-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UW+yOlDfpOo8A9Nb4orcla2wqaUI4LeSI5SAnE5rr8/vgVB81Qf5MNHLDIY/4Axc wc3GOfzWmLxbS8ls3840oQ== 0000950144-01-003489.txt : 20010314 0000950144-01-003489.hdr.sgml : 20010314 ACCESSION NUMBER: 0000950144-01-003489 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20010127 FILED AS OF DATE: 20010313 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DYCOM INDUSTRIES INC CENTRAL INDEX KEY: 0000067215 STANDARD INDUSTRIAL CLASSIFICATION: WATER, SEWER, PIPELINE, COMM AND POWER LINE CONSTRUCTION [1623] IRS NUMBER: 591277135 STATE OF INCORPORATION: FL FISCAL YEAR END: 0729 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10613 FILM NUMBER: 1567230 BUSINESS ADDRESS: STREET 1: 4440 PGA BLVD. STE 500 STREET 2: FIRST UNION CENTER CITY: PALM BEACH GARDENS STATE: FL ZIP: 33410 BUSINESS PHONE: 5616277171 MAIL ADDRESS: STREET 1: P O BOX 3524 STREET 2: SUITE 860 CITY: WEST PALM BEACH STATE: FL ZIP: 33402 FORMER COMPANY: FORMER CONFORMED NAME: MOBILE HOME DYNAMICS INC DATE OF NAME CHANGE: 19820302 10-Q 1 g67583e10-q.txt DYCOM INDUSTRIES 1/27/01 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended January 27, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________to________ Commission file number 0-5423 DYCOM INDUSTRIES, INC. ------------------------------------------------- (Exact name of registrant as specified in its charter) Florida 59-1277135 - ------------------------- ------------------------------------------------- (State of incorporation) (IRS Employer Identification No.) 4440 PGA Boulevard, Suite 500 Palm Beach Gardens, Florida 33410 - ----------------------------------------------- -------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (561) 627-7171 -------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding as of March 12, 2001 Common Stock, par value $0.33 1/3 42,496,991 2 DYCOM INDUSTRIES, INC. INDEX
PAGE NO. -------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets- January 27, 2001 and July 29, 2000 3 Condensed Consolidated Statements of Operations for the Three Months Ended January 27, 2001 and January 29, 2000 4 Condensed Consolidated Statements of Operations for the Six Months Ended January 27, 2001 and January 29, 2000 5 Condensed Consolidated Statements of Cash Flows for the Six Months Ended January 27, 2001 and January 29, 2000 6-7 Notes to Condensed Consolidated Financial Statements 8-16 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 17-21 Item 3. Quantitative and Qualitative Disclosures about Market Risk 21 PART II. OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds 22 Item 4. Submission of Matters to a Vote of Security Holders 22 Item 6. Exhibits and Reports on Form 8-K 22 SIGNATURES 23
3 DYCOM INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
JANUARY 27, JULY 29, 2001 2000 ------------ ------------ CURRENT ASSETS: Cash and equivalents $ 82,151,281 $105,701,950 Accounts receivable, net 138,608,382 144,291,699 Costs and estimated earnings in excess of billings 37,666,008 52,301,022 Deferred tax assets, net 6,510,001 6,039,264 Inventories 11,857,261 14,563,649 Other current assets 5,407,111 1,530,972 ------------ ------------ Total current assets 282,200,044 324,428,556 ------------ ------------ PROPERTY AND EQUIPMENT, net 116,406,069 101,092,862 ------------ ------------ OTHER ASSETS: Intangible assets, net 145,032,183 85,783,092 Other 2,892,643 2,695,084 ------------ ------------ Total other assets 147,924,826 88,478,176 ------------ ------------ TOTAL $546,530,939 $513,999,594 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 29,979,660 $ 42,922,557 Notes payable 2,718,790 2,594,413 Billings in excess of costs and estimated earnings 2,582,179 6,405 Accrued self-insured claims 4,617,854 4,232,243 Income taxes payable 521,080 5,916,000 Customer advances 11,339,774 11,762,547 Other accrued liabilities 37,186,165 47,324,948 ------------ ------------ Total current liabilities 88,945,502 114,759,113 ------------ ------------ NOTES PAYABLE 7,894,763 9,106,201 ACCRUED SELF-INSURED CLAIMS 6,306,349 5,554,417 DEFERRED TAX LIABILITIES, net 4,843,621 4,256,781 OTHER LIABILITIES 2,922,082 2,345,525 ------------ ------------ Total liabilities 110,912,317 136,022,037 ------------ ------------ COMMITMENTS AND CONTINGENCIES, Note 9 STOCKHOLDERS' EQUITY: Preferred stock, par value 1.00 per share: 1,000,000 shares authorized: no shares issued and outstanding -- -- Common stock, par value $.33 1/3 per share: 150,000,000 shares authorized: 42,491,991 and 41,900,516 shares issued and outstanding, respectively 14,163,998 13,966,839 Additional paid-in capital 244,327,870 221,593,083 Retained earnings 177,126,754 142,417,635 ------------ ------------ Total stockholders' equity 435,618,622 377,977,557 ------------ ------------ TOTAL $546,530,939 $513,999,594 ============ ============
See notes to condensed consolidated financial statements--unaudited. 3 4 DYCOM INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
FOR THE THREE MONTHS ENDED --------------------------------- JANUARY 27, JANUARY 29, 2001 2000 ------------- ------------- Contract revenues earned $ 195,765,314 $ 177,212,481 ------------- ------------- Expenses: Costs of earned revenues, excluding depreciation 147,235,563 131,704,528 General and administrative 18,187,339 15,348,417 Depreciation and amortization 9,851,659 7,417,534 ------------- ------------- Total 175,274,561 154,470,479 ------------- ------------- Interest income, net 1,104,784 829,354 Other income, net 592,748 317,302 ------------- ------------- INCOME BEFORE INCOME TAXES 22,188,285 23,888,658 ------------- ------------- PROVISION FOR INCOME TAXES: Current 9,155,696 8,948,472 Deferred (58,500) 543,387 ------------- ------------- Total 9,097,196 9,491,859 ------------- ------------- NET INCOME $ 13,091,089 $ 14,396,799 ============= ============= EARNINGS PER COMMON SHARE: Basic $ 0.31 $ 0.35 ============= ============= Diluted $ 0.31 $ 0.34 ============= ============= SHARES USED IN COMPUTING EARNINGS PER COMMON SHARE: Basic 42,249,501 41,447,696 ============= ============= Diluted 42,731,489 42,011,736 ============= =============
See notes to condensed consolidated financial statements--unaudited 4 5 DYCOM INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
FOR THE SIX MONTHS ENDED ------------------------------ JANUARY 27, JANUARY 29, 2001 2000 ------------ ------------ Contract revenues earned $430,455,735 $354,699,593 ------------ ------------ Expenses: Costs of earned revenues, excluding depreciation 320,222,574 263,806,344 General and administrative 36,322,076 30,158,724 Depreciation and amortization 18,984,984 14,908,416 ------------ ------------ Total 375,529,634 308,873,484 ------------ ------------ Interest income, net 2,407,670 1,572,689 Other income, net 869,241 538,880 ------------ ------------ INCOME BEFORE INCOME TAXES 58,203,012 47,937,678 ------------ ------------ PROVISION FOR INCOME TAXES: Current 23,377,790 18,623,855 Deferred 116,103 368,461 ------------ ------------ Total 23,493,893 18,992,316 ------------ ------------ NET INCOME $ 34,709,119 $ 28,945,362 ============ ============ EARNINGS PER COMMON SHARE: Basic $ 0.82 $ 0.70 ============ ============ Diluted $ 0.81 $ 0.69 ============ ============ SHARES USED IN COMPUTING EARNINGS PER COMMON SHARE: Basic 42,120,423 41,355,245 ============ ============ Diluted 42,699,338 41,914,223 ============ ============
See notes to condensed consolidated financial statements--unaudited 5 6 DYCOM INDUSTRIES, INC.AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
FOR THE SIX MONTHS ENDED --------------------------------- JANUARY 27, JANUARY 29, 2001 2000 ------------- ------------- Increase (Decrease) in Cash and Equivalents from OPERATING ACTIVITIES: Net Income $ 34,709,119 $ 28,945,362 Adjustments to reconcile net cash provided by operating activities: Depreciation and amortization 18,984,984 14,908,416 Gain on disposal of assets (410,922) (275,983) Realized gain on marketable securities -- (20,724) Deferred income taxes 116,103 394,961 Change in assets and liabilities: Accounts receivable, net 20,059,079 (677,588) Unbilled revenues, net 23,306,481 (10,039,417) Other current assets 2,837,322 (4,234,579) Other assets 129,141 3,776,971 Accounts payable (13,884,206) 6,718,191 Customer advances (422,773) (5,574,190) Accrued self-insured claims and other liabilities (19,154,618) (2,017,502) Accrued income taxes (1,691,929) (1,601,659) ------------- ------------- Net cash inflow from operating activities 64,577,781 30,302,259 ------------- ------------- INVESTING ACTIVITIES: Capital expenditures (27,688,845) (20,735,207) Proceeds from sale of assets 972,018 1,117,514 Acquisition expenditures, net of cash acquired (59,464,435) (27,654,288) ------------- ------------- Net cash outflow from investing activities (86,181,262) (47,271,981) ------------- ------------- FINANCING ACTIVITIES: Principal payments on notes payable and bank lines-of-credit (4,035,655) (2,030,262) Exercise of stock options 2,088,467 1,446,214 ------------- ------------- Net cash outflow from financing activities (1,947,188) (584,048) ------------- ------------- NET CASH OUTFLOW FROM ALL ACTIVITIES (23,550,669) (17,553,770) CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 105,701,950 97,995,283 ------------- ------------- CASH AND EQUIVALENTS AT END OF PERIOD $ 82,151,281 $ 80,441,513 ============= =============
See notes to condensed consolidated financial statements--unaudited. 6 7 DYCOM INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) (Unaudited)
FOR THE SIX MONTHS ENDED -------------------------------------- JANUARY 27, JANUARY 29, 2001 2000 ---------------- --------------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW AND NON-CASH INVESTING AND FINANCING ACTIVITIES: Cash paid during the period for: Interest $ 505,945 $ 562,087 Income taxes 28,888,813 21,123,716 Property and equipment acquired and financed with: Notes payable $ 280,280 $ -- Income tax benefit from stock options exercised $ 3,819,860 $ 1,065,402 During the six months ended January 27, 2001, the company acquired all of the capital stock of Cable Connectors, Inc., Schaumburg Enterprises, Inc., Point to Point Communications, Inc. and Stevens Communications, Inc. at a cost of $85.2 million. In conjunction with these acquisitions, assets acquired and liabilities assumed were as follows: Fair market value of assets acquired, including goodwill $96,639,128 Consideration paid (including $17.0 million of common stock issued) 85,235,895 ----------- Fair market value of liabilities assumed $11,403,233 =========== During the six months ended January 29, 2000, the Company acquired all of the capital stock of Lamberts' Cable Splicing Company, C-2 Utility Contractors, Inc., and Artoff Construction Company, Inc. at a cost of $40.8 million. In conjunction with these acquisitions, assets acquired and liabilities assumed were as follows: Fair market value of assets acquired, including goodwill $42,888,925 Consideration paid (including $10.5 million of common stock issued) 40,754,577 ----------- Fair market value of liabilities assumed $ 2,134,348 ===========
See notes to condensed consolidated financial statements--unaudited. 7 8 1. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--Unaudited The accompanying condensed consolidated balance sheets of Dycom Industries, Inc. ("Dycom" or the "Company") as of January 27, 2001 and July 29, 2000, and the related condensed consolidated statements of operations for the three and six months ended January 27, 2001 and January 29, 2000 and the condensed consolidated statements of cash flows for the six months ended January 27, 2001 and January 29, 2000 reflect all normal recurring adjustments which are, in the opinion of management, necessary for a fair presentation of such statements. The results of operations for the three and six months ended January 27, 2001 are not necessarily indicative of the results which may be expected for the entire year. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION -- The condensed consolidated financial statements are unaudited. These statements include Dycom Industries, Inc. and its subsidiaries, all of which are wholly owned. During fiscal 2000, the Company acquired Lamberts' Cable Splicing Company ("LCS"), C-2 Utility Contractors, Inc. ("C-2"), and Artoff Construction Company, Inc. ("ACC"). During fiscal 2001, the Company acquired Cable Connectors, Inc. ("CAB"), Schaumburg Enterprises, Inc. ("SEI"), Point to Point Communications, Inc. ("PTP"), and Stevens Communications, Inc. ("SCI"). Each of these transactions was accounted for using the purchase method of accounting. The Company's results include the results of LCS, C-2, ACC, CAB, SEI, PTP, and SCI from their respective acquisition dates until January 27, 2001. On March 8, 2000, Niels Fugal Sons Company ("NFS") merged with the Company in an exchange of common stock. This transaction was accounted for as a pooling of interests. Accordingly, the Company's condensed consolidated financial statements include the results of NFS for all periods presented. See Note 4. The Company's operations consist primarily of providing specialty contracting services to the telecommunications industries. All material intercompany accounts and transactions have been eliminated. CHANGE IN FISCAL YEAR -- On September 29, 1999, the Company changed to a fiscal year with 52 or 53 week periods ending on the Saturday nearest July 31. This Quarterly Report presents financial information for the first and second quarters of fiscal 2001, beginning July 30, 2000 and ending January 27, 2001. USE OF ESTIMATES -- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates and such differences may be material to the financial statements. Estimates are used in the Company's revenue recognition of work-in-process, allowance for doubtful accounts, self-insured claims liability, depreciation and amortization, and in the estimated lives of assets, including intangibles. REVENUE -- Income on short-term contracts is recognized as the related work is completed. Work-in-process on unit contracts is based on work performed but not billed. Income on long-term contracts is recognized on the percentage-of-completion method based primarily on the ratio of contract costs incurred to date to total estimated contract costs. At the time a loss on a contract becomes known, the entire amount of the estimated ultimate loss is accrued. "Costs and estimated earnings in excess of billings" represents the excess of contract revenues recognized under the percentage-of-completion method of accounting for long-term contracts and work-in-process on unit contracts over billings to date. For those contracts in which billings exceed contract revenues recognized to date, such excesses are included in the caption "billings in excess of costs and estimated earnings." CASH AND EQUIVALENTS -- Cash and equivalents include cash balances on deposit in banks, overnight repurchase agreements, certificates of deposit, commercial paper, and various other financial instruments having an original maturity of three months or less. For purposes of the condensed consolidated statements of cash flows, the Company considers these amounts to be cash equivalents. INVENTORIES -- Inventories consist primarily of materials and supplies used in the Company's business. The Company values these inventories using the first-in, first-out method. The Company periodically reviews the appropriateness of the carrying value of its inventories. The Company records a reserve for obsolescence if inventories are not expected to be used in the Company's normal course of business. No reserve has been recorded in the periods presented. PROPERTY AND EQUIPMENT -- Property and equipment is stated at cost. Depreciation and amortization is computed over the estimated useful life of the assets utilizing the straight-line method. The estimated useful service lives of the assets are: buildings--20-31 years; leasehold improvements--the term of the respective lease or the estimated useful life of the improvements, whichever is shorter; vehicles--3-7 years; equipment and machinery--2-10 years; and furniture and fixtures--3-10 years. Maintenance and repairs are expensed as incurred; expenditures that enhance the value of the property or extend its useful life are capitalized. When assets are sold or retired, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss is included in income. 8 9 INTANGIBLE ASSETS -- The excess of the purchase price over the fair market value of the tangible net assets of acquired businesses (goodwill) is amortized on a straight-line basis over 20-40 years. The appropriateness of the carrying value of goodwill is reviewed periodically by the Company at the subsidiary level. An impairment loss is recognized when the projected future cash flows are less than the carrying value of goodwill. No impairment loss has been recognized in the periods presented. As of January 27, 2001 and July 29, 2000, net intangible assets include $144.7 million and $85.4 million of net goodwill, respectively. Amortization expense was $2,601,123 and $1,799,275 for the six months ended January 27, 2001 and January 29, 2000. The intangible assets are net of accumulated amortization of $9,153,213 at January 27, 2001 and $6,552,090 at July 29, 2000, respectively. SELF-INSURED CLAIMS LIABILITY -- The Company retains the risk, up to certain limits, for automobile and general liability, workers' compensation, and employee group health claims. A liability for unpaid claims and the associated claim expenses, including incurred but not reported losses, is actuarially determined and reflected in the condensed consolidated financial statements as an accrued liability. The self-insured claims liability includes incurred but not reported losses of $6,480,095 and $5,161,379 at January 27, 2001 and July 29, 2000, respectively. The determination of such claims and expenses and the appropriateness of the related liability is periodically reviewed and updated. CUSTOMER ADVANCES -- Under the terms of certain contracts, the Company receives advances from customers that may be offset against future billings by the Company. The Company has recorded these advances as liabilities and has not recognized any revenue for these advances. INCOME TAXES -- The Company and its subsidiaries file a consolidated federal income tax return. Deferred income taxes are provided for the temporary differences between the financial reporting basis and the tax basis of the Company's assets and liabilities. PER SHARE DATA -- Earnings per common share-basic is computed using the weighted-average common shares outstanding during the period. Earnings per common share-diluted is computed using the weighted-average common shares outstanding during the period and the dilutive effect of common stock options, using the treasury stock method. See Note 3. STOCK SPLITS -- On January 20, 2000, the Board of Directors declared a 3-for-2 split of the Company's common stock, effected in the form of a stock dividend paid on February 16, 2000 to stockholders of record on February 2, 2000. All agreements concerning stock options provide for the issuance of additional shares due to the declaration of the stock split. An amount equal to the par value of the common shares issued plus cash paid in lieu of fractional shares was transferred from capital in excess of par value to the common stock account. All references to number of shares and to per share information have been adjusted to reflect the stock split on a retroactive basis. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS -- In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 133 "Accounting for Derivative Instruments and Hedging Activities" which establishes standards for the accounting and reporting of derivative instruments, including certain derivative instruments embedded in other contracts, (collectively referred to as derivatives) and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. SFAS No. 133 did not have a material impact on the financial statements of the Company. In December 1999, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin ("SAB") No. 101 "Revenue Recognition" which provides guidance on the recognition, presentation and disclosure of revenue in financial statements filed with the SEC. SAB No. 101 is applicable beginning with our fourth quarter fiscal 2001 consolidated financial statements. Based on our current analysis of SAB No. 101, management does not believe it will have an impact on the financial results of the Company. RECLASSIFICATION -- Certain prior year amounts have been reclassified in order to conform to current year presentation. 9 10 3. COMPUTATION OF PER SHARE EARNINGS The following is a reconciliation of the numerators and denominators of the basic and diluted per share computation as required by SFAS 128.
FOR THE THREE MONTHS ENDED ---------------------------- JANUARY 27, JANUARY 29, 2001 2000 ----------- ----------- Net income available to common stockholders (numerator) $13,091,089 $14,396,799 =========== =========== Weighted-average number of common shares (denominator) 42,249,501 41,447,696 =========== =========== Earnings per common share-basic $ 0.31 $ 0.35 =========== =========== Weighted-average number of common shares 42,249,501 41,447,696 Potential common stock arising from stock options 481,988 564,040 ----------- ----------- Total shares (denominator) 42,731,489 42,011,736 =========== =========== Earnings per common share-diluted $ 0.31 $ 0.34 =========== ===========
FOR THE SIX MONTHS ENDED ---------------------------- JANAURY 27, JANUARY 29, 2001 2000 ----------- ----------- Net income available to common stockholders (numerator) $34,709,119 $28,945,362 =========== =========== Weighted-average number of common shares (denominator) 42,120,423 41,355,245 =========== =========== Earnings per common share-basic $ 0.82 $ 0.70 =========== =========== Weighted-average number of common shares 42,120,423 41,355,245 Potential common stock arising from stock options 578,915 558,978 ----------- ----------- Total shares (denominator) 42,699,338 41,914,223 =========== =========== Earnings per common share-diluted $ 0.81 $ 0.69 =========== ===========
4. ACQUISITIONS In August 1999, the Company acquired Lamberts' Cable Splicing Company ("LCS") for $10.0 million in cash and 73,309 shares of Dycom common stock for an aggregate purchase price of $12.4 million before various transaction costs. Located in Rocky Mount, North Carolina, LCS's primary business is the construction and maintenance of telecommunications systems under master service agreements. In January 2000, the Company acquired C-2 Utility Contractors, Inc. ("C-2") for $18.0 million in cash and 247,555 shares of Dycom common stock for an aggregate purchase price of $25.2 million before various transaction costs and Artoff Construction Company ("ACC") for $2.2 million in cash and 30,081 shares of Dycom common stock for an aggregate purchase price of $3.0 million before various transaction costs. Located in Eugene, Oregon, C-2's primary business is the construction and maintenance of telecommunications systems under master service agreements. Located in Gold Hill, Oregon, ACC's primary business is the construction and maintenance of telecommunications systems. 10 11 In October 2000, the Company acquired Cable Connectors, Inc. ("CAB") for $3.2 million in cash and 13,286 shares of Dycom common stock for an aggregate purchase price of $3.8 million before various transaction costs. In December 2000, the Company acquired Schaumburg Enterprises, Inc. ("SEI") for $3.0 million in cash and 15,518 shares of Dycom common stock for an aggregate purchase price of $3.6 million before various transaction costs. In December 2000, the Company acquired Point to Point Communications, Inc. ("PTP") for $52.2 million in cash and 312,312 shares of Dycom common stock for an aggregate purchase price of $65.3 million before various transaction costs. In January 2001, the Company acquired Stevens Communications, Inc. ("SCI") for $9.9 million in cash and 76,471 shares of Dycom common stock for an aggregate purchase price of $12.5 million before various transaction costs. The Company has recorded the acquisitions of LCS, C-2, ACC, CAB, SEI, PTP, and SCI using the purchase method of accounting. All acquired goodwill associated with these acquisitions is being amortized over a period of 20 years. The operating results of LCS, C-2, ACC, CAB, SEI, PTP and SCI are included in the accompanying condensed consolidated financial statements from the date of purchase. The following unaudited pro forma summary presents the consolidated results of operations of the Company as if the acquisitions of LCS, C-2, ACC, CAB, SEI, PTP, and SCI had occurred on August 1, 1999: FOR THE SIX MONTHS ENDED ------------------------------ JANUARY 27, JANUARY 29, 2001 2000 ------------ ------------ Total revenues $470,382,758 $399,742,714 Income before income taxes 66,335,068 53,004,692 Net income 39,536,886 31,470,961 Earnings per share: Basic $ 0.93 $ 0.75 Diluted $ 0.92 $ 0.74 On March 8, 2000, the Company consummated the acquisition of NFS. The Company issued 2,726,210 shares of common stock in exchange for all the outstanding capital stock of NFS. Located in Pleasant Grove, Utah, NFS's primary business is providing telecommunication construction services throughout the Western United States. Dycom has accounted for the acquisition as a pooling-of-interests and, accordingly, the Company's historical condensed financial statements include the results of NFS for all periods presented. 11 12 Prior to the acquisition, NFS used a fiscal year ending January 31 and as of March 8, 2000 adopted Dycom's fiscal year. All periods presented reflect the adoption of such fiscal year end as of the beginning of the period. The combined and separate results of Dycom and NFS for the three and six month periods ending January 27, 2001 and January 29, 2000, respectively, are as follows:
DYCOM NFS COMBINED ------------------ ----------------- -------------- Three month period ended January 27, 2001 Total revenues $195,765,314 $ -- $195,765,314 Net income $ 13,091,089 $ -- $ 13,091,089 January 29, 2000 Total revenues $158,381,266 $ 18,831,215 $177,212,481 Net income $ 11,996,560 $ 2,400,239 $ 14,396,799 Six month period ended January 27, 2001 Total revenues $430,455,735 $ -- $430,455,735 Net income $ 34,709,119 $ -- $ 34,709,119 January 29, 2000 Total revenues $319,285,541 $ 35,414,052 $354,699,593 Net income $ 24,459,791 $ 4,485,571 $ 28,945,362
In connection with each of the acquisitions referred to above the Company entered into employment contracts with certain executive officers of each of the acquired companies varying in length from three to six years. 5. ACCOUNTS RECEIVABLE Accounts receivable consist of the following:
JANUARY 27, JULY 29, 2001 2000 ------------ ------------ Contract billings $128,150,927 $134,740,946 Retainage 12,228,662 11,835,425 Other receivables 2,258,979 1,835,560 ------------ ------------ Total 142,638,568 148,411,931 Less allowance for doubtful accounts 4,030,186 4,120,232 ------------ ------------ Accounts receivable, net $138,608,382 $144,291,699 ============ ============
12 13 For the periods indicated, the allowance for doubtful accounts changed as follows:
FOR THE THREE MONTHS ENDED -------------------------------- JANUARY 27, JANUARY 29, 2001 2000 ----------- ----------- Allowance for doubtful accounts at 10/28/2000 and 10/30/1999, respectively $ 4,388,689 $ 3,521,902 Allowance for doubtful account balances from acquisitions 600,000 -- Reductions charged against bad debt expense (215,002) (31,212) Amounts charged against the allowance, net of recoveries (743,501) (67,071) ----------- ----------- Allowance for doubtful accounts $ 4,030,186 $ 3,423,619 =========== ===========
FOR THE SIX MONTHS ENDED -------------------------------- JANUARY 27, JANUARY 29, 2001 2000 ----------- ----------- Allowance for doubtful accounts at 7/29/2000 and 7/31/1999, respectively $ 4,120,232 $ 4,129,280 Allowance for doubtful account balances from acquisitions 600,000 -- Additions (Reductions) charged to (against) bad debt expense 63,310 (339,146) Amounts charged against the allowance, net of recoveries (753,356) (366,515) ----------- ----------- Allowance for doubtful accounts $ 4,030,186 $ 3,423,619 =========== ===========
As of January 27, 2001 and July 29, 2000, the Company expected to collect all of its retainage balances within twelve months. 6. COSTS AND ESTIMATED EARNINGS ON CONTRACTS IN PROGRESS The accompanying condensed consolidated balance sheets include costs and estimated earnings on contracts in progress, net of progress billings as follows:
JANUARY 27, JULY 29, 2001 2000 ----------- ----------- Costs incurred on contracts in progress $29,981,999 $48,037,774 Estimated earnings thereon 8,353,513 13,855,362 ----------- ----------- 38,335,512 61,893,136 Less billings to date 3,251,683 9,598,519 ----------- ----------- $35,083,829 $52,294,617 =========== =========== Included in the accompanying consolidated balance sheets under the captions: Costs and estimated earnings in excess of billings $37,666,008 $52,301,022 Billings in excess of costs and estimated earnings 2,582,179 6,405 ----------- ----------- $35,083,829 $52,294,617 =========== ===========
13 14 As stated in Note 1, the Company performs services under short-term, unit based and long-term, percentage of completion contracts. The amounts presented above aggregate the effects of these two types of contracts. 7. PROPERTY AND EQUIPMENT The accompanying condensed consolidated balance sheets include the following property and equipment: JANUARY 27, JULY 29, 2001 2000 ------------ ------------ Land $ 3,410,467 $ 3,373,037 Buildings 6,444,062 6,330,683 Leasehold improvements 1,690,482 1,574,013 Vehicles 121,670,656 102,489,730 Equipment and machinery 78,630,385 70,501,903 Furniture and fixtures 11,558,813 10,401,809 ------------ ------------ Total 223,404,865 194,671,175 Less accumulated depreciation 106,998,796 93,578,313 ------------ ------------ Property and equipment, net $116,406,069 $101,092,862 ============ ============ Maintenance and repairs of property and equipment amounted to $2,985,974 and $2,690,101 for the three months ended January 27, 2001 and January 29, 2000, respectively. Maintenance and repairs of property and equipment amounted to $7,079,257 and $5,589,971 for the six months ended January 27, 2001 and January 29, 2000, respectively. 8. NOTES PAYABLE Notes payable are summarized by type of borrowings as follows: JANUARY 27, JULY 29, 2001 2000 ----------- ----------- Bank Credit Agreement - Term Loan $ 9,750,000 $10,750,000 Capital lease obligations 9,690 458 Equipment loans 853,863 950,156 ----------- ----------- Total 10,613,553 11,700,614 Less current portion 2,718,790 2,594,413 ----------- ----------- Notes payable - non-current $ 7,894,763 $ 9,106,201 =========== =========== On April 27, 1999, the Company signed an amendment to its bank credit agreement increasing the total facility to $175.3 million and extending the facility's maturity to April 2002. The agreement was further amended on December 12, 2000 to reduce the interest rates, eliminate the collateral requirement and streamline certain administrative covenants. The bank credit agreement provides for (i) a $17.5 million standby letter of credit facility, (ii) a $50.0 million 14 15 revolving working capital facility; (iii) a $12.8 million five-year term loan, and (iv) a $95.0 million equipment acquisition and small business purchase facility. The Company is required to pay an annual non-utilization fee equal to 0.15% of the unused portion of the revolving working capital and the equipment acquisition and small business purchase facilities. In addition, the Company pays annual agent and facility commitment fees of $15,000 and $135,000, respectively. The Company had total outstanding standby letters of credit of $14.0 million at January 27, 2001, substantially all of which are letters of credit issued to the Company's insurance administrators as part of its self-insurance program. The revolving working capital facility bears interest, at the option of the Company, at the bank's prime interest rate minus 1.25% or LIBOR plus 1.125%. As of January 27, 2001, there was no outstanding balance on this facility resulting in an available borrowing capacity of $50.0 million. The outstanding loans under the equipment acquisition and small business purchase facility bear interest, at the option of the Company, at the bank's prime interest rate minus 0.875% or LIBOR plus 1.375%. The advances under the equipment acquisition and small business purchase facility are converted to term loans with maturities not to exceed 48 months. The outstanding principal on the equipment term loans is payable in monthly installments through February 2001. As of January 27, 2001, there was no outstanding balance on this facility resulting in an available borrowing capacity of $71.1 million. The available borrowing capacity on this nonrevolving facility has been reduced due to prior borrowings which have been repaid in full. The Term Loan bears interest, at the option of the Company, at the bank's prime interest rate minus 0.625% or LIBOR plus 1.625%. Principal and interest is payable in semiannual installments through April 2004. The amount outstanding on the term loan was $9.8 million at January 27, 2001 and bore interest at the rate of 8.5%. The bank credit agreement contains restrictions which, among other things, requires maintenance of certain financial ratios and covenants, restricts encumbrances of assets and creation of indebtedness, and limits the payment of cash dividends. Cash dividends are limited to 50% of each fiscal year's after-tax profits. No cash dividends were paid during the periods presented. At January 27, 2001, the Company was in compliance with all financial covenants and conditions. All obligations under the amended credit agreement are unconditionally guaranteed by the Company's subsidiaries. In addition to the borrowings under the bank credit agreement, certain subsidiaries have outstanding obligations under capital leases and other equipment financing arrangements. The obligations are payable in monthly installments expiring at various dates through April 2004. Interest costs incurred on notes payable, all of which were expensed during the three months ended January 27, 2001 and January 29, 2000 were $218,141 and $256,961, respectively. Interest costs for the six months ended January 27, 2001 and January 29, 2000 were $480,299 and $465,728, respectively. The interest rates on notes payable under the bank credit agreement are at current rates and, therefore, the carrying amount approximates fair value. 9. COMMITMENTS AND CONTINGENCIES The federal employment tax returns for one of the Company's subsidiaries are currently being audited by the Internal Revenue Service ("IRS"). As a result of the audit, the Company received an examination report from the IRS in October 1999 proposing a $6.1 million tax deficiency. At issue, according to the examination report, is the taxpayer's payment of certain employee allowances for the years 1995 through 1997 without reporting such payment as wages on its employees' W-2 forms. The Company intends to vigorously defend its position in this matter and believes it has a number of legal defenses available to it, which could reduce the proposed tax deficiency, although there can be no assurance in this regard. The Company believes that the ultimate disposition of this matter will not have a material adverse effect on its consolidated financial statements. In the normal course of business, certain subsidiaries of the Company have pending and unasserted claims. It is the opinion of the Company's management, based on the information available at this time, that these claims will not have a material adverse impact on the Company's consolidated financial statements. In the normal course of business, the Company enters into employment agreements with certain members of the Company's executive management. It is the opinion of the Company's management based on the information available at this time, that these agreements will not have a material adverse impact on the Company's consolidated financial statements. 10. SEGMENT INFORMATION The Company operates in one reportable segment as a specialty contractor. The Company provides engineering, placement and maintenance of aerial, underground, and buried fiber-optic, coaxial and copper cable systems owned by local and long 15 16 distance communications carriers, and cable television multiple system operators. Additionally, the Company provides similar services related to the installation of integrated voice, data, and video local and wide area networks within office buildings and similar structures and also provides underground locating services to various utilities and provides construction and maintenance services to electrical utilities. Each of these services is provided by various Company subsidiaries which provide management with monthly financial statements. All of the Company's subsidiaries have been aggregated into one reporting segment due to their similar customer bases, products and production methods, and distribution methods. The following table presents information regarding annual contract revenues by type of customer:
FOR THE THREE MONTHS ENDED ------------------------------------ JANUARY 27, JANUARY 29, 2001 2000 ------------ ------------ Telecommunications $183,291,798 $162,577,091 Electrical utilities 3,691,257 6,437,056 Various customers - Utility line locating 8,782,259 8,198,334 ------------ ------------ Total contract revenues $195,765,314 $177,212,481 ============ ============
FOR THE SIX MONTHS ENDED ------------------------------------ JANUARY 27, JANUARY 29, 2001 2000 ------------ ------------ Telecommunications $403,892,323 $321,895,917 Electrical utilities 7,879,975 13,848,475 Various customers - Utility line locating 18,683,437 18,955,201 ------------ ------------ Total contract revenues $430,455,735 $354,699,593 ============ ============
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-interest, the condensed consolidated financial statements and related notes, included elsewhere in this Form 10-Q, have been restated to include the operations of NFS for all periods presented. Results Of Operations The following table sets forth, as a percentage of contract revenues earned, certain items in the Company's Condensed Consolidated Statements of Operations for the periods indicated:
FOR THE THREE MONTHS ENDED ---------------------------- JANUARY 27, JANUARY 29, 2001 2000 ----------- ----------- Contract revenues earned 100.0% 100.0% Expenses: Cost of earned revenues, excluding depreciation 75.2 74.3 General and administrative 9.3 8.7 Depreciation and amortization 5.0 4.2 ------ ------ Total 89.5 87.2 Interest income, net 0.6 0.5 Other income, net 0.3 0.2 ------ ------ Income before income taxes 11.4 13.5 ------ ------ Provision for income taxes 4.6 5.4 ------ ------ Net Income 6.8% 8.1% ====== ======
17 18
FOR THE SIX MONTHS ENDED ------------------------------ JANUARY 27, JANUARY 29, 2001 2000 ----------- ------------ Contract revenues earned 100.0% 100.0% Expenses: Cost of earned revenues, excluding depreciation 74.4 74.4 General and administrative 8.4 8.5 Depreciation and amortization 4.4 4.2 ------ ------ Total 87.2 87.1 ------ ------ Interest income, net 0.6 0.4 Other income, net 0.2 0.2 ------ ------ Income before income taxes 13.6 13.5 ------ ------ Provision for income taxes 5.5 5.4 ------ ------ Net Income 8.1% 8.1% ====== ======
REVENUES. Contract revenues increased $18.6 million, or 10.5%, to $195.8 million in the quarter ending January 27, 2001 from $177.2 million in the quarter ended January 29, 2000. Of this increase, $20.7 million was attributable to specialty contracting services provided to telecommunications companies, an increase of $0.6 million was attributable to underground utility locating services provided to various utilities, and a decrease of $2.7 million was attributable to construction and maintenance services provided to electrical utilities. During the quarter ended January 27, 2001, the Company recognized $183.3 of contract revenues from telecommunications services as compared to $162.6 million for the quarter ended January 29, 2000, an increase of 12.7%. The increase in the Company's telecommunication's service revenue is primarily from acquisitions that were consummated subsequent to January 29, 2000 and acquisitions that were not included for the entire quarter ended January 29, 2000. Excluding the effect of these acquisitions the Company's revenues from telecommunications services grew by 2.9%. Results during the current quarter were impacted by lower than expected demand from several cable customers. The Company is unable to predict when demand from cable customers will pick up, but expects that this condition will continue throughout the following quarter. The Company recognized contract revenues of $3.7 million from electric construction and maintenance services in the quarter ended January 27, 2001 as compared to $6.4 million in the quarter ended January 29, 2000. The Company recognized contract revenues of $8.8 million from underground utility locating services in the quarter ended January 27, 2001 as compared to $8.2 million in the quarter ended January 29, 2000. Acquisitions subsequent to January 29, 2000 contributed $11.3 million of contract revenues during the quarter ended January 27, 2001, primarily in contract revenues from telecommunications services. Contract revenues from multi-year master service agreements and other long-term agreements represented 78.8% of total contract revenues in the quarter ended January 27, 2001 as compared to 76.7% in the quarter ended January 29, 2000, of which contract revenues from multi-year master service agreements represented 49.8% of total contract revenues in the quarter ended January 27, 2001 as compared to 48.6% in the quarter ended January 29, 2000. Contract revenues increased $75.8 million, or 21.4%, to $430.5 million in the six months ending January 27, 2001 from $354.7 million in the six months ended January 29, 2000. Of this increase, $82.0 million was attributable to specialty contracting services provided to telecommunications companies, a decrease of $0.3 million was attributable to underground utility locating services provided to various utilities, and a decrease of $5.9 million was attributable to construction and maintenance services provided to electrical utilities. During the six months ended January 27, 2001, the Company recognized $403.9 of contract revenues from telecommunications services as compared to $321.9 million for the six months ended January 29, 2000. The increase in the Company's telecommunications service revenues primarily occurred during the first three months of the six-month period. Revenues for the second three months were up 2.9% from the prior year when the effects of acquisitions are removed. The Company recognized contract revenues of $7.9 million from electric construction and maintenance services in the six months ended January 27, 2001 as compared to 18 19 $13.8 million in the six months ended January 29, 2000. The Company recognized contract revenues of $18.7 million from underground utility locating services in the six months ended January 27, 2001 as compared to $19.0 million in the six months ended January 29, 2000. Acquisitions subsequent to January 29, 2000 contributed $15.2 million of contract revenues during the six months ended January 27, 2001, primarily in contract revenues from telecommunications services. Contract revenues from multi-year master service agreements and other long-term agreements represented 75.1% of total contract revenues in the six months ended January 27, 2001 as compared to 76.3% in the six months ended January 29, 2000, of which contract revenues from multi-year master service agreements represented 45.7% of total contract revenues in the six months ended January 27, 2001 as compared to 46.0% in the six months ended January 29, 2000. COSTS OF EARNED REVENUES. Costs of earned revenues increased $15.5 million to $147.2 million in the quarter ended January 27, 2001 from $131.7 million in the quarter ended January 29, 2000, and increased as a percentage of contract revenues to 75.2% from 74.3%. Direct labor and equipment costs increased slightly as a percentage of contract revenues while direct materials and subcontractor costs declined slightly as a percentage of contract revenues.. Costs of earned revenues increased $56.4 million to $320.2 million in the six months ended January 27, 2001 from $263.8 million in the six months ended January 29, 2000, and remained the same as a percentage of contract revenues at 74.4%. Direct labor and equipment costs declined slightly as a percentage of contract revenues as a result of improved productivity and the utilization of more modern equipment. GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses increased $2.8 million to $18.2 million in the quarter ended January 27, 2001 from $15.3 million in the quarter ended January 29, 2000. The increase in general and administrative expenses for the quarter ended January 27, 2001, as compared to the quarter ended January 29, 2000, was primarily attributable to increases in salaries, employee benefits, and payroll taxes of $2.6 million and other general and administrative expense of $0.4 million. General and administrative expenses increased as a percentage of contract revenues to 9.3% from 8.7% in the quarter ended January 27, 2001 as compared to the quarter ended January 29, 2000. General and administrative expenses increased $6.1 million to $36.3 million in the six months ended January 27, 2001 from $30.2 million in the six months ended January 29, 2000. The increase in general and administrative expenses for the six months ended January 27, 2001, as compared to the six months ended January 29, 2000, was primarily attributable to increases in salaries, employee benefits, and payroll taxes of $4.8 million and other general and administrative expense of $0.9 million. General and administrative expenses decreased as a percentage of contract revenues to 8.4% from 8.5% in the six months ended January 27, 2001 as compared to the six months ended January 29, 2000. DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased $2.5 million to $9.9 million in the quarter ending January 27, 2001 as compared to $7.4 million in the quarter ended January 29, 2000, and increased as a percentage of contract revenues to 5.0% from 4.2%. The $2.5 million increase reflects the depreciation of additional capital expenditures incurred in the ordinary course of business and amortization of goodwill related to acquisitions made in 2001 and 2000, respectively. Depreciation and amortization increased $4.0 million to $19.0 million in the six months ending January 27, 2001 as compared to $15.0 million in the six months ended January 29, 2000, and increased as a percentage of contract revenues to 4.4% from 4.2%. The $4.0 million increase reflects the depreciation of additional capital expenditures incurred in the ordinary course of business and amortization of goodwill related to acquisitions made in 2001 and 2000, respectively. INTEREST INCOME, NET. Interest income, net increased $0.3 million to $1.1 million in the quarter ended January 27, 2001 from $0.8 million in the quarter ended January 29, 2000. The increase was primarily due to increased cash and cash equivalents. Interest income, net increased $0.8 million to $2.4 million in the six months ended January 27, 2001 from $1.6 million in the six months ended January 29, 2000. The increase was primarily due to increased cash and equivalents. INCOME TAXES. The provision for income taxes was $9.1 million in the three months ended January 27, 2001 as compared to $9.5 million in the same period last year. The Company's effective tax rate was 41.0% in the three months ended January 27, 2001 as compared to 39.7% in the same period last year. The effective tax rate differs from the statutory rate due to state income taxes, the amortization of intangible assets that do not provide a tax benefit, and other non-deductible expenses for tax purposes. The provision for income taxes was $23.5 million in the six months ended January 27, 2001 as compared to $19.0 million in the same period last year. The Company's effective tax rate was 40.4% in the six months ended January 27, 2001 as compared to 39.6% in the same period last year. The effective tax rate differs from the statutory rate due to state income taxes, the amortization of intangible assets that do not provide a tax benefit, and other non-deductible expenses for tax purposes. 19 20 Liquidity and Capital Resources The Company's needs for capital are attributable primarily to its needs for equipment to support its contractual commitments to customers and its needs for working capital sufficient for general corporate purposes. Capital expenditures have been financed by operating and capital leases, bank borrowings and internal cash flow. The Company's sources of cash have historically been from operating activities, equity offerings, bank borrowings, and from proceeds arising from the sale of idle and surplus equipment and real property. To the extent that the Company seeks to grow by acquisitions that involve consideration other than Company stock, the Company's capital requirements may increase, although the Company is not currently subject to any commitments or obligations with respect to any acquisitions. For the six months ended January 27, 2001, net cash provided by operating activities was $64.6 million compared to $30.3 million for the six months ended January 29, 2000. Net income and non-cash charges are the primary sources of operating cash flow. Working capital items generated $11.2 million of operating cash flow for the six-month period ended January 27, 2001 principally through a decrease in accounts receivable, net and unbilled revenues, net offset by a decrease in accounts payable and other accrued liabilities. In the six months ended January 27, 2001, net cash used in investing activities was $86.2 million as compared to $47.3 million for the same period last year. For the six months ended January 27, 2001, capital expenditures of $27.7 million were for the normal replacement of equipment and purchases for the start up of certain long-term contracts. In the six months ended January 27, 2001, net cash utilized by financing activities was $1.9 million, which was primarily attributable to the proceeds from the exercise of stock options net of principal payments on long-term notes. On April 27, 1999, the Company signed an amendment to its bank credit agreement increasing the total facility to $175.3 million and extending the facility's maturity to April 2002. The agreement was further amended on December 12, 2000 to reduce the interest rates, eliminate the collateral requirement and streamline certain administrative covenants. The bank credit agreement provides for (i) a $17.5 million standby letter of credit facility, (ii) a $50.0 million revolving working capital facility, (iii) a $12.8 million five-year term loan, and (iv) a $95.0 million equipment acquisition and small business purchase facility. The Company is required to pay an annual non-utilization fee equal to 0.15% of the unused portion of the revolving working capital and the equipment acquisition and small business purchase facilities. In addition, the Company pays annual agent and facility commitment fees of $15,000 and $135,000, respectively. The Company had total outstanding standby letters of credit of $14.0 million at January 27, 2001, substantially all of which are letters of credit issued to the Company's insurance administrators as part of its self-insurance program. The revolving working capital facility bears interest, at the option of the company, at the bank's prime interest rate minus 1.25% or LIBOR plus 1.125%. As of January 27, 2001, there was no outstanding balance on this facility resulting in an available borrowing capacity of $50.0 million. The outstanding loans under the equipment acquisition and small business purchase facility bear interest, at the option of the Company, at the bank's prime interest rate minus 0.875% or LIBOR plus 1.375%. The advances under the equipment acquisition and small business purchase facility are converted to term loans with maturities not to exceed 48 months. The outstanding principal on the equipment term loans is payable in quarterly installments through February 2001. There were no amounts outstanding on the equipment acquisition and small business purchase facility at January 27, 2001, resulting in an available borrowing capacity of $71.1 million. The available borrowing capacity on this nonrevolving facility has been reduced due to prior borrowings which have been repaid in full. The Term Loan bears interest, at the option of the Company, at the bank's prime interest rate minus 0.625% or LIBOR plus 1.625%. Principal and interest is payable in semiannual installments through April 2004. The amount outstanding on the term loan was $9.8 million at January 27, 2001 and bore interest at the rate of 8.5%. The bank credit agreement requires the Company to maintain certain financial covenants and conditions, as well as restricting the encumbrances of assets and the creation of additional indebtedness and limits the payment of cash dividends. No cash dividends were paid during the periods presented. At January 27, 2001, the Company was in compliance with all covenants and conditions under the credit agreement. The Company believes its capital resources, together with existing cash balances, to be sufficient to meet its financial obligations, including the scheduled debt payments under the amended bank credit agreement and operating lease commitments, and to support the Company's normal replacement of equipment at its current level of business for at least the next twelve months. The Company's future operating results and cash flows may be affected by a number of factors including the Company's success in bidding on future contracts and the Company's continued ability to effectively manage controllable costs. 20 21 Special Note Concerning Forward-Looking Statements This Quarterly Report on Form 10-Q, including the Notes to Condensed Financial Statements and this Management's Discussion and Analysis of Financial Condition and Results of Operations, contains forward looking statements. The words "believe," "expect," "anticipate," "intends," "forecast," "project," and similar expressions identify forward looking statements. Such statements may include, but may not be limited to, the anticipated outcome of contingent events, including litigation, projections of revenues, income or loss, capital expenditures, plans for future operations, growth and acquisitions, financial needs or plans and the availability of financing, and plans relating to services of the Company, as well as assumptions relating to the foregoing. Such forward looking statements are within the meaning of that term in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company considered the provision of Financial Reporting Release No. 48, "Disclosure of Accounting Policies for Derivative Financial Instruments and Derivative Commodity Instruments, and disclosure of Quantitative and Qualitative Information about Market Risk Inherent in Derivative Financial Instruments, Other Financial Instruments and Derivative Commodity Instruments." The Company had no significant holdings of derivative financial or commodity instruments at January 27, 2001. A review of the Company's other financial instruments and risk exposures at that date revealed that the Company had exposure to interest rate risk. At January 27, 2000, the Company assessed the potential effect of this risk and concluded that near-term changes in interest rates should not materially effect the Company's financial position, results of operations, or cash flows. 21 22 PART II. OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS On December 18, 2000, the Company issued 15,518 and 312,312 shares, respectively, of the Company's common stock in connection with the acquisition of SEI and PTP. These shares were issued in a manner not involving a public offering and therefore did not require registration under the Securities Act of 1933, as amended, pursuant to Section 4(2) thereof. On January 8, 2001, the Company issued 76,471 shares of the Company's common stock in connection with the acquisition of SCI. These shares were issued in a manner not involving a public offering and therefore did not require registration under the Securities Act of 1933, as amended, pursuant to Section 4(2) thereof ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. An annual meeting of shareholders of the Company was held on November 28, 2000 to consider and take action on the election of two directors. The Company's nominee, Mr. Steven E. Nielsen, was elected. Mr. Nielsen received 26,897,065 votes for and votes abstained totaled 8,597,532. The Company's nominee, Mr. Ronald P. Younkin, was elected. Mr. Younkin received 35,285,668 votes for and votes abstained totaled 208,929. The directors whose terms continue after the annual meeting are Messrs. Louis W. Adams, Jr., Thomas G. Baxter, and Joseph M. Shell. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K: (a) Exhibits Exhibits furnished pursuant to the requirements of Form 10-Q: NUMBER DESCRIPTION - ------ ----------- (10) Amendment two to second amended and restated credit facility agreement dated as of April 27, 1999, dated December 12, 2000 (11) Statement re computation of per share earnings; All information required by Exhibit 11 is presented within Note 3 of the Company's condensed consolidated financial statements in accordance with the provisions of SFAS No. 128. (b) Reports On Form 8-K The following reports on Form 8-K were filed on behalf of the Registrant during the quarter ended January 27, 2001: (i) The press release announcing the execution of a stock purchase agreement with the stockholders of Point to Point Communications, Inc. Item Reported: 5 Date Filed: November 30, 2000 (ii) The press release announcing the completion of the Point to Point Communications, Inc. acquisition. Item Reported: 5 Date Filed: December 21, 2000 22 23 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DYCOM INDUSTRIES, INC. Registrant Date: March 13, 2001 /s/ Steven E. Nielsen ----------------------------------------- Steven E. Nielsen President and Chief Executive Officer Date: March 13, 2001 /s/ Richard L. Dunn ----------------------------------------- Richard L. Dunn Senior Vice President, Chief Financial Officer and Principal Accounting Officer 23 EX-10 2 g67583ex10.txt AMEND 2 TO 2ND AMENDED & RESTATED CREDIT AGRMT 1 EXHIBIT 10 AMENDMENT TWO TO SECOND AMENDED AND RESTATED CREDIT FACILITY AGREEMENT DATED AS OF APRIL 27, 1999 WHEREAS, Dresdner Bank Lateinamerika Aktiengesellschaft, Miami Agency as Agent and Lender, and First Union National Bank, Bank of America, NA, Wachovia Bank, N.A., Bank Leumi USA, Banque Sudameris, Miami Agency, and Israel Discount Bank Limited, Miami Agency, as Lenders, and Dycom Industries, Inc., as Borrower, are parties to the Second Amended and Restated Credit Facility Agreement dated 27 April 1999 and an Amendment to Second Amended and Restated Credit Facility Agreement dated as of the 7th day of July, 2000 ("Amendment One") (collectively, the "Agreement"); and WHEREAS, the parties have agreed to further modification of the Agreement; NOW, THEREFORE, in consideration of the mutual promises and good and valuable consideration, the sufficiency of which is hereby agreed, the parties agree as follows: 1. Section 2.02 (C) is hereby amended to read as follows: "(C) INTEREST RATE. Interest with respect to each Advance under the "B" Line of Credit shall accrue and be paid on the unpaid principal balance from time to time outstanding at one of the following rates elected by Borrower in the relevant Request for Advance: (1) the thirty (30), sixty (60), ninety (90) or one hundred eighty (180) day LIBOR rate effective on the date of such Advance according to the term for which the relevant Advance is requested, plus one and one-eighth of one percent (1.125%) per annum; or (2) the Prime Rate minus one and one-fourth of one per cent (1.250%) per annum, to change with each change in the Prime Rate. Interest based on the Prime Rate shall be computed on the basis of a year of 365 or 366 days, as the case may be. Interest based on LIBOR shall be computed on the basis of a 360-day year in each case for the actual number of days elapsed (i.e., 1/360 of a full year's interest shall accrue for each day any LIBOR based Advance is outstanding) and shall be due quarterly (or, if earlier, at maturity) and payable in arrears. Said interest rate shall never exceed the maximum rate allowed, from time to time, by law." 2. Section 2.03 (C) of the Agreement is hereby amended to read as follows: 2 "(C) INTEREST RATE. Interest on the "C" Term Loan shall accrue and be paid on the unpaid principal balance from time to time outstanding at one of the following rates elected by Borrower on the Closing Date: (1) the thirty (30), sixty (60), ninety (90) or one hundred eighty (180) day LIBOR rate effective on the Closing Date applicable to the thirty (30), sixty (60), ninety (90) or one hundred eighty (180) day initial Interest Period selected by Borrower, plus one and five-eighths of one per cent (1.625%) per annum, to change in accordance with the LIBOR Rate applicable to each relevant Interest Period elected by Borrower thereafter, provided, however, that, if at the end of any relevant Interest Period Borrower shall not make such an election on a timely basis, then the one hundred eighty (180) day rate shall be applicable; or (2) the Prime Rate minus five-eighths of one per cent (0.625%) per annum, to change with each change in the Prime Rate. Interest based on the Prime Rate shall be computed on the basis of a year of 365 or 366 days, as the case may be. Interest based on LIBOR shall be computed on the basis of a 360-day year in each case for the actual number of days elapsed (i.e., 1/360 of a full year's interest shall accrue for each day any LIBOR based Advance is outstanding) and shall be due quarterly (or, if earlier, at maturity) and payable in arrears. Said interest rate shall never exceed the maximum rate allowed, from time to time, by law." 3. Section 2.04 (C) of the Agreement is hereby amended to read as follows: "(C) INTEREST RATE. Interest with respect to each Advance under the "D" Line of Credit shall accrue and be paid on the unpaid principal balance of each Advance from time to time outstanding at one of the following rates elected by Borrower in the relevant Request for Advance: (1) the thirty (30), sixty (60), ninety (90) or one hundred eighty (180) day LIBOR rate effective on the Closing Date applicable to the thirty (30), sixty (60), ninety (90) or one hundred eighty (180) day initial Interest Period elected by Borrower, plus one and three-eighths of one per cent (1.375%) per annum, to change in accordance with the LIBOR Rate applicable to each relevant Interest Period elected by Borrower thereafter, provided, however, that if, at the end of any relevant Interest Period Borrower shall not make such an election on a timely basis, then the one hundred eighty (180) day rate shall be applicable; or (2) the Prime Rate in effect, from time to time, minus seven-eighths of one per cent (0.875%) per annum, to change with each change in the Prime Rate. 2 3 Interest based on the Prime Rate shall be computed on the basis of a year of 365 or 366 days, as the case may be. Interest based on LIBOR shall be computed on the basis of a 360-day year in each case for the actual number of days elapsed (i.e., 1/360 of a full year's interest shall accrue for each day any LIBOR based Advance is outstanding) and shall be due monthly (or, if earlier, at maturity) and payable in arrears. Such interest rate shall never exceed the maximum rate allowed, from time to time, by law." 4. Section 4.01 of the Agreement is hereby amended to read as follows: "4.01 RELEASE OF AND RIGHT TO REQUIRE, COLLATERAL. Borrower and each Guarantor confirms the prior grant to Lenders under the Agreement, a Lien on and security interest in the following property belonging to each of them (the "Collateral") as security for the payment of the Obligations whether now existing or hereafter arising and the performance by Borrower and each Guarantor of its obligations under this Agreement and any Hedging Instrument entered into from time to time: (A) All machinery, equipment, vehicles, vessels, aircraft, fixtures, buildings, appliances, furniture and other tangible assets, now owned or hereafter acquired and wherever located. (B) All inventory now owned or hereafter acquired and products and proceeds t thereof. (C) All accounts, contract rights and accounts receivable, now or hereafter in existence and all proceeds thereof, and all returned or repossessed goods arising from or relating to any of the said accounts or rights. (D) All instruments, documents, chattel paper and general intangibles, rights in trademarks, trade names, patents, copyrights and licenses now owned or hereafter acquired or arising. (E) All cash or non-cash proceeds of any of the foregoing, including insurance proceeds. (F) All ledger sheets, files, records, documents, and instruments (including, but not limited to, computer programs, tapes and related electronic data processing software) evidencing an interest or relating to the above, and all products or proceeds of the above. (G) All substitutes, and replacements for, accessions, attachments, and other additions to, and tools, parts, and equipment used in connection with any of the above, and all products and proceeds of the above. 3 4 Such security interest was evidenced by appropriate security agreements or amendments to such security agreements, mortgages, trust deeds or other instruments in such form as was required by law and was perfected in all appropriate jurisdictions. By its execution of this Amendment Two to the Agreement, Lenders agree to release the Collateral from the Lien of the aforementioned Security Agreements and to execute such releases and termination statements and file in the appropriate jurisdictions, as to evidence that release, provided, however, that Borrower and each Guarantor shall covenant and agree not to encumber the Collateral without the written approval of Agent. Notwithstanding, in the event of the occurrence of an Event of Default under this Agreement, as here amended, Agent and Lenders reserve the right, but shall not have the obligation, to require that Borrower and any or all of Guarantors grant a first perfected security interest in the Collateral for repayment of the Second Amended Facility. The Collateral, if required, together with all of Borrower's other property or the property of any Guarantor of any kind held by any Lenders, shall stand as one general, continuing collateral security for all Obligations, and such continuing security interest may be retained by Lenders until all Obligations have been satisfied in full. " 5. Except as herein modified and amended, the Agreement and Amendment One remain in full force and effect. 6. The Borrower represents and warrants that it has no cause of action or claim against the Agent or the Lenders as of the date of this Amendment, and further waives any claim or cause of action against the Agent or the Lenders that may have arisen as of the date of this Amendment. Borrower further acknowledges and agrees that it neither has, nor has had, any defenses, counterclaims, or setoffs or any rights therefor to its obligations under the Second Amended and Restated Credit Facility Agreement or any loan documents. 7. All parties agree that this Amendment Two will be treated as duly executed upon exchange of fax signatures. [SIGNATURES APPEAR ON THE FOLLOWING PAGES] 4 5 IN WITNESS WHEREOF, the parties have executed this Amendment Two to the Second Amended and Restated Credit Facility Agreement dated as of April 27, 1999 on this 12th day of December, 2000: Borrower: Dycom Industries, Inc. By: /s/ RICHARD L. DUNN --------------------------------- Name: RICHARD L. DUNN --------------------------------- Title: SENIOR VICE PRESIDENT --------------------------------- Lender: Dresdner Bank Lateinamerika AG (also as Agent) By: /s/ ALAN HILLS --------------------------------- Name: ALAN HILLS --------------------------------- Title: VICE PRESIDENT --------------------------------- By: /s/ FRANK HUTHNANCE --------------------------------- Name: FRANK HUTHNANCE --------------------------------- Title: VICE PRESIDENT --------------------------------- 5 6 Lender: Bank Leumi USA, A New York Banking Corporation By: /s/ PAUL TINE ----------------------------------- Name: PAUL TINE ----------------------------------- Title: VICE PRESIDENT ----------------------------------- By: /s/ JOHN KOENIGSBERG ----------------------------------- Name: JOHN KOENIGSBERG ----------------------------------- Title: FIRST VICE PRESIDENT ----------------------------------- Lender: BANQUE SUDAMERIS, MIAMI AGENCE By: /s/ EFRAIN C. LOPEZ ----------------------------------- Name: EFRAIN C. LOPEZ ----------------------------------- Title: ASSISTANT VICE PRESIDENT By: /s/ HUBERT DE LA FELD ----------------------------------- Name: HUBERT DE LA FELD ----------------------------------- Title: SENIOR VICE PRESIDENT ----------------------------------- Lender: BANK OF AMERICA By: /s/ ANDREW M. AIRHEART ----------------------------------- Name: ANDREW M. AIRHEART ----------------------------------- Title: MANAGING DIRECTOR ----------------------------------- 6 7 Lender: WACHOVIA BANK, N.A. By: /s/ TAD LITTLE ----------------------------------- Name: TAD LITTLE ----------------------------------- Title: VICE PRESIDENT ----------------------------------- Lender: ISRAEL DISCOUNT BANK LIMITED, MIAMI AGENCY By: /s/ STEPHEN J. JEZIOROWSKI --------------------------- Name: STEPHEN J. JEZIOROWSKI --------------------------- Title: ASSISTANT VICE PRESIDENT By: /s/ DAVID KEINAN --------------------------- Name: DAVID KEINAN --------------------------- Title: SENIOR VICE PRESIDENT --------------------------- Lender: FIRST UNION NATIONAL BANK By: /s/ MARY A. MORGAN --------------------------- Name: MARY A. MORGAN --------------------------- Title: SENIOR VICE PRESIDENT --------------------------- 7 -----END PRIVACY-ENHANCED MESSAGE-----