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The following is an excerpt from a 10-K405 SEC Filing, filed by DAYTON SUPERIOR CORP on 4/1/2002.
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DAYTON SUPERIOR CORP - 10-K405 - 20020401 - BUSINESS

ITEM 1. BUSINESS.

GENERAL

We believe we are the largest North American manufacturer and distributor of metal accessories and forms used in concrete construction and of metal accessories used in masonry construction. In many of our product lines, we believe we are the market leader and lowest cost manufacturer competing primarily in two segments of the construction industry: infrastructure construction, such as highways, bridges, utilities, water and waste treatment facilities and airport runways, and non-residential building, such as schools, stadiums, prisons, retail sites, commercial offices and manufacturing facilities. For the year ended December 31, 2001, our net sales were $393.7 million.

We derive our revenue from a mix of sales of consumable products and the sale and rental of engineered equipment. We believe that the breadth of our product offerings and national distribution network allow us to maintain a large customer base that prefers a "one-stop" supplier. We manufacture the substantial majority of our 20,000 products, which we sell under a number of well-established brand names. Our national distribution system, which we believe is the largest in our industry, allows us to efficiently cross-sell and distribute newly developed and acquired product lines on a nationwide basis. Through our network of 60 service/distribution centers, we serve over 8,000 customers, comprised of independent distributors and a broad array of precast concrete manufacturers, general contractors, subcontractors and metal fabricators. This nationwide customer base provides us with a geographically diversified sales.

We currently have three principal business units, which are organized around the following product lines:

Concrete Accessories (Dayton/Richmond(R)). We believe we are the leading North American manufacturer of concrete accessories, which are used in connecting forms for poured-in-place concrete walls, anchoring or bracing for walls and floors, supporting bridge framework and positioning steel reinforcing bars, as well as masonry products, which are placed between layers of brick and concrete blocks and covered with mortar to provide additional strength to walls. Masonry products also include engineered products used to repair or restore brick and stone buildings. For the year ended December 31, 2001, our concrete accessories business unit had net sales to external customers of $218.4 million, or 56% of our total net sales.

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Concrete Forming Systems (Symons(R)). We believe we are the leading North American manufacturer of concrete forming systems, which are reusable, engineered forms and related accessories used in the construction of concrete walls, columns and bridge supports to hold concrete in place while it hardens. Sales from concrete forming systems and related accessories represented approximately 65% and rental revenue represented approximately 35% of Symons' total sales in 2001. For the year ended December 31, 2001, our concrete forming systems business unit had net revenues to external customers of $126.5 million, or 32% of our total net sales.

Paving Products (American Highway Technology(R)). We believe we are the leading North American manufacturer of welded dowel assemblies and dowel baskets, which are paving products used in the construction and rehabilitation of concrete roads, highways and airport runways to extend the life of the pavement. These consumable products are used to transfer dynamic loads between adjacent slabs of concrete roadway. For the year ended December 31, 2001, our paving products business unit had net sales to external customers of $48.8 million, or 12% of our total net sales.

Each of our three principal business units also sells specialty construction chemicals that are used in conjunction with its other products.

PRODUCTS

Although almost all of our products are used in concrete or masonry construction, the function and nature of the products differ widely. Most of our products are consumable, providing us with a source of recurring revenue. In addition, while our products represent a relatively small portion of a construction project's total cost, our products assist in ensuring the on-time, quality completion of those projects. 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.

CONCRETE ACCESSORIES. Our concrete accessories business unit manufactures and sells concrete accessories primarily under the Dayton/Richmond(R) brand name and masonry products under the Dur-O-Wal(R) brand name. For the year ended December 31, 2001, net sales of our concrete accessories business unit to external customers accounted for $218.4 million, or 56% of our total net sales.

Concrete accessories include:

- WALL-FORMING PRODUCTS. Wall-forming products include shaped metal ties and accessories that are used with modular forms to hold concrete in place when walls are poured at a construction site or are prefabricated off site. These products, which generally are not reusable, are made of wire or plastic or a combination of both materials. We generally manufacture these products on customized high-speed automatic equipment.

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- 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 metal, plastic, or cementious supports used to position rebar within a horizontal slab or form to be filled with concrete. Metal bar supports are often plastic or epoxy coated, galvanized or equipped with plastic tips to prevent creating a conduit for corrosion of the embedded rebar.

- SPLICING PRODUCTS. Splicing products are used to join two pieces of rebar together while at a construction site without the need for extensive preparation of the rebar ends.

- PRECAST AND PRESTRESSED CONCRETE CONSTRUCTION PRODUCTS. Precast and prestressed concrete construction products are metal assemblies of varying designs used in the manufacture of precast concrete panels and prestressed concrete beams and structural members. Precast concrete panels and prestressed concrete beams are fabricated away from the construction site and transported to the site. Precast concrete panels are used in the construction of prisons, freeway sound barrier walls, external building facades and other similar applications. Prestressed concrete beams use multiple strands of steel cable under tension embedded in concrete beams to provide rigidity and bearing strength, and often are used in the construction of bridges, parking garages and other applications where long, unsupported spans are required.

- TILT-UP CONSTRUCTION PRODUCTS. Tilt-up construction products include a complete line of inserts, lifting hardware and adjustable beams used in the tilt-up method of construction, in which the concrete floor slab is used as part of a form for casting the walls of a building. After the cast walls have hardened on the floor slab, a crane is used to "tilt-up" the walls, which then are braced in place until they are secured to the rest of the structure. Tilt-up construction generally is considered to be a faster method of constructing low-rise buildings than conventional poured-in-place concrete construction. Some of our tilt-up construction products can be rented as well as sold.

- FORMLINER PRODUCTS. Formliner products include plastic and elastomeric products that adhere to the inside face of forms to provide shape to the surface of the concrete.

- CHEMICAL PRODUCTS. Chemical products sold by our concrete accessories business unit 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.

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- MASONRY PRODUCTS. Masonry products are wire products sold under the Dur-O-Wal(R) name that improve the performance and longevity of masonry walls by providing crack control, greater elasticity and higher strength to withstand seismic shocks and better resistance to rain penetration. Our masonry product line consists primarily of masonry wall reinforcement products, masonry anchors, engineered products and other accessories used in masonry construction and restoration to reinforce brick and concrete walls, anchor inner to outer walls and provide avenues for water to escape. We also sell other masonry products which connect one form of masonry to another or masonry to a building structure.

We have the in-house ability to produce hot-dipped zinc galvanized finishes on masonry wall reinforcement products. Hot-dipped galvanized finishes are considered to provide superior protection against corrosion compared to alternative finishes. In recent years, model building codes in a number of regions of the country in which masonry construction is used have been amended to require use of hot-dipped galvanized masonry wall reinforcement products.

CONCRETE FORMING SYSTEMS. Our concrete forming systems business unit manufactures, sells and rents reusable modular concrete forming systems primarily under the Symons(R) name. These products include standard and specialty concrete forming systems, shoring systems and accessory products. To capitalize on the durability and relatively high unit cost of prefabricated forming equipment, we also rent forming products. For the year ended December 31, 2001, net sales of our concrete forming systems business unit to external customers accounted for $126.5 million, or 32% of our total net sales.

Our concrete forming system products include:

- CONCRETE FORMING SYSTEMS. Concrete forming systems are reusable, engineered modular forms which hold liquid concrete in place on concrete construction jobs while it hardens. Standard forming systems are made of steel and plywood and are used in the creation of concrete walls and columns. Specialty forming systems consist primarily of steel forms that are designed to meet architects' specific needs for concrete placements. Both standard and specialty forming systems and related accessories are sold and rented for use.

- SHORING SYSTEMS. Shoring systems, including aluminum beams and joists, post shores and shoring frames are used to support deck and other raised forms while concrete is being poured.

- ARCHITECTURAL PAVING PRODUCTS. Architectural Paving Products are used to apply decorative texture and coloration to concrete surfaces while concrete is being poured.

- CONSTRUCTION CHEMICALS. Construction chemicals sold by the concrete forming systems business unit include form release agents, sealers, water repellents, grouts and epoxies and other chemicals used in the pouring, stamping and placement of concrete.

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PAVING PRODUCTS. Our paving products business unit sells products, primarily consisting of welded dowel assemblies and dowel baskets, used in the construction and rehabilitation of roads, highways and airport runways to extend the life of the pavement. This business unit sells paving products primarily under the American Highway Technology(R) name, but we also offer some paving products under the Dayton/Richmond(R) name. We manufacture welded dowel assemblies primarily using automated and semi-automated equipment. For the year ended December 31, 2001, net sales of paving products accounted for $48.8 million, or 12% of our total net sales.

Paving products include:

- WELDED DOWEL ASSEMBLIES AND DOWEL BASKETS. Welded dowel assemblies and dowel baskets are used to transfer dynamic loads between two adjacent slabs of concrete roadway. Metal dowels are part of a dowel basket design that is imbedded in two adjacent slabs to transfer the weight of vehicles as they move over a road.

- CORROSIVE-PREVENTING EPOXY COATINGS. Corrosive-preventing epoxy coatings are used for infrastructure construction products and a wide range of industrial and construction uses.

- CONSTRUCTION CHEMICALS. Construction chemicals sold by our paving products business unit include curing compounds used in concrete road construction.

MANUFACTURING

We manufacture the substantial majority of the products we sell. Most of our concrete accessories and paving products are manufactured in 18 facilities throughout the United States, although a majority of our service/distribution facilities also can produce smaller lots of some products. Our production volumes enable us to design and build or custom modify much of the equipment we use to manufacture these products, using a team of experienced manufacturing engineers and tool and die makers.

By developing our own automatic high-speed manufacturing equipment, 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. In addition, our concrete accessories business unit's ability to "hot-dip" galvanize masonry products provides it with an advantage over many competitors' manufacturing masonry wall reinforcement products, which lack this internal capability. We also have a flexible manufacturing setup and can make the same products at several locations using short and discrete manufacturing lines.

We manufacture our concrete forming systems at two facilities in the United States. 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.

We generally operate our manufacturing facilities on two shifts per day, five days per week (six days per week during peak months and, in some instances, three shifts), with the number of employees increasing or decreasing as necessary to satisfy demand on a seasonal basis.

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DISTRIBUTION

We distribute our products through over 3,000 independent distributors, and our own network of 60 service/distribution centers located in the United States and Canada. Twenty-eight of the service/distribution centers are associated with our manufacturing plants.

Distribution centers by segment are as follows:

Concrete Accessories                                  29
Concrete Forming Systems                              26
Paving Products                                        5

Some locations carry more than one of our product lines. We ship most of our products to our service/distribution centers from our manufacturing plants; however, a majority of our centers also are able to produce smaller batches of some products on an as-needed basis to fill rush orders.

We have an on-line inventory tracking system for the concrete accessories and paving products businesses, which enables our customer service representatives to identify, reserve and ship inventory quickly from any of our locations in response to telephone orders.

Our system provides us with a competitive advantage since our service representatives are able to answer customer questions about availability and shipping dates while still on the telephone. We primarily use third-party common carriers to ship our products.

We also use our distribution system to sell products which are manufactured by others. These products usually are sold under our brand names and often are produced for us on an exclusive basis. Sales of these products allow us to utilize our distribution network to increase sales without making significant capital investments. We believe there is an increasing trend among our distributors to consolidate into larger entities, which could result in increased price competition.

SALES AND MARKETING

We employ approximately 300 sales and marketing personnel, of whom approximately 60% are field sales people and 40% are customer service representatives. Sales and marketing personnel are located in all of our locations. We produce product catalogs and promotional materials that illustrate certain 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 and engineers to secure the use of our products whenever possible.

We consider our engineers to be an integral part of the sales and marketing effort. Our engineers have developed proprietary software applications to conduct extensive pre-testing on both new products and construction projects.

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CUSTOMERS

We have over 8,000 customers, over 50% of which purchase our products for resale. Our customer base is geographically diverse, with no customer accounting for more than 5% of net sales in 2001. Our ten largest customers accounted for less than 15% of our net sales in 2001. Customers who purchase our products for resale generally do not sell our products exclusively.

CONCRETE ACCESSORIES. Our concrete accessories business unit has approximately 5,700 customers, consisting of distributors, rebar fabricators, precast and prestressed concrete manufacturers, brick and concrete block manufacturers, general contractors and sub-contractors. We estimate that approximately 70% of the customers of this business unit purchase our products for resale. The largest customer of the business unit accounted for 7% of the business unit's 2001 net sales. The business unit's top ten customers accounted for 30% of its 2001 net sales.

Our concrete accessories business unit has instituted a certified dealer program for those dealers who handle our tilt-up construction products. This program was established to educate dealers in the proper use of our tilt-up products and to assist them in providing engineering assistance to their customers. Certified dealers are not permitted to carry other manufacturers' tilt-up products, which we believe are incompatible with ours and, for that reason, could be unsafe if used with our products. The business unit currently has 100 certified tilt-up construction product dealers.

CONCRETE FORMING SYSTEMS. Our concrete forming systems business unit has approximately 2,700 customers, consisting of distributors, precast and prestressed concrete manufacturers, general contractors and subcontractors. We estimate that approximately 89% of the customers of this business unit are the end-users of its products, while approximately 11% of those customers purchase its products for resale or re-rent. This business unit's largest customer accounted for 8% of the business unit's 2001 net sales and its ten largest customers accounted for 26% of its 2001 net sales.

PAVING PRODUCTS. Our paving products business unit has approximately 200 customers, consisting primarily of distributors of construction supplies and, to a lesser extent, general contractors and subcontractors. This business unit's largest customer accounted for 18% of the business unit's 2001 net sales and its ten largest customers accounted for 65% of its 2001 net sales.

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. Steel, in its various forms, constitutes approximately 35% of our cost of sales. We currently purchase materials from over 2000 vendors and are not dependent on any single vendor or small group of vendors for any significant portion of our raw material purchases. The U.S. Government has recently imposed tariffs on certain imported steel. At this point, we are unable to determine the impact that these tariffs will have on our results of operations.

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COMPETITION

Our industry is highly competitive in most product categories and geographic regions. We compete with a limited number of full-line national manufacturers of concrete accessories, concrete forming systems and paving products, and a much larger number of regional manufacturers and manufacturers with limited product lines. We believe competition in our industry is largely based on, among other things, price, quality, breadth of product lines, distribution capabilities (including quick delivery times) and customer service. Due primarily 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 lines provide us with advantages of scale in both distribution and production relative to our competitors.

TRADEMARKS AND PATENTS

We sell most products under the registered trade names Dayton Superior(R), Dayton/Richmond(R), Symons(R), Dur-O-Wal(R) and American Highway Technology(R), which we believe are widely recognized in the construction industry and, therefore, are important to our business. Although some of our products (and components of some products) are protected by patents, we do not believe these patents are material to our business. We have approximately 126 trademarks and 139 patents.

EMPLOYEES

As of December 31, 2001, we employed approximately 800 salaried and 1,400 hourly personnel, of whom approximately 700 of the hourly personnel and five of the salaried personnel are represented by labor unions. Employees at our Miamisburg, Ohio; Parsons, Kansas; Des Plaines, Illinois; New Braunfels, Texas; Tremont, Pennsylvania; Long Beach, California; and Aurora, Illinois manufacturing/distribution plants and our service/distribution centers in Atlanta, Georgia and Santa Fe Springs, California are covered by collective bargaining agreements. We believe we have good employee and labor relations.

SEASONALITY

Our operations are seasonal in nature, with approximately 56% of our sales historically occurring in the second and third quarters. Working capital and borrowings fluctuate with sales volume.

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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 shipped up to six months after we receive the order, depending on our customer's needs. Accordingly, we do not maintain significant backlog, and backlog as of any particular date is not representative of our actual sales for any succeeding period.

RECENT DEVELOPMENTS

Refer to Management's Discussion and Analysis of Financial Condition and Results of Operations, Comparison of Years Ended December 31, 2001 and 2000, Operating Expenses for discussions regarding recent developments.

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