1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 28, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-5423
DYCOM INDUSTRIES, INC.
---------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 59-1277135
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(State of incorporation) (I.R.S. 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 report(s), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding as of June 8, 2001
Common Stock, par value $0.33 1/3 42,936,607
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DYCOM INDUSTRIES, INC.
INDEX
Page No.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets- 3
April 28, 2001 and July 29, 2000
Condensed Consolidated Statements of 4
Operations for the Three Months Ended
April 28, 2001 and April 29, 2000
Condensed Consolidated Statements of 5
Operations for the Nine Months Ended
April 28, 2001 and April 29, 2000
Condensed Consolidated Statements of 6-7
Cash Flows for the Nine Months Ended
April 28, 2001 and April 29, 2000
Notes to Condensed Consolidated 8-16
Financial Statements
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 6. Exhibits and Reports on Form 8-K 22
SIGNATURES 23
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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
April 28, July 29,
2001 2000
------------ ------------
CURRENT ASSETS:
Cash and equivalents $107,038,804 $105,701,950
Accounts receivable, net 122,710,100 144,291,699
Costs and estimated earnings in excess of billings 45,398,530 52,301,022
Deferred tax assets, net 7,036,482 6,039,264
Inventories 9,864,027 14,563,649
Other current assets 6,665,853 1,530,972
------------ ------------
Total current assets 298,713,796 324,428,556
------------ ------------
PROPERTY AND EQUIPMENT, net 116,171,478 101,092,862
------------ ------------
OTHER ASSETS:
Intangible assets, net 156,088,631 85,783,092
Other 1,675,245 2,695,084
------------ ------------
Total other assets 157,763,876 88,478,176
------------ ------------
TOTAL $572,649,150 $513,999,594
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 27,907,880 $ 42,922,557
Notes payable 2,473,084 2,594,413
Billings in excess of costs and estimated earnings 1,116,837 6,405
Accrued self-insured claims 5,624,466 4,232,243
Income taxes payable 7,529,894 5,916,000
Customer advances 11,583,669 11,762,547
Other accrued liabilities 39,328,444 47,324,948
------------ ------------
Total current liabilities 95,564,274 114,759,113
------------ ------------
NOTES PAYABLE 6,847,008 9,106,201
ACCRUED SELF-INSURED CLAIMS 7,250,448 5,554,417
DEFERRED TAX LIABILITIES, net 5,676,428 4,256,781
OTHER LIABILITIES 2,287,268 2,345,525
------------ ------------
Total liabilities 117,625,426 136,022,037
------------ ------------
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: 42,934,357 and 41,900,516
shares issued and outstanding, respectively 14,311,453 13,966,839
Additional paid-in capital 250,527,851 221,593,083
Retained earnings 190,184,420 142,417,635
------------ ------------
Total stockholders' equity 455,023,724 377,977,557
------------ ------------
TOTAL $572,649,150 $513,999,594
============ ============
See notes to condensed consolidated financial statements - unaudited
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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended
-----------------------------------
April 28, April 29,
2001 2000
------------ -------------
Contract revenues earned $201,610,942 $ 212,260,383
------------ -------------
Expenses:
Costs of earned revenues, excluding depreciation 151,713,580 159,601,096
General and administrative 18,760,181 18,071,442
Depreciation and amortization 10,456,936 7,846,956
------------ -------------
Total 180,930,697 185,519,494
------------ -------------
Interest income, net 1,124,225 907,557
Merger-related expenses -- (2,364,284)
Other income, net 942,427 431,789
------------ -------------
INCOME BEFORE INCOME TAXES 22,746,897 25,715,951
------------ -------------
PROVISION FOR INCOME TAXES:
Current 9,642,515 11,456,615
Deferred 46,716 (237,117)
------------ -------------
Total 9,689,231 11,219,498
------------ -------------
NET INCOME $ 13,057,666 $ 14,496,453
============ =============
EARNINGS PER COMMON SHARE:
Basic $ 0.31 $ 0.35
============ =============
Diluted $ 0.31 $ 0.34
============ =============
SHARES USED IN COMPUTING EARNINGS PER COMMON SHARE:
Basic 42,592,484 41,738,741
============ =============
Diluted 42,700,926 42,579,451
============ =============
See notes to condensed consolidated financial statements - unaudited
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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Nine Months Ended
----------------------------------
April 28, April 29,
2001 2000
------------ -------------
Contract revenues earned $632,066,677 $ 566,959,976
------------ -------------
Expenses:
Costs of earned revenues, excluding depreciation 471,936,154 423,407,440
General and administrative 55,082,257 48,230,166
Depreciation and amortization 29,441,920 22,755,372
------------ -------------
Total 556,460,331 494,392,978
------------ -------------
Interest income, net 3,531,895 2,479,753
Merger-related expenses -- (2,364,284)
Other income, net 1,811,668 971,162
------------ -------------
INCOME BEFORE INCOME TAXES 80,949,909 73,653,629
------------ -------------
PROVISION FOR INCOME TAXES:
Current 33,020,305 30,080,470
Deferred 162,819 131,344
------------ -------------
Total 33,183,124 30,211,814
------------ -------------
NET INCOME $ 47,766,785 $ 43,441,815
============ =============
EARNINGS PER COMMON SHARE:
Basic $ 1.13 $ 1.05
============ =============
Diluted $ 1.12 $ 1.03
============ =============
SHARES USED IN COMPUTING EARNINGS PER COMMON SHARE:
Basic 42,277,784 41,483,255
============ =============
Diluted 42,688,434 42,175,372
============ =============
See notes to condensed consolidated financial statements - unaudited
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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months Ended
------------------------------------
April 28, April 29,
2001 2000
------------- ------------
Increase (Decrease) in Cash and Equivalents from
OPERATING ACTIVITIES:
Net Income $ 47,766,785 $ 43,441,815
Adjustments to reconcile net cash provided by operating activities:
Depreciation and amortization 29,441,920 22,755,372
Gain on disposal of assets (917,012) (625,860)
Realized gain on marketable securities -- (20,724)
Deferred income taxes 162,819 131,344
Change in assets and liabilities:
Accounts receivable, net 39,605,980 (20,586,722)
Unbilled revenues, net 14,108,617 (20,378,887)
Other current assets 3,838,461 (2,965,122)
Other assets 1,346,539 4,236,342
Accounts payable (16,103,566) 11,725,569
Customer advances (178,878) (9,439,353)
Accrued self-insured claims and other liabilities (16,407,808) 8,883,957
Accrued income taxes 5,316,885 (1,121,416)
------------- ------------
Net cash inflow from operating activities 107,980,742 36,036,315
------------- ------------
INVESTING ACTIVITIES:
Capital expenditures (35,333,984) (32,796,303)
Proceeds from sale of assets 2,398,753 2,198,638
Acquisition expenditures, net of cash acquired (70,592,336) (29,619,779)
------------- ------------
Net cash outflow from investing activities (103,527,567) (60,217,444)
------------- ------------
FINANCING ACTIVITIES:
Principal payments on notes payable and bank lines-of-credit (5,329,116) (2,266,617)
Exercise of stock options 2,212,795 2,492,098
------------- ------------
Net cash inflow (outflow) from financing activities (3,116,321) 225,481
------------- ------------
NET CASH INFLOW (OUTFLOW) FROM ALL ACTIVITIES 1,336,854 (23,955,648)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 105,701,950 97,995,283
------------- ------------
CASH AND EQUIVALENTS AT END OF PERIOD $ 107,038,804 $ 74,039,635
============= ============
See notes to condensed consolidated financial statements - unaudited.
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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Unaudited)
For the Nine Months Ended
---------------------------------
April 28, April 29,
2001 2000
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW AND NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Cash paid during the period for:
Interest $ 726,725 $ 705,587
Income taxes 31,569,230 32,398,632
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 nine months ended April 28, 2001, the company acquired all of the
capital stock of Cable Connectors, Inc., Schaumburg Enterprises, Inc., Point to
Point Communications, Inc., Stevens Communications, Inc., and Nichols Holding, Inc.
at a cost of $102.9 million. In conjunction with these acquisitions, assets acquired and
liabilities assumed were as follows:
Fair market value of assets acquired, including goodwill $119,480,455
Consideration paid (including $23.2 million of common stock issued) 102,850,503
------------
Fair market value of liabilities assumed $ 16,629,952
============
During the nine months ended April 29, 2000, the company acquired all of the
capital stock of Lamberts' Cable Splicing Company, C-2 Utility Contractors, Inc.,
Artoff Construction Company, Inc., and K.H. Smith Communications, Inc.
at a cost of $41.9 million. In conjunction with these acquisitions, assets
acquired and liabilities assumed were as follows:
Fair market value of assets acquired, including goodwill $ 44,660,499
Consideration paid (including $10.7 million of common stock issued) 41,948,181
------------
Fair market value of liabilities assumed $ 2,712,318
============
See notes to condensed consolidated financial statements - unaudited.
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1. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Unaudited
The accompanying condensed consolidated balance sheets of Dycom Industries, Inc.
("Dycom" or the "Company") as of April 28, 2001 and July 29, 2000, and the
related condensed consolidated statements of operations for the three and nine
months ended April 28, 2001 and April 29, 2000 and the condensed consolidated
statements of cash flows for the nine months ended April 28, 2001 and April 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 nine months ended April 28, 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"), Artoff Construction Company,
Inc. ("ACC"), and K.H. Smith Communications, Inc. ("KHS"). During fiscal 2001,
the Company acquired Cable Connectors, Inc. ("CAB"), Schaumburg Enterprises,
Inc. ("SEI"), Point to Point Communications, Inc. ("PTP"), Stevens
Communications, Inc. ("SCI"), and Nichols Holding, Inc. ("NHI"). Each of these
transactions was accounted for using the purchase method of accounting. The
Company's results include the results of each of these acquired companies from
their respective acquisition dates until April 28, 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, second, and third
quarters of fiscal 2001, beginning July 30, 2000 and ending April 28, 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 billing" 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
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
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incurred; expenditures that enhance the value of the property or extend its
useful life are capitalized. When assets are sold or retired, the cost and
related accumulated depreciation are removed from the accounts and the resulting
gain or loss is included in income.
INTANGIBLE ASSETS - The excess of the purchase price over the fair market value
of the tangible net assets of acquired businesses (goodwill) is amortized on a
straight-line basis over 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 April 28, 2001 and July 29, 2000, net intangible assets
include $155.8 million and $85.4 million of net goodwill, respectively.
Amortization expense was $1,953,752 and $1,144,107 for the three months ended
April 28, 2001 and April 29, 2000, respectively, and $4,554,875 and $2,943,382
for the nine months ended April 28, 2001 and April 29, 2000, respectively. The
intangible assets are net of accumulated amortization of $11,106,965 at April
28, 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, worker's 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 $7,538,991 and $5,161,379 at April 28, 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 amount.
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
--------------------------------
April 28, April 29,
2001 2000
----------- -----------
Net income available to common stockholders (numerator) $13,057,666 $14,496,453
=========== ===========
Weighted-average number of common shares (denominator) 42,592,484 41,738,741
=========== ===========
Earnings per common share-basic $ 0.31 $ 0.35
=========== ===========
Weighted-average number of common shares 42,592,484 41,738,741
Potential common stock arising from stock options 108,442 840,710
----------- -----------
Total shares (denominator) 42,700,926 42,579,451
=========== ===========
Earnings per common share-diluted $ 0.31 $ 0.34
=========== ===========
For the Nine Months Ended
--------------------------------
April 28, April 29,
2001 2000
----------- -----------
Net income available to common stockholders (numerator) $47,766,785 $43,441,815
=========== ===========
Weighted-average number of common shares (denominator) 42,277,784 41,483,255
=========== ===========
Earnings per common share-basic $ 1.13 $ 1.05
=========== ===========
Weighted-average number of common shares 42,277,784 41,483,255
Potential common stock arising from stock options 410,650 692,117
----------- -----------
Total shares (denominator) 42,688,434 42,175,372
=========== ===========
Earnings per common share-diluted $ 1.12 $ 1.03
=========== ===========
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, Inc. ("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.
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
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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. In April 2001, the Company
acquired Nichols Holding, Inc. ("NHI") for $11.4 million in cash and 437,016
shares of Dycom common stock for an aggregate purchase price of $17.6 million
before various transaction costs.
The Company has recorded the acquisitions of LCS, C-2, ACC, CAB, SEI, PTP, SCI
and NHI 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, SCI and NHI 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, SCI and NHI had occurred on August 1, 1999:
For the Nine Months Ended
----------------------------------
April 28, April 29,
2001 2000
------------ ------------
Total revenues $686,897,223 $642,747,117
Income before income taxes 92,284,273 81,643,664
Net income 54,515,936 48,206,257
Earnings per share:
Basic $ 1.26 $ 1.13
Diluted $ 1.25 $ 1.11
On March 8, 2000, the Company acquired 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.
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 nine month periods ended
April 28, 2001 and April 29, 2000, respectively, are as follows:
Dycom NFS Combined
------------ ----------- ------------
Three month period ended
April 28, 2001
Total revenues $201,610,942 $ -- $201,610,942
Net income $ 13,057,666 $ -- $ 13,057,666
April 29, 2000
Total revenues $193,564,041 $18,696,342 $212,260,383
Net income $ 12,434,970 $ 2,061,483 $ 14,496,453
Nine month period ended
April 28, 2001
Total revenues $632,066,677 $ -- $632,066,677
Net income $ 47,766,785 $ -- $ 47,766,785
April 29, 2000
Total revenues $512,849,582 $54,110,394 $566,959,976
Net income $ 36,894,761 $ 6,547,054 $ 43,441,815
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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:
April 28, July 29,
2001 2000
------------ ------------
Contract billings $112,229,558 $134,740,946
Retainage 11,431,035 11,835,425
Other receivables 2,540,005 1,835,560
------------ ------------
Total 126,200,598 148,411,931
Less allowance for doubtful accounts 3,490,498 4,120,232
------------ ------------
Accounts receivable, net $122,710,100 $144,291,699
============ ============
For the periods indicated, the allowance for doubtful accounts changed as
follows:
For the Three Months Ended
---------------------------------
April 28, April 29,
2001 2000
----------- -----------
Allowance for doubtful accounts at 1/27/2001 and 1/29/2000, respectively $ 4,030,186 $ 3,423,619
Allowance for doubtful account balances from acquisitions -- --
Additions (Reductions) charged to (against) bad debt expense (109,481) 1,296,208
Amounts charged against the allowance, net of recoveries (430,207) (13,911)
----------- -----------
Allowance for doubtful accounts $ 3,490,498 $ 4,705,916
=========== ===========
For the Nine Months Ended
---------------------------------
April 28, April 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 (46,171) 957,062
Amounts charged against the allowance, net of recoveries (1,183,563) (380,426)
----------- -----------
Allowance for doubtful accounts $ 3,490,498 $ 4,705,916
=========== ===========
As of April 28, 2001 and July 29, 2000, the Company expected to collect all of
its retainage balances within twelve months.
12
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6. COSTS AND ESTIMATED EARNINGS ON CONTRACTS IN PROGRESS
The accompanying condensed consolidated balance sheets include costs and
estimated earnings on contracts in progress, net of progress billings as
follows:
April 28, July 29,
2001 2000
----------- -----------
Costs incurred on contracts in progress $35,174,072 $48,037,774
Estimated earnings thereon 11,256,497 13,855,362
----------- -----------
46,430,569 61,893,136
Less billings to date 2,148,876 9,598,519
----------- -----------
$44,281,693 $52,294,617
=========== ===========
Included in the accompanying consolidated
balance sheets under the captions:
Costs and estimated earnings in excess of billings $45,398,530 $52,301,022
Billings in excess of costs and estimated earnings 1,116,837 6,405
----------- -----------
$44,281,693 $52,294,617
=========== ===========
As stated in Note 2, 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:
April 28, July 29,
2001 2000
------------ ------------
Land $ 3,410,467 $ 3,373,037
Buildings 6,471,496 6,330,683
Leasehold improvements 1,781,344 1,574,013
Vehicles 118,091,371 102,489,730
Equipment and machinery 82,749,599 70,501,903
Furniture and fixtures 13,251,325 10,401,809
------------ ------------
Total 225,755,602 194,671,175
Less accumulated depreciation 109,584,124 93,578,313
------------ ------------
Property and equipment, net $116,171,478 $101,092,862
============ ============
Maintenance and repairs of property and equipment amounted to $2,839,420 and
$3,445,748 for the three months ended April 28, 2001 and April 29, 2000,
respectively. Maintenance and repairs of property and equipment amounted to
$9,918,677 and $8,679,774 for the nine months ended April 28, 2001 and April 29,
2000, respectively.
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14
8. NOTES PAYABLE
Notes payable are summarized by type of borrowings as follows:
April 28, July 29,
2001 2000
---------- -----------
Bank Credit Agreement - Term Loan $8,750,000 $10,750,000
Capital lease obligations 8,719 458
Equipment loans 561,373 950,156
---------- -----------
Total 9,320,092 11,700,614
Less current portion 2,473,084 2,594,413
---------- -----------
Notes payable - non-current $6,847,008 $ 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
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
April 28, 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 April 28, 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 May 2003. As of
April 28, 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 $8.8 million at April 28, 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
April 28, 2001, the Company was in compliance with all 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 2005.
Interest costs incurred on notes payable, all of which were expensed during the
three months ended April 28, 2001 and April 29, 2000, were $208,667 and
$309,868, respectively. Interest costs for the nine months ended April 28, 2001
and April 29, 2000 were $688,966 and $775,596, respectively.
14
15
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 on
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. SHAREHOLDERS' RIGHTS PLAN
On April 4, 2001, the Board of Directors of the Company adopted a shareholders'
rights plan (the "Rights Plan") pursuant to which a dividend consisting of one
preferred stock purchase right (a "Right") was distributed for each outstanding
share of the Company's common stock. The dividend was payable to the
shareholders of record on April 14, 2001. Each Right entitles the holder to
purchase from the Company one ten-thousandth of a share of Series A preferred
stock at a price of $95.00, subject to adjustment. The rights become exercisable
only if a person or group acquires beneficial ownership of 15% or more of the
Company's outstanding common stock or commences a tender or exchange offer which
would result in a person or group beneficially owning 15% or more of the
Company's outstanding common stock. The Rights Plan is designed to deter
coercive takeover tactics and to prevent an acquirer from gaining control of the
Company without offering fair value to the Company's stockholder. When
exercisable, the Rights would entitle the holders (other than the acquirer) to
purchase, at the Right's then-current exercise price, units of the Company's
Series A preferred stock having a market value equal to twice the then-current
exercise price. A complete description of the Rights Plan is set forth in the
Current Report on Form 8-K of the Company filed on April 4, 2001.
The Board of Directors, pursuant to the terms of the previously existing
shareholders' rights plan, declared the rights issued thereunder to be null and
void on April 14, 2001. The existing plan was scheduled to expire on June 1,
2002.
11. 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
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:
15
16
For the Three Months Ended
----------------------------------
April 28, April 29,
2001 2000
------------ ------------
Telecommunications $184,095,698 $197,399,270
Electrical utilities 3,551,187 5,261,919
Various customers - Utility line locating 13,964,057 9,599,194
------------ ------------
Total contract revenues $201,610,942 $212,260,383
============ ============
For the Nine Months Ended
----------------------------------
April 28, April 29,
2001 2000
------------ ------------
Telecommunications $587,988,021 $519,295,187
Electrical utilities 11,431,162 19,110,394
Various customers - Utility line locating 32,647,494 28,554,395
------------ ------------
Total contract revenues $632,066,677 $566,959,976
============ ============
12. SUBSEQUENT EVENTS
On June 4, 2001, the Company announced that the Board of Directors had
authorized a program to repurchase up to $25 million worth of the Company's
common stock over an eighteen month period. Any such repurchases will be made in
the open market or in privately negotiated transactions from time to time,
subject to market conditions, applicable legal requirements and other factors.
This plan does not obligate the Company to acquire any particular amount of its
common stock, and the plan may be suspended at any time at the Company's
discretion. No shares have been repurchased as of June 11, 2001.
16
17
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-interests, 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
--------------------------
April 28, April 29,
2001 2000
--------- ---------
Contract revenues earned 100.0% 100.0%
Expenses:
Cost of earned revenues, excluding depreciation 75.3 75.2
General and administrative 9.3 8.5
Depreciation and amortization 5.2 3.7
------ ------
Total 89.8 87.4
Interest income, net 0.6 0.4
Merger-related expenses 0.0 (1.1)
Other income, net 0.5 0.2
------ ------
Income before income taxes 11.3 12.1
------ ------
Provision for income taxes 4.8 5.3
------ ------
Net Income 6.5% 6.8%
====== ======
17
18
For the Nine Months Ended
-----------------------------------
April 28, April 29,
2001 2000
---------- ----------
Contract revenues earned 100.0% 100.0%
Expenses:
Cost of earned revenues, excluding depreciation 74.7 74.7
General and administrative 8.7 8.5
Depreciation and amortization 4.7 4.0
---------- ----------
Total 88.1 87.2
---------- ----------
Interest income, net 0.6 0.4
Merger-related expenses 0.0 (0.4)
Other income, net 0.3 0.2
---------- ----------
Income before income taxes 12.8 13.0
---------- ----------
Provision for income taxes 5.2 5.3
---------- ----------
Net Income 7.6% 7.7%
========== ==========
REVENUES. Contract revenues decreased $10.6 million, or 5.0% to $201.6 million
in the quarter ending April 28, 2001 from $212.3 million in the quarter ended
April 29, 2000. Of this decrease, $13.3 million was attributable to specialty
contracting services provided to telecommunications companies and $1.7 million
was attributable to construction and maintenance services provided to electrical
utilities, offset by an increase of $4.4 million to underground utility locating
services provided to various utilities.
During the quarter ended April 28, 2001, the Company recognized $184 million of
contract revenues from telecommunications services as compared to $197.4 million
for the quarter ended April 29, 2000, a decrease of 6.7%. The decrease in the
Company's telecommunication's service revenue is primarily from lower than
expected demand from several cable customers and emerging telecommunications
providers. The Company is unable to predict when demand from these customers
will pick up, but expects that this condition will continue throughout the
following quarter. The Company recognized contract revenues of $3.6 million from
electric construction and maintenance services in the quarter ended April 28,
2001 as compared to $5.3 million in the quarter ended April 29, 2000. The
Company recognized contract revenues of $14.0 million from underground utility
locating services in the quarter ended April 28, 2001 as compared to $9.6
million in the quarter ended April 29, 2000. Acquisitions subsequent to April
29, 2000 contributed $22.6 million or 11.2% of contract revenues during the
quarter ended April 28, 2001, primarily in contract revenues from
telecommunications services.
Contract revenues from multi-year master service agreements and other long-term
agreements represented 88.4% of total contract revenues in the quarter ended
April 28, 2001 as compared to 79.8% in the quarter ended April 29, 2000, of
which contract revenues from multi-year master service agreements represented
58.9% of total contract revenues in the quarter ended April 28, 2001 as compared
to 52.0% in the quarter ended April 29, 2000.
Contract revenues increased $65.1 million, or 11.5% to $632.1 million in the
nine months ending April 28, 2001 from $567.0 million in the nine months ended
April 29, 2000. Of this increase, $68.7 million was attributable to specialty
contracting services provided to telecommunications companies, an increase of
$4.1 million was attributable to underground utility locating services provided
to various utilities, and a decrease of $7.7 million was attributable to
construction and maintenance services provided to electrical utilities.
18
19
During the nine months ended April 28, 2001, the Company recognized $588.0
million of contract revenues from telecommunications services as compared to
$519.3 million for the nine months ended April 29, 2000. The increase in the
Company's telecommunications service revenues primarily occurred during the
first three months of fiscal 2001. Revenues for the second three months were up
2.9% from the prior year when the effects of acquisitions are removed. Revenues
for the third three months were down 17.1% from the prior year when the effects
of acquisitions are removed. The Company recognized contract revenues of $11.4
million from electric construction and maintenance services in the nine months
ended April 28, 2001 as compared to $19.1 million in the nine months ended April
29, 2000. The Company recognized contract revenues of $32.6 million from
underground utility locating services in the nine months ended April 28, 2001 as
compared to $28.5 million in the nine months ended April 29, 2000. Acquisitions
subsequent to April 29, 2000 contributed $36.3 million or 5.7% of contract
revenues during the nine months ended April 28, 2001, primarily in contract
revenues from telecommunications services.
Contract revenues from multi-year master service agreements and other long-term
agreements represented 79.4% of total contract revenues in the nine months ended
April 28, 2001 as compared to 77.6% in the nine months ended April 29, 2000, of
which contract revenues from multi-year master service agreements represented
49.9% of total contract revenues in the nine months ended April 28, 2001 as
compared to 48.3% in the nine months ended April 29, 2000.
COST OF EARNED REVENUES. Costs of earned revenues decreased $7.9 million to
$151.7 million in the quarter ended April 28, 2001 from $159.6 million in the
quarter ended April 29, 2000, and increased slightly as a percentage of contract
revenues to 75.3% from 75.2%. Subcontractor costs and direct materials decreased
as a percentage of contract revenues while direct labor and other direct costs
increased slightly as a percentage of contract revenues.
Costs of earned revenues increased $48.5 million to $471.9 million in the nine
months ended April 28, 2001 from $423.4 million in the nine months ended April
29, 2000, and remained the same as a percentage of contract revenues at 74.7%.
Other direct costs and direct materials decreased as percentage of contract
revenues while direct labor and direct materials increased as a percentage of
contract costs.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased $0.7 million to $18.8 million in the quarter ended April 28, 2001 from
$18.1 million in the quarter ended April 29, 2000. The increase in general and
administrative expenses for the quarter ended April 28, 2001, as compared to the
quarter ended April 29, 2000, was primarily attributable to increase in salaries
and payroll taxes of $1.7 million, offset by a decrease in the provision for
doubtful accounts of $0.9. General and administrative expenses increased as a
percentage of contract revenues to 9.3% from 8.5% in the quarter ended April 28,
2001 as compared to the quarter ended April 29, 2000.
General and administrative expenses increased $6.9 million to $55.1 million in
the nine months ended April 28, 2001 from $48.2 million in the nine months ended
April 29, 2000. The increase in general and administrative expenses for the nine
months ended April 28, 2001, as compared to the nine months ended April 29,
2000, was primarily attributable to increases in salaries, employee benefits,
and payroll taxes of $6.4 million and other general and administrative expense
of $0.5 million. General and administrative expenses increased as a percentage
of contract revenues to 8.7% from 8.5% in the nine months ended April 28, 2001
as compared to the nine months ended April 29, 2000.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased $2.7
million to $10.5 million in the quarter ended April 28, 2001 as compared to $7.8
million in the quarter ended April 29, 2000, and increased as a percentage of
contract revenues to 5.2% from 3.7%. The $2.7 million increase reflects the
depreciation of additional capital expenditures incurred in the ordinary course
of business and amortization of goodwill and depreciation related to
acquisitions made in 2001 and 2000.
Depreciation and amortization increased $6.6 million to $29.4 million in the
nine months ended April 28, 2001 as compared to $22.8 million in the nine months
ended April 29, 2000, and increased as a percentage of contract revenues to 4.7%
from 4.0%. The $6.6 million increase reflects the depreciation of additional
capital expenditures incurred in the ordinary course of business and
amortization of goodwill and depreciation related to acquisitions made in 2001
and 2000.
INTEREST INCOME, NET. Interest income, net increased $0.2 million to $1.1
million in the quarter ended April 28, 2001 from $0.9 million in the quarter
ended April 29, 2000. The increase was primarily due to increased cash and cash
equivalents.
Interest income, net increased $1.0 million to $3.5 million in the nine months
ended April 28, 2001 from $2.5 million in the nine months ended April 29, 2000.
The increase was primarily due to increased cash and equivalents.
INCOME TAXES. The provision for income taxes was $9.7 million in the three
months ended April 28, 2001 as compared to $11.2 million in the same period last
year. The Company's effective tax rate was 42.6% in the three months ended April
28, 2001 as compared to 43.6% 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.
19
20
The provision for income taxes was $33.2 million in the nine months ended April
28, 2001 as compared to $30.2 million in the same period last year. The
Company's effective tax rate was 41.0% in the nine months ended April 28, 2001
and April 29, 2000. 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.
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 nine months ended April 28, 2001, net cash provided by operating
activities was $108.0 million compared to $36.0 million for the nine months
ended April 29, 2000. Net income and non-cash charges are the primary sources of
operating cash flow. Working capital items generated $28.5 million of operating
cash flow for the nine-month period ended April 28, 2001 principally through
decreases in accounts receivable, net and unbilled revenues, net offset by a
decrease in accounts payable and other accrued liabilities.
In the nine months ended April 28, 2001, net cash used in investing activities
was $103.5 million as compared to $60.2 million for the same period last year.
For the nine months ended April 28, 2001, capital expenditures of $35.3 million
were for the normal replacement of equipment and purchases for the start up of
certain long-term contracts. For the nine months ended April 28, 2001,
acquisition expenses net of cash acquired was $70.6 million.
In the nine months ended April 28, 2001, net cash utilized by financing
activities was $3.1 million, which was primarily attributable to principal
payments on long-term notes net of proceeds from the exercise of stock options.
For the nine months ended April 29, 2000, net cash generated by financing
activities was $0.2 million, which was attributed to proceeds received 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
April 28, 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 April 28, 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 loan is payable in quarterly installments through May 2003. There
were no amounts outstanding on the equipment acquisition and small business
purchase facility at April 28, 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 $8.8 million at April 28, 2001 and bore interest at the rate
of 8.5%.
20
21
The bank credit agreement requires the Company to maintain certain financial
covenants and conditions, as well as restricts 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 April
28, 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.
On June 4, 2001, the Company announced that the Board of Directors had
authorized a program to repurchase up to $25 million worth of the Company's
common stock over an eighteen month period. Any such repurchases will be made in
the open market or in privately negotiated transactions from time to time,
subject to market conditions, applicable legal requirements and other factors.
This plan does not obligate the Company to acquire any particular amount of its
common stock, and the plan may be suspended at any time at the Company's
discretion. No shares have been repurchased as of June 11, 2001.
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 1993, 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
April 28, 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 April 28, 2001, 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.
21
22
PART II. OTHER INFORMATION
Item 2. Changes In Securities and Use of Proceeds
On April 9, 2001, the Company issued 437,016 shares of the Company's common
stock in connection with the acquisition of Nichols Holding, Inc. 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 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
Exhibits furnished pursuant to the requirements of Form 10-Q:
Number Description
- ------ -----------
(3) Articles of Amendment to the Articles of Incorporation of Dycom
Industries, Inc.
(4) Shareholder Rights Agreement, dated April 4, 2001, between the Company
and the Rights Agent (which includes the Form of Rights Certificate, as
Exhibit A, the Summary of Rights to Purchase Preferred Stock, as
Exhibit B, and the Form of Articles of Amendment to the Articles of
Incorporation of Dycom Industries, Inc. for Series A Preferred Stock,
as Exhibit C) which was filed as Exhibit 4 to Form 8-A filed April 6,
2001 is incorporated herein by reference.
(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 report on Form 8-K was filed on behalf of the Registrant during
the quarter ended April 28, 2001:
(i) Distribution of Rights - relating to approval by the Board of Directors
of a distribution of one right for each outstanding common share of
Registrant. The distribution was made to shareholders of record on
April 14, 2001. Each Right entitles the registered holder to purchase
from Registrant, initially, one ten-thousandth of a share of Series A
Preferred Stock at a price of $95.00, subject to adjustment. The
complete description and terms of the Rights are set forth in a Rights
Agreement between Registrant and First Union National Bank, L.L.C., as
Rights Agent. The Board of Directors, pursuant to the terms of the
Shareholder Protection Rights Agreement dated June 1, 1992, declared
the rights issued thereunder to be null and void on April 14, 2001.
Item Reported: 5
Date Filed: April 4, 2001
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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: June 11, 2001 /s/ Steven E. Nielsen
------------------------------------------
Steven E. Nielsen
President and Chief Executive Officer
Date: June 11, 2001 /s/ Richard L. Dunn
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Richard L. Dunn
Senior Vice President, Chief Financial
Officer and Principal Accounting Officer
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