<PAGE> 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, 1995
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.)
450 Australian Avenue, South, West Palm Beach, Florida 33401
(Address of principal executive office) (Zip Code)
(407) 659-6301
(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 6, 1995
_____ ________________________________
Common 8,543,990
<PAGE> 2
DYCOM INDUSTRIES, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
________
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets-
April 30, 1995 and July 31, 1994 3
Condensed Consolidated Statements of
Operations for the Three Months Ended
April 30, 1995 and 1994 4
Condensed Consolidated Statements of
Operations for the Nine Months Ended
April 30, 1995 and 1994 5
Condensed Consolidated Statements of
Cash Flows for the Nine Months Ended
April 30, 1995 and 1994 6-7
Notes to Condensed Consolidated
Financial Statements 8-13
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 14-17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 19
EXHIBIT INDEX 20
</TABLE>
<PAGE> 3
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
April 30, July 31,
1995 1994
____ ____
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 4,314,363 $ 2,625,783
Accounts receivable, net 15,055,776 14,885,597
Costs and estimated earnings in
excess of billings 5,152,854 3,765,931
Deferred tax assets, net 215,503 613,402
Other current assets 1,357,468 1,263,604
------------ ------------
Total current assets 26,095,964 23,154,317
------------ ------------
PROPERTY AND EQUIPMENT, net 19,488,874 19,955,051
------------ ------------
OTHER ASSETS:
Intangible assets, net 5,033,306 5,149,623
Other 254,408 440,347
------------ ------------
Total other assets 5,287,714 5,589,970
------------ ------------
TOTAL $ 50,872,552 $ 48,699,338
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 4,806,605 $ 4,730,378
Notes payable 4,793,421 22,594,407
Billings in excess of costs and
estimated earnings 40,300 252,441
Accrued self-insured claims 2,103,121 2,388,642
Income taxes payable 616,594
Other accrued liabilities 5,759,744 6,660,198
------------ ------------
Total current liabilities 18,119,785 36,626,066
NOTES PAYABLE 16,155,280
ACCRUED SELF-INSURED CLAIMS 6,746,092 5,136,730
DEFERRED TAX LIABILITIES 227,647
------------ ------------
Total liabilities 41,021,157 41,990,443
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, par value $.33 1/3 per share:
50,000,000 shares authorized; 8,543,990
and 8,528,990 shares issued and
outstanding, respectively 2,847,997 2,842,997
Additional paid-in capital 24,293,308 24,253,309
Retained deficit (17,289,910) (20,387,411)
------------ ------------
Total stockholders' equity 9,851,395 6,708,895
------------ ------------
TOTAL $ 50,872,552 $ 48,699,338
============= ============
See notes to condensed consolidated financial statements--unaudited.
</TABLE>
<PAGE> 4
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
___________________________
April 30, April 30,
1995 1994
____ ____
<S> <C> <C>
REVENUES:
Contract revenues earned $ 35,880,085 $ 30,745,126
Other, net 648,252 775,308
------------ ------------
Total 36,528,337 31,520,434
------------ ------------
EXPENSES:
Costs of earned revenues
excluding depreciation 29,758,702 25,464,726
General and administrative 3,407,562 3,890,777
Depreciation and amortization 1,354,643 1,783,110
------------ ------------
Total 34,520,907 31,138,613
------------ ------------
INCOME BEFORE INCOME TAXES 2,007,430 381,821
------------ ------------
PROVISION (BENEFIT) FOR INCOME TAXES:
Current 785,876 (33,924)
Deferred 170,252 117,957
------------ ------------
Total 956,128 84,033
------------ ------------
NET INCOME $ 1,051,302 $ 297,788
============ ============
EARNINGS PER COMMON SHARE $ 0.12 $ 0.03
====== ======
See notes to condensed consolidated financial statements--unaudited.
</TABLE>
<PAGE> 5
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Nine Months Ended
___________________________
April 30, April 30,
1995 1994
____ ____
<S> <C> <C>
REVENUES:
Contract revenues earned $105,607,532 $ 89,710,703
Other, net 1,136,287 818,739
------------ ------------
Total 106,743,819 90,529,442
------------ ------------
EXPENSES:
Costs of earned revenues
excluding depreciation 86,451,747 78,191,700
General and administrative 10,423,662 11,329,708
Depreciation and amortization 4,461,447 5,418,907
------------ ------------
Total 101,336,856 94,940,315
------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES 5,406,963 (4,410,873)
------------ ------------
PROVISION (BENEFIT) FOR INCOME TAXES:
Current 2,139,210 (968,826)
Deferred 170,252 1,086,253
------------ ------------
Total 2,309,462 117,427
------------ ------------
NET INCOME (LOSS) $ 3,097,501 $ (4,528,300)
============ ============
EARNINGS (LOSS) PER COMMON SHARE $ 0.36 $(0.54)
====== ======
See notes to condensed consolidated financial statements--unaudited.
</TABLE>
<PAGE> 6
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Nine Months Ended
___________________________
April 30, April 30,
1995 1994
____ ____
<S> <C> <C>
Increase (Decrease) in Cash and equivalents from:
OPERATING ACTIVITIES:
Net income (loss) $ 3,097,501 $ (4,528,300)
Add revenues and expenses accrued which
did not generate or require cash:
Depreciation and amortization 4,461,447 5,418,907
(Gain) loss on disposal of assets (745,390) (155,695)
Deferred income taxes 170,252 1,086,253
Deferred compensation 225,000
Changes in assets and liabilities:
Accounts receivable, net (170,179) 785,891
Unbilled revenues, net (1,599,064) (2,154,951)
Other current assets (93,864) (167,340)
Other assets 185,939 (278,606)
Accounts payable 76,227 849,495
Accrued self-insured claims and
other liabilities 416,073 1,012,270
Accrued income taxes 616,594
------------ ------------
Net cash inflow from operating activities 6,415,536 2,092,924
------------ ------------
FINANCING ACTIVITIES:
Borrowing on bank lines-of-credit 1,350,000 1,100,000
Principal payments on notes and loans payable
and bank lines-of-credit (3,141,395) (4,139,242)
Exercise of stock options 45,000
------------ ------------
Net cash outflow from financing activities (1,746,395) (3,039,242)
------------ ------------
INVESTING ACTIVITIES:
Capital expenditures (4,913,386) (3,522,162)
Proceeds from sales of assets 1,932,825 2,031,118
------------ ------------
Net cash outflow from investing activities (2,980,561) (1,491,044)
------------ ------------
NET CASH INFLOW (OUTFLOW) FROM ALL ACTIVITIES 1,688,580 (2,437,362)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 2,625,783 4,432,739
------------ ------------
CASH AND EQUIVALENTS AT END OF PERIOD $ 4,314,363 $ 1,995,377
============ ============
See notes to condensed consolidated financial statements--unaudited.
</TABLE>
<PAGE> 7
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Unaudited)
<TABLE>
<CAPTION>
For the Nine Months Ended
___________________________
April 30, April 30,
1995 1994
____ ____
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW AND
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Cash paid during the period for:
Interest $ 1,453,559 $ 1,275,181
Income taxes 1,702,804 750,447
Property and equipment acquired and
financed with:
Capital lease obligations $ 153,003
Short-term notes payable $ 204,521
See notes to condensed consolidated financial statements--unaudited.
</TABLE>
<PAGE> 8
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 April 30, 1995 and July
31, 1994, the related condensed consolidated statements of operations for
the three and nine months ended April 30, 1995 and 1994 and the condensed
consolidated statements of cash flows for the nine months ended April 30,
1995 and 1994 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,
1995 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 include Dycom Industries, Inc. and its subsidiaries, all of
which are wholly-owned. The Company's operations consist primarily of
telecommunication and utility services contracting. All material
intercompany accounts and transactions have been eliminated.
REVENUE-- 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. As some of these
contracts extend over one or more years, revisions in cost and profit
estimates during the course of the work are reflected in the accounting
period in which the facts which require the revision become known. At the
time a loss on a contract becomes known, the entire amount of the estimated
ultimate loss is accrued. Income on short-term unit 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.
"Costs and estimated earnings in excess of billings" represent 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 revenue 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 in excess
of the daily requirements which are invested in overnight repurchase
agreements, certificates of deposits, and various other financial
instruments with maturities of three months or less. For purposes of the
condensed consolidated statements of cash flows, the Company considers
these amounts to be cash equivalents.
PROPERTY AND EQUIPMENT-- Property and equipment are stated at cost, reduced
in certain cases by valuation reserves. Depreciation and amortization are
computed over the estimated useful life of the assets utilizing the
straight-line method. The estimated useful lives of the assets are:
buildings--20-31 years; leasehold improvements--the term of the respective
lease or the estimated useful life of the improvement, whichever is
shorter; vehicles--3-7 years; equipment and machinery--3-10 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
their useful lives are capitalized. When assets are sold or retired, the
cost and the accumulated depreciation are removed from the accounts and the
resulting gain or loss is included in income.
<PAGE> 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 the straight-line method over 40 years. The appropriateness
of the carrying value of intangible assets is continually reviewed and
adjusted where appropriate. The ongoing assessment of intangible assets
for impairment is based on the recoverability of such amounts through
future operations.
Intangible assets are net of accumulated amortization of $802,411 at April
30, 1995 and $686,094 at July 31, 1994. Amortization expense for the nine
month periods ended April 30, 1995 and 1994 was $116,317 and $220,110,
respectively. In the fourth quarter of fiscal 1994, the Company wrote off
$1,286,321 of goodwill related to the termination of Prime Utility
Contractors, Inc., a wholly owned subsidiary of the Company. In addition,
the Company also wrote off $136,555 of intangible assets in the fourth
quarter of fiscal 1994 related to the termination of the utility
right-of-way maintenance activities.
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 associated expenses, including incurred but not reported losses,
is actuarially determined and reflected in the condensed consolidated
financial statements as an accrued liability. The determination of such
claims and expenses and the appropriateness of the liability is continually
reviewed and updated.
INCOME TAXES-- The Company and its subsidiaries file a consolidated
federal income tax return. Taxes on income are provided in the period in
which the related transactions enter into the determination of net income.
Deferred income taxes are recognized for the tax consequences of temporary
differences by applying enacted statutory tax rates to differences between
the financial statement carrying value and the tax basis of the Company's
existing assets and liabilities. The effect on deferred taxes of a change
in tax law or rates is recognized in income in the period that includes the
enactment date.
The ability to realize deferred tax assets is continuously reviewed and
adjusted when appropriate. The ultimate realization of the deferred tax
assets depends on the Company's ability to generate sufficient taxable
income in the future. Management has determined, based on the Company's
history of recent operating performance, that taxable income of the Company
will more than likely not be sufficient to fully realize the net deferred
tax assets. Accordingly, deferred tax assets are net of a valuation
allowance of $1,768,924 at April 30, 1995 and $1,712,373 at July 31, 1994.
PER SHARE DATA-- Per common share amounts are computed on the basis of
weighted average shares of common stock outstanding plus common equivalent
shares arising from the effect of dilutive stock options, using the
treasury stock method. In the three and nine month periods ended April 30,
1995 and 1994, stock options did not impact the per share amounts as they
were either insignificant or antidilutive. The weighted-average number of
shares was 8,540,282 and 8,454,865 for the three month periods ended April
30, 1995 and 1994, respectively, and 8,532,671 and 8,461,740 for the nine
month periods ended April 30, 1995 and 1994, respectively.
<PAGE> 10
3. OPERATING DIFFICULTIES
The Company and its subsidiaries provide a range of services, under
comprehensive services contracts, to large companies in the
telecommunication and electric utility industries, private enterprise and
governmental units. In prior years, the Company experienced significant
operating difficulties resulting from work reductions in the construction
industry, increased operating costs, competition from smaller contractors,
loss of experienced operating personnel, as well as various legal matters,
including class action and shareholder derivative lawsuits and
investigations involving Company executives. These matters created a
significant burden on the Company's financial resources. As a result, the
Company incurred losses and declining cash flows in prior years which
significantly reduced its available cash balances. These factors raise
substantial doubt about the Company's ability to continue as a going
concern.
As shown in the accompanying condensed consolidated financial statements,
the operating results during the nine months ended April 30, 1995 reflect
significant improvements in operating profit margins and cash flows in
comparison to the corresponding period last year. The Company has also
resolved various legal matters, including the class action and shareholder
derivative lawsuits. Although the Company has made progress, its viability
as a going concern is dependent upon further improvement of future cash
flows from operating activities, obtaining alternative sources of financing
for operations and bonding facilities, and ultimately to continue operating
profitably.
4. ACCOUNTS RECEIVABLE
Accounts receivable, net consist of the following:
<TABLE>
<CAPTION>
April 30, July 31,
1995 1994
____ ____
<S> <C> <C>
Contract billings, net of retainage $ 13,693,499 $ 12,975,307
Retainage 909,723 1,246,340
Refundable income taxes 1,092,375
Other receivables 1,655,074 739,427
------------ ------------
Total 16,258,296 16,053,449
Less allowance for doubtful accounts 1,202,520 1,167,852
------------ ------------
Accounts receivable, net $ 15,055,776 $ 14,885,597
============ ============
</TABLE>
<PAGE> 11
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:
<TABLE>
<CAPTION>
April 30, July 31,
1995 1994
____ ____
<S> <C> <C>
Costs incurred on contracts in progress $ 27,411,987 $ 22,244,850
Estimated earnings thereon 1,022,900 534,618
------------ ------------
28,434,887 22,779,468
Less billings to date 23,322,333 19,265,978
------------ ------------
$ 5,112,554 $ 3,513,490
============ ============
Included in the accompanying condensed
consolidated balance sheets under
the captions:
Costs and estimated earnings in
excess of billings $ 5,152,854 $ 3,765,931
Billings in excess of costs and
estimated earnings (40,300) (252,441)
------------ ------------
$ 5,112,554 $ 3,513,490
============ ============
</TABLE>
6. PROPERTY AND EQUIPMENT
The accompanying condensed consolidated balance sheets include the following
property and equipment:
<TABLE>
<CAPTION>
April 30, July 31,
1995 1994
____ ____
<S> <C> <C>
Land $ 1,789,527 $ 1,789,527
Buildings 2,313,627 2,304,730
Leasehold improvements 735,370 1,209,742
Vehicles 21,718,359 20,852,476
Equipment and machinery 19,885,686 20,477,127
Furniture and fixtures 2,953,310 2,802,377
------------ ------------
Total 49,395,879 49,435,979
Less accumulated depreciation and
amortization 29,907,005 29,480,928
------------ ------------
Property and equipment, net $ 19,488,874 $ 19,955,051
============ ============
</TABLE>
Idle assets consisting of land and office and shop facilities, are included
in property and equipment. These assets are not currently being used and
certain assets are being offered for sale. The carrying value of these
assets at April 30, 1995 and July 31, 1994 was $100,550 and 112,500,
respectively. In the opinion of management, the carrying values of these
assets are not in excess of their net realizable value.
<PAGE> 12
7. NOTES PAYABLE
Notes and loans payable are summarized by type of borrowings as follows:
<TABLE>
<CAPTION>
April 30, July 31,
1995 1994
____ ____
<S> <C> <C>
Bank Credit Agreement:
Revolving credit facility $ 9,000,000 $ 9,000,000
Term-loan 9,997,190 12,461,306
Equipment acquisition term-loans 1,816,667 962,500
Due former shareholder of acquired company 110,000
Vehicle and equipment loans 60,601
Capital lease obligations 134,844
------------ ------------
Total 20,948,701 22,594,407
Less current portion 4,793,421 22,594,407
------------ ------------
Notes payable--non-current $ 16,155,280 $ 0
============ ============
</TABLE>
At April 30, 1995, the Company had a bank credit agreement consisting of a
$10.0 million term-loan, a $9.0 million revolving credit facility, a $9.8
million standby letter of credit facility, and a $3.0 million capital
equipment acquisition facility of which $1.2 million was available and
unused. Substantially all of the Company's assets are pledged as collateral
under the terms of the agreement.
In April 1995, $0.9 million was drawn against the capital equipment
acquisition facility. In accordance with the bank credit agreement, the
borrowing against the capital equipment acquisition facility was converted
to a term-loan. The outstanding principal on the borrowing is payable
quarterly through January 1998. Quarterly principal payments of $70,833
will begin in July 1995.
At April 30, 1995, the Company had $8.8 million outstanding standby
letters of credit issued as security to the Company's insurance
administrators as part of its self-insurance program. The capital equipment
acquisition facility and standby letter of credit facility expire November
30, 1995.
The bank credit agreement contains provisions regarding minimum working
capital, tangible net worth, debt-to-equity ratios and certain other
financial covenants. The credit agreement also restricts the payment of
cash dividends until the term-loan is reduced to $5.0 million; thereafter
cash dividends are limited to 33 1/3 percent of earnings available for
distribution as dividends. At July 31, 1994, the Company was required to
classify the outstanding borrowings under the bank credit agreement as a
current liability. This classification resulted from the likelihood of the
Company violating certain of its financial covenants within the subsequent
twelve months. The Company requested modifications of these existing
financial covenant requirements going forward, and on December 14, 1994 the
bank granted the modifications. Although there can be no assurances,
management believes it is more likely than not that the Company will remain
in compliance with the modified covenant requirements within the next
twelve months. As a result, the Company is no longer required to classify
the outstanding borrowings under the bank credit agreement as a current
liability. At April 30, 1995, the Company was in compliance with all
covenants and conditions.
<PAGE> 13
The amount shown in the above table as due former stockholder of an acquired
company resulted from the repurchase of the stockholder's stock upon his
retirement. This arrangement was an existing arrangement made by a
subsidiary prior to Dycom's acquisition of the subsidiary. The stock
payment was payable at $110,000 per year plus interest at 10% and expired in
the quarter ended October 31, 1994.
Subsidiaries of the Company have capital lease obligations. The obligations
are payable in monthly installments and expire in the quarter ended April
30, 1998.
The interest on the term-loan and the revolving credit facility is at the
bank's prime rate plus one-half percent (9.50% at April 30, 1995). The
interest on the equipment acquisition term-loans is at the bank's prime rate
plus three-quarters of one percent (9.75% at April 30, 1995). Interest costs
incurred on notes payable, all of which were expensed, for the nine month
periods ended April 30, 1995 and 1994 were $1,446,187 and $1,248,296,
respectively. Such amounts are included in general and administrative
expenses in the accompanying condensed consolidated statements of
operations.
8. LITIGATION SETTLEMENTS
During the quarter ended January 31, 1995, the Company settled a shareholder
class action lawsuit filed in June 1991, a derivative complaint filed in
July 1992 and several other related matters. The settlement of the class
action resulted in the creation of a $4.0 million settlement fund out of
which all class claims and plaintiff's attorney fees will be paid. In
fiscal 1994, the Company paid $600,000 into escrow for the settlement fund,
with the balance of the settlement fund provided by the Company's insurance
carrier. The settlement of the derivative complaint provided for certain
therapeutic changes in the Company's corporate governance, but did not
require any additional payments of monies other than the cash settlement
provided for in the context of the class action settlement. The Company
believes that all matters related to the class action and derivative
complaint have been concluded as a result of the settlement reached.
During the quarter ended January 31, 1995, a final settlement was reached in
the complaint filed in March 1993 by BellSouth Telecommunications, Inc.
("BellSouth") against Star Construction, Inc. ("Star"), a subsidiary of the
Company. The settlement provided for the payment of $750,000 to BellSouth
by Star. The settlement monies were paid in two equal installments of
$375,000 during the quarters ended April 30, 1995 and January 31, 1995,
respectively. The favorable settlement in this matter resulted in a
$450,000 reversal of a previously accrued liability during the quarter ended
January 31, 1995.
9. COMMITMENTS AND CONTINGENCIES
In the normal course of business, certain subsidiaries of the Company have
pending and unasserted claims. Although the ultimate resolution and
liability of these claims cannot be determined, management believes the
final disposition of these claims will not have a material adverse impact on
the Company's consolidated financial condition or results of operations.
<PAGE> 14
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.
Liquidity and Capital Resources
The Company's sources of funds are generated from operations, proceeds from
the sale of idle real property and equipment and its available borrowing
capabilities under the current bank credit agreement. Cash flow from
operating activities increased $4.3 million to $6.4 million in comparison
to the same period last year. Strong operating results during the nine
months ended April 30, 1995 contributed to the Company's strengthening cash
flow position. In addition, the Company made a draw against the capital
equipment acquisition facility of $1.4 million and recorded $1.9 million in
proceeds from the sale of certain real property and equipment. Cash flow
from operating activities have been and are expected to be the Company's
primary source of liquidity.
Working capital at April 30, 1995 increased $21.4 million from a deficit
position of $13.5 million at July 31, 1994, to $7.9 million. At July 31,
1994, the Company was required to classify the outstanding borrowings under
the bank credit agreement as a current liability as discussed below. The
improvement in working capital is principally the result of reclassifying a
portion of the Company's outstanding debt balance to a non-current
liability.
The Company's sources of funds provided for capital expenditures of $4.9
million during the nine month period ended April 30, 1995. These capital
expenditures resulted from both the normal replacement of equipment and the
additional investment of equipment related to the start-up of new
comprehensive services contracts in the telecommunication services group.
Aside from these capital expenditures, the Company obtained approximately
$3.1 million of equipment under various noncancelable operating leases.
At April 30, 1995, the Company had outstanding borrowings under a term-loan
of $10.0 million, equipment acquisition term-loans aggregating $1.8
million and a revolving credit facility of $9.0 million. Interest on the
term-loan and revolving credit facility is at the bank's prime rate plus
one-half percent (9.50% at April 30, 1995). The interest on the equipment
acquisition term-loans is at the bank's prime rate plus three-quarters of
one percent (9.75% at April 30, 1995). During the nine month period ended
April 30, 1995, the Company reduced its outstanding debt balance by $3.1
million, which included a $0.2 million prepayment of the term-loan
principal utilizing the proceeds received from the sale of certain real
property and equipment. Substantially all of the Company's assets are
pledged as collateral in support of these facilities.
In addition, the Company has available a $9.8 million standby letter of
credit facility and a $3.0 million capital equipment acquisition facility
of which $1.2 million is available and unused at April 30, 1995. The
standby letter of credit facility is issued as security to the Company's
insurance administrators as part of its self-insurance program. The
Company had outstanding standby letters of credit of $8.8 million against
the standby letter of credit facility at April 30, 1995. Both facilities
expire November 30, 1995.
<PAGE> 15
The bank credit agreement contains provisions regarding minimum working
capital, tangible net worth, debt-to-equity ratios and certain other
financial covenants. At July 31, 1994, the Company was required to
classify the outstanding borrowings under the bank credit agreement as a
current liability. This classification resulted from the likelihood of the
Company violating certain of its financial covenants within the subsequent
twelve months. On December 14, 1994, the bank modified the financial
covenant requirements going forward. Although there can be no assurances,
management believes it is more likely than not that the Company will remain
in compliance with the modified covenant requirements within the next
twelve months. As a result, the Company is no longer required to classify
the outstanding borrowings under the bank credit agreement as a current
liability. At April 30, 1995, the Company was in compliance with all
covenants and conditions.
In the near term, cash flow generated from operations will continue to be
the Company's primary source of funds as available borrowing capabilities
under the bank credit agreement are limited. The Company foresees these
available sources of funds along with existing cash balances to be
sufficient to meet its financial obligations, including the scheduled debt
payments under the bank credit agreement and operating lease commitments,
and to support the Company's normal replacement of equipment at its current
level of business; however, the Company may not be able to take advantage
of opportunities that would require substantial investment. The Company's
viability as a going concern is dependent upon further improvement of cash
flows from operations, obtaining alternative sources of financing for
operations and bonding facilities, and ultimately to continue operating
profitably.
No dividends have been paid during the nine month period ended April 30,
1995, and no dividends are expected to be declared and paid in the
foreseeable future. The Board will determine future dividend policies
based on financial condition, profitability, cash flow, capital
requirements and business outlook, as well as other factors relevant at the
time.
Results of Operations
The Company reported earnings per common share of $0.12 and $0.36 for the
three and nine month periods ended April 30, 1995, respectively, as
compared to earnings per common share of $0.03 and a loss per common share
of $0.54, respectively, for the corresponding periods last year.
Contract revenues for the quarter ended April 30, 1995 increased 16.7% to
$35.9 million, as compared to $30.7 million for the same quarter last year.
The increase in contract revenues is primarily attributable to the
increased volume experienced in telecommunication services and utility
line locating services groups. The telecommunication services and utility
line locating services groups contract revenue increased 17.5% to $32.8
million for the quarter. The electrical services group contract revenue
remained relatively stable as compared to the corresponding period last
year.
For the nine month period ended April 30, 1995 contract revenues of $105.6
million increased 17.7% from the $89.7 million reported in the
corresponding period last year. Contract revenues from the
telecommunication services and utility line locating services groups
increased 26.1% to $96.7 million as a result of improved pricing and volume
realized on multi-year comprehensive services contracts primarily within
the telecommunication services group. In addition, during the nine months
<PAGE> 16
ended April 30, 1994, certain contracts had expired and the Company had
canceled other less profitable contracts which resulted in lower volume.
The electrical services group contract revenues decreased $4.1 million to
$8.9 million for the nine month period ended April 30, 1995 as compared to
the corresponding period last year. The electrical services group
continues to experience lower contract revenues as a result of lower
volumes on existing master contracts, difficulty in meeting bonding
requirements and the decision in fiscal 1994 to terminate the Company's
business interest in the governmental electrical contracting activities.
The Company's ability to meet the bid and performance bond requirements and
success in bidding on future contracts are key factors affecting the future
revenue growth of the Company.
The contract revenue mix between telecommunication services, utility line
locating services and electrical services over recent years has reflected a
steady increase in contract revenues from the telecommunication services
group offset by a decline in the electrical services group as discussed
above. The increase in contract revenues from the telecommunication
services group is primarily attributable to multi-year comprehensive
services contracts which at the three and nine month periods ended April
30, 1995 represented 64% and 68% of total contract revenues, respectively.
The contract revenue mix between telecommunication services, utility line
locating services and electrical services was 81%, 11%, and 8% of total
contract revenues, respectively, for the three and nine month period ended
April 30, 1995.
The Company's backlog of uncompleted work at April 30, 1995 was $192
million as compared to $197 million at April 30, 1994 and $181 million at
July 31, 1994.
Other revenue is primarily comprised of earnings on short-term investments
and net gains and losses from property and equipment disposals. For the
three and nine month periods ended April 30, 1995, other revenue included
net gains on the disposal of idle and surplus property and equipment of
$0.5 million and $0.7 million, respectively. For the three and nine month
periods ended April 30, 1994, other revenue included $0.3 million from the
recovery of damages received in the settlement of a breach of contract
claim and a net gain of $0.2 million from the disposal of idle and surplus
property and equipment.
The Company's costs and operating expenses may be affected by a number of
factors including contract volumes, character of services rendered, work
locations, competition, and changes in productivity. Costs of earned
revenues, excluding depreciation, was 83% of contract revenues for both
the quarters ended April 30, 1995 and 1994, and 82% and 87% of contract
revenues for the nine month periods ended April 30, 1995 and 1994,
respectively. Cost of earned revenues as a percentage of contract revenues
remained relatively stable for the quarter ended April 30, 1995 as compared
to the same period last year. For the nine month periods ended April 30,
1995 cost of earned revenue decreased as a percentage of contract revenues
as compared to the same period last year as a result of improved operating
efficiencies and productivity, and the cancellation of less profitable
contracts during fiscal 1994. In addition, as a result of the favorable
settlement of a lawsuit, the Company reversed $450,000 of a previously
accrued liability during the quarter ended January 31, 1995.
General and administrative expenses decreased 12.4% for the quarter ended
April 30, 1995 to $3.4 million as compared to $3.9 million for the same
quarter last year. For the nine month period ended April 30, 1995 general
and administrative expenses decreased 8.0% to $10.4 million as compared to
$11.3 million for the corresponding period last year. These decreases are
<PAGE> 17
primarily attributable to lower professional and legal fees, general and
group insurance and the absence of a provision recorded for the settlement
of a lawsuit which for the quarter ended April 30, 1994 was $0.4 million.
The decline in general and administrative expenses in both periods was
partially offset by increases in the provision for doubtful accounts.
Intangible asset amortization expense of $38,772 and $116,317 for the three
and nine month periods ended April 30, 1995 decreased 47% as compared to
the corresponding periods last year. The lower expense resulted from the
write-off of certain intangible assets during the fourth quarter of fiscal
1994.
The variance from the statutory income tax rates resulted primarily from
the inability to recognize state income tax benefits for certain loss
subsidiaries and the impact of non-deductible expenses for tax purposes.
Deferred tax assets are net of a valuation allowance of $1,768,924 at April
30, 1995 and $1,712,373 at July 31, 1994.
<PAGE> 18
PART II. OTHER INFORMATION
__________________________
Item 1. Legal Proceedings
The information concerning legal proceedings is hereby incorporated by
reference from Note 8, Litigation Settlements, to the condensed
consolidated financial statements included in Part I hereof.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibits furnished pursuant to the requirements of Form 10-Q:
See Exhibit Index on Page 20
(b) Reports On Form 8-K
No reports on Form 8-K were filed on behalf of the Registrant during the
quarter ended April 30, 1995.
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities and 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
<TABLE>
<S> <C>
Date: June 13, 1995 /s/ Thomas R. Pledger
______________ ____________________________
Thomas R. Pledger
Chairman and Chief Executive
Officer
Date: June 13, 1995 /s/ Ronald L. Roseman
______________ ____________________________
Ronald L. Roseman
President and Chief Operating
Officer
Date: June 13, 1995 /s/ Douglas J. Betlach
______________ ____________________________
Douglas J. Betlach
Vice President and Chief
Financial Officer
</TABLE>
<PAGE> 20
EXHIBIT INDEX
<TABLE>
<CAPTION>
Number Description
______ ___________
<C> <C>
(27) Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DYCOM
INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEET AT APRIL 30, 1995 AND
THE CONDENSED CONSOLIDATED STATMENT OF OPERATIONS FOR THE NINE MONTHS ENDED
APRIL 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000067215
<NAME> DYCOM INDUSTRIES, INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-END> APR-30-1995
<EXCHANGE-RATE> 1
<CASH> 4,314,363
<SECURITIES> 0
<RECEIVABLES> 14,603,222
<ALLOWANCES> 1,202,520
<INVENTORY> 5,112,554
<CURRENT-ASSETS> 26,095,964
<PP&E> 49,395,879
<DEPRECIATION> 29,907,005
<TOTAL-ASSETS> 50,872,552
<CURRENT-LIABILITIES> 18,119,785
<BONDS> 20,948,701
<COMMON> 2,847,997
0
0
<OTHER-SE> 7,003,398
<TOTAL-LIABILITY-AND-EQUITY> 50,872,552
<SALES> 0
<TOTAL-REVENUES> 105,607,532
<CGS> 0
<TOTAL-COSTS> 86,451,747
<OTHER-EXPENSES> 4,461,447
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,446,187
<INCOME-PRETAX> 5,406,963
<INCOME-TAX> 2,309,462
<INCOME-CONTINUING> 3,097,501
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,097,501
<EPS-PRIMARY> 0.36
<EPS-DILUTED> 0.36
</TABLE>
