-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CpL35fl/IL8HnHPnGEBKv6CYOKDF4fjUxRDXXLIXLW1G2tBtHCaUgTHc57sG4+nn ZOyAyEY06befpRZxZuPwqg== 0000950152-09-003375.txt : 20090331 0000950152-09-003375.hdr.sgml : 20090331 20090331173037 ACCESSION NUMBER: 0000950152-09-003375 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20081231 FILED AS OF DATE: 20090331 DATE AS OF CHANGE: 20090331 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DAYTON SUPERIOR CORP CENTRAL INDEX KEY: 0000854709 STANDARD INDUSTRIAL CLASSIFICATION: STEEL PIPE & TUBES [3317] IRS NUMBER: 310676346 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-11781 FILM NUMBER: 09720549 BUSINESS ADDRESS: STREET 1: 7777 WASHINGTON VILLAGE DRIVE STREET 2: SUITE 130 CITY: DAYTON STATE: OH ZIP: 45459 BUSINESS PHONE: 9374287172 MAIL ADDRESS: STREET 1: 7777 WASHINGTON VILLAGE DRIVE STREET 2: SUITE 130 CITY: DAYTON STATE: OH ZIP: 45459 10-K 1 l35994ae10vk.htm FORM 10-K FORM 10-K
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
 
Form 10-K
 
     
þ
  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
    For the fiscal year ended December 31, 2008
OR
o
  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
Commission File Number 1-11781
DAYTON SUPERIOR CORPORATION
(Exact name of registrant as specified in its charter)
 
     
Delaware   31-0676346
(State of incorporation)   (I.R.S. Employer Identification No.)
 
7777 Washington Village Dr.
Suite 130
Dayton, Ohio 45459
(Address of principal executive office)
Registrant’s telephone number, including area code:
(937) 428-6360
 
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, par value $0.01 per share, registered on The Nasdaq Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act:
None
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o     No þ
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes o     No þ
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller reporting company þ
(Do not check if a smaller reporting company)
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o     No þ
 
As of March 31, 2009, there were 19,070,697 shares of common stock outstanding. As of June 30, 2008, the aggregate market value of common stock held by non-affiliates was $23,295,879 based on the closing market price of the common stock.
 
DOCUMENT INCORPORATED BY REFERENCE
 
Dayton Superior Corporation’s proxy statement for its Annual Meeting of Stockholders; definitive copies of the proxy statement will be filed with the Commission within 120 days of the Company’s most recently completed fiscal year. Only such portions of the proxy statement as are specifically incorporated by reference into Part III of this Report shall be deemed filed as part of this Report.
 

 
TABLE OF CONTENTS

Part I
Item 1. Business.
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments.
Item 2. Properties.
Item 3. Legal Proceedings.
Item 4. Submission of Matters to a Vote of Security Holders.
Part II
Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities.
Item 6. Selected Financial Data.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Item 8. Financial Statements and Supplementary Data.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Stockholders’ Deficit
Consolidated Statements of Cash Flows Years Ended December 31
Consolidated Statements of Comprehensive Loss Years Ended December 31
Notes to Consolidated Financial Statements December 31, 2008, 2007 and 2006 ($ in thousands, except per share amounts)
Schedule II -- Valuation and Qualifying Accounts Years Ended December 31, 2008, 2007, and 2006
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
Item 9A. Controls and Procedures.
Item 9B. -- Other Information
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Item 9A(T) Controls and Procedures.
Part III
Item 10. Directors, Executive Officers, and Corporate Governance of the Registrant.
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management, and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions and Director Independence.
Item 14. Principal Accounting Fees and Services
Part IV
Item 15. Exhibits and Financial Statement Schedules
SIGNATURES
EX-4.7.1
EX-10.11
EX-23
EX-31.1
EX-31.2
EX-32.1
EX-32.2

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In this Annual Report on Form 10-K, unless otherwise noted, the terms “Dayton Superior,” “we,” “us” and “our” refer to Dayton Superior Corporation, a Delaware corporation and successor (pursuant to a reincorporation merger effective December 15, 2006) to an Ohio corporation of the same name, and its subsidiary.
 
Part I
 
Item 1.   Business.
 
Available Information
 
We file annual, quarterly, current reports, and other documents with the Securities and Exchange Commission (SEC) under the Securities Exchange Act of 1934. The public may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NW, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Also, the SEC maintains an Internet website that contains reports and information statements, and other information regarding issuers, including the Company, that file electronically with the SEC. The public can obtain any documents that we file with the SEC at http://www.sec.gov.
 
Recent Developments
 
We have been engaged in a process to evaluate possible strategic alternatives in light of the maturity of indebtedness under our senior credit facilities and the pending maturity of our outstanding senior subordinated notes. These alternatives have included the possible sale of the Company or a controlling interest in the Company, and an exploration of available options to refinance or otherwise restructure our outstanding indebtedness. We retained Harris Williams & Co. on November 6, 2008 to assist us in our evaluation of possible strategic alternatives to enhance stockholder value, including the possible sale of the Company or a controlling interest in the Company. We retained Morgan Stanley & Co. Incorporated on November 21, 2008 to advise us on options to refinance or otherwise restructure our outstanding indebtedness. On February 24, 2009, we terminated the engagement of Morgan Stanley and, on March 15, 2009, we retained Moelis & Company LLC to advise us on options to refinance or otherwise restructure our outstanding indebtedness.
 
On March 16, 2009 and March 23, 2009, we amended our senior credit facilities to, among other things, extend the scheduled maturities thereunder to April 9, 2009, to increase the rate of interest payable thereunder and to provide for the payment of certain fees. These credit agreement extensions provide us with additional time to evaluate our alternatives.
 
We can provide no assurance that the process to explore strategic alternatives will result in a transaction or that the process to restructure the company’s indebtedness will be successful. As previously announced, we do not intend to disclose developments regarding these initiatives unless and until a definitive agreement is entered into or the Board of Directors determines to terminate one or both processes. There can be no assurances that we will be able to successfully negotiate a more comprehensive amendment or forbearance agreement or that waivers or additional extensions can be obtained from its senior lenders on acceptable terms in the future. There can be no assurance that any alternative sources of capital and/or alternative transactions will be available to us on acceptable terms or at all in the current challenging economic environment. We may be required to enter into a transaction that substantially dilutes or eliminates the value of our outstanding common stock. If we are unable to find suitable strategic alternatives or restructure our outstanding indebtedness on a consensual basis, we will be required to seek protection under the federal bankruptcy laws. See also “Risk Factors” and “Liquidity and Capital Resources”.
 
General
 
We believe we are both the leading North American provider of specialized products consumed in non-residential, concrete construction and the largest concrete forming and shoring rental company serving the domestic, non-residential construction market. In many of our product lines, we believe we are the lowest-cost


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provider, competing primarily with smaller, regional suppliers that offer a more limited range of products and one other smaller national competitor. Our products can be found on construction sites nationwide and are used in non-residential construction projects, including:
 
  •  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.
 
Although certain of our products can be used in residential construction projects, we believe that less than 5% of our revenues are attributable to residential construction activity.
 
We sell most of our 17,000 products under well-established brand names. Our products are used to help form, strengthen, move, stabilize, cure, or color concrete. Our products are generally imbedded in, or applied to, concrete and consumed during the construction process, thereby providing us with a source of recurring revenue. Our products include metal and plastic bar supports, anchor bolts, snap ties, wall forming products, rebar splicing devices, load transfer units, precast and tilt-up construction lifting hardware, and construction chemicals. In addition, we sell a complete line of new and used forming and shoring systems, which may be combined to create solutions for a wide variety of customer-specific applications. We also rent a complete line of forming and shoring systems, and believe our rental fleet is the largest and most diverse in North America.
 
We manufacture and source our products through a balanced combination of North American manufacturing facilities and strategic outsourcing relationships. We use our network of 45 distribution, manufacturing, and sales and service centers to establish a strong local presence in each of the markets we serve, which also allows us to deliver our broad product offering, technical expertise, and customer service in a timely and efficient manner to our customers. We serve approximately 3,800 customers, consisting primarily of regional dealers and a broad array of general contractors and sub-contractors. We believe our distribution, manufacturing and service network is the largest in our industry.
 
In 2008, we generated $476 million in net sales, 84% of which were from product sales. Approximately 84% of our 2008 product sales (or approximately 72% of our total net sales) were generated through the sale of consumable products. This mix of consumable versus reusable products, which is typical for our business, represents a significant source of recurring revenue for our company.
 
Products
 
We offer more than 17,000 products, which we believe to be significantly more than our competitors who are mostly regional suppliers with limited product offerings. Most of our products are consumable, providing us with a source of recurring revenue. We continually attempt to increase the number of products we offer by using engineers and product development teams to introduce new products and refine existing products. Most of our products are sold under industry-recognized brand names including: Dayton/Richmond®, Aztec®, Symons®, BarLock®, Jahn®, Swift Lift®, Steel-Ply®, Dayton Superior®, Conspec®, Edoco®, Dur-O-Wal®, and American Highway Technology®.
 
Product Sales Consist Of:
 
  •  Wall-Forming Products.  Wall-forming products include shaped metal ties and accessories used to hold concrete forms in place while the concrete is curing.
 
  •  Bridge Deck Products.  Bridge deck products are metal assemblies of varying designs used to support the formwork used by contractors in the construction and rehabilitation of bridges.
 
  •  Bar Supports.  Bar supports are non-structural steel, plastic, or cementitious supports used to position rebar within a horizontal slab or concrete form.
 
  •  Splicing Products.  Splicing products are used to join two pieces of rebar together at a construction site without the need for extensive preparation of the rebar ends.


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  •  Precast and Prestressed Concrete Construction Products.  Precast and prestressed concrete construction products are metal assemblies of varying designs used or consumed in the manufacture of precast concrete panels and prestressed concrete beams and structural members.
 
  •  Formliner Products.  Formliner products include plastic and elastomeric products that adhere to the inside face of forms to provide shape or texture to the surface of the concrete.
 
  •  Chemical Products.  Chemical products 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 and placement of concrete.
 
  •  Masonry Products.  Masonry products are wire products that improve the performance and longevity of masonry walls by providing crack control, better water resistance, greater elasticity, and higher strength to withstand seismic shocks.
 
  •  Welded Dowel Assemblies.  Welded dowel assemblies are used to transfer dynamic loads between two adjacent slabs of concrete roadway.
 
  •  Architectural Paving Products.  Architectural paving products are used to apply decorative texture and coloration to concrete surfaces.
 
  •  Tilt-Up Construction Products.  Tilt-up construction products include a complete line of inserts, reusable lifting hardware, and adjustable beams used in the tilt-up method of construction.
 
  •  Forming Systems.  Forming systems are reusable, engineered modular forms which hold liquid concrete in place on concrete construction jobs while it cures.
 
  •  Shoring Systems.  Shoring systems, including aluminum beams and joists, are reusable post shores and shoring frames used to support deck and other raised forms while concrete is being poured.
 
Rental Revenues and Sales of Used Rental Equipment Consist Of:
 
  •  Forming Systems, Shoring Systems, and Tilt-Up Construction Products, each as described above.
 
Manufacturing
 
We manufacture a majority of the products we sell and rent in 18 facilities throughout North America. These facilities incorporate semi-automated and automated production lines, heavy metal presses, forging equipment, stamping equipment, robotic welding machines, drills, punches and other heavy machinery typical for this type of manufacturing operation. Our production volumes and product mix enable us to use a combination of custom-designed and standard production equipment. We support our equipment with a team of experienced manufacturing engineers and tool and die makers.
 
Through investment in advanced technology for both production equipment and ERP-driven product planning, combined with our lean manufacturing management techniques, we believe we generally have achieved significantly greater productivity, lower capital equipment costs, lower scrap rates, higher product quality, faster changeover times, and lower inventory levels than most of our competitors. We also have a flexible manufacturing setup and can make the same products at several locations, which allows us to respond to local market requirements in a timely manner.
 
Given the high volume of certain of our products, we have recently been able to reduce our costs of sales by sourcing finished products and components through our manufacturing facility in Reynosa, Mexico and through foreign sourcing initiatives, including in China.


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Fleet Management
 
We believe our rental fleet is the largest in North America. We actively manage our fleet mix to ensure certain products are regionally focused to address geography-specific applications. We also monitor our fleet purchases to maintain appropriate equipment levels and to manage our deployment of capital resources.
 
Distribution
 
We distribute our products to customers through our network of 22 service/distribution centers located in the United States and Canada. We ship most of our products to our service/distribution centers from our manufacturing plants. We have an on-line inventory tracking system that enables us to identify, reserve, and ship inventory quickly from our locations in response to customer orders.
 
Sales and Marketing
 
We employed approximately 260 sales and marketing personnel at December 31, 2008, of whom approximately two-thirds were field sales people and one-third were customer service representatives. Sales and marketing personnel are located in most of our service/distribution centers and are instrumental in driving the productivity of our regional operating model. We provide product documentation and consult on certain non-residential construction techniques in which our products can be used to solve typical construction problems. We promote our products through seminars and other customer education efforts and work directly with architects, engineers, and contractors to secure the use of our products whenever possible.
 
Technical and Customer Service
 
Each of our eight regions is supported by product specialists, engineers, and customer service representatives who provide our customers with product application technical support, engineering consultation, and product training. In addition, all of our regions are supported by one or more captive distribution facilities with make-to-order manufacturing capabilities. These capabilities allow us to deliver our products to any construction site in the United States in a timely manner and support our belief that our customer support infrastructure is a significant competitive strength in our industry. We employ approximately 80 individuals in our engineering department who combine region-specific product and application expertise with proprietary software applications to advise and consult on non-residential construction projects. We also make our library of product literature and training manuals readily available to our customers.
 
Customers
 
Of our approximately 3,800 customers, approximately half purchase our products for resale and half are end users. On a sales basis, 72% of our sales are purchased for resale and 28% of our sales are purchased by end users. Our customer base is geographically diverse and consists of distributors, rebar fabricators, precast and prestressed concrete manufacturers, brick, and concrete block manufacturers, general contractors, and sub-contractors.
 
Raw Materials
 
Our principal raw materials are steel wire rod, steel hot rolled bar, metal stampings and flat steel, aluminum sheets and extrusions, plywood, cement and cementitious ingredients, liquid chemicals, zinc, plastic resins and injection-molded plastic parts. We currently purchase materials from over 800 vendors and are not dependent on any single vendor or small group of vendors for any significant portion of our raw material purchases. Steel, in its various forms, typically constitutes approximately 30% of our product cost of sales.
 
Competition
 
Our industry is highly competitive in most product categories and geographic regions. We compete with smaller, regional suppliers that offer a more limited range of products, and one smaller national competitor. We believe competition in our industry is largely based on, among other things, price, quality, breadth of product offering, distribution capabilities (including quick delivery times), customer service, and expertise. Due primarily


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to factors such as freight rates, quick delivery times and customer preference for local suppliers, some local or regional manufacturers and suppliers may have a competitive advantage over us in a given region. We believe the size, breadth, and quality of our product offerings provide us with advantages of scale in both distribution and production relative to our competitors.
 
Trademarks and Patents
 
Our products are sold under our registered trademarks that are well known throughout the concrete construction industry and are therefore important to our business. Among our better-known trademarks are Dayton Superior®, Dayton/Richmond®, Symons®, Aztec®, Dur-O-Wal®, American Highway Technology®, Conspec®, Edoco®, Jahn®, Swift Lift®, Bar Lock®, Steel-Ply®, the Hexagon Logo® and the S & Diamond® design. Many of our products are protected by our patents, which we consider an important asset. As of December 31, 2008, we had 111 patents and 37 pending patent applications, domestic and foreign, and 189 registered trademarks and pending applications for registration.
 
Employees
 
We employ approximately 600 salaried and 800 hourly personnel, of whom approximately 400 of the hourly personnel are represented by labor unions. Employees at the Miamisburg, Ohio; Parsons, Kansas; Elk Grove, Illinois; New Braunfels, Texas; Tremont, Pennsylvania; City of Industry, California, and Aurora, Illinois facilities are covered by collective bargaining agreements. Of the union contracts, three expire in 2009, two expire in 2010, and three expire in 2011. We believe we have good employee and labor relations and that no one contract is individually significant.
 
Seasonality
 
Due to weather, the non-residential construction industry is seasonal in most of North America. Demand for our products generally is higher in the spring and summer than in the winter and late fall. As a result, our first quarter net sales and income from operations typically are the lowest of the year. Our net sales and income from operations in the fourth quarter are also generally less than in the second and third quarters. Consequently, our working capital requirements related to accounts receivable and inventories, and therefore our peak revolving credit facility borrowings, tend to be higher in the second and third quarters.
 
Backlog
 
We typically ship most of our products, other than paving products and most specialty forming systems, within one week and often within 24 hours after we receive the order. Other product lines, including paving products and specialty forming systems, may be produced and shipped up to one year after we receive the order, depending on our customers’ needs. Accordingly, we do not maintain significant backlog, and backlog as of any particular date has not been representative of our actual sales for any succeeding period.
 
Item 1A.   Risk Factors
 
There is substantial doubt about our ability to continue as a going concern and, if we are unable to find suitable strategic alternatives or restructure our outstanding indebtedness on a consensual basis, we will be required to seek protection under the federal bankruptcy laws. As of March 27, 2009, we had $367.8 million in principal amount of debt (excluding debt discounts) maturing on or before June 15, 2009. If we are unable to refinance or extend that debt before its maturity, or if that debt is accelerated due to our default, and our lenders require immediate repayment, we will not be able to repay them.
 
Our $150 million revolving credit facility and our term loan, with an outstanding balance of $99.25 million, are each scheduled to mature on April 9, 2009. In addition, our Senior Subordinated Notes, which have a face value of $154.7 million, mature on June 15, 2009; however, the maturity of the Senior Subordinated Notes may be accelerated by the holders if we fail to repay our revolving credit facility and term loan when due.


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Our independent, registered public accounting firm has issued an opinion on our financial statements that states that the financial statements were prepared assuming that we will continue as a going concern and further states that our recurring losses, stockholders’ deficit and inability to generate sufficient cash flow to meet our obligations as they come due and sustain our operations raise substantial doubt about our ability to continue as a going concern. If we are unsuccessful in refinancing or extending the term of our revolving credit facility, term loan and the Senior Subordinated Notes, our ability to continue as a going concern would be doubtful and we likely would be required to seek protection under the federal bankruptcy laws. In addition, it is possible that creditors could file an involuntary petition in bankruptcy against us. Even if we were successful in pursuing a negotiated restructuring of our outstanding debt and equity, we might be required to implement the restructuring through a proceeding under the federal bankruptcy laws.
 
There is no assurance that the terms of any refinanced indebtedness would be commercially reasonable, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows. Our 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 we be deemed to be unable to continue as a going concern.
 
If we file for bankruptcy protection our business and operations will be subject to certain additional risks.  A bankruptcy filing by or against us would subject our business to various risks, including the following:
 
  •  A bankruptcy filing by or against us may adversely affect our business prospects and our ability to operate during the reorganization process;
 
  •  Coordinating a bankruptcy filing and operating under protection of the bankruptcy court would involve significant costs, including expenses of legal counsel and other professional advisors;
 
  •  We may have difficulty continuing to obtain and maintain contracts necessary to continue our operations at affordable rates with competitive terms;
 
  •  Transactions by us outside the ordinary course of business would be subject to the prior approval of the court, which may limit our ability to respond timely to certain events or take advantage of certain opportunities;
 
  •  We may not be able to obtain court approval or such approval may be delayed with respect to motions made in the reorganization cases;
 
  •  We may be unable to retain and motivate key executives and employees during the process of reorganization, and we may have difficulty attracting new employees;
 
  •  There can be no assurance as to our ability to maintain or obtain sufficient financing sources for operations or to fund any reorganization plan and meet future obligations;
 
  •  There can be no assurance that we will be able to successfully develop, prosecute, confirm and consummate one or more plans of reorganization that are acceptable to the bankruptcy court and our creditors, equity holders and other parties in interest;
 
  •  The value of our common stock could be reduced to zero as result of a bankruptcy filing; and
 
  •  Certain of our customers and vendors may be reluctant to continue to transact business with us as a result of our bankruptcy filing.
 
We may not have sufficient cash to maintain our operations.  Due to weather, the non-residential construction industry is seasonal in most of North America. Demand for our products generally is higher in the spring and summer than in the winter and late fall. As a result, our first quarter net sales and income from operations typically are the lowest of the year. Our business requires us to increase our inventories in advance of the spring and summer construction season, which requires us to invest cash in our inventories. In addition, because of our financial condition, many of our vendors have refused to continue to extend us credit, or have reduced the terms on which they will extend us credit, requiring us to accelerate the payment of cash to our vendors. We also face significantly higher expenditures due in part to payments to our financial and legal advisers, as well as fees and other amounts payable to our lenders and their advisors in connection with amendments to our loan agreements to extend the maturity of their loans. Those


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amendments also restrict how we utilize our operating cash flows. In addition, our cash inflow also is negatively affected by the downturn in the nonresidential construction industry in which we primarily operate. The lender under our revolving credit facility also has imposed additional limitations on the amount of cash we may borrow under the facility. In the event that the cash available to us from operations and under the revolving credit facility is insufficient to fund our operating expenses, we may be required to file for bankruptcy protection, as described above.
 
Our debt instruments impose significant operating restrictions on us.  Our debt agreements, among other things, restrict our ability to incur additional indebtedness; create liens; pay dividends and make distributions in respect of our capital stock; enter into agreements that restrict our subsidiary’s ability to pay dividends or make distributions; redeem or repurchase capital stock; make investments or other restricted payments; issue or sell preferred stock of subsidiaries; enter into transactions with affiliates; and consolidate, merge, or sell all or substantially all of our assets.
 
In addition to these restrictions, we are also restricted in the amount we may borrow under our revolving credit facility by a borrowing base calculation and are required to comply with certain financial covenants under our revolving credit and term loan agreements. Our ability to comply with these restrictions and covenants may be affected by events beyond our control, and an adverse development affecting our business could require us to seek waivers or amendments of covenants, alternative or additional sources of financing or reductions in expenditures. We may not be able to obtain such waivers, amendments or alternative or additional financings on terms acceptable to us or at all. A breach of any of the covenants or restrictions contained in any of our existing or future debt agreements could result in an event of default under those agreements. Such a default could allow the creditors under the debt agreements to discontinue lending, to accelerate the related debt as well as any other debt to which a cross-acceleration or cross-default provision applies, and to declare all borrowings outstanding thereunder to be due and payable. If our creditors require immediate repayments, we may not be able to repay them.
 
The non-residential construction industry is cyclical, and we are currently experiencing depressed market conditions for our products and services.  The non-residential construction industry is cyclical, and the downturn in the non-residential construction industry has caused a decline in the demand for our products. Our products are primarily used in domestic, non-residential construction; therefore our sales and earnings are strongly influenced by non-residential construction activity, which historically has been cyclical. Most recently, during 2007, 2008 and the first quarter of 2009, the non-residential construction market experienced a downward trend, and as a result, our sales unit volume was negatively affected. Non-residential construction activity can decline because of many other factors we cannot control, such as:
 
  •  a decline in general economic activity;
 
  •  a decrease in government spending on construction projects;
 
  •  an increase in raw material and overall construction costs;
 
  •  interest rate increases, which make borrowings used to finance construction projects more expensive; and
 
  •  changes in banking and tax laws, which may reduce incentives to begin construction projects.
 
Demand for some of our products is seasonal, and we may experience significant variations in quarterly performance.  Due to weather, the non-residential construction industry is seasonal in most of North America. Demand for our products generally is higher in the spring and summer than in the winter and late fall. As a result, our first quarter net sales and income from operations typically are the lowest of the year. Our net sales and income from operations in the fourth quarter are also generally less than in the second and third quarters. Consequently, our working capital requirements related to accounts receivable and inventories tend to be higher in the second and third quarters and, accordingly, can adversely affect our liquidity and cash flow. Adverse weather, such as unusually prolonged periods of cold, rain, blizzards, hurricanes and other severe weather patterns, could delay or halt construction activity over wide regions of the country. A severe winter could lead to reduced construction activity and thus magnify the seasonal decline in our revenues and earnings during the winter months. Sustained extreme adverse weather conditions could have a material adverse effect on our business, financial condition, results of operations, and cash flows.


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We have a history of losses and may experience substantial losses in the future. We cannot assure you that our net operating loss carryforwards will result in any significant tax savings in future periods.  Our business has experienced substantial net losses over the past several years and may continue to do so in the future. We reported net losses of $18.0 million in 2006, $6.7 million in 2007, and $12.0 million in 2008, and our stockholders’ deficit was $106.3 million as of December 31, 2008. Our results of operations and cash flows will continue to be affected by events and conditions both within and beyond our control, including competition, economic, financial, business and other conditions. We cannot assure you that our operations will become or remain profitable in the future. As of December 31, 2008, we had deferred tax assets of $55.6 million related to net operating loss carryforwards. We had valuation allowances for these net operating loss carryforwards and other net deferred tax assets as of December 31, 2008, as estimated levels of taxable income are less than the amount needed to realize these assets. In addition, the use of net operating loss carryforwards may be limited under Section 382 of the Internal Revenue Code of 1986, as amended. Section 382 imposes limitations on a company’s ability to use net operating loss carryforwards if a company experiences a more-than-50-percent ownership change over a three-year testing period. Some of the restructuring alternatives we are evaluating would cause a more-than-50-percent ownership change. As a result, our ability to use some of our net operating loss carryforwards in future periods may be limited as provided in Section 382.
 
Increased costs of raw materials and energy resources may result in increased operating expenses and adversely affect our results of operations and cash flows.  Significant variations in the costs, quality and availability of raw materials and energy may negatively affect our results of operations and cash flows. Steel, in its various forms, is our principal raw material, constituting approximately 30% of our product cost of sales in 2008. Any decrease in our volume of steel purchases could affect our ability to secure volume purchase discounts that we have obtained in the past. In addition, an overall increase in energy costs, including the cost of natural gas and petroleum products, could adversely impact our overall operating costs in the form of higher raw material, utilities, and freight costs. We typically do not enter into forward contracts to hedge commodity price risks that we face. Even though our costs may increase, our customers may not accept corresponding price increases for our products, or the prices for our products may decline. Our ability to achieve acceptable margins is principally dependent on managing our cost structure and managing changes in raw materials prices, which fluctuate based upon factors beyond our control. If the prices of our products decline, or if our raw material costs increase, such changes could have a material adverse effect on our operating margins and profitability.
 
Losing certain key customers could materially affect our revenues, and continuing consolidation of our customer base could reduce our profit margins.  Our top ten customers accounted for 26% of our net sales for the year ended December 31, 2008 and our largest customer accounted for 5%, 6%, and 7% of our net sales for the years ended December 31, 2008, 2007, and 2006, respectively. The loss of any of these customers could have a material adverse effect on our revenue and could also adversely affect our liquidity and cash flow from operating activities. Further, increasing consolidation of our customers may negatively affect our earnings. We believe there is an increasing trend among our distributor customers to consolidate into larger entities. As our customers increase in size and gain market power, they may be able to exert pressure on us to reduce prices or increase price competition by dealing more readily with our competitors. If the consolidation of our customers does result in increased price competition, our sales and profit margins may be adversely affected.
 
Our business may be subject to significant environmental investigation, remediation and compliance costs.  Our business and our facilities are subject to a number of federal, state and local environmental laws and regulations that govern, among other things, the discharge of hazardous materials into the air and water as well as the use, generation, handling, storage, transport and disposal of these materials. Many of these laws and regulations provide for substantial fines and criminal sanctions for violations. Permits are required for operation of our businesses (particularly air emission permits), and these permits are subject to renewal, modification and, in certain circumstances, revocation. Pursuant to certain environmental laws, a current or previous owner or operator of land may be liable for the costs of investigation and remediation of hazardous materials at the property. These laws can often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of any hazardous materials. Persons who arrange (as defined under these statutes) for the disposal or treatment of hazardous materials also may be liable for the costs of investigation and remediation of these substances at the disposal or treatment site, regardless of whether the affected site is owned or operated by them. We may be liable for costs under certain environmental laws even if we did


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not cause the condition causing such liability. Changes in environmental laws or unexpected investigations could adversely affect our business. Since we own and operate a number of facilities where industrial activities have been historically conducted and because we arrange for the disposal of hazardous materials at many disposal sites, we may incur costs for investigation and remediation, as well as capital costs associated with compliance with these laws. More stringent environmental laws as well as more vigorous enforcement policies or discovery of previously unknown conditions requiring remediation could impose material costs and liabilities on us which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
 
Our Mexican operations and foreign sourcing relationships are subject to local business risks which could have a material adverse effect on our financial condition, results of operations and cash flows.  We operate a manufacturing facility in Reynosa, Mexico and purchase finished goods from China and other foreign sources. The success of our operations in Mexico and our foreign sourcing initiatives depend on numerous factors, many of which are beyond our control, including our inexperience with operating abroad, general economic conditions, restrictions on the repatriation of assets, compliance with foreign laws and standards and political risks. Our Mexican operations and foreign outsourcing relationships are affected directly and indirectly by global regulatory, economic and political conditions, including:
 
  •  new and different legal and regulatory requirements in local jurisdictions;
 
  •  export duties or import quotas;
 
  •  domestic and foreign customs and tariffs or other trade barriers;
 
  •  potential difficulties in staffing and labor disputes;
 
  •  managing and obtaining support and distribution for local operations;
 
  •  increased costs of, and availability of, transportation or shipping;
 
  •  credit risk and financial conditions of local customers and distributors;
 
  •  potential difficulties in protecting intellectual property;
 
  •  risk of nationalization of private enterprises by foreign governments;
 
  •  potential imposition of restrictions on investments;
 
  •  potentially adverse tax consequences, including imposition or increase of withholding and other taxes on remittances and other payments by subsidiaries;
 
  •  capital controls;
 
  •  foreign exchange restrictions and fluctuations; and
 
  •  local political, economic and social conditions, including the possibility of hyperinflationary conditions and political instability in certain countries.
 
We cannot assure you that we will succeed in developing and implementing policies and strategies to counter the foregoing factors effectively in each location where we do business. Some or all of these factors may have a material adverse effect on our operations or upon our financial condition, results of operations, and cash flows in the future.
 
The high level of competition in our industry could materially adversely affect our business.  The markets in which we compete are highly competitive. Many of the markets in which we operate are served by numerous competitors, ranging from multi-regional companies to small, independent businesses with a limited number of locations. We generally compete on the basis of, among other things: price, quality, breadth of product offering, distribution capabilities (including quick delivery times), customer service and expertise. However, the uniformity of products among our competitors results in substantial pressure on pricing and profit margins. As a result of these pricing pressures, we may experience reductions in the profit margins on our sales, or we may be unable to pass any cost increases on to our customers. We cannot assure you that we will be able to maintain or increase the current market share of our products or compete successfully in the future. If competitive pressures were to cause us to reduce our prices, our operating margins may be adversely impacted. If we were to maintain our prices in the face of


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price reductions by our competitors, our net sales could decline. We may encounter increased competition from existing competitors or new market entrants in the future, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
 
We are effectively controlled by a major stockholder, whose interests may conflict with yours.  Odyssey Investment Partners Fund, LP (“Odyssey”) and its affiliates control the voting of 47.8% of our common stock and, therefore, have the power to control or substantially affect the outcome of matters on which stockholders are entitled to vote. These include the election of directors, the adoption or amendment of our certificate of incorporation and by-laws, and possible mergers, corporate control contests and significant corporate transactions. Through their control of our board of directors, Odyssey and its affiliates also have the ability to appoint or replace our senior management, issue additional shares of our common stock or repurchase common stock, declare dividends or take other actions. Our controlling stockholder may make decisions regarding our company and business that are opposed to your interests or with which you disagree. To the extent the interests of our public stockholders are harmed by the actions of our controlling stockholder, the price of our common stock may be harmed.
 
Labor disputes with our employees could interrupt our operations and adversely affect our business.  We depend on our highly trained employees, and any work stoppage or difficulty hiring similar employees would adversely affect our business. We could be adversely affected by a shortage of skilled employees. As of December 31, 2008, approximately 25% of our employees were unionized. We are subject to several collective bargaining agreements with employees at our Miamisburg, Ohio; Parsons, Kansas; Elk Grove, Illinois; New Braunfels, Texas; Tremont, Pennsylvania; City of Industry, California; and Aurora, Illinois facilities. These collective bargaining agreements are scheduled to terminate beginning in April 2009 through June 2011, and we cannot offer assurances that we will be able to negotiate a satisfactory renewal of these collective bargaining agreements or that our employee relations will remain stable. Any shortage of labor could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
 
We depend on our key personnel and the loss of the services provided by any of our executive officers or other key employees could harm our business and results of operations.  Our success depends to a significant degree upon the continued contributions of our senior management, many of whom would be difficult to replace. Generally, these employees may voluntarily terminate their employment with us at any time. In such event, we may not be able to successfully retain existing personnel or identify, hire and integrate new personnel. Accordingly, it is possible that our business would be materially adversely affected if one or more of these key individuals left. We do not maintain any key-man or similar insurance policies covering any of our senior management or key personnel.
 
The nature of our business involves product liability and construction-related risks that could adversely affect our operating results.  Our products are used in various construction projects, and defects in our products could result in claims for personal injury or death and property damage. While we maintain insurance to cover these claims, it is possible that existing or future claims will exceed our insurance coverage. In addition, it is possible that third-party insurance will not continue to be available to us on economically reasonable terms. Claims brought against us that are not covered by insurance could have a material adverse effect on our operating results and financial condition. Our operations are subject to hazards inherent in the construction industry that could result in personal injury or death, work stoppage or serious damage to our equipment or to the property of our customers. To protect ourselves against such casualty and liability risks, we maintain an insurance program. Our deductibles per incident are $500,000 for general liability, $350,000 for workers’ compensation liability and $1,000 for automobile liability. In addition, we maintain a one-time annual deductible of $4.0 million for general liability and $5.0 million for workers’ compensation liability coverage. We maintain outside insurance for such liability in excess of these deductibles. Our deductibles may cause us to incur significant costs. If our insurance premiums or other costs rise significantly in the future, our profitability could be reduced.
 
The price of our common stock may fluctuate significantly.  Volatility in the market price of our common stock may prevent you from being able to sell your stock at prices equal to or greater than your purchase price. The market price of our common stock could fluctuate significantly for various reasons, including:
 
  •  our operating and financial performance and prospects;
 
  •  our quarterly or annual earnings or those of other companies in our industry;


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  •  the impending maturity of long term debt;
 
  •  the public’s reaction to our press releases, other public announcements and filings with the SEC;
 
  •  changes in earnings estimates or recommendations by research analysts who track our common stock or the stock of other companies in our industry;
 
  •  strategic actions by us or our competitors;
 
  •  new laws or regulations or new interpretations of existing laws or regulations applicable to our business;
 
  •  changes in accounting standards, policies, guidance, interpretations or principles;
 
  •  changes in general economic conditions in the United States and global economies or financial markets, including those resulting from war, incidents of terrorism or responses to such events; and
 
  •  sales of common stock by us or our principal stockholders or by members of our management team.
 
In addition, in recent years, the stock market has experienced significant price and volume fluctuations. This volatility has had a significant impact on the market price of securities issued by many companies, including us. The changes frequently occur without regard to the operating performance of the affected companies. Hence, the price of our common stock has fluctuated significantly.
 
Our common stock may be delisted from the Nasdaq Stock Market.  Our common stock is currently listed on The Nasdaq Stock Market’s Global Market (“Nasdaq”). We may fail to comply with Nasdaq’s continued listing rules, which require, among other things, that our common stock maintain a minimum bid price per share of $1.00. While Nasdaq has suspended enforcement of its minimum bid price rule, that suspension currently is scheduled to end on April 20, 2009, and there are no assurances that Nasdaq will extend the suspension beyond that date. If the suspension ends and we fail to comply with the minimum bid price rule and are unable to cure the failure within the period provided in Nasdaq’s rules, Nasdaq might delist our common stock. Delisting likely would have an adverse effect on the liquidity of our common stock and, as a result, the market price for our common stock might become more volatile. Delisting also might make it more difficult for us to raise equity capital.
 
Our certificate of incorporation and by-laws contain provisions that could discourage a third party from acquiring us and consequently decrease the market value of an investment in our common stock.  Our certificate of incorporation and by-laws contain provisions that may make the acquisition of our company more difficult without the approval of our board of directors, including, but not limited to, the following:
 
  •  our board of directors is classified into three classes, each of which serves for a staggered three-year term;
 
  •  only our board of directors may call special meetings of our stockholders;
 
  •  we have authorized undesignated preferred stock, the terms of which may be established and shares of which may be issued without stockholder approval;
 
  •  our stockholders have only limited rights to amend our by-laws; and
 
  •  we require advance notice for stockholder proposals.
 
These provisions could discourage proxy contests, make it more difficult for our stockholders to elect directors and take other corporate actions and may discourage, delay or prevent a change in control or changes in our management that a stockholder might consider favorable. Any delay or prevention of a change in control or change in management that stockholders might otherwise consider to be favorable could deprive holders of our common stock of the opportunity to sell their common stock at a price in excess of the prevailing trading price and cause the trading price of our common stock to decline.
 
Item 1B.   Unresolved Staff Comments.
 
None


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Item 2.   		Properties.
 
Our corporate headquarters is located in leased facilities in Dayton, Ohio. We believe our facilities provide adequate manufacturing and distribution capacity for our needs. We also believe all of the leases were entered into on market terms. Our other principal facilities as of December 31, 2008 are located throughout North America, as follows:
 
                         
                    Lease
              Size
 		    Expiration
Location
 
Use
  Leased/Owned     (Sq. Ft.)     Date
 
Birmingham, Alabama
  Manufacturing/Distribution     Leased       287,000     December 2021
Elk Grove, Illinois
  Manufacturing/Distribution     Leased       230,768     May 2022
Rialto, California
  Service/Distribution     Leased       191,809     February 2017
Kankakee, Illinois
  Manufacturing/Distribution     Leased       172,954     December 2010
Miamisburg, Ohio
  Service/Distribution     Leased       156,600     September 2017
Allentown, Pennsylvania
  Service/Distribution     Leased       114,000     May 2015
Reynosa, Mexico
  Manufacturing/Distribution     Leased       110,000     July 2011
Aurora, Illinois
  Manufacturing/Distribution     Leased       103,700     October 2016
Parsons, Kansas
  Manufacturing/Distribution     Leased       120,000     October 2018
New Braunfels, Texas
  Manufacturing/Distribution     Owned       89,600      
Tremont, Pennsylvania
  Manufacturing/Distribution     Owned       86,000      
Parker, Arizona
  Manufacturing/Distribution     Leased       60,000     June 2009
Kansas City, Kansas
  Manufacturing/Distribution     Leased       56,600     September 2015
Fontana, California
  Manufacturing/Distribution     Leased       56,000     May 2009
Modesto, California
  Manufacturing/Distribution     Leased       54,100     March 2010
Grand Prairie, Texas
  Service/Distribution     Leased       51,000     June 2010
Toronto, Ontario
  Manufacturing/Distribution     Leased       45,661     January 2010
Orlando, Florida
  Service/Distribution     Leased       44,470     September 2018
Kent, Washington
  Service/Distribution     Leased       40,640     June 2009
Oregon, Illinois
  Service/Distribution     Owned       39,000      
Brandywine, Maryland
  Service/Distribution     Leased       36,800     October 2010
Lemont, Illinois
  Service/Distribution     Leased       33,400     December 2017
 
Item 3.   		Legal Proceedings.
 
During the ordinary course of our business, we are from time to time threatened with, or may become a party to, legal actions and other proceedings. While we are currently involved in various legal proceedings, we believe the results of these proceedings will not have a material effect on our business, financial condition, results of operations, or cash flows. We believe that our potential exposure to these legal actions is adequately covered by product and general liability insurance, our legal liability reserves included in our financial statements, and, in some instances, by indemnification arrangements.
 
Item 4.   		Submission of Matters to a Vote of Security Holders.
 
Not applicable.


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Executive Officers
 
Our executive officers and their ages as of March 31, 2009, are as follows:
 
             
Eric R. Zimmerman
    58     President, Chief Executive Officer and Director
Peter J. Astrauskas
    58     Vice President, Engineering
Raymond E. Bartholomae
    62     Executive Vice President and President, Symons
Jeffrey S. Dawley
    45     Vice President, Manufacturing
Edward J. Puisis
    48     Executive Vice President and Chief Financial Officer
Thomas W. Roehrig
    43     Vice President, Finance and Secretary
Keith M. Sholos
    55     Vice President, Sales
 
Eric R. Zimmerman has been President, Chief Executive Officer and a director of our company since August 2005.
 
Peter J. Astrauskas has been Vice President, Engineering since September 2003.
 
Raymond E. Bartholomae has been employed with Symons since 1970 and has been Executive Vice President and President, Symons since November 2005. He served as Vice President, Sales and Marketing from August 2003 to November 2005.
 
Jeffrey S. Dawley has been employed with the Company since 2000 and has been Vice President, Manufacturing since January 2007. From February 2006 to January 2007, he served as Director, Manufacturing Operations. From December 2003 to February 2006, he served as Manager, Operations Analysis.
 
Edward J. Puisis has been employed with the Company since 2003 and has been Executive Vice President and Chief Financial Officer since November 2005. He served as Vice President and Chief Financial Officer from August 2003 to November 2005.
 
Thomas W. Roehrig has been employed with the Company since 1998 and has been Vice President, Finance and Secretary since January 2007. From November 2005 to January 2007, he served as Vice President of Corporate Accounting and Secretary. He served as Vice President of Corporate Accounting from February 2003 to November 2005 and was also Treasurer from August 2003 to December 2003.
 
Keith M. Sholos has been employed with the Company since 2002 and has been Vice President, Sales since January 2007. From September 2005 to January 2007, he served as Vice President, Sales. From August 2004 to September 2005, he served as Vice President, Dealer Sales. From January 2004 to August 2004, he served as Vice President, Sales & Marketing, Construction Products Group.


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Part II
 
Item 5.   		Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities.
 
Our common stock is traded on The Nasdaq Stock Market’s Global Market under the symbol “DSUP.” The prices presented in the following table are the high and the low closing prices for the period presented as reported by The Nasdaq Stock Market’s Global Market.
 
                         
          High     Low  
 
  2008     4th Quarter   $ 1.67     $ 0.28  
  2008     3rd Quarter     2.64       1.46  
  2008     2nd Quarter     3.14       1.51  
  2008     1st Quarter     4.05       1.98  
  2007     4th Quarter     8.70       3.86  
  2007     3rd Quarter     13.82       6.99  
  2007     2nd Quarter     14.13       9.90  
  2007     1st Quarter     11.70       10.22  
 
As of February 26, 2009, we had approximately 100 holders of record of our common stock.
 
We have not paid dividends on our common stock. We intend to retain all future earnings, if any, for repayment of debt, use in our operations, and to fund expansion of our business and future growth. We do not anticipate paying any dividends for the foreseeable future. The decision whether to pay dividends will be made by our board of directors in light of conditions then existing, including factors such as our results of operations, cash flows, financial condition and requirements, business condition and covenants under any applicable contractual arrangements. Our ability to pay dividends on our common stock is limited by the covenants of our revolving credit facility and the indentures governing our outstanding debt securities.


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Item 6.   		Selected Financial Data.
 
The following table sets forth selected historical consolidated financial information as of and for each of the years in the five-year period ended December 31, 2008 and has been derived from our audited consolidated financial statements. Our audited consolidated financial statements for the three years ended December 31, 2008 are included elsewhere herein. You should read the following table together with the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section below and our consolidated financial statements and their related notes included elsewhere herein.
 
                                         
    Year Ended December 31,  
    2008     2007     2006     2005     2004  
    ($ in thousands)  
 
Statement of Operations Data:
                                       
Net sales
  $ 475,871     $ 482,958     $ 479,310     $ 418,983     $ 418,639  
Cost of sales
    316,581       331,192       340,902       320,399       311,335  
                                         
Gross profit
    159,290       151,766       138,408       98,584       107,304  
Selling, general and administrative expenses
    110,659       106,882       106,453       94,526       90,724  
Facility closing and severance expenses
    3,843       1,753       423       1,712       2,036  
Impairment of goodwill
    —       —       —       64,000 (1)     —  
Loss (gain) on disposals of property, plant and equipment
    (296 )     560       (1,504 )     4,529       (248 )
                                         
Income (loss) from operations
    45,084       42,571       33,036       (66,183 )     14,792  
Interest expense
    50,229       47,019       49,983       48,133       47,207  
Interest income
    (260 )     (493 )     113       (163 )     (559 )
Loss on early extinguishment of long-term debt
    6,224 (2)     —       —       —       842 (3)
Other (income) expense
    219       2,300       555       (89 )     (134 )
                                         
Loss before provision for income taxes
    (11,328 )     (6,255 )     (17,615 )     (114,064 )     (32,564 )
Provision for income taxes
    620       437       394       639       4,863 (4)
                                         
Net loss
  $ (11,948 )   $ (6,692 )   $ (18,009 )   $ (114,703 )   $ (37,427 )
                                         
Net loss per share:
                                       
Basic and diluted
  $ (0.64 )   $ (0.37 )   $ (1.76 )   $ (11.57 )   $ (3.77 )
Weighted average shares outstanding
    18,564,123       18,283,773       10,224,765       9,916,425       9,932,872  


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    Year Ended December 31,  
    2008     2007     2006     2005     2004  
    ($ in thousands)  
 
Other Financial Data:
                                       
Depreciation and amortization
  $ 23,953     $ 25,353     $ 26,479     $ 97,427 (1)   $ 31,738  
Property, plant and equipment additions, net
    10,803       19,905       13,216       5,140       4,586  
Rental equipment additions (proceeds), net
    (10,405 )     1,515       1,997       148       (7,739 )
Balance Sheet Data (at period end):
                                       
Working capital (deficit)(5)
  $ (259,040 )   $ 62,045     $ 81,358     $ 63,584     $ 93,623  
Goodwill and intangibles
    44,475       46,332       48,705       48,668       114,828  
Total assets
    300,087       317,253       321,638       281,520       394,763  
Long-term debt (including current portion)
    337,894       324,597       322,450       369,254       379,735  
Stockholders’ deficit
    (106,278 )     (89,643 )     (90,222 )     (160,277 )     (48,076 )
 
 
(1) In accordance with Statement of Financial Accounting Standard (“SFAS”) No. 142, we assess our goodwill recoverability annually. Prior to 2006, the Company’s financial performance had gradually deteriorated over several years due to a general decline in nonresidential construction activity and rising costs, such as steel and fuel. The Company had been unable to sustain positive cash flow and its future ability to do so was uncertain. Accordingly, the Company recorded an impairment charge of $64 million in 2005 to reduce the carrying value of goodwill to its implied fair value.
 
(2) In March 2008, we redeemed our $165 million senior second secured notes with the proceeds of a new $100 million term loan and a new $150 million revolving credit facility, which replaced a $130 million senior secured revolving credit facility. The notes were redeemed at a premium of 2.813% of face value, or $4.6 million, which, along with the write-off of the remaining debt discount and deferred financing costs of $1.6 million, were expensed as a loss on extinguishment of long-term debt in the first quarter of 2008.
 
(3) In 2004, we established an $80 million senior secured revolving credit facility which was used to refinance our previous $50 million revolving credit facility. As a result of the transaction, we incurred a loss on the early extinguishment of long-term debt of $0.8 million, due to the expensing of deferred financing costs related to the previous revolving credit facility.
 
(4) In the fourth quarter of 2004, we recorded a non-cash valuation allowance for our net deferred tax assets related to net operating loss carryforwards as a result of adherence to SFAS No. 109, as our estimated levels of future taxable income are less than the amount needed to realize the deferred tax asset related to the carryforwards. Future changes in these estimates could result in a non-cash increase or decrease to net income.
 
(5) Our $150 million revolving credit facility and our term loan, with an outstanding balance of $99.25 million mature on April 9, 2009. In addition, our Senior Subordinated Notes, which have a face value of $154.7 million, mature on June 15, 2009. See “Business—Recent Developments”, “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources.”
 
Item 7.   		Management’s Discussion and Analysis of Financial Condition and Results of Operations.
 
The following discussion should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this document. This discussion contains forward-looking statements that involve risks and uncertainties. See “Risk Factors” included elsewhere in this document 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.

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Overview
 
We believe we are both the leading North American provider of specialized products consumed in non-residential, concrete construction and the largest concrete forming and shoring rental company serving the domestic, non-residential construction market. Demand for our products and rental equipment is driven primarily by the level of non-residential construction activity in the United States, which consists primarily of:
 
  •  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.
 
Although certain of our products can be used in residential construction projects, we believe that less than 5% of our revenues are attributable to residential construction activity.
 
We use three segments to monitor gross profit by sales type: product sales, rental revenue, and used rental equipment sales. These sales are differentiated by their source and gross margin as a percentage of sales. Accordingly, this segmentation provides information for decision-making and resource allocation. Product sales represent sales of new products carried in inventories on the balance sheet. Cost of goods sold for product sales include material, manufacturing labor, overhead costs, and freight. Rental revenues represent the leasing of the rental equipment and are recognized ratably over the lease term. Cost of goods sold for rental revenues includes depreciation of the rental equipment, maintenance of the rental equipment, and freight. Sales of used rental equipment represent sales of the rental equipment after a period of generating rental revenue. Cost of goods sold for sales of used rental equipment consists of the net book value of the rental equipment.
 
Recent Developments
 
See “Business—Recent Developments”, “Risk Factors” and “Liquidity and Capital Resources” for a discussion of recent developments that are material to our Company.
 
Industry Conditions
 
The non-residential construction industry is cyclical, and we are currently experiencing depressed market conditions for our products and services. Our products are primarily used in domestic, non-residential construction; therefore our sales and earnings are strongly influenced by non-residential construction activity, which historically has been cyclical. Most recently, during 2007, 2008 and the first quarter of 2009, the non-residential construction market experienced a downward trend, and as a result, our sales unit volume was negatively affected. We have made headcount reductions, closed facilities, and curbed spending to align our operations with fourth quarter and anticipated 2009 unit volume declines.


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Results of Operations
 
The following table summarizes our results of operations as a percentage of net sales for the periods indicated:
 
                         
    Years Ended December 31,  
    2008     2007     2006  
 
Product sales
    84.0 %     82.4 %     81.0 %
Rental revenue
    12.1       12.4       13.1  
Used rental equipment sales
    3.9       5.2       5.9  
                         
Net sales
    100.0       100.0       100.0  
                         
Product cost of sales
    70.5       73.5       76.4  
Rental cost of sales
    55.9       55.8       58.7  
Used rental equipment cost of sales
    13.6       19.9       27.1  
                         
Cost of sales
    66.5       68.6       71.1  
                         
Product gross profit
    29.5       26.5       23.6  
Rental gross profit
    44.1       44.2       41.3  
Used rental equipment gross profit
    86.4       80.1       72.9  
                         
Gross profit
    33.5       31.4       28.9  
Selling, general and administrative expenses
    23.3       22.1       22.2  
Facility closing and severance expenses
    0.8       0.4       0.1  
Loss (gain) on disposals of property, plant and equipment
    (0.1 )     0.1       (0.3 )
                         
Income from operations
    9.5       8.8       6.9  
Interest expense
    10.6       9.7       10.5  
Interest income
    (0.1 )     (0.1 )     —  
Loss on early extinguishment of long-term debt
    1.4       —       —  
Other expense
    —       0.5       0.1  
                         
Loss before provision for income taxes
    (2.4 )     (1.3 )     (3.7 )
Provision for income taxes
    0.1       0.1       0.1  
                         
Net loss
    (2.5 )%     (1.4 )%     (3.8 )%
                         
 
Comparison of Years Ended December 31, 2008 and 2007
 
Net Sales.  Our 2008 net sales were $475.9 million, a 1.5% decrease from $483.0 million in 2007. The following table summarizes our net sales by product type for the periods indicated:
 
                                         
    Years Ended December 31,        
    2008     2007        
    Sales     %     Sales     %     % Change  
    ($ in thousands)  
 
Product sales
  $ 399,929       84.0 %   $ 398,404       82.4 %     0.4 %
Rental revenue
    57,454       12.1       59,671       12.4       (3.7 )
Used rental equipment sales
    18,488       3.9       24,883       5.2       (25.7 )
                                         
Net sales
  $ 475,871       100.0 %   $ 482,958       100.0 %     (1.5 )%
                                         
 
Product sales increased $1.5 million, or 0.4%, to $399.9 million in 2008 from $398.4 million in 2007. The increase in product sales was due to price increases of $53.5 million, offset by a reduction in unit volume of $52.0 million as a result of declines in the nonresidential construction markets.
 
Rental revenue decreased $2.2 million, or 3.7%, to $57.5 million in 2008, compared to $59.7 million in 2007. The decrease was due to declines in the nonresidential construction markets.
 
Used rental equipment sales decreased to $18.5 million in 2008 from $24.9 million in 2007 due to lower customer demand. Used rental equipment sales may vary significantly from period to period.


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Gross Profit.  Gross profit for 2008 was $159.3 million, a $7.5 million increase from the $151.8 million for 2007. Gross profit was 33.5% of sales in 2008, increasing from 31.4% in 2007.
 
Product gross profit in 2008 was $118.0 million, or 29.5% of product sales, in 2008, compared to $105.5 million, or 26.5% of product sales, in 2007. The $12.5 million increase in product gross profit was due to higher product sales prices of $53.5 million, offset by net cost inflation, primarily steel costs, of $27.2 million and unit volume declines of $13.8 million. Our cost savings and efficiencies partially offset the impact of inflation.
 
Rental gross profit decreased $1.1 million to $25.3 million, or 44.1% of rental revenue, in 2008, from $26.4 million, or 44.2% of rental revenue, in 2007. Depreciation on rental equipment in 2008 was $13.6 million, as compared to $16.6 million in 2007, due to lower rental equipment additions. Rental gross profit before depreciation decreased to $38.9 million, or 67.7% of rental revenue, in 2008 from $43.0 million, or 72.0% of rental revenue in 2007, due primarily to freight between facilities increasing as a result of regional demand.
 
Gross profit on used rental equipment sales in 2008 was $16.0 million, or 86.4% of used rental equipment sales, compared to $20.0 million, or 80.1% of used rental equipment sales, in 2007. The decrease in gross profit dollars was due to the decreased sales discussed previously. Gross profit as a percentage of sales fluctuates based on the age and type of the specific equipment sold and was higher than normal due to more sales of fully depreciated rental equipment.
 
Operating Expenses.  Selling, general, and administrative expenses increased to $110.7 million in 2008 as compared to $106.9 million in 2007. Personnel related expenses accounted for $1.7 million of the increase. Depreciation expense and taxes increased $0.8 million each, and professional fees increased $0.5 million.
 
Facility closing and severance expenses increased to $3.8 million in 2008 from $1.8 million in 2007. In the first half of 2008, we completed the move of our manufacturing and distribution operation from Des Plaines, Illinois to Elk Grove, Illinois that began in 2007. In the fourth quarter of 2008, we offered and completed a voluntary early retirement program and made other reductions to headcount and facilities to align our operations with fourth quarter and anticipated 2009 unit volume declines. The 2008 expense was comprised of $2.6 million of employee termination benefits and $1.2 million of facility closing costs. Expected future closing costs, primarily related to ongoing lease obligations of vacated facilities, of $1.8 million are expected to be incurred through the first quarter of 2013, $0.8 million of which is expected to be incurred in 2009.
 
Other Expenses.  During the first quarter of 2008, we refinanced a portion of our long-term debt. We entered into a new $150 million revolving credit facility and issued a $100 million term loan. The proceeds of the term loan and an initial draw on the revolving credit facility were used to repay our $165 million Senior Second Secured Notes.
 
Interest expense was $50.2 million in 2008, comprised of $37.5 million of interest charges and $12.7 of non-cash amortization of debt discount and financing costs. This compares to interest expense of $47.0 in 2007, comprised of $40.0 million of interest charges and $7.0 million of non-cash amortization of debt discount and financing costs. The decrease in interest charges was due to lower interest rates on the new revolving credit facility and new term loan as compared to the previous revolving credit facility and Senior Second Secured Notes. The increase in non-cash amortization of debt discount and financing costs was due to the debt discount and financing costs on the new term loan and revolving credit facility being amortized over the initial terms of the new facilities of approximately one year.
 
In conjunction with the refinancing, the Company recorded a loss on extinguishment of long-term debt, comprised of the following:
 
         
    ($ in millions)  
 
Prepayment premium on Senior Second Secured Notes
  $ 4.6  
Unamortized discount on Senior Second Secured Notes
    1.1  
Unamortized financing costs on Senior Second Secured Notes
    0.2  
Unamortized financing costs on previous revolving credit facility
    0.3  
         
Loss on extinguishment of long-term debt
  $ 6.2  
         


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Loss Before Provision for Income Taxes.  The loss before income taxes in 2008 was $11.3 million, as compared to $6.3 million in 2007 due to the factors described above.
 
Provision for Income Taxes.  The provision for income taxes is a result of foreign earnings and state and local taxes. A non-cash valuation allowance has been recorded to reduce net deferred tax assets, primarily 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 Loss.  Net loss for 2008 was $12.0 million, or $0.64 per share, compared to $6.7 million, or $0.37 per share, in 2007 due to the factors described above.
 
Comparison of Years Ended December 31, 2007 and 2006
 
Net Sales.  Our 2007 net sales were $483.0 million, a 0.8% increase from $479.3 million in 2006. The following table summarizes our net sales by product type for the periods indicated:
 
                                         
    Years Ended December 31,  
    2007     2006        
    Sales     %     Sales     %     % Change  
    ($ in thousands)  
 
Product sales
  $ 398,404       82.4 %   $ 388,100       81.0 %     2.7 %
Rental revenue
    59,671       12.4       62,769       13.1       (4.9 )
Used rental equipment sales
    24,883       5.2       28,441       5.9       (12.5 )
                                         
Net sales
  $ 482,958       100.0 %   $ 479,310       100.0 %     0.8 %
                                         
 
Product sales increased $10.3 million, or 2.7%, to $398.4 million in 2007 from $388.1 million in 2006. The increase in product sales was due to price increases of $15.9 million, partially offset by a reduction in unit volume of $5.6 million as a result of declines in the nonresidential construction markets.
 
Rental revenue decreased $3.1 million, or 4.9%, to $59.7 million in 2007, compared to $62.8 million in 2006. The decrease was due to declines in the nonresidential construction markets.
 
Used rental equipment sales decreased to $24.9 million in 2007 from $28.4 million in 2006 due to lower customer demand. Used rental equipment sales may vary significantly from period to period.
 
Gross Profit.  Gross profit for 2007 was $151.8 million, a $13.4 million increase from the $138.4 million for 2006. Gross profit was 31.4% of sales in 2007, increasing from 28.9% in 2006. Each segment experienced increased gross profit as a percentage of sales.
 
Product gross profit was $105.5 million, or 26.5% of product sales, in 2007, compared to $91.7 million, or 23.6% of product sales, in 2006. The $13.7 million increase in product gross profit was due to higher product sales, which contributed $14.6 million of product gross profit, and $9.7 million of lower costs due to operating efficiencies, partially offset by inflation in costs of $10.6 million.
 
Rental gross profit increased $0.5 million to $26.4 million, or 44.2% of rental revenue in 2007, from $25.9 million, or 41.3% of rental revenue, in 2006. Depreciation on rental equipment in 2007 was $16.6 million, as compared to $19.2 million in 2006, due to the rental equipment acquired in a 2003 acquisition having primarily a 3-year estimated useful life. Rental gross profit before depreciation decreased to $43.0 million, or 72.0% of rental revenue, in 2007 from $45.1 million, or 71.8% of rental revenue in 2006, due to decreased rental revenue as discussed above.
 
Gross profit on used rental equipment sales was $20.0 million, or 80.1% of used rental equipment sales, compared to $20.7 million, or 72.9% of used rental equipment sales, in 2006. The decrease in gross profit dollars was due to the decreased sales discussed previously. Gross profit as a percentage of sales fluctuates based on the age and type of the specific equipment sold and was higher than normal due to more sales of fully depreciated rental equipment.


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Operating Expenses.  Selling, general, and administrative expenses was virtually flat at $106.9 million in 2007 as compared to $106.5 million in 2006. Stock compensation expense, a non-cash expense, was $2.8 million in 2007 as compared to $2.2 million in 2006. Professional fees decreased $2.2 million, as reduced consulting fees for profit improvement initiatives were partially offset by Sarbanes-Oxley compliance costs. Rent expense at distribution centers increased $2.1 million due to more square footage. Depreciation expense increased $0.8 million due to investments in information systems and distribution centers. All other items netted to a $0.9 million decrease.
 
Facility closing and severance expenses were $1.8 million in 2007 and $0.4 million in 2006, due to moving our manufacturing and distribution operation from Des Plaines, Illinois to Elk Grove, Illinois.
 
Other Expenses.  Interest expense decreased to $47.0 million in 2007 from $50.0 million in 2006 due to the proceeds of the Company’s December 2006 initial public offering being used to pay down debt. Other expense was $2.3 million in 2007 due to $2.2 million of costs related to terminated merger discussions.
 
Loss Before Provision for Income Taxes.  The loss before income taxes in 2007 was $6.3 million, as compared to $17.6 million in 2006 due to the factors described above.
 
Provision for Income Taxes.  The provision for income taxes is a result of foreign earnings and state and local taxes. A non-cash valuation allowance has been recorded to reduce net deferred tax assets, primarily 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 Loss.  The net loss for 2007 was $6.7 million, or $0.37 per share, as compared to a loss of $18.0 million, or $1.76 per share, in 2006 due to the factors described above.
 
Liquidity and Capital Resources
 
Our $150 million revolving credit facility and $100 million term loan were scheduled to mature on March 14, 2009 unless we were able to repay or refinance our Senior Subordinated Notes due June 2009 prior to that time. We were unable to repay or refinance the Senior Subordinated Notes before the initial maturity date of the revolving credit facility and term loan. While we have entered into amendments to the revolving credit and term loan agreements to extend the scheduled maturities to give us time to continue negotiations on the terms of a more comprehensive amendment or forbearance arrangement and to allow us to continue to evaluate possible strategic alternatives to enhance stockholder value (including the possible sale of the Company or a controlling interest in the Company), as of March 31, 2009, those maturities had been extended only until April 9, 2009. In addition, the amendments to the revolving credit and term loan agreements, (i) increase the rate of interest payable thereunder and provide for the payment of certain fees, (ii) require us to make interest rate payments on a monthly basis, rather than quarterly; (iii) amend the reporting covenants under the agreements to provide for more frequent disclosures; (iv) provide that we will not extend our previously announced private exchange offer and concurrent consent solicitation with respect to the Senior Subordinated Notes due 2009 that expires on April 9, 2009 or accept for payment any Senior Subordinated Notes surrendered in connection therewith; and (v) require us to provide, on or prior to April 9, 2009, a letter of intent or definitive term sheet for the acquisition of the Company by a person acceptable to the lenders on terms and conditions satisfactory to the lenders.
 
Our Senior Subordinated Notes, which have a face value of $154.7 million, mature on June 15, 2009. We commenced a private offer in July 2008 to exchange the Senior Subordinated Notes in a private placement for an equal amount of newly issued Senior Secured Notes due September 2014 and we periodically have extended that offer. The current expiration date of the offer is April 9, 2009. As of March 31, 2009, that offer had not been accepted by the holders of the required 95% in aggregate principal amount of the Senior Subordinated Notes (as of the close of business on March 12, 2009, Senior Subordinated Notes with an aggregate principal amount of $9.6 million had been tendered and not withdrawn). The amendments to the revolving credit facility and the term loan agreements restrict us from further extending the offer or from accepting for payment any Senior Subordinated Notes surrendered in connection with the exchange offer.
 
Our independent, registered public accounting firm has issued an opinion on our consolidated financial statements that states that the financial statements were prepared assuming that we will continue as a going concern


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and further states that our recurring losses, stockholders’ deficit and inability to generate sufficient cash flow to meet our obligations as they come due and sustain our operations raise substantial doubt about our ability to continue as a going concern. If we are unsuccessful in refinancing or extending the term of our revolving credit facility, term loan and Senior Subordinated Notes, our ability to continue as a going concern would be doubtful and we likely would be required to seek protection under federal bankruptcy laws. See “Risk Factors”.
 
We may not have sufficient cash to maintain our operations. Due to weather, the non-residential construction industry is seasonal in most of North America. Demand for our products generally is higher in the spring and summer than in the winter and late fall. As a result, our first quarter net sales and income from operations typically are the lowest of the year. Our business requires us to increase our inventories in advance of the spring and summer construction season, which requires us to invest cash in our inventories. In addition, because of our financial condition, many of our vendors have refused to continue to extend us credit, or have reduced the terms on which they will extend us credit, requiring us to accelerate the payment of cash to our vendors. We also face significantly higher expenditures due in part to payments to our financial and legal advisers, as well as fees and other amounts payable to our lenders and their advisors in connection with amendments to our loan agreements to extend the maturity of their loans. Those amendments also restrict how we utilize our operating cash flows. In addition, our cash inflow also is negatively affected by the downturn in the nonresidential construction industry in which we primarily operate. The lender under our revolving credit facility also has imposed additional limitations on the amount of cash we may borrow under the facility. In the event that the cash available to us from operations and under the revolving credit facility is insufficient to fund our operating expenses, we may be required to file for bankruptcy protection, as described above.
 
Historically, working capital borrowings under our revolving credit facility fluctuate with sales volume, such that our peak revolving credit borrowings are generally in the late second or early third quarter. Our key measure of liquidity and capital resources is the amount available under our revolving credit facility. As of December 31, 2008, we had $14.1 million available under our revolving credit facility, with an additional $0.4 million of cash.
 
Our capital uses relate primarily to capital expenditures and debt service. Our capital expenditures consist primarily of additions to our rental equipment fleet and additions to our property, plant, and equipment. Property, plant, and equipment consist primarily of manufacturing and distribution equipment and management information systems. We finance these capital expenditures with borrowings under our revolving credit facility and proceeds of sales of our used rental equipment. The following table sets forth a summary of these transactions for the years indicated.
 
                         
    Years Ended December 31,  
    2008     2007     2006  
    ($ in thousands)  
 
Rental equipment additions
  $ 12,592     $ 25,230     $ 21,535  
Property, plant, and equipment additions
    12,309       19,943       13,237  
Proceeds from sales of used rental equipment
    (22,997 )     (23,715 )     (23,532 )
Proceeds from sales of property, plant, and equipment
    (1,506 )     (38 )     (21 )
                         
Net additions to rental equipment and property, plant, and equipment
  $ 398     $ 21,420     $ 11,219  
                         
 
We believe we can manage the capital requirements of the rental fleet, and thus our cash flow, through the careful monitoring of rental fleet additions. Subject to market demand, sales of used equipment can be adjusted to increase cash available for fleet additions or other corporate purposes. We expect rental equipment and property, plant, and equipment additions in 2009 to be similar to 2008.
 
Our cash requirements relate primarily to capital expenditures and debt service and, in the near term, professional fees related to our evaluation of possible strategic alternatives to refinance or restructure our indebtedness. Historically, our primary sources of financing have been cash generated from operations before interest, net borrowings under our revolving credit facility, and the issuance of long-term debt and equity. In December 2006, we completed an initial public offering of our common stock and received $87.8 million in proceeds, net of issuance costs.


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Comparison of Years Ended December 31, 2008 and 2007
 
Net cash provided by operating activities for 2008 was $3.2 million compared to net cash used in operating activities for 2007 of $1.2 million, comprised of the following:
 
                 
    2008     2007  
    ($ in millions)  
 
Net loss
  $ (12.0 )   $ (6.7 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities
    32.0       17.6  
Changes in assets and liabilities
    (16.8 )     (12.1 )
                 
Net cash provided by (used in) operating activities
  $ 3.2     $ (1.2 )
                 
 
Adjustments to reconcile net loss to net cash provided by (used in) operating activities were $32.0 million for 2008 as compared to $17.6 million for 2007, primarily due to the loss on extinguishment of long-term debt and higher amortization of deferred financing costs and debt discount, as discussed in “Other Expenses” above.
 
Changes in assets and liabilities resulted in a $16.8 million use of cash in 2008 as compared to $12.1 million in 2007. The change consisted primarily of the following:
 
  •  Inventories were a $0.4 million use of cash in 2008 compared to $8.1 million in 2007, as we managed our inventory quantities in alignment with the unit volume of product sales.
 
  •  Accounts payable were a $12.7 million use of cash in 2008 as compared to $0.1 million in 2007, due to the timing of purchases and payments.
 
Net cash used in investing activities was $0.4 million in 2008 compared to $21.4 million in 2007. Property, plant, and equipment additions decreased to $12.3 million in 2008 from $19.9 million in 2007 as fewer investments were needed. Proceeds from sales of property, plant, and equipment of $1.5 million in 2008, were primarily related to the sale of a facility we previously vacated. Additions to rental equipment decreased to $12.6 million in 2008 as compared to $25.2 million in 2007 as the decline in demand for rental equipment required less investment in additional rental equipment. Proceeds from sales of used rental equipment, which tend to lag the actual sales of the equipment approximately by a quarter, were $23.0 million in 2008 as compared to $23.7 million in 2007.
 
During the first quarter of 2008, we refinanced a portion of our long-term debt. We entered into a new $150.0 million revolving credit facility and issued a $100.0 million term loan, which was issued at a discount for net proceeds of $94.2 million. The proceeds of the term loan and an initial $88.7 million draw on the revolving credit facility were used to repay our $165.0 million Senior Second Secured Notes, including prepayment premium of $4.6 million, accrued interest of $9.8 million, and financing costs related to the new debt instruments of $3.4 million.
 
For the fiscal year ended December 31, 2008, our net borrowings on the new revolving line of credit facility and its predecessor were $84.8 million, which primarily related to the initial $88.7 million draw discussed above. Net borrowings were comprised of gross borrowings of $234.2 million and gross repayments of $149.3 million.
 
Comparison of Years Ended December 31, 2007 and 2006
 
Net cash used in investing activities was $21.4 million in 2007 compared to $11.2 million in 2006. Net PP&E additions increased to $19.9 million in 2007 from $13.2 million in 2006 due to the move to the Elk Grove, Illinois facility, and increased investments in manufacturing and distribution equipment and facilities and information systems. Net additions to rental equipment were a $1.5 million use of cash in 2007 as compared to a $2.0 million source of cash in 2006 due to the higher additions of rental equipment.
 
For the year ended December 31, 2007, our gross long-term debt borrowings, which represent the sum of individual days with borrowings on the revolving credit facility, were $106.4 million. This was offset by repayments on the revolving credit facility of $106.4 million and $2.3 million of repayments of other long-term debt.


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Credit Arrangements
 
Under the revolving credit facility, borrowings are limited to 85% of eligible accounts receivable and 60% of eligible inventories and rental equipment. At December 31, 2008, $107.9 million was available, of which $84.8 million was outstanding at a weighted average interest rate of 5.3%. Outstanding letters of credit were $9.0 million, resulting in available borrowings of $14.1 million. The revolving credit facility is secured by substantially all of our assets.
 
As of December 31, 2008, our other long-term debt consisted of the following:
 
         
    ($ in thousands)  
 
Senior Subordinated Notes, interest rate of 13.0%
  $ 154,729  
Debt discount on Senior Subordinated Notes
    (1,117 )
Term loan, interest rate of 7.9%
    99,250  
Debt discount on term loan
    (1,175 )
Debentures
    1,024  
Capital lease obligations
    337  
         
Total long-term debt
    253,048  
Less current maturities
    252,987  
         
Long-term portion
  $ 61  
         
 
The Senior Subordinated Notes mature in June 2009. The Senior Subordinated 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 term loan was issued at a discount, which is being accreted to the face value using the effective interest method and reflected as interest expense. The term loan is subject to financial covenants for debt to adjusted EBITDA, as defined in the agreement, and interest coverage, and has a second security interest in substantially all of our assets. We are in compliance with both of these covenants. Adjusted EBITDA would have had to decrease by approximately $14.0 million for us to have been out of compliance with the more restrictive covenant.
 
At December 31, 2008, working capital (deficit) was $(259.0) million, compared to $62.0 million at December 31, 2007. The decrease was comprised primarily of the following:
 
  •  $84.8 million increase in the revolving credit facility,
 
  •  $244.0 million increase in the current portion of long-term debt due to the term loan and Senior Subordinated Notes maturing within twelve months, and
 
  •  $10.2 million decrease in accounts receivable primarily due to lower fourth quarter sales in 2008 as compared to 2007, partially offset by
 
  •  $15.1 million decrease in accounts payable due to the timing of vendor purchases and payments.


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Commitments
 
Scheduled payments of long-term debt, interest, future minimum lease payments under capital leases, future minimum lease payments under non-cancelable operating leases and unrecognized tax benefits at December 31, 2008 were as follows:
 
                                                                 
    Revolving
 		    Other
 		                                     
    Credit
 		    Long-Term
 		    Interest
 		    Capital
 		    Operating
 		    Unrecognized
 		             
Year
  Facility     Debt     Payments     Leases     Leases     Tax Benefits     Pension(1)     Total  
    ($ in thousands)        
 
2009
  $ 84,846     $ 255,003     $ 14,682     $ 295     $ 10,468     $ —     $ 606     $ 365,900  
2010
    —       —       —       46       9,407       —       —       9,453  
2011
    —       —       —       5       8,241       —       —       8,246  
2012
    —       —       —       5       7,426       —       —       7,431  
2013
    —       —       —       5       6,527       —       —       6,532  
Thereafter
    —       —       —       3       30,100       285       —       30,388  
                                                                 
    $ 84,846     $ 255,003     $ 14,682     $ 359     $ 72,169     $ 285     $ 606     $ 427,950  
                                                                 
 
 
(1)  No amounts beyond 2009 have been included in this table as amounts will be based upon future performance of the plan.
 
Seasonality
 
Due to weather, the non-residential construction industry is seasonal in most of North America. Demand for our products generally is higher in the spring and summer than in the winter and late fall. As a result, our first quarter net sales and income from operations typically are the lowest of the year. Our net sales and income from operations in the fourth quarter are also generally less than in the second and third quarters. Consequently, our working capital requirements related to accounts receivable and inventories, and therefore our peak revolving credit facility borrowings, tend to be higher in the second and third quarters.
 
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 30% of our product cost of sales in 2008. Although our steel costs decreased slightly during the fourth quarter of 2008, costs remain significantly higher than at the beginning of 2008. In 2009, we expect our overall steel costs to continue increasing, perhaps significantly.
 
Forward-Looking Statements
 
This Form 10-K 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 as a result of a number of important factors. Representative examples of these factors include (without limitation) the cyclical nature of nonresidential building and infrastructure construction activity, which can be affected by factors outside our control such as the general economy, governmental expenditures, interest rate increases, and changes in banking and tax laws; the amount of debt we must service; the effects of weather and the seasonality of the construction industry; our ability to implement cost savings programs successfully and on a


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timely basis; cost increases in raw materials and operating costs; and favorable market response to sales price increases. This list of factors is not intended to be exhaustive, and additional information concerning relevant risk factors can be found under the heading Risk Factors above and in future Quarterly Reports on Form 10-Q, and current Reports on Form 8-K we file with the Securities and Exchange Commission.
 
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, results of operations, and cash flows. We continually review our accounting policies and financial information disclosures. On an ongoing basis, we evaluate our estimates, including those related to allowance for doubtful accounts, inventories, long-lived assets, income taxes, self-insurance reserves, litigation, and the fair value of the Company and its business segments. 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. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.
 
Accounts Receivable Reserves
 
We maintain reserves for sales discounts and allowances and for doubtful accounts for estimated losses resulting from customer disputes and/or the inability of customers to make required payments. Receivables are charged to the allowance for doubtful accounts when an account is deemed to be uncollectible.
 
Inventories
 
We value our inventories at the lower of first-in, first-out, or FIFO, cost or market and include all costs associated with manufacturing products: materials, inbound freight, labor and manufacturing overhead. We provide net realizable value reserves that reflect our best estimate of the excess of the cost of potential obsolete and slow moving inventory over the expected net realizable value. Excluding newly introduced products, we reserve 100% of inventory items that have had no sales or usage in the trailing twelve-month period. We additionally reserve for items that have a quantity on hand in excess of the trailing twelve months’ sales and usage, ranging from 25% to 100% of the excess, depending on the number of years’ supply on hand. Based on this calculation, our reserve was approximately $4.8 million as of December 31, 2008. If the range were decreased by 10%, the reserve at December 31, 2008 would be reduced by $400,000. If the range were increased by 10%, the reserve at December 31, 2008 would be increased by $225,000.
 
Rental Equipment
 
We manufacture and purchase rental equipment for rent to others on a short-term basis and for resale. We record rental equipment at the lower of FIFO cost or market and depreciate it over the estimated useful life of the equipment, three to fifteen years, on a straight-line method. Rental equipment that is sold is charged to cost of sales on a FIFO basis.
 
Goodwill
 
We review the recorded value of our goodwill annually for the product sales reporting unit, the only business segment with goodwill, as of the end of the fiscal third quarter, or more frequently if events or changes in circumstances indicate that the carrying amount may exceed fair value. An additional review was performed as of December 31, 2008. The review for impairment requires us to estimate the fair value of our product sales reporting unit and considerable judgment must be exercised in determining these values.


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When exercising judgment, we consider all of the relevant facts and circumstances available to us at the time. The critical factors affecting this analysis include:
 
  •  the amount of adjusted EBITDA (which is income from operations adjusted to exclude depreciation and amortization of intangibles; gain (loss) from disposals of property, plant, and equipment; facility closing and severance expenses; and stock compensation expense) generated by our product sales business segment;
 
  •  our historical ability to meet operating results compared to projections;
 
  •  the level of expected activity in the nonresidential construction industry; and
 
  •  our future prospects.
 
Taking all of these factors into account, we determine the fair value of our product sales reporting unit by deriving enterprise value indications using a weighted average of multiple valuation approaches, including discounted cash flow analyses and a range of adjusted EBITDA multiples from market prices of companies that provide a reasonable basis of comparison. The fair value of our product sales reporting unit would have had to decrease by approximately 20% and 40% as of September 30, 2008 and December 31, 2008, respectively, for our goodwill to have been impaired.
 
Income Taxes
 
Deferred tax assets and liabilities are recorded for temporary differences between financial statement carrying amounts and the tax bases of assets and liabilities. Deferred tax assets and liabilities reflect the enacted tax rates in effect for the years the differences are expected to reverse. We evaluate the need for a deferred tax asset valuation allowance by assessing whether it is more likely than not that we will realize deferred tax assets in the future. In estimating whether deferred tax assets are realizable, we consider both positive and negative evidence. We estimate levels of future taxable income by considering historical results of operations in recent years and would, if necessary, consider the implementation of prudent and feasible tax planning strategies to generate taxable income. We record liabilities for uncertain tax matters based on an assessment of the likelihood of sustaining certain tax positions.
 
Insurance Reserves
 
We are self-insured for certain of our group medical, workers’ compensation and product and general liability claims. We have stop loss insurance coverage at various per occurrence and per annum levels depending on type of claim. Actual claims experience can impact these calculations and, to the extent that subsequent claim costs vary from estimates, future earnings could be impacted and the impact could be material.
 
Our group medical reserve is undiscounted and based on the dollar-weighted average historical lag between the date the service was incurred and the date the claim is paid, which was approximately 110 days at December 31, 2008. A 5-day increase or decrease in the lag would increase or decrease the reserve by approximately $40,000.
 
Our workers’ compensation reserve is undiscounted and estimated based on industry development factors of incurred and paid losses. A one-percentage point increase or decrease in the development factor would increase or decrease the reserve by $130,000 at December 31, 2008.
 
The product and general liability reserve is undiscounted and is the sum of the loss estimate of known claims and the estimate of incurred but not reported (IBNR) claims. IBNR claims are estimated based on the historical annual number of claims times the historical cost per claim. A 10% increase or decrease in the average cost would increase or decrease the December 31, 2008 reserve by approximately $50,000.
 
Pension Liabilities
 
Pension and other retirement benefits, including all relevant assumptions required by accounting principles generally accepted in the United States of America, are evaluated each year. Since there are many assumptions used to estimate future retirement benefits, differences between actual future events and prior estimates and assumptions could result in adjustments to pension expense and obligations. Certain actuarial assumptions, such as the discount


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rate and expected long-term rate of return, have an impact on the amounts reported for net periodic pension cost and the related benefit obligations. In estimating the discount rate for our plans, we use a rate derived from a corporate yield curve.
 
A one percentage point change in the discount rate would have the following effects:
 
                 
    One Percentage Point
 		    One Percentage Point
 		 
    Increase     Decrease  
    ($ in thousands)  
 
Effect on 2008 net periodic pension cost
  $ (152 )   $ 227  
Effect on December 31, 2008 pension benefit obligation
    (2,209 )     2,765  
 
The Company’s expected return on plan assets is 8.0%, which represents a weighted average of 11% for equity securities, 5.5% for debt securities, and 4% for cash and cash equivalents and an insurance contract applied to the Plan’s target asset allocation. A one percentage point change in the expected return on plan assets would have the following effects:
 
                 
    One Percentage Point
 		    One Percentage Point
 		 
    Increase     Decrease  
    ($ in thousands)  
 
Effect on 2008 net periodic pension cost
  $ (135 )   $ 135  
 
Revenue Recognition
 
Revenue is generally recognized from product sales when the product is shipped from our facilities and risk of loss and title have passed to the customer. Additionally, revenue is recognized at the customer’s written request and when the customer has made a fixed commitment to purchase goods on a schedule consistent with the customer’s business, where risk of ownership has passed to the buyer, the goods are physically segregated, and we do not retain any specific performance obligations. For customer-requested bill and hold transactions in which a performance obligation exists on our part prior to the delivery date, we do not recognize revenue until the total performance obligation has been met and all of the above criteria related to bill and hold transactions have been met. In instances where the customer provides payment for these services prior to the delivery date, the revenue is deferred until all performance obligations have been met. Sales recognized under bill and hold arrangements were $3.8 million, $3.1 million, and $3.7 million as of December 31, 2008, 2007, and 2006, respectively. For rental equipment sales, revenue is recognized and recorded on the date of shipment. Rental revenues are recognized ratably over the terms of the rental agreements. Sales orders with multiple deliverables are allocated among the components based on the fair values of the individual components.
 
Recently Issued Accounting Pronouncements
 
The Financial Accounting Standards Board has issued several pronouncements that we adopted in 2008 or are required to adopt in 2009. However, currently these pronouncements are either not applicable to us or not material to our consolidated financial statements.
 
Item 7A.   		Quantitative and Qualitative Disclosures About Market Risk.
 
As of December 31, 2008, the financial instruments we had that were sensitive to changes in interest rates are our $150.0 million revolving credit facility and our term loan with an outstanding balance of $99.3 million.
 
The outstanding balance under the revolving credit facility as of December 31, 2008 was $84.8 million, and the average borrowings for the fiscal year ended December 31, 2008 were $95.5 million. The facility has several interest rate options that re-price on a short-term basis. During the fiscal year ended December 31, 2008, our weighted average interest rate on the facility was 6.0%. A one percentage point increase or decrease in our weighted average interest rate on the facility would have increased or decreased our annual interest expense by approximately $1.0 million. Pursuant to recent amendments to the revolving credit agreement, effective as of March 23, 2009, (a) the interest rate has been increased to, at our option, the adjusted base rate, as defined, plus 5.5%, or LIBOR plus 6.5%, plus (i) an additional 1.5% on special overadvances, (other than additional special overadvances), as defined, and (ii) an additional 3.5% on additional special overadvances, as defined, (with up to (1) other than in the case of


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interest on special overadvances and additional special overadvances, 4.0% of the total interest rate paid-in-kind at our option, (2) in the case of interest of special overadvances (other than additional special overadvances), 3% of such interest paid-in-kind at our option and (3) in case of interest on additional special overadvances), 5% of such interest paid-in-kind at our option) and (b) the minimum adjusted base rate was established at 4.25% and the minimum LIBOR was established at 3.25%.
 
The term loan bears interest at three-month LIBOR plus 4.50%, with a LIBOR floor of 3.25%. Due to the floor, a one percentage point increase or decrease in three-month LIBOR would not have changed our annual interest expense. Effective March 16, 2009, pursuant to an amendment to the term loan credit facility, the interest rate increased to, at our option, the adjusted base rate, as defined, plus 11.50% or LIBOR plus 12.50% (with up to 8.00% of the total interest rate paid-in-kind at our option). Effective March 23, 2009, pursuant to an additional amendment to the term loan credit facility, the minimum adjusted base rate was increased to 4.25% from 3.25%.
 
In the ordinary course of our business, we also are exposed to price changes in raw materials (particularly steel rod and steel bar), freight due to fuel costs, and products purchased for resale. The prices of these items can change significantly due to changes in the markets in which our suppliers operate. We do not use financial instruments to manage our exposure to changes in commodity prices.
 
The risk of changes in foreign exchange rates on the translation of the financial statements of our Canadian subsidiary is not material.


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Item 8.   		Financial Statements and Supplementary Data.
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
To the Board of Directors and Stockholders of
Dayton Superior Corporation
Dayton, OH
 
We have audited the accompanying consolidated balance sheets of Dayton Superior Corporation and subsidiary (the “Company”) as of December 31, 2008 and 2007, and the related consolidated statements of operations, stockholders’ deficit, cash flows, and comprehensive loss for each of the three years in the period ended December 31, 2008. Our audits also included the financial statement schedule listed in the Index at Item 15(a)(2). These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.
 
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Dayton Superior Corporation and subsidiary as of December 31, 2008 and 2007, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2008, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
 
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company’s recurring losses, stockholders’ deficit, and inability to generate sufficient cash flow to meet its obligations as they come due and sustain its operations raise substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also discussed in Note 2 to the consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
As discussed in Note 7, effective January 1, 2007, the Company adopted Financial Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an Interpretation of Financial Accounting Standards Board Statement No. 109.” Also, as discussed in Note 6, the Company adopted the provisions of Statement of Financial Accounting Standards No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Benefits Plans — an amendment of FASB Statements No. 87, 88, 106, and 132(R), on December 31, 2006.
 
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2008, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 31, 2009 expresses an unqualified opinion on the Company’s internal control over financial reporting.
 
DELOITTE & TOUCHE LLP
 
Dayton, Ohio
March 31, 2009


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Dayton Superior Corporation and Subsidiary
 
Consolidated Balance Sheets
As of December 31
 
                 
    2008     2007  
    ($ in thousands, except per share amounts)  
 
ASSETS
Current assets:
               
Cash and cash equivalents
  $ 398     $ 3,381  
Accounts receivable, net of reserves for doubtful accounts and sales returns and allowances of $4,536 and $4,447
    58,435       68,593  
Inventories
    66,732       66,740  
Prepaid expenses and other current assets
    7,551       5,718  
Prepaid income taxes
    —       740  
                 
Total current assets
    133,116       145,172  
                 
Rental equipment, net of accumulated depreciation of $69,923 and $67,276
    63,426       67,640  
                 
Property, plant and equipment
               
Land and improvements
    1,655       2,020  
Buildings and leasehold improvements
    22,253       18,391  
Machinery and equipment
    90,452       94,943  
                 
      114,360       115,354  
Less accumulated depreciation
    (59,250 )     (58,542 )
                 
Net property, plant and equipment
    55,110       56,812  
                 
Goodwill
    43,643       43,643  
Other assets
    4,792       3,986  
                 
Total assets
  $ 300,087     $ 317,253  
                 
 
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
               
Revolving credit facility
  $ 84,846     $ —  
Current portion of long-term debt
    252,987       8,990  
Accounts payable
    24,093       39,204  
Accrued compensation and benefits
    15,862       15,456  
Accrued interest
    3,016       6,193  
Accrued freight
    2,924       4,065  
Other accrued liabilities
    8,428       9,219  
                 
Total current liabilities
    392,156       83,127  
Other long-term debt, net of current portion
    61       315,607  
Other long-term liabilities
    14,148       8,162  
                 
Total liabilities
    406,365       406,896  
                 
Commitments and contingencies (Note 8)
               
Stockholders’ deficit Common stock; $0.01 par value; 100,000,000 shares authorized; 19,070,697 (251,492 unvested) and 19,066,212 (502,982 unvested) outstanding
    191       191  
Additional paid-in capital
    208,621       207,181  
Loans to stockholders
    (1,119 )     (1,085 )
Accumulated other comprehensive loss
    (6,711 )     (618 )
Accumulated deficit
    (307,260 )     (295,312 )
                 
Total stockholders’ deficit
    (106,278 )     (89,643 )
                 
Total liabilities and stockholders’ deficit
  $ 300,087     $ 317,253  
                 
 
The accompanying notes to consolidated financial statements are an integral part of these consolidated statements.


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Dayton Superior Corporation and Subsidiary
 
Consolidated Statements of Operations
Years Ended December 31
 
                         
    2008     2007     2006  
    ($ and shares in thousands,
 
    except per share amounts)  
 
Product sales
  $ 399,929     $ 398,404     $ 388,100  
Rental revenue
    57,454       59,671       62,769  
Used rental equipment sales
    18,488       24,883       28,441  
                         
Net sales
    475,871       482,958       479,310  
                         
Product cost of sales
    281,929       292,946       296,351  
Rental cost of sales
    32,145       33,295       36,845  
Used rental equipment cost of sales
    2,507       4,951       7,706  
                         
Cost of sales
    316,581       331,192       340,902  
                         
Product gross profit
    118,000       105,458       91,749  
Rental gross profit
    25,309       26,376       25,924  
Used rental equipment gross profit
    15,981       19,932       20,735  
                         
Gross profit
    159,290       151,766       138,408  
Selling, general and administrative expenses
    110,659       106,882       106,453  
Facility closing and severance expenses
    3,843       1,753       423  
Loss (gain) on disposals of property, plant and equipment
    (296 )     560       (1,504 )
                         
Income from operations
    45,084       42,571       33,036  
Other expenses
                       
Interest expense
    50,229       47,019       49,983  
Interest income
    (260 )     (493 )     113  
Loss on extinguishment of long-term debt
    6,224       —       —  
Other expense
    219       2,300       555  
                         
Loss before provision for income taxes
    (11,328 )     (6,255 )     (17,615 )
Provision for income taxes
    620       437       394  
                         
Net loss
  $ (11,948 )   $ (6,692 )   $ (18,009 )
                         
Basic net loss per common share
  $ (0.64 )   $ (0.37 )   $ (1.76 )
Weighted average number of common shares outstanding
    18,564       18,284       10,225  
Diluted net loss per common share
  $ (0.64 )   $ (0.37 )   $ (1.76 )
Weighted average number of common shares and equivalents outstanding
    18,564       18,284       10,225  
 
The accompanying notes to consolidated financial statements are an integral part of these consolidated statements.


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Dayton Superior Corporation and Subsidiary

Consolidated Statements of Stockholders’ Deficit
Years Ended December 31, 2008, 2007, and 2006
 
                                                                                 
                                        Accumulated Other Comprehensive Loss              
                                              Pension and
 		             
                                              Other
 		             
                                        Cumulative
 		    Post-
 		             
                Additional
 		                      Foreign
 		    Retirement
 		             
    Common stock     Paid-in
 		    Loans to
 		    Treasury stock     Currency
 		    Benefits
 		    Accumulated
 		       
    Shares     Amount     Capital     Stockholders     Shares     Amount     Translation     liability     Deficit     Total  
    ($ in thousands)  
 
Balances January 1, 2006
    9,522,165     $ 115,248     $ —     $ (1,643 )     111,167     $ (1,509 )   $ 631     $ (2,393 )   $ (270,611 )   $ (160,277 )
Net loss
                                                                    (18,009 )     (18,009 )
Foreign currency translation adjustment
                                                    (55 )                     (55 )
Change in pension liability
                                                            733               733  
Adoption of SFAS 158
                                                            (40 )             (40 )
Reincorporation as a Delaware corporation
    (111,167 )     (115,154 )     113,645               (111,167 )     1,509                               —  
Expiration of put options as a result of initial public offering
    506,318       5       800       (805 )                                             —  
Grant of stock options and restricted stock
    1,005,967       10       2,239                                                       2,249  
Changes in loans to stockholders
                            180                                               180  
Issuance of common stock, net of issuance costs of $9,203
    7,850,000       79       84,918                                                       84,997  
                                                                                 
Balances at December 31, 2006
    18,773,283       188       201,602       (2,268 )     —       —       576       (1,700 )     (288,620 )     (90,222 )
Net loss
                                                                    (6,692 )     (6,692 )
Change in pension and other post-retirement benefits
                                                            (251 )             (251 )
Foreign currency translation adjustment
                                                    757                       757  
Issuance of common stock, net of issuance costs of $402
    250,000       3       2,595                                                       2,598  
Exercise of stock options, including benefit for income taxes of $25
    20,641       —       205                                                       205  
Exercise of warrants
    22,288       —       —                                                       —  
Stock compensation expense
                    2,779                                                       2,779  
Changes in loans to stockholders
                            1,183                                               1,183  
                                                                                 
Balances at December 31, 2007
    19,066,212       191       207,181       (1,085 )     —       —       1,333       (1,951 )     (295,312 )     (89,643 )
Net loss
                                                                    (11,948 )     (11,948 )
Change in pension and other post-retirement benefits
                                                            (4,865 )             (4,865 )
Foreign currency translation adjustment
                                                    (1,228 )                     (1,228 )
Exercise of warrants
    4,485       —                                                               —  
Stock compensation expense
                    1,440                                                       1,440  
Changes in loans to stockholders
                            (34 )                                             (34 )
                                                                                 
Balances at December 31, 2008
    19,070,697     $ 191     $ 208,621     $ (1,119 )     —     $ —     $ 105     $ (6,816 )   $ (307,260 )   $ (106,278 )
                                                                                 
 
The accompanying notes to consolidated financial statements are an integral part of these consolidated statements.
 


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Dayton Superior Corporation and Subsidiary
 
Consolidated Statements of Cash Flows
Years Ended December 31
 
                         
    2008     2007     2006  
    ($ in thousands)  
 
Cash Flows From Operating Activities:
                       
Net loss
  $ (11,948 )   $ (6,692 )   $ (18,009 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
                       
Depreciation
    23,824       25,106       25,919  
Amortization of intangibles
    129       247       560  
Provision for accounts receivable reserve
    4,657       3,023       3,712  
Loss on extinguishment of long-term debt
    6,224       —       —  
Stock compensation expense
    1,440       2,779       2,249  
Deferred income taxes
    (102 )     (9 )     (315 )
Amortization of deferred financing costs and debt discount
    12,676       7,021       5,680  
Amortization of deferred gain from sale-leaseback
    (777 )     (1,624 )     (3,021 )
Gain on sales of used rental equipment
    (15,981 )     (19,932 )     (20,735 )
(Gain) loss on disposals of property, plant, and equipment
    (120 )     1,050       435  
Change in assets and liabilities:
                       
Accounts receivable
    860       471       (8,258 )
Inventories
    (381 )     (8,142 )     (1,024 )
Prepaid expenses and other assets
    20       220       (581 )
Prepaid income taxes
    —       (415 )     226  
Accounts payable
    (12,700 )     (125 )     9,576  
Accrued liabilities and other long-term liabilities
    (4,640 )     (4,153 )     7,336  
                         
Net cash provided by (used in) operating activities
    3,181       (1,175 )     3,750  
                         
Cash Flows From Investing Activities:
                       
Property, plant and equipment additions
    (12,309 )     (19,943 )     (13,237 )
Proceeds from sale of property, plant, and equipment
    1,506       38       21  
Rental equipment additions
    (12,592 )     (25,230 )     (21,535 )
Proceeds from sales of used rental equipment
    22,997       23,715       23,532  
                         
Net cash used in investing activities
    (398 )     (21,420 )     (11,219 )
                         
Cash Flows From Financing Activities:
                       
Repayments of long-term debt, including revolving credit facility
    (323,921 )     (108,767 )     (190,608 )
Issuance of long-term debt, including revolving credit facility
    328,437       106,449       139,028  
Financing costs incurred
    (5,253 )     (712 )     (1,272 )
Issuance of common stock, net of issuance costs
    —       791       87,009  
Prepayment premium on redemption of long term-debt
    (4,641 )     —       —  
Change in loans to stockholders
    (34 )     1,183       180  
                         
Net cash provided by (used in) financing activities
    (5,412 )     (1,056 )     34,337  
                         
Effect of Exchange Rate Changes on Cash
    (354 )     219       (55 )
                         
Net increase (decrease) in cash and cash equivalents
    (2,983 )     (23,432 )     26,813  
Cash and cash equivalents, beginning of year
    3,381       26,813       —  
                         
Cash and cash equivalents, end of year
  $ 398     $ 3,381     $ 26,813  
                         
Supplemental Disclosures:
                       
Cash paid for income taxes
  $ 304     $ 568     $ 341  
Cash paid for interest
    40,730       39,546       44,771  
Purchase of equipment on capital lease
    24       —       917  
Property, plant and equipment and rental equipment additions in accounts payable
    756       3,710       2,762  
Financing cost additions in accounts payable
    669       71       736  
Common share issuance costs in accounts payable
    —       —       2,012  
Sales of used rental equipment in accounts and notes receivable
    7,943       12,451       11,283  
 
The accompanying notes to consolidated financial statements are an integral part of these consolidated statements.


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Dayton Superior Corporation and Subsidiary
 
Consolidated Statements of Comprehensive Loss
Years Ended December 31
 
                         
    2008     2007     2006  
    ($ in thousands)  
 
Net loss
  $ (11,948 )   $ (6,692 )   $ (18,009 )
Other comprehensive income (loss):
                       
Foreign currency translation adjustment
    (1,228 )     757       (55 )
Change in pension and other post-retirement benefits liability
    (4,865 )     (251 )     693  
                         
Comprehensive loss
  $ (18,041 )   $ (6,186 )   $ (17,371 )
                         
 
The accompanying notes to consolidated financial statements are an integral part of these consolidated statements.


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Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
($ in thousands, except per share amounts)
 
(1)   The Company
 
The accompanying consolidated financial statements include the accounts of Dayton Superior Corporation and its wholly-owned subsidiary (collectively referred to as the “Company”). All intercompany transactions have been eliminated.
 
Odyssey Investment Partners Fund, LP (“Odyssey”) is the Company’s principal stockholder. Along with certain of its affiliates, co-investors, and certain members of the Company’s management who are a party to a voting agreement, Odyssey controlled 47.8% of the Company as of December 31, 2008.
 
In December 2006, in connection with the Company’s initial public offering of its common stock, the Company amended its certificate of incorporation to effectuate a 2.1673-for-1 stock split. All common share amounts in the consolidated financial statements have been retroactively adjusted for all periods presented to give effect to the stock split.
 
In its initial public offering, the Company issued 7,850,000 shares of common stock and received net proceeds of $84,997, net of issuance costs. In January 2007, the underwriters of the offering exercised a portion of their over-allotment option. The Company issued an additional 250,000 shares of common stock and received net proceeds of $2,598, net of issuance costs.
 
The Company believes it is the largest North American manufacturer and distributor of metal accessories and forms used in concrete construction and of metal accessories used in masonry construction. The Company has a distribution network consisting of 18 manufacturing/distribution plants and 22 service/distribution centers in the United States, Canada, and Mexico. The Company employs approximately 600 salaried and 800 hourly personnel, of whom approximately 400 of the hourly personnel are represented by labor unions. Employees at the Miamisburg, Ohio; Parsons, Kansas; Des Plaines, Illinois; New Braunfels, Texas; Tremont, Pennsylvania; City of Industry, California, and Aurora, Illinois facilities are covered by collective bargaining agreements.
 
(2)   Going Concern
 
The financial statements were prepared assuming that the Company will continue as a going concern. The Company’s recurring losses, stockholders’ deficit and inability to generate sufficient cash flow to meet its obligations as they come due and sustain its operations raise substantial doubt about its ability to continue as a going concern. Further, if the Company is unsuccessful in refinancing or extending the term of its revolving credit facility, term loan and/or Senior Subordinated Notes, and the Company likely would be required to seek the protection of the federal bankruptcy laws. In addition, it is possible that creditors could file an involuntary petition in bankruptcy against the Company
 
The Company has been engaged in a process to evaluate possible strategic alternatives in light of the maturity of indebtedness under its senior credit facilities and the pending maturity of its outstanding Senior Subordinated Notes. These alternatives have included the possible sale of the company or a controlling interest in the Company, and an exploration of available options to refinance or otherwise restructure its outstanding indebtedness.
 
As of March 27, 2009, the Company had $367,814 in principal amount of debt (excluding debt discounts) maturing on or before June 15, 2009. If the Company is unable to refinance or extend that debt before its maturity, or if that debt is accelerated due to default, and the Company’s lenders require immediate repayment, the Company will not be able to repay them. The Company’s $150,000 revolving credit facility and term loan with a balance of $99,250 were scheduled to mature on March 14, 2009 unless the Company was able to repay or refinance the Senior Subordinated Notes due June 2009 prior to that time. The Company was unable to repay or refinance the Senior Subordinated Notes before the initial maturity date of the revolving credit facility and term loan. While the Company has entered into amendments to the revolving credit and term loan agreements to extend the scheduled maturities to give the Company time to continue negotiations on the terms of a more comprehensive amendment or forbearance arrangement and to allow the Company to continue to evaluate possible strategic alternatives to


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Notes to Consolidated Financial Statements — (Continued)
 
enhance stockholder value (including the possible sale of the Company or a controlling interest in the Company), as of March 31, 2009, those maturities had been extended only until April 9, 2009. In addition, the amendments (i) increase the rate of interest payable thereunder and provide for the payment of certain fees; (ii) require the Company to make interest rate payments on a monthly basis, rather than quarterly; (iii) require the Company to provide more frequent disclosures; (iv) provide that the Company will not extend its previously announced private exchange offer and concurrent consent solicitation with respect to the Notes that expires April 9, 2009 or accept for payment any Senior Subordinated Notes surrendered in connection therewith; and (v) require the Company provide, on or prior to April 9, 2009, a letter of intent or definitive term sheet for the acquisition of the Company by a person acceptable to the lenders on terms and conditions satisfactory to the lenders.
 
The Company’s Senior Subordinated Notes, which have a face value of $154,729, mature on June 15, 2009; however, the maturity of the Senior Subordinated Notes may be accelerated by the holders if the Company fails to repay its revolving credit facility and term loan when due. The Company commenced a private offer in July 2008 to exchange the Senior Subordinated Notes in a private placement for an equal amount of newly issued Senior Secured Notes due September 2014. The Company periodically has extended that offer, and the current expiration date of the offer is April 9, 2009. As of March 31, 2009, that offer had not been accepted by the holders of the required 95% in aggregate principal amount of the Senior Subordinated Notes (as of the close of business on March 12, 2009, only Senior Subordinated Notes with an aggregate principal amount of only $9,600 had been tendered and not withdrawn).
 
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 unable to continue as a going concern.
 
(3)   Summary of Significant Accounting Policies
 
Cash and Cash Equivalents
 
The Company considers all highly liquid investments with an original maturity of three months or less from the date of purchase to be cash equivalents. Cash equivalents are carried at cost, which approximates fair value.
 
Accounts Receivable Reserves
 
The Company maintains reserves for sales discounts and allowances and for doubtful accounts for estimated losses resulting from customer disputes and/or the inability of customers to make required payments. Receivables are charged to the allowance for doubtful accounts when an account is deemed to be uncollectible.
 
Inventories
 
The Company values 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 December 31, 2008 and 2007:
 
                 
    December 31,
    December 31,
 		 
    2008     2007  
 
Raw materials
  $ 13,641     $ 13,534  
Work in progress
    6,598       3,518  
Finished goods
    46,493       49,688  
                 
Total Inventory
  $ 66,732     $ 66,740  
                 


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Notes to Consolidated Financial Statements — (Continued)
 
Rental Equipment
 
Rental equipment is manufactured and purchased by the Company for rent to others on a short-term basis. Additionally, used rental equipment is sold to customers. Rental equipment is recorded at the lower of FIFO cost or market and is depreciated over the estimated useful lives of the equipment, three to fifteen years, on a straight-line basis. Rental equipment that is sold is charged to cost of sales on a FIFO basis.
 
Property, Plant and Equipment
 
Property, plant and equipment are valued at cost and depreciated using straight-line methods over their estimated useful lives of 10-30 years for buildings and improvements and 3-10 years for machinery and equipment.
 
Leasehold improvements are amortized over the lesser of the term of the lease or the estimated useful lives of the improvements. Improvements and replacements are capitalized, while expenditures for maintenance and repairs are charged to expense as incurred.
 
Included in the cost of property, plant and equipment and rental equipment are assets obtained through capital leases. As of December 31, 2008, the cost of assets under capital lease is $3,426 with accumulated amortization of $2,084. As of December 31, 2007, the cost of assets under capital lease was $4,829, with accumulated amortization of $2,819. Amortization expense related to assets under capital lease was $588, $553, and $778 for the years ended December 31, 2008, 2007, and 2006, respectively.
 
In accordance with SFAS No. 144, the Company tests for the recoverability of property, plant, and equipment whenever events or changes in circumstances indicated that the carrying amount may not be recoverable. There was no impairment to property, plant, and equipment for the years ended December 31, 2008, 2007, and 2006.
 
Goodwill
 
The Company reviews the recorded value of its goodwill annually for the product sales reporting unit, which is the only business segment with goodwill, as of the end of the fiscal third quarter, or more frequently if events or changes in circumstances indicate that the carrying amount may exceed fair value. An additional review was performed as of December 31, 2008. The review for impairment requires the Company to estimate the fair value of its product sales reporting unit and considerable judgment must be exercised in determining these values.
 
When exercising judgment, the Company considers all of the relevant facts and circumstances available to us at the time. The critical factors affecting this analysis include:
 
  •  the amount of adjusted EBITDA (which is income from operations adjusted to exclude depreciation and amortization of intangibles; gain (loss) from disposals of property, plant, and equipment; facility closing and severance expenses; and stock compensation expense) generated by the product sales reporting unit;
 
  •  the historical ability to meet operating results compared to projections;
 
  •  the level of expected activity in the nonresidential construction industry; and
 
  •  the Company’s future prospects.
 
Taking all of these factors into account, the Company determine the fair value of the product sales reporting unit by deriving enterprise value indications using a weighted average of multiple valuation approaches, including discounted cash flow analyses and a range of adjusted EBITDA multiples from market prices of companies that provide a reasonable basis of comparison.
 
There was no impairment to goodwill for the years ended December 31, 2008, 2007 and 2006.
 
Income Taxes
 
Deferred tax assets and liabilities are recorded for temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities. Deferred tax assets and liabilities reflect the enacted tax rates in


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Notes to Consolidated Financial Statements — (Continued)
 
effect for the years the differences are expected to reverse. The Company evaluates the need for a deferred tax asset valuation allowance by assessing whether it is more likely than not that it will realize deferred tax assets in the future. In estimating whether deferred tax assets are realizable, we consider both positive and negative evidence. We estimate levels of future taxable income by considering historical results of operations in recent years and would, if necessary, consider the implementation of prudent and feasible tax planning strategies to generate taxable income.
 
The Company also records liabilities for uncertain tax matters based on an assessment of the likelihood of sustaining certain tax positions.
 
Foreign Currency Translation Adjustment
 
The financial statements of the Company’s foreign subsidiary are maintained in its functional currency (Canadian dollars) and are then translated into U.S. dollars. The balance sheets are translated at end of year rates while revenues, expenses and cash flows are translated at weighted average rates throughout the year. Translation adjustments, which result from changes in exchange rates from period to period, are accumulated in a separate component of stockholders’ deficit.
 
Transactions in foreign currencies are translated into U.S. dollars at the rate in effect on the date of the transaction. Changes in foreign exchange rates from the date of the transaction to the date of the settlement of the asset or liability are recorded as income or expense.
 
Revenue Recognition
 
Revenue is generally recognized from product sales when the product is shipped from the Company’s facilities and risk of loss and title have passed to the customer. Additionally, revenue is recognized at the customer’s written request and when the customer has made a fixed commitment to purchase goods on a schedule consistent with the customer’s business, where risk of ownership has passed to the buyer, the goods are physically segregated, and we do not retain any specific performance obligations. For customer-requested bill and hold transactions in which a performance obligation exists on the Company’s part prior to the delivery date, we do not recognize revenue until the total performance obligation has been met and all of the above criteria related to bill and hold transactions have been met. In instances where the customer provides payment for these services prior to the delivery date, the revenue is deferred until all performance obligations have been met. Sales recognized under bill and hold arrangements were $3,845, $3,064, and $3,675 as of December 31, 2008, 2007, and 2006, respectively. For rental equipment sales, revenue is recognized and recorded on the date of shipment. Rental revenues are recognized ratably over the terms of the rental agreements. Sales orders with multiple deliverables are allocated among the components based on the relative fair values of the individual components. Freight amounts billed to a customer in a sales transaction are classified as sales and totaled $15,287, $12,848, and $13,443 for the years ended December 31, 2008, 2007, and 2006, respectively. The related costs are recorded as cost of sales.
 
Customer Rebates
 
The Company offers rebates to certain customers that are redeemable only if the customer meets certain specified thresholds relating to an aggregate level of sales. The Company records such rebates as a reduction of sales in the periods that the individual sales transactions are recognized. The rebates accrued as of December 31, 2008 and 2007 were $1,407 and $2,849, respectively.
 
Stock Compensation Expense
 
The Company measures compensation cost for stock options and restricted stock in accordance with SFAS No. 123R, Accounting for Stock-Based Compensation, using a modified prospective application.


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Notes to Consolidated Financial Statements — (Continued)
 
Loss Per Share of Common Stock
 
Basic loss per share of common stock is computed by dividing net loss by the weighted average number of vested shares of common stock outstanding during the period. Diluted loss per share is computed by dividing net loss by the weighted average number of shares of common stock and common stock equivalents outstanding, if dilutive, during each period. The Company’s common stock equivalents consist of unvested shares, warrants, and stock options. For the years ended December 31, 2008, 2007, and 2006, shares of 1,907,392, 1,478,626, and 1,868,092, respectively, were not included in the calculation of diluted loss per share as their effect would have been anti-dilutive.
 
Use of Estimates
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the balance sheet date and the reported amounts of revenues and expenses during the year. Actual results could differ from those estimates. Examples of accounts in which estimates are used include the allowance for doubtful accounts and sales returns and allowances, the reserve for excess and obsolete inventory, the fair value of the Company’s product sales reporting unit, the accrual for self-insured employee medical claims, the self-insured general liability accrual, the self-insured workers’ compensation accrual, accruals for litigation losses, the valuation allowance for deferred tax assets, stock-based compensation, and actuarial assumptions used in determining pension benefits.
 
Fair Value of Financial Instruments
 
The carrying amount of accounts receivable approximate fair value because of the relatively short maturity of these financial instruments. Fair values of debt are based on recent quoted market prices of the Company’s debt instrument or similar debt instruments.
 
Recent Accounting Pronouncements
 
The Financial Accounting Standards Board has issued several pronouncements that we adopted in 2008 or are required to adopt in 2009. However, currently these pronouncements are either not applicable or not material to the Company’s consolidated financial statements.
 
(4)   Credit Arrangements
 
During the first quarter of 2008, the Company refinanced a portion of its long-term debt. The Company entered into a new $150,000 revolving credit facility and issued a $100,000 term loan. The proceeds of the term loan and an initial draw on the revolving credit facility were used to repay the Company’s $165,000 Senior Second Secured Notes. A summary of the sources and uses of cash at the closing of the refinancing was as follows:
 
         
Sources:
       
Issuance of $100,000 term loan, net of discount
  $ 94,250  
Initial draw on new revolving credit facility
    88,666  
         
    $ 182,916  
         
Uses:
       
Repayment of Senior Second Secured Notes
  $ 165,000  
Prepayment premium on Senior Second Secured Notes
    4,641  
Accrued interest
    9,836  
Financing costs paid at closing
    3,439  
         
    $ 182,916  
         


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Notes to Consolidated Financial Statements — (Continued)
 
In conjunction with the refinancing, the Company recorded a loss on extinguishment of long-term debt, comprised of the following:
 
                 
Prepayment premium on Senior Second Secured Notes
          $ 4,641  
Unamortized debt discount on Senior Second Secured Notes
            1,063  
Unamortized financing costs on Senior Second Secured Notes
            243  
Unamortized financing costs on previous revolving credit facility
            277  
                 
Loss on extinguishment of long-term debt
          $ 6,224  
                 
 
Under the new revolving credit facility, borrowings are limited to 85% of eligible accounts receivable and 60% of eligible inventories and rental equipment. At December 31, 2008, $107,881 was available, of which $84,846 was outstanding at a weighted average interest rate of 5.3%. Outstanding letters of credit were $8,924, resulting in available borrowings of $14,111. The new revolving credit facility was scheduled to mature on March 14, 2009 unless the Senior Subordinated Notes (the “Notes”) that mature in June 2009 were repaid or refinanced prior to that time. The Company was unable to repay or refinance the Notes before the initial maturity date. While the Company has entered into amendments to the new revolving credit facility to extend the scheduled maturities to give the Company time to continue negotiations on the terms of a more comprehensive amendment or forbearance arrangement and to allow the Company to continue to evaluate possible strategic alternatives to enhance stockholder value (including the possible sale of the Company or a controlling interest in the Company), as of March 31, 2009, those maturities had been extended only until April 9, 2009. In addition, the amendments (i) increase the rate of interest payable thereunder and provide for the payment of certain fees; (ii) require the Company to make interest rate payments on a monthly basis, rather than quarterly; (iii) require the Company to provide more frequent disclosures; (iv) provide that the Company will not extend its previously announced private exchange offer and concurrent consent solicitation with respect to the Notes that expires April 9, 2009 or accept for payment any Senior Subordinated Notes surrendered in connection therewith; and (v) require the Company provide, on or prior to April 9, 2009, a letter of intent or definitive term sheet for the acquisition of the Company by a person acceptable to the lenders on terms and conditions satisfactory to the lenders. Pursuant to recent amendments to the revolving credit agreement, effective as of March 23, 2009, (a) the interest rate has been increased to, at the Company’s option, the adjusted base rate, as defined, plus 5.5%, or LIBOR plus 6.5%, plus (i) an additional 1.5% on special overadvances (other than additional special overadvances), as defined, and (ii) an additional 3.5% on additional special overadvances, as defined, (with up to (1) other than in the case of interest on special overadvances and additional special overadvances, 4.0% of the total interest rate paid-in-kind at the Company’s option, (2) in the case of interest on special overadvances (other than additional special overadvances), 3.0% of such interest paid-in-kind at the Company’s option and (3) in the case of interest on additional special overadvances), 5.0% of such interest paid-in-kind at the Company’s option) and (b) the minimum adjusted base rate was established at 4.25% and the minimum LIBOR was established at 3.25%. The revolving credit facility is secured by a first priority security interest on substantially all of the current assets of the Company. and a second priority security interest on substantially all of the fixed assets of the Company.
 
The term loan was issued at a discount, which is being accreted to the face value using the effective interest method and reflected as interest expense. The loan was initially scheduled to mature on March 14, 2009 unless the Notes were repaid or refinanced prior to that time. The Company was unable to repay or refinance the Notes before the initial maturity date. While the Company has entered into amendments to the term loan to extend the scheduled maturities to give the Company time to continue negotiations on the terms of a more comprehensive amendment or forbearance arrangement and to allow the Company to continue to evaluate possible strategic alternatives to enhance stockholder value (including the possible sale of the Company or a controlling interest in the Company), as of March 31, 2009, those maturities had been extended only until April 9, 2009. In addition, to the amendments (i) increase the rate of interest payable thereunder and provide for the payment of certain fees; (ii) require the Company to make interest rate payments on a monthly basis, rather than quarterly; (iii) require the Company to provide more frequent disclosures; (iv) provide that the Company will not extend its previously announced private exchange offer and concurrent consent solicitation with respect to the Notes that expires April 9, 2009 or accept for payment any Senior Subordinated Notes surrendered in connection therewith; and require that the Company


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Notes to Consolidated Financial Statements — (Continued)
 
provide, on or prior to April 9, 2009, a letter of intent or definitive term sheet for the acquisition of the Company by a person acceptable to the agent and the lenders on terms and conditions satisfactory to the agent and the lenders. Effective March 16, 2009, the interest rate increased to, at the Company’s option, the adjusted base rate, as defined, plus 11.50%, or LIBOR plus 12.50% (with up to 8.00% of the total interest rate paid-in-kind at the Company’s option). Effective March 23, 2009, pursuant to an additional amendment to the term loan credit facility, the minimum adjusted base rate was increased to 4.25% from 3.25%. The term loan is subject to financial covenants based on debt to adjusted EBITDA, as defined in the agreement, and interest coverage. The Company is in compliance with both of these covenants. Adjusted EBITDA would have had to decrease by approximately $14,000 for the Company to have been out of compliance with the more restrictive covenant. The term loan is secured by a first priority security interest in substantially all of the fixed assets of the Company and a second priority security interest in substantially all of the current assets of the Company. The estimated fair value of the term loan as of December 31, 2008 was approximately $85,835.
 
The average borrowings, maximum borrowings and weighted average interest rates on the new revolving credit facility and its predecessor for the periods indicated were as follows:
 
                         
    For the Year Ended  
    December 31,
 		    December 31,
 		    December 31,
 		 
    2008     2007     2006  
 
Average borrowing
  $ 95,520     $ 11,925     $ 69,784  
Maximum borrowing
    129,346       27,050       83,200  
Weighted average interest rate
    6.0 %     13.5 %     8.1 %
 
The weighted average interest rate is calculated by dividing interest expense (which is the sum of interest on borrowings, letter of credit fees, and commitment fees on unused credit and borrowing availability) by average borrowings. The high weighted average interest rate for the year ended December 31, 2007 is a reflection of the limited average borrowings during that period. Interest expense on the facility for the year ended December 31, 2007 was $1,611, consisting of $962 of interest on borrowings (8.1%), $239 of letter of credit fees (2.0%), and $410 for commitment fees on unused availability (3.4%).
 
Effective March 16, 2009, the interest rate increased to, at the Company’s option, the adjusted base rate, as defined, plus 5.5%, or LIBOR plus 6.5% (with up to 4.0% of the total interest rate paid-in-kind at the Company’s option), plus an additional 1.5% on special overadvances, as defined. Effective March 23, 2009, the minimum adjusted base rate was increased to 4.25%, and the interest rate on special overadvances, is, at the Company’s option, the adjusted base rate plus 11.0% or LIBOR plus 10.0% (with up to 5.0% of the total interest rate payable-in-kind at the Company’s option).
 
Following is a summary of the Company’s other long-term debt as of December 31, 2008 and December 31, 2007:
 
                 
    December 31,
 		    December 31,
 		 
    2008     2007  
 
Senior Subordinated Notes, interest rate of 13.0%
  $ 154,729     $ 154,729  
Debt discount on Senior Subordinated Notes
    (1,117 )     (3,045 )
Term loan, interest rate of 7.9%
    99,250       —  
Debt discount on term loan
    (1,175 )     —  
Senior Second Secured Notes, interest rate of 10.75%
    —       165,000  
Debt discount on Senior Second Secured Notes
    —       (1,393 )
Senior notes payable to seller in 2003 acquisition, non-interest bearing, accreted at 14.5%
    —       6,907  
Debentures
    1,024       1,035  
Capital lease obligations
    337       1,364  
                 
Total long-term debt
    253,048       324,597  
Less current maturities
    (252,987 )     (8,990 )
                 
Long-term portion
  $ 61     $ 315,607  
                 


42

Table of Contents

 
Notes to Consolidated Financial Statements — (Continued)
 
The Notes mature on June 15, 2009. However the maturity of the Notes may be accelerated by the holders if the Company fails to repay its revolving credit facility and term loan when due. In July 2008 the Company commenced a private offer to exchange its Notes in a private placement for an equal amount of newly issued Senior Secured Notes due September 2014. The Company has periodically extended that offer, and the current expiration date is April 9, 2009. As of March 31, 2009, that offer had not been accepted by the holders of the required 95% in aggregate principal amount of the Notes (as of the close of business on March 12, 2009, Notes with an aggregate principal amount of $9.6 million had been tendered and not withdrawn). Effective March 23, 2009, amendments to the new revolving credit facility and the term loan restrict the Company from further extending the offer or from accepting for payment any Notes surrendered in connection with the exchange offer. The Notes were issued at a discount that 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 254,172 shares of the Company’s common stock for $0.0046 per share, of which 227,395 remain outstanding as of December 31, 2008. The estimated fair value of the notes was $100,760 and $145,445 as of December 31, 2008 and 2007, respectively.
 
A breach of any of the covenants or restrictions contained in any of existing or future debt agreements could result in an event of default under those agreements. Such a default could allow the creditors under the debt agreements to discontinue lending, to accelerate the related debt as well as any other debt to which a cross-acceleration or cross-default provision applies, and to declare all borrowings outstanding thereunder to be due and payable. If our creditors require immediate repayments, we may not be able to repay them.
 
Other long-term debt at December 31, 2008 consisted of $1,024 of 9.1% junior subordinated debentures and $337 of capital lease obligations. The debentures are due on demand, but have an ultimate maturity of September 30, 2029. The capital lease obligations are due in monthly payments through August 2014.
 
The wholly-owned foreign subsidiary of the Company is not a guarantor of the Notes and does not have any credit arrangements senior to the Notes. The Company’s ability to pay dividends on its common stock is limited by the covenants of its revolving credit facility and the indentures governing its outstanding debt securities.
 
Scheduled maturities of long-term debt and future minimum lease payments under capital leases are as follows:
 
                                 
    Revolving
 		    Other Long-
 		    Capital
 		       
Year
  Credit Facility     Term Debt     Leases     Total  
 
2009
  $ 84,846     $ 255,003     $ 295     $ 340,144  
2010
    —       —       46       46  
2011
                    5       5  
2012
                    5       5  
2013
                    5       5  
Thereafter
    —       —       3       3  
                                 
Long-term debt and capital lease payments
    84,846       255,003       359       340,208  
Less: Debt discount
    —       (2,292 )     —       (2,292 )
Less: Amounts representing interest
    —       —       (22 )     (22 )
                                 
    $ 84,846     $ 252,711     $ 337     $ 337,894  
                                 
 
The Company capitalizes financing costs associated with obtaining debt instruments and amortizes them over the life of the credit agreement. The costs are reflected as “Other assets” on the consolidated balance sheets and had a net value of $2,717 and $1,810 as of December 31, 2008 and 2007, respectively. The amortization is reflected as “Interest expense” on the consolidated statements of operations and was $4,811, $2,556, and $1,821 for the years ended December 31, 2008, 2007, and 2006, respectively.


43

Table of Contents

 
Notes to Consolidated Financial Statements — (Continued)
 
(5)   Common Stock
 
Stock Option Plan —
 
The 2000 Dayton Superior Corporation Stock Option Plan, as amended, (“Stock Option Plan”), permits the grant of stock options to purchase 1,667,204 shares of common stock. Options that are cancelled may be reissued. The following table sets forth the status of the authorized options as of December 31, 2008:
 
         
Granted and outstanding
    1,428,505  
Granted and exercised
    122,998  
Available for granting
    115,701  
         
Total
    1,667,204  
         
 
The terms of the option grants are five or ten years from the date of grant. The weighted average remaining life of the outstanding options was 6.4 years as of December 31, 2008. For the options granted in 2008, 145,000 vest at a rate of 25% on each of the first four anniversaries of the grant date and 570,000 vest upon the earliest of: (i) December 31, 2010, (ii) immediately prior to a sale of the Company, or (iii) upon termination of employment without cause following a change of control of the Company. The options granted in 2007 vested upon stockholder approval, which was approximately a month after the issuance date. The options granted during 2006 vested on the grant date. For the options granted prior to 2006, between 10% and 25% of each option has a fixed vesting period of less than three years, with the remaining 75% to 90% of the option becoming exercisable nine years after the grant date. These options may be subject to accelerated vesting over one to five years from the grant date based on Company performance or upon certain change in control events based on the rate of return on investment achieved by the Company’s largest stockholder. Under the Stock Option Plan, the option exercise price must not be less than the stock’s market price on date of grant.
 
The Company accounts for stock options in accordance with SFAS No. 123R, Accounting for Stock-Based Compensation, and recorded non-cash compensation expense of $229, $144, and $699 for the years ended December 31, 2008, 2007 and 2006. Due to the Company’s net operating losses, no income tax benefit was recognized related to these options. The remaining expected future compensation expense for unvested stock options, based on estimated forfeitures of 7%, was $469 as of December 31, 2008, and is expected to be expensed over a weighted average period of 1.2 years.
 
The fair value of each option grant is estimated on the date of grant using the Black Scholes options pricing model with the following assumptions used for grants during the years ended December 31, 2008, 2007, and 2006:
 
             
    2008   2007   2006
 
Risk-free interest rates
  1.80 – 2.60%   4.19 – 4.61%   4.80%
Expected dividend yield
  0.00%   0.00%   0.00%
Expected life
  5 years   2 – 2.5 years   1 year
Range of expected volatility
  81.46 – 121.38%   16.31 – 47.03%   158.75%
Weighted average volatility
  113.28%   31.39%   158.75%
 
The expected life is based on the estimated future exercise patterns. The expected volatility was based on the continuously compounded rate of return of the Company’s daily stock price.


44

Table of Contents

 
Notes to Consolidated Financial Statements — (Continued)
 
A summary of the status of the Company’s stock option plans at December 31, 2008, 2007, and 2006, and changes during the years then ended is presented in the table and narrative below:
 
                                         
          Weighted
 		                   
          Average
 		    Unvested
 		    Weighted
 		    Aggregate
 		 
    Number of
 		    Exercise Price
 		    Number of
 		    Average Grant-
 		    Intrinsic
 		 
    Shares     Per Share     Shares     Date Value     Value  
 
Outstanding at January 1, 2006
    871,391     $ 11.96       671,901     $ 2.93     $ —  
Granted
    80,307       12.46       80,307       2.93          
Vested
    —               (80,307 )     2.93          
Expired
    (13,142 )     12.28       —                  
Forfeited
    (79,111 )     12.67       (79,111 )     2.22          
                                         
Outstanding at December 31, 2006
    859,445       11.93       592,790       3.02       293  
Granted
    35,091       8.13       35,091       1.02       —  
Vested
    —               (35,091 )     1.02          
Exercised
    (20,641 )     8.74       —               65  
Expired
    (20,592 )     12.49       —                  
Forfeited
    (109,541 )     12.51       (109,541 )     3.30          
                                         
Outstanding at December 31, 2007
    743,762       11.74       483,249       2.96       —  
Granted
    715,000       0.50       715,000       0.39          
Expired
    (16,228 )     8.18       —                  
Forfeited
    (14,029 )     12.46       (14,029 )     3.53          
                                         
Outstanding at December 31, 2008
    1,428,505       6.35       1,184,220       1.56     $ 177  
                                         
 
Price ranges and other information for stock options outstanding at December 31, 2008 are as follows:
 
                                                         
    Outstanding     Exercisable  
          Weighted
 		    Weighted
 		                Weighted
 		       
          Average
 		    Average
 		    Aggregate
 		          Average
 		    Aggregate
 		 
          Exercise
 		    Remaining
 		    Intrinsic
 		          Exercise
 		    Intrinsic
 		 
Range of Exercise Prices
  Shares     Price     Life     Value     Shares     Price     Value  
 
$0.33 - $4.12
    732,219     $ 0.99       9.7     $ 177       17,219     $ 4.12     $ —  
$8.97
    14,536       8.97       0.1       —       14,536       8.97       —  
$11.07 - $12.69
    681,750       12.07       2.9       —       212,530       12.18       —  
                                                         
      1,428,505     $ 6.35       6.4 years     $ 177       244,285     $ 11.42     $ —  
                                                         
 
As of December 31, 2008, the number of shares exercisable and expected to become exercisable was 1,342,497. The weighted average exercise price was $6.15, the weighted average remaining life was 6.4 years, and the aggregate intrinsic value was $177. The weighted average life of the exercisable shares is 3.4 years. The aggregate intrinsic value in the tables above is the amount by which the market value of the underlying stock exceeded the exercise price of outstanding options, and represents only in-the-money options.
 
During 2006, the Compensation Committee of the Board of Directors of the Company approved the issuance of 1,005,967 shares of restricted common stock to certain executives. Due to the completion of the Company’s initial public offering in December 2006, 25% of the stock vested on each of December 31, 2006, 2007, and 2008, and the remaining 25% will vest on December 31, 2009. The unvested portion of the stock is subject to forfeiture by the executive under certain circumstances and is subject to accelerated vesting upon a change of control, as defined.


45

Table of Contents

 
Notes to Consolidated Financial Statements — (Continued)
 
In accordance with SFAS 123R, the per share grant-date fair value was the fair value of a share of common stock on the grant date. The Company recorded $1,211, $2,635 and $1,550 of compensation expense for the years ended December 31, 2008, 2007 and 2006, respectively. The remaining compensation expense for unvested restricted stock is expected to be $485 in 2009. There was no cash impact to the Company for the restricted stock. Due to the Company’s net operating losses, no income tax benefit was recognized related to the stock.
 
A summary of the status of the Company’s outstanding restricted stock as of and for the year ended December 31, 2008, is presented in the table below:
 
                         
                Weighted
 		 
    Total
 		    Unvested
 		    Average
 		 
    Number of
 		    Number of
 		    Grant-Date
 		 
    Shares     Shares     Fair Value  
 
Outstanding at January 1, 2006
    —       —     $ —  
Granted
    1,005,967       1,005,967       5.85  
Vested
    —       (251,492 )     5.85  
                         
Outstanding at December 31, 2006
    1,005,967       754,475       5.85  
Vested
    —       (251,493 )     5.85  
                         
Outstanding at December 31, 2007
    1,005,967       502,982       5.85  
Vested
    —       (251,490 )     5.85  
                         
Outstanding at December 31, 2008
    1,005,967       251,492     $ 5.85  
                         
 
As of December 31, 2008, the unvested stock had an intrinsic value of $161.
 
(6)   Retirement Plans
 
Company-Sponsored Pension 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 approximately 35 salaried and hourly employees who retired prior to May 1, 1995.
 
Effective December 31, 2006, the Company adopted the provisions of SFAS 158, Employer’s Accounting for Defined Benefit Pension and Other Postretirement Plans — an amendment of FASB Statements No. 87, 88, 106, and 132(R). This Statement requires an employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income of a business entity. The adoption of SFAS 158 increased stockholders’ deficit by $40.


46

Table of Contents

 
Notes to Consolidated Financial Statements — (Continued)
 
The following table sets forth the funded status of the Company’s plans and the amounts recognized in the Company’s consolidated balance sheets and consolidated statements of operations as of and for the years ended December 31, 2008 and 2007:
 
                                 
    Pension
 		    Pension
 		    Postretirement
 		    Postretirement
 		 
    Benefits
 		    Benefits
 		    Benefits
 		    Benefits
 		 
    2008     2007     2008     2007  
 
Change in benefit obligation
                               
Benefit obligation at beginning of year
  $ 14,608     $ 13,920     $ 511     $ 539  
Service cost
    419       432       —       —  
Interest cost
    864       813       16       30  
Amendments
    110       —               —  
Actuarial loss/(gain)
    1,422       (144 )     (213 )     —  
Participant contributions
    —       —       155       128  
Benefits paid
    (458 )     (413 )     (120 )     (186 )
                                 
Benefit obligation at end of year
  $ 16,965     $ 14,608     $ 349     $ 511  
                                 
Change in plan assets
                               
Fair value of plan assets at beginning of year
  $ 13,091     $ 11,683     $ —     $ —  
Actual return on plan assets
    (2,564 )     483       —       —  
Participant contribution
    —       —       155       128  
Employer contribution
    1,117       1,338       (35 )     58  
Benefits paid
    (458 )     (413 )     (120 )     (186 )
                                 
Fair value of plan assets at end of year
  $ 11,186     $ 13,091     $ —     $ —  
                                 
Funded status
  $ (5,779 )   $ (1,517 )   $ (349 )   $ (511 )
                                 
Amounts recognized in the statement of financial position consist of:
                               
Current liability
  $ —     $ —     $ (26 )   $ (44 )
Long-term liability
    (5,779 )     (1,517 )     (323 )     (467 )
Accumulated other comprehensive loss (income):
                               
Net actuarial loss (gain)
    7,750       2,772       (304 )     (122 )
Prior service cost
    130       37       48       72  
 


47

Table of Contents

 
Notes to Consolidated Financial Statements — (Continued)
 
                                                 
                      Post
 		    Post
 		    Post
 		 
    Pension
 		    Pension
 		    Pension
 		    Retirement
 		    Retirement
 		    Retirement
 		 
    Benefits
 		    Benefits
 		    Benefits
 		    Benefits
 		    Benefits
 		    Benefits
 		 
    2008     2007     2006     2008     2007     2006  
 
Components of net periodic benefit cost:
                                               
Service cost
  $ 419     $ 432     $ 682     $ —     $ —     $ —  
Interest cost
    864       813       760       16       30       27  
Expected return on plan assets
    (1,080 )     (973 )     (816 )     —       —       —  
Amortization of actuarial (gain) loss
    88       70       145       (31 )     (9 )     (10 )
Amortization of prior service cost
    17       8       14       24       24       24  
                                                 
Net cost
  $ 308     $ 350     $ 785     $ 9     $ 45     $ 41  
                                                 
Change in other comprehensive income:
                                               
Amortization of actuarial gain (loss)
  $ (88 )   $ (70 )           $ 31     $ 8          
Actuarial gain loss arising during the period
    5,066       345               (213 )     —          
Amortization of prior service cost
    (17 )     (8 )             (24 )     (24 )        
Prior service cost arising during the period
    110       —               —       —          
                                                 
Increase (decrease) in other comprehensive loss (income)
  $ 5,071     $ 267             $ (206 )   $ (16 )        
                                                 
 
                 
Amounts Expected to be
 		        Post
 		 
Recognized in Net Periodic
 		  Pension
 		    Retirement
 		 
Pension Expense in 2009
  Benefits     Benefits  
 
(Gain) loss recognition
  $ 472     $ (27 )
Prior service cost recognition
    17       24  
                 
Total (before tax effect)
  $ 489     $ (3 )
                 
 
The weighted average assumptions used in the actuarial computation that derived the above funded status amounts were as follows:
 
                                 
    Pension
 		    Pension
 		    Postretirement
 		    Postretirement
 		 
    Benefits
 		    Benefits
 		    Benefits
 		    Benefits
 		 
    2008     2007     2008     2007  
 
Discount rate
    5.75 %     6.00 %     5.75 %     5.75 %
Rate of compensation increase
    N/A       N/A       N/A       N/A  
 
The weighted average assumptions used in the actuarial computation that derived net periodic benefit cost were as follows:
 
                                                 
    Pension
 		    Pension
 		    Pension
 		                   
    Benefits
 		    Benefits
 		    Benefits
 		    Postretirement
 		    Postretirement
 		    Postretirement
 		 
    2008     2007     2006     Benefits 2008     Benefits 2007     Benefits 2006  
 
Discount rate
    6.00 %     6.00 %     5.75 %     5.75 %     5.75 %     5.75 %
Expected return on plan assets
    8.00 %     8.00 %     8.00 %     N/A       N/A       N/A  
Rate of compensation increase
    N/A       N/A       N/A       N/A       N/A       N/A  

48

Table of Contents

 
Notes to Consolidated Financial Statements — (Continued)
 
One of the principal components of the net periodic pension cost calculation is the expected long-term rate of return on assets. The required use of an expected long-term rate of return on plan assets may result in recognized pension income that is greater or less than the actual returns of those plan assets in any given year. Over time, however, the expected long-term returns are designed to approximate the actual long-term returns and therefore result in a pattern of income and expense recognition that more closely matches the pattern of the services provided by the employees. The plan’s assets are invested primarily in equity and fixed income mutual funds. The Company uses its long-term historical actual return experience and estimates of future long-term investment return with consideration to the expected investment mix of the plan’s assets to develop the expected rate of return assumption used in the net periodic pension cost calculation.
 
The Company’s expected return on plan assets is 8.0%, which represents a weighted average of 11% for equity securities, 5.5% for debt securities, and 4% for cash and cash equivalents and insurance contract applied to the Plan’s target asset allocations.
 
The postretirement healthcare benefit plan is unfunded and has no plan assets. Therefore, the expected long-term rate of return on plan assets is not a factor in accounting for this benefit plan. At December 31, 2008 and 2007, the postretirement healthcare benefit plan had accumulated benefit obligations of $349 and $511, respectively, which consists of life insurance benefits. As the participant contributions exceed the benefit payments, there is no actuarial liability for medical benefits. Accordingly, the assumed health care cost trend rates are not applicable.
 
As of December 31, 2008 and 2007, the pension plan had accumulated benefit obligations of $16,965 and $14,609, respectively.
 
The pension plan asset allocations at December 31, 2008 and 2007, by asset category were as follows:
 
                 
    Plan Assets at December 31,  
Asset Category
  2008     2007  
 
Equity Securities
    33 %     48 %
Debt Securities
    30       26  
Cash and Cash Equivalents
    31       22  
Insurance Contract
    6       4  
                 
Total
    100 %     100 %
 
The Company’s pension plan asset investment strategy is to invest in a combination of equities and fixed income investments while maintaining a moderate risk posture. The targeted asset allocation within the investment portfolio is 55% equities and 45% fixed income. The Company’s allocation is temporarily out of balance due to the recent rapid decline of the value of equity securities. The Company evaluates the performance of the pension investment program in the context of a three- to five-year horizon.
 
The Company’s contributions meet the minimum funding requirements of the Internal Revenue Service. For the year ended December 31, 2008, contributions totaling $1,117 were made, comprised of $300 for the fourth quarterly installment for the 2007 plan year and three quarterly installments of $272 each for the 2008 plan year. Total contributions in 2009 are expected to be $606.
 
The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:
 
                 
    Pension
    Other
 
    Benefits     Benefits  
 
2009
  $ 585     $ 26  
2010
    637       27  
2011
    693       27  
2012
    763       27  
2013
    813       27  
Years 2014-2018
    5,101       131  


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Notes to Consolidated Financial Statements — (Continued)
 
Multi-Employer Pension Plan —
 
Approximately 20% of the Company’s employees are currently covered by collectively bargained, multi-employer pension plans. Contributions are determined in accordance with the provisions of negotiated union contracts and generally are based on the number of hours worked. The Company does not have the information available to determine its share of the accumulated plan benefits or net assets available for benefits under the multi-employer pension plans. The aggregate amount charged to expense under these plans was $475, $523, and $336 for the years ended December 31, 2008, 2007, and 2006, respectively.
 
401(k) Savings Plan —
 
Most employees are eligible to participate in Company-sponsored 401(k) savings plans. Company matching contributions were up to 2% of eligible compensation until March 31, 2008. Effective April 1, 2008, the matching contribution was enhanced to be up to 4.5% of eligible compensation. The aggregate amount charged to expense under these plans was $1,808, $808, and $751 for the years ended December 31, 2008, 2007, and 2006, respectively.
 
Retirement Contribution Account —
 
The Company’s defined contribution plan was replaced in 2008 with the enhanced 401(k) matching program and therefore had no expense. The amount charged to expense for the years ended December 31, 2007 and 2006 were $2,005 and $1,862, respectively.
 
(7)   Income Taxes
 
The following is a summary of the components of the Company’s income tax provision for the years ended December 31, 2008, 2007, and 2006:
 
                         
    2008     2007     2006  
 
Current tax (benefit):
                       
Federal
  $ (10 )   $ —     $ —  
State and local
    140       493       —  
Foreign
    583       (47 )     709  
Deferred taxes
    (3,896 )     (1,227 )     (5,777 )
Change in valuation allowance
    3,803       1,218       5,462  
                         
Total provision
  $ 620     $ 437     $ 394  
                         
 
The effective income tax rate differs from the statutory federal income tax rate for the years ended December 31, 2008, 2007, and 2006 for the following reasons:
 
                         
    2008     2007     2006  
 
Statutory income tax rate
    35.0 %     35.0 %     34.0 %
State income taxes, net of federal tax benefit and before valuation allowance
    (1.3 )     (7.8 )     3.9  
Permanent differences
    (6.6 )     (18.0 )     (4.5 )
Foreign income taxes
    1.4       3.9       (2.0 )
Valuation allowance
    (33.5 )     (19.2 )     (31.0 )
Other
    (0.5 )     (0.8 )     (2.6 )
                         
Effective income tax rate
    (5.5 )%     (6.9 )%     (2.2 )%
                         


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Notes to Consolidated Financial Statements — (Continued)
 
The components of the Company’s deferred taxes as of December 31, 2008 and 2007 are the result of book/tax basis differences related to the following items:
 
                 
    2008     2007  
 
Deferred tax assets:
               
Accounts receivable reserves
  $ 1,765     $ 1,730  
Inventory reserves
    1,781       1,898  
Goodwill and intangible assets
    2,547       2,156  
Accrued liabilities
    4,711       2,584  
Other long-term liabilities
    1,714       2,270  
Net operating loss carryforwards
    55,615       51,723  
Other
    410       407  
Valuation allowance
    (51,813 )     (48,010 )
                 
Total
    16,730       14,758  
                 
Deferred tax liabilities:
               
Accelerated depreciation
    (16,660 )     (14,495 )
Note payable to seller of Safway
    —       (286 )
                 
Total
    (16,660 )     (14,781 )
                 
Net deferred taxes
  $ 70     $ (23 )
                 
 
As of December 31, 2008, the Company’s net deferred tax assets are reported as $2,129 in the caption prepaid expenses and other current assets and $2,059 in the caption other long-term liabilities in the consolidated balance sheet.
 
For federal income tax purposes, the Company has federal net operating loss carryforwards of approximately $142,000 that expire over a ten-year period beginning in 2019. The Company also has state net operating tax loss carryforwards of approximately $109,000 that expire over a period of five to twenty years beginning in 2009. The Company has recorded a non-cash valuation allowance to reduce its deferred tax asset related to these net operating loss carryforwards and other net deferred tax assets, as estimated levels of future taxable income are less than the amount needed to realize these assets. If such estimates change in the future, the valuation allowance would be decreased or increased, resulting in a non-cash increase or decrease to net income.
 
The Financial Accounting Standards Board issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”), 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 adoption of Interpretation No. 48 did not have a material impact on the consolidated financial statements. The Company files income tax returns in the United States, Canada, and in various state, local, and provincial jurisdictions. The Company is subject to U.S. Federal income tax examination for 2005 through 2007, and in other jurisdictions for 2000 through 2007. 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 the


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Notes to Consolidated Financial Statements — (Continued)
 
provision for income taxes. A reconciliation of the beginning and ending balance of unrecognized tax benefits is as follows:
 
                 
    For The Year Ended
 		 
    December 31,  
    2008     2007  
 
Balance at January 1
  $ 987     $ 563  
Additions for new tax positions in current year
    —       570  
Additions to existing tax positions from prior year
    62       12  
Reductions in existing tax positions from prior year
    (728 )     (170 )
Reductions from expiration of statute
    (5 )     —  
Interest
    3       —  
Foreign currency translation
    (34 )     12  
                 
Balance at December 31
  $ 285     $ 987  
                 
 
As of December 31, 2008 and 2007, the amounts are reflected as $142 and $864, respectively, as reductions to the deferred tax asset related to the net operating loss carryforwards and $143 and $123, respectively, as income taxes payable, which, if recognized, would affect the future effective tax rate. There was no impact to the provision for income taxes or the effective rate reconciliation as a result of FIN 48. The total amount of accrued interest and penalties at December 31, 2008 and 2007 was $17 and $14, respectively. The Company does not expect any material changes in its uncertain tax positions for the next twelve months.
 
A provision has not been made for domestic or additional foreign taxes on the undistributed portion of earnings of the Company’s foreign subsidiary as those earnings have been permanently reinvested. The undistributed earnings of the Company’s foreign subsidiary approximate $8,000. The amount of the deferred tax liability associated with these earnings has not been calculated, as it is impractical to determine.
 
(8)   Segment Reporting
 
The Company uses three 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 percents of sales. Accordingly, this segmentation provides information for decision-making and resource allocation. Product sales represent sales of new products carried in inventories on the balance sheet. Cost of goods sold for product sales include material, manufacturing labor, overhead costs, and freight. Rental revenues represent the leasing of the rental equipment and are recognized ratably over the lease term. Cost of goods sold for rental revenues includes depreciation of the rental equipment, maintenance of the rental equipment, and freight. Sales of used rental equipment represent sales of the rental equipment after a period of generating rental revenue. Cost of goods sold for sales of used rental equipment consists of the net book value of the rental equipment. All other expenses, as well as assets and liabilities, are not tracked by sales type and therefore it is not practicable to disclose this information by segment. Depreciation was reflected in determining segment gross profit; however, it is not practicable to allocate the depreciation expense between the rental and used rental equipment segments. Export sales and sales by non-U.S. affiliates are not significant.


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Notes to Consolidated Financial Statements — (Continued)
 
Information about the income of each segment and the reconciliations to the consolidated amounts for the years ended December 31, 2008, 2007, and 2006 are as follows:
 
                         
    2008     2007     2006  
 
Product sales
  $ 399,929     $ 398,404     $ 388,100  
Rental revenue
    57,454       59,671       62,769  
Used rental equipment sales
    18,488       24,883       28,441  
                         
Net sales
    475,871       482,958       479,310  
                         
Product cost of sales
    281,929       292,946       296,351  
Rental cost of sales
    32,145       33,295       36,845  
Used rental equipment cost of sales
    2,507       4,951       7,706  
                         
Cost of sales
    316,581       331,192       340,902  
                         
Product gross profit
    118,000       105,458       91,749  
Rental gross profit
    25,309       26,376       25,924  
Used rental equipment gross profit
    15,981       19,932       20,735  
                         
Gross profit
  $ 159,290     $ 151,766     $ 138,408  
                         
Depreciation Expense:
                       
Product sales (Property, plant, and equipment)
  $ 6,624     $ 5,657     $ 5,041  
Rental Revenue (Rental equipment)
    13,575       16,623       19,156  
Corporate
    3,625       2,826       1,722  
                         
Total depreciation
  $ 23,824     $ 25,106     $ 25,919  
                         
 
(9)  Commitments and Contingencies
 
Operating Leases —
 
Rental expense for property, plant, and equipment (principally manufacturing/distribution, service/distribution, office facilities, forklifts, and office equipment) was $11,107, $10,261, and $7,514, for the years ended December 31, 2008, 2007 and 2006, respectively. Lease terms range from month-to-month to 20 years and some contain renewal options.
 
Aggregate minimum annual rental commitments under non-cancelable operating leases are as follows:
 
         
Year
  Amount  
 
2009
  $ 10,468  
2010
    9,407  
2011
    8,241  
2012
    7,426  
2013
    6,527  
Thereafter
    30,100  
         
Total
  $ 72,169  
         
 
Several of the Company’s operating leases contain predetermined fixed increases of the minimum rental rate during the initial lease term. For these leases, the Company recognizes the related rental expense on a straight-line basis and records the difference between the amount charged to expense and the rent paid as accrued rent. The amount of accrued rent as of December 31, 2008 and 2007 was $2,230 and $1,797, respectively.


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Notes to Consolidated Financial Statements — (Continued)
 
Litigation —
 
From time to time, the Company is involved in various legal proceedings arising out of the ordinary course of business. None of the matters in which the Company is currently involved, either individually, or in the aggregate, is expected to have a material adverse effect on the Company’s consolidated financial position, results of operations, or cash flows.
 
Self-Insurance —
 
The Company is self-insured for certain of its group medical, workers’ compensation and general liability claims. The Company estimates the reserves required for these claims, which are undiscounted. No material revisions were made to the estimates for the years ended December 31, 2008, 2007 and 2006. The Company has reserved $7,715 and $6,387 as of December 31, 2008 and 2007, respectively. The Company has stop loss insurance coverage at various per occurrence and per annum levels depending on the type of claim. The stop loss amounts are as follows:
 
                 
    Per Occurrence and
 		    Aggregate
 		 
Insurance Type
  per Annum Levels     per Annum Levels  
 
Group Medical
  $ 150       N/A  
Worker’s Compensation
  Up to $ 350     Up to $ 5,000  
General Liability
  Up to $ 500     Up to $ 4,000  
 
Severance Obligations —
 
The Company has employment agreements with certain of its executive management with annual base compensation ranging in value from $300 to $555. The agreements generally provide for salary continuation in the event of termination without cause for periods of one to three years. The agreements also contain certain non-competition clauses. As of December 31, 2008, the remaining aggregate commitment under these severance agreements if all individuals were terminated without cause was approximately $3,800.
 
(10)   Facility Closing and Severance
 
Facility closing and severance expenses for the year ended December 31, 2008 were $3,843 and were related to the completion of the move of a manufacturing and distribution operation from a leased facility in Des Plaines, Illinois to a newly leased facility in Elk Grove, Illinois and the reduction of overall headcount in response to declines in sales unit volumes. A summary of these activities as of and for the year ended December 31, 2008 is as follows:
 
                         
    One-Time
 		    Facility
 		       
    Termination
 		    Closing
 		       
    Benefits     Costs     Total  
 
Balance, January 1, 2008
  $ 77     $ —     $ 77  
Facility closing and severance expenses
    2,647       1,196       3,843  
Amounts paid
    (769 )     (1,196 )     (1,965 )
                         
Balance, December 31, 2008
  $ 1,955     $ —     $ 1,955  
                         
 
The remaining balance of the one-time termination benefits is expected to be paid throughout 2009. Expected future closing costs, primarily related to ongoing lease obligations of vacated facilities, of approximately $1,800 are expected to be incurred through the first quarter of 2013, approximately $800 of which is expected to be incurred in 2009.
 
Facility closing and severance expenses were $1,753 in 2007, due primarily to the move of a manufacturing and distribution operation from a leased facility in Des Plaines, Illinois to a newly leased facility in Elk Grove,


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Notes to Consolidated Financial Statements — (Continued)
 
Illinois. Facility closing and severance expenses were $423 in 2006, due to a realignment of the Company’s management structure and lease costs of distribution facilities exited in previous years.
 
(11)   Related Party Transactions
 
As of December 31, 2008, 2007, and 2006, the Company had outstanding loans to stockholders of $1,119, $1,085, and $2,268, respectively. There have been no new loans or changes to the existing agreements since July, 2002.
 
For the years ended December 31, 2008, 2007, and 2006, the Company reimbursed Odyssey for travel, lodging, and meals of $33, $86, and $45, respectively.
 
(12)  Quarterly Financial Information (Unaudited)
 
                                         
    2008  
    First
 		    Second
 		    Third
 		    Fourth
 		    Full
 		 
Quarterly Operating Data
  Quarter     Quarter     Quarter     Quarter     Year  
 
Net sales
  $ 95,379     $ 141,037     $ 135,775     $ 103,680     $ 475,871  
Gross profit
    28,055       51,361       47,768       32,106       159,290  
Net income (loss)
    (17,663 )(1)     8,461       6,366       (9,112 )     (11,948 )
Net income (loss) per basic share
    (0.95 )(1)     0.46       0.34       (0.49 )     (0.64 )
Net income (loss) per diluted share
    (0.95 )(1)     0.44       0.33       (0.49 )     (0.64 )
 
                                         
    2007  
    First
 		    Second
 		    Third
 		    Fourth
 		    Full
 		 
Quarterly Operating Data
  Quarter     Quarter     Quarter     Quarter     Year  
 
Net sales
  $ 99,022     $ 137,516     $ 130,823     $ 115,597     $ 482,958  
Gross profit
    29,371       44,423       39,064       38,908       151,766  
Net income (loss)
    (8,159 )     4,383       386       (3,302 )     (6,692 )
Net income (loss) per basic share
    (0.45 )     0.24       0.02       (0.18 )     (0.37 )
Net income (loss) per diluted share
    (0.45 )     0.23       0.02       (0.18 )     (0.37 )
 
 
(1) Includes loss on extinguishment of long term debt of $6,224.
 
The full year diluted per share amounts do not equal the sum of the quarterly amounts due to the dilutive effect of common stock equivalents in periods with net income.
 
Due to weather, the non-residential construction industry is seasonal in most of North America. Demand for our products generally is higher in the spring and summer than in the winter and late fall. As a result, our first quarter net sales and income from operations typically are the lowest of the year. Our net sales and income from operations in the fourth quarter are also generally less than in the second and third quarters. Consequently, our working capital requirements related to accounts receivable and inventories, and therefore our peak revolving credit facility borrowings, tend to be higher in the second and third quarters.


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DAYTON SUPERIOR CORPORATION AND SUBSIDIARY
 
Schedule II — Valuation and Qualifying Accounts
Years Ended December 31, 2008, 2007, and 2006
 
                                 
    Additions     Deductions  
    Balance at
 		    Charged
 		          Balance
 		 
    Beginning of
 		    to Costs and
 		          at End of
 		 
    Year     Expenses     Write-Offs     Year  
    (Amounts in thousands)  
 
Reserves for Doubtful Accounts and
                               
Sales Returns and Allowances
                               
For the year ended December 31, 2008
  $ 4,447     $ 4,657     $ (4,568 )   $ 4,536  
For the year ended December 31, 2007
    5,430       3,023       (4,006 )     4,447  
For the year ended December 31, 2006
    5,435       3,712       (3,717 )     5,430  
Valuation Allowance for Deferred Tax Assets
                               
For the year ended December 31, 2008
  $ 48,010     $ 3,803     $ —     $ 51,813  
For the year ended December 31, 2007
    46,792       1,218       —       48,010  
For the year ended December 31, 2006
    41,330       5,462       —       46,792  


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Item 9.   		Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
 
Not applicable.
 
Item 9A.   		Controls and Procedures.
 
Disclosure Controls and Procedures
 
The Company maintains disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act 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.
 
Management, with the participation of the Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal year covered by this Annual Report on Form 10-K. Based on that evaluation, the Chief Executive Office and Chief Financial Officer have concluded that such disclosure controls and procedures were effective as noted below as of the end of the fiscal year covered by this Annual Report on Form 10-K.
 
Annual Report of Management on Internal Control Over Financial Reporting
 
Management is responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Internal Control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect Dayton Superior Corporation’s transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of the financial statements; providing reasonable authorization of transactions; and providing reasonable assurance that unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on our financial statements would be prevented or detected on a timely basis.
 
Management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the internal control over financial reporting as of December 31, 2008. Management based its assessment on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management’s assessment included evaluation of such elements as the design and operating effectiveness of key financial reporting controls, process documentation, accounting policies and the overall control environment. This assessment is supported by testing and monitoring performed under the direction of management.
 
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Accordingly, even an effective system of internal control over financial reporting will provide only reasonable assurance with respect to financial statement preparation.
 
Based on the assessment of the internal control over financial reporting, management has concluded that the internal control over financial reporting was effective as of December 31, 2008. The results of management’s assessment were reviewed with the Audit Committee of the Board of Directors.


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Additionally, an independent registered public accounting firm, Deloitte & Touche, independently assessed the Company’s internal control over financial reporting and issued the accompanying Report of Independent Registered Public Accounting Firm.
 
March 31, 2009
 
Changes in Internal Control over Financial Reporting
 
There have been no changes in the Company’s internal control over financial reporting, as such item is defined in Exchange Act Rules 13a — 15(f) and 15d — 15(f), during the fiscal quarter ended December 31, 2008, that have materially affected, or are reasonable likely to materially affect the Company’s internal control over financial reporting.
 
Item 9B. — 		Other Information
 
Not applicable.


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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
To the Board of Directors and Stockholders of
Dayton Superior Corporation Dayton, Ohio
 
We have audited the internal control over financial reporting of Dayton Superior Corporation and subsidiary (the “Company”) as of December 31, 2008, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Annual Report of Management on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
 
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
 
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
 
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
 
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
 
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2008 of the Company and our report dated March 31, 2009 expresses an unqualified opinion on those financial statements and financial statement schedule and includes an explanatory paragraph regarding substantial doubt about the Company’s ability to continue as a going concern.
 
DELOITTE & TOUCHE LLP
 
Dayton, Ohio
March 31, 2009


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Item 9A(T)   Controls and Procedures.
 
Not applicable.
 
Part III
 
Item 10.   		Directors, Executive Officers, and Corporate Governance of the Registrant.
 
The information required by this Item 10 is incorporated herein by reference to the information under the headings “Directors and Nominees” and “Corporate Governance” in our proxy statement for the Annual Meeting of Stockholders, except for certain information concerning our executive officers, which is set forth at the end of Part I of this Annual Report on Form 10-K.
 
Item 11.   Executive Compensation
 
The information required by this Item 11 is incorporated herein by reference to the information under the heading “Executive Compensation” in our proxy statement for the Annual Meeting of Stockholders.
 
Item 12.   Security Ownership of Certain Beneficial Owners and Management, and Related Stockholder Matters
 
Equity Compensation Plan Information
 
The following table sets forth information concerning our equity compensation plans as of December 31, 2008, which currently includes only the 2000 Dayton Superior Corporation Stock Option Plan, as amended.
 
                         
                Number of Securities
 		 
    Number of Securities
 		          Available for Future
 		 
    to be Issued Upon
 		    Weighted Average Exercise
 		    Issuance Under Equity
 
    Exercise of
 		    Price of Outstanding
 		    Compensation Plans
 		 
    Outstanding Options,
 		    Options, Warrants and
 		    (Excluding Securities
 		 
Plan Category
  Warrants and Rights     Rights     Reflected in Column(a)  
 
Equity compensation plans approved by security holders
    1,428,505     $ 6.35       115,701  
Equity compensation plans not approved by security holders
    —       —       —  
                         
Total
    1,428,505     $ 6.35       115,701  
                         
 
The other information required by this Item 12 is incorporated herein by reference to the information under the heading “Beneficial Ownership of Common Stock” in our proxy statement for the Annual Meeting of Stockholders.
 
Item 13.   Certain Relationships and Related Transactions and Director Independence.
 
The information required by this Item 13 is incorporated herein by reference to the information under the headings “Certain Relationships and Related Party Transactions” and “Corporate Governance” in our proxy statement for the Annual Meeting of Stockholders.
 
Item 14.   Principal Accounting Fees and Services
 
The information required by this Item 14 is incorporated herein by reference to the information under the heading “Independent Auditors” in our proxy statement for the Annual Meeting of Stockholders.


60

Table of Contents

 
Part IV
 
Item 15.   		Exhibits and Financial Statement Schedules
 
(a)(1) Financial Statements  The following consolidated financial statements of the Company and subsidiaries are incorporated by reference as part of this Report under Item 8.
 
Report of Independent Registered Public Accounting Firm
 
Consolidated Balance Sheets as of December 31, 2008 and 2007
 
Consolidated Statements of Operations for the years ended December 31, 2008, 2007, and 2006
 
Consolidated Statements of Stockholders’ Deficit for the years ended December 31, 2008, 2007, and 2006
 
Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2007, and 2006
 
Consolidated Statements of Comprehensive Loss for the years ended December 31, 2008, 2007, and 2006
 
Notes to Consolidated Financial Statements
 
(a)(2) Financial Statement Schedules
 
Schedule II — Valuation and Qualifying Accounts (at Item 8 of this Report)
 
All other schedules are omitted because they are not applicable, or not required, or because the required information is included in the consolidated financial statements or notes thereto.
 
(a)(3) Exhibits.  See Index to Exhibits following the signature pages to this Report for a list of exhibits.


61

Table of Contents

 
SIGNATURES
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Dayton Superior Corporation has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
DAYTON SUPERIOR CORPORATION
 
  By 
/s/  Eric R. Zimmerman
Eric R. Zimmerman
President and Chief Executive Officer
March 31, 2009
 
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of Dayton Superior Corporation and in the capacities and on the dates indicated.
 
             
NAME
 
TITLE
 
DATE
 
         
/s/  Eric R. Zimmerman

Eric R. Zimmerman 		  President, Chief Executive Officer and Director   March 31, 2009
         
/s/  Edward J. Puisis

Edward J. Puisis 		  Executive Vice President and Chief Financial Officer (Principal Financial Officer)   March 31, 2009
         
/s/  Thomas W. Roehrig

Thomas W. Roehrig 		  Vice President, Finance and Secretary (Principal Accounting Officer)   March 31, 2009
         
/s/  Stephen Berger

Stephen Berger 		  Director   March 31, 2009
         
/s/  Steven M. Berzin

Steven M. Berzin 		  Director   March 31, 2009
         
/s/  Joseph D. Hinkel

Joseph D. Hinkel 		  Director   March 31, 2009
         
/s/  William F. Hopkins

William F. Hopkins 		  Director   March 31, 2009
         
/s/  Sidney J. Nurkin

Sidney J. Nurkin 		  Director   March 31, 2009
         
/s/  Douglas Rotatori

Douglas Rotatori 		  Director   March 31, 2009


62

Table of Contents

Index of Exhibits
 
                 
Exhibit No.
 
Description
 
  (3)              
        Articles of Incorporation and By-Laws    
        3.1   Amended and Restated Certificate of Incorporation of the Company   †
        3.2   Amended and Restated By-Laws of the Company   †
  (4)              
        Instruments defining the Rights of Security Holders, Including Indentures    
        4.1   Form of Junior Convertible Subordinated Indenture between the Company and Firstar Bank, N.A., as Indenture Trustee [Incorporated by reference to Exhibit 4.2.3 to the Company’s Registration Statement on Form S-3 (Reg. 333-84613)]   †
        4.1.1   First Supplemental Indenture dated January 17, 2000, between the Company and Firstar Bank, N.A., as Trustee [Incorporated by reference to Exhibit 4.1.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004]   †
        4.1.2   Form of Junior Convertible Subordinated Debenture [Incorporated by reference to Exhibit 4.2.3 to the Company’s Registration Statement on Form S-3 (Reg. 333-84613)]   †
        4.1.3   Second Supplemental Indenture dated December 14, 2006 between the Company and U.S. Bank N.A., as trustee [Incorporated by reference to Exhibit 4.1.3 to the Company’s Registration Statement on Form S-1 (Reg. No. 333-137785)]   †
        4.2   Indenture dated June 16, 2000 among the Company, the Guarantors named therein, as guarantors, and United States Trust Company of New York, as trustee, relating to $170,000,000 in aggregate principal amount of 13% Senior Subordinated Notes due 2009 and registered 13% Senior Subordinated Notes due 2009 [Incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-4 (Reg. 333-41392)]   †
        4.2.1   First Supplemental Indenture dated as of August 3, 2000. [Incorporated by reference to Exhibit 4.5.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2001]   †
        4.2.2   Second Supplemental Indenture dated as of January 4, 2001. [Incorporated by reference to Exhibit 4.5.2 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2001]   †
        4.2.3   Third Supplemental Indenture dated as of June 19, 2001. [Incorporated by reference to Exhibit 4.5.3 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2001]   †
        4.2.4   Fourth Supplemental Indenture dated as of September 30, 2003. [Incorporated by reference to Exhibit 4.2.4 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2003]   †
        4.2.5   Fifth Supplemental Indenture dated as of December 4, 2006. [Incorporated by reference to Exhibit 4.2.5 to the Company’s Registration Statement on Form S-1 (Reg. No. 333-137785)]   †
        4.2.6   Sixth Supplemental Indenture dated as of December 14, 2006. [Incorporated by reference to Exhibit 4.2.6 to the Company’s Registration Statement on Form S-1 (Reg. No. 333-137785)]   †
        4.3   Specimen Certificate of 13% Senior Subordinated Notes due 2009 [Incorporated by reference to Exhibit 4.2 to the Company’s Registration Statement on Form S-4 (Reg. 333-41392)]   †
        4.4   Specimen Certificate of the registered 13% Senior Subordinated Notes due 2009 [Incorporated by reference to Exhibit 4.3 to the Company’s Registration Statement on Form S-4 (Reg. 333-41392)]   †
        4.5   Warrant Agreement dated as of June 16, 2000 between the Company and United States Trust Company of New York, as Warrant Agent [Incorporated by reference to Exhibit 4.5 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2003]   †


63

Table of Contents

                 
Exhibit No.
 
Description
 
        4.6   Warrant Shares Registration Rights Agreement dated as of June 16, 2000 among the Company and the Initial Purchasers [Incorporated by reference to Exhibit 4.6 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2003]   †
        4.7   Term Loan Credit Agreement Dated as of March 3, 2008 among Dayton Superior Corporation, as the Borrower the Lenders Party Hereto and General Electric Capital Corporation as Administrative Agent and Collateral Agent [Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed March 7, 2008]   †
        4.7.1   First Amendment to the Term Loan Credit Agreement, dated as of March 16, 2008, by and among Dayton Superior Corporation, the Lenders party thereto and General Electric Capital Corporation, as Administrative Agent and Collateral Agent.   **
        4.7.2   Second Amendment to the Term Loan Credit Agreement, dated as of March 16, 2009, by and among Dayton Superior Corporation, the Lenders party thereto and General Electric Capital Corporation, as Administrative Agent and Collateral Agent. [Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated March 16, 2009]   †
        4.7.3   Third Amendment to the Term Loan Credit Agreement, dated as of March 23, 2009, by and among Dayton Superior Corporation, the Lenders party thereto and General Electric Capital Corporation, as Administrative Agent and Collateral Agent. [Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated March 23, 2009]   †
        4.8   Revolving Credit Agreement Dated as of March 3, 2008 among Dayton Superior Corporation, as the Borrower the Lenders and L/C Issuers Party Hereto and General Electric Capital Corporation as Administrative Agent and Collateral Agent [Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed March 7, 2008]   †
        4.8.1   First Amendment to the Revolving Credit Agreement, dated as of March 16, 2009, by and among Dayton Superior Corporation, the Lenders signatory thereto and General Electric Capital Corporation, as Administrative Agent and Collateral Agent. [Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated March 16, 2009]   †
        4.8.2   Second Amendment to the Revolving Credit Agreement, dated as of March 23, 2009, by and among Dayton Superior Corporation, the Lenders signatory thereto and General Electric Capital Corporation, as Administrative Agent and Collateral Agent. [Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated March 23, 2009]   †
        4.9   Registration Rights Agreement among the Company, Odyssey Investment Partners Fund, LP, Odyssey Coinvestors, LLC, DS Coinvestment I, LLC and DS Coinvestment II, LLC [Incorporated by reference to Exhibit 4.15 to the Company’s Registration Statement on Form S-1 (Reg. No. 333-137785)]   †
            Certain instruments defining the rights of holders of long-term debt of the Company have not been filed because the total amount does not exceed 10% of the total assets of the Company and its subsidiary on a consolidated basis. A copy of each such instrument will be furnished to the Commission upon request.    
  (10)              
        Material Contracts    
        10.1   Amended and Restated Employment Agreement effective as of November 24, 2008 between Edward J. Puisis and the Company. [Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated December 1, 2008]   †*
        10.2   Letter Agreement dated August 13, 2003 between Raymond Bartholomae and the Company [Incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q dated November 10, 2003]   †*


64

Table of Contents

                 
Exhibit No.
 
Description
 
        10.2.1   Letter Agreement dated as of December 15, 2005 between Raymond Bartholomae and the Company amending prior Letter Agreement. [Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated December 21, 2005]   †*
        10.3   Amended and Restated Employment Agreement effective as of November 24, 2008 between Eric R. Zimmerman and the Company. [Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated December 1, 2008]   †*
        10.4   Dayton Superior Corporation 2000 Stock Option Plan [Incorporated by reference to Exhibit 10.13 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2001]   †*
        10.4.1   First Amendment to Dayton Superior Corporation 2000 Stock Option Plan [Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 30, 2001]   †*
        10.4.2   Second Amendment to Dayton Superior Corporation 2000 Stock Option Plan dated July 15, 2002 [Incorporated by reference to Exhibit 10.13.2 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2002]   †*
        10.4.3   Third Amendment to Dayton Superior Corporation 2000 Stock Option Plan dated October 23, 2002 [Incorporated by reference to Exhibit 10.13.3 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2002]   †*
        10.4.4   Fourth Amendment to Dayton Superior Corporation 2000 Stock Option Plan dated February 10, 2004. [Incorporated by reference to Exhibit 10.10.4 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2003]   †*
        10.4.5   Fifth Amendment to Dayton Superior Corporation 2000 Stock Option Plan dated February 10, 2004 effective April 18, 2007 [Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated May 30, 2007]   †*
        10.4.6   Form of Amended and Restated Stock Option Agreement entered into between the Company and certain of its executive officers [Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 28, 2002]   †*
        10.4.7   Form of First Amendment to Stock Option Agreement dated as of July 1, 2003 [Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended July 2, 2003]   †*
        10.4.8   Form of Stock Option Agreement entered into between the Company and certain of its Directors dated April 18, 2007 [Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated April 25, 2007]   †*
        10.4.9   Form of Incentive Stock Option Agreement entered into between the Company and certain of its executive officers. [Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K dated April 1, 2008]   †*
        10.4.10   Form of Stock Option Agreement entered into between the Company and certain of its executive officers. [Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K dated December 1, 2008]   †*
        10.5   Restricted Stock Agreement dated as of June 30, 2006, between the Company and Eric R. Zimmerman. [Incorporated by reference to Exhibit 10.10 to the Company’s Registration Statement on Form S-1 (Reg. No. 333-137785)]   †*
        10.6   Restricted Stock Agreement dated as of June 30, 2006, between the Company and Edward J. Puisis. [Incorporated by reference to Exhibit 10.11 to the Company’s Registration Statement on Form S-1 (Reg. No. 333-137785)]   †*
        10.7   Restricted Stock Agreement dated as of June 30, 2006, between the Company and Raymond E. Bartholomae. [Incorporated by reference to Exhibit 10.12 to the Company’s Registration Statement on Form S-1 (Reg. No. 333-137785)]   †*
        10.8   Repayment and Stock Pledge Agreement dated June 16, 2000, between the Company and Raymond E. Bartholomae. [Incorporated by reference to Exhibit 10.14 to the Company’s Registration Statement on Form S-1 (Reg. No. 333-137785)]   †*


65

EX-4.7.1 2 l35994aexv4w7w1.htm EX-4.7.1 EX-4.7.1
Exhibit 4.7.1
Execution Copy
AMENDMENT NO. 1
     This AMENDMENT NO. 1 dated as of June 4, 2008 (“Amendment No. 1”), is entered into by and among DAYTON SUPERIOR CORPORATION, Delaware corporation (the “Borrower”), the persons designated as “Lenders” on the signature pages hereto (the “Lenders”), and GENERAL ELECTRIC CAPITAL CORPORATION (“GE Capital”), a Delaware corporation, as administrative agent (in such capacity, the “Administrative Agent”).
     WHEREAS, the Borrower, the other Loan Parties, the Lenders and GE Capital, as administrative agent and collateral agent, are party to the Term Loan Credit Agreement dated as of March 3, 2008 (“Original Credit Agreement”; all capitalized terms defined in the Original Credit Agreement and not otherwise defined herein to have the meanings assigned thereto in the Original Credit Agreement); and
     WHEREAS, pursuant to the Fee Letter, the Administrative Agent is entitled, at any time prior to the date on which GE Capital holds no more than $25,000,000 of Commitments, to increase the Applicable Margins for Base Rate Loans and Eurodollar Loans by up to 0.75% each (the “Market Flex”); and
     WHEREAS, the Administrative Agent has opted to exercise the Market Flex and in connection therewith, to amend the Original Credit Agreement in certain respects.
     NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the Borrower, the Lenders whose signatures appear below and the Administrative Agent agree as follows:
SECTION 1.
AMENDMENT
     Subject to the satisfaction of the condition to effectiveness referred to in Section 2 below, the definition of “Applicable Margin” set forth in Section 1.1 of the Original Credit Agreement is amended and restated in its entirety as follows:
     “‘ Applicable Margin’ means, in the case of Base Rate Loans, 3.50% per annum and in the case of Eurodollar Rate Loans, 4.50% per annum.”
SECTION 2.
CONDITIONS TO EFFECTIVENESS
     This Amendment No. 1 shall be effective as of the Closing Date upon receipt by the Administrative Agent of one or more counterparts of this Amendment No. 1 executed and delivered by the Borrower, the Administrative Agent and the Required Lenders.
SECTION 3.
LIMITATION ON SCOPE
     Except as expressly amended hereby, all of the representations, warranties, terms, covenants and conditions of the Loan Documents shall remain in full force and effect in accordance with their respective terms. The amendment set forth herein shall be limited precisely as provided for herein and shall not be

 

 

deemed to be a waiver of, amendment of, consent to or modification of any term or provision of the Loan Documents or any other document or instrument referred to therein or of any transaction or further or future action on the part of the Borrower or any other Loan Party requiring the consent of the Administrative Agent or Lenders except to the extent specifically provided for herein. The Administrative Agent and Lenders have not and shall not be deemed to have waived any of their respective rights and remedies against the Borrower or any other Loan Party for any existing or future Defaults or Event of Default.
SECTION 4.
MISCELLANEOUS
     (a) The Borrower hereby represents and warrants that this Amendment No. 1 has been duly authorized and executed by it, and the Original Credit Agreement, as amended by this Amendment No. 1, is its legal, valid and binding obligation, enforceable in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, moratorium and similar laws affecting the rights of creditors in general; and
     (b) The Borrower repeats and restates its representations and warranties contained in the Original Credit Agreement as of the date of this Amendment No. 1 and as of the Effective Date, except to the extent such representations and warranties relate to a specific date.
     (c) This Amendment No. 1 is being delivered in the State of New York.
     (d) The Borrower hereby ratifies and confirms the Original Credit Agreement as amended hereby, and agrees that, as amended hereby, the Original Credit Agreement remains in full force and effect.
     (e) The Borrower agrees that all Loan Documents remains in full force and effect notwithstanding the execution and delivery of this Amendment No. 1.
     (f) This Amendment No. 1 may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all of which counterparts together shall constitute but one and the same instrument.
     (g) All references in the Loan Documents to the “Credit Agreement” and in the Original Credit Agreement as amended hereby to “this Agreement,” “hereof,” “herein” or the like shall mean and refer to the Original Credit Agreement as amended by this Amendment No. 1 (as well as by all subsequent amendments, restatements, modifications and supplements thereto).
     (h) Each of the following provisions of the Original Credit Agreement is hereby incorporated herein by this reference with the same effect as though set forth in its entirety herein, mutatis mutandis, and as if “this Agreement” in any such provision read “this Amendment No. 1”: Section 11.11 (Notices), Section 11.13 (Governing Law), Section 11.14 (Jurisdiction), Section 11.15 (Waiver of Jury Trial), Section 11.16 (Severability) and Section 11.18 (Entire Agreement).
[signature pages follow]

2

 

WITNESS the due execution hereof by the respective duly authorized officers of the undersigned as of the date first written above.
         
    DAYTON SUPERIOR CORPORATION, a Delaware
corporation
 
        
 
  By:    
 
      /s/Edward J. Puisis
 
       
 
      Name: Edward J. Puisis
 
      Title:

3

 

         
    ADMINISTRATIVE AGENT AND LENDERS:
 
        
    GENERAL ELECTRIC CAPITAL CORPORATION,
as Administrative Agent and a Lender
 
        
 
  By:   /s/ Michelle Handy
 
       
 
      Name: Michelle Handy
 
      Title: Its Duly Authorized Signatory

4

EX-10.11 3 l35994aexv10w11.htm EX-10.11 EX-10.11
Exhibit 10.11
12/16/08
DAYTON SUPERIOR CORPORATION
AMENDED OUTSIDE DIRECTOR COMPENSATION PROGRAM
On December 16, 2008, the Board of Directors of Dayton Superior Corporation (the “Company”), acting in accordance with the recommendations of its Compensation Committee, amended the compensation payable to those directors of the Company who are not employed by the Company or any subsidiary or by Odyssey Investment Partners Fund, L.P. or any affiliate (collectively, the “Outside Directors”) for their service on the Board of Directors and its committees, effective January 1, 2009. The amended program is as follows:
  1.   Each Outside Director shall be paid a $60,000 annual retainer fee for each calendar year during which the Outside Director serves as an Outside Director, to be paid in cash in four equal quarterly installments. The annual retainer fee shall be prorated for service of less than a full calendar year.
 
  2.   Each Outside Director who serves as a member of the Audit Committee shall be paid an additional $16,000 fee for each calendar year during which the Outside Director serves as a member of the Audit Committee, to be paid in cash in four equal quarterly installments. The annual fee for membership on the Audit Committee shall be prorated for membership on the Audit Committee of less than a full calendar year.
 
  3.   The Outside Director who serves as Chair of the Audit Committee shall be paid an additional $15,000 fee for each calendar year during which the Outside Director serves as Chair of the Audit Committee, to be paid in cash in four equal quarterly installments. The fee for serving as Chair of the Audit Committee shall be prorated for service of less than a full calendar year.
 
  4.   Each Outside Director is encouraged to own at least 25,000 shares of the Company’s common stock.
 
  5.   Outside Directors shall receive no additional fee for attendance at meetings of the Board of Directors or of the committees of the Board of Directors existing at the time this program is adopted or for service on any of those committees, other than the Audit Committee. Directors of the Company who are not Outside Directors shall receive no separate compensation from the Company for their service on the Board of Directors or any of its committees.

 

EX-23 4 l35994aexv23.htm EX-23 EX-23
Exhibit 23
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement No. 333-139970 on Form S-8 of our reports dated March 31, 2009, relating to the consolidated financial statements and financial statement schedule of Dayton Superior Corporation and subsidiary (the “Company”) (which report expresses an unqualified opinion and includes explanatory paragraphs regarding substantial doubt about the Company’s ability to continue as a going concern and the adoption of new accounting standards in 2007 and 2006), and the effectiveness of the Company’s internal control over financial reporting, appearing in this Annual Report on Form 10-K of Dayton Superior Corporation for the year ended December 31, 2008.
DELOITTE & TOUCHE LLP
Dayton, Ohio
March 31, 2009

 

EX-31.1 5 l35994aexv31w1.htm EX-31.1 EX-31.1
Exhibit 31.1
Certification of Chief Executive Officer
Pursuant to Securities Exchange Act Rule 13a-14(a) or Rule 15d-14(a)
I, Eric R. Zimmerman, certify that:
  1.   I have reviewed this Annual Report on Form 10-K of Dayton Superior Corporation;
 
  2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
  3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
  4.   The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
  a)   designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
  b)   designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
  c)   evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
  d)   disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
  5.   The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:
  a)   all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
  b)   any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
         
     
March 31, 2009  /s/ Eric R. Zimmerman    
  Eric R. Zimmerman   
  President and Chief Executive Officer   
 

 

EX-31.2 6 l35994aexv31w2.htm EX-31.2 EX-31.2
Exhibit 31.2
Certification of Chief Financial Officer
Pursuant to Securities Exchange Act Rule 13a-14(a) or Rule 15d-14(a)
I, Edward J. Puisis, certify that:
  1.   I have reviewed this Annual Report on Form 10-K of Dayton Superior Corporation;
 
  2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
  3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
  4.   The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
  a)   designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
  b)   designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
  c)   evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
  d)   disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
  5.   The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:
  a)   all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
  b)   any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
         
     
March 31, 2009  /s/Edward J. Puisis    
  Edward J. Puisis   
  Executive Vice President and Chief Financial Officer   

 

EX-32.1 7 l35994aexv32w1.htm EX-32.1 EX-32.1
         
Exhibit 32.1
Certification pursuant to
Securities Exchange Act Rule 13a-14(b) or Rule 15d-14(b)
I, Eric R. Zimmerman, President, and Chief Executive Officer of Dayton Superior Corporation (the “Company”), do hereby certify in accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
The Annual Report on Form 10-K of the Company for the period ending December 31, 2008 (the “Periodic Report”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)) and
The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: March 31, 2009 
         
     
  /s/ Eric R. Zimmerman    
  Eric R. Zimmerman   
  President and Chief Executive Officer   
 

 

EX-32.2 8 l35994aexv32w2.htm EX-32.2 EX-32.2
Exhibit 32.2
Certification pursuant to
Securities Exchange Act Rule 13a-14(b) or Rule 15d-14(b)
I, Edward J. Puisis, Executive Vice President and Chief Financial Officer of Dayton Superior Corporation (the “Company”), do hereby certify in accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
The Annual Report on Form 10-K of the Company for the period ending December 31, 2008 (the “Periodic Report”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)) and
The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: March 31, 2009 
         
     
  /s/ Edward J. Puisis    
  Edward J. Puisis   
  Executive Vice President and
Chief Financial Officer 		  
 

 

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