1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________to________
Commission file number 0-5423
DYCOM INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Florida 59-1277135
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4440 PGA Boulevard, Suite 600
Palm Beach Gardens, Florida 33410
(Address of principal executive office) (Zip Code)
(561) 627-7171
(Registrant's telephone number, including area code)
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 [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding as of June 6, 1997
_____ __________________________________
Common Stock, par value $0.33 1/3 8,805,078
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DYCOM INDUSTRIES, INC.
INDEX
Page No.
________
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets-
April 30, 1997 and July 31, 1996 3
Condensed Consolidated Statements of
Operations for the Three Months Ended
April 30, 1997 and 1996 4
Condensed Consolidated Statements of
Operations for the Nine Months Ended
April 30, 1997 and 1996 5
Condensed Consolidated Statements of
Cash Flows for the Nine Months Ended
April 30, 1997 and 1996 6-7
Notes to Condensed Consolidated
Financial Statements 8-13
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 14-16
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURES 18
EXHIBIT INDEX 19
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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
April 30, July 31,
1997 1996
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 4,426,490 $ 3,835,479
Accounts receivable, net 20,818,895 13,306,064
Costs and estimated earnings in
excess of billings 11,615,597 7,137,212
Deferred tax assets, net 1,604,270 1,261,065
Other current assets 1,551,280 1,248,405
Total current assets 40,016,532 26,788,225
PROPERTY AND EQUIPMENT, net 20,872,998 19,574,410
OTHER ASSETS:
Intangible assets, net 4,723,130 4,839,447
Deferred tax assets 742,407 598,887
Other 193,668 272,916
Total other assets 5,659,205 5,711,250
TOTAL $ 66,548,735 $ 52,073,885
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 7,573,207 $ 3,541,789
Notes payable 7,054,914 2,758,795
Billings in excess of costs and
estimated earnings 38,714
Accrued self-insured claims 2,750,723 3,064,229
Income taxes payable 748,600 227,619
Other accrued liabilities 7,800,101 8,151,589
Total current liabilities 25,927,545 17,782,735
NOTES PAYABLE 8,986,446 9,452,630
ACCRUED SELF-INSURED CLAIMS 7,412,529 7,062,150
Total liabilities 42,326,520 34,297,515
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, par value $.33 1/3 per share:
50,000,000 shares authorized; 8,771,501
and 8,601,492 shares issued and
outstanding, respectively 2,923,833 2,867,164
Additional paid-in capital 25,146,315 24,473,269
Retained deficit (3,847,933) (9,564,063)
Total stockholders' equity 24,222,215 17,776,370
TOTAL $ 66,548,735 $ 52,073,885
See notes to condensed consolidated financial statements--unaudited.
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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
For the Three Months Ended
April 30, April 30,
1997 1996
REVENUES:
Contract revenues earned $ 47,929,157 $ 34,529,891
Other, net 256,827 860,754
Total 48,185,984 35,390,645
Expenses:
Costs of earned revenues
excluding depreciation 38,102,026 27,426,818
General and administrative 4,534,378 3,638,872
Depreciation and amortization 1,529,605 1,359,242
Total 44,166,009 32,424,932
INCOME BEFORE INCOME TAXES 4,019,975 2,965,713
PROVISION (BENEFIT) FOR INCOME TAXES:
Current 1,847,785 1,500,211
Deferred (240,843) (238,648)
Total 1,606,942 1,261,563
NET INCOME $ 2,413,033 $ 1,704,150
EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE:
Primary $0.27 $0.20
Fully diluted $0.27 $0.20
SHARES USED IN COMPUTING
EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE:
Primary 8,892,171 8,564,660
Fully diluted 8,892,312 8,564,660
See notes to condensed consolidated financial statements--unaudited.
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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
For the Nine Months Ended
April 30, April 30,
1997 1996
REVENUES:
Contract revenues earned $ 128,069,236 $ 104,544,413
Other, net 496,047 1,283,278
Total 128,565,283 105,827,691
Expenses:
Costs of earned revenues
excluding depreciation 103,099,014 84,331,152
General and administrative 11,637,961 11,073,271
Depreciation and amortization 4,473,683 4,138,546
Total 119,210,658 99,542,969
INCOME BEFORE INCOME TAXES 9,354,625 6,284,722
PROVISION (BENEFIT) FOR INCOME TAXES:
Current 4,125,221 3,171,692
Deferred (486,726) (543,990)
Total 3,638,495 2,627,702
NET INCOME $ 5,716,130 $ 3,657,020
EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE:
Primary $0.64 $0.43
Fully diluted $0.64 $0.43
SHARES USED IN COMPUTING
EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE:
Primary 8,888,496 8,554,808
Fully diluted 8,888,680 8,554,808
See notes to condensed consolidated financial statements--unaudited.
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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For the Nine Months Ended
April 30, April 30,
1997 1996
Increase (Decrease) in Cash and Equivalents from:
OPERATING ACTIVITIES:
Net income $ 5,716,130 $ 3,657,020
Adjustments to reconcile net cash provided
by operating activities:
Depreciation and amortization 4,473,683 4,138,546
Gain on disposal of assets (333,190) (945,910)
Deferred income taxes (486,726) (543,990)
Changes in assets and liabilities:
Accounts receivable, net (7,512,831) 4,757,864
Unbilled revenues, net (4,517,099) (1,952,257)
Other current assets (302,875) 106,164
Other assets 79,248 54,130
Accounts payable 4,031,418 (2,273,060)
Accrued self-insured claims and
other liabilities (314,614) 1,531,484
Accrued income taxes 653,550 475,481
Net cash inflow from operating activities 1,486,694 9,005,472
INVESTING ACTIVITIES:
Capital expenditures (5,871,687) (5,097,060)
Proceeds from sale of assets 1,149,947 2,070,328
Net cash outflow from investing activities (4,721,740) (3,026,732)
FINANCING ACTIVITIES:
Borrowing on bank lines-of-credit 16,259,396
Principal payments on notes payable
and bank lines-of-credit (13,030,485) (5,566,638)
Exercise of stock options 597,146 117,707
Net cash outflow from financing activities 3,826,057 (5,448,931)
NET CASH INFLOW FROM ALL ACTIVITIES 591,011 529,809
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 3,835,479 4,306,675
CASH AND EQUIVALENTS AT END OF PERIOD $ 4,426,490 $ 4,836,484
See notes to condensed consolidated financial statements--unaudited.
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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(continued)
For the Nine Months Ended
April 30, April 30,
1997 1996
SUPPLEMENTAL DISCLOSURES OF CASH FLOW AND
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Cash paid during the period for:
Interest $ 821,543 $ 1,200,196
Income taxes 3,528,134 2,753,674
Property and equipment acquired and
financed with:
Capital lease obligations $ 601,024
Income tax benefit related to incentive
stock options exercised $ 132,569
See notes to condensed consolidated financial statements--unaudited.
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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS--Unaudited
1. The accompanying condensed consolidated balance sheets of Dycom
Industries, Inc. and subsidiaries ("Dycom" or the "Company") as of April 30,
1997 and July 31, 1996, the related condensed consolidated statements of
operations for the three and nine months ended April 30, 1997 and 1996 and
the condensed consolidated statements of cash flows for the nine months ended
April 30, 1997 and 1996 reflect all normal recurring adjustments which are,
in the opinion of management, necessary for a fair presentation of such
statements. The results of operations for the nine months ended April 30,
1997 are not necessarily indicative of the results which may be expected for
the entire year.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION-- The condensed consolidated financial statements
include Dycom Industries, Inc. and its subsidiaries, all of which are wholly-
owned. The Company's operations consist primarily of telecommunication and
electric utility services contracting. All material intercompany accounts
and transactions have been eliminated.
USE OF ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities as of the date of the
financial statements and revenues and expenses during the period reported.
Actual results could differ from those estimates.
Estimates are used for the revenue recognition of work-in-process, allowance
for doubtful accounts, self-insured claims liability, deferred tax asset
valuation allowance, depreciation and amortization, and the estimated lives of
assets, including intangible assets.
REVENUE-- Income on long-term contracts is recognized on the percentage-of-
completion method based primarily on the ratio of contract costs incurred to
date to total estimated contract costs. As some of these contracts extend over
one or more years, revisions in cost and profit estimates during the course
of the work are reflected in the accounting period as the facts that require
the revision become known. At the time a loss on a contract becomes known,
the entire amount of the estimated ultimate loss is accrued. Income on
short-term unit contracts is recognized as the related work is completed.
Work-in-process on unit contracts is based on management's estimate of work
performed but not billed.
"Costs and estimated earnings in excess of billings" represent the excess of
contract revenues recognized under the percentage-of-completion method of
accounting for long-term contracts and work-in-process on unit contracts over
billings to date. For those contracts in which billings exceed contract
revenues recognized to date, such excesses are included in the caption
"billings in excess of costs and estimated earnings".
CASH AND EQUIVALENTS-- Cash and equivalents include cash balances in excess
of the daily requirements which are invested in overnight repurchase agreements,
certificates of deposits, and various other financial instruments having a
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maturity of three months or less. For purposes of the condensed consolidated
statements of cash flows, the Company considers these amounts to be cash
equivalents. The carrying amount reported in the condensed consolidated
balance sheets for cash and equivalents approximates its fair value.
PROPERTY AND EQUIPMENT-- Property and equipment is stated at cost, reduced in
certain cases by valuation reserves. Depreciation and amortization is
computed over the estimated useful life of the assets utilizing the straight-
line method. The estimated useful lives of the assets are: buildings--20-31
years; leasehold improvements--the term of the respective lease or the
estimated useful life of the improvement, whichever is shorter; vehicles--3-7
years; equipment and machinery--3-10 years; and furniture and fixtures--3-10
years. Maintenance and repairs are expensed as incurred; expenditures that
enhance the value of the property or extend its useful life are capitalized.
When assets are sold or retired, the cost and related accumulated
depreciation are removed from the accounts and the resulting gain or loss is
included in income.
INTANGIBLE ASSETS-- The excess of the purchase price over the fair market
value of the tangible net assets of acquired businesses (goodwill) is
amortized on the straight-line method over 40 years. The appropriateness of
the carrying value of goodwill is reviewed at the subsidiary level when
operating losses are incurred and there are other changes in the business
environment that may affect the recoverability of goodwill through future
operations. If operating losses have been incurred, and there is a liklihood
that such losses will continue, the Company will determine if impairment
exists by comparing the carrying value of goodwill to the estimated future
cash flows from operations and adjust the carrying value of the intangible
asset as appropriate.
Amortization expense, which is comprised primarily of goodwill, was $116,317
for the nine month periods ended April 30, 1997 and 1996. The intangible
assets are net of accumulated amortization of $1,112,587 at April 30, 1997
and $996,270 at July 31, 1996.
LONG-LIVED ASSETS-- In March 1995, the FASB issued SFAS No. 121 "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of". SFAS No. 121 requires that the long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. The Company adopted the provisions of SFAS No. 121
effective August 1, 1996 and determined that no impairment loss need be
recognized.
SELF-INSURED CLAIMS LIABILITY-- The Company is primarily self-insured, up to
certain limits, for automobile and general liability, workers' compensation,
and employee group health claims. A liability for unpaid claims and the
associated claim expenses, including incurred but not reported losses, is
actuarially determined and reflected in the condensed consolidated financial
statements as an accrued liability. The self-insured claims liability
includes incurred but not reported losses of $5,100,000 and $4,458,000 at
April 30, 1997 and July 31, 1996, respectively. The determination of such
claims and expenses and the appropriateness of the related liability is
continually reviewed and updated.
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INCOME TAXES-- The Company and its subsidiaries file a consolidated federal
income tax return. Deferred income taxes are provided for the temporary
differences between the financial reporting basis and the tax basis of the
Company's assets and liabilities.
A valuation allowance is provided when it is more likely than not that some
portion of the Company's deferred tax assets will not be realized.
Management has evaluated the available evidence about the Company's future
taxable income and other possible sources of realization of deferred tax
assets. The valuation allowance recorded in the financial statements reduces
deferred tax assets to an amount that represents management's best estimate
of the amount of such deferred tax assets that more likely than not will be
realized. Accordingly, at April 30, 1997 and July 31, 1996, deferred tax
assets are net of a valuation allowance of $513,912 and $728,491, respectively.
PER SHARE DATA-- Earnings per common and common equivalent share are computed
using the weighted average shares of common stock outstanding plus the common
stock equivalents arising from the effect of dilutive stock options, using the
treasury stock method.
CHANGE IN ACCOUNTING PRINCIPLE-- In October, 1995, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 123, "Accounting for Stock Based Compensation," which was
effective for the Company beginning August 1, 1996. SFAS No. 123 requires
expanded disclosures of stock based compensation arrangements with employees
and encourages, but does not require, compensation cost to be measured based
on the fair value of the equity instrument awarded. Under SFAS No. 123,
companies are permitted, however, to continue to apply Accounting Principles
Board ("APB") Opinion No. 25, which recognizes compensation cost based on the
intrinsic value of the equity instrument awarded. The Company will continue
to apply APB Opinion No. 25 to its stock based compensation awards to
employees and will disclose in the annual financial statements the required
pro forma effect on net income and earnings per share.
RECENT ACCOUNTING PRONOUNCEMENTS-- In February, 1997, the FASB issued SFAS
No. 128 "Earnings per Share" which changes the method of calculating earnings
per share and is effective for fiscal years ending after December 15, 1997.
SFAS No. 128 requires the presentation of "basic" earnings per share and
"diluted" earnings per share on the face of the income statement. Basic
earnings per share is computed by dividing the net income available to common
shareholders by the weighted average shares of outstanding common stock. The
calculation of diluted earnings per share is similar to basic earnings per
share except the denominator includes dilutive common stock equivalents such
as stock options and warrants. The Company will adopt SFAS No. 128 in fiscal
1998 as early adoption is not permitted. The disclosure of earnings per
share under SFAS No. 128 is not expected to be materially different than the
current disclosure of earnings per share.
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3. ACCOUNTS RECEIVABLE
Accounts receivable, net consist of the following:
April 30, July 31,
1997 1996
Contract billings $ 19,833,140 $ 12,305,652
Retainage 1,718,683 1,138,619
Other receivables 363,974 368,677
Total 21,915,797 13,812,948
Less allowance for doubtful accounts 1,096,902 506,884
Accounts receivable, net $ 20,818,895 $ 13,306,064
4. COSTS AND ESTIMATED EARNINGS ON CONTRACTS IN PROGRESS
The accompanying condensed consolidated balance sheets include costs and
estimated earnings on contracts in progress, net of progress billings as
follows:
April 30, July 31,
1997 1996
Costs incurred on contracts in progress $ 29,749,015 $ 24,272,835
Estimated earnings thereon 1,656,020 334,905
31,405,035 24,607,740
Less billings to date 19,789,438 17,509,242
$ 11,615,597 $ 7,098,498
Included in the accompanying condensed
consolidated balance sheets under
the captions:
Costs and estimated earnings in
excess of billings $ 11,615,597 $ 7,137,212
Billings in excess of costs and
estimated earnings (38,714)
$ 11,615,597 $ 7,098,498
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5. PROPERTY AND EQUIPMENT
The accompanying condensed consolidated balance sheets include the following
property and equipment:
April 30, July 31,
1997 1996
Land $ 1,958,777 $ 1,711,464
Buildings 2,339,541 2,236,322
Leasehold improvements 809,095 743,101
Vehicles 22,868,696 22,153,365
Equipment and machinery 20,877,357 20,033,610
Furniture and fixtures 4,148,209 3,541,638
Total 53,001,675 50,419,500
Less accumulated depreciation and
amortization 32,128,677 30,845,090
Property and equipment, net $ 20,872,998 $ 19,574,410
Certain subsidiaries of the Company entered into lease arrangements accounted
for as capitalized leases. The carrying value of capital leases at April 30,
1997 and July 31, 1996 was $874,965 and $372,170, respectively, net of
accumulated depreciation of $221,642 and $123,413, respectively. Capital
leases are included as a component of equipment and machinery.
6. NOTES PAYABLE
Notes and loans payable are summarized by type of borrowings as follows:
April 30, July 31,
1997 1996
Bank Credit Agreement:
Revolving credit facility $ 4,200,000 $ 9,000,000
Term-loan 9,000,000 2,162,812
Equipment term-loans 2,052,396 704,167
Capital lease obligations 788,964 344,446
Total 16,041,360 12,211,425
Less current portion 7,054,914 2,758,795
Notes payable--non-current $ 8,986,446 $ 9,452,630
On April 28, 1997 the Company signed a new $35.0 million credit agreement with
a group of banks. The proceeds of the new credit agreement were used to
refinance the previously existing credit facility and provide funding for
working capital and equipment requirements. As of April 30, 1997, the
Company's credit facility consists of a $10.0 million revolving working
capital credit facility of which $5.8 million was available, a $9.0 million
term loan, a $6.0 million revolving equipment acquisition facility of which
$3.9 million was available, and a $10.0 million standby letter of credit
facility of which $0.8 million was available. The bank credit agreement
contains restrictions which, among other things, require maintenance of
certain financial ratios and covenants, restrict encumbrances of assets and
creation of indebtedness, and limit the payment of cash dividends.
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Cash dividends are limited to 50% of each fiscal year's after-tax profits.
No cash dividends have been paid during the nine month period ending April
30, 1997. The credit facility is secured by the Company's assets. At April
30, 1997, the Company was in compliance with all financial covenants and
conditions.
The revolving working capital credit facility is available for a one-year
period and bears interest, at the option of the Company, at the bank's prime
interest rate minus 1% or LIBOR plus 1.50%. At April 30, 1997, the interest
rate was at LIBOR plus 1.50% or 7.56%. The proceeds of the revolving credit
facility were used for working capital requirements.
The term loan facility has a five-year maturity and bears interest at the
bank's prime interest rate minus 0.50% (8.00% at April 30, 1997). Principal
and interest is payable in quarterly installments through April, 2002. The
proceeds of the term loan were used to refinance the indebtedness under the
previous revolving credit facility.
The revolving equipment acquisition facility is available for a one-year
period and bears interest, at the option of the Company, at the bank's prime
interest rate minus 0.75% or LIBOR plus 1.75%. Advances against this
facility are converted to term-loans with maturities not to exceed 48 months.
The outstanding principal on the equipment term-loans is payable in monthly
installments through January, 2001. During the quarter ended April 30, 1997,
the Company borrowed $1.2 million to refinance the indebtedness under the
previous equipment acquisition term-loans and an additional $0.8 million for
current equipment requirements. At April 30, 1997, the interest rate was at
LIBOR plus 1.75% or 7.81%.
The standby letter of credit facility is available for a one-year period. At
April 30, 1997, the Company had $9.2 million in outstanding standby letters
of credit issued as security to the Company's insurance administrators as
part of its self-insurance program.
Interest costs incurred on notes payable and capital lease obligations, all of
which were expensed, for the nine month periods ended April 30, 1997 and 1996
were $771,886 and $1,141,292, respectively. Such amounts are included in
general and administrative expenses in the accompanying condensed
consolidated statements of operations.
In addition to the borrowings under the bank credit agreement, certain
subsidiaries have outstanding obligations under capital leases. The
obligations are payable in monthly installments expiring at various dates
through December, 2001.
7. COMMITMENTS AND CONTINGENCIES
In the normal course of business, certain subsidiaries of the Company have
pending and unasserted claims. Although the ultimate resolution and
liability of these claims cannot be determined, management believes the final
disposition of these claims will not have a material adverse impact on the
Company's consolidated financial condition or results of operations.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of the Company's
consolidated financial condition and results of operations. The discussion
should be read in conjunction with the condensed consolidated financial
statements and notes thereto.
Results of Operations
The Company reported earnings per common and common equivalent share of $0.27
and $0.20 for the quarters ended April 30, 1997 and 1996, respectively.
Earnings per common and common equivalent share for the nine month periods
ended April 30, 1997 and 1996 was $0.64 and $0.43, respectively. Earnings
per common share assuming full dilution for the three and nine month periods
ended April 30, 1997 was $0.27 and $0.64, respectively. This compares to
earnings per common and common equivalent share assuming full dilution of
$0.20 and $0.43 for the three and nine month period ended April 30, 1996.
Contract revenues for the quarter ended April 30, 1997 increased 38.8% to
$47.9 million as compared to $34.5 million for the same quarter last year.
The increase in contract revenues is attributable to increased volume
experienced in all service groups. The telecommunication services group
contract revenues increased 37.3% to $39.0 million, the utility line locating
services group contract revenues increased 6.7% to $3.7 million and the
electrical services group contract revenues increased 97.9% to $5.2 million
for the current quarter compared to the same quarter last year. For the nine
month period ended April 30, 1997, contract revenues increased 22.5% to
$128.1 million as compared to $104.5 million for the corresponding period
last year. The contract revenue growth reflects higher volume in all service
groups. Contract revenues increased 20.6% to $104.9 million in the
telecommunication services group, 13.6% to $10.6 million in the utility line
locating services group, and 51.8% to $12.6 million in the electrical
services group.
The contract revenue mix between telecommunication services, utility line
locating services and electrical services for the quarter ended April 30,
1997 was 81%,8%, and 11%, respectively, and 82%, 10% and 8%, respectively,
for the quarter ended April 30, 1996. The contract revenue mix reflects a
significant increase in the electrical services group due to increased volume
in bid jobs. For the nine month period ended April 30, 1997, the contract
revenue mix between the telecommunication services group, the utility line
locating services group and the electrical services group was 82%, 8% and
10%, respectively, compared to 83%, 9%, and 8%, respectively, for the
corresponding period last year. Multi-year comprehensive service contracts
continue to be the primary source of revenue for the telecommunication
services group. For the three and nine month periods ended April 30, 1997,
multi-year comprehensive service contracts represented 86% of
telecommunication services group contract revenues, as compared to 89% and
90% for the comparable periods last year. The decline is offset by higher
volume associated with premise wiring, inside network installations for
office buildings, and other telephony contracting services.
The Company's backlog of uncompleted work at April 30, 1997 was $247 million
as compared to $231 million at April 30, 1996. During the three month period
ending April 30, 1997 various contracts were awarded in the telecommunication
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services, utility line locating services and the electrical services group.
The significant contract awards in the telecommunication services group
included a multi-year telephone splicing and a multi-year broadband network
installation contract totaling $11.2 million, a multi-year engineering design
contract and an extension of an engineering design contract totaling $12.6
million, and several bid contracts totaling $1.5 million.
The Company's costs and operating expenses may be affected by a number of
factors including contract volumes, character of services rendered, work
locations, competition, and changes in productivity. Costs of earned
revenues, excluding depreciation, were 79% of contract revenues for both the
quarters ended April 30, 1997 and 1996, respectively, and 81% for both the
nine month periods ended April 30, 1997 and 1996. As a percentage of
contract revenues, the Company's prime costs of direct labor, materials,
subcontractors, and equipment costs were 59% for both the three and nine
month periods ended April 30, 1997, respectively. This compares to 60% and
61% for the corresponding periods last year. The Company's continued efforts
to control costs resulted in stable operating margins.
General and administrative expenses increased $0.9 million to $4.5 million
for the quarter ended April 30, 1997 as compared to $3.6 million for the
corresponding period last year. This is primarily attributable a $0.4 million
increase in the provision for doubtful accounts, a $0.3 million increase in
payroll and payroll taxes, and a $0.4 million increase in other general and
administrative expenses offset by a reduction in general insurance costs of
$0.2 million. For the nine month period ended April 30, 1997 general and
administrative expenses increased $0.5 million to $11.6 million as compared
to $11.1 million for the same period last year. This increase is
attributable to a $0.5 million increase in the provision for doubtful
accounts, a $0.4 million increase in payroll and payroll taxes, offset by a
$0.4 million reduction in interest costs.
The Company's 39% effective income tax rate for the nine month period ended
April 30, 1997 differs from the statutory rate due to state income taxes, the
amortization of intangible assets with no tax benefit, other non-deductible
expenses for tax purposes and the reduction of $0.2 million in the Company's
deferred tax asset valuation allowance.
Liquidity and Capital Resources
Cash and equivalents increased $0.6 million to $4.4 million during the nine
month period ending April 30, 1997. During this period, the Company generated
$1.5 million of positive cash flow from operating activities reflecting
strong earnings of $5.7 million. The cash flow from operating activities was
reduced by higher levels of accounts receivable and unbilled revenue and
partially offset by higher accounts payable. The cash flow from operating
activities is less than the reported net income due to an increase in working
capital required to support the growth in contract revenues.
The Company's investing activities absorbed $5.9 million in capital
expenditures during the nine month period ended April 30, 1997. These capital
expenditures represent the normal replacement of equipment and the start up
of a new contract in the telecommunication services group. In addition, the
Company acquired and financed $0.6 million of equipment with capital leases
and financed $1.6 million of equipment under various noncancelable operating
leases. Proceeds from the sale of surplus equipment was $1.1 million for the
nine months ended April 30, 1997.
16
On April 28, 1997 the Company signed a new $35.0 million credit agreement
arranged by a group of banks. The new credit agreement provides a $10.0
million revolving working capital facility, a $10.0 million standby letter
of credit facility, a $9.0 million five-year term loan, and a $6.0 million
revolving equipment acquisition facility. The objective of establishing the
new credit agreement was to refinance the indebtedness under the previous
credit facility and to provide additional borrowing capacity to support the
future growth of the Company. The new credit agreement requires the Company
to maintain certain financial covenants and conditions such as debt-to-equity
ratios, current and quick ratios, and net profit levels. In addition, the
new credit agreement limits the payment of cash dividends to 50% of each
fiscal year's after-tax profits. At April 30, 1997, the Company was in
compliance with all covenants and conditions.
The revolving working capital facility is available for a one-year period and
bears interest, at the option of the Company, at the bank's prime interest
rate minus 1% or LIBOR plus 1.50%. During the quarter ended April 30, 1997,
the Company borrowed $4.2 million against the revolving working capital
facility to meet current working capital requirements leaving an available
borrowing capacity of $5.8 million. At April 30, 1997, the interest rate on
the outstanding balance was at LIBOR plus 1.50% or 7.56%.
The term loan facility has a five-year maturity and bears interest at the
bank's prime interest rate minus 0.50% (8.00% at April 30, 1997). The term
loan principal and interest is payable in quarterly installments through
April, 2002. At April 30, 1997, the $9.0 million outstanding principal was
used to refinance the indebtedness under the previous revolving credit facility.
The revolving equipment acquisition facility is available for a one-year
period and bears interest, at the option of the Company, at the bank's prime
interest rate minus 0.75% or LIBOR plus 1.75%. Advances against this
facility are converted into term-loans with maturities not to exceed 48
months. The outstanding principal on the equipment acquisition term-loans is
payable in monthly installments through January, 2001. During the quarter
ended April 30, 1997, the Company borrowed $1.2 million to refinance the
indebtedness under the previous equipment acquisition term-loans and an
additional $0.8 million for current equipment requirements. The Company has
available borrowing capacity of $3.9 million under this facility. At April
30, 1997, the interest rate on the outstanding equipment acquisition term-
loans was at LIBOR plus 1.75% or 7.81%.
The standby letter of credit facility is available for a one-year period. At
April 30, 1997, the Company had $9.2 million in outstanding standby letters
of credit issued as security to the Company's insurance administrators as
part of its self-insurance program leaving $0.8 million of available borrowing
capacity.
No cash dividends have been paid during the quarter ended April 30, 1997. The
Board will determine future dividend policies based on financial condition,
profitability, cash flow, capital requirements, and business outlook, as well
as other factors relevant at the time.
The Company's future operating results and cash flows may be affected by a
number of factors including, the Company's success in bidding on future
contracts and the Company's ability to effectively manage controllable costs.
The Company foresees its capital resources, including the funds available
under the new credit facility, together with existing cash balances, to be
sufficient to meet its financial obligations, support the normal replacement
of equipment and to finance internal growth.
17
PART II. OTHER INFORMATION
__________________________
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibits furnished pursuant to the requirements of Form 10-Q:
See Exhibit Index on Page 18
(b) Reports On Form 8-K
No reports on Form 8-K were filed on behalf of the Registrant during the
quarter ended April 30, 1997.
18
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DYCOM INDUSTRIES, INC.
Registrant
Date: June 9, 1997 /s/ Thomas R. Pledger
_________________ ____________________________
Thomas R. Pledger
Chairman and Chief Executive
Officer
Date: June 9, 1997 /s/ Steven Nielsen
_________________ ____________________________
Steven Nielsen
President and Chief Operating
Officer
Date: June 9, 1997 /s/ Douglas J. Betlach
_________________ ____________________________
Douglas J. Betlach
Vice President and Chief
Financial Officer
19
EXHIBIT INDEX
Number Description
______ ___________
(11) Statement re computation of per share earnings
(27) Financial Data Schedule
(99) Credit Facility Agreement dated as of April 28,
1997 between Dycom Industries, Inc. and
Dresdner Bank Lateinamerika Aktiengesellschaft;
Bank Leumi Trust Company of New York; and
Republic National Bank of Miami, N.A.
Security Agreement dated as of April 28, 1997
between Dycom Industries, Inc. and Dresdner
Bank Lateinamerika Aktiengesellschaft; Bank
Leumi Trust Company of New York; and Republic
National Bank of Miami, N.A. Similar
agreements were executed by each subsidiary of
Dycom Industries, Inc.
Guaranty Agreement dated as of April 28, 1997
between Ansco & Associates, Inc. and Dresdner
Bank Lateinamerika Aktiengesellschaft; Bank
Leumi Trust Company of New York; and Republic
National Bank of Miami, N.A. Similar
agreements were executed by each subsidiary of
Dycom Industries, Inc.