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, 1998
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 5, 1998
_____ __________________________________
Common Stock, par value $0.33 1/3 14,703,826
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DYCOM INDUSTRIES, INC.
INDEX
Page No.
________
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets-
April 30, 1998 and July 31, 1997 3
Condensed Consolidated Statements of
Operations for the Three Months Ended
April 30, 1998 and 1997 4
Condensed Consolidated Statements of
Operations for the Nine Months Ended
April 30, 1998 and 1997 5
Condensed Consolidated Statements of
Cash Flows for the Nine Months Ended
April 30, 1998 and 1997 6-7
Notes to Condensed Consolidated
Financial Statements 8-16
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 17-22
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 23-24
SIGNATURES 25
3
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
April 30, July 31,
ASSETS 1998 1997
CURRENT ASSETS:
Cash and equivalents $ 29,025,332 $ 5,276,112
Accounts receivable, net 54,777,186 49,526,678
Costs and estimated earnings in
excess of billings 18,514,948 11,398,621
Deferred tax assets, net 2,133,612 2,168,763
Other current assets 2,213,242 1,966,538
Total current assets 106,664,320 70,336,712
PROPERTY AND EQUIPMENT, net 42,161,455 36,336,212
OTHER ASSETS:
Intangible assets, net 4,568,043 4,684,358
Deferred tax assets 424,205
Other 412,907 730,394
Total other assets 4,980,950 5,838,957
TOTAL $153,806,725 $112,511,881
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 13,585,504 $ 14,724,340
Notes payable 8,101,813 17,719,780
Billings in excess of costs and
estimated earnings 470,940
Accrued self-insured claims 1,777,803 2,011,622
Income taxes payable 1,665,331 1,228,648
Other accrued liabilities 13,798,734 13,278,712
Total current liabilities 38,929,185 49,434,042
NOTES PAYABLE 14,716,859 13,588,022
ACCRUED SELF-INSURED CLAIMS 6,550,569 6,418,400
OTHER LIABILITIES 2,477,931 644,625
Total liabilities 62,674,544 70,085,089
COMMITMENTS AND CONTINGENCIES, Note 10
STOCKHOLDERS' EQUITY:
Common stock, par value $.33 1/3 per share:
50,000,000 shares authorized; 14,688,516
and 12,667,877 shares issued and
outstanding, respectively 4,896,172 4,222,625
Additional paid-in capital 62,349,847 25,670,666
Retained earnings 23,886,162 12,533,501
Total stockholders' equity 91,132,181 42,426,792
TOTAL $153,806,725 $112,511,881
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,
1998 1997
REVENUES:
Contract revenues earned $95,928,640 $80,487,870
Other, net 944,186 321,514
Total 96,872,826 80,809,384
Expenses:
Costs of earned revenues
excluding depreciation 73,659,560 63,415,602
General and administrative 10,824,214 8,402,788
Depreciation and amortization 3,581,895 2,917,444
Total 88,065,669 74,735,834
INCOME BEFORE INCOME TAXES 8,807,157 6,073,550
PROVISION (BENEFIT) FOR INCOME TAXES:
Current 3,178,535 2,122,848
Deferred 285,617 (240,843)
Total 3,464,152 1,882,005
NET INCOME $ 5,343,005 $ 4,191,545
EARNINGS PER COMMON SHARE:
Basic $0.36 $0.33
Diluted $0.36 $0.33
PRO FORMA NET INCOME AND EARNINGS
PER COMMON SHARE DATA:
Income before income taxes $ 8,807,157 $ 6,073,550
Pro forma provision for
income taxes 3,374,916 2,444,567
PRO FORMA NET INCOME $ 5,432,241 $ 3,628,983
PRO FORMA EARNINGS PER COMMON SHARE:
Basic $0.37 $0.29
Diluted $0.36 $0.28
See notes to condensed consolidated financial statements--unaudited.
5
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Nine Months Ended
April 30, April 30,
1998 1997
REVENUES:
Contract revenues earned $267,741,732 $224,080,990
Other, net 2,028,090 737,390
Total 269,769,822 224,818,380
Expenses:
Costs of earned revenues
excluding depreciation 208,616,434 179,110,073
General and administrative 26,785,971 22,012,855
Depreciation and amortization 9,905,266 8,530,528
Total 245,307,671 209,653,456
INCOME BEFORE INCOME TAXES 24,462,151 15,164,924
PROVISION (BENEFIT) FOR INCOME TAXES:
Current 8,056,132 5,934,498
Deferred 459,356 (933,412)
Total 8,515,488 5,001,086
NET INCOME $ 15,946,663 $ 10,163,838
EARNINGS PER COMMON SHARE:
Basic $1.15 $0.81
Diluted $1.13 $0.80
PRO FORMA NET INCOME AND EARNINGS
PER COMMON SHARE DATA:
Income before income taxes $ 24,462,151 $ 15,164,924
Pro forma provision for
income taxes 9,889,748 6,153,002
PRO FORMA NET INCOME $ 14,572,403 $ 9,011,922
PRO FORMA EARNINGS PER COMMON SHARE:
Basic $1.05 $0.72
Diluted $1.03 $0.71
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,
1998 1997
Increase (Decrease) in Cash and Equivalents from:
OPERATING ACTIVITIES:
Net income $ 15,946,663 $ 10,163,838
Adjustments to reconcile net cash provided
by operating activities:
Depreciation and amortization 9,905,266 8,530,528
(Gain) on disposal of assets (398,797) (325,018)
Deferred income taxes 459,356 (933,412)
Changes in assets and liabilities:
Accounts receivable, net (5,250,508) (16,047,502)
Unbilled revenues, net (7,587,267) (4,510,580)
Other current assets (246,704) (326,469)
Other assets 317,487 (140,599)
Accounts payable (1,138,836) 7,661,116
Accrued self-insured claims and
other liabilities 2,251,678 969,504
Accrued income taxes 631,166 1,427,971
Net cash inflow from operating activities 14,889,504 6,469,377
INVESTING ACTIVITIES:
Capital expenditures (16,751,282) (12,330,015)
Proceeds from sale of assets 1,535,885 1,638,858
Net cash outflow from investing activities (15,215,397) (10,691,157)
FINANCING ACTIVITIES:
Borrowings on notes payable
and bank lines-of-credit 14,398,865 22,665,472
Principal payments on notes payable
and bank lines-of-credit (22,887,995) (17,182,018)
Exercise of stock options 199,627 597,146
Distributions to shareholders of pooled
companies (4,594,002) (1,968,282)
Proceeds from stock offering 36,958,618
Net cash inflow from financing activities 24,075,113 4,112,318
NET CASH INFLOW (OUTFLOW) FROM ALL ACTIVITIES 23,749,220 (109,462)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 5,276,112 3,060,069
CASH AND EQUIVALENTS AT END OF PERIOD $ 29,025,332 $ 2,950,607
See notes to condensed consolidated financial statements--unaudited.
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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Unaudited)
For the Nine Months Ended
April 30, April 30,
1998 1997
SUPPLEMENTAL DISCLOSURES OF CASH FLOW AND
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Cash paid during the period for:
Interest $ 1,645,539 $ 1,989,747
Income taxes 7,488,328 5,159,627
Property and equipment acquired and
financed with:
Capital lease obligation $ 601,024
Income tax benefit related to incentive
stock options exercised $ 194,483 $ 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. ("Dycom" or the "Company") as of April 30, 1998 and July 31,
1997, and the related condensed consolidated statements of operations for the
three and nine months ended April 30, 1998 and 1997 and the condensed
consolidated statements of cash flows for the nine months ended April 30,
1998 and 1997 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, 1998 are not
necessarily indicative of the results which may be expected for the entire
year.
Prior to the acquisition by Dycom, Cable Com Inc. ("CCI") and Installation
Technicians, Inc. ("ITI") elected under Subchapter S of the Internal Revenue
Code to have the stockholders recognize their proportionate share of CCI's
and ITI's taxable income on their personal tax returns in lieu of paying
corporate income tax. The pro forma net income and earnings per common share
reflected on the Condensed Consolidated Statements of Operations reflects a
provision for current and deferred income taxes for all periods presented as
if the corporations were included in Dycom's federal and state income tax
returns. At April 6, 1998, the consumation date of the acquisition, CCI and
ITI recorded deferred taxes on the temporary differences between the
financial reporting basis and the tax basis of their assets and liabilities.
See Note 4.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION-- The condensed consolidated financial statements
are unaudited. These statements include Dycom Industries, Inc. and its
subsidiaries, all of which are wholly owned. On July 29, 1997,
Communications Construction Group, Inc. ("CCG") was acquired by the Company
through an exchange of common stock. On April 6, 1998, CCI and ITI were
acquired by the Company through an exchange of common stock. These
acquisitions were accounted for as pooling of interests. Accordingly, the
Company's condensed consolidated financial statements include the results of
CCG, CCI and ITI for all periods presented. See Note 4.
The Company's operations consist primarily of engineering, construction and
maintenance services provided to the telecommunications industry as well as,
underground utility locating services and maintenance and construction services
provided to the electric utility industry. 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 amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates and such differences may be material to the financial statements.
Estimates are used in the Company's revenue recognition of work-in-process,
allowance for doubtful accounts, self-insured claims liability, deferred tax
asset valuation allowance, depreciation and amortization, and in the
estimated lives of assets, including intangibles.
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,
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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" represents 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 on deposit
in banks, overnight repurchase agreements, certificates of deposit,
commercial paper, and various other financial instruments having a 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 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 service lives of the assets are:
buildings--20-31 years; leasehold improvements--the term of the respective
lease or the estimated useful life of the improvements, whichever is shorter;
vehicles--3-7 years; equipment and machinery--2-10 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 a straight-line basis over 40 years. The appropriateness of the
carrying value of goodwill is reviewed periodically by the Company at the
subsidiary level. An impairment loss is recognized when the projected future
cash flows is less than the carrying value of goodwill. No impairment loss
has been recognized in the periods presented.
Amortization expense was $116,315 for each of the nine-month periods ended
April 30, 1998 and 1997. The intangible assets are net of accumulated
amortization of $1,267,673 at April 30, 1998 and $1,151,358 at July 31, 1997.
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 $4,836,000 and $4,429,000 at
April 30, 1998 and July 31, 1997, 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, except for CCI and ITI,
file a consolidated federal income tax return. CCI and ITI will be included
in the Company's federal and state income tax returns effective April 6,
1998. 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. The
valuation allowance recorded in the condensed consolidated financial
statements reduces deferred tax assets to an amount that represents
management's best estimate of the amount of deferred tax assets that more
likely than not will be realized. Management's estimate and conclusion is
based on the available evidence supporting the reversing deductible temporary
differences being offset by reversing taxable temporary differences and the
existence of sufficient taxable income within the current carryback periods.
Accordingly, at April 30, 1998 and July 31, 1997, deferred tax assets are net
of a valuation allowance of $239,644 and $475,185, respectively.
PER SHARE DATA--Earnings per common share-basic is computed using the weighted
average common shares outstanding during the period. Earnings per common
share-diluted is computed using the weighted average common shares
outstanding during the period and the dilutive effect of common stock
options, using the treasury stock method. See Note 3.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS--In June 1997, the Financial
Accounting Standards Board ("FASB") issued Statement of Financial Accounting
Standards ("SFAS") No. 130 "Reporting Comprehensive Income" which establishes
standards for reporting and display of comprehensive income and its
components (revenues, expenses, gains and losses) in a full set of general
purpose financial statements. This statement requires that an enterprise
classify items of other comprehensive income by their nature in a financial
statement and display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital in the
equity section of a statement of financial position. This statement is
effective for fiscal years beginning after December 15, 1997.
In June 1997, the FASB issued SFAS No. 131 "Disclosure about Segments of an
Enterprise and Related Information" which establishes standards for public
business enterprises to report information about operating segments in annual
financial statements and requires those enterprises to report selected
information about operating segments in interim financial reports issued to
shareholders. It also establishes the standards for related disclosures
about products and services, geographic areas, and major customers. This
statement requires that a public business enterprise report financial and
descriptive information about its reportable operating segments. The
financial information is required to be reported on the basis that it is used
internally for evaluating segment performance and deciding how to allocate
resources to segments. Operating segments are components of an enterprise
about which separate financial information is available that is evaluated
regularly by the chief operating decision maker in deciding how to allocate
resources and in assessing performance. This statement is effective for
financial statements for periods beginning after December 15, 1997.
In February 1998, the FASB issued SFAS No. 132 "Employers' Disclosures about
Pension and Other Postretirement Benefits", which revises certain disclosures
about pension and other postretirement benefit plans. This statement does
not change the measurement and recognition methods for pensions or
postretirement benefit costs reported in financial statements. This
statement is effective for fiscal years beginning after December 15, 1997.
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Management is currently evaluating the requirements and related disclosures
of SFAS No. 130, 131, and 132, respectively.
3. ACCOUNTING CHANGE
In February 1997, the FASB issued SFAS No. 128 "Earnings per Share" which
changes the method of calculating earnings per share and was effective for
the Company in the quarter ended January 31, 1998. All periods presented
have been restated in accordance with the provisions of SFAS No. 128.
The following is a reconciliation of the numerators and denominators of the
basic and diluted per share computation as required by SFAS No. 128. Pro
forma earnings per common share is presented as described in Note 1.
For the Three Months Ended For the Nine Months Ended
April 30, April 30, April 30, April 30,
1998 1997 1998 1997
Net income available
to common stockholders
(numerator) $ 5,343,005 $ 4,191,545 $15,946,663 $10,163,838
Weighted-average
number of common
shares (denominator) 14,686,164 12,601,243 13,914,942 12,550,644
Earnings per common
share - basic $0.36 $0.33 $1.15 $0.81
Weighted-average
number of common
shares 14,686,164 12,601,243 13,914,942 12,550,644
Potential common
stock arising from
stock options 210,340 144,170 195,824 191,094
Total shares
(denominator) 14,896,504 12,745,413 14,110,766 12,741,738
Earnings per common
share - diluted $0.36 $0.33 $1.13 $0.80
Pro forma net income
available to common
stockholders
(numerator) $ 5,432,241 $ 3,628,983 $14,572,403 $ 9,011,922
Pro Forma Earnings
Per Share Data:
Basic $0.37 $0.29 $1.05 $0.72
Diluted $0.36 $0.28 $1.03 $0.71
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4. ACQUISITIONS
On July 29, 1997, the Company consummated the CCG acquisition. The Company
issued 2,053,242 shares of common stock in exchange for all the outstanding
capital stock of CCG. Dycom has accounted for the acquisition as a pooling
of interests and, accordingly, the Company's historical condensed financial
statements include the results of CCG for all periods presented.
Prior to the acquisition, CCG used a fiscal year ending May 31 and as of July
31, 1997 adopted Dycom's fiscal year. The Company's three and nine months
condensed consolidated statements of operations and cash flows for the period
ended April 30, 1997 combines the three and nine months operations and cash
flows for the period ended February 28, 1997 of CCG.
On April 6, 1998, the Company consummated the CCI and ITI acquisitions. The
Company issued 1.2 million and 600,000 shares of common stock in exchange for
all the outstanding capital stock of CCI and ITI, respectively. Dycom has
accounted for these acquisitions as pooling of interests and, accordingly,
the Company's historical financial statements include the results of CCI and
ITI for all periods presented.
Prior to the acquisitions, CCI and ITI used a normal fiscal year consisting of a
52/53 week time period and as a result of the acquisitions have adopted Dycom's
fiscal year end of July 31. All periods presented reflect the adoption of such
fiscal year end as of the beginning of the period. The combined and separate
Company results of Dycom, CCI, and ITI for the three and nine month periods
ending April 30, 1998 and 1997 are as follows:
DYCOM CCI ITI COMBINED
Three month period ended
April 30, 1998:
Total revenues $ 73,342,964 $16,873,921 $ 6,655,941 $ 96,872,826
Net income $ 3,960,068 $ 1,120,122 $ 262,815 $ 5,343,005
April 30, 1997:
Total revenues $ 63,181,306 $12,666,453 $ 4,961,625 $ 80,809,384
Net income $ 2,818,373 $ 1,020,289 $ 352,883 $ 4,191,545
Nine month period ended
April 30, 1998:
Total revenues $206,759,008 $43,707,727 $19,303,087 $269,769,822
Net income $ 10,722,729 $ 3,831,816 $ 1,392,118 $ 15,946,663
April 30, 1997:
Total revenues $176,871,029 $30,735,189 $17,212,162 $224,818,380
Net income $ 7,368,580 $ 1,360,430 $ 1,434,828 $ 10,163,838
The direct transaction costs resulting from the merger of CCI and ITI were
approximately $0.6 million. These costs, which include filing fees with
regulatory agencies, legal, accounting and other professional costs, were
charged to the combined operations for the quarter ended April 30, 1998.
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5. ACCOUNTS RECEIVABLE
Accounts receivable, net consist of the following:
April 30, July 31,
1998 1997
Contract billings $51,390,440 $45,589,232
Retainage 3,975,703 3,652,358
Other receivables 1,428,949 1,314,181
Total 56,795,092 50,555,771
Less allowance for doubtful
accounts 2,017,906 1,029,093
Accounts receivable, net $54,777,186 $49,526,678
6. 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,
1998 1997
Costs incurred on contracts
in progress $19,393,190 $17,715,762
Estimated earnings thereon 3,814,264 3,319,456
23,207,454 21,035,218
Less billings to date 4,692,506 10,107,537
$18,514,948 $10,927,681
Included in the accompanying
condensed consolidated balance
sheets under the captions:
Costs and estimated earnings
in excess of billings $18,514,948 $11,398,621
Billings in excess of costs
and estimated earnings (470,940)
$18,514,948 $10,927,681
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7. PROPERTY AND EQUIPMENT
The accompanying condensed consolidated balance sheets include the following
property and equipment:
April 30, July 31,
1998 1997
Land $ 1,579,028 $ 1,942,247
Buildings 2,352,867 2,346,993
Leasehold improvements 1,519,017 1,463,698
Vehicles 49,956,864 41,522,848
Equipment and machinery 33,687,591 30,721,638
Furniture and fixtures 6,136,457 5,289,975
Total 95,231,824 83,287,399
Less accumulated depreciation and
amortization 53,070,369 46,951,187
Property and equipment, net $42,161,455 $36,336,212
Certain subsidiaries of the Company entered into lease arrangements accounted
for as capitalized leases. The carrying value of capital leases at April 30,
1998 and July 31, 1997 was $842,982 and $1,291,733, respectively, net of
accumulated depreciation of $381,044 and $985,636, respectively. Capital
leases are included as a component of equipment and machinery.
8. NOTES PAYABLE
Notes payable are summarized by type of borrowings as follows:
April 30, July 31,
1998 1997
Bank Credit Agreements:
Revolving credit facility $ 6,365,000 $15,053,484
Term-loan 7,200,000 8,550,000
Equipment term-loans 5,409,226 4,559,937
Capital lease obligations 681,057 1,086,967
Equipment loans 3,163,389 2,057,414
Total 22,818,672 31,307,802
Less current portion 8,101,813 17,719,780
Notes payable--non-current $14,716,859 $13,588,022
On April 29, 1998, the Company signed an amendment to its bank credit agreement,
providing for a total facility of up to $85.0 million. The amended bank credit
facility provides for (i) a $30.0 million revolving working capital facility;
(ii) a $15.0 million standby letter of credit facility; (iii) a $25.0 million
revolving equipment acquisition and small business purchase facility; and
(iv) a $15.0 million five-year term-loan. The revolving working capital
facility, the standby letter of credit facility and the revolving equipment
acquisition and small business purchase facility are available for a two-year
period.
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The loans under the revolving working capital facility and the revolving
equipment acquisition and small business purchase facility bear interest, at
the option of the Company, at the prime interest rate minus 1.00% or LIBOR
plus 1.5% and at the prime interest rate minus 0.75% or LIBOR plus 1.75%,
respectively. At April 30, 1998, the interest rates on the outstanding
revolving equipment acquisition and small business purchase facility loans
were at LIBOR options ranging from 7.531% to 7.813%. On November 28, 1997,
the Company repaid the outstanding balance of its previous revolving working
capital facility with proceeds from the public offering of its common stock.
No amounts are outstanding under the amended revolving working capital
facility.
The outstanding principal under the term-loan bears interest at the prime
interest rate minus 0.50% (8.00% at April 30, 1998 and July 31, 1997).
Principal and interest is payable in quarterly installments through April
2003. At April 30, 1998, the outstanding amount under the term-loan was $7.2
million. In May 1998, the outstanding principal under the term-loan was
increased to $15.0 million, in accordance with the terms of the amended bank
credit agreement.
The advances under the revolving equipment acquisition and small business
purchase 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 February 2001. At April 30, 1998, the
outstanding amount owed under the revolving equipment acquisition and small
business purchase facility was $3.7 million.
At April 30, 1998, the Company had outstanding $9.1 million in standby
letters of credit issued to the Company's insurance administrators as part of
its self-insurance program.
The amended bank credit agreement contains restrictions which, among other
things, requires maintenance of certain financial ratios and covenants,
restricts encumbrances of assets and creation of indebtedness, and limits the
payment of cash dividends. Cash dividends are limited to 50% of each fiscal
year's after-tax profits. No cash dividends were paid during the nine-month
period ended April 30, 1998. The amended bank credit facility is secured by
the Company's assets and guaranteed by each of its subsidiaries.
At April 30, 1998, the Company was in compliance with all financial covenants
and conditions under the facility.
The Company's newly acquired subsidiaries, CCI and ITI, have credit facilities
entered into prior to their acquisition by Dycom. CCI has a $5.2 million
revolving credit facility for funding working capital and a $2.0 million term
note used to purchase equipment. The revolving credit facility bears
interest at the bank's prime interest rate and the interest rate on the term
loan is at 8.75%. ITI has a $2.0 million revolving credit facility for
funding working capital and a $0.5 million multiple advance term facility for
equipment acquisitions. The interest rate on the revolving credit facility
and the multiple advance term facility are at the bank's prime interest rate.
The obligations are collateralized by substantially all the companies'
assets. The facilities contain restrictions, which among other things,
require the maintenance of certain financial ratios and covenants and
restricts the payment of cash dividends. At April 30, 1998, CCI and ITI were
in compliance with all covenants and conditions under their respective
facilities.
16
In addition to the borrowings under the amended bank credit agreement, certain
subsidiaries have outstanding obligations under capital leases and other
equipment financing arrangements. The obligations are payable in monthly
installments expiring at various dates through December 2001.
Interest costs incurred on notes payable, all of which were expensed for
three and nine month periods ended April 30, 1998 and 1997 were $456,513 and
$716,212, respectively and $1,554,358 and $1,817,771, respectively. Such
amounts are included in the general and administrative expenses in the
accompanying condensed consolidated financial statements.
9. STOCK OFFERING
The Company concluded the public offering of 2,700,000 shares of its common
stock on November 4, 1997. The Company offered 1,573,378 shares and selling
shareholders offered 1,126,622 shares at an offering price of $20.00 per
share. The Company received $29,736,844 on November 10, 1997 which is net of
an underwriting discount of $1.10 per share. Additionally, the underwriters
exercised their option to purchase 405,000 shares to cover over-allotments.
The Company received $7,654,500 on November 25, 1997 as payment for the
over-allotments. The total offering proceeds, net of offering expenses of
$432,726, are included in stockholders' equity at January 31, 1998.
On November 28, 1997, the Company repaid the outstanding balance of its
previous revolving working capital facility and will use the balance of the
proceeds to fund the Company's growth strategy, including acquisitions,
working capital and capital expenditures and for other general corporate
purposes.
10. COMMITMENTS AND CONTINGENCIES
In September 1995, the State of New York commenced a sales and use tax audit
of CCG for the years 1989 through 1995. As a result of the audit, certain
additional taxes were paid by CCG in fiscal 1996. In addition, the State of
New York concluded that cable television service providers are subject to New
York State sales taxes for the construction of cable television distribution
systems, and by a Notice dated January 1997, asserted amounts due from CCG
for sales taxes and interest for the periods through August 31, 1995,
aggregating approximately $1.3 million. Any sales taxes asserted against CCG
may be offset by use taxes already paid by the customers of CCG. The Company
intends to vigorously contest the assertion. The Company is unable to
assess the likelihood of any particular outcome at this time or to quantify
the effect a resolution of this matter may have on the Company's consolidated
financial statements.
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 statements.
17
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
In April 1998, Dycom completed the CCI and ITI acquisitions in transactions
accounted for as a pooling of interests. CCI provides construction services
to cable television multiple system operators, and ITI provides construction
and engineering services to local and long-distance telephone companies.
Dycom's financial statements and all financial and operating data derived
therefrom have been combined for all periods presented herein to include the
financial condition and results of operations of CCI and ITI.
The following table sets forth, as a percentage of contract revenues earned,
certain items in the Company's Statement of Operations for the periods
indicated:
For the Three Months Ended For the Nine Months Ended
April 30, April 30, April 30, April 30,
1998 1997 1998 1997
Revenues:
Contract revenues
earned 100.0% 100.0% 100.0% 100.0%
Other, net 1.0 0.4 0.8 0.3
Total revenues 101.0 100.4 100.8 100.3
Expenses:
Cost of earned revenues,
excluding depreciation 76.8 78.8 77.9 80.0
General and
administrative 11.3 10.4 10.0 9.8
Depreciation and
amortization 3.7 3.6 3.7 3.8
Total expenses 91.8 92.8 91.6 93.6
Income before income
taxes 9.2 7.6 9.2 6.7
Provision for income
taxes 3.6 2.4 3.2 2.2
Historical Net Income 5.6 5.2 6.0 4.5
Pro forma adjustments to
income tax provision -0.1 0.7 0.6 0.5
Pro Forma Net Income 5.7% 4.5% 5.4% 4.0%
Revenues. Contract revenues increased $15.4 million, or 19.2%, to $95.9
million in the quarter ending April 30, 1998 from $80.5 million in the
quarter ended April 30, 1997. Of this increase, $14.9 million was
attributable to the telecommunications services group and $0.5 million was
attributable to the underground utility locating services group, reflecting
an increased market demand for the Company's services.
18
During the quarter ended April 30, 1998, the Company recognized $86.5 million of
contract revenues from the telecommunications services group as compared to
$71.6 million for the same period last year. The increase in the Company's
telecommunications services group contract revenues reflects increased volume of
projects and activities associated with cable television construction
services which increased by $13.3 million to $42.4 million in the quarter
ending April 30, 1998 from $29.1 million in the same period last year. Also,
the telecommunications services group experienced increased volume in its
telephone engineering, outside plant and telephony splicing services which
was offset by declines in contract revenues in premise wiring services and
the design and installation of broadband networks. Contract revenues
recognized from the electrical construction and maintenance services group
was $5.2 million for each of the quarters ending April 30, 1998 and
1997. The Company recognized contract revenues of $4.2 million from the
underground utility locating services group in the quarter ending April 30,
1998 as compared to $3.7 million in the same period last year.
Contract revenues from all long-term agreements which includes master service
agreements in all service groups, continues to be a significant source of the
Company's revenues, representing approximately 70.7% of total contract
revenues in the quarter ended April 30, 1998 compared to 67.5% for the same
period last year. Contract revenues from master service agreements
represented approximately 39.1% and 44.2% of total contract revenues in the
quarter ended April 30, 1998 and 1997, respectively.
For the nine-month period ended April 30, 1998, contract revenues increased
19.5% to $267.7 million as compared to $224.1 million for the corresponding
period last year. Of this increase, $39.6 million was attributable to the
telecommunications services group, $1.8 million was attributable to the
electrical construction and maintenance services group and $2.2 million wa
attributable to the underground utility locating services group, reflecting
an increased market demand for the Company's services.
During the nine-month period ended April 30, 1998, the Company recognized $239.9
million of contract revenues from the telecommunications services group as
compared to $200.3 million for the same period last year, an increase of
19.8%. The increase in the Company's telecommunications services group
contract revenues reflects increased volume of projects and activities
associated with cable television construction services which increased by
$34.0 million to $115.6 million in the nine-month period ended April 30, 1998
from $81.6 million in the same period last year. Also, the telecommunications
services group experienced increased volume in its telephone engineering
services, the design and installation of broadband networks, and telephony
splicing services which was partially offset by declines in contract
revenues from outside plant and premise wiring services. The Company recognized
contract revenues of $15.0 million from the electrical construction and
maintenance services group in the nine-month period ended April 30, 1998 as
compared to $13.2 million in the nine-month period ended April 30, 1997, an
increase of 13.6%. The Company recognized contract revenues of $12.8 million
from the underground utility locating services group in the nine-month period
ended April 30, 1998 as compared to $10.6 million in the same period last
year, an increase of 20.8%.
Contract revenues from all long-term agreements represented approximately 70.5%
of total contract revenues in the nine-month period ended April 30, 1998 as
compared to 68.8% for the same period last year. Contract revenues from
master service agreements represented approximately 38.2% and 44.1% of total
contract revenues in the nine month period ended April 30, 1998 and 1997,
respectively.
19
Costs of Earned Revenues. Costs of earned revenues increased $10.3 million to
$73.7 million in the quarter ended April 30, 1998 from $63.4 million in the
quarter ended April 30, 1997, but decreased as a percentage of contract
revenues to 76.8% from 78.8%. For the nine-month period ended April 30,
1998, cost of earned revenues increased $29.5 million to $208.6 million as
compared to $179.1 for the same period last year, but decreased as a
percentage of contract revenues to 77.9% from 80.0%. The decrease in costs of
earned revenues as a percentage of contract revenues for the three and nine
month periods ended April 30, 1998 is the due to increased productivity and
the management of controllable costs.
General and Administrative Expenses. General and administrative expenses
increased $2.4 million to $10.8 million in the quarter ending April 30, 1998
from $8.4 million in the quarter ended April 30, 1997. The increase in
general and administrative expenses for the quarter ended April 30, 1998, as
compared to the same period last year, was primarily attributable to
increases in administrative salaries, employee benefits and payroll taxes of
$0.6 million, merger costs of $0.6 million, legal and professional fees of
$0.3 million, provision for doubtful accounts of $0.3 million, and other
general and administrative expenses of $0.6 million. For the nine-month
period ended April 30, 1998, general and administrative expenses increased $4.8
million to $26.8 million as compared to $22.0 million for the same period
last year. The increase in general and administrative expenses for the
nine-month period ended April 30, 1998, as compared to the same period last
year, was primarily attributable to increases in administrative salaries,
employee benefits and payroll taxes of $1.9 million, legal and professional
fees of $0.7 million, merger costs of $0.6 million, provision for doubtful
accounts of $0.5 million, and other general and administrative costs of $1.1
million.
Depreciation and Amortization. Depreciation and amortization increased $0.7
million to $3.6 million in the quarter ending April 30, 1998 as compared to
$2.9 million in the same period last year. Depreciation and amortization
increased $1.4 million to $9.9 million in the nine-month period ended
April 30, 1998 as compared to $8.5 million for the same period last year.
These increases in depreciation and amortization were due to the increase in
capital expenditures of $16.8 million in the nine-month period ended April
30, 1998 as compared to $12.3 million in the nine-month period ended April
30, 1997, an increase of $4.5 million. The increase represents capital
expenditures acquired in the ordinary course of business and the buy-out of
certain operating leases on terms favorable to the Company.
Income Taxes. The provision for income taxes was $8.5 million in the nine-month
period ended April 30, 1998 as compared to $5.0 million in the same period
last year. The Company's effective tax rate was 34.8% in the nine-month
period ended April 30, 1998 as compared to 33.0% in the same period last
year. The effective tax rate differs from the statutory rate due to the
taxable income of Subchapter S Corporations (CCI and ITI), state income
taxes, the amortization of intangible assets that do not provide a tax
benefit and other non-deductible expenses for tax purposes.
The pro forma provision for income taxes was $9.9 million in the nine-month
period ended April 30, 1998 as compared to $6.2 million for the corresponding
period last year. The pro forma effective tax rate was 40.4% in the nine
months ended April 30, 1998 as compared to 40.6% for the same period last
year.
20
The provision for income taxes was $3.5 million in the quarter ended April
30, 1998 as compared to $1.9 million for the same period last year. The
effective tax rate was 39.3% for the quarter ended April 30, 1998 as compared
to 31.0% for the quarter ended April 30, 1997. As of the date of the
acquisition, CCI and ITI recognized a deferred tax (asset) liability of
$616,358 and ($11,035), respectively. The recording of deferred taxes
resulted in a higher effective tax rate in the quarter as compared to the
pro forma effective tax rate. The pro forma effective tax rate was
38.3% in the quarter ended April 30, 1998 as compared to 40.2% for the same
period last year. See Note 1.
Liquidity and Capital Resources
The Company's needs for capital are attributable primarily to its needs for
equipment to support its contractual commitments to customers and its needs
for working capital sufficient for general corporate purposes. Capital
expenditures have been financed by operating leases, capital leases and bank
borrowings. The Company's sources of cash have historically been from
operating activities, bank borrowings and proceeds arising from the sale of
idle and surplus equipment and real property.
For the nine-month period ended April 30, 1998, net cash provided by operating
activities was $14.9 million compared to $6.5 million for the nine-month
period ended April 30, 1997. An increase in net income and non-cash expenses
contributed to the increase in cash flow for the nine-month period ended
April 30, 1998.
In the nine-month period ended April 30, 1998, net cash used in investing
activities was $15.2 million as compared to $10.7 million for the same period
last year. For the nine-month period ended April 30, 1998, capital
expenditures of $16.8 million were for the normal replacement of equipment
and the buy-out of certain operating leases on terms favorable to the
Company. In addition to equipment purchases, the Company obtained
approximately $1.8 million of equipment under noncancellable operating leases
in the nine-month period ended April 30, 1998.
In the nine-month period ended April 30, 1998, net cash provided from financing
activities was $24.1 million as compared to $4.1 million for the same period
last year. The increase was primarily due to the proceeds on the sale of the
Company's common stock. On November 4, 1997, the Company concluded the
public offering of 2,700,000 shares of its common stock. The Company offered
1,573,378 shares and selling shareholders offered 1,126,622 shares at an
offering price of $20.00 per share. The Company received $29,736,844 on
November 10, 1997 which is net of an underwriting discount of $1.10 per
share. Additionally, the underwriters exercised their option to purchase
405,000 to cover over-allotments. The Company received $7,654,500 on
November 25, 1997 as payment for the over-allotments. The total proceeds,
net of offering expenses of $432,726, are included in stockholders' equity
at April 30, 1998. The Company invested the proceeds, after paying off
$9.1 million of its outstanding indebtedness, in various short-term
instruments having a maturity of three months or less.
Net cash from financing activities was also provided by borrowings on the
revolving equipment facility and the revolving working capital facility.
At July 31, 1997, the Company's subsidiary, CCG, had a $6.6 million working
capital bank credit facility. This facility was an arrangement made by CCG
prior to its acquisition by Dycom. During the first quarter of the current
fiscal year, the Company paid off the outstanding balance of $6.6 million by
borrowing $4.9 million under its revolving working capital facility and $1.7
million under its revolving equipment facility. During the second quarter of
the current fiscal year, the Company paid off the outstanding balance of the
revolving working capital facility of $9.1 million, including the new
borrowings of $4.9 million for CCG, with a portion of the stock
21
offering proceeds. Also during the first quarter of the current fiscal year,
the Company borrowed $1.0 million under the revolving equipment facility to
buy-out certain existing operating leases on terms favorable to the Company.
On April 29, 1998, the Company signed an amendment to its bank credit agreement,
providing for a total facility of up to $85.0 million. The amended credit
facility provides for (i) a $30.0 million revolving working capital facility;
(ii) a $15.0 million standby letter of credit facility; (iii) a $25.0 million
revolving equipment acquisition and small business purchase facility; and
(iv) a $15.0 million five-year term-loan. The Company sought these increased
borrowing level to facilitate its ability to meet its working capital needs
in order to sustain its current level of internal growth.
The five-year term-loan facility bears interest at the bank's prime interest
rate minus 0.50% (8.00% at April 30, 1998). The term-loan principal and
interest is payable in quarterly installments through April 2003. During the
nine months ended April 30, 1998, the Company repaid $1.4 million on this
facility.
The revolving equipment acquisition and small business purchase facility is
available for a two-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%.
At April 30, 1998, the interest rate was at the LIBOR plus 1.75% option
(7.531% to 7.813%). During the nine-month period ended April 30, 1998, the
Company repaid $0.9 million and has available borrowing capacity of
$21.3 million under this facility.
The revolving working capital facility is available for a two-year period and
bears interest, at the option of the Company, at the bank's prime interest
rate minus 1.00% or LIBOR plus 1.50%. At April 30, 1998, there was no
outstanding balance on this facility resulting in an available borrowing
capacity of $30.0 million.
The standby letter of credit facility is available for a two-year period. At
April 30, 1998, the Company had $9.1 million in outstanding standby letters
of credit issued as security to the Company's insurance administrators as
part of its self-insurance program, leaving $5.9 million in available
borrowing capacity.
The amended bank credit agreement requires the Company to maintain certain
financial covenants and conditions, as well as restricting the encumbrances
of assets and the creation of additional indebtedness and limits the payment
of cash dividends. At April 30, 1998, the Company was in compliance with all
covenants and conditions under the credit agreement.
The Company's recently acquired subsidiaries, CCI and ITI, have credit
facilities made prior to the acquisition by Dycom. CCI has a $5.2 million
revolving credit facility for funding working capital and a $2.0 million
term note used to purchase equipment. The revolving credit facility bears
interest at the bank's prime interest rate and the interest rate on the term
loan is at 8.75%. At April 30, 1998, CCI has $4.7 million outstanding under
its revolving credit facility and $1.2 million outstanding under the term note.
ITI has a $2.0 million revolving credit facility for funding working capital
and a $0.5 million multiple advance term facility for equipment acquisitions.
The interest rate on the revolving credit facility and the multiple advance
term facility are at the bank's prime interest rate. At April 30, 1998, ITI
had $1.7 million outstanding under its revolving credit facility and no amounts
outstanding under its advance term facility. The obligations are
collateralized by substantially all the companies' assets. The facilities
contain restrictions, which among other things, require the maintenance of
certain financial ratios and covenants and restricts the payment of cash
dividends. At April 30, 1998, CCI and ITI were in compliance with all
covenants and conditions.
22
The Company foresees its capital resources together with existing cash
balances to be sufficient to meet its financial obligations, including the
scheduled debt payments under the amended bank credit agreement and operating
lease commitments, and to support the Company's normal replacement of
equipment at its current level of business for at least the next twelve
months. 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 continued ability to effectively manage
controllable costs.
Special Note Concerning Forward Looking Statements
This Quarterly Report on Form 10Q, including the Notes to Condensed Financial
Statements and this Management's Discussion and Analysis of Financial Condition
and Results of Operations, contains forward looking statements. The words
"believe," "expect," "anticipate," "intends," "forecast," " project," and
similar expressions identify forward looking statements. Such statements may
include, but may not be limited to, the anticipated outcome of contingent
events, including litigation, projections of revenues, income or loss,
capital expenditures, plans for future operations, growth and aquisitions,
financial needs or plans and the availability of financing, and plans
relating to services of the Company, as well as assumptions relating to the
foregoing. Such forward looking statements are within the meaning of
that term in Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended.
23
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:
Number Description
______ ___________
(11) Statement re computation of per share earnings
All information required by Exhibit 11 is presented
within Note 3 of the Company's condensed consolidated
financial statements in accordance with the provisions
of SFAS No. 128.
(27) Financial Data Schedule
(99) Amended and Restated Credit Facility Agreement dated as of
April 29, 1998 between Dycom Industries, Inc. and
Dresdner Bank Lateinamerika Aktiengesellschaft; Bank
Leumi USA; Republic National Bank of Miami, N.A.;
SunTrust Bank South Florida, N.A.; and Israel Discount
Bank Limited.
Amended and Restated Security Agreement dated as of
April 29, 1998 between Dycom Industries, Inc. and
Dresdner Bank Lateinamerika Aktiengesellschaft; Bank
Leumi USA; Republic National Bank of Miami, N.A.;
SunTrust Bank South Florida, N.A.; and Israel Discount
Bank Limited. Similar agreements were executed by each
subsidiary of Dycom Industries, Inc.
Guaranty Agreement dated as of April 29, 1998 between
Ansco & Associates, Inc. and Dresdner Bank Lateinamerika
Aktiengesellschaft; Bank Leumi USA; Republic National
Bank of Miami, N.A.; SunTrust Bank South Florida, N.A.;
and Israel Discount Bank Limited. Similar agreements
were executed by each subsidiary of Dycom Industries,
Inc.
(b) Reports On Form 8-K
The following reports on Form 8-K were filed on behalf of the Registrant
during the quarter ended April 30, 1998:
(i) The acquisitions of Cable Com Inc. and Installation Technicians, Inc.
pursuant to agreements and plans of merger dated February 23, 1998.
Items Reported: 2, 7
Date Filed: April 21, 1998
Financial Statements Filed:
Audited financial statements of Cable Com Inc. for the periods ended
December 26, 1997 and December 27, 1996.
24
Audited financial statements of Installation Technicians, Inc. for the
periods ended December 27, 1997 and December 28, 1996.
Unaudited pro forma combined balance sheet as of January 31, 1998.
Unaudited pro forma combined consolidated statements of operations for
the six months ended January 31, 1998 and 1997.
Unaudited pro forma combined consolidated statements of operations for
the fiscal years ended July 31, 1997, 1996 and 1995.
25
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 15, 1998 /s/ Thomas R. Pledger
_________________ ____________________________
Thomas R. Pledger
Chairman and Chief Executive
Officer
Date: June 15, 1998 /s/ Steven Nielsen
_________________ ____________________________
Steven Nielsen
President and Chief Operating
Officer
Date: June 15, 1998 /s/ Douglas J. Betlach
_________________ ____________________________
Douglas J. Betlach
Vice President, Treasurer, and
Chief Financial Officer