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: April 21, 1998
Dycom Industries, Inc.
(Exact name of Registrant as specified in its charter)
Florida 0-5423 59-1277135
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
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
Exhibit Index on Page
2
Item 2. Acquisition and Disposition of Assets.
On April 6, 1998, Dycom Industries, Inc., a Florida
corporation (the "Company"), through two wholly-owned subsidiaries, Dycom
Acquisition Corporation I and Dycom Acquisition Corporation II (together, the
"Acquisition Subsidiaries"), acquired Installation Technicians, Inc., a Missouri
corporation ("ITI"), and Cable Com Inc., a Delaware corporation ("CCI"). The
transactions were consummated pursuant to (a) an Agreement and Plan of Merger,
dated February 23, 1998 (the "ITI Merger Agreement"), among the Company, ITI,
Dycom Acquisition Corporation I and the stockholders listed on the signature
pages thereto and (b) an Agreement and Plan of Merger, dated February 23, 1998
(the "CCI Merger Agreement", together with the ITI Merger Agreement, the
"Agreements"), among the Company, CCI, Dycom Acquisition Corporation II and the
stockholders listed on the signature pages thereto. The Merger Agreements were
amended by amendments dated as of March 30, 1998 (the "Amendments"). The ITI
Merger Agreement was further amended as of April 6, 1998 ("Amendment No.2").
Copies of the Merger Agreements are included herewith as Exhibits 99(i) and
99(ii) and copies of the Amendments and Amendment No.2 are included herewith as
Exhibits 99(iii) and 99(iv) and 99(v), respectively. The Agreements, the
Amendments and Amendment No.2 are incorporated herein by reference. The
Agreements, as so amended, are hereinafter referred to as the "Merger
Agreements".
Pursuant to the Merger Agreements and the Certificates of
Merger (as defined below), dated April 6, 1998, at the Effective Time (as
defined in the Merger Agreements) Dycom Acquisition Corporation I was merged
with and into ITI and Dycom Acquisition Corporation II was merged with and into
CCI (the "Mergers"). As a result of the Mergers, the separate corporate
existence of the Acquisition Subsidiaries ceased and the shareholders of CCI and
ITI became shareholders of the Company. ITI and CCI will continue to conduct
business as wholly-owned subsidiaries of the Company, operating under the names
Installation Technicians, Inc. and Cable Com Inc., respectively. The Certificate
of Merger for CCI and the Articles of Merger for ITI (collectively, the
"Certificates of Merger") are included herewith as Exhibits 99(vi) and 99(vii),
respectively, and are incorporated herein by reference.
Pursuant to the Merger Agreements, the Company issued
1,800,000 shares of the Company's common stock, par value $0.33 1/3 per share
(the "Common Stock"), to the stockholders of ITI and CCI. The stockholders of
ITI received 20 shares of Common Stock for each share of ITI common stock, par
value $1.00 per share, issued and outstanding immediately prior to the Effective
Time, representing a total of 600,000 shares of Common Stock. The stockholders
of CCI received 40 shares of Common Stock for each share of CCI common stock,
par value $1.00 per share, issued and outstanding immediately prior to the
Effective Time, representing a total of 1,200,000 shares of Common Stock.
3
The foregoing description of the Mergers and the Merger
Agreements does not purport to be complete and is qualified in its entirety by
reference to the Merger Agreements, attached hereto as Exhibits 99(i) through
99(v) and incorporated by reference herein. The terms of the Mergers were
determined in accordance with the Merger Agreements and were established through
arm's length negotiations between the parties to such Merger Agreements.
Pursuant to the Merger Agreements, on April 6, 1998, the
Company entered into five-year employment agreements with John J. Ekstrom ("Mr.
Ekstrom") and Gerald W. Hartman ("Mr. Hartman"), included herewith as Exhibits
99(viii) and 99(ix), respectively, and incorporated herein by reference. The
employment agreements provide for the continued employment of Mr. Ekstrom and
Mr. Hartman as President and Chief Executive Officer of CCI and ITI,
respectively. Further, the employment agreements provide that Mr. Ekstrom and
Mr. Hartman will be on the Board of Directors of CCI and ITI, respectively.
CCI, a Lithonia, Georgia based firm, provides construction
services to cable television multiple system operators throughout the United
States. ITI, a Kimberling City, Missouri based firm, provides construction and
engineering services to local and long distance telephone companies throughout
the United States. The Company intends to use the assets acquired pursuant to
the Mergers in the business in which the assets were used prior to the Mergers,
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 Installation
Technicians, Inc. for the periods ended
December 27, 1997 and December 28, 1996. F-1
Audited financial statements of Cable Com
Inc. for the periods ended
December 26, 1997 and December 27, 1996 F-14
(b) Pro forma financial information.
Introduction to unaudited pro forma
condensed financial statements. F-28
Unaudited pro forma combined consolidated balance
sheet as of January 31, 1998. F-29
4
Unaudited pro forma combined consolidated statements
of operations for the six months ended January 31,
1998 and 1997. F-30
Unaudited pro forma combined consolidated statements
of operations for the fiscal years ended July 31, 1997,
1996 and 1995. F-32
Notes to unaudited pro forma condensed financial
statements. F-35
(c) Exhibits
99(i) Agreement and Plan of Merger, dated as of February 23,
1998, among Dycom Industries, Inc., Dycom Acquisition
Corporation I, Installation Technicians, Inc. and the
stockholders listed on the signature pages attached
thereto.
99(ii) Agreement and Plan of Merger, dated as of February 23,
1998, among Dycom Industries, Inc., Dycom Acquisition
Corporation II, Cable Com Inc. and the stockholders listed
on the signature pages attached thereto.
99(iii) First Amendment to Agreement and Plan of Merger, dated as
of March 30, 1998, among Dycom Industries, Inc., Dycom
Acquisition Corporation I, Installation Technicians, Inc.
and the stockholders listed on the signature pages
attached thereto.
99(iv) First Amendment to Agreement and Plan of Merger, dated as
of March 30, 1998, among Dycom Industries, Inc., Dycom
Acquisition Corporation II, Cable Com Inc. and the
stockholders listed on the signature pages attached
thereto.
99(v) Second Amendment to Agreement and Plan of Merger, dated as
of April 6, 1998, among Dycom Industries, Inc., Dycom
Acquisition Corporation I, Installation Technicians, Inc.
and the stockholders listed on the signature pages
attached thereto.
99(vi) Certificate of Merger, dated April 6, 1998, for Cable Com
Inc.
99(vii) Articles of Merger, dated April 6, 1998, for Installation
Technicians, Inc.
5
99(viii) Employment Agreement dated April 6, 1998 between Dycom
Industries, Inc., John J. Ekstrom and Cable Com Inc.
99(ix) Employment Agreement dated April 6, 1998 between Dycom
Industries, Inc., Gerald W. Hartman and Installation
Technicians, Inc.
99(x) Press Release.
6
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.
Date: April 21, 1998 By: /s/ Thomas R. Pledger
----------------------------------
Name: Thomas R. Pledger
Title: Chairman and Chief Executive
Officer
By: /s/ Douglas J. Betlach
----------------------------------
Name: Douglas J. Betlach
Title: Vice President, Treasurer and
Chief Financial Officer
INSTALLATION TECHNICIANS, INC.
Accountants' Report
and Financial Statements
December 27, 1997
and December 28, 1996
Independent Accountants' Report
Board of Directors
Installation Technicians, Inc.
Kimberling City, Missouri
We have audited the accompanying balance sheets of INSTALLATION
TECHNICIANS, INC. as of December 27, 1997 and December 28, 1996, and the related
statements of income, stockholders' equity and cash flows 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 financial position of INSTALLATION TECHNICIANS,
INC. as of December 27, 1997 and December 28, 1996, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ Baird, Kurtz & Dobson
Springfield, Missouri
February 12, 1998, except for Note 12, as to
which the date is February 23, 1998
F-1
INSTALLATION TECHNICIANS, INC.
BALANCE SHEETS
DECEMBER 27, 1997 AND DECEMBER 28, 1996
ASSETS
1997 1996
---- ----
CURRENT ASSETS
Cash $ 293,888 $ 23,674
Accounts receivable, less allowance
for doubtful accounts of $12,000 3,152,671 3,262,778
Costs and estimated earnings in excess of billings 330,634 188,750
Due from employees 64,190 45,739
Prepaid expenses and other 110,976 16,418
Deposits 54,945 54,340
---------- ----------
Total Current Assets 4,007,304 3,591,699
---------- ----------
CERTIFICATE OF DEPOSIT -- 212,017
---------- ----------
NOTE RECEIVABLE - RELATED PARTY 196,690 43,447
---------- ----------
PROPERTY AND EQUIPMENT, At Cost
Vehicles 1,121,555 937,025
Equipment 1,381,043 1,377,834
Furniture and fixtures 36,867 26,439
Tools 50,011 49,546
---------- ----------
2,589,476 2,390,844
Less accumulated depreciation 1,279,317 977,753
---------- ----------
1,310,159 1,413,091
---------- ----------
$5,514,153 $5,260,254
========== ==========
See Notes to Financial Statements
F-2
LIABILITIES AND STOCKHOLDERS' EQUITY
1997 1996
---- ----
CURRENT LIABILITIES
Notes payable to bank $ -- $ 390,000
Current maturities of long-term debt 192,150 221,907
Checks issued in process of clearing 418,092 301,377
Accounts payable 280,100 548,623
Due to related parties 2,468 1,810
Accrued salaries 350,719 274,056
Other accrued expenses 69,320 72,405
Income taxes payable 63,906 84,590
---------- ----------
Total Current Liabilities 1,376,755 1,894,768
---------- ----------
LONG-TERM DEBT 177,395 164,106
---------- ----------
STOCKHOLDERS' EQUITY
Common stock, $1 par value; authorized,
issued and outstanding 3,000 shares
voting and 27,000 shares nonvoting 30,000 30,000
Retained earnings 3,930,003 3,171,380
---------- ----------
3,960,003 3,201,380
---------- ----------
$5,514,153 $5,260,254
========== ==========
See Notes to Financial Statements
F-3
INSTALLATION TECHNICIANS, INC.
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 27, 1997 AND DECEMBER 28, 1996
1997 1996
---- ----
NET SALES $ 23,190,181 $ 21,416,471
COST OF SALES 16,820,196 16,239,276
------------ ------------
GROSS PROFIT 6,369,985 5,177,195
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 4,342,348 3,502,570
------------ ------------
INCOME FROM OPERATIONS 2,027,637 1,674,625
------------ ------------
OTHER INCOME (EXPENSE)
Interest income 14,608 17,223
Interest expense (88,177) (85,614)
Handling charges, net 86,333 26,762
Other 102,730 171,385
------------ ------------
115,494 129,756
------------ ------------
INCOME BEFORE INCOME TAXES 2,143,131 1,804,381
PROVISION FOR STATE INCOME TAXES 109,508 83,000
------------ ------------
NET INCOME $ 2,033,623 $ 1,721,381
============ ============
See Notes to Financial Statements
F-4
INSTALLATION TECHNICIANS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 27, 1997 AND DECEMBER 28, 1996
Common Paid-In Retained
Stock Capital Earnings
----- ------- --------
BALANCE, DECEMBER 30, 1995 $ 30,000 $ 0 $ 2,289,999
NET INCOME -- -- 1,721,381
DIVIDENDS -- -- (840,000)
----------- ----------- ------------
BALANCE, DECEMBER 28, 1996 30,000 0 3,171,380
NET INCOME -- -- 2,033,623
DIVIDENDS -- -- (1,275,000)
----------- ----------- ------------
BALANCE, DECEMBER 27, 1997 $ 30,000 $ 0 $ 3,930,003
=========== =========== ============
See Notes to Financial Statements
F-5
INSTALLATION TECHNICIANS, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 27, 1997 AND DECEMBER 28, 1996
1997 1996
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,033,623 $ 1,721,381
Items not requiring (providing) cash:
Depreciation 489,251 453,148
Loss (gain) on sale of property and equipment 7,260 (15,408)
Changes in:
Accounts receivable 110,107 (930,664)
Costs and estimated earnings in excess of billings (141,884) (188,750)
Prepaid expenses (91,782) (4,257)
Deposits (605) (823)
Accounts payable, accrued expenses and other (101,690) 328,810
----------- -----------
Net cash provided by operating activities 2,304,280 1,363,437
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property and equipment 95,051 153,216
Purchase of property and equipment (259,951) (383,961)
Advances to related parties (18,451) (33,758)
Redemption of certificate of deposit 212,017 --
Note receivable issued by related party (163,722) (50,000)
Principal payments received on note receivable 10,479 6,553
----------- -----------
Net cash used in investing activities (124,577) (307,950)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (repayments) under
line-of-credit agreement (390,000) 220,000
Principal payments under capital lease obligations (138,858) (80,933)
Net borrowings from (repayments to) related parties 658 (129,116)
Proceeds from issuance of long-term debt -- 136,000
Principal payments on long-term debt (106,289) (356,769)
Dividends paid (1,275,000) (840,000)
----------- -----------
Net cash used in financing activities (1,909,489) (1,050,818)
----------- -----------
INCREASE IN CASH AND CASH EQUIVALENTS 270,214 4,669
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 23,674 19,005
----------- -----------
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 293,888 $ 23,674
=========== ===========
See Notes to Financial Statements
F-6
INSTALLATION TECHNICIANS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 27, 1997 AND DECEMBER 28, 1996
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Nature of Operations
Installation Technicians, Inc. (ITI) is a specialty contractor with its
primary revenues from providing extensions, line maintenance, service
connections, installation and repair of telecommunications equipment and cable,
cable splicing and technical assistance. The Company extends unsecured credit to
telecommunications companies throughout the United States.
Fiscal Year
The Company uses a 52/53 week fiscal year. The years ended on December 27,
1997 and December 28, 1996, consisted of 52 weeks each.
Property and Equipment
Property and equipment are depreciated using the straight-line method over
the estimated useful life of each asset. Lives range from three to seven years
for all property and equipment.
Income Taxes
Effective January 2, 1994, the Company, with the consent of its
stockholders, elected under Section 1362 of the Internal Revenue Code to have
the stockholders recognize their proportionate share of the Company's taxable
income on their personal income tax returns in lieu of paying corporate income
taxes. The Company and its shareholders have elected, in states where allowed,
to file a corporate composite state income tax return in lieu of individual
shareholder state income tax returns and pay state income taxes at the corporate
level.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-7
INSTALLATION TECHNICIANS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 27, 1997 AND DECEMBER 28, 1996
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
Revenue Recognition
Bid job revenue is recorded on the basis of the Company's estimates of the
percentage-of-completion of individual contracts. The contract costs and the
estimated profit are accrued based on the ratio of labor hours to date to total
estimated labor hours, except that projected job losses are provided for in
their entirety without reference to the percentage of completion. As contracts
can extend over several months, revisions in cost and profit estimates during
the course of the work are reflected in the accounting period in which the facts
become known. In general, the company bills the customer on the same basis as
the method of determining the percentage of completion. The asset "costs and
estimated earnings in excess of billing" represents revenues recognized in
excess of amounts billed.
NOTE 2: ACCOUNTS RECEIVABLE
Accounts receivable at December 27, 1997 and December 28, 1996, consist of
the following:
1997 1996
---- ----
Contract billings $3,125,117 $3,030,747
Retainage 39,554 238,796
Other receivables -- 5,235
---------- ----------
3,164,671 3,274,778
Less allowance for doubtful accounts 12,000 12,000
---------- ----------
Accounts receivable $3,152,671 $3,262,778
========== ==========
NOTE 3: COSTS AND ESTIMATED EARNINGS ON CONTRACTS IN PROGRESS
The accompanying balance sheets include costs and estimated earnings on
contracts in progress, net of progress billings as follows:
F-8
INSTALLATION TECHNICIANS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 27, 1997 AND DECEMBER 28, 1996
NOTE 3: COSTS AND ESTIMATED EARNINGS ON CONTRACTS IN PROGRESS
(Continued)
1997 1996
---- ----
Costs incurred on contracts in progress $313,151 $226,864
Estimated earnings thereon 110,010 55,305
-------- --------
423,161 282,169
Less billings to date 92,527 93,419
-------- --------
Costs and estimated earnings in excess of billings $330,634 $188,750
======== ========
NOTE 4: LINE OF CREDIT
The Company has a revolving line of credit with NationsBank. The line of
credit for $1,500,000 expired July 1, 1997, and was renewed as a $2,000,000 line
of credit, which expires July 1, 1998. Interest on advances is computed at the
prime rate and is secured by substantially all corporate assets and is renewable
annually. As of December 27, 1997 and December 28, 1996, there was $-0- and
$390,000, respectively, outstanding under the lines of credit.
In connection with the above line of credit, the Company is required to
maintain certain financial conditions, which includes dividend payment
restrictions equal to the sum of $300,000 plus shareholders' income tax
obligations.
The Company also has a multiple advance term note with NationsBank for
$500,000 for equipment purchases payable monthly, due on July 1, 2000. Interest
on advances is computed at the bank's corporate base interest rate and is
secured by all equipment owned by the Company. As of December 27, 1997 and
December 28, 1996, there was $-0- outstanding under this note.
F-9
INSTALLATION TECHNICIANS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 27, 1997 AND DECEMBER 28, 1996
NOTE 5: LONG-TERM DEBT
1997 1996
---- ----
Notes payable, bank (A) $ 30,349 $121,075
Notes payable, bank (B) -- 15,596
Notes payable, autos (C) 339,196 249,342
-------- --------
369,545 386,013
Less current maturities 192,150 221,907
-------- --------
$177,395 $164,106
======== ========
Aggregate annual maturities of long-term debt at December 27, 1997,
are:
1997 $ 192,150
1998 124,191
1999 53,204
----------
$ 369,545
==========
(A) NationsBank -- three notes due January 18, 1997 through May 8, 1998;
payable in monthly installments ranging from $3,000 to $6,222 for a total
monthly payment of $12,722, payments include interest ranging from 9% to
10%; secured by substantially all corporate assets.
(B) Capital Bank of Columbia -- a note payable due March 25, 1997; payable in
monthly installments of $10,206; payments include interest of 7%; secured
by specific equipment.
(C) Ford Motor Credit -- thirty-two notes due April 26, 1997 through November
29, 2000; payable in monthly installments ranging from $348 to $1,083 for
a total monthly payment of $18,610; payments include interest ranging
from 2.9% to 9.5%; secured by specific vehicles.
F-10
INSTALLATION TECHNICIANS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 27, 1997 AND DECEMBER 28, 1996
NOTE 6: LEASES
Operating
The Company leases office space from a corporation 60% owned by Company
shareholders under an operating lease, which expires December 31, 2001. Rent
expense for the years ended December 27, 1997 and December 28, 1996, was $60,600
and $48,000, respectively.
The Company also leases corporate offices from another related party on a
month-to-month lease. Rental expense for these offices for the years ended
December 27, 1997 and December 28, 1996, was $24,000 each year.
The Company also rented office space during 1997 and 1996 at two job
locations. Rental expense for these offices for the years ended December 27,
1997 and December 28, 1996, was $58,900 and $35,536, respectively.
Total rent expense amounted to $146,668 and $133,787 for the years ended
December 27, 1997 and December 28, 1996, respectively.
Future minimum lease payments assuming continuation of related party
month-to-month leases at December 27, 1997, were:
1998 $ 72,628
1999 68,880
2000 60,600
2001 60,600
----------
$ 262,708
==========
NOTE 7: RELATED PARTY TRANSACTIONS
On March 1, 1996, the Company entered into a $50,000 note receivable with a
related company which is 60% owned by the stockholders of the Company. This note
is payable in monthly payments of $1,042 including interest at 8% with the final
payment due January 1, 2001.
F-11
INSTALLATION TECHNICIANS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 27, 1997 AND DECEMBER 28, 1996
NOTE 7: RELATED PARTY TRANSACTIONS (Continued)
The Company agreed to advance funds for a building addition to the
office space leased from a related company which is 60% owned by stockholders of
the Company. These advances totaled $163,722 for the year ended December 27,
1997. The related party plans to obtain financing from an independent party to
reimburse the Company during 1998.
See Note 6 for other related party transactions.
NOTE 8: INCOME TAXES
State Income Tax Provision
The provision for income taxes consists of composite state income taxes
paid on behalf of the Company's shareholders:
1997 1996
---- ----
Taxes currently payable $ 109,508 $ 83,000
============ ===========
NOTE 9: STOCK REDEMPTION AGREEMENT
In the event of a stockholder's death or desire to dispose of stock, the
Company has the first option to redeem such stock. Stock not redeemed by the
Company may be purchased by the remaining shareholders.
NOTE 10: EMPLOYEE BENEFIT PLAN
The Company has a defined contribution employee 401(k) retirement plan
covering substantially all employees. Employees may contribute a portion of
their annual compensation not to exceed the maximum allowable 401(k)
contribution limit.
F-12
NOTE 11: ADDITIONAL CASH FLOW INFORMATION
1997 1996
---- ----
Noncash Investing and Financing Activities
Long-term debt incurred for equipment $ 228,679 $ 215,832
Additional Cash Payment Information
Interest paid $ 88,177 $ 101,371
Income taxes paid $ 49,926 $ 58,577
NOTE 12: SUBSEQUENT EVENT
On February 23, 1998, the Company and a related entity entered into merger
agreements to become wholly-owned subsidiaries of Dycom Industries, Inc., a
Florida-based provider of engineering, construction and maintenance services to
telecommunications providers. The transaction is expected to be completed in the
second calendar quarter of 1998.
F-13
CABLE COM, INC.
Accountants' Report
and Financial Statements
December 26, 1997
and December 27, 1996
Independent Accountants' Report
Board of Directors
Cable Com, Inc.
Atlanta, Georgia
We have audited the accompanying balance sheets of CABLE COM, INC. as of
December 26, 1997 and December 27, 1996, and the related statements of income,
stockholders' equity and cash flows 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 financial position of CABLE COM, INC. as of
December 26, 1997 and December 27, 1996, and the results of its operations and
its cash flows for the years then ended in conformity with generally accepted
accounting principles.
/s/ Baird, Kurtz & Dobson
Springfield, Missouri
February 6, 1998, except for Note 14, as to
which the date is February 23, 1998
F-14
CABLE COM, INC.
BALANCE SHEETS
DECEMBER 26, 1997 AND DECEMBER 27, 1996
ASSETS
1997 1996
---- ----
CURRENT ASSETS
Cash $ 343,553 $ 115,015
Accounts receivable, less allowance
for doubtful accounts of $2,500 9,260,551 5,995,510
Costs and estimated earnings in
excess of billings 1,253,934 669,158
Due from employees 57,732 100,400
Due from related parties 30,533 627
Prepaid expenses 74,923 330,855
----------- -----------
Total Current Assets 11,021,226 7,211,565
----------- -----------
DUE FROM RELATED PARTY -- 266,342
----------- -----------
PROPERTY AND EQUIPMENT, At Cost
Vehicles 9,386,517 7,696,920
Machinery and equipment 5,214,003 5,057,013
Tools and safety supplies 878,526 1,176,338
Furniture and fixtures 216,777 327,171
Leasehold improvements 112,016 102,399
----------- -----------
15,807,839 14,359,841
Less accumulated depreciation
and amortization 7,899,797 6,488,480
----------- -----------
7,908,042 7,871,361
----------- -----------
OTHER ASSETS
Restricted Cash 175,187 145,000
Deposits 48,469 57,854
----------- -----------
223,656 202,854
----------- -----------
$19,152,924 $15,552,122
=========== ===========
See Notes to Financial Statements
F-15
LIABILITIES AND STOCKHOLDERS' EQUITY
1997 1996
---- ----
CURRENT LIABILITIES
Current maturities of long-term debt $ 2,140,987 $ 1,953,920
Accounts payable 4,371,764 2,962,919
Other accrued expenses 831,807 321,756
Income taxes payable 103,691 15,328
----------- -----------
Total Current Liabilities 7,448,249 5,253,923
----------- -----------
LONG-TERM DEBT 4,425,221 5,951,475
----------- -----------
DEFERRED COMPENSATION 175,187 145,000
----------- -----------
STOCKHOLDERS' EQUITY
Common stock,
$.01 par value; 3,000 shares
voting and 27,000 shares nonvoting
authorized, issued and outstanding; 300 300
Additional paid-in capital 818,665 818,665
Retained earnings 6,285,302 3,382,759
----------- -----------
7,104,267 4,201,724
----------- -----------
$19,152,924 $15,552,122
=========== ===========
See Notes to Financial Statements
F-16
CABLE COM, INC.
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 26, 1997 AND DECEMBER 27, 1996
1997 1996
---- ----
NET SALES $ 53,461,943 $ 33,748,237
COST OF SALES 45,351,264 30,313,044
------------ ------------
GROSS PROFIT 8,110,679 3,435,193
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 2,525,679 1,686,399
------------ ------------
INCOME FROM OPERATIONS 5,585,000 1,748,794
------------ ------------
OTHER INCOME (EXPENSE)
Interest expense (605,531) (535,319)
Service charge income 4,308 342
Miscellaneous income 38,654 55,396
------------ ------------
(562,569) (479,581)
------------ ------------
INCOME BEFORE INCOME TAXES 5,022,431 1,269,213
PROVISION FOR STATE INCOME TAXES 144,888 65,000
------------ ------------
NET INCOME $ 4,877,543 $ 1,204,213
============ ============
See Notes to Financial Statements
F-17
CABLE COM, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 26, 1997 AND DECEMBER 27, 1996
Additional
Common Paid-In Retained
Stock Capital Earnings
----- ------- --------
BALANCE, DECEMBER 29, 1995 $ 300 $ 818,665 $ 3,408,546
NET INCOME -- -- 1,204,213
DIVIDENDS -- -- (1,230,000)
----------- ----------- -----------
BALANCE, DECEMBER 27, 1996 300 818,665 3,382,759
NET INCOME -- -- 4,877,543
DIVIDENDS -- -- (1,975,000)
----------- ----------- -----------
BALANCE, DECEMBER 26, 1997 $ 300 $ 818,665 $ 6,285,302
=========== =========== ===========
See Notes to Financial Statements
F-18
CABLE COM, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 26, 1997 AND DECEMBER 27, 1996
1997 1996
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES $ 4,877,543 $ 1,204,213
Net income
Items not requiring cash:
Depreciation and amortization 2,843,928 2,430,466
Loss on sale of fixed assets 94,502 89,339
Changes in:
Accounts receivable (3,265,041) (1,393,216)
Costs and estimated earnings in excess
of billings (584,776) (669,158)
Prepaid expenses and other 265,317 (146,262)
Accounts payable and accrued expenses 2,007,259 892,948
----------- -----------
Net cash provided by operating activities 6,238,732 2,408,330
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of fixed assets 193,906 372,447
Purchase of fixed assets (1,622,037) (2,639,309)
(Advances to) repayments from related parties 12,762 (32,454)
Notes receivable issued to related party 266,342 (266,342)
----------- -----------
Net cash used in investing activities (1,149,027) (2,565,658)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net payments under line-of-credit agreement (720,000) (1,730,000)
Dividends paid (1,975,000) (1,230,000)
Proceeds from issuance of long-term debt -- 7,030,000
Principal payments on long-term debt (2,166,167) (3,813,569)
----------- -----------
Net cash provided by (used in)
financing activities (4,861,167) 256,431
----------- -----------
INCREASE IN CASH 228,538 99,103
CASH, BEGINNING OF YEAR 115,015 15,912
----------- -----------
CASH, END OF YEAR $ 343,553 $ 115,015
=========== ===========
See Notes to Financial Statements
F-19
CABLE COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 26, 1997 AND DECEMBER 27, 1996
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Nature of Operations
Cable Com, Inc. is a specialty contractor and its revenues are
predominately earned from providing installation of telecommunications broad
band and other cable and equipment on a contract basis. The Company extends
unsecured credit to CATV and telephone companies throughout the United States.
Fiscal Year
The Company's normal fiscal year consists of a 52/53 week time period. The
Company's fiscal periods ended on December 26, 1997 and December 27, 1996,
consisted of 52 weeks each.
Property and Equipment
Property and equipment are depreciated using the straight-line method over
the estimated useful life of each asset. Lives range from five to seven years
for all property and equipment.
Income Taxes
Effective May 1, 1994, the Company, with the consent of its stockholders,
elected under Section 1362 of the Internal Revenue Code to have the stockholders
recognize their proportionate share of the Company's taxable income on their
personal income tax returns in lieu of paying corporate income taxes. The
Company and its shareholders have elected in states where allowed to file
corporate composite state income tax returns in lieu of individual shareholder
state income tax returns and pay state income taxes at the corporate level.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-20
CABLE COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 26, 1997 AND DECEMBER 27, 1996
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
Revenue Recognition
Bid job revenue is recorded on the basis of the Company's estimates of the
percentage-of-completion of individual contracts. The contract costs and the
estimated profit are accrued based on the ratio of units completed to date to
total estimated units, except that projected job losses are provided for in
their entirety without reference to percentage-of-completion. As contracts can
extend over several months, revisions in cost and profit estimates during the
course of the work are reflected in the accounting period in which facts become
known. In general, the Company bills the customer on the same basis as the
method of determining the percentage-of-completion. The asset, "Costs and
estimated earnings in excess of billings" represents revenues recognized in
excess of amounts billed.
NOTE 2: ACCOUNTS RECEIVABLE
Accounts receivable at December 26, 1997 and December 27, 1996, consist of
the following:
1997 1996
---- ----
Contract billings $7,085,526 $4,672,109
Retainage 1,919,228 1,148,762
Other receivables 258,297 177,139
---------- ----------
9,263,051 5,998,010
Less allowance for doubtful accounts 2,500 2,500
---------- ----------
Accounts receivable $9,260,551 $5,995,510
========== ==========
NOTE 3: COSTS AND ESTIMATED EARNINGS ON CONTRACTS IN PROGRESS
The accompanying balance sheets include costs and estimated earnings on
contracts in progress, net of progress billings as follows:
F-21
CABLE COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 26, 1997 AND DECEMBER 27, 1996
NOTE 3: COSTS AND ESTIMATED EARNINGS ON CONTRACTS IN PROGRESS
(Continued)
1997 1996
---- ----
Costs incurred on contracts in progress $31,809,737 $ 6,253,707
Estimated earnings thereon 6,826,883 170,589
----------- -----------
38,636,620 6,424,296
Less billings to date 37,382,686 5,755,138
----------- -----------
Costs and estimated earnings in excess of
billings $ 1,253,934 $ 669,158
=========== ===========
NOTE 4: LINE OF CREDIT
The Company had a revolving line of credit with NationsBank totaling
$4,500,000 as of January 1, 1996, which expired May 1, 1996. On July 1, 1996,
this line of credit was renewed through January 31, 1998. On July 1, 1997, the
line of credit was renewed for $5,200,000 through January 31, 1999. Interest on
advances is computed at the prime rate and is secured by substantially all
corporate assets. As of December 26, 1997 and December 27, 1996, there was
$2,570,000 and $3,290,000, respectively, outstanding under the line of credit.
The entire balance is included in long-term debt in accordance with its
repayment terms as of December 26, 1997 and December 27, 1996, (see Note 3).
In connection with the above line of credit, the Company is required to
maintain certain financial conditions, which includes dividend payment
restrictions equal to the Company's annual earnings. The line is also secured by
the personal guarantee of each of the three major shareholders.
F-22
CABLE COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 26, 1997 AND DECEMBER 27, 1996
NOTE 5: LONG-TERM DEBT
Long-term debt consists of the following:
1997 1996
---- ----
Note payable, bank (A) $ 639,941 $ 947,519
Note payable, bank (B) 1,565,630 2,412,135
Line of credit (C) 2,570,000 3,290,000
Installment notes payable (D) 719,251 794,807
Installment notes payable (E) 781,107 --
Capital lease obligations (Note 4) 290,279 460,934
---------- ----------
6,566,208 7,905,395
Less current maturities 2,140,987 1,953,920
---------- ----------
$4,425,221 $5,951,475
========== ==========
Aggregate annual maturities of long-term debt at December 26, 1997, are:
1998 $ 2,140,987
1999 4,120,864
2000 304,357
-------------
$ 6,566,208
=============
(A) NationsBank - due July 1, 2000; payable $31,540 monthly including
interest at 8.58%; secured by specific pieces of personal property.
(B) NationsBank - due August 1, 1999; payable $84,760 monthly including
interest at 8.75%; secured by substantially all corporate assets.
(C) NationsBank - due January 31, 1999; $5,200,000 line of credit secured by
substantially all corporate assets.
(D) Installment notes on specific pieces of equipment; due February 1996
through December 1999; payable in monthly installments including interest
at rates ranging from 6.68% to 10%; secured by such equipment.
(E) Installment notes on specific vehicles; due October 1999 through December
2000; payable in monthly installments including interest at 2.3% plus the
current LIBOR rate; secured by such vehicles and guaranteed by the three
major shareholders.
F-23
CABLE COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 26, 1997 AND DECEMBER 27, 1996
NOTE 6: LEASES
Operating
The Company has noncancellable operating leases for various offices and
warehouses expiring in various years through 2001. The Company also leased
equipment under month-to-month operating leases at various times throughout the
periods. Rental expense amounted to $981,720 and $833,956 for the periods ended
December 26, 1997 and December 27, 1996, respectively.
Future minimum lease payments at December 26, 1997, were:
1998 $ 121,196
1999 72,707
2000 47,760
2001 47,760
------------
Future minimum lease payments $ 289,423
============
The Company leases office space from a corporation 60% owned by Company
shareholders under an operating lease which expires December 31, 2001. Rent
expense for the year ended December 26, 1997, and the period August 1 through
December 27, 1996, was $47,760 and $19,900, respectively.
Capital
Capital lease obligations shown in long-term debt (Note 3) consisted of
leases of vehicles and equipment expiring at various dates through 1999.
Property and equipment include the following property under capital leases
as of December 26, 1997 and December 27, 1996.
1997 1996
---- ----
Vehicles and equipment $ 593,208 $ 907,924
Less accumulated depreciation 155,214 374,664
----------- ------------
$ 437,994 $ 533,260
=========== ============
F-24
CABLE COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 26, 1997 AND DECEMBER 27, 1996
NOTE 6: LEASES (Continued)
Future minimum lease payments as of December 26, 1997, were:
1998 $ 279,173
1999 30,222
------------
Future minimum lease payments 309,395
Less amount representing interest 19,116
------------
Present value of future minimum lease payments 290,279
Less current maturities 262,425
------------
Noncurrent portion $ 27,854
============
NOTE 7: RELATED PARTY TRANSACTIONS
The Company had a short-term receivable from a related company owned by the
Company's stockholders, in the amount of $30,533 and $627 at December 26, 1997
and December 27, 1996, respectively.
The Company has made travel and relocation advances to employees which
total $57,732 and $100,400 at December 26, 1997 and December 27, 1996,
respectively.
During 1996 the Company advanced funds totaling $266,342 to a related
company which is owned by the stockholders of the Company. During 1997 the
Company received full payment, therefore, the balance at December 26, 1997, is
zero.
See Note 6 for other related party transactions.
NOTE 8: INCOME TAXES
State Income Tax Provision
The provision for state income taxes consists of composite state income
taxes paid on behalf of the Company's shareholders:
1997 1996
---- ----
State taxes currently payable $ 144,888 $ 65,000
============ ===========
F-25
CABLE COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 26, 1997 AND DECEMBER 27, 1996
NOTE 9: STOCK REDEMPTION AGREEMENT
In the event of a stockholder's death or desire to dispose of Company
stock, the Company has the first option to redeem such stock. Stock not redeemed
by the Company may be purchased by the remaining shareholders.
NOTE 10: EMPLOYEE BENEFIT PLAN
The Company has a defined contribution employee 401(k) retirement plan
covering substantially all employees. Employees may contribute a portion of
their annual compensation not to exceed the maximum allowable 401(k)
contribution limit. The Company matches contributions equal to 25% of the
employees' contribution up to a maximum employee contribution of 5% of
compensation. The Company contributed $70,173 and $46,209 in 1997 and 1996,
respectively.
NOTE 11: DEFERRED COMPENSATION AGREEMENT
The Company has a deferred compensation agreement with certain key
employees which provides payments based on a payment schedule to be determined
by the Company. Expense for 1997 and 1996 was $0. The employees covered by the
deferred compensation agreement are fully vested in the amounts accrued prior to
curtailment of contributions to the plan in 1996.
The restricted cash represents funds designated by the Company and held in
a grantor trust to facilitate payments related to the deferred compensation
agreement.
NOTE 12: SIGNIFICANT ESTIMATES AND CONCENTRATIONS
Generally accepted accounting principles require disclosure of certain
significant estimates and current vulnerabilities due to certain concentrations.
Those matters include the following:
Revenues from Customers
Approximately 60% of the Company's sales for 1997 were to two customers and
approximately 56% of the Company's sales for 1996 were to two customers.
F-26
NOTE 13: ADDITIONAL CASH FLOW INFORMATION
1997 1996
---- ----
Noncash Investing and Financing Activities
Capital lease obligation incurred for
property and equipment $ -- $ 301,064
Debt incurred for purchase of property and equipment $1,546,980 $ 345,488
Additional Cash Payment Information
Interest paid $ 591,628 $ 543,031
Income taxes paid $ 101,224 $ 131,426
NOTE 14: SUBSEQUENT EVENT
On February 23, 1998, the Company and a related entity entered into merger
agreements to become wholly-owned subsidiaries of Dycom Industries, Inc., a
Florida-based provider of engineering, construction and maintenance services to
telecommunications providers. The transaction is expected to be completed in the
second calendar quarter of 1998.
F-27
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONSOLIDATED
FINANCIAL STATEMENTS INCLUDING
CABLE COM INC. AND INSTALLATION TECHNICIANS, INC.
INTRODUCTION TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS
On February 23, 1998, Dycom Industries, Inc. ("Dycom" or the "Company") entered
into merger agreements whereby Cable Com Inc. ("CCI") and Installation
Technicians, Inc. ("ITI") would become wholly-owned subsidiaries of the Company.
On April 6, 1998, the consummation date of such mergers, the stockholders of CCI
and ITI received 1,200,000 and 600,000 shares, respectively, of Dycom's $0.33
1/3 par value common stock. Dycom is accounting for the acquisitions as a
pooling of interests.
The following unaudited pro forma combined consolidated financial statements
give effect to the mergers on a pooling of interests basis. The unaudited pro
forma combined financial statements are based on the respective historical
financial statements of Dycom, CCI and ITI. In addition, the unaudited pro forma
combined consolidated financial statements reflects CCI's and ITI's adoption of
Dycom's fiscal year end of July 31 for all periods presented.
The unaudited pro forma combined consolidated balance sheet assumes that the
acquisitions took place on January 31, 1998 and combines Dycom's January 31,
1998 unaudited consolidated balance sheet with CCI's and ITI's January 31, 1998
unaudited balance sheet. The unaudited pro forma combined consolidated
statements of operations assume that the acquisition took place as of the
beginning of the periods presented and combine Dycom's unaudited consolidated
statements of operations for the six months ended January 31, 1998 and 1997 and
for the fiscal years ended July 31, 1997, 1996, and 1995 with CCI's and ITI's
unaudited results of operations for the same periods. This presentation is
consistent with the periods expected to be combined after the date of the
closing of the acquisitions.
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-28
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES,
CABLECOM INC. AND INSTALLATION TECHNICIANS, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
January 31, 1998
Pro Forma Pro Forma
Dycom CCI ITI Adjustments Combined
------------ ------------ ------------ ------------ ------------
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 29,454,502 $ (943,884) $ (226,041) $ $ 28,284,577
Accounts receivable, net 34,927,156 7,702,918 3,112,000 45,742,074
Costs and estimated earnings
in excess of billings 11,424,220 1,577,201 436,918 13,438,339
Deferred income taxes, net 2,114,249 114,243 2,228,492
Other current assets 1,800,469 311,161 61,878 2,173,508
------------ ------------ ------------ ------------ ------------
Total current assets 79,720,596 8,647,396 3,384,755 114,243 91,866,990
------------ ------------ ------------ ------------ ------------
PROPERTY AND EQUIPMENT, net 29,833,292 8,108,213 1,365,350 39,306,855
OTHER ASSETS:
Intangible assets, net 4,606,813 4,606,814
Deferred tax assets, net 304,980 (304,980)
Other 368,468 264,964 633,431
------------ ------------ ------------ ------------ ------------
Total other assets 5,280,261 264,964 (304,980) 5,240,245
------------ ------------ ------------ ------------ ------------
TOTAL $114,834,149 $ 17,020,573 $ 4,750,105 $ (190,737) $136,414,090
============ ============ ============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 6,195,512 $ 3,493,876 $ 329,485 $ $ 10,018,873
Notes payable 3,785,645 2,591,621 192,150 6,569,416
Billings in excess of costs
and estimated earnings
Accrued self-insured claims 1,712,575 1,712,575
Income taxes payable 20,061 103,691 63,906 187,658
Other accrued liabilities 9,716,462 973,683 463,516 905,000 12,058,661
------------ ------------ ------------ ------------ ------------
Total current liabilities 21,430,255 7,162,871 1,049,057 905,000 30,547,183
NOTES PAYABLE 9,135,675 3,815,320 219,896 13,170,891
ACCRUED SELF-INSURED CLAIMS 6,426,246 6,426,246
DEFERRED TAX LIABILITY, NET 381,928 381,928
------------ ------------ ------------ ------------ ------------
Total liabilities 36,992,176 10,978,191 1,268,953 1,286,928 50,526,248
------------ ------------ ------------ ------------ ------------
STOCKHOLDERS' EQUITY:
Preferred stock
Common stock 4,294,357 300 30,000 569,700 4,894,357
Additional paid-in capital 62,077,025 818,665 (569,700) 62,325,990
Retained (deficit) earnings 11,470,591 5,223,417 3,451,152 (1,477,665) 18,667,495
------------ ------------ ------------ ------------ ------------
Total shareholders' equity 77,841,973 6,042,382 3,481,152 (1,477,665) 85,887,842
------------ ------------ ------------ ------------ ------------
TOTAL $114,834,149 $ 17,020,573 $ 4,750,105 $ (190,737) $136,414,090
============ ============ ============ ============ ============
See notes to unaudited pro forma combined financial statements.
F-29
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES,
CABLE COM INC. AND INSTALLATION TECHNICIANS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JANUARY 31, 1998
Pro Forma Pro Forma
Dycom CCI ITI Adjustments Combined
------------ ------------ ------------ ------------ ------------
REVENUES:
Contract revenues earned $132,422,006 $ 26,899,783 $ 12,491,303 $ $171,813,092
Other, net 994,038 (65,977) 155,943 1,084,004
------------ ------------ ------------ ------------ ------------
Total 133,416,044 26,833,806 12,647,246 172,897,096
------------ ------------ ------------ ------------ ------------
EXPENSES:
Costs of earned revenue
excluding depreciation 103,980,781 21,991,305 10,339,803 136,311,889
General and administrative 13,287,851 513,197 805,794 14,606,842
Depreciation and amortization 4,564,968 1,494,222 264,181 6,323,371
------------ ------------ ------------ ------------ ------------
Total 121,833,600 23,998,724 11,409,778 157,242,102
------------ ------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES 11,582,444 2,835,082 1,237,468 15,654,994
PROVISION FOR INCOME TAXES 4,819,783 123,388 108,165 5,051,336
------------ ------------ ------------ ------------ ------------
NET INCOME $ 6,762,661 $ 2,711,694 $ 1,129,303 $ $ 10,603,658
============ ============ ============ ============ ============
EARNINGS PER COMMON SHARE:
Basic $ 0.58 $ 0.78
============ ============
Diluted $ 0.57 $ 0.77
============ ============
SUPPLEMENTARY PRO FORMA FINANCIAL INFORMATION:
HISTORICAL PRO FORMA NET INCOME $ 10,603,658
PRO FORMA ADJUSTMENTS TO INCOME TAX PROVISION 1,463,496
------------
PRO FORMA NET INCOME $ 9,140,162
============
EARNINGS PER COMMON SHARE:
Basic $ 0.67
============
Diluted $ 0.67
============
SHARES USED IN COMPUTING
EARNINGS PER COMMON SHARE:
Basic 11,741,418 13,541,418
============ ============
Diluted 11,928,690 13,728,690
============ ============
See notes to unaudited pro forma combined financial statements.
F-30
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES,
CABLE COM INC. AND INSTALLATION TECHNICIANS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JANUARY 31, 1997
Pro Forma Pro Forma
Dycom CCI ITI Adjustments Combined
------------ ------------ ------------ ------------ ------------
REVENUES:
Contract revenues earned $113,450,390 $ 18,055,589 $ 12,087,141 $ $143,593,120
Other, net 239,333 13,065 163,396 415,794
------------ ------------ ------------ ------------ ------------
Total 113,689,723 18,068,654 12,250,537 144,008,914
------------ ------------ ------------ ------------ ------------
EXPENSES:
Costs of earned revenue
excluding depreciation 91,264,570 15,275,967 10,244,214 116,784,751
General and administrative 10,755,628 1,145,477 618,682 12,519,787
Depreciation and amortization 4,112,878 1,277,629 222,577 5,613,084
------------ ------------ ------------ ------------ ------------
Total 106,133,076 17,699,073 11,085,473 134,917,622
------------ ------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES 7,556,647 369,581 1,165,064 9,091,292
PROVISION FOR INCOME TAXES 3,006,440 29,522 83,119 3,119,081
------------ ------------ ------------ ------------ ------------
NET INCOME $ 4,550,207 $ 340,059 $ 1,081,945 $ $ 5,972,211
============ ============ ============= ============ ============
EARNINGS PER COMMON SHARE:
Basic $ 0.42 $ 0.48
============ ============
Diluted $ 0.42 $ 0.47
============ ============
SUPPLEMENTARY PRO FORMA FINANCIAL INFORMATION:
HISTORICAL PRO FORMA NET INCOME $ 5,972,211
PRO FORMA ADJUSTMENTS TO INCOME TAX PROVISION 589,354
------------
PRO FORMA NET INCOME $ 5,382,857
============
EARNINGS PER COMMON SHARE:
Basic $ 0.43
============
Diluted $ 0.42
============
SHARES USED IN COMPUTING
EARNINGS PER COMMON SHARE:
Basic 10,726,173 12,526,173
============ ============
Diluted 10,940,009 12,740,009
============ ============
See notes to unaudited pro forma combined financial statements.
F-31
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES,
CABLE COM INC. AND INSTALLATION TECHNICIANS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JULY 31, 1997
Pro Forma Pro Forma
Dycom CCI ITI Adjustments Combined
------------ ------------ ------------ ------------ ------------
REVENUES:
Contract revenues earned $242,957,932 $ 45,188,676 $ 23,091,500 $ $311,238,108
Other, net 965,549 3,043 212,658 1,181,250
------------ ------------ ------------ ------------ ------------
Total 243,923,481 45,191,719 23,304,158 312,419,358
------------ ------------ ------------ ------------ ------------
EXPENSES:
Costs of earned revenue
excluding depreciation 192,412,439 36,342,482 19,388,489 248,143,410
General and administrative 23,779,913 3,530,956 1,380,095 28,690,964
Depreciation and amortization 8,689,611 2,669,087 455,879 11,814,577
------------ ------------ ------------ ------------ ------------
Total 224,881,963 42,542,525 21,224,463 288,648,951
------------ ------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES 19,041,518 2,649,194 2,079,695 23,770,407
PROVISION FOR INCOME TAXES 7,822,710 51,022 83,119 7,956,851
------------ ------------ ------------ ------------ ------------
NET INCOME $ 11,218,808 $ 2,598,172 $ 1,996,576 $ $ 15,813,556
============ ============ ============ ============ ============
EARNINGS PER COMMON SHARE:
Basic $ 1.04 $ 1.26
============ ============
Diluted $ 1.02 $ 1.24
============ ============
SUPPLEMENTARY PRO FORMA FINANCIAL INFORMATION:
HISTORICAL PRO FORMA NET INCOME $ 15,813,556
PRO FORMA ADJUSTMENTS TO INCOME TAX PROVISION 1,884,230
------------
PRO FORMA NET INCOME $ 13,929,326
============
EARNINGS PER COMMON SHARE:
Basic $ 1.11
============
Diluted $ 1.09
============
SHARES USED IN COMPUTING
EARNINGS PER COMMON SHARE:
Basic 10,775,991 12,575,991
============ ============
Diluted 10,948,689 12,748,689
============ ============
See notes to unaudited pro forma combined financial statements.
F-32
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES,
CABLE COM INC. AND INSTALLATION TECHNICIANS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JULY 31, 1996
Pro Forma Pro Forma
Dycom CCI ITI Adjustments Combined
------------ ------------ ------------ ------------ ------------
REVENUES:
Contract revenues earned $194,053,617 $ 33,005,455 $ 18,877,991 $ $245,937,063
Other, net 1,206,624 33,456 118,448 1,358,528
------------ ------------ ------------ ------------ ------------
Total 195,260,241 33,038,911 18,996,439 247,295,591
------------ ------------ ------------ ------------ ------------
EXPENSES:
Costs of earned revenue
excluding depreciation 155,769,390 27,838,432 15,616,229 199,224,051
General and administrative 20,485,022 1,645,928 1,451,788 23,582,738
Depreciation and amortization 7,624,395 2,382,369 427,225 10,433,989
------------ ------------ ------------ ------------ ------------
Total 183,878,807 31,866,729 17,495,242 233,240,778
------------ ------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES 11,381,434 1,172,182 1,501,197 14,054,813
PROVISION FOR INCOME TAXES 3,717,576 273,686 141,224 4,132,486
------------ ------------ ------------ ------------ ------------
NET INCOME $ 7,663,858 $ 898,496 $ 1,359,973 $ $ 9,922,327
============ ============ ============= ============ ============
EARNINGS PER COMMON SHARE:
Basic $ 0.72 $ 0.80
============ ============
Diluted $ 0.71 $ 0.78
============ ============
SUPPLEMENTARY PRO FORMA FINANCIAL INFORMATION:
HISTORICAL PRO FORMA NET INCOME $ 9,922,327
PRO FORMA ADJUSTMENTS TO INCOME TAX PROVISION 727,276
------------
PRO FORMA NET INCOME $ 9,195,051
============
EARNINGS PER COMMON SHARE:
Basic $ 0.74
============
Diluted $ 0.73
============
SHARES USED IN COMPUTING
EARNINGS PER COMMON SHARE:
Basic 10,616,376 12,416,376
============ ============
Diluted 10,859,819 12,659,819
============ ============
See notes to unaudited pro forma combined financial statements.
F-33
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES,
CABLE COM INC. AND INSTALLATION TECHNICIANS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JULY 31, 1995
Pro Forma Pro Forma
Dycom CCI ITI Adjustments Combined
------------ ------------ ------------ ------------ ------------
REVENUES:
Contract revenues earned $186,956,976 $ 52,199,856 $ 14,154,001 $ $253,310,833
Other, net 1,376,398 254,625 102,730 1,733,753
------------ ------------ ------------ ------------ ------------
Total 188,333,374 52,454,481 14,256,731 255,044,586
------------ ------------ ------------ ------------ ------------
EXPENSES:
Costs of earned revenue
excluding depreciation 153,284,320 42,820,965 10,955,235 207,060,520
General and administrative 19,009,530 2,145,902 1,974,342 23,129,774
Depreciation and amortization 7,165,252 2,150,083 385,818 9,701,153
------------ ------------ ------------ ------------ ------------
Total 179,459,102 47,116,950 13,315,395 239,891,447
------------ ------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES 8,874,272 5,337,531 941,336 15,153,139
PROVISION FOR INCOME TAXES 3,732,893 67,792 3,800,685
------------ ------------ ------------ ------------ ------------
NET INCOME $ 5,141,379 $ 5,269,739 $ 941,336 $ $ 11,352,454
============ ============ ============ ============ ============
EARNINGS PER COMMON SHARE:
Basic $ 0.49 $ 0.92
============ ============
Diluted $ 0.49 $ 0.92
============ ============
SUPPLEMENTARY PRO FORMA FINANCIAL INFORMATION:
HISTORICAL PRO FORMA NET INCOME $ 11,352,454
PRO FORMA ADJUSTMENTS TO INCOME TAX PROVISION 2,542,944
------------
PRO FORMA NET INCOME $ 8,809,510
============
EARNINGS PER COMMON SHARE:
Basic $ 0.71
============
Diluted $ 0.71
============
SHARES USED IN COMPUTING
EARNINGS PER COMMON SHARE:
Basic 10,588,766 12,388,766
============ ============
Diluted 10,588,766 12,388,766
============ ============
See notes to unaudited pro forma combined financial statements.
F-34
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES,
CABLE COM INC. AND INSTALLATION TECHNICIANS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
1. Accounting Periods
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 merger 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.
2. Periods Combined
The Dycom consolidated balance sheet as of January 31, 1998 has been
combined with CCI's and ITI's balance sheet as of the same period.
The Dycom consolidated statements of operations for the six months ended
January 31, 1998 and 1997 and for the fiscal years ended July 31, 1997, 1996
and 1995, respectively, have been combined with CCI's and ITI's results of
operations for the same periods.
3. Merger Costs
Dycom, CCI and ITI estimate they will incur direct transaction costs of
approximately $0.6 million associated with the acquisition, consisting of fees
for filing with regulatory agencies, legal, accounting and other related costs.
These nonrecurring costs will be charged to operations in the fiscal quarter
ending April 30, 1998.
4. Provision for Income Taxes
Prior to the acquisition, CCI and 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 income tax returns in
lieu of paying corporate income tax. The supplementary pro forma financial
information 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.
5. Pro Forma Adjustments
The consolidated balance sheet as of January 31, 1998 reflects a pro
forma adjustment of $905,000 for stockholder distributions subsequent to the
balance sheet date. These distributions were for payment of the 1997 tax
liability associated with CCI's and ITI's taxable income recognized on the
stockholders' personal income tax returns. In addition, the balance sheet
reflects a pro forma adjustment of 572,665 for deferred income taxes on the
difference between the accounting basis and tax basis of CCI's and ITI's assets
and liabilities.
6. Exchange of Stock
The Dycom shares issued in the acquisitions were in exchange for all
the outstanding common stock of CCI and ITI. CCI's and ITI's capital are
reclassified to reflect the par value of the Dycom shares issued in the
acquisitions.
7. Pro Forma Net Income Per Share
The unaudited pro forma and supplementary pro forma combined net income
per common share, basic and diluted, are based upon the weighted average common
shares and dilutive common stock options outstanding for each period presented
adjusted for the 1,200,000 and 600,000 shares of Dycom common stock issued to
the CCI and ITI shareholders, respectively.
F-35