1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 January 27, 2001
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 of incorporation) (IRS Employer Identification No.)
4440 PGA Boulevard, Suite 500
Palm Beach Gardens, Florida 33410
- ----------------------------------------------- --------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (561) 627-7171
--------------
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 March 12, 2001
Common Stock, par value $0.33 1/3 42,496,991
2
DYCOM INDUSTRIES, INC.
INDEX
PAGE NO.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets-
January 27, 2001 and July 29, 2000 3
Condensed Consolidated Statements of
Operations for the Three Months Ended
January 27, 2001 and January 29, 2000 4
Condensed Consolidated Statements of
Operations for the Six Months Ended
January 27, 2001 and January 29, 2000 5
Condensed Consolidated Statements of
Cash Flows for the Six Months Ended
January 27, 2001 and January 29, 2000 6-7
Notes to Condensed Consolidated
Financial Statements 8-16
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 17-21
Item 3. Quantitative and Qualitative Disclosures
about Market Risk 21
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 22
Item 4. Submission of Matters to a Vote of Security Holders 22
Item 6. Exhibits and Reports on Form 8-K 22
SIGNATURES 23
3
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
JANUARY 27, JULY 29,
2001 2000
------------ ------------
CURRENT ASSETS:
Cash and equivalents $ 82,151,281 $105,701,950
Accounts receivable, net 138,608,382 144,291,699
Costs and estimated earnings in excess of billings 37,666,008 52,301,022
Deferred tax assets, net 6,510,001 6,039,264
Inventories 11,857,261 14,563,649
Other current assets 5,407,111 1,530,972
------------ ------------
Total current assets 282,200,044 324,428,556
------------ ------------
PROPERTY AND EQUIPMENT, net 116,406,069 101,092,862
------------ ------------
OTHER ASSETS:
Intangible assets, net 145,032,183 85,783,092
Other 2,892,643 2,695,084
------------ ------------
Total other assets 147,924,826 88,478,176
------------ ------------
TOTAL $546,530,939 $513,999,594
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 29,979,660 $ 42,922,557
Notes payable 2,718,790 2,594,413
Billings in excess of costs and estimated earnings 2,582,179 6,405
Accrued self-insured claims 4,617,854 4,232,243
Income taxes payable 521,080 5,916,000
Customer advances 11,339,774 11,762,547
Other accrued liabilities 37,186,165 47,324,948
------------ ------------
Total current liabilities 88,945,502 114,759,113
------------ ------------
NOTES PAYABLE 7,894,763 9,106,201
ACCRUED SELF-INSURED CLAIMS 6,306,349 5,554,417
DEFERRED TAX LIABILITIES, net 4,843,621 4,256,781
OTHER LIABILITIES 2,922,082 2,345,525
------------ ------------
Total liabilities 110,912,317 136,022,037
------------ ------------
COMMITMENTS AND CONTINGENCIES, Note 9
STOCKHOLDERS' EQUITY:
Preferred stock, par value 1.00 per share:
1,000,000 shares authorized: no shares issued and outstanding -- --
Common stock, par value $.33 1/3 per share:
150,000,000 shares authorized: 42,491,991 and 41,900,516
shares issued and outstanding, respectively 14,163,998 13,966,839
Additional paid-in capital 244,327,870 221,593,083
Retained earnings 177,126,754 142,417,635
------------ ------------
Total stockholders' equity 435,618,622 377,977,557
------------ ------------
TOTAL $546,530,939 $513,999,594
============ ============
See notes to condensed consolidated financial statements--unaudited.
3
4
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
FOR THE THREE MONTHS ENDED
---------------------------------
JANUARY 27, JANUARY 29,
2001 2000
------------- -------------
Contract revenues earned $ 195,765,314 $ 177,212,481
------------- -------------
Expenses:
Costs of earned revenues, excluding depreciation 147,235,563 131,704,528
General and administrative 18,187,339 15,348,417
Depreciation and amortization 9,851,659 7,417,534
------------- -------------
Total 175,274,561 154,470,479
------------- -------------
Interest income, net 1,104,784 829,354
Other income, net 592,748 317,302
------------- -------------
INCOME BEFORE INCOME TAXES 22,188,285 23,888,658
------------- -------------
PROVISION FOR INCOME TAXES:
Current 9,155,696 8,948,472
Deferred (58,500) 543,387
------------- -------------
Total 9,097,196 9,491,859
------------- -------------
NET INCOME $ 13,091,089 $ 14,396,799
============= =============
EARNINGS PER COMMON SHARE:
Basic $ 0.31 $ 0.35
============= =============
Diluted $ 0.31 $ 0.34
============= =============
SHARES USED IN COMPUTING EARNINGS PER COMMON SHARE:
Basic 42,249,501 41,447,696
============= =============
Diluted 42,731,489 42,011,736
============= =============
See notes to condensed consolidated financial statements--unaudited
4
5
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
FOR THE SIX MONTHS ENDED
------------------------------
JANUARY 27, JANUARY 29,
2001 2000
------------ ------------
Contract revenues earned $430,455,735 $354,699,593
------------ ------------
Expenses:
Costs of earned revenues, excluding depreciation 320,222,574 263,806,344
General and administrative 36,322,076 30,158,724
Depreciation and amortization 18,984,984 14,908,416
------------ ------------
Total 375,529,634 308,873,484
------------ ------------
Interest income, net 2,407,670 1,572,689
Other income, net 869,241 538,880
------------ ------------
INCOME BEFORE INCOME TAXES 58,203,012 47,937,678
------------ ------------
PROVISION FOR INCOME TAXES:
Current 23,377,790 18,623,855
Deferred 116,103 368,461
------------ ------------
Total 23,493,893 18,992,316
------------ ------------
NET INCOME $ 34,709,119 $ 28,945,362
============ ============
EARNINGS PER COMMON SHARE:
Basic $ 0.82 $ 0.70
============ ============
Diluted $ 0.81 $ 0.69
============ ============
SHARES USED IN COMPUTING EARNINGS PER COMMON SHARE:
Basic 42,120,423 41,355,245
============ ============
Diluted 42,699,338 41,914,223
============ ============
See notes to condensed consolidated financial statements--unaudited
5
6
DYCOM INDUSTRIES, INC.AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
FOR THE SIX MONTHS ENDED
---------------------------------
JANUARY 27, JANUARY 29,
2001 2000
------------- -------------
Increase (Decrease) in Cash and Equivalents from
OPERATING ACTIVITIES:
Net Income $ 34,709,119 $ 28,945,362
Adjustments to reconcile net cash provided by operating activities:
Depreciation and amortization 18,984,984 14,908,416
Gain on disposal of assets (410,922) (275,983)
Realized gain on marketable securities -- (20,724)
Deferred income taxes 116,103 394,961
Change in assets and liabilities:
Accounts receivable, net 20,059,079 (677,588)
Unbilled revenues, net 23,306,481 (10,039,417)
Other current assets 2,837,322 (4,234,579)
Other assets 129,141 3,776,971
Accounts payable (13,884,206) 6,718,191
Customer advances (422,773) (5,574,190)
Accrued self-insured claims and other liabilities (19,154,618) (2,017,502)
Accrued income taxes (1,691,929) (1,601,659)
------------- -------------
Net cash inflow from operating activities 64,577,781 30,302,259
------------- -------------
INVESTING ACTIVITIES:
Capital expenditures (27,688,845) (20,735,207)
Proceeds from sale of assets 972,018 1,117,514
Acquisition expenditures, net of cash acquired (59,464,435) (27,654,288)
------------- -------------
Net cash outflow from investing activities (86,181,262) (47,271,981)
------------- -------------
FINANCING ACTIVITIES:
Principal payments on notes payable and bank lines-of-credit (4,035,655) (2,030,262)
Exercise of stock options 2,088,467 1,446,214
------------- -------------
Net cash outflow from financing activities (1,947,188) (584,048)
------------- -------------
NET CASH OUTFLOW FROM ALL ACTIVITIES (23,550,669) (17,553,770)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 105,701,950 97,995,283
------------- -------------
CASH AND EQUIVALENTS AT END OF PERIOD $ 82,151,281 $ 80,441,513
============= =============
See notes to condensed consolidated financial statements--unaudited.
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7
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Unaudited)
FOR THE SIX MONTHS ENDED
--------------------------------------
JANUARY 27, JANUARY 29,
2001 2000
---------------- ---------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW AND NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Cash paid during the period for:
Interest $ 505,945 $ 562,087
Income taxes 28,888,813 21,123,716
Property and equipment acquired and financed with:
Notes payable $ 280,280 $ --
Income tax benefit from stock options exercised $ 3,819,860 $ 1,065,402
During the six months ended January 27, 2001, the company acquired all of the
capital stock of Cable Connectors, Inc., Schaumburg Enterprises, Inc., Point to
Point Communications, Inc. and Stevens Communications, Inc. at a cost of
$85.2 million. In conjunction with these acquisitions, assets acquired and
liabilities assumed were as follows:
Fair market value of assets acquired, including goodwill $96,639,128
Consideration paid (including $17.0 million of common stock issued) 85,235,895
-----------
Fair market value of liabilities assumed $11,403,233
===========
During the six months ended January 29, 2000, the Company acquired all of the
capital stock of Lamberts' Cable Splicing Company, C-2 Utility Contractors, Inc.,
and Artoff Construction Company, Inc. at a cost of $40.8 million. In conjunction
with these acquisitions, assets acquired and liabilities assumed were as follows:
Fair market value of assets acquired, including goodwill $42,888,925
Consideration paid (including $10.5 million of common stock issued) 40,754,577
-----------
Fair market value of liabilities assumed $ 2,134,348
===========
See notes to condensed consolidated financial statements--unaudited.
7
8
1. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--Unaudited
The accompanying condensed consolidated balance sheets of Dycom Industries, Inc.
("Dycom" or the "Company") as of January 27, 2001 and July 29, 2000, and the
related condensed consolidated statements of operations for the three and six
months ended January 27, 2001 and January 29, 2000 and the condensed
consolidated statements of cash flows for the six months ended January 27, 2001
and January 29, 2000 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 three and six months ended January 27, 2001 are
not necessarily indicative of the results which may be expected for the entire
year.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION -- The condensed consolidated financial statements
are unaudited. These statements include Dycom Industries, Inc. and its
subsidiaries, all of which are wholly owned.
During fiscal 2000, the Company acquired Lamberts' Cable Splicing Company
("LCS"), C-2 Utility Contractors, Inc. ("C-2"), and Artoff Construction Company,
Inc. ("ACC"). During fiscal 2001, the Company acquired Cable Connectors, Inc.
("CAB"), Schaumburg Enterprises, Inc. ("SEI"), Point to Point Communications,
Inc. ("PTP"), and Stevens Communications, Inc. ("SCI"). Each of these
transactions was accounted for using the purchase method of accounting. The
Company's results include the results of LCS, C-2, ACC, CAB, SEI, PTP, and SCI
from their respective acquisition dates until January 27, 2001. On March 8,
2000, Niels Fugal Sons Company ("NFS") merged with the Company in an exchange of
common stock. This transaction was accounted for as a pooling of interests.
Accordingly, the Company's condensed consolidated financial statements include
the results of NFS for all periods presented. See Note 4.
The Company's operations consist primarily of providing specialty contracting
services to the telecommunications industries. All material intercompany
accounts and transactions have been eliminated.
CHANGE IN FISCAL YEAR -- On September 29, 1999, the Company changed to a fiscal
year with 52 or 53 week periods ending on the Saturday nearest July 31. This
Quarterly Report presents financial information for the first and second
quarters of fiscal 2001, beginning July 30, 2000 and ending January 27, 2001.
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, depreciation and
amortization, and in the estimated lives of assets, including intangibles.
REVENUE -- Income on short-term contracts is recognized as the related work is
completed. Work-in-process on unit contracts is based on work performed but not
billed. 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. At the time a loss on a
contract becomes known, the entire amount of the estimated ultimate loss is
accrued.
"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 an original 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.
INVENTORIES -- Inventories consist primarily of materials and supplies used in
the Company's business. The Company values these inventories using the first-in,
first-out method. The Company periodically reviews the appropriateness of the
carrying value of its inventories. The Company records a reserve for
obsolescence if inventories are not expected to be used in the Company's normal
course of business. No reserve has been recorded in the periods presented.
PROPERTY AND EQUIPMENT -- Property and equipment is stated at cost. 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.
8
9
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 20-40 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 are less than
the carrying value of goodwill. No impairment loss has been recognized in the
periods presented. As of January 27, 2001 and July 29, 2000, net intangible
assets include $144.7 million and $85.4 million of net goodwill, respectively.
Amortization expense was $2,601,123 and $1,799,275 for the six months ended
January 27, 2001 and January 29, 2000. The intangible assets are net of
accumulated amortization of $9,153,213 at January 27, 2001 and $6,552,090 at
July 29, 2000, respectively.
SELF-INSURED CLAIMS LIABILITY -- The Company retains the risk, 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 $6,480,095 and $5,161,379 at January 27, 2001 and July
29, 2000, respectively. The determination of such claims and expenses and the
appropriateness of the related liability is periodically reviewed and updated.
CUSTOMER ADVANCES -- Under the terms of certain contracts, the Company receives
advances from customers that may be offset against future billings by the
Company. The Company has recorded these advances as liabilities and has not
recognized any revenue for these advances.
INCOME TAXES -- The Company and its subsidiaries file a consolidated federal
income tax return. Deferred income taxes are provided for the temporary
differences between the financial reporting basis and the tax basis of the
Company's assets and liabilities.
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.
STOCK SPLITS -- On January 20, 2000, the Board of Directors declared a 3-for-2
split of the Company's common stock, effected in the form of a stock dividend
paid on February 16, 2000 to stockholders of record on February 2, 2000. All
agreements concerning stock options provide for the issuance of additional
shares due to the declaration of the stock split. An amount equal to the par
value of the common shares issued plus cash paid in lieu of fractional shares
was transferred from capital in excess of par value to the common stock account.
All references to number of shares and to per share information have been
adjusted to reflect the stock split on a retroactive basis.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS -- In June 1998, the Financial
Accounting Standards Board ("FASB") issued Statement of Financial Accounting
Standards ("SFAS") No. 133 "Accounting for Derivative Instruments and Hedging
Activities" which establishes standards for the accounting and reporting of
derivative instruments, including certain derivative instruments embedded in
other contracts, (collectively referred to as derivatives) and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the statement of financial position and measure those
instruments at fair value. SFAS No. 133 did not have a material impact on the
financial statements of the Company.
In December 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin ("SAB") No. 101 "Revenue Recognition" which provides
guidance on the recognition, presentation and disclosure of revenue in financial
statements filed with the SEC. SAB No. 101 is applicable beginning with our
fourth quarter fiscal 2001 consolidated financial statements. Based on our
current analysis of SAB No. 101, management does not believe it will have an
impact on the financial results of the Company.
RECLASSIFICATION -- Certain prior year amounts have been reclassified in order
to conform to current year presentation.
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3. COMPUTATION OF PER SHARE EARNINGS
The following is a reconciliation of the numerators and denominators of the
basic and diluted per share computation as required by SFAS 128.
FOR THE THREE MONTHS ENDED
----------------------------
JANUARY 27, JANUARY 29,
2001 2000
----------- -----------
Net income available to common stockholders (numerator) $13,091,089 $14,396,799
=========== ===========
Weighted-average number of common shares (denominator) 42,249,501 41,447,696
=========== ===========
Earnings per common share-basic $ 0.31 $ 0.35
=========== ===========
Weighted-average number of common shares 42,249,501 41,447,696
Potential common stock arising from stock options 481,988 564,040
----------- -----------
Total shares (denominator) 42,731,489 42,011,736
=========== ===========
Earnings per common share-diluted $ 0.31 $ 0.34
=========== ===========
FOR THE SIX MONTHS ENDED
----------------------------
JANAURY 27, JANUARY 29,
2001 2000
----------- -----------
Net income available to common stockholders (numerator) $34,709,119 $28,945,362
=========== ===========
Weighted-average number of common shares (denominator) 42,120,423 41,355,245
=========== ===========
Earnings per common share-basic $ 0.82 $ 0.70
=========== ===========
Weighted-average number of common shares 42,120,423 41,355,245
Potential common stock arising from stock options 578,915 558,978
----------- -----------
Total shares (denominator) 42,699,338 41,914,223
=========== ===========
Earnings per common share-diluted $ 0.81 $ 0.69
=========== ===========
4. ACQUISITIONS
In August 1999, the Company acquired Lamberts' Cable Splicing Company ("LCS")
for $10.0 million in cash and 73,309 shares of Dycom common stock for an
aggregate purchase price of $12.4 million before various transaction costs.
Located in Rocky Mount, North Carolina, LCS's primary business is the
construction and maintenance of telecommunications systems under master service
agreements.
In January 2000, the Company acquired C-2 Utility Contractors, Inc. ("C-2") for
$18.0 million in cash and 247,555 shares of Dycom common stock for an aggregate
purchase price of $25.2 million before various transaction costs and Artoff
Construction Company ("ACC") for $2.2 million in cash and 30,081 shares of Dycom
common stock for an aggregate purchase price of $3.0 million before various
transaction costs. Located in Eugene, Oregon, C-2's primary business is the
construction and maintenance of telecommunications systems under master service
agreements. Located in Gold Hill, Oregon, ACC's primary business is the
construction and maintenance of telecommunications systems.
10
11
In October 2000, the Company acquired Cable Connectors, Inc. ("CAB") for $3.2
million in cash and 13,286 shares of Dycom common stock for an aggregate
purchase price of $3.8 million before various transaction costs. In December
2000, the Company acquired Schaumburg Enterprises, Inc. ("SEI") for $3.0 million
in cash and 15,518 shares of Dycom common stock for an aggregate purchase price
of $3.6 million before various transaction costs. In December 2000, the Company
acquired Point to Point Communications, Inc. ("PTP") for $52.2 million in cash
and 312,312 shares of Dycom common stock for an aggregate purchase price of
$65.3 million before various transaction costs. In January 2001, the Company
acquired Stevens Communications, Inc. ("SCI") for $9.9 million in cash and
76,471 shares of Dycom common stock for an aggregate purchase price of $12.5
million before various transaction costs.
The Company has recorded the acquisitions of LCS, C-2, ACC, CAB, SEI, PTP, and
SCI using the purchase method of accounting. All acquired goodwill associated
with these acquisitions is being amortized over a period of 20 years. The
operating results of LCS, C-2, ACC, CAB, SEI, PTP and SCI are included in the
accompanying condensed consolidated financial statements from the date of
purchase.
The following unaudited pro forma summary presents the consolidated results of
operations of the Company as if the acquisitions of LCS, C-2, ACC, CAB, SEI,
PTP, and SCI had occurred on August 1, 1999:
FOR THE SIX MONTHS ENDED
------------------------------
JANUARY 27, JANUARY 29,
2001 2000
------------ ------------
Total revenues $470,382,758 $399,742,714
Income before income taxes 66,335,068 53,004,692
Net income 39,536,886 31,470,961
Earnings per share:
Basic $ 0.93 $ 0.75
Diluted $ 0.92 $ 0.74
On March 8, 2000, the Company consummated the acquisition of NFS. The Company
issued 2,726,210 shares of common stock in exchange for all the outstanding
capital stock of NFS. Located in Pleasant Grove, Utah, NFS's primary business is
providing telecommunication construction services throughout the Western United
States.
Dycom has accounted for the acquisition as a pooling-of-interests and,
accordingly, the Company's historical condensed financial statements include the
results of NFS for all periods presented.
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12
Prior to the acquisition, NFS used a fiscal year ending January 31 and as of
March 8, 2000 adopted Dycom's fiscal year. All periods presented reflect the
adoption of such fiscal year end as of the beginning of the period. The combined
and separate results of Dycom and NFS for the three and six month periods ending
January 27, 2001 and January 29, 2000, respectively, are as follows:
DYCOM NFS COMBINED
------------------ ----------------- --------------
Three month period ended
January 27, 2001
Total revenues $195,765,314 $ -- $195,765,314
Net income $ 13,091,089 $ -- $ 13,091,089
January 29, 2000
Total revenues $158,381,266 $ 18,831,215 $177,212,481
Net income $ 11,996,560 $ 2,400,239 $ 14,396,799
Six month period ended
January 27, 2001
Total revenues $430,455,735 $ -- $430,455,735
Net income $ 34,709,119 $ -- $ 34,709,119
January 29, 2000
Total revenues $319,285,541 $ 35,414,052 $354,699,593
Net income $ 24,459,791 $ 4,485,571 $ 28,945,362
In connection with each of the acquisitions referred to above the Company
entered into employment contracts with certain executive officers of each of the
acquired companies varying in length from three to six years.
5. ACCOUNTS RECEIVABLE
Accounts receivable consist of the following:
JANUARY 27, JULY 29,
2001 2000
------------ ------------
Contract billings $128,150,927 $134,740,946
Retainage 12,228,662 11,835,425
Other receivables 2,258,979 1,835,560
------------ ------------
Total 142,638,568 148,411,931
Less allowance for doubtful accounts 4,030,186 4,120,232
------------ ------------
Accounts receivable, net $138,608,382 $144,291,699
============ ============
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For the periods indicated, the allowance for doubtful accounts changed as
follows:
FOR THE THREE MONTHS ENDED
--------------------------------
JANUARY 27, JANUARY 29,
2001 2000
----------- -----------
Allowance for doubtful accounts at 10/28/2000 and 10/30/1999,
respectively $ 4,388,689 $ 3,521,902
Allowance for doubtful account balances from acquisitions 600,000 --
Reductions charged against bad debt expense (215,002) (31,212)
Amounts charged against the allowance, net of recoveries (743,501) (67,071)
----------- -----------
Allowance for doubtful accounts $ 4,030,186 $ 3,423,619
=========== ===========
FOR THE SIX MONTHS ENDED
--------------------------------
JANUARY 27, JANUARY 29,
2001 2000
----------- -----------
Allowance for doubtful accounts at 7/29/2000 and 7/31/1999,
respectively $ 4,120,232 $ 4,129,280
Allowance for doubtful account balances from acquisitions 600,000 --
Additions (Reductions) charged to (against) bad debt expense 63,310 (339,146)
Amounts charged against the allowance, net of recoveries (753,356) (366,515)
----------- -----------
Allowance for doubtful accounts $ 4,030,186 $ 3,423,619
=========== ===========
As of January 27, 2001 and July 29, 2000, the Company expected to collect all of
its retainage balances within twelve months.
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:
JANUARY 27, JULY 29,
2001 2000
----------- -----------
Costs incurred on contracts in progress $29,981,999 $48,037,774
Estimated earnings thereon 8,353,513 13,855,362
----------- -----------
38,335,512 61,893,136
Less billings to date 3,251,683 9,598,519
----------- -----------
$35,083,829 $52,294,617
=========== ===========
Included in the accompanying consolidated balance
sheets under the captions:
Costs and estimated earnings in excess of billings $37,666,008 $52,301,022
Billings in excess of costs and estimated earnings 2,582,179 6,405
----------- -----------
$35,083,829 $52,294,617
=========== ===========
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As stated in Note 1, the Company performs services under short-term, unit based
and long-term, percentage of completion contracts. The amounts presented above
aggregate the effects of these two types of contracts.
7. PROPERTY AND EQUIPMENT
The accompanying condensed consolidated balance sheets include the following
property and equipment:
JANUARY 27, JULY 29,
2001 2000
------------ ------------
Land $ 3,410,467 $ 3,373,037
Buildings 6,444,062 6,330,683
Leasehold improvements 1,690,482 1,574,013
Vehicles 121,670,656 102,489,730
Equipment and machinery 78,630,385 70,501,903
Furniture and fixtures 11,558,813 10,401,809
------------ ------------
Total 223,404,865 194,671,175
Less accumulated depreciation 106,998,796 93,578,313
------------ ------------
Property and equipment, net $116,406,069 $101,092,862
============ ============
Maintenance and repairs of property and equipment amounted to $2,985,974 and
$2,690,101 for the three months ended January 27, 2001 and January 29, 2000,
respectively. Maintenance and repairs of property and equipment amounted to
$7,079,257 and $5,589,971 for the six months ended January 27, 2001 and January
29, 2000, respectively.
8. NOTES PAYABLE
Notes payable are summarized by type of borrowings as follows:
JANUARY 27, JULY 29,
2001 2000
----------- -----------
Bank Credit Agreement - Term Loan $ 9,750,000 $10,750,000
Capital lease obligations 9,690 458
Equipment loans 853,863 950,156
----------- -----------
Total 10,613,553 11,700,614
Less current portion 2,718,790 2,594,413
----------- -----------
Notes payable - non-current $ 7,894,763 $ 9,106,201
=========== ===========
On April 27, 1999, the Company signed an amendment to its bank credit agreement
increasing the total facility to $175.3 million and extending the facility's
maturity to April 2002. The agreement was further amended on December 12, 2000
to reduce the interest rates, eliminate the collateral requirement and
streamline certain administrative covenants. The bank credit agreement provides
for (i) a $17.5 million standby letter of credit facility, (ii) a $50.0 million
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revolving working capital facility; (iii) a $12.8 million five-year term loan,
and (iv) a $95.0 million equipment acquisition and small business purchase
facility. The Company is required to pay an annual non-utilization fee equal to
0.15% of the unused portion of the revolving working capital and the equipment
acquisition and small business purchase facilities. In addition, the Company
pays annual agent and facility commitment fees of $15,000 and $135,000,
respectively.
The Company had total outstanding standby letters of credit of $14.0 million at
January 27, 2001, substantially all of which are letters of credit issued to the
Company's insurance administrators as part of its self-insurance program.
The revolving working capital facility bears interest, at the option of the
Company, at the bank's prime interest rate minus 1.25% or LIBOR plus 1.125%. As
of January 27, 2001, there was no outstanding balance on this facility resulting
in an available borrowing capacity of $50.0 million.
The outstanding loans under the equipment acquisition and small business
purchase facility bear interest, at the option of the Company, at the bank's
prime interest rate minus 0.875% or LIBOR plus 1.375%. The advances under the
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.
As of January 27, 2001, there was no outstanding balance on this facility
resulting in an available borrowing capacity of $71.1 million. The available
borrowing capacity on this nonrevolving facility has been reduced due to prior
borrowings which have been repaid in full.
The Term Loan bears interest, at the option of the Company, at the bank's prime
interest rate minus 0.625% or LIBOR plus 1.625%. Principal and interest is
payable in semiannual installments through April 2004. The amount outstanding on
the term loan was $9.8 million at January 27, 2001 and bore interest at the rate
of 8.5%.
The 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 periods presented. At
January 27, 2001, the Company was in compliance with all financial covenants and
conditions.
All obligations under the amended credit agreement are unconditionally
guaranteed by the Company's subsidiaries.
In addition to the borrowings under the 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 April 2004.
Interest costs incurred on notes payable, all of which were expensed during the
three months ended January 27, 2001 and January 29, 2000 were $218,141 and
$256,961, respectively. Interest costs for the six months ended January 27, 2001
and January 29, 2000 were $480,299 and $465,728, respectively.
The interest rates on notes payable under the bank credit agreement are at
current rates and, therefore, the carrying amount approximates fair value.
9. COMMITMENTS AND CONTINGENCIES
The federal employment tax returns for one of the Company's subsidiaries are
currently being audited by the Internal Revenue Service ("IRS"). As a result of
the audit, the Company received an examination report from the IRS in October
1999 proposing a $6.1 million tax deficiency. At issue, according to the
examination report, is the taxpayer's payment of certain employee allowances for
the years 1995 through 1997 without reporting such payment as wages on its
employees' W-2 forms. The Company intends to vigorously defend its position in
this matter and believes it has a number of legal defenses available to it,
which could reduce the proposed tax deficiency, although there can be no
assurance in this regard. The Company believes that the ultimate disposition of
this matter will not have a material adverse effect on its consolidated
financial statements.
In the normal course of business, certain subsidiaries of the Company have
pending and unasserted claims. It is the opinion of the Company's management,
based on the information available at this time, that these claims will not have
a material adverse impact on the Company's consolidated financial statements.
In the normal course of business, the Company enters into employment agreements
with certain members of the Company's executive management. It is the opinion of
the Company's management based on the information available at this time, that
these agreements will not have a material adverse impact on the Company's
consolidated financial statements.
10. SEGMENT INFORMATION
The Company operates in one reportable segment as a specialty contractor. The
Company provides engineering, placement and maintenance of aerial, underground,
and buried fiber-optic, coaxial and copper cable systems owned by local and long
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distance communications carriers, and cable television multiple system
operators. Additionally, the Company provides similar services related to the
installation of integrated voice, data, and video local and wide area networks
within office buildings and similar structures and also provides underground
locating services to various utilities and provides construction and maintenance
services to electrical utilities. Each of these services is provided by various
Company subsidiaries which provide management with monthly financial statements.
All of the Company's subsidiaries have been aggregated into one reporting
segment due to their similar customer bases, products and production methods,
and distribution methods. The following table presents information regarding
annual contract revenues by type of customer:
FOR THE THREE MONTHS ENDED
------------------------------------
JANUARY 27, JANUARY 29,
2001 2000
------------ ------------
Telecommunications $183,291,798 $162,577,091
Electrical utilities 3,691,257 6,437,056
Various customers - Utility line locating 8,782,259 8,198,334
------------ ------------
Total contract revenues $195,765,314 $177,212,481
============ ============
FOR THE SIX MONTHS ENDED
------------------------------------
JANUARY 27, JANUARY 29,
2001 2000
------------ ------------
Telecommunications $403,892,323 $321,895,917
Electrical utilities 7,879,975 13,848,475
Various customers - Utility line locating 18,683,437 18,955,201
------------ ------------
Total contract revenues $430,455,735 $354,699,593
============ ============
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ITEM 2. 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.
In March 2000, the Company acquired Niels Fugal Sons Company ("NFS") in a
transaction accounted for as a pooling-of-interests. Due to the
pooling-of-interest, the condensed consolidated financial statements and related
notes, included elsewhere in this Form 10-Q, have been restated to include the
operations of NFS for all periods presented.
Results Of Operations
The following table sets forth, as a percentage of contract revenues earned,
certain items in the Company's Condensed Consolidated Statements of Operations
for the periods indicated:
FOR THE THREE MONTHS ENDED
----------------------------
JANUARY 27, JANUARY 29,
2001 2000
----------- -----------
Contract revenues earned 100.0% 100.0%
Expenses:
Cost of earned revenues, excluding depreciation 75.2 74.3
General and administrative 9.3 8.7
Depreciation and amortization 5.0 4.2
------ ------
Total 89.5 87.2
Interest income, net 0.6 0.5
Other income, net 0.3 0.2
------ ------
Income before income taxes 11.4 13.5
------ ------
Provision for income taxes 4.6 5.4
------ ------
Net Income 6.8% 8.1%
====== ======
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FOR THE SIX MONTHS ENDED
------------------------------
JANUARY 27, JANUARY 29,
2001 2000
----------- ------------
Contract revenues earned 100.0% 100.0%
Expenses:
Cost of earned revenues, excluding depreciation 74.4 74.4
General and administrative 8.4 8.5
Depreciation and amortization 4.4 4.2
------ ------
Total 87.2 87.1
------ ------
Interest income, net 0.6 0.4
Other income, net 0.2 0.2
------ ------
Income before income taxes 13.6 13.5
------ ------
Provision for income taxes 5.5 5.4
------ ------
Net Income 8.1% 8.1%
====== ======
REVENUES. Contract revenues increased $18.6 million, or 10.5%, to $195.8 million
in the quarter ending January 27, 2001 from $177.2 million in the quarter ended
January 29, 2000. Of this increase, $20.7 million was attributable to specialty
contracting services provided to telecommunications companies, an increase of
$0.6 million was attributable to underground utility locating services provided
to various utilities, and a decrease of $2.7 million was attributable to
construction and maintenance services provided to electrical utilities.
During the quarter ended January 27, 2001, the Company recognized $183.3 of
contract revenues from telecommunications services as compared to $162.6 million
for the quarter ended January 29, 2000, an increase of 12.7%. The increase in
the Company's telecommunication's service revenue is primarily from acquisitions
that were consummated subsequent to January 29, 2000 and acquisitions that were
not included for the entire quarter ended January 29, 2000. Excluding the effect
of these acquisitions the Company's revenues from telecommunications services
grew by 2.9%. Results during the current quarter were impacted by lower than
expected demand from several cable customers. The Company is unable to predict
when demand from cable customers will pick up, but expects that this condition
will continue throughout the following quarter. The Company recognized contract
revenues of $3.7 million from electric construction and maintenance services in
the quarter ended January 27, 2001 as compared to $6.4 million in the quarter
ended January 29, 2000. The Company recognized contract revenues of $8.8 million
from underground utility locating services in the quarter ended January 27, 2001
as compared to $8.2 million in the quarter ended January 29, 2000. Acquisitions
subsequent to January 29, 2000 contributed $11.3 million of contract revenues
during the quarter ended January 27, 2001, primarily in contract revenues from
telecommunications services.
Contract revenues from multi-year master service agreements and other long-term
agreements represented 78.8% of total contract revenues in the quarter ended
January 27, 2001 as compared to 76.7% in the quarter ended January 29, 2000, of
which contract revenues from multi-year master service agreements represented
49.8% of total contract revenues in the quarter ended January 27, 2001 as
compared to 48.6% in the quarter ended January 29, 2000.
Contract revenues increased $75.8 million, or 21.4%, to $430.5 million in the
six months ending January 27, 2001 from $354.7 million in the six months ended
January 29, 2000. Of this increase, $82.0 million was attributable to specialty
contracting services provided to telecommunications companies, a decrease of
$0.3 million was attributable to underground utility locating services provided
to various utilities, and a decrease of $5.9 million was attributable to
construction and maintenance services provided to electrical utilities.
During the six months ended January 27, 2001, the Company recognized $403.9 of
contract revenues from telecommunications services as compared to $321.9 million
for the six months ended January 29, 2000. The increase in the Company's
telecommunications service revenues primarily occurred during the first three
months of the six-month period. Revenues for the second three months were up
2.9% from the prior year when the effects of acquisitions are removed. The
Company recognized contract revenues of $7.9 million from electric construction
and maintenance services in the six months ended January 27, 2001 as compared to
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$13.8 million in the six months ended January 29, 2000. The Company recognized
contract revenues of $18.7 million from underground utility locating services in
the six months ended January 27, 2001 as compared to $19.0 million in the six
months ended January 29, 2000. Acquisitions subsequent to January 29, 2000
contributed $15.2 million of contract revenues during the six months ended
January 27, 2001, primarily in contract revenues from telecommunications
services.
Contract revenues from multi-year master service agreements and other long-term
agreements represented 75.1% of total contract revenues in the six months ended
January 27, 2001 as compared to 76.3% in the six months ended January 29, 2000,
of which contract revenues from multi-year master service agreements represented
45.7% of total contract revenues in the six months ended January 27, 2001 as
compared to 46.0% in the six months ended January 29, 2000.
COSTS OF EARNED REVENUES. Costs of earned revenues increased $15.5 million to
$147.2 million in the quarter ended January 27, 2001 from $131.7 million in the
quarter ended January 29, 2000, and increased as a percentage of contract
revenues to 75.2% from 74.3%. Direct labor and equipment costs increased
slightly as a percentage of contract revenues while direct materials and
subcontractor costs declined slightly as a percentage of contract revenues..
Costs of earned revenues increased $56.4 million to $320.2 million in the six
months ended January 27, 2001 from $263.8 million in the six months ended
January 29, 2000, and remained the same as a percentage of contract revenues at
74.4%. Direct labor and equipment costs declined slightly as a
percentage of contract revenues as a result of improved productivity and the
utilization of more modern equipment.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased $2.8 million to $18.2 million in the quarter ended January 27, 2001
from $15.3 million in the quarter ended January 29, 2000. The increase in
general and administrative expenses for the quarter ended January 27, 2001, as
compared to the quarter ended January 29, 2000, was primarily attributable to
increases in salaries, employee benefits, and payroll taxes of $2.6 million and
other general and administrative expense of $0.4 million. General and
administrative expenses increased as a percentage of contract revenues to 9.3%
from 8.7% in the quarter ended January 27, 2001 as compared to the quarter ended
January 29, 2000.
General and administrative expenses increased $6.1 million to $36.3 million in
the six months ended January 27, 2001 from $30.2 million in the six months ended
January 29, 2000. The increase in general and administrative expenses for the
six months ended January 27, 2001, as compared to the six months ended January
29, 2000, was primarily attributable to increases in salaries, employee
benefits, and payroll taxes of $4.8 million and other general and administrative
expense of $0.9 million. General and administrative expenses decreased as a
percentage of contract revenues to 8.4% from 8.5% in the six months ended
January 27, 2001 as compared to the six months ended January 29, 2000.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased $2.5
million to $9.9 million in the quarter ending January 27, 2001 as compared to
$7.4 million in the quarter ended January 29, 2000, and increased as a
percentage of contract revenues to 5.0% from 4.2%. The $2.5 million increase
reflects the depreciation of additional capital expenditures incurred in the
ordinary course of business and amortization of goodwill related to acquisitions
made in 2001 and 2000, respectively.
Depreciation and amortization increased $4.0 million to $19.0 million in the six
months ending January 27, 2001 as compared to $15.0 million in the six months
ended January 29, 2000, and increased as a percentage of contract revenues to
4.4% from 4.2%. The $4.0 million increase reflects the depreciation of
additional capital expenditures incurred in the ordinary course of business and
amortization of goodwill related to acquisitions made in 2001 and 2000,
respectively.
INTEREST INCOME, NET. Interest income, net increased $0.3 million to $1.1
million in the quarter ended January 27, 2001 from $0.8 million in the quarter
ended January 29, 2000. The increase was primarily due to increased cash and
cash equivalents.
Interest income, net increased $0.8 million to $2.4 million in the six months
ended January 27, 2001 from $1.6 million in the six months ended January 29,
2000. The increase was primarily due to increased cash and equivalents.
INCOME TAXES. The provision for income taxes was $9.1 million in the three
months ended January 27, 2001 as compared to $9.5 million in the same period
last year. The Company's effective tax rate was 41.0% in the three months ended
January 27, 2001 as compared to 39.7% in the same period last year. The
effective tax rate differs from the statutory rate due to state income taxes,
the amortization of intangible assets that do not provide a tax benefit, and
other non-deductible expenses for tax purposes.
The provision for income taxes was $23.5 million in the six months ended January
27, 2001 as compared to $19.0 million in the same period last year. The
Company's effective tax rate was 40.4% in the six months ended January 27, 2001
as compared to 39.6% in the same period last year. The effective tax rate
differs from the statutory rate due to state income taxes, the amortization of
intangible assets that do not provide a tax benefit, and other non-deductible
expenses for tax purposes.
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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 and capital leases, bank borrowings and internal
cash flow. The Company's sources of cash have historically been from operating
activities, equity offerings, bank borrowings, and from proceeds arising from
the sale of idle and surplus equipment and real property.
To the extent that the Company seeks to grow by acquisitions that involve
consideration other than Company stock, the Company's capital requirements may
increase, although the Company is not currently subject to any commitments or
obligations with respect to any acquisitions.
For the six months ended January 27, 2001, net cash provided by operating
activities was $64.6 million compared to $30.3 million for the six months ended
January 29, 2000. Net income and non-cash charges are the primary sources of
operating cash flow. Working capital items generated $11.2 million of operating
cash flow for the six-month period ended January 27, 2001 principally through a
decrease in accounts receivable, net and unbilled revenues, net offset by a
decrease in accounts payable and other accrued liabilities.
In the six months ended January 27, 2001, net cash used in investing activities
was $86.2 million as compared to $47.3 million for the same period last year.
For the six months ended January 27, 2001, capital expenditures of $27.7 million
were for the normal replacement of equipment and purchases for the start up of
certain long-term contracts.
In the six months ended January 27, 2001, net cash utilized by financing
activities was $1.9 million, which was primarily attributable to the proceeds
from the exercise of stock options net of principal payments on long-term notes.
On April 27, 1999, the Company signed an amendment to its bank credit agreement
increasing the total facility to $175.3 million and extending the facility's
maturity to April 2002. The agreement was further amended on December 12, 2000
to reduce the interest rates, eliminate the collateral requirement and
streamline certain administrative covenants. The bank credit agreement provides
for (i) a $17.5 million standby letter of credit facility, (ii) a $50.0 million
revolving working capital facility, (iii) a $12.8 million five-year term loan,
and (iv) a $95.0 million equipment acquisition and small business purchase
facility. The Company is required to pay an annual non-utilization fee equal to
0.15% of the unused portion of the revolving working capital and the equipment
acquisition and small business purchase facilities. In addition, the Company
pays annual agent and facility commitment fees of $15,000 and $135,000,
respectively.
The Company had total outstanding standby letters of credit of $14.0 million at
January 27, 2001, substantially all of which are letters of credit issued to the
Company's insurance administrators as part of its self-insurance program.
The revolving working capital facility bears interest, at the option of the
company, at the bank's prime interest rate minus 1.25% or LIBOR plus 1.125%. As
of January 27, 2001, there was no outstanding balance on this facility resulting
in an available borrowing capacity of $50.0 million.
The outstanding loans under the equipment acquisition and small business
purchase facility bear interest, at the option of the Company, at the bank's
prime interest rate minus 0.875% or LIBOR plus 1.375%. The advances under the
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 quarterly installments through February 2001.
There were no amounts outstanding on the equipment acquisition and small
business purchase facility at January 27, 2001, resulting in an available
borrowing capacity of $71.1 million. The available borrowing capacity on this
nonrevolving facility has been reduced due to prior borrowings which have been
repaid in full.
The Term Loan bears interest, at the option of the Company, at the bank's prime
interest rate minus 0.625% or LIBOR plus 1.625%. Principal and interest is
payable in semiannual installments through April 2004. The amount outstanding on
the term loan was $9.8 million at January 27, 2001 and bore interest at the rate
of 8.5%.
The 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. No cash dividends were paid during the periods presented. At January
27, 2001, the Company was in compliance with all covenants and conditions under
the credit agreement.
The Company believes 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.
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Special Note Concerning Forward-Looking Statements
This Quarterly Report on Form 10-Q, 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 acquisitions, 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.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company considered the provision of Financial Reporting Release No. 48,
"Disclosure of Accounting Policies for Derivative Financial Instruments and
Derivative Commodity Instruments, and disclosure of Quantitative and Qualitative
Information about Market Risk Inherent in Derivative Financial Instruments,
Other Financial Instruments and Derivative Commodity Instruments." The Company
had no significant holdings of derivative financial or commodity instruments at
January 27, 2001. A review of the Company's other financial instruments and risk
exposures at that date revealed that the Company had exposure to interest rate
risk. At January 27, 2000, the Company assessed the potential effect of this
risk and concluded that near-term changes in interest rates should not
materially effect the Company's financial position, results of operations, or
cash flows.
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PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On December 18, 2000, the Company issued 15,518 and 312,312 shares,
respectively, of the Company's common stock in connection with the acquisition
of SEI and PTP. These shares were issued in a manner not involving a public
offering and therefore did not require registration under the Securities Act of
1933, as amended, pursuant to Section 4(2) thereof.
On January 8, 2001, the Company issued 76,471 shares of the Company's common
stock in connection with the acquisition of SCI. These shares were issued in a
manner not involving a public offering and therefore did not require
registration under the Securities Act of 1933, as amended, pursuant to Section
4(2) thereof
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
An annual meeting of shareholders of the Company was held on November 28, 2000
to consider and take action on the election of two directors.
The Company's nominee, Mr. Steven E. Nielsen, was elected. Mr. Nielsen received
26,897,065 votes for and votes abstained totaled 8,597,532. The Company's
nominee, Mr. Ronald P. Younkin, was elected. Mr. Younkin received 35,285,668
votes for and votes abstained totaled 208,929. The directors whose terms
continue after the annual meeting are Messrs. Louis W. Adams, Jr., Thomas G.
Baxter, and Joseph M. Shell.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
(a) Exhibits
Exhibits furnished pursuant to the requirements of Form 10-Q:
NUMBER DESCRIPTION
- ------ -----------
(10) Amendment two to second amended and restated credit facility
agreement dated as of April 27, 1999, dated December 12, 2000
(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.
(b) Reports On Form 8-K
The following reports on Form 8-K were filed on behalf of the Registrant during
the quarter ended January 27, 2001:
(i) The press release announcing the execution of a stock purchase
agreement with the stockholders of Point to Point
Communications, Inc.
Item Reported: 5
Date Filed: November 30, 2000
(ii) The press release announcing the completion of the Point to
Point Communications, Inc. acquisition.
Item Reported: 5
Date Filed: December 21, 2000
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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 thereunto duly authorized.
DYCOM INDUSTRIES, INC.
Registrant
Date: March 13, 2001 /s/ Steven E. Nielsen
-----------------------------------------
Steven E. Nielsen
President and Chief Executive Officer
Date: March 13, 2001 /s/ Richard L. Dunn
-----------------------------------------
Richard L. Dunn
Senior Vice President, Chief Financial
Officer and Principal Accounting Officer
23