )
    
    
    295Loss before benefit for income taxes
    
    
    (14,689
    )
    
    
    (15,868
    )Benefit for income taxes
    
    
    
    
    
    
    Net loss
    
    $
    (14,689
    )
    
    $
    (15,868
    )
 The accompanying notes to consolidated financial statements are
an integral part of these consolidated statements. 3




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Dayton Superior Corporation and Subsidiaries
Consolidated Statements of Cash Flows
For The Three Fiscal Months Ended April 1, 2005 and April 2, 2004
(Amounts in thousands)
(Unaudited) Three Fiscal Months EndedApril 1, 2005
    
    
    April 2, 2004Cash Flows From Operating Activities:Net loss
    
    $
    (14,689
    )
    
    $
    (15,868
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation
    
    
    7,309
    
    
    
    6,860Amortization of intangibles
    
    
    142
    
    
    
    248Loss on early extinguishment of long-term debt
    
    
    
    
    
    
    842Deferred income taxes
    
    
    (74
    )
    
    
    126Amortization of deferred financing costs and debt discount
    
    
    1,352
    
    
    
    1,342Gain on sales of rental equipment
    
    
    (3,340
    )
    
    
    (2,870
    )Loss on sales of property, plant and equipment
    
    
    61
    
    
    
    59Changes in assets and liabilities, net of effects of acquisition:Accounts receivable
    
    
    (1,537
    )
    
    
    (9,226
    )Inventories
    
    
    (6,082
    )
    
    
    (7,230
    )Accounts payable
    
    
    (271
    )
    
    
    2,121Accrued liabilities and other long-term liabilities
    
    
    (1,749
    )
    
    
    (3,654
    )Prepaid expenses and other assets
    
    
    1,890
    
    
    
    (2,274
    )Net cash used in operating activities
    
    
    (16,988
    )
    
    
    (29,524
    )Cash Flows From Investing Activities:Property, plant and equipment additions
    
    
    (1,623
    )
    
    
    (1,017
    )Proceeds from sales of property, plant and equipment
    
    
    4
    
    
    
    Rental equipment additions
    
    
    (5,175
    )
    
    
    (3,897
    )Proceeds from sales of rental equipment
    
    
    4,563
    
    
    
    4,397Acquisition
    
    
    
    
    
    
    (245
    )Net cash used in investing activities
    
    
    (2,231
    )
    
    
    (762
    )Cash Flows From Financing Activities:Borrowings under revolving credit facility, net
    
    
    15,175
    
    
    
    30,600Repayments of other long-term debt
    
    
    (413
    )
    
    
    (312
    )Financing costs incurred
    
    
    (3
    )
    
    
    (2,199
    )Repayment of loans to shareholders
    
    
    55
    
    
    
    Issuance of common shares
    
    
    13
    
    
    
    12Net cash provided by financing activities
    
    
    14,827
    
    
    
    28,101Effect of Exchange Rate Changes on Cash
    
    
    (112
    )
    
    
    190Net increase (decrease) in cash
    
    
    (4,504
    )
    
    
    (1,995
    )Cash, beginning of period
    
    
    4,504
    
    
    
    1,995Cash, end of period
    
    $
    
    
    
    $
    Supplemental Disclosures:Cash paid for income taxes
    
    $
    54
    
    
    $
    586Cash paid for interest
    
    
    9,721
    
    
    
    9,751
 The accompanying notes to consolidated financial statements are
an integral part of these consolidated statements. 4




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Dayton Superior Corporation and Subsidiaries
Consolidated Statements of Comprehensive Loss
For The Three Months Ended April 1, 2005 and April 2, 2004
(Amounts in thousands)
(Unaudited) Three Fiscal Months EndedApril 1, 2005
    
    
    April 2, 2004Net loss
    
    $
    (14,689
    )
    
    $
    (15,868
    )Other comprehensive income:Foreign currency translation
adjustment
    
    
    (112
    )
    
    
    190Comprehensive loss
    
    $
    (14,801
    )
    
    $
    (15,678
    )
 The accompanying notes to consolidated financial statements are
an integral part of these consolidated statements. 5




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Dayton Superior Corporation and Subsidiaries
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 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, 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 April 1, 2005 and
December 31, 2004: April 1, 2005
    
    
    December 31, 2004Raw materials
    
    $
    19,215
    
    
    $
    21,663Work in progress
    
    
    3,226
    
    
    
    2,588Finished goods
    
    
    43,030
    
    
    
    35,138Total Inventory
    
    $
    65,471
    
    
    $
    59,389
  (c)
    New Accounting Pronouncements  In December 2004, the FASB issued Staff Position No.
FAS 109-2, Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision
within the American Jobs Creation Act of 2004 (FSP 109-2). FSP 109-2 provides guidance on the
accounting for the effects of the Acts repatriation of certain foreign earnings to a U.S.
taxpayer, provided certain criteria are met. FSP 109-2 was effective upon issuance. This
pronouncement did not have a material impact on the Companys consolidated results of
operations, financial position, and cash flows.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 6




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year beginning after June 15, 2005. The Company has not determined the impact that SFAS No. 151
will have on its financial statements. In December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment. This
statement requires that the cost resulting from all share-based payment transactions are
recognized in the financial statements. That cost will be measured based on the fair value of
the equity of liability instruments issued. SFAS 123 ® is effective as of the 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.  (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 endedApril 1, 2005
    
    
    April 2, 2004Net income (loss)As Reported
    
    $
    (14,689
    )
    
    $
    (15,868
    )Deduct: Total
stock-based
employee
compensation
expense determined
under fair
value-based method
for all awards, net
of related tax
effect
    
    
    (72
    )
    
    
    (62
    )Pro Forma
    
    $
    (14,761
    )
    
    $
    (15,930
    )
  (e)
    Reclassifications  Certain reclassifications have been made to the 2004
amounts to conform to their 2005 classifications.  (3)
    Credit Arrangements On January 30, 2004, the Company established an $80,000 senior secured revolving credit
facility, which was used to refinance the previous $50,000 facility. The Company recorded a loss
on the early extinguishment of long-term debt of $842 due to the expensing of deferred financing
costs on the previous facility. The facility was subsequently increased to $95,000 and matures on
January 30, 2007. The credit facility has no financial covenants. Availability of borrowings is
limited to 85% of eligible accounts receivable and 60% of eligible inventories and rental
equipment, less $10,000. At April 1, 2005, the Company had an outstanding balance of $73,975 at a
weighted average interest rate of 5.6% as compared with $58,800 outstanding at December 31, 2004.
Outstanding letters of credit were $6,983 and available borrowings were $14,042 under this
revolving credit facility at April 1, 2005. The credit facility is secured by substantially all
assets of the Company. The average borrowings, maximum borrowings and weighted average interest rates on the revolving
credit facility and its predecessor for the periods indicated were as follows: Three fiscal months endedApril 1, 2005
    
    
    April 2, 2004Revolving Credit Facility:Average borrowings
    
    $
    62,780
    
    
    $
    35,740Peak borrowing
    
    
    75,775
    
    
    
    54,975Weighted average interest rate
    
    
    5.7
    %
    
    
    3.8
    %
 7




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Following is a summary of the Companys other long-term debt as of April 1, 2005 and December
31, 2004: December 31,April 1, 2005
    
    
    2004Senior Second Secured Notes, interest rate of 10.75%
    
    $
    165,000
    
    
    $
    165,000Debt discount on Senior Second Secured Notes
    
    
    (5,858
    )
    
    
    (6,194
    )Senior Subordinated Notes, interest rate of 13.0%
    
    
    154,729
    
    
    
    154,729Debt discount on Senior Subordinated Notes
    
    
    (7,090
    )
    
    
    (7,397
    )Notes payable to seller of Safway, non-interest
bearing, accreted at 6.0% to 14.5%
    
    
    7,995
    
    
    
    7,794Debentures previously held by Dayton Superior
Capital Trust, interest rate of 9.1%, due on demand
    
    
    1,080
    
    
    
    1,102Capital lease obligations
    
    
    3,439
    
    
    
    3,794City of Parsons, Kansas Economic Development Loan,
interest rate of 7.0%
    
    
    8
    
    
    
    16Total long-term debt
    
    
    319,303
    
    
    
    318,844Less current maturities
    
    
    (2,490
    )
    
    
    (2,455
    )Long-term portion
    
    $
    316,813
    
    
    $
    316,389
 As of April 1, 2005, the senior second secured notes (the Senior Notes) have a principal
amount of $165,000 and mature in June 2008. The Notes were issued at a discount, which is being
accreted to the face value using the effective interest method and is reflected as interest
expense. The estimated fair value of the notes was $161,700 as of April 1, 2005. The senior
second secured notes are secured by substantially all assets of the Company. As of April 1, 2005, the Senior Subordinated Notes (the Notes) have a principal amount of
$154,729 and mature in June 2009. The Notes were issued at a discount, which is being accreted to
the face value using the effective interest method and is reflected as interest expense. The Notes
were issued with warrants that allow the holders to purchase 117,276 of the Companys Common Shares
for $0.01 per share. The estimated fair value of the notes was $139,256 as of April 1, 2005.  (4)
    Stock Option Plans The Companys 2000 Stock Option Plan permits the grant of stock options to purchase common
shares. Options that are cancelled may be reissued. The Stock Option Plan constitutes the
amendment and merger into one plan of four previous option plans and governs options that remain
outstanding following our recapitalization in 2000, as well as new option grants. The terms of the
option grants are ten years from the date of grant. Generally, between 10% and 25% of the options have a fixed vesting period of fewer than three
years. The remaining options are eligible to become exercisable in installments over one to five
years from the date of grant based on the Companys performance, but, in any case, become
exercisable no later than nine years after the grant date. These options may be subject to accelerated vesting upon certain change in control events based on
Odyssey Investment Partners, LLC return on investment. Under the Stock Option Plan, the option
exercise price equals the stocks market price on date of grant. 8




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A summary of the status of the Companys stock option plans at April 1, 2005, as well as changes
during the fiscal quarter then ended is presented in the table below: Weighted AverageNumber of
    
    
    Exercise Price PerShares
    
    
    ShareOutstanding at December 31, 2004
    
    
    682,978
    
    
    $
    26.13Cancelled
    
    
    (75,000
    )
    
    
    27.50Outstanding at April 1, 2005
    
    
    607,978
    
    
    $
    25.96
  (5)
    Retirement Plans The Companys pension plans cover virtually all hourly employees not covered by multi-employer
pension plans and provide benefits of stated amounts for each year of credited service. The Company
funds such plans at a rate that meets or exceeds the minimum amounts required by applicable
regulations. The plans assets are primarily invested in mutual funds comprised primarily of common
stocks and corporate and U.S. government obligations. The Company provides postretirement health care benefits on a contributory basis and life insurance
benefits for Symons salaried and hourly employees who retired prior to May 1, 1995. The following are the components of Net Periodic Benefit Cost for the three months ended April 1,
2005 and April 2, 2004: Symons
    
    
    SymonsPension
    
    
    Pension
    
    
    Postretirement
    
    
    PostretirementBenefits 2005
    
    
    Benefits 2004
    
    
    Benefits 2005
    
    
    Benefits 2004Service cost
    
    $
    173
    
    
    $
    149
    
    
    $
    
    
    
    $
    Interest cost
    
    
    163
    
    
    
    149
    
    
    
    7
    
    
    
    9Expected return on plan assets
    
    
    (185
    )
    
    
    (150
    )
    
    
    
    
    
    
    Amortization of prior service cost
    
    
    4
    
    
    
    1
    
    
    
    6
    
    
    
    6Amortization of net loss
    
    
    23
    
    
    
    19
    
    
    
    (3
    )
    
    
    Net periodic benefit cost
    
    $
    178
    
    
    $
    169
    
    
    $
    10
    
    
    $
    15
 As of April 1, 2005, $131 of contributions have been made. The Company presently anticipates
contributing an additional $800 to fund its pension plan obligations in 2005 for a total of $931.  (6)
    Segment Reporting The Company has three reporting segments to monitor gross profit by sales type: product sales,
rental revenue, and used rental equipment sales. These types of sales are differentiated by their
source and gross margin percentage of sales. Product sales represent sales of new products carried in inventories on the balance sheet. Cost of
goods sold for product sales include material, labor, overhead, and freight. Rental revenues are derived from leasing the rental equipment, and are recognized ratably over the
term of the lease. Cost of goods sold for rental revenues include depreciation of the rental
equipment, maintenance of the rental equipment, and freight. Sales of used rental equipment are sales of rental equipment after a period of generating rental
revenue. Cost of goods sold for sales of used rental equipment is the net book value of the
equipment. All other expenses, as well as assets and liabilities, are not tracked by sales type. Export sales
and sales by non-U.S. affiliates is not significant. 9




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Information about the gross profit of each sales type and the reconciliations to the consolidated
amounts for the three fiscal months ended April 1, 2005 and April 2, 2004 follows. The 2004
amounts have been reclassified to conform to the 2005 classification. Three Fiscal Months EndedApril 1, 2005
    
    
    April 2, 2004Product sales
    
    $
    71,089
    
    
    $
    75,291Rental revenue
    
    
    10,130
    
    
    
    9,429Used rental equipment sales
    
    
    4,563
    
    
    
    4,397Net sales
    
    
    85,782
    
    
    
    89,117Product cost of sales
    
    
    55,149
    
    
    
    58,834Rental cost of sales
    
    
    8,501
    
    
    
    8,149Used rental equipment cost of sales
    
    
    1,223
    
    
    
    1,527Cost of sales
    
    
    64,873
    
    
    
    68,510Product gross profit
    
    
    15,940
    
    
    
    16,457Rental gross profit
    
    
    1,629
    
    
    
    1,280Used rental equipment gross profit
    
    
    3,340
    
    
    
    2,870Gross profit
    
    $
    20,909
    
    
    $
    20,607Depreciation Expense:Product sales (property, plant, and
equipment)
    
    $
    1,445
    
    
    $
    1,329Rental Revenue (rental equipment)
    
    
    5,146
    
    
    
    4,936Corporate
    
    
    718
    
    
    
    595Total depreciation
    
    $
    7,309
    
    
    $
    6,860
  (7)
    Facility Closing and Severance Expenses During 2003, we approved and began implementing a plan to exit certain of our
manufacturing and distribution facilities and to reduce overall headcount by approximately 120 in
order to keep our cost structure in alignment with net sales. Activity for this plan for the year
ended December 31, 2004 was as follows: 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
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 There was no activity for this plan in the three months ended April 1, 2005. 10




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##### Table of Contents



During 2004, we continued to execute our plan to exit additional distribution facilities and
to reduce overall headcount by approximately 75 in order to keep our cost structure in alignment
with net sales. Activity for this plan for the three months ended April 1, 2005 was as follows: 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
    
    
    67
    
    
    
    69
    
    
    
    4
    
    
    
    110
    
    
    
    250Items charged against reserve
    
    
    (67
    )
    
    
    (75
    )
    
    
    (4
    )
    
    
    (110
    )
    
    
    (256
    )Balance, April 1, 2005
    
    $
    
    
    
    $
    114
    
    
    $
    
    
    
    $
    
    
    
    $
    114
 The total expected future expense for commitments under this plan is approximately $250
and will be expensed in accordance with SFAS No. 146.  (8)
    Benefit for Income Taxes The Company has recorded a non-cash valuation allowance to reduce its deferred tax asset
related to net operating loss carryforwards to zero, as estimated levels of future taxable income
are less than the amount needed to realize this asset. If such estimates change in the future, the
valuation allowance will be decreased or increased appropriately, resulting in a non-cash increase
or decrease to net income.  (9)
    Subsequent Event We entered into an Agreement of Sale dated April 21, 2005 with an unrelated party, pursuant to
which we sold our manufacturing facility in Des Plaines, Illinois. At the same time, we also
entered into a lease dated April 21, 2005 under which we immediately leased the Des Plaines
facility back from the purchaser. The purchase price under the Agreement of Sale was $12,000,
which was paid at the closing. Our net proceeds after commissions and other normal closing costs
were approximately, $11,600. The principal terms of the lease are as follows:  -
    The lease has an initial term of 24 months, with an optional renewal for an additional 12
months.  -
    We are obligated to pay rent totaling approximately $1,400 over the initial lease term and
approximately $725 over the renewal term. In addition, we are responsible for all property
taxes, operating expenses (including maintenance expenses) and insurance on the leased
property. We expect to realize a gain of approximately $7,000 on the sale of our Des Plaines facility, which
we initially will defer and recognize ratably over the initial term of the lease. 11




---



##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations Overview We believe we are the largest North American manufacturer and distributor of metal accessories
and forms used in concrete construction, and a leading manufacturer of metal accessories used in
masonry construction in terms of revenues. We operate in two sectors of the construction industry:
infrastructure construction, such as highways, bridges, utilities, water and waste treatment
facilities and airport runways, and non-residential building, such as schools, stadiums, prisons,
retail sites, commercial offices, hotels and manufacturing facilities. We have expanded our
business units through acquisitions. Effective December 31, 2004, all of Dayton Superiors wholly owned domestic subsidiaries
(consisting of Symons Corporation; Aztec Concrete Accessories, Inc.; Dur-O-Wal, Inc.; Trevecca
Holdings, Inc.; Dayton Superior Specialty Chemical Corp.; and Southern Construction Products, Inc.)
were merged into Dayton Superior Corporation. Dayton Superior Corporation is the surviving
corporation in the merger and now directly operates the businesses that were being operated by the
domestic subsidiaries immediately prior to the merger. As a result of the merger, the guarantees by the merged subsidiaries of our Senior Second Secured
Notes and the Senior Subordinated Notes and the pledge of the capital stock of certain of the
merged subsidiaries that secured the Credit Agreement and the Senior Second Secured Notes
immediately prior to the merger ceased to exist, effective December 31, 2004. As the surviving
corporation in the merger, however, Dayton Superior, which is the issuer of the Senior Second
Secured Notes, the Senior Subordinated Notes and the borrower under the Credit Agreement, succeeded
to all of the assets and liabilities of each of the merged subsidiaries that had been guarantors of
the notes and Credit Agreement. Effective January 1, 2004, the Company changed its financial reporting to monitor gross profit by
sales type: product sales, rental revenue, and used rental equipment sales. These types of sales
are differentiated by their source and gross margin percents of sales.  
    Product sales consist of:  
    Concrete accessories,which are used for connecting forms for
poured-in-place concrete walls, anchoring or bracing for walls and floors,
supporting bridge framework and positioning steel reinforcing bars, and include
products which remain in place at the convenience of the contractors.
    Masonry products,which are placed between layers of brick and concrete
blocks and covered with mortar to provide additional strength to walls.
    Paving products,which are used in the construction and rehabilitation
of concrete roads, highways and airport runways to extend the life of the pavement,
and include products which remain in place at the convenience of the contractors.
Welded dowel assemblies are a paving product used to transfer dynamic loads between
two adjacent slabs of concrete roadway. Metal 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. 12




---



##### 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 During 2003, we approved and began implementing a plan to exit certain of our
manufacturing and distribution facilities and to reduce overall headcount by approximately 120 in
order to keep our cost structure in alignment with net sales. Activity for this plan for the year
ended December 31, 2004 was as follows: $
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
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 There was no activity for this plan in the three months ended April 1, 2005 During 2004, we continued to execute our plan to exit additional distribution facilities and
reduce headcount by approximately 75 in order to keep our cost structure in alignment with net
sales. Activity for this plan for the three months ended April 1, 2005 was as follows: $
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
    
    
    67
    
    
    
    69
    
    
    
    4
    
    
    
    110
    
    
    
    250Items charged against reserve
    
    
    (67
    )
    
    
    (75
    )
    
    
    (4
    )
    
    
    (110
    )
    
    
    (256
    )Balance, April 1, 2005
    
    $
    
    
    
    $
    114
    
    
    $
    
    
    
    $
    
    
    
    $
    114
 The total expected future expense for commitments under this plan is approximately
$250,000 and will be expensed in accordance with SFAS No. 146. 13




---



##### Table of Contents



Results of Operations The following table summarizes our results of operations as a percentage of net sales for the
periods indicated. Three fiscal months endedApril 1, 2005
    
    
    April 2, 2004Product sales
    
    
    82.9
    %
    
    
    84.5
    %Rental revenue
    
    
    11.8
    
    
    
    10.6Used rental equipment sales
    
    
    5.3
    
    
    
    4.9Net sales
    
    
    100.0
    
    
    
    100.0Product cost of sales
    
    
    77.6
    
    
    
    78.1Rental cost of sales
    
    
    83.9
    
    
    
    86.4Used rental equipment cost of sales
    
    
    26.8
    
    
    
    34.7Cost of sales
    
    
    75.6
    
    
    
    76.9Product gross profit
    
    
    22.4
    
    
    
    21.9Rental gross profit
    
    
    16.1
    
    
    
    13.6Used rental equipment gross profit
    
    
    73.2
    
    
    
    65.3Gross profit
    
    
    24.4
    
    
    
    23.1Selling, general and administrative expenses
    
    
    26.8
    
    
    
    25.4Facility closing and severance expenses
    
    
    0.3
    
    
    
    0.5Loss (gain) on disposals of property, plant,
and equipment
    
    
    0.1
    
    
    
    0.1Amortization of intangibles
    
    
    0.2
    
    
    
    0.3Loss from operations
    
    
    (3.0
    )
    
    
    (3.2
    )Interest expense
    
    
    14.1
    
    
    
    13.3Loss on early extinguishment of long-term debt
    
    
    
    
    
    
    0.9Other expense
    
    
    
    
    
    
    0.3Loss before provision (benefit) for income taxes
    
    
    (17.1
    )
    
    
    (17.8
    )Benefit for income taxes
    
    
    
    
    
    
    Net loss
    
    
    (17.1
    %)
    
    
    (17.8
    %)
 14




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##### Table of Contents



Comparison of Three Fiscal Months Ended April 1, 2005 and April 2, 2004 Net Sales Net sales decreased $3.3 million, or 3.7%, to $85.8 million in the first quarter of 2005 from
$89.1 million in the first quarter of 2004. The following table summarizes our net sales by product
type: Three fiscal months endedApril 1, 2005
    
    
    April 2, 2004(In thousands)Net Sales
    
    
    %
    
    
    Net Sales
    
    
    %
    
    
    % ChangeProduct sales
    
    $
    71,089
    
    
    
    82.9
    %
    
    $
    75,291
    
    
    
    84.5
    %
    
    
    (5.6
    %)Rental revenue
    
    
    10,130
    
    
    
    11.8
    
    
    
    9,429
    
    
    
    10.6
    
    
    
    7.4Used rental equipment sales
    
    
    4,563
    
    
    
    5.3
    
    
    
    4,397
    
    
    
    4.9
    
    
    
    3.8Net sales
    
    $
    85,782
    
    
    
    100.0
    %
    
    $
    89,117
    
    
    
    100.0
    %
    
    
    (3.7
    %)
 Product sales decreased $4.2 million, or 5.6%, to $71.1 million in the first quarter of 2005 from
$75.3 million in the first quarter of 2004. The decrease in sales was primarily due to lower
demand in our markets from adverse weather in most geographic regions, and 2% fewer shipping days
in the first quarter of 2005. Price increases have helped to offset most of the volume decline. We
also believe certain of our customers curtailed purchases in the first quarter with the expectation
that steel prices will abate later in the year. Rental revenue increased $0.7 million, or 7.4%, to $10.1 million for the first quarter of 2005,
compared to $9.4 million in the first quarter of 2004. The increase in rental revenue is due to an
improving rental rates and improved volume from better positioning of our fleet acquired from
Safway, particularly in the southeastern and western United States. Used rental equipment sales increased to $4.6 million in the first quarter of 2005 from $4.4
million in the first quarter of 2004. Gross Profit Gross profit on product sales for the first quarter of 2005 was $15.9 million, or 22.4% of
sales, a decrease of $0.6 million from $16.5 million, or 21.9% of sales, in the first quarter of
2004. The decrease in gross profit dollars was primarily due to the decreased net sales as
discussed above. As a percent of sales, gross profit improved despite
a $3.0 million increase in
steel costs in the first quarter of 2005 as compared to the first quarter of 2004, due to
productivity gains and the impact of the sales price increases. Gross profit on rental revenue for the first quarter of 2005 was $1.6 million, or 16.1% of revenue,
an increase of $0.3 million from $1.3 million, or 13.6% of revenue, in the first quarter of 2004.
Depreciation on rental equipment for the first quarter of 2005 was $5.1 million, an increase of
$0.2 million from $4.9 million in the first quarter of 2004. The increase in depreciation expense
was due to having more rental fleet. Gross profit before depreciation was $6.8 million, or 66.9%
of revenue, an increase of $0.6 million from $6.2 million, or 65.9% of revenue. The increase in
gross profit dollars was primarily due to the increased net sales discussed above. The increase in
gross profit as a percentage of revenue was primarily due to a more favorable mix of products on
rent. Gross profit on sales of used rental equipment for the first quarter of 2005 was $3.3 million, or
73.2% of sales, compared to $2.9 million, or 65.3% of sales, in the first quarter of 2004. This
was primarily a result of taking advantage of strategic opportunities to sell used fleet. Gross
margin percentages fluctuate based on the mix and age of rental equipment sold and remained within
historical ranges. 15




---



##### Table of Contents



Operating Expenses Selling, general and administrative expenses increased $0.3 million to $23.0 million in the
first quarter of 2005 from $22.7 million in the first quarter of 2004. The increase was due to
severance expenses of $1.0 million related to the termination of employment of our former
President and Chief Executive Officer. The increase was mostly offset by cost controls. Facility closing and severance expense during the first quarter of 2005 was $0.3 million compared
to $0.5 million in the first quarter of 2004. Amortization of intangibles was $0.1 million in the first quarter of 2005, compared to $0.2 million
in the first quarter of 2004. Other Expenses Interest expense increased to $12.1 million in the first quarter of 2005 from $11.9 million in
the first quarter of 2004. This was primarily due to higher average borrowings and higher interest
rates compared to the first quarter of 2004. Income (Loss) Before Income Taxes Loss before income taxes in the first quarter of 2005 was $(14.7) million compared to $(15.9)
million in the first quarter of 2004, due to the factors described above. Benefit for Income Taxes The Company has recorded a non-cash valuation allowance to reduce its deferred tax asset
related to net operating loss carryforwards to zero, as estimated levels of future taxable income
are less than the amount needed to realize this asset. If such estimates change in the future, the
valuation allowance will be decreased or increased appropriately, resulting in a non-cash increase
or decrease to net income. Net Income (Loss) The net loss for the first quarter of 2005 was $(14.7) million, compared to $(15.9) million in
the first quarter of 2004, due to the factors described above. Liquidity and Capital Resources Our key statistics for measuring liquidity and capital resources are net cash provided by
operating activities, capital expenditures, and amounts available under our revolving credit
facility. Our capital requirements relate primarily to capital expenditures, debt service and the cost of
acquisitions. Historically, our primary sources of financing have been cash generated from
operations, borrowings under our revolving credit facility and the issuance of long-term debt and
equity. Net cash used in operating activities in the first three months of 2005 was $(17.0) million,
compared to $(29.6) million in the first three months of 2004. This activity is comprised of the
following: 2005
    
    
    2004(in millions)Net loss
    
    $
    (14.7
    )
    
    $
    (15.9
    )Non-cash adjustments
    
    
    5.5
    
    
    
    6.6Net loss after non-cash adjustments
    
    
    (9.2
    )
    
    
    (9.3
    )Changes in assets and liabilities
    
    
    (7.8
    )
    
    
    (20.3
    )Net cash used in operating activities
    
    $
    (17.0
    )
    
    $
    (29.6
    )
 16




---



##### Table of Contents



Net loss after non-cash adjustments was $(9.2) million for the first three months of 2005,
virtually flat with the net loss after non-cash adjustments of $(9.3) million in the first three
months of 2004. Changes in assets and liabilities resulted in a $(7.8) million use of cash in the first three
months of 2005, as compared to $(20.3) million use of cash in the first three months of 2004. This
variance was primarily due to the change in accounts receivable, which was a $(1.5) million use of
cash in the first quarter of 2005 as compared to a $(9.2) million use of cash in the first quarter
of 2004. The cash used by the increase in accounts receivable in the first quarter of 2005 was
less than in the first quarter of 2004 primarily due to an improvement in days sales outstanding in
2005 compared to 2004. Net cash used in investing activities was $2.2 million in the first three months of 2005, compared
to $0.8 million in the first three months of 2004. Property, plant and equipment additions
increased to $1.6 million in the first three months of 2005 from $1.0 million in the first three
months of 2004, as we continue to undertake projects that improve efficiency. Rental equipment
additions increased to $5.2 million in the first three months of 2005 from $3.9 million in the
first three months of 2004 due to strategic additions in certain rental product families and
geographic regions. On January 30, 2004, the Company established an $80.0 million senior secured revolving credit
facility, which was used to refinance the previous $50.0 million facility. The Company recorded a
loss on the early extinguishment of long-term debt of $0.8 million due to the expensing of deferred
financing costs on the previous facility. The facility was subsequently increased to $95.0 million
and matures on January 30, 2007. The credit facility has no financial covenants. Availability of
borrowings is limited to 85% of eligible accounts receivable and 60% of eligible inventories and
rental equipment, less $10.0 million. At April 1, 2005, the Company had an outstanding balance of
$74.0 million at a weighted average interest rate of 5.6%, outstanding letters of credit of $7.0
million and available borrowings of $14.0 million under this revolving credit facility. The credit
facility is secured by substantially all assets of the Company. As of April 1, 2005, our other long-term debt consisted of the following: April 1, 2005Senior Second Secured Notes, interest rate of 10.75%
    
    
    165,000Debt discount on Senior Second Secured Notes
    
    
    (5,858
    )Senior Subordinated Notes, interest rate of 13.0%
    
    
    154,729Debt discount on Senior Subordinated Notes
    
    
    (7,090
    )Notes payable to seller of Safway, non-interest bearing,
accreted at 6.0% to 14.5%
    
    
    7,995Debentures previously held by Dayton Superior Capital Trust,
interest rate of 9.1%, due on demand
    
    
    1,080Capital lease obligations
    
    
    3,439City of Parsons, Kansas Economic Development Loan, interest
rate of 7.0%
    
    
    8Total long-term debt
    
    
    319,303Less current maturities
    
    
    (2,490
    )Long-term portion
    
    $
    316,813
 Our long-term debt repayments for the quarter ended April 1, 2005, were $0.4 million. The Company may, from time to time, seek to retire its outstanding debt through cash purchases
and/or exchanges for equity securities, in open market purchases, privately negotiated transactions
or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions,
the Companys liquidity requirements, contractual restrictions and other factors. The amounts
involved may be material. 17




---



##### Table of Contents



At April 1, 2005, working capital was $99.7 million, compared to $95.3 million at December 31,
2004. The $4.4 million increase was comprised of the following:  
    $1.5 million increase in accounts receivable due to the normal seasonal
increase in net sales from December to March,
    $6.1 million increase in inventories due to the anticipated seasonal higher
sales in the second quarter and to higher raw material costs,
    $3.8 million decrease in accrued compensation due to employee incentive
payments; partially offset by,
    $4.5 million decrease in cash due to the timing of cash receipts at
December and March,
    $1.1 million decrease in prepaid expenses and other current assets due to
collections on notes receivable,
    $1.1 million increase in accrued interest due to the timing of interest payments; and
    $0.3 million of changes in other items. We intend to pursue additional acquisitions that present opportunities to realize significant
synergies, operating expense economies or overhead cost savings or to increase our market position.
We regularly engage in discussions with respect to potential acquisitions and investments. There
are no definitive agreements with respect to any material acquisitions at this time, and we cannot
assure you that we will be able to reach an agreement with respect to any future acquisition. Our
acquisition strategy may require substantial capital, and no assurance can be given that we will be
able to raise any necessary funds on terms acceptable to us or at all. We intend to fund
acquisitions with cash, securities or a combination of cash and securities. To the extent we use cash for all or part of any future acquisitions, we expect to raise the cash
from our business operations, from borrowings under our revolving credit facility or, if feasible
and attractive, by issuing long-term debt or additional common shares. If we incur additional debt
to finance acquisitions, our total interest expense will increase. We believe our liquidity, capital resources, and cash flows from operations are sufficient, in the
absence of additional acquisitions, to fund the capital expenditures we have planned and our
working capital and debt service requirements. Our ability to make scheduled payments of principal of, or to pay the interest on, or to refinance,
our indebtedness, or to fund planned capital expenditures and research and development will depend
on our future performance, which, to a certain extent, is subject to general economic, financial,
competitive, legislative, regulatory and other factors that are beyond our control. Based on our
current level of operations and anticipated operating improvements, management believes that cash
flow from operations and available borrowings under our revolving credit facility will be adequate
to meet our future liquidity for the foreseeable future. We cannot assure you, however, that our
business will generate sufficient cash flow from operations, that operating improvements will be
realized on schedule or that future borrowings will be available to us under our revolving credit
facility in an amount sufficient to enable us to pay our indebtedness or to fund our other
liquidity needs. We may from time to time seek to retire our outstanding debt through cash
purchases and/or exchanges for equity securities, in open market purchases, in privately negotiated
transactions or otherwise. Any such repurchases or exchanges will depend on prevailing market
conditions, our liquidity requirements, contractual restrictions and other factors. The amounts
involved may be material. We may need to refinance all or a portion of our indebtedness on or
before maturity. We cannot assure you that we will be able to refinance any of our indebtedness,
including our revolving credit facility, the senior subordinated notes and the senior second
secured notes, on commercially reasonable terms or at all. Commitments There were no material changes to minimum future payments from December 31, 2004. 18




---



##### Table of Contents



Seasonality Our operations are seasonal in nature with approximately 55% of sales historically occurring
in the second and third quarters. Working capital and borrowings fluctuate with the volume of our
sales. Inflation We may not be able to pass on the cost of commodity price increases to our customers. Steel,
in its various forms, is our principal raw material, constituting approximately 22.5% of our cost
of sales in 2004. Historically, steel prices have fluctuated and we
are currently facing a steel supply market which has an unusual
pricing set of trends depending on the form and type of steel. Some
forms are trending up and some have a temporary trend down. Any decrease in our volume of steel purchases could affect our ability to secure volume
purchase discounts that we have obtained in the past. Additionally, the overall increase in energy
costs, including natural gas and petroleum products, has adversely impacted our overall operating
costs in the form of higher raw material, utilities, and freight costs. We cannot assure you we
will be able to pass these cost increases on to our customers. Stock Collateral Valuation  Senior Second Secured Notes Rule 3-16 of the SECs Regulation S-X requires the presentation of a subsidiarys stand-alone,
audited financial statements if the subsidiarys capital stock secures an issuers notes and the
par value, book value or market value (Applicable Value) of the stock equals or exceeds 20% of
the aggregate principal amount of the secured class of securities the (Collateral Threshold.) The
indenture governing our Senior Second Secured Notes and the security documents for the notes
provide that the collateral will never include the capital stock of any subsidiary to the extent
the Applicable Value of the stock is equal to or greater than the Collateral Threshold. As a
result, we will not be required to present separate financial statements of our subsidiary under
Rule 3-16. In addition, in the event that Rule 3-16 or Rule 3-10 of Regulation S-X is amended,
modified or interpreted by the SEC to require (or is replaced with another rule or regulation, or
any other law, rule or regulation is adopted, which would require) the filing with the SEC (or any
other governmental agency) of separate financial statements of subsidiary due to the fact that such
subsidiarys capital stock or other securities secure our Senior Second Secured Notes, then the
capital stock or other securities of such subsidiary automatically will be deemed not to be part
of the collateral for the notes but only to the extent necessary to not be subject to such
requirement. In such event, the security documents for the Senior Second Secured Notes may be
amended or modified, without the consent of any holder of notes, to the extent necessary to release
the liens of the Senior Second Secured Notes on the shares of capital stock or other securities
that are so deemed to no longer constitute part of the collateral; however, the excluded collateral
will continue to secure our first priority lien obligations such as our senior secured revolving
credit facility. As a result of the provisions in the indenture and security documents relating to
subsidiary capital stock, holders of our Senior Second Secured Notes may at any time in the future
lose all or a portion of their security interest in the capital stock of any of our subsidiaries if
the Applicable Value of that stock were to become equal to or greater than the Collateral
Threshold. As of April 1, 2005, 65% of the voting capital stock and 100% of the non-voting capital
stock of our subsidiary Dayton Superior Canada Ltd. constitutes collateral for the notes. We have
based our determination of whether 65% of the voting capital stock and 100% of the non-voting
capital stock of our subsidiary Dayton Superior Canada Ltd. constitutes collateral upon the book
value, par value and estimated market value of the capital as of April 1, 2005. The Applicable
Value for the capital stock is the greater of the book value and estimated market value, as the par
value of each subsidiarys capital stock is nominal and therefore has not impacted our calculation
of Applicable Value. The Applicable Value of Dayton Superior Canada Ltd. was $7.4 million as of April 1, 2005. Based
upon the foregoing, as of April 1, 2005, the Applicable Value of the capital stock of Dayton
Superior Canada Ltd. did not exceed the Collateral Threshold. The Applicable Value of the common
stock of Dayton Superior Canada Ltd was based upon the estimated market value. We have calculated
the estimated market value of our Dayton Superior Canada Ltd. capital stock by determining the
earnings before interest, taxes, depreciation, and amortization, or EBITDA, for the twelve months
ended April 1, 2005, adjusted to add back facility closing and severance expenses, loss on sale of
fixed assets and other expense, and multiplied this adjusted EBITDA by 5.5 times. We retain an
independent appraisal firm for purposes of calculating the market value of our common stock on a
going concern basis, as required under our Management Stockholders Agreement and in connection
with determining equity-based compensation. The appraisal firm has informed us that a range of 5 19




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to 6 times adjusted EBITDA is reasonable for determining the fair value of the capital stock of
smaller, basic manufacturing companies. We determined that using a multiple of 5.5 times, which is
the mid-point of the range described above, is a reasonable and appropriate means for determining
fair value of our subsidiarys capital stock. Set forth below is the adjusted EBITDA of Dayton Superior Canada Ltd. for the twelve fiscal months
ended April 1, 2005, together with a reconciliation to the net income: DaytonSuperiorCanada Ltd.Net Income
    
    $
    1,329Provision for Income Taxes
    
    
    (42
    )Income from Operations
    
    
    1,287Depreciation Expense
    
    
    64Adjusted valuation EBITDA
    
    
    1,351Multiple
    
    
    5.5Estimated Fair Value
    
    $
    7,431
 As described above, we have used EBITDA and adjusted valuation EBITDA of Dayton Superior Canada
Ltd. solely for purposes of determining the estimated market value of the capital stock to
determine whether that capital stock is included in the collateral. EBITDA and adjusted valuation
EBITDA are not recognized financial measures under generally accepted accounting principles and do
not purport to be alternatives to operating income as indicators of operating performance or to
cash flows from operating activities as measures of liquidity. Additionally, EBITDA has limitations
as an analytical tool, and you should not consider it in isolation or as a substitute for analysis
of our consolidated results as reported under generally accepted accounting principles. Because not
all companies use identical calculations, the presentation of adjusted EBITDA also may not be
comparable to other similarly titled measures of other companies. You are encouraged to evaluate
the adjustments taken and the reasons we consider them appropriate for analysis for determining
estimated market value of our subsidiaries capital stock. A change in the Applicable Value of the capital stock of Dayton Superior Canada Ltd. could result
in the capital stock being excluded from collateral (or becoming part of the collateral if it was
previously excluded). The following table reflects the amounts by which the Applicable Value of
Dayton Superior Canada Ltd. as of April 1, 2005 and the adjusted EBITDA for the twelve months ended
April 1, 2005 would have to increase in order for Dayton Superior Canada Ltd. capital stock to no
longer constitute collateral: Change in
    
    
    Change in AdjustedSubsidiary
    
    Applicable Value
    
    
    Valuation EBITDADayton Superior Canada Ltd.
    
    $
    25,570
    
    
    $
    4,649
 Critical Accounting Policies In preparing our consolidated financial statements, we follow accounting principles generally
accepted in the United States. These principles require us to make certain estimates and apply
judgments that affect our financial position and results of operations. We continually review our
accounting policies and financial information disclosures. On an on-going basis, we evaluate our
estimates, including those related to allowance for doubtful accounts, inventories, investments,
long-lived assets, income taxes, insurance reserves, restructuring liabilities, environmental
contingencies and litigation. We base our estimates on historical experience and on various other
assumptions that we believe are reasonable under the circumstances. Actual results may differ from
these estimates under different assumptions or conditions. There have been no material changes in
our policies or estimates since December 31, 2004. 20




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Forward-Looking Statements This Form 10-Q includes, and future filings by us on Form 10-K, Form 10-Q, and Form 8-K, and
future oral and written statements by us and our management may include certain forward-looking
statements, including (without limitation) statements with respect to anticipated future operating
and financial performance, growth opportunities and growth rates, acquisition and divestitive
opportunities and other similar forecasts and statements of expectation. Words such as expects,
anticipates, intends, plans, believes, seeks, estimates and should, and variations of
these words and similar expressions, are intended to identify these forward-looking statements.
Forward-looking statements by our management and us are based on estimates, projections, beliefs
and assumptions of management and are not guarantees of future performance. We disclaim any
obligation to update or revise any forward-looking statement based on the occurrence of future
events, the receipt of new information, or otherwise. Actual future performance, outcomes and results may differ materially from those expressed in
forward-looking statements made by us, and our management, as the result of a number of important
factors. Representative examples of these factors include (without limitation) the cyclicality of
the construction industry; the Companys substantial leverage; net losses; price increases and
availability of raw materials; weather-related risks; chemical products competition; potential
exposure to environmental liabilities; consolidation of our customers; increased dependence on
foreign operations; product mix profit margins; risks associated with acquisitions; competition;
control by Odyssey; risks associated with our workforce; dependence on key personnel; and
restrictive covenants. This list is not intended to be exhaustive, and additional information can
be found under Risks Related to Our Business in Part I of our most recent Annual Report on Form
10-K. In addition to these factors, actual future performance, outcomes and results may differ
materially because of other, more general, factors including (without limitation) general industry
and market conditions and growth rates, domestic economic conditions, governmental and public
policy changes and the continued availability of financing in the amounts, at the terms and on the
conditions necessary to support our future business. 21




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Item 3. Quantitative and Qualitative Disclosures About Market Risk. As of April 1, 2005, we had financial instruments, which were sensitive to changes in interest
rates. These financial instruments consist of:  
    $95.0 million revolving credit facility, $74.0 million of which was outstanding at April 1, 2005;
    $165.0 million of Senior Second Secured Notes with a net book value of $159.1 million;
    $154.7 million of Senior Subordinated Notes with a net book value of $147.6 million;
    $8.0 million of Notes payable to the seller of Safway;
    $3.4 million in capital lease obligations;
    $1.1 million in other fixed-rate, long-term debt. Our $95.0 million senior secured revolving credit facility matures on January 30, 2007. The
credit facility has no financial covenants. Availability of borrowings is limited to 85% of
eligible accounts receivable and 60% of eligible inventories and rental equipment, less $10.0
million. At April 1, 2005, the Company had outstanding letters of credit of $7.0 million and
available borrowings of $14.0 million under this revolving credit facility. The credit facility is
secured by substantially all assets of the Company. Our $165.0 million of senior second secured notes mature in June 2008. The notes were issued
at a discount, which is being accreted to the face value using the effective interest method and is
reflected as interest expense. The senior second secured notes have an interest rate of 10.75%.
The estimated fair value of the notes is $161.7 million as of April 1, 2005. The senior second
secured notes are secured by substantially all assets of the Company and its domestic subsidiaries. Our $154.7 million of senior subordinated notes mature in June 2009. The notes were issued at
a discount, which is being accreted to the face value using the effective interest method and is
reflected as interest expense. The notes were issued with warrants that allow the holder to
purchase 117,276 of the Companys Class A Common Shares for $0.01 per share. The senior
subordinated notes have an interest rate of 13.0%. The estimated fair value of the notes is $139.3
million as of April 1, 2005. Our $12.0 million non-interest bearing note to the seller of Safway has a remaining balance of
$10.0 million and is being accreted to the face value at 14.5% using the effective interest method.
Annual payments of $1.0 million are due on September 30 of each year from 2005 through 2008, with
a final balloon payment of $6.0 million due on December 31, 2008. The book value of the note at
April 1, 2005 was $6.6 million. Our $2.0 million non-interest bearing note payable to the seller of Safway has a remaining
balance of $1.8 million and is being accreted to the face value at 6.0% using the effective
interest method. Minimum payments on the note are $232,000 for the balance of 2005, $398,000 in
2006, $563,000 in 2007, and $464,000 in 2008. Payments may be accelerated if certain revenue
targets are met. The book value of the note at April 1, 2005 was $1.4 million. Our other long-term debt at April 1, 2005 consisted of $1.1 million of 9.1% junior
subordinated debentures previously held by the Dayton Superior Capital Trust with an estimated fair
value of $1.8 million, and an $8,000, 7% loan with an estimated fair value as of April 1, 2005 of
$8,000. In the ordinary course of our business, we also are exposed to price changes in raw materials,
particularly steel and energy. The prices of these items can change significantly due to changes
in the markets in which our suppliers operate. We generally do not, however, use financial
instruments to manage our exposure to changes in commodity prices. 22




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Item 4. Controls and Procedures. We maintain disclosure controls and procedures that are designed to ensure that information
required to be disclosed in our Exchange Act reports is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange Commissions rules and
forms and that such information is accumulated and communicated to our management, including our
Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions
regarding required disclosure. In designing and evaluating the disclosure controls and procedures,
management recognizes that any controls and procedures, no matter how well designed and operated,
can provide only reasonable assurance of achieving the desired control objectives, and management
is required to apply its judgment in evaluating the cost-benefit relationship of possible controls
and procedures. As required by SEC Rule 13a-15(b), we carried out an evaluation, under the supervision and with the
participation of our management, including our Chief Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of our disclosure controls and procedures as of
the end of the quarter covered by this report. Based on the foregoing, our Chief Executive Officer
and Chief Financial Officer concluded that our disclosure controls and procedures were effective at
the reasonable assurance level. The Company is currently undergoing a comprehensive effort to comply with Section 404 of the
Sarbanes-Oxley Act of 2002, which is required as of December 31, 2006. This effort includes
documenting, evaluating the design and testing the effectiveness of our internal controls. During
this process, we expect to make improvements in the design of and operation of our internal
controls including further formalization of policies and procedures and improving segregation of
duties. Although we believe that our efforts will enable us to provide the required management
report on internal controls and our independent auditors to provide the required attestation as of
fiscal year end 2006, we can give no assurance that these efforts will be successfully completed in
a timely manner. 23




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Part II.  Other Information 
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. On March 30, 2005, the Company sold 560 Common shares to Edward J. Puisis for an aggregate
purchase price of $12,516 ($22.35 per share) in conjunction with his employment agreement with the
Company. The shares were issued in reliance upon the exemption from registration set forth is
Section 4(2) of the Securities Act of 1933, as amended, for transactions not involving a public
offering. 
 Item 6. Exhibits See Index to Exhibits following the signature page to this report for a list of Exhibits. 24




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SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized. DAYTON SUPERIOR CORPORATION
 DATE: May 16, 2005
    
    BY: /s/ Edward J. PuisisEdward J. Puisis
Vice President and Chief Financial Officer
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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
 26