1 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 ---------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): July 29, 1997 ------------------- Dycom Industries, Inc. ----------------------------------------------------- (Exact name of registrant as specified in its charter) Florida 0-5423 59-1277135 - ---------------------------- ------------ ------------------- (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 4440 PGA Boulevard, Suite 600 Palm Beach Gardens, Florida 33410 - ----------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (561) 627-7171 -------------------- 2 Item 2. Acquisition or Disposition of Assets. On July 29, 1997, Dycom Industries, Inc., a Florida corporation (the "Company"), through its wholly-owned subsidiary, Dycom Acquisitions, Inc., a Pennsylvania corporation ("Acquisitions"), acquired Communications Construction Group, Inc., a Pennsylvania corporation ("Communications"). The transaction was consummated pursuant to an Agreement and Plan of Merger dated July 7, 1997 (the "Merger Agreement"), among the Company, Acquisitions, Communications, and George Tamasi and Thomas Polis. The Merger Agreement was amended by an Amendment dated as ofJuly 29, 1997 (the "Amendment"). Copies of the Merger Agreement and Amendment are included herewith as Exhibits 99(i) and 99(ii), respectively, and are incorporated herein by reference. The Merger Agreement, as so amended, is hereinafter referred to as the "Agreement". Pursuant to the Agreement and the Articles of Merger dated July 29, 1997 (the "Articles of Merger"), at the Effective Time (as defined in the Agreement), Acquisitions was merged with and into Communications (the "Merger"). As a result of the Merger, the separate corporate existence of Acquisitions ceased and the shareholders of Communications (Messrs. Tamasi and Polis) became shareholders of the Company. Communications will continue its business as a wholly-owned subsidiary of the Company, operating under the name "Communications Construction Group, Inc." The Articles of Merger are included herewith as Exhibit 99(iii), and are incorporated herein by reference. 1,026,621 shares of the Company's common stock, par value $0.33 1/3 per share (the "Common Stock") were issued to each of Mr. Tamasi and Mr. Polis. Upon the consummation of the Merger, each share of common stock of Communications, par value $1.00 per share, and of the preferred shares of Communications, par value $25.00 per share, issued and outstanding immediately prior to the Effective Time, automatically and without any action on the part of the holder thereof, was converted into 959.4588 shares of Common Stock, with the total rounded up to the nearest whole number of shares of Common Stock. Mr. Tamasi and Mr. Polis each received stock representing approximately 9.4465% of the Common Stock issued and outstanding subsequent to the Merger. The consideration paid pursuant to the Agreement resulted from arm's length negotiations between George Tamasi, as shareholder representative and Chairman and Chief Executive Officer of Communications, and Thomas R. Pledger, as Chairman and Chief Executive Officer of the Company. In deciding to approve the Merger and the consideration to be paid in connection therewith, the Board of Directors of the Company considered, among other things, the following factors: the earnings, the financial condition, business, assets, and the management of Communications. The forgoing factors were evaluated by the Board of Directors on the basis of Communications becoming a wholly-owned subsidiary of the Company. In considering the terms of the Merger, no one factor assumed any specific or special significance; rather approval of the terms of the Merger 3 reflects an overall assessment by the Board of Directors of the relative values of the securities of Communications in the context of a stock exchange. The share conversions are based on a total of $28,600,000 in Common Stock, with a value of approximately $13.93 per share, being issued in connection with the Merger. The exchange ratio establishing the shares of stock to be issued to George Tamasi and Thomas Polis was calculated by the Company in accordance with the formula set forth in the Agreement. Pursuant to the Agreement, on July 29, 1997, Communications and the Company entered into five-year employment agreements with Mr. Tamasi and Mr. Polis, included herewith as Exhibits 99(iv) and 99(v), and incorporated herein by reference. The employment agreements provide for their continued employment as President and Chief Executive Officer and as Executive Vice President, respectively. Further, the employment agreements provide that Mr. Tamasi and Mr. Polis will be on the Board of Directors of Communications. Concurrent with the establishment of control over Communications, the Company accounted for the acquisition as a pooling-of-interest. Communications provides construction and engineering services to the telecommunications industry, primarily through long-term contracts with Comcast Cable Communications, Inc. and to other local telecommunications and cable TV companies. The assets acquired as a result of the Merger include vehicles, equipment, furnishings, and leasehold rights and improvements currently used by Communications. The Company intends to use the assets acquired pursuant to the Merger in the business in which the assets were used prior to the Merger, subject to such changes as the Company may deem appropriate in the future. Item 7. Financial Statements and Exhibits. (a) Financial statements of businesses acquired. Page Audited financial statements of Communications Construction Group, Inc. for the fiscal years ended May 31, 1997 and 1996 F-1 (b) Pro forma financial information. Introduction to unaudited pro forma condensed financial statements. F-13 Unaudited pro forma combined consolidated balance sheet as of April 30, 1997. F-14 Unaudited pro forma combined consolidated statements of operations for the nine months ended April 30, 1997 and 1996. F-15 to F-16 4 Page Unaudited pro forma combined consolidated balance sheets as of July 31, 1996 and 1995. F-17 to F-18 Unaudited pro forma combined consolidated statements of operations for the fiscal years ended July 31, 1996, 1995, and 1994. F-19 to F-21 Notes to unaudited pro forma combined Financial statements. F-22 (c) Exhibits 99(i) Agreement and Plan of Merger ("the Merger Agreement") dated July 7, 1997 among Dycom Industries, Inc., Dycom Acquisitions, Inc., Communications Construction Group, Inc., George Tamasi and Thomas Polis. 99(ii) Amendment to the Merger Agreement dated July 29, 1997 among the parties to the Merger Agreement. 99(iii) Articles of Merger of Dycom Acquisitions, Inc. into Communications Construction Group, Inc. dated July 29, 1997. 99(iv) Employment Agreement dated July 29, 1997 between George Tamasi, Communications Construction Group, Inc., and Dycom Industries, Inc. 99(v) Employment Agreement dated July 29, 1997 between Thomas Polis, Communications Construction Group, Inc., and Dycom Industries, Inc. 99(vi) Press Release issued July 30, 1997. 5 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Dycom Industries, Inc. (Registrant) Date: August 13, 1997 /s/ Thomas R. Pledger Thomas R. Pledger Chairman and Chief Executive Officer Date: August 13, 1997 /s/ Steven Nielsen Steven Nielsen President and Chief Operating Officer Date: August 13, 1997 /s/ Douglas J. Betlach Douglas J. Betlach Vice President, Treasurer and Chief Financial Officer 6 COMMUNICATIONS CONSTRUCTION GROUP, INC. CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended May 31, 1997 and 1996 INDEX PAGE Independent Auditor's Report F-1 Consolidated Balance Sheets as of May 31, 1997 and 1996 F-2 Consolidated Statements of Operations for the years ended May 31, 1997 and 1996 F-3 Consolidated Statements of Cash Flows for the years ended May 31, 1997 and 1996 F-4 Consolidated Statements of Changes in Stockholders' Equity for the years ended F-5 May 31, 1997 and 1996 Notes to Consolidated Financial Statements F-6 to F-12 /TABLE 7 INDEPENDENT AUDITOR'S REPORT To the Board of Directors Communications Construction Group, Inc. We have audited the accompanying consolidated balance sheets of Communications Construction Group, Inc. (the "Company") as of May 31, 1997 and 1996, and the related consolidated statements of operations, cash flows and changes in stockholders' equity for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. 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, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Communications Construction Group, Inc. as of May 31, 1997 and 1996, and the consolidated results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. /s/ Nowalk & Associates Nowalk & Associates Cranbury, New Jersey July 23, 1997 F-1 8 COMMUNICATIONS CONSTRUCTION GROUP, INC. CONSOLIDATED BALANCE SHEETS May 31, ASSETS 1997 1996 Current assets Cash $ 401,482 $ 92,257 Accounts receivable Trade, less allowance for doubtful accounts of $76,551 and $99,159 11,080,515 7,988,550 Contract retainage 301,378 293,926 Unbilled receivables 178,186 382,072 Materials and supplies inventory 6,297 Prepaid expenses 545,691 36,547 Deferred tax assets 629,234 Other 328,139 158,728 Total current assets 13,464,625 8,958,377 Plant and equipment, net 6,841,609 4,940,060 Other assets Deferred tax assets 106,000 Deposits 146,512 117,031 146,512 223,031 Total Assets $20,452,746 $14,121,468 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Current maturities of long-term debt $ 319,563 $ 513,953 Note payable 4,712,895 3,985,119 Accounts payable 2,881,039 2,025,723 Accrued payroll and expenses 3,371,660 2,160,277 Dividends payable 6,000 - Payroll and income taxes payable 2,167,139 1,055,712 Total current liabilities 13,458,296 9,740,784 Long-term debt, net of current maturities 1,149,533 1,575,207 Deferred tax liability 95,134 Total liabilities 14,702,963 11,315,991 Commitments and Contingencies Stockholders' equity Preferred stock 12% cumulative, $25 par value, 2,000 shares authorized, issued and outstanding 50,000 50,000 Common stock - $1 par value, 1,000 shares authorized, 140 shares issued and outstanding 140 140 Paid in capital 143,838 143,838 Retained earnings 5,555,805 2,611,499 Total stockholders' equity 5,749,783 2,805,477 Total $20,452,746 $14,121,468 The accompanying notes to consolidated financial statements are an integral part of these statements. F-2 9 COMMUNICATIONS CONSTRUCTION GROUP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS For the Years Ended May 31, 1997 1996 Contract revenues earned $67,717,326 $50,121,009 Operating costs and expenses 53,290,045 40,995,700 Selling, general and administrative expenses 8,336,135 6,345,137 Interest expense, net of interest income 838,440 518,458 62,464,620 47,859,295 Income before income taxes 5,252,706 2,261,714 Provision for income taxes Current 2,730,500 1,094,000 Deferred ( 428,100) ( 106,000) 2,302,400 988,000 Net income $ 2,950,306 $ 1,273,714 The accompanying notes to consolidated financial statements are an integral part of these statements. F-3 10 COMMUNICATIONS CONSTRUCTION GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended May 31, 1997 1996 Cash flows from operations Net income $2,950,306 $1,273,714 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 2,585,315 1,905,632 Provision for losses on trade accounts receivable 26,939 Changes in assets and liabilities (Increase) in receivables and contract retainage (2,895,531) ( 511,510) Decrease in inventory 6,297 - (Increase) in deferred tax assets, net ( 428,100) ( 106,000) (Increase) decrease in prepaid expenses deposits and other assets ( 708,036) 20,084 Increase (decrease) in accounts payable and accrued expenses 2,066,699 ( 758,856) Increase in payroll and income taxes payable 1,111,427 412,763 Net cash provided by operating activities 4,688,377 2,262,766 Cash flows from investing activities Capital expenditures (4,482,796) (3,051,434) Cash flows from financing activities Principal payments on long-term debt ( 776,350) ( 922,129) Proceeds from notes payable 1,083,518 1,507,149 (Payments) proceeds from notes payable - stockholders ( 197,524) 183,768 Dividends ( 6,000) Net cash provided by financing activities 103,644 768,788 Net increase (decrease) in cash 309,225 ( 19,880) Cash at beginning of period 92,257 112,137 Cash at end of period $ 401,482 $ 92,257 Supplemental disclosures of cash flow information Cash paid during the year for Interest $ 838,440 $ 518,458 Income taxes $2,097,020 $ 750,237 The accompanying notes to consolidated financial statements are an integral part of these statements. F-4 11 COMMUNICATIONS CONSTRUCTION GROUP, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY For the Years Ended May 31, 1997 and 1996 Common Stock Preferred Stock Number Number Paid in Retained of Shares Amount of Shares Amount Capital Earnings Balance, May 31, 1995 126 $126 $193,852 $1,337,785 Stock Issued at Reorganization 14 $ 14 2,000 $50,000 $( 50,014) Net income 1,273,714 Balance, May 31, 1996 140 $140 2,000 50,000 $143,838 $2,611,499 Net income 2,950,306 Preferred Dividend ( 6,000) Balance, May 31, 1997 140 $140 2,000 $50,000 $143,838 $5,555,805 The accompanying notes to consolidated financial statements are an integral part of these statements. F-5 12 COMMUNICATIONS CONSTRUCTION GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS May 31, 1997 and 1996 1. The accounting policies which have a significant effect on the operations of Communications Construction Group, Inc. (the Company) are as follows: Principals Of Consolidation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Tampol Enterprises, Inc. (Tampol). At May 31, 1996, Tampol was merged into the Company. The Company's operations consist primarily of cable TV services contracting. All material intercompany accounts and transactions have been eliminated. Equipment Equipment is carried at cost. Depreciation and amortization, for financial reporting purposes, is provided using a straight-line method over the estimated useful lives of the related assets. An accelerated method of depreciation is utilized for income tax purposes. Gains or losses resulting from dispositions are included in operations. Expenditures which improve and extend the life of an asset are capitalized; maintenance and repairs are expensed. Revenue and Cost Recognition The Company derives its revenue principally from construction contracts which extend over one year, that typically specify a price per mile or foot of system cable or strand installed and price per unit of hardware or equipment installed, subject to adjustments in specified circumstances. Revenue and associated costs are recognized as work progresses. Revisions in cost and profit estimated during performance of the work are reflected in the accounting periods in which the facts require recognition. Contract costs include all direct material and labor costs and those indirect costs related to contract performance. This policy substantially approximates the percentage of completion method. F-6 13 COMMUNICATIONS CONSTRUCTION GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Engineering, design, selling, general and administrative costs are charged to expenses as incurred. Billings in advance of performance are accounted for as liabilities and are not recognized as revenue until such time as the work is performed. Unbilled accounts receivable represent revenue recognized for performance under contracts not yet billed. Anticipated losses on contract operations are charged to operations at the time such losses are known. In accordance with the terms of contracts, an amount representing retainage is withheld until completion of the project or until the end of pre-established phases. Final payments of all such amounts may not be received within a one-year period; however, in conformance with trade practice, the full amount of such amounts withheld is included in current assets. Income Taxes Income tax expense is based on reported income adjusted for differences that do not enter into the computation of taxes payable under applicable tax laws. The Company and its subsidiary filed a consolidated federal income tax return for fiscal year ended May 31, 1996. Deferred income taxes are provided for temporary differences between the financial reporting basis and the tax basis of the Company's assets and liabilities. 2. PLANT AND EQUIPMENT The following is a summary of plant and equipment at May 31 1997 1996 C> Machinery and equipment $ 2,810,841 $2,167,466 Office equipment 289,611 212,813 Furniture and fixture 180,939 164,139 Transportation equipment 9,023,633 6,231,982 Leasehold improvements 469,397 335,838 Tools 399,275 280,530 13,173,696 9,392,768 Less: accumulated depreciation ( 6,332,087) (4,452,708) $ 6,841,609 $4,940,060 Depreciation expense amounted to approximately $2,585,315 and $1,905,632 for the years ended May 31, 1997 and 1996, respectively. F-7 14 COMMUNICATIONS CONSTRUCTION GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3. INCOME TAXES The components of the provision (benefit) for income taxes are 1997 1996 Current Federal $2,002,600 $ 857,450 State 727,900 236,550 2,730,500 1,094,000 Deferred Federal ( 293,400) ( 106,000) State ( 134,700) ( 428,100) ( 106,000) Total tax provision (benefit) $2,302,400 $ 988,000 The deferred tax provision (benefit) is the change in the deferred tax assets and liabilities representing the tax consequences of changes in the amount of temporary differences and changes in tax rates during the year. The deferred tax assets and liabilities at May 31 are comprised of the following 1997 1996 Deferred tax assets Property and equipment $ $ 106,000 Non-deductible reserves 629,234 Deferred tax liabilities Property and equipment ( 95,134) Net deferred tax assets $ 534,100 $ 106,000 The difference between the total tax provision and the amount computed by applying the statutory federal income tax rates to pre-tax income is as follows 1997 1996 Statutory rate applied to pre-tax income $1,785,920 $ 768,983 State taxes, net of federal tax benefit 381,347 156,737 Adjustments for amounts not deductible 135,133 62,280 Total tax provision $2,302,400 $ 988,000 F-8 15 COMMUNICATIONS CONSTRUCTION GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4. DEBT On October 20, 1993, the Company entered into a new credit facility with PNC Bank N.A., formerly Midlantic Bank N.A. which was then revised December 1, 1996. The facility consists of a $8,500,000 revolving line of credit. Currently, the bank is reviewing this line for extension. This facility bears interest at various rates ranging from PNC Bank's prime rate plus .25% (8.75% at May 31, 1997) and is collateralized by 75% of the trade accounts receivable less than 90 days old, inventories, equipment and machinery. The loan agreement contains certain annual financial covenants related to tangible net worth, debt to tangible net worth and capital expenditure limitations. For purposes of calculating these covenants, the revolving credit facility has been treated as long term debt in accordance with the intentions of the Company and PNC Bank N.A. The agreement also contains a provision whereby repayment of the debt could be accelerated at the sole discretion of PNC Bank N.A. should there be a material and adverse change in the condition of the Company. At May 31, 1996, the Company was in default with the capital expenditures and liabilities to tangible net worth covenants of its loan and security agreement with PNC Bank N.A. A waiver of these defaults was obtained from PNC Bank N.A. on December 10. As of that date all other terms and conditions of the agreement remained in force and effect. In September 1995, the Company entered a secured financing arrangement with CIT Group/Equipment Financing, Inc. in the amount of $922,510. A summary of the key provisions of this debt instrument are i. A processing fee of one percent ii. Collateral pledged was all transportation equipment iii. 48 monthly principal payments of $19,218.95 iv. Interest is calculated using lenders' prime interest rate plus .75% In February 1997, the Company borrowed an additional $355,742 from CIT Group/Equipment Financing, Inc. at 9.5% fixed for four years. The Company was advanced $1,000,000 by Comcast Corporation in 1994. In fiscal 1997, the loan was paid in full. F-9 16 COMMUNICATIONS CONSTRUCTION GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4. DEBT (Continued) Long term debt as of May 31, 1997 and 1996 consists of the following Original Balance Interest Loan Amount 1997 1996 Rate CIT Group Four year term loan $ 922,510 $ 538,131 $768,758 Prime plus .75% Four year term loan 355,742 330,965 9.5% PNC Bank N.A. Three year term loan 600,000 83,325 Prime plus 1.5% Comcast Work performance advance 1,000,000 439,553 Non-interest bearing Stockholders 955,915 600,000 797,524 $3,834,167 1,469,096 2,089,160 Current maturities 319,563 513,953 Long term debt, net of current maturities $1,149,533 $1,575,207 A schedule of debt maturity for each of the next three years and beyond is 1998 319,563 1999 317,683 2000 173,331 2001 and beyond 658,519 $1,469,096 F-10 17 COMMUNICATIONS CONSTRUCTION GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5. COMMITMENTS AND CONTINGENCIES The Company leases buildings under both month-to-month and long-term noncancellable operating lease arrangements. Rental expense for these leases approximated $1,243,448 and $823,541 for the years ended May 31, 1997 and 1996, respectively. Minimum future rental payments under long- term noncancellable operating leases are 1998 686,731 1999 231,400 2000 163,200 2001 67,200 1,148,531 In 1995, New York State audited the Company for compliance with statutory sales and use tax regulations for the years 1989 through 1995. As a result of this audit the Company paid in fiscal 1996 sales tax on several small construction jobs and use tax on vehicles and equipment operated in the state during this period. In January 1997, New York State asserted amounts due from the Company for sales tax and interest for periods through August 31, 1995 in the amount of approximately $1,330,000. The attorney representing the Company in this matter has filed for a conciliation conference to discuss the matter with the state tax authorities. The Company will contest the asserted deficiency vigorously and its attorney recommends that if any liability is established that it pursue fully its rights vis-a-vis its customers and the taxes paid by such customers. Currently, New York State is auditing the customers for sales and use tax compliance. Currently, the Company does not bill its major customer for sales or use tax on its construction work. The customer indicates that the work is not subject to sales or use tax in the states in which the company has built or is building systems for the customer. All of these states with the exception of New Jersey have provided written verification that the services performed by the Company are not taxable. The customer has indicated in writing to the Company that it has self assessed for sales and use tax in New Jersey for work performed by the Company. Further, the Company's corporate council has given its opinion under the individual work contracts that the customer is liable for sales or use tax and penalties and interest if the customer is billed for the tax within twelve months of the contract conclusion. F-11 18 COMMUNICATIONS CONSTRUCTION GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5. COMMITMENTS AND CONTINGENCIES (Continued) Based upon the above facts, management has accrued approximately $164,000 for sales tax on the New York state audit issue. This liability is included in the current liabilities at May 31, 1996 and 1997 with no offsetting receivable. Cost of sales was charged for this accrual in fiscal 1996. If an assessment of tax, interest and penalties is made against the Company, it will assert its rights under its contracts and bill the customers for the amounts assessed. The Company is party to certain litigation relating to the general operations of the business which under the opinion of legal counsel is not expected to exceed insurance coverage limits. 6. EMPLOYEE BENEFIT PLAN All employees of the Company who meet certain minimum age and period of service requirements are eligible to participate in a Section 401(k) plan (the "Plan") as defined by the code. The Plan allows eligible employees to defer up to 15 percent of their annual compensation. The amounts contributed by employees are immediately vested and nonforfeitable. The Company, at management's discretion, may match employees contributions. A matching contribution of $115,000 was made for the fiscal year ended May 31, 1997. 7. RELATED PARTY TRANSACTIONS The Company leases its administrative offices from a partnership under the control of officers of the Company. These payments amounted to $115,200 and $112,200 for the years ended May 31, 1997 and 1996, respectively. 8. SIGNIFICANT GROUP CONCENTRATIONS OF CREDIT RISKS Most of the Company's operations are with customers in the cable television industry and represent a limited number of contracts. One customer approximates 82% of the current and projected work load. 9. SUBSEQUENT EVENT On July 7, 1997, the Company entered into a plan of merger with Dycom Industries, Inc. (Dycom). The merger will result in the common and preferred stock of the Company being exchanged for common shares of Dycom equal in value to $28,000,000. The merger will be accounted for as a pooling of interest and the Company will operate as a wholly owned subsidiary of Dycom. F-12 19 DYCOM INDUSTRIES, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS INCLUDING COMMUNICATIONS CONSTRUCTION GROUP, INC. INTRODUCTION TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS On July 29, 1997, Dycom Industries, Inc. ("Dycom") entered into an agreement to acquire Communications Construction Group, Inc. ("CCG") for 2,053,242 shares of Dycom's $0.33 1/3 par value common stock. Dycom is accounting for the acquisition as a pooling of interests. The following unaudited pro forma combined consolidated financial statements give effect to the merger on a pooling of interest basis. The unaudited pro forma combined financial statements are based on the respective historical financial statements of Dycom and CCG. The unaudited pro forma combined consolidated balance sheet assumes that the acquisition took place on April 30, 1997 and combines Dycom's April 30, 1997 unaudited consolidated balance sheet with CCG's February 28, 1997 unaudited balance sheet. Also presented are the unaudited pro forma combined balance sheets combining the Dycom consolidated balance sheets as of July 31, 1996 and 1995, respectively, with the CCG balance sheets as of May 31, 1996 and 1995, respectively. The unaudited pro forma combined consolidated statements of operations assume that the acquisition took place as of the beginning of the periods presented and combined Dycom's unaudited consolidated statements of operations for the nine months ended April 30, 1997 and 1996 and for the fiscal years ended July 31, 1996, 1995 and 1994 with CCG's unaudited results of operations for the nine months ended February 28, 1997 and 1996 and for the fiscal years ended May 31, 1996, 1995 and 1994, respectively. This presentation is consistent with the fiscal years expected to be combined after the date of the closing of the acquisition. The unaudited pro forma combined consolidated financial statements are based on the estimates and assumptions set forth in the notes to these statements. The pro forma adjustments made in connection with the pro forma combined financial statements are preliminary and have been made solely for purposes of developing such pro forma financial information for illustrative purposes necessary to comply with the disclosure requirements of the Securities and Exchange Commission. The unaudited pro forma combined financial statements do not purport to be indicative of the results of operations for future periods. F-13 20 DYCOM INDUSTRIES, INC. AND SUBSIDIARIES AND COMMUNICATIONS CONSTRUCTION GROUP, INC. UNAUDITED PRO FORMA COMBINED BALANCE SHEET April 30, 1997 Dycom CCG Pro Forma Pro Forma April 30, 1997 Feb.28, 1997 Adjustments Combined --------------- -------------- ----------- ---------- ASSETS CURRENT ASSETS: Cash and equivalents $ 4,426,490 $ 31,402 $ $ 4,457,892 Accounts Receivable, net 20,818,895 11,844,329 32,663,224 Costs and estimated earnings in excess of billings 11,615,597 190,000 11,805,597 Deferred income taxes, net 1,604,270 1,604,270 Other current assets 1,551,280 45,457 1,596,737 ------------- ------------- ---------- ------------ Total current assets 40,016,532 12,111,188 52,127,720 ------------- ------------- ---------- ------------ PROPERTY AND EQUIPMENT, net 20,872,998 6,468,591 27,341,589 OTHER ASSETS: Intangible assets, net 4,723,130 4,723,130 Deferred tax assets, net 742,407 106,000 848,407 Other 193,668 147,805 341,473 ------------- ------------- ---------- ------------ Total other assets 5,659,205 253,805 5,913,010 ------------- ------------- ---------- ------------ TOTAL $ 66,548,735 $ 18,833,584 $ $85,382,319 ============= ============= =========== ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 7,573,207 $ 3,430,865 $ $11,004,072 Notes payable 7,054,914 5,463,445 12,518,359 Billings in excess of costs and estimated earnings Accrued self-insured claims 2,750,723 2,750,723 Income taxes payable 748,600 1,070,149 1,818,749 Other accrued liabilities 7,800,101 3,371,602 11,171,703 ------------- ------------- ----------- ----------- Total current liabilities 25,927,545 13,336,061 39,263,606 NOTES PAYABLE 8,986,446 1,060,170 (600,000)(3) 9,446,616 ACCRUED SELF-INSURED CLAIMS 7,412,529 7,412,529 ------------- ------------- ----------- ---------- Total liabilities 42,326,520 14,396,231 (600,000) 56,122,751 ------------- ------------- ----------- ---------- STOCKHOLDERS' EQUITY: Preferred stock 50,000 ( 50,000)(3) Common stock 2,923,833 140 684,274 (3) 3,608,247 Additional paid-in capital 25,146,315 143,838 ( 34,274)(3) 25,255,879 Retained (deficit) earnings ( 3,847,933) 4,243,375 395,442 ------------- ------------- ---------- ----------- Total shareholders' equity 24,222,215 4,437,353 600,000 29,259,568 ------------- ------------- ----------- ----------- TOTAL $ 66,548,735 $ 18,833,584 $ $85,382,319 ============ ============= =========== =========== See notes to unaudited pro forma combined financial statements. F-14 21 DYCOM INDUSTRIES, INC. AND SUBSIDIARIES AND COMMUNICATIONS CONSTRUCTION GROUP, INC. UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED APRIL 30, 1997 Dycom CCG Nine Months Nine Months Ended Ended Pro Forma Pro Forma April 30, 1997 Feb.28, 1997 Adjustments Combined --------------- ------------- ------------ ---------- REVENUES: Contract revenues earned $128,069,236 $48,305,402 $ $176,374,638 Other, net 496,047 344 496,391 ------------ ----------- --------- ----------- Total 128,565,283 48,305,746 176,871,029 ------------ ----------- --------- ------------ EXPENSES: Costs of earned revenue excluding depreciation 103,099,014 8,339,447 141,438,461 General and administrative 11,637,961 5,481,223 17,119,184 Depreciation and amortization 4,473,683 1,753,200 6,226,883 ------------ ----------- ---------- ------------ Total 119,210,658 45,573,870 164,784,528 ------------ ----------- ---------- ------------ INCOME BEFORE INCOME TAXES 9,354,625 2,731,876 12,086,501 PROVISION FOR INCOME TAXES 3,638,495 1,100,000 4,738,495 ------------ ----------- ---------- ------------- NET INCOME $ 5,716,130 $ 1,631,876 $ $ 7,348,006 ============ =========== ========== ============= EARNING PER COMMON AND COMMON EQUIVALENT SHARE: Primary $ 0.64 $ 0.67 ============ ============ Fully diluted $ 0.64 $ 0.67 ============ ============ SHARES USED IN COMPUTING EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE: Primary 8,888,496 10,941,738 ============ ============ Fully diluted 8,888,680 10,941,922 ============ ============ See notes to unaudited pro forma combined financial statements. F-15 22 DYCOM INDUSTRIES, INC. AND SUBSIDIARIES AND COMMUNICATIONS CONSTRUCTION GROUP, INC. UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED APRIL 30, 1996 Dycom CCG Nine Months Nine Months Ended Ended Pro Forma Pro Forma April 30, 1996 Feb.28, 1996 Adjustments Combined ------------- ------------- ------------ ----------- REVENUES: Contract revenues earned $104,544,413 $35,528,792 $ $140,073,205 Other, net 1,283,278 2,666 1,285,944 ------------ ------------ ----------- ------------ Total 105,827,691 35,531,458 141,359,149 ------------ ------------ ----------- ------------- EXPENSES: Costs of earned revenue excluding depreciation 84,331,152 29,312,178 113,643,330 General and administrative 11,073,271 4,079,630 15,152,901 Depreciation and amortization 4,138,546 1,416,700 5,555,246 ------------ ------------ ------------ ------------- Total 99,542,969 34,808,508 134,351,477 ------------ ------------ ------------ ------------ INCOME BEFORE INCOME TAXES 6,284,722 722,950 7,007,672 PROVISION FOR INCOME TAXES 2,627,702 300,000 2,927,702 ------------- ------------ ------------ ------------- NET INCOME $ 3,657,020 $ 422,950 $ $ 4,079,970 ============= ============ ============ ============= EARNING PER COMMON AND COMMON EQUIVALENT SHARE: Primary $ 0.43 $ 0.38 ============ ============= Fully diluted $ 0.43 $ 0.38 ============ ============= SHARES USED IN COMPUTING EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE: Primary 8,554,808 10,608,050 ============ ============= Fully diluted 8,554,808 10,608,050 ============ ============= See notes to unaudited pro forma combined financial statements. F-16 23 DYCOM INDUSTRIES, INC. AND SUBSIDIARIES AND COMMUNICATIONS CONSTRUCTION GROUP, INC. UNAUDITED PRO FORMA COMBINED BALANCE SHEET JULY 31, 1996 Dycom CCG Pro Forma Pro Forma July 31, 1996 May 31, 1996 Adjustments Combined -------------- ------------- ----------- ------------- ASSETS CURRENT ASSETS: Cash and equivalents $ 3,835,479 $ 92,257 $ $ 3,927,736 Accounts Receivable, net 13,306,064 8,441,204 21,747,268 Costs and estimated earnings in excess of billings 7,137,212 382,072 7,519,284 Deferred income taxes, net 1,261,065 1,261,065 Other current assets 1,248,405 42,844 1,291,249 ----------- ----------- --------- ------------ Total current assets 26,788,225 8,958,377 35,746,602 ----------- ----------- --------- ----------- PROPERTY AND EQUIPMENT, net 19,574,410 4,940,060 24,514,470 OTHER ASSETS: Intangible assets, net 4,839,447 4,839,447 Deferred tax assets, net 598,887 106,000 704,887 Other 272,916 117,031 389,947 ----------- ----------- ---------- ------------ Total other assets 5,711,250 223,031 5,934,281 ----------- ----------- ---------- ----------- TOTAL $52,073,885 $14,121,468 $ $66,195,353 =========== =========== ========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 3,541,789 $ 2,025,723 $ $ 5,567,512 Notes payable 2,758,795 4,499,072 7,257,867 Billings in excess of costs and estimated earnings 38,714 38,714 Accrued self-insured claims 3,064,229 3,064,229 Income taxes payable 227,619 871,559 1,099,178 Other accrued liabilities 8,151,589 2,344,430 10,496,019 ----------- ----------- ---------- ----------- Total current liabilities 17,782,735 9,740,784 27,523,519 NOTES PAYABLE 9,452,630 1,575,207 (600,000)(3) 10,427,837 ACCRUED SELF-INSURED CLAIMS 7,062,150 7,062,150 ----------- ----------- --------- ------------ Total liabilities 34,297,515 11,315,991 (600,000) 45,013,506 ----------- ------------ --------- ------------ STOCKHOLDERS' EQUITY: Preferred stock 50,000 ( 50,000)(3) Common stock 2,867,164 140 684,274 (3) 3,551,578 Additional paid-in capital 24,473,269 143,838 ( 34,274)(3) 24,582,833 Retained (deficit) earnings ( 9,564,063) 2,611,499 (6,952,564) ------------ ----------- --------- ----------- Total shareholders' equity 17,776,370 2,805,477 600,000 21,181,847 ----------- ----------- --------- ------------ TOTAL $52,073,885 $14,121,468 $ $66,195,353 =========== =========== ========= ============= See notes to unaudited pro forma combined financial statements. F-17 24 DYCOM INDUSTRIES, INC. AND SUBSIDIARIES AND COMMUNICATIONS CONSTRUCTION GROUP, INC. UNAUDITED PRO FORMA COMBINED BALANCE SHEET JULY 31, 1995 Dycom CCG Pro Forma Pro Forma July 31, 1995 May 31, 1995 Adjustments Combined -------------- ------------- ------------ --------- ASSETS CURRENT ASSETS: Cash and equivalents $ 4,306,675 $ 112,137 $ $ 4,418,812 Accounts Receivable, net 16,330,477 8,259,684 24,590,161 Costs and estimated earnings in excess of billings 5,223,425 72,000 5,295,425 Deferred income taxes, net 385,755 385,755 Other current assets 1,396,201 100,690 1,496,891 ----------- ----------- ---------- ------------ Total current assets 27,642,533 8,544,511 36,187,044 ----------- ----------- ---------- ----------- PROPERTY AND EQUIPMENT, net 18,802,563 3,794,348 22,596,911 OTHER ASSETS: Intangible assets, net 4,994,535 4,994,535 Other 353,227 86,290 439,517 ----------- ----------- ---------- ------------ Total other assets 5,347,762 86,290 5,434,052 ----------- ----------- ---------- ------------ TOTAL $51,792,858 $12,425,149 $ $64,218,007 =========== =========== ========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 5,607,567 $ 2,727,064 $ $ 8,334,631 Notes payable 4,955,080 3,830,510 8,785,590 Billings in excess of costs and estimated earnings 100,951 100,951 Accrued self-insured claims 2,266,855 2,266,855 Income taxes payable 621,483 392,468 1,013,951 Other accrued liabilities 6,585,387 2,468,273 9,053 660 ----------- ----------- ----------- ------------ Total current liabilities 20,137,323 9,418,315 29,555,638 NOTES PAYABLE 13,870,064 1,475,071 (600,000)(3) 14,745,135 ACCRUED SELF-INSURED CLAIMS 6,598,372 6,598,372 ------------ ----------- ----------- ------------ Total liabilities 40,605,759 10,893,386 (600,000) 50,899,145 ------------ ----------- ----------- ----------- STOCKHOLDERS' EQUITY: Common stock 2,847,997 126 684,288 (3) 3,532,411 Additional paid-in capital 24,293,309 193,852 ( 84,288)(3) 24,402,873 Retained (deficit) earnings (15,954,207) 1,337,785 (14,616,422) ----------- ----------- --------- ----------- Total shareholders' equity 11,187,099 1,531,763 600,000 13,318,862 ----------- ----------- --------- ------------ TOTAL $51,792,858 $12,425,149 $ $64,218,007 =========== =========== ========= ============ See notes to unaudited pro forma combined financial statements. F-18 25 DYCOM INDUSTRIES, INC. AND SUBSIDIARIES AND COMMUNICATIONS CONSTRUCTION GROUP, INC. UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED JULY 31, 1996 Dycom CCG Fiscal Year Fiscal Year Ended Ended Pro Forma Pro Forma July 31, 1996 May 31, 1996 Adjustments Combined -------------- ------------- ----------- ---------- REVENUES: Contract revenues earned $143,932,608 $50,121,009 $ $194,053,617 Other, net 1,202,772 3,852 1,206,624 ------------ ----------- -------- ------------ Total 145,135,380 50,124,861 195,260,241 ------------ ----------- -------- ------------ EXPENSES: Costs of earned revenue excluding depreciation 115,732,334 40,037,056 155,769,390 General and administrative 14,564,558 5,920,464 20,485,022 Depreciation and amortization 5,718,768 1,905,627 7,624,395 ------------- ----------- -------- ------------ Total 136,015,660 47,863,147 183,878,807 ------------- ----------- -------- ------------ INCOME BEFORE INCOME TAXES 9,119,720 2,261,714 11,381,434 PROVISION FOR INCOME TAXES 2,729,576 988,000 3,717,576 ------------- ----------- --------- ------------ NET INCOME $ 6,390,144 $ 1,273,714 $ $ 7,663,858 ============= =========== ========= ============= EARNING PER COMMON AND COMMON EQUIVALENT SHARE: Primary $ 0.73 $ 0.71 ============= ============ Fully diluted $ 0.72 $ 0.70 ============= ============ SHARES USED IN COMPUTING EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE: Primary 8,806,577 10,859,819 ============== =========== Fully diluted 8,875,042 10,928,284 ============== ============ See notes to unaudited pro forma combined financial statements. F-19 26 DYCOM INDUSTRIES, INC. AND SUBSIDIARIES AND COMMUNICATIONS CONSTRUCTION GROUP, INC. UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED JULY 31, 1995 Dycom CCG Fiscal Year Fiscal Year Ended Ended Pro Forma Pro Forma July 31, 1995 May 31, 1995 Adjustments Combined ------------- ------------ ----------- ------------- REVENUES: Contract revenues earned $143,909,874 $43,047,102 $ $186,956,976 Other, net 1,373,242 3,156 1,376,398 ------------ ----------- ---------- ------------ Total 145,283,116 43,050,258 188,333,374 ------------ ----------- ---------- ------------- EXPENSES: Costs of earned revenue excluding depreciation 117,742,300 35,542,020 153,284,320 General and administrative 14,113,615 4,895,915 19,009,530 Depreciation and amortization 5,911,104 1,254,148 7,165,252 ------------ ----------- ---------- ------------- Total 137,767,019 41,692,083 179,459,102 ------------ ----------- ---------- ------------ INCOME BEFORE INCOME TAXES 7,516,097 1,358,175 8,874,272 PROVISION FOR INCOME TAXES 3,082,893 650,000 3,732,893 ----------- ----------- ----------- ------------ NET INCOME $ 4,433,204 $ 708,175 $ $ 5,141,379 ============ =========== =========== ============ EARNING PER COMMON AND COMMON EQUIVALENT SHARE: Primary $ 0.52 $ 0.49 ============ =========== Fully diluted $ 0.52 $ 0.49 ============ ============ SHARES USED IN COMPUTING EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE: Primary 8,535,524 10,588,766 ============ =========== Fully diluted 8,535,524 10,588,766 ============ =========== See notes to unaudited pro forma combined financial statements. F-20 27 DYCOM INDUSTRIES, INC. AND SUBSIDIARIES AND COMMUNICATIONS CONSTRUCTION GROUP, INC. UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED JULY 31, 1994 Dycom CCG Fiscal Year Fiscal Year Ended Ended Pro Forma Pro Forma July 31, 1994 May 31, 1994 Adjustments Combined ------------- ------------- ------------ ---------- REVENUES: Contract revenues earned $121,407,707 $30,137,050 $ $151,544,757 Other, net 1,084,195 17,962 1,102,157 ------------ ----------- ---------- ------------ Total 122,491,902 30,155,012 152,646,914 ------------ ----------- ---------- ---------- EXPENSES: Costs of earned revenue excluding depreciation 105,607,777 22,914,998 128,522,775 General and administrative 15,582,953 5,806,742 21,389,695 Depreciation and amortization 7,337,438 683,647 8,021,085 Intangible asset write-off 1,422,876 1,422,876 ------------ ---------- ---------- ------------ Total 129,951,044 29,405,387 159,356,431 ------------ ----------- ---------- ------------ INCOME (LOSS) BEFORE INCOME TAXES ( 7,459,142) 749,625 ( 6,709,517) PROVISION FOR INCOME TAXES 317,781 473,781 791,562 ------------ ----------- ---------- ------------ NET INCOME (LOSS) $( 7,776,923) $ 275,844 $ $( 7,501,079) ============= =========== ========== ============ EARNING (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE: Primary $ (0.91) $ (0.71) ============= ============= Fully diluted $ (0.91) $ (0.71) ============= ============= SHARES USED IN COMPUTING EARNINGS (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE: Primary 8,528,990 10,582,232 ============= =========== Fully diluted 8,528,990 10,582,232 ============= =========== See notes to unaudited pro forma combined financial statements. F-21 28 DYCOM INDUSTRIES, INC. AND SUBSIDIARIES AND COMMUNICATIONS CONSTRUCTION GROUP, INC. NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS 1. Periods Combined The Dycom consolidated balance sheets as of April 30, 1997 and July 31, 1996 and 1995, respectively, have been combined with the CCG balance sheets as of February 28, 1997 and May 31, 1996 and 1995, respectively. The Dycom consolidated statements of operations for the nine months ended April 30, 1997 and 1996 and for the fiscal years ended July 31, 1996, 1995 and 1994, respectively, have been combined with the CCG results of operations for the nine months ended February 28, 1997 and 1996 and for the fiscal years ended May 31, 1996, 1995 and 1994, respectively. For comparative purposes, certain amounts in the CCG financial statements have been reclassified to conform with the Dycom financial statement presentation. 2. Merger Costs Dycom and CCG estimate they will incur direct transaction costs of approximately $0.5 million associated with the acquisition, consisting of fees for filings with regulatory agencies, legal, accounting and other related costs. These nonrecurring costs will be charged to operations in the fiscal quarter in which the acquisition was consummated. 3. Exchange of Stock The entry reflects the $0.6 million of CCG shareholder loans as additional paid-in capital. The Dycom shares issued in the acqusisition were in exchange for all the outstanding common stock and perferred shares of CCG and for the satisfaction of the shareholder loans. Also, the entry reclassifies CCG's capital to reflect the par value of the Dycom shares issued in the acquisition. 4. Pro Forma Net Income (Loss) Per Share The unaudited pro forma combined net income (loss) per common and common equivalent share is based upon the weighted average number of common and common equivalent shares of Dycom outstanding for each period presented and the 2,053,242 shares of Dycom common stock issued to the CCG shareholders. F-22