1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________to________
Commission file number 0-5423
DYCOM INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Florida 59-1277135
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4440 PGA Boulevard, Suite 600
Palm Beach Gardens, Florida 33410
(Address of principal executive office) (Zip Code)
(561) 627-7171
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding as of June 4, 1999
----- ------------------------------
Common Stock, par value $0.33 1/3 25,554,081
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2
DYCOM INDUSTRIES, INC.
INDEX
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets-
July 31, 1998 and April 30, 1999 3
Condensed Consolidated Statements of
Operations for the Three Months Ended
April 30, 1998 and 1999 4
Condensed Consolidated Statements of
Operations for the Nine Months Ended
April 30, 1998 and 1999 5
Condensed Consolidated Statements of
Cash Flows for the Nine Months Ended
April 30, 1998 and 1999 6-7
Notes to Condensed Consolidated
Financial Statements 8-14
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 15-19
Item 3. Quantitative and Qualitative Disclosures
about Market Risk 19
PART II. OTHER INFORMATION
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 20-21
SIGNATURES 22
3
3
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
July 31, April 30,
ASSETS 1998 1999
------------ ------------
CURRENT ASSETS:
Cash and equivalents $ 35,927,307 $ 23,956,787
Accounts receivable, net 62,142,808 68,832,220
Costs and estimated earnings in
excess of billings 14,382,620 34,050,749
Deferred tax assets, net 2,726,348 2,961,075
Other current assets 3,014,199 10,097,277
------------ ------------
Total current assets 118,193,282 139,898,108
------------ ------------
PROPERTY AND EQUIPMENT, net 42,865,197 72,854,277
OTHER ASSETS:
Intangible assets, net 4,529,270 58,090,771
Other 730,342 3,934,594
------------ ------------
Total other assets 5,259,612 62,025,365
------------ ------------
TOTAL $166,318,091 $274,777,750
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 12,182,699 $ 18,092,924
Notes payable 4,727,782 13,177,379
Accrued self-insured claims 2,440,303 3,379,925
Billings in excess of costs
and estimated earnings -- 266,815
Income taxes payable 2,812,144 1,902,563
Other accrued liabilities 14,819,181 21,592,181
------------ ------------
Total current liabilities 36,982,109 58,411,787
NOTES PAYABLE 13,407,990 34,314,868
ACCRUED SELF-INSURED CLAIMS 7,454,849 8,427,903
OTHER LIABILITIES 10,094,195 17,680,487
------------ ------------
Total liabilities 67,939,143 118,835,045
------------ ------------
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:
50,000,000 shares authorized; 22,084,097 and 23,047,187
shares issued and outstanding, respectively 7,361,366 7,682,396
Additional paid-in capital 60,042,463 94,374,437
Retained earnings 30,975,119 53,885,872
------------ ------------
Total stockholders' equity 98,378,948 155,942,705
------------ ------------
TOTAL $166,318,091 $274,777,750
============ ============
See notes to condensed consolidated financial statements--unaudited.
4
4
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended April 30,
------------------------------------
1998 1999
------------- --------------
REVENUES:
Contract revenues earned $ 95,928,640 $ 121,401,998
Other, net 944,186 962,866
------------- --------------
Total 96,872,826 122,364,864
------------- --------------
Expenses:
Costs of earned revenues
excluding depreciation 73,659,560 91,596,083
General and administrative 10,824,214 11,677,686
Depreciation and amortization 3,581,895 4,892,312
------------- --------------
Total 88,065,669 108,166,081
------------- --------------
INCOME BEFORE INCOME TAXES 8,807,157 14,198,783
------------- --------------
PROVISION FOR INCOME TAXES:
Current 3,178,535 5,020,824
Deferred 285,617 411,499
------------- --------------
Total 3,464,152 5,432,323
------------- --------------
NET INCOME $ 5,343,005 $ 8,766,460
============= ==============
EARNINGS PER COMMON SHARE:
Basic $ 0.24 $ 0.39
============= ==============
Diluted $ 0.24 $ 0.38
============= ==============
PRO FORMA NET INCOME AND EARNINGS
PER COMMON SHARE DATA:
Income before income taxes $ 8,807,157
Pro forma provision for
income taxes 3,374,916
-------------
PRO FORMA NET INCOME $ 5,432,241
=============
PRO FORMA EARNINGS PER COMMON SHARE:
Basic $ 0.25
=============
Diluted $ 0.24
=============
See notes to condensed consolidated financial statements--unaudited.
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5
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Nine Months Ended April 30,
--------------------------------------
1998 1999
--------------- ---------------
REVENUES:
Contract revenues earned $ 267,741,732 $ 326,742,438
Other, net 2,028,090 2,379,228
--------------- ---------------
Total 269,769,822 329,121,666
--------------- ---------------
Expenses:
Costs of earned revenues
excluding depreciation 208,616,434 246,245,006
General and administrative 26,785,971 31,892,067
Depreciation and amortization 9,905,266 13,009,139
--------------- ---------------
Total 245,307,671 291,146,212
--------------- ---------------
INCOME BEFORE INCOME TAXES 24,462,151 37,975,454
--------------- ---------------
PROVISION FOR INCOME TAXES:
Current 8,056,132 14,648,066
Deferred 459,356 416,635
--------------- ---------------
Total 8,515,488 15,064,701
--------------- ---------------
NET INCOME $ 15,946,663 $ 22,910,753
=============== ===============
EARNINGS PER COMMON SHARE:
Basic $ 0.76 $ 1.03
=============== ===============
Diluted $ 0.75 $ 1.01
=============== ===============
PRO FORMA NET INCOME AND EARNINGS
PER COMMON SHARE DATA:
Income before income taxes $ 24,462,151
Pro forma provision for
income taxes 9,889,748
---------------
PRO FORMA NET INCOME $ 14,572,403
===============
PRO FORMA EARNINGS PER COMMON SHARE:
Basic $ 0.70
===============
Diluted $ 0.69
===============
See notes to condensed consolidated financial statements--unaudited.
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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months Ended April 30,
------------------------------------
1998 1999
-------------- --------------
INCREASE (DECREASE) IN CASH AND EQUIVALENTS FROM:
OPERATING ACTIVITIES:
Net income $ 15,946,663 $ 22,910,753
Adjustments to reconcile net cash provided
by operating activities:
Depreciation and amortization 9,905,266 13,009,139
Gain on disposal of assets (398,797) (494,284)
Deferred income taxes 459,356 (416,635)
Changes in assets and liabilities:
Accounts receivable, net (5,250,508) 2,486,020
Unbilled revenues, net (7,587,267) (17,057,919)
Other current assets (246,704) (6,337,849)
Other assets 317,487 (83,633)
Accounts payable (1,138,836) 4,253,152
Accrued self-insured claims and
other liabilities 2,251,678 8,232,570
Accrued income taxes 631,166 60,737
-------------- --------------
Net cash inflow from operating activities 14,889,504 26,562,051
-------------- --------------
INVESTING ACTIVITIES:
Capital expenditures (16,751,282) (36,717,730)
Proceeds from sale of assets 1,535,885 1,302,738
Net expenditures for businesses acquired -- (29,352,213)
Assets of acquired business -- (750,000)
Investment in unconsolidated affiliate -- (3,000,000)
-------------- --------------
Net cash outflow from investing activities (15,215,397) (68,517,205)
-------------- --------------
FINANCING ACTIVITIES:
Borrowings on notes payable
and bank lines-of-credit 14,398,865 31,750,000
Principal payments on notes payable
and bank lines-of-credit (22,887,995) (3,149,695)
Exercise of stock options 199,627 1,384,329
Proceeds from stock offering 36,958,618 --
Distributions to shareholders of pooled
companies (4,594,002) --
-------------- --------------
Net cash inflow from financing activities 24,075,113 29,984,634
-------------- --------------
NET CASH INFLOW (OUTFLOW) FROM ALL ACTIVITIES 23,749,220 (11,970,520)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 5,276,112 35,927,307
-------------- --------------
CASH AND EQUIVALENTS AT END OF PERIOD $ 29,025,332 $ 23,956,787
============== ==============
See notes to condensed consolidated financial statements--unaudited.
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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Unaudited)
For the Nine Months Ended April 30,
----------------------------------------
1998 1999
--------------- -----------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW AND
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Cash paid during the period for:
Interest $ 1,645,539 $ 1,230,300
Income taxes $ 7,488,328 $ 14,611,808
Property and equipment acquired and
financed with:
Capital lease obligation $ 233,618
Income tax benefit from stock options exercised $ 194,483 $ 1,115,554
During the nine month period ended April 30, 1999, the Company acquired all of
the capital stock of Locating, Inc., Ervin Cable Construction, Inc. And Apex
Digital TV, Inc. at a cost of $10,345,449, $32,706,655, and $21,446,169,
respectively. In conjunction with these acquisitions, assets acquired and
liabilities assumed were as follows:
Fair market value of assets acquired, including goodwill $ 74,691,937
Consideration paid 64,498,273
-----------------
Fair market value of liabilities assumed $ 10,193,664
=================
See notes to condensed consolidated financial statements--unaudited.
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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS--Unaudited
1. The accompanying condensed consolidated balance sheets of Dycom Industries,
Inc. ("Dycom" or the "Company") as of July 31, 1998 and April 30, 1999, and the
related condensed consolidated statements of operations for the three and nine
months ended April 30, 1998 and 1999, respectively, and the condensed
consolidated statements of cash flows for the nine months ended April 30, 1998
and 1999 reflect all normal recurring adjustments which are, in the opinion of
management, necessary for a fair presentation of such statements. The results of
operations for the nine months ended April 30, 1999 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. On April 6, 1998, the Company
consummated the Cable Com Inc. ("CCI") and Installation Technicians, Inc.
("ITI") acquisitions and issued 1.8 million and 900,000 shares of common stock
in exchange for all the outstanding capital stock of CCI and ITI, respectively.
These acquisitions were accounted for as poolings of interests and accordingly,
the Company's condensed consolidated financial statements include the results of
CCI and ITI for all periods presented. Prior to the acquisitions, CCI and ITI
used a fiscal year consisting of a 52/53 week time period and, as a result of
the merger, have adopted Dycom's fiscal year end of July 31. All periods
presented reflect the adoption of such fiscal year end as of the beginning of
the period.
Dycom is a leading provider of engineering, construction and maintenance
services to telecommunications providers and also performs underground utility
locating services and electrical construction and maintenance contracting
services. All material intercompany accounts and transactions have been
eliminated.
PRO FORMA ADJUSTMENTS -- Prior to the acquisition by Dycom, CCI and ITI elected
under Subchapter S of the Internal Revenue Code to have the stockholders
recognize their proportionate share of CCI's and ITI's taxable income on their
personal tax returns in lieu of paying corporate income tax. The pro forma net
income and earnings per common share on the condensed consolidated statements of
operations reflect a provision for current and deferred income taxes for all
periods presented as if the corporations were included in Dycom's federal and
state income tax returns. At April 6, 1998, the consummation date of the
acquisition, CCI and ITI recorded deferred taxes on the temporary differences
between the financial reporting basis and the tax basis of their assets and
liabilities. The deferred tax (asset) liability recorded by CCI and ITI was
$616,358 and $(11,035), respectively.
USE OF ESTIMATES -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates and such
differences may be material to the financial statements.
Estimates are used in the Company's revenue recognition of work-in-process,
allowance for doubtful accounts, self-insured claims liability, deferred tax
asset valuation allowance, depreciation and amortization, and in the estimated
lives of assets, including intangibles.
REVENUE -- Income on short-term contracts is recognized as the related work is
completed. Work-in-process on unit contracts is based on management's estimate
of work performed but not billed. 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.
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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.
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 a period of 20 to 40 years. The appropriateness of the
carrying value of goodwill is reviewed periodically by the Company. An
impairment loss is recognized when the projected future cash flows is less than
the carrying value of goodwill. No impairment loss has been recognized in the
periods presented. Non-compete agreements obtained through the purchase of
business assets are amortized on a straight-line basis over the term of the
agreements.
Amortization expense was $38,772 and $350,725 for the three month periods and
was $116,315 and $434,466 for the nine month periods ended April 30, 1998 and
1999, respectively. The intangible assets are net of accumulated amortization of
$1,306,466 at July 31, 1998 and $1,895,076 at April 30, 1999.
SELF-INSURED CLAIMS LIABILITY -- The Company is primarily self-insured, up to
certain limits, for automobile and general liability, workers' compensation, and
employee group health claims. A liability for unpaid claims and the associated
claim expenses, including incurred but not reported losses, is actuarially
determined and reflected in the condensed consolidated financial statements as
an accrued liability. The self-insured claims liability includes incurred but
not reported losses of $5,120,000 and $7,360,000 at July 31, 1998 and April 30,
1999, respectively. The determination of such claims and expenses and the
appropriateness of the related liability is continually reviewed and updated.
INCOME TAXES -- The Company and its subsidiaries, except for CCI and ITI, file a
consolidated federal income tax return. CCI and ITI were included in the
Company's consolidated federal income tax return effective April 6, 1998.
Deferred income taxes are provided for the temporary differences between the
financial reporting basis and the tax basis of the Company's assets and
liabilities.
PER SHARE DATA -- Earnings per common share-basic is computed using the
weighted-average common shares outstanding during the period. Earnings per
common share-diluted is computed using the weighted-average common shares
outstanding during the period and the dilutive effect of common stock options,
using the treasury stock method. See Note 3.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS -- In June 1997, the Financial
Accounting Standards Board ("FASB") issued Statement of Financial Accounting
Standards ("SFAS") No. 130 "Reporting Comprehensive Income" which establishes
standards for reporting and display of comprehensive income and its components
(revenues, expenses, gains and losses) in a full set of general purpose
financial statements. This statement requires that an enterprise classify items
of other comprehensive income by their nature in a financial statement and
display the accumulated balance of other comprehensive income separately from
retained earnings and additional paid-in capital in the equity section of a
statement of financial position. This statement is effective for fiscal years
beginning after December 15, 1997.
In June 1997, the FASB issued SFAS No. 131 "Disclosure about Segments of an
Enterprise and Related Information" which establishes standards for public
business enterprises to report information about operating segments in annual
financial statements and requires those enterprises to report selected
information about operating segments in interim financial reports issued to
shareholders. It also establishes the standards for related disclosures about
products and services, geographic areas, and major customers. This statement
requires that a public business enterprise report financial and descriptive
information about its reportable operating segments. The financial information
is required to be reported on the basis that it is used internally for
evaluating segment performance and deciding how to allocate resources to
segments. Operating segments are components of an enterprise about which
separate financial information is available that is evaluated regularly by the
chief operating decision maker in deciding how to allocate resources and in
assessing performance. This statement is effective for fiscal years beginning
after December 15, 1997.
In February 1998, the FASB issued SFAS No. 132 "Employers' Disclosures about
Pension and Other Postretirement Benefits", which revises certain disclosures
about pension and other postretirement benefit plans. This statement does not
change the measurement and recognition methods for pensions or postretirement
benefit costs reported in financial statements. This statement is effective for
fiscal years beginning after December 15, 1997.
In June 1998, the FASB issued 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. This statement is
effective for all fiscal quarters of all fiscal years beginning after June 15,
1999. An exposure draft to amend the statement has been issued and, if adopted,
will defer the effective date one year.
Management is currently evaluating the requirements and related disclosures of
SFAS No. 130, 131, 132, and 133.
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3. EARNINGS PER SHARE
In February 1997, the FASB issued SFAS No. 128 "Earnings per Share" which
changes the method of calculating earnings per share and was effective for the
Company in the quarter ended January 31, 1998. All periods presented have been
restated in accordance with the provisions of SFAS No. 128.
On December 14, 1998, the Board of Directors declared a three-for-two split of
the Company's common stock, effected in the form of a stock dividend paid on
January 4, 1999 to shareholders of record on December 23, 1998. All agreements
concerning stock options provide for the adjustment of shares to be issued 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.
The following is a reconciliation of the numerators and denominators of the
basic and diluted per share computation as required by SFAS No. 128.
For the Three Months Ended April 30,
--------------------------------------
1998 1999
-------------- --------------
Net income available to common stockholders (numerator) $ 5,343,005 $ 8,766,460
============== ==============
Weighted-average number of common shares (denominator) 22,029,246 22,519,055
============== ==============
Earnings per common share - basic $ 0.24 $ 0.39
============== ==============
Weighed-average number of common shares 22,029,246 22,519,055
Potential common stock arising from stock options 315,510 440,521
-------------- --------------
Total shares (denominator) 22,344,756 22,959,576
============== ==============
Earnings per common share - diluted $ 0.24 $ 0.38
============== ==============
PRO FORMA EARNINGS PER SHARE DATA:
Pro forma net income available to common stockholders (numerator) $ 5,432,241
==============
Pro forma earnings per common share - basic $ 0.25
==============
Pro forma earnings per common share - diluted $ 0.24
==============
For the Nine Months Ended April 30,
----------------------------------------
1998 1999
--------------- ---------------
Net income available to common stockholders (numerator) $ 15,946,663 $ 22,910,753
=============== ===============
Weighted-average number of common shares (denominator) 20,872,413 22,266,846
=============== ===============
Earnings per common share - basic $ 0.76 $ 1.03
=============== ===============
Weighed-average number of common shares 20,872,413 22,266,846
Potential common stock arising from stock options 293,736 409,435
--------------- ---------------
Total shares (denominator) 21,166,149 22,676,281
=============== ===============
Earnings per common share - diluted $ 0.75 $ 1.01
=============== ===============
PRO FORMA EARNINGS PER SHARE DATA:
Pro forma net income available to common stockholders (numerator) $ 14,572,403
===============
Pro forma earnings per common share - basic $ 0.70
===============
Pro forma earnings per common share - diluted $ 0.69
===============
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4. ACCOUNTS RECEIVABLE
Accounts receivable consist of the following:
July 31, April 30,
1998 1999
----------------- ----------------
Contract billings $ 58,888,421 $ 66,838,158
Retainage 4,133,590 4,571,044
Other receivables 1,331,775 1,172,823
----------------- ----------------
Total 64,353,786 72,582,025
Less allowance for doubtful accounts 2,210,978 3,749,805
----------------- ----------------
Accounts receivable, net $ 62,142,808 $ 68,832,220
================= ================
5. 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:
July 31, April 30,
1998 1999
---------------- --------------
Costs incurred on contracts in progress $ 15,056,642 $ 43,981,147
Estimated earnings thereon 3,387,933 14,209,942
---------------- --------------
18,444,575 58,191,089
Less billings to date 4,061,955 24,407,155
---------------- --------------
Costs and estimated earnings in excess of billings $ 14,382,620 $ 33,783,934
================ ==============
Included in the accompanying condensed consolidated
balance sheets under the captions:
Costs and estimated earnings in excess of billings $ 14,382,620 $ 34,050,749
Billings in excess of costs and estimated earnings -- 266,815
---------------- --------------
$ 14,382,620 $ 33,783,934
================ ==============
6. PROPERTY AND EQUIPMENT
The accompanying condensed consolidated balance sheets include the following
property and equipment:
July 31, April 30,
1998 1999
---------------- ----------------
Land $ 1,592,958 $ 3,122,155
Buildings 2,497,103 5,472,959
Leasehold improvements 1,459,543 1,504,167
Vehicles 52,287,135 74,391,803
Equipment and machinery 34,319,707 44,722,706
Furniture and fixtures 5,638,326 7,168,328
---------------- ----------------
Total 97,794,772 136,382,118
Less accumulated depreciation and amortization 54,929,575 63,527,841
---------------- ----------------
Property and equipment, net $ 42,865,197 $ 72,854,277
================ ================
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7. NOTES PAYABLE
Notes payable are summarized by type of borrowings as follows:
July 31, April 30,
1998 1999
--------------- --------------
Bank Credit Agreement:
Term loan $ 14,250,000 $ 12,750,000
Revolving working capital facilities -- 9,750,000
Equipment term loans 3,339,218 23,930,909
Capital lease obligations 60,931 253,001
Equipment and other loans 485,623 808,337
--------------- --------------
Total 18,135,772 47,492,247
Less current portion 4,727,782 13,177,379
--------------- --------------
Notes payable--non-current $ 13,407,990 $ 34,314,868
=============== ==============
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 amended 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 outstanding standby letters of credit issued to the Company's
insurance administrators as part of its self-insurance program of $11.4 million
at April 30, 1999.
The revolving working capital facility bears interest, at the option of the
Company, at the bank's prime interest rate minus 1.125% or LIBOR plus 1.25%. As
of April 30, 1999, there was $9.8 million outstanding balance on this facility
resulting in an available borrowing capacity of $40.2 million. The interest rate
on the outstanding principal was at the LIBOR option or 6.25% as of April 30,
1999.
The outstanding loans under the revolving equipment acquisition and small
business purchase facility bear interest, at the option of the Company, at the
bank's prime interest rate minus 0.75% or LIBOR plus 1.50%. At April 30, 1999,
the interest rate on the outstanding revolving equipment and small business
purchase facility was at the LIBOR option or 6.75%. The advances under the
revolving equipment acquisition and small business purchase facility are
converted to term loans with maturities not to exceed 48 months. The outstanding
principal on the equipment term loans is payable in monthly installments through
February 2001. The amount outstanding on the revolving equipment acquisition and
small business purchase facility was $23.9 million at April 30, 1999, resulting
in an available borrowing capacity of $71.1 million.
The outstanding principal under the term loan bears interest at the bank's prime
interest rate minus 0.50% (7.25% at April 30, 1999). Principal and interest is
payable in quarterly installments through April 2003. The amount outstanding on
the term loan was $12.8 million at April 30, 1999.
The amended bank credit agreement contains restrictions which, among other
things, requires maintenance of certain financial ratios and covenants,
restricts encumbrances of assets and creation of indebtedness, and limits the
payment of cash dividends. Cash dividends are limited to 50% of each fiscal
year's after-tax profits. No cash dividends were paid during the three and nine
month periods ended April 30, 1999. The amended bank credit facility is secured
by the Company's assets and guaranteed by each of its subsidiaries. At April 30,
1999, the Company was in compliance with all financial covenants and conditions.
In addition to the borrowings under the amended bank credit agreement, certain
subsidiaries have outstanding obligations under capital leases and other
equipment financing arrangements. The obligations are payable in monthly
installments expiring at various dates through March 2002.
13
13
7. NOTES PAYABLE (CONTINUED)
Interest costs incurred on notes payable, all of which were expensed, were
$456,513 and $578,919, for the three month period ended April 30, 1998 and 1999,
respectively, and were $1,554,358 and $1,243,999, for the nine month period
ended April 30, 1998 and 1999, respectively. Such amounts are included in
general and administrative expenses in the accompanying condensed consolidated
statements of operations.
8. ACQUISITIONS
On February 3, 1999, the Company acquired all of the outstanding common stock of
Locating, Inc. ("Locating") for $10.0 million. Located in Issaquah, Washington,
Locating's primary line of business is the locating, marking, and mapping of
underground utility facilities for cable television multiple system operators,
telephone companies, and electrical and gas utilities. On March 31, 1999, the
Company purchased all of the outstanding shares of common stock of Ervin Cable
Construction, Inc. ("Ervin") for $21.8 million in cash and 258,066 shares of
Dycom's common stock for an aggregate purchase price of $32.5 million. Ervin's
primary line of business is the construction and installation of new cable
television systems as well as providing repair and expansion services to
existing cable television systems. On April 1, 1999, the Company issued 516,128
with an aggregate value of $21.4 million of Dycom's common stock to the
shareholders of Apex Digital TV, Inc. ("Apex") in exchange for all of the
outstanding common stock of Apex. Apex's primary line of business is providing
installation and maintenance services to direct broadcast satellite providers.
Both Ervin and Apex are located in Sturgis, Kentucky. The Company has recorded
the acquisitions of Locating, Ervin, and Apex using the purchase method of
accounting. The operating results of Locating, Ervin, and Apex are included in
the accompanying consolidated condensed financial statements from the date of
purchase.
The direct transaction costs resulting from the acquisitions of Locating, Ervin,
and Apex were approximately $590,000. These costs, which include filing fees
with regulatory agencies, legal, accounting, and other professional costs, were
capitalized as part of the purchase prices of Locating, Ervin, and Apex.
The following unaudited pro forma summary presents the consolidated results of
the operations of the Company as if the business combinations had occurred on
August 1, 1997:
Nine months ended April 30,
1998 1999
-------------- --------------
Total revenues $ 319,571,835 $ 372,209,862
Income before income taxes $ 25,984,411 $ 40,500,256
Net income $ 17,078,403 $ 24,129,856
Earnings per share:
Basic $ 0.79 $ 1.08
Diluted $ 0.78 $ 1.06
9. COMMITMENTS AND CONTINGENCIES
In September 1995, the State of New York commenced a sales and use tax audit of
Communications Construction Group, Inc. ("CCG"), a wholly-owned subsidiary, for
the years 1989 through 1995. As a result of the audit, certain additional taxes
were paid by CCG in fiscal 1996. In addition, the State of New York concluded
that cable television service providers are subject to New York State sales
taxes for the construction of cable television distribution systems, and by a
Notice dated January 1997, asserted amounts due from CCG for sales taxes and
interest for the periods through August 31, 1995, aggregating approximately $1.3
million. Any sales taxes asserted against the Company may be offset by use taxes
already paid by the customers of the Company. The Company intends to vigorously
contest the assertion. The Company is unable to assess the likelihood of any
particular outcome at this time or to quantify the effect a resolution of this
matter may have on the Company's consolidated financial statements.
In the normal course of business, certain subsidiaries of the Company have
pending and unasserted claims. 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.
14
14
10. COMMON STOCK OFFERING
In April 1999, the Company filed, at its cost, a registration statement for an
offering of 2.5 million shares and 200,000 shares of common stock, to be sold by
the Company and certain selling stockholders, respectively. The closing of the
offering, at $48.50 per share, was consummated on May 19, 1999. On that date,
the Company received $115.3 million in proceeds from the offering which was net
of an underwriting discount of $2.40 per share. The Company estimates that legal
fees and other expenses incurred for this transaction were approximately
$450,000. In addition to the shares sold above, the Company and the selling
stockholders have granted the underwriters an option to purchase within 30 days
after the offering an additional 375,000 and 30,000 shares, respectively, to
cover over-allotments.
On June 4, 1999, the Company repaid the outstanding balance of its revolving
credit facility of $33.7 million with proceeds of the common stock offering. The
remaining proceeds will be used to fund the Company's growth strategy, including
acquisitions, working capital and capital expenditures, and for other general
corporate purposes.
On June 11, 1999, the underwriters exercised a portion of their option to
purchase additional shares to cover over-allotments. The underwriters will
purchase 37,038 shares from the Company and 2,962 shares from certain selling
stockholders. The Company will receive approximately $1.7 million as payment for
the over-allotment.
15
15
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.
Results of Operations
In April 1998, Dycom completed the acquisition of CCI and ITI in transactions
accounted for as poolings of interests. See Note 2 of the Notes to the Condensed
Consolidated Financial Statements--(Unaudited). Dycom's financial statements and
all financial and operating data derived therefrom have been combined for all
periods presented herein to include the financial condition and results of
operations of CCI and ITI.
In addition, Dycom completed the acquisitions of Locating, Ervin, and Apex
during the three month period ended April 30, 1999. The Company has recorded
these acquisitons using the purchase method of accounting and, accordingly, the
operating results of Locating, Ervin, and Apex are included in the Company's
consolidated condensed financial statements from the date of purchase.
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 30,
-----------------------------------------
1998 1999
----------------- ------------------
Revenues:
Contract revenues earned 100.0% 100.0%
Other, net 1.0 0.8
--------------- ---------------
Total revenues 101.0 100.8
Expenses:
Cost of earned revenues, excluding depreciation 76.8 75.5
General and administrative 11.3 9.6
Depreciation and amortization 3.7 4.0
--------------- ---------------
Total expenses 91.8 89.1
--------------- ---------------
Income before income taxes 9.2 11.7
Provision for income taxes 3.6 4.5
--------------- ---------------
Historical Net Income 5.6 7.2%
===============
Pro forma adjustments to income tax provision (0.1)
---------------
Pro Forma Net Income 5.7%
===============
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16
For the Nine Months Ended April 30,
-----------------------------------------
1998 1999
----------------- ------------------
Revenues:
Contract revenues earned 100.0% 100.0%
Other, net 0.8 0.7
---------------- -----------------
Total revenues 100.8 100.7
Expenses:
Cost of earned revenues, excluding depreciation 77.9 75.4
General and administrative 10.0 9.7
Depreciation and amortization 3.7 4.0
---------------- -----------------
Total expenses 91.6 89.1
---------------- -----------------
Income before income taxes 9.2 11.6
Provision for income taxes 3.2 4.6
---------------- -----------------
Historical Net Income 6.0 7.0%
=================
Pro forma adjustments to income tax provision 0.6
----------------
Pro Forma Net Income 5.4%
================
REVENUES. Contract revenues increased $25.5 million, or 26.6%, to $121.4 million
in the quarter ending April 30, 1999 from $95.9 million in the quarter ended
April 30, 1998. Of this increase, $20.9 million was attributable to the
telecommunications services group, $4.4 million was attributable to the
underground utility locating services group, and $0.2 million was attributable
to the electrical services group, reflecting a stronger market demand for the
Company's services. The companies acquired during the quarter ending April 30,
1999 contributed $8.1 million of the increase in contract revenues; $4.3 million
related to the telecommunications services group and $3.8 million related to the
underground utility locating services group.
During the quarter ended April 30, 1999, the Company recognized $107.4 million
of contract revenues from the telecommunications services group as compared to
$86.5 million for the same period last year. The increase in the Company's
telecommunications services group contract revenues reflects increased volume of
projects and activities associated with cable television construction services
which increased by $1.4 million to $48.6 million in the quarter ended April 30,
1999. Of the remaining $19.5 million increase in telecommunications contract
revenues, $14.1 million related to geographic expansion and an increased volume
of services to existing customers under the terms of several new master
contracts. Contract revenues recognized from the electrical construction and
maintenance services group was $5.4 million and $5.2 million, respectively, for
the quarters ended April 30, 1999 and 1998. The Company recognized contract
revenues of $8.6 million from the underground utility locating services group in
the quarter ended April 30, 1999 as compared to $4.2 million in the same period
last year, an increase of 103.6%.
Contract revenues from multi-year master service agreements and other long-term
agreements represented 91.6% and 84.0% of total contract revenues in the quarter
ended April 30, 1998 and 1999, respectively. Contract revenues from multi-year
master service agreements represented 48.1% and 46.2% of total contract revenues
in the quarters ended April 30, 1998 and 1999, respectively.
Contract revenues increased $59.0 million, or 22.0%, to $326.7 million in the
nine months ending April 30, 1999 from $267.7 million in the nine months ended
April 30, 1998. Of this increase, $53.2 million was attributable to the
telecommunications services group, $5.4 million was attributable to the
underground utility locating services group, and $0.4 million was attributable
to the electrical services group, reflecting a stronger market demand for the
Company's services. The companies acquired during the nine month period ending
April 30, 1999 contributed $8.1 million of the increase in contract revenues;
$4.3 million related to the telecommunications services group and $3.8 million
related to the underground utility locating services group.
During the nine months ended April 30, 1999, the Company recognized $293.1
million of contract revenues from the telecommunications services group as
compared to $239.9 million for the same period last year. The increase in the
Company's telecommunications services group contract revenues reflects increased
volume of projects and activities associated with cable television construction
services which increased by $14.3 million to $140.5 million in the nine months
ended April 30, 1999. Of the remaining $38.9 million increase in
telecommunications contract revenues, $40.5 million related to geographic
expansion and an increased volume of services to existing customers under the
terms of several new master contracts offset by a $1.6 million decline in
services provided under bid contracts. Contract revenues recognized from the
electrical construction and maintenance services group was $15.4 million and
$15.0 million, respectively, for the nine months ended April 30, 1999 and 1998.
The Company recognized contract revenues of $18.2 million from the underground
utility locating services group in the nine months ended April 30, 1999 as
compared to $12.8 million in the same period last year, an increase of 41.9%.
17
17
REVENUES (CONTINUED).
Contract revenues from multi-year master service agreements and other long-term
agreements represented 90.5% and 86.6% of total contract revenues in the nine
months ended April 30, 1998 and 1999, respectively. Contract revenues from
multi-year master service agreements represented 47.5% and 46.9% of total
contract revenues in the nine months ended April 30, 1998 and 1999,
respectively.
COSTS OF EARNED REVENUES. Costs of earned revenues increased $17.9 million to
$91.6 million in the quarter ended April 30, 1999 from $73.7 million in the
quarter ended April 30, 1998, but decreased as a percentage of contract revenues
to 75.5% from 76.8%. Costs of earned revenues increased $37.6 million to $246.2
million in the nine months ended April 30, 1999 from $208.6 million in the nine
months ended April 30, 1998, but decreased as a percentage of contract revenues
to 75.4% from 77.9%. For the three and nine months ended April 30, 1999,
respectively, insurance and equipment costs declined as a percentage of contract
revenues as a result of more effective management of insurance claims, positive
results of the corporate safety program, and the buy-out of certain operating
leases. Other factors affecting the improved operating margin include increased
productivity of the Company's labor force combined with the more effective
utilization of subcontractors to meet labor demands.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased $0.9 million to $11.7 million in the quarter ended April 30, 1999 from
$10.8 million in the quarter ended April 30, 1998. The increase in general and
administrative expenses for the quarter ended April 30, 1999, as compared to the
same period last year, was primarily attributable to increases in administrative
salaries, employee benefits and payroll taxes of $1.6 million offset by a
reduction in other general and administrative expenses of $0.1 and a reduction
in the provision for doubtful accounts of $0.6 million.
General and administrative expenses increased $5.1 million to $31.9 million in
the nine months ended April 30, 1999 from $26.8 million in the nine months ended
April 30, 1998. The increase in general and administrative expenses for the
quarter ended April 30, 1999, as compared to the same period last year, was
primarily attributable to increases in administrative salaries, employee
benefits and payroll taxes of $4.6 million, registration costs of $0.4 million,
and other general and administrative expenses of $1.0 million offset by a
reduction in interest costs of $0.3 million and a reduction in the provision for
doubtful accounts of $0.6 million.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased $1.3
million to $4.9 million in the quarter ending April 30, 1999 as compared to $3.6
million in the same period last year. Depreciation and amortization increased
$3.1 million to $13.0 million in the nine months ending April 30, 1999 as
compared to $9.9 million in the same period last year. The increase in
depreciation and amortization was due to capital expenditures of $37.5 million
in the nine month period ended April 30, 1999 as compared to $16.8 million in
the nine month period ended April 30, 1998, an increase of $20.7 million. The
increased capital expenditures represent capital expenditures in the ordinary
course of business, equipment purchased for the start-up of certain long-term
contracts, and the buy-out of certain operating leases on terms favorable to the
Company.
INCOME TAXES. The provision for income taxes was $5.4 million in the three-month
period ended April 30, 1999 as compared to $3.5 million in the same period last
year. The Company's effective tax rate was 38.3% in the three-month period ended
April 30, 1999 as compared to 39.3% in the same period last year. The effective
tax rate differs from the statutory rate due to state income taxes, income of
Subchapter S Corporations (CCI and ITI) being taxed to their shareholders, 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 $15.1 million in the nine month period ended
April 30, 1999 as compared to $8.5 million in the same period last year. The
Company's effective tax rate was 39.7% in the nine month period ended April 30,
1999 as compared to 34.8% in the same period last year. The effective tax rate
differs from the statutory rate due to state income taxes, income of Subchapter
S Corporations (CCI and ITI) being taxed to their shareholders, the amortization
of intangible assets that do not provide a tax benefit, and other non-deductible
expenses for tax purposes.
For the three and nine month periods ended April 30, 1998, the provision for
income taxes has been adjusted to reflect a pro forma tax provision for pooled
companies which were previous Subchapter S Corporations. The pro forma provision
for income taxes was $3.5 million and 9.9 million and the pro forma effective
tax rate was 38.3% and 40.4% for the three and nine month periods ended April
30, 1998, respectively.
18
18
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 to provide
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 regularly reviews various strategic acquisition
opportunities and periodically engages in discussions regarding possible
acquisitions. The Company may require additional debt or equity financing for
future acquisitions which may not be available on terms favorable to the
Company, if at all. The Company's sources of cash have historically been from
operating activities, bank borrowings, proceeds arising from the sale of idle
and surplus equipment and real property, and the public offering of its common
stock.
For the nine month period ended April 30, 1999, net cash provided by operating
activities was $26.6 million compared to $14.9 million for the nine month period
ended April 30, 1998. Net income and non-cash charges are the primary sources of
operating cash flow. Working capital items decreased operating cash flow by $8.4
million for the nine month period ended April 30, 1999 principally through an
increase in other current assets and unbilled revenues offset by a decrease in
accounts receivable and increases in accounts payable, accrued self-insurance
claims, and other current liabilities.
In the nine month period ended April 30, 1999, net cash used in investing
activities was $68.5 million as compared to $15.2 million for the same period
last year. For the nine month period ended April 30, 1999, capital expenditures
of $36.7 million were for the normal replacement of equipment in the ordinary
course of business, equipment purchased for the start up of certain long-term
contracts, and the buy-out of certain operating leases on terms favorable to the
Company.
In August 1998, the Company purchased a 13.0% equity interest in Witten
Technologies, Inc. ("Witten") for $3.0 million. Witten has developed, and is the
owner of, various proprietary technologies and materials relating to
ground-penetrating radar and the use of other electromagnetic frequencies. In
addition to the equity received, the Company has acquired an exclusive license
to market certain technologies within the United States and Canada. Witten is
being accounted for as an unconsolidated affiliate. Additionally, the Company
purchased the assets of a business which included a non-compete agreement for
$750,000 for use in the telecommunications services group.
On February 3, 1999, the Company acquired all of the outstanding common stock of
Locating for $10.0 million. On March 31, 1999, the Company purchased all of the
outstanding shares of common stock of Ervin for $21.8 million in cash and
258,066 shares of Dycom's common stock for an aggregate purchase price of $32.5
million. On April 1, 1999, the Company issued 516,128 of Dycom's common stock
with a total value of $21.4 million to the shareholders of Apex in exchange for
all of the outstanding common stock of Apex. As part of these transactions, the
Company acquired cash balances of $2.4 million.
In the nine month period ended April 30, 1999, net cash provided by financing
activities was $30.0 million which was primarily attributable to new borrowings
from the amended bank credit agreement of $31.8 million used to finance the
Company's recent acquisitions and from stock options excercised during the
period of $1.4 million. Normal debt payments under the terms of the amended bank
credit agreement totalled $3.2 million during the nine month period.
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 2002. The amended credit facility 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 revolving equipment acquisition and small business purchase facility.
The five-year term loan facility is payable in quarterly installments through
April 2002. During the nine months ended April 30, 1999, the Company repaid $1.5
million on this facility. The revolving equipment acquisition and small business
purchase facility, the revolving working capital facility and the standby letter
of credit facility are available for a two-year period. At April 30, 1999, the
Company had available borrowing capacity of $71.1 million under the revolving
equipment acquisition and small business purchase facility, $40.2 million under
the revolving working capital facility and $3.6 million under the standby letter
of credit facility.
The amended bank credit agreement requires the Company to maintain certain
financial covenants and conditions, as well as restricting the encumbrances of
assets and the creation of additional indebtedness and limits the payment of
cash dividends. The amended bank credit facility is secured by the Company's
assets and guaranteed by each of its subsidiaries. At April 30, 1999, the
Company was in compliance with all covenants and conditions under the credit
agreement.
In April 1999, the Company filed, at its cost, a registration statement for an
offering of 2.5 million shares and 200,000 shares of common stock, to be sold by
the Company and certain selling stockholders, respectively. The closing of the
offering, at $48.50 per share,
19
19
Liquidity and Capital Resources (continued)
was consummated on May 19, 1999. On that date, the Company received $115.3
million in proceeds from the offering which was net of an underwriting discount
of $2.40 per share. The Company estimates that legal fees and other expenses
incurred for this transaction were approximately $450,000. In addition to the
shares sold above, the Company and the selling stockholders have granted the
underwriters an option to purchase within 30 days after the offering an
additional 375,000 and 30,000 shares, respectively, to cover over-allotments.
On June 4, 1999, the Company repaid the outstanding balance of its revolving
credit facility of $33.7 million with proceeds of the common stock offering. The
remaining proceeds will be used to fund the Company's growth strategy, including
acquisitions, working capital and capital expenditures, and for other general
corporate purposes.
On June 11, 1999, the underwriters exercised a portion of their option to
purchase additional shares to cover over-allotments. The underwriters will
purchase 37,038 shares from the Company and 2,962 shares from certain selling
stockholders. The Company will receive approximately $1.7 million as payment for
the over-allotment.
The Company foresees its capital resources together with existing cash balances
to be sufficient to meet its financial obligations, including the scheduled debt
payments under the amended bank credit agreement and operating lease
commitments, and to support the Company's normal replacement of equipment at its
current level of business for at least the next twelve months. The Company's
future operating results and cash flows may be affected by a number of factors
including the Company's success in bidding on future contracts and the Company's
continued ability to effectively manage controllable costs.
Special Note Concerning Forward Looking Statements
This Quarterly Report on Form 10-Q, including the Notes to Condensed
Consolidated Financial Statements and this Management's Discussion and Analysis
of Financial Condition and Results of Operations, contains forward looking
statements. The words "believe", "expect", "anticipate", "intends", "forecast",
" project", and similar expressions identify forward looking statements. Such
statements may include, but may not be limited to, the anticipated outcome of
contingent events, including litigation, projections of revenues, income or
loss, capital expenditures, plans for future operations, growth and aquisitions,
financial needs or plans and the availability of financing, and plans relating
to services of the Company, as well as assumptions relating to the foregoing.
Such forward looking statements are within the meaning of that term in Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended.
Year 2000 Compliance
The Company has reviewed its computer systems to identify those areas that could
be adversely affected by Year 2000 software failures. The Company has converted
approximately 85% of its information systems to be Year 2000 compliant. The
Company has incurred approximately $1.4 million through April 30, 1999 and
approximately $0.5 million will be incurred in the remainder of fiscal 1999 to
complete the information system conversions, including the implementation and
conversion cost of our recently acquired subsidiaries. Although the Company
expects that any additional expenditures that may be required in connection with
the Year 2000 conversions will not be material, there can be no assurance in
this regard. The Company believes that certain of its customers, particularly
local exchange and long distance carriers and cable multiple system operators,
may be impacted by the Year 2000 problem, which could in turn affect the
Company. Currently, the Company cannot predict the effect of the Year 2000
problem on these customers and there can be no assurance it will not have a
material adverse effect on the Company's business, financial condition, results
of operations or cash flows. The Company will be formulating a contingency plan
prior to the end of the current fiscal year to address the possible effects, if
any, of its customers experiencing Year 2000 problems.
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
has no holdings of derivative financial or commodity instruments at April 30,
1999 although it does have exposure to interest rate risk. At April 30, 1999,
the Company performed sensitivity analysis to assess the potential effect of
interest rate risk and concluded that near-term changes in interest rates should
not materially adversely affect the Company's financial position, results of
operations or cash flows.
20
20
PART II. OTHER INFORMATION
- --------------------------
Item 5. Other Information.
Douglas J. Betlach, Vice President, Treasurer, and Chief Financial Officer, has
decided to pursue other opportunities and will leave the Company effective June
23, 1999. As of the effective date, the Company's Senior Vice President and
Chief Administrative Officer, Kenneth G. Geraghty, will assume the Chief
Financial Officer's responsibilities. The Company has initiated a search for a
new Chief Financial Officer.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibits furnished pursuant to the requirements of Form 10-Q:
Number Description
------ -----------
(3)(ii) By-Laws of Dycom Industries, Inc. as amended by the
Company's Board of Directors on May 24, 1999.
(11) Statement re computation of per share earnings
All information required by Exhibit 11 is presented within
Note 3 of the Company's condensed consolidated financial
statements in accordance with the provisions of SFAS No.
128.
(27) Financial Data Schedule
(b) Reports On Form 8-K
The following reports on Form 8-K were filed on behalf of the Registrant during
the quarter ended April 30, 1999:
(i) The press release announcing the execution of a stock purchase agreement and
a merger agreement for the acquisition of Ervin Cable Construction, Inc. and
Apex Digital TV, Inc.
Item Reported: 5
Date Filed: March 18, 1999
(ii) The acquisition of Ervin Cable Construction, Inc. and Apex Digital TV, Inc.
pursuant to a stock purchase agreement and a merger agreement dated March 12,
1999.
Items Reported: 2 and 7
Date Filed: April 15, 1999
Financial Statements Filed:
Audited financial statements of Ervin Cable Construction,
Inc. for the year ended December 31, 1998.
Audited financial statements of Apex Digital TV, Inc. for
the year ended December 31, 1998, and for the period from
September 22, 1997 (inception) to December 31, 1997.
Unaudited pro forma consolidated balance sheet as of
January 31, 1999.
Unaudited pro forma consolidated statement of operations
for the six months ended January 31, 1999.
Unaudited pro forma consolidated statement of operations
for the fiscal year ended July 31, 1998.
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21
(b) Reports On Form 8-K (Continued)
(iii) The press release announcing the execution of a Second Amended and
Restated Credit Facility Agreement dated April 27, 1999 and the backlog of the
Registrant as of January 31, 1999.
Item Reported: 5
Date Filed: April 29, 1999
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22
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 14, 1999 /s/ Thomas R. Pledger
----------------- ----------------------------
Thomas R. Pledger
Executive Chairman
Date: June 14, 1999 /s/ Steven Nielsen
------------------ ----------------------------
Steven Nielsen
President and Chief Executive Officer
Date: June 14, 1999 /s/ Douglas J. Betlach
------------------ ----------------------------
Douglas J. Betlach
Vice President, Treasurer, and
Chief Financial Officer