<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 January 31, 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 March 10, 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-
January 31, 1995 and July 31, 1994 3
Condensed Consolidated Statements of
Operations for the Three Months Ended
January 31, 1995 and 1994 4
Condensed Consolidated Statements of
Operations for the Six Months Ended
January 31, 1995 and 1994 5
Condensed Consolidated Statements of
Cash Flows for the Six Months Ended
January 31, 1995 and 1994 6-7
Notes to Condensed Consolidated
Financial Statements 8-14
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 15-18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 4. Submission of Matter to a Vote of
Security Holders 19
Item 6. Exhibits and Reports on Form 8-K 19
SIGNATURES 20
EXHIBIT INDEX 21
</TABLE>
<PAGE> 3
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
January 31, July 31,
1995 1994
____ ____
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 4,280,927 $ 2,625,783
Accounts receivable, net 13,739,559 14,885,597
Costs and estimated earnings in
excess of billings 4,876,280 3,765,931
Deferred tax assets, net 385,756 613,402
Other current assets 1,194,867 1,263,604
------------ ------------
Total current assets 24,477,389 23,154,317
------------ ------------
PROPERTY AND EQUIPMENT, net 19,069,181 19,955,051
------------ ------------
OTHER ASSETS:
Intangible assets, net 5,072,078 5,149,623
Other 383,530 440,347
------------ ------------
Total other assets 5,455,608 5,589,970
------------ ------------
TOTAL $ 49,002,178 $ 48,699,338
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 4,680,335 $ 4,730,378
Notes payable 4,225,168 22,594,407
Billings in excess of costs and
estimated earnings 109,324 252,441
Accrued self-insured claims 2,099,641 2,388,642
Income taxes payable 808,909
Other accrued liabilities 5,602,728 6,660,198
------------ ------------
Total current liabilities 17,526,105 36,626,066
NOTES PAYABLE 16,693,092
ACCRUED SELF-INSURED CLAIMS 6,027,887 5,136,730
DEFERRED TAX LIABILITIES 227,647
------------ ------------
Total liabilities 40,247,084 41,990,443
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, par value $.33 1/3 per share:
50,000,000 shares authorized; 8,528,990
shares issued and outstanding 2,842,997 2,842,997
Additional paid-in capital 24,253,309 24,253,309
Retained deficit (18,341,212) (20,387,411)
------------ ------------
Total stockholders' equity 8,755,094 6,708,895
------------ ------------
TOTAL $ 49,002,178 $ 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
___________________________
January 31, January 31,
1995 1994
____ ____
<S> <C> <C>
REVENUES:
Contract revenues earned $ 33,515,513 $ 27,048,436
Other, net 277,370 (57,383)
------------ ------------
Total 33,792,883 26,991,053
------------ ------------
EXPENSES:
Costs of earned revenues
excluding depreciation 27,473,391 25,362,016
General and administrative 3,510,445 3,809,721
Depreciation and amortization 1,357,717 1,820,573
------------ ------------
Total 32,341,553 30,992,310
------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES 1,451,330 (4,001,257)
------------ ------------
PROVISION (BENEFIT) FOR INCOME TAXES:
Current 344,358 (1,057,174)
Deferred 1,335,865
------------ ------------
Total 344,358 278,691
------------ ------------
NET INCOME (LOSS) $ 1,106,972 $ (4,279,948)
============ ============
EARNINGS (LOSS) PER COMMON SHARE $ 0.13 $(0.51)
====== ======
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 Six Months Ended
___________________________
January 31, January 31,
1995 1994
____ ____
<S> <C> <C>
REVENUES:
Contract revenues earned $ 69,727,447 $ 58,965,577
Other, net 488,035 43,431
------------ ------------
Total 70,215,482 59,009,008
------------ ------------
EXPENSES:
Costs of earned revenues
excluding depreciation 56,693,045 52,726,974
General and administrative 7,016,100 7,438,931
Depreciation and amortization 3,106,804 3,635,797
------------ ------------
Total 66,815,949 63,801,702
------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES 3,399,533 (4,792,694)
------------ ------------
PROVISION (BENEFIT) FOR INCOME TAXES:
Current 1,353,334 (934,902)
Deferred 968,296
------------ ------------
Total 1,353,334 33,394
------------ ------------
NET INCOME (LOSS) $ 2,046,199 $ (4,826,088)
============ ============
EARNINGS (LOSS) PER COMMON SHARE $ 0.24 $(0.57)
====== ======
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 Six Months Ended
___________________________
January 31, January 31,
1995 1994
____ ____
<S> <C> <C>
Increase (Decrease) in Cash and equivalents from:
OPERATING ACTIVITIES:
Net income (loss) $ 2,046,199 $ (4,826,088)
Add revenues and expenses accrued which
did not generate or require cash:
Depreciation and amortization 3,106,804 3,635,797
(Gain) loss on disposal of assets (211,465) 118,739
Deferred income taxes 968,296
Deferred compensation 150,000
Changes in assets and liabilities:
Accounts receivable, net 1,146,038 3,117,820
Unbilled revenues, net (1,253,466) (198,219)
Other current assets 68,737 103,672
Other assets 56,817 11,510
Accounts payable (50,043) (754,799)
Accrued self-insured claims and
other liabilities (455,314) 151,870
Accrued income taxes 808,908
------------ ------------
Net cash inflow from operating activities 5,263,215 2,478,598
------------ ------------
FINANCING ACTIVITIES:
Borrowing on bank lines-of-credit 500,000
Principal payments on notes and loans payable
and bank lines-of-credit (2,207,433) (2,454,803)
------------ ------------
Net cash outflow from financing activities (1,707,433) (2,454,803)
------------ ------------
INVESTING ACTIVITIES:
Capital expenditures (2,565,695) (1,280,757)
Proceeds from sales of assets 665,057 907,867
------------ ------------
Net cash outflow from investing activities (1,900,638) (372,890)
------------ ------------
NET CASH INFLOW (OUTFLOW) FROM ALL ACTIVITIES 1,655,144 (349,095)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 2,625,783 4,432,739
------------ ------------
CASH AND EQUIVALENTS AT END OF PERIOD $ 4,280,927 $ 4,083,644
============ ============
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 Six Months Ended
___________________________
January 31, January 31,
1995 1994
____ ____
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW AND
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Cash paid during the period for:
Interest $ 961,573 $ 881,029
Income taxes 660,025 522,632
Property and equipment acquired and financed
with short-term notes payable $ 31,286 $ 204,521
Property and equipment acquired and included
in accounts payable $ 1,711,497
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 January 31, 1995 and July
31, 1994, the related condensed consolidated statements of operations for
the three and six months ended January 31, 1995 and 1994 and the condensed
consolidated statements of cash flows for the six months ended January 31,
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 six months ended January 31, 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
telecommunications 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 $763,639 at January
31, 1995 and $686,094 at July 31, 1994. Amortization expense for the six
month periods ended January 31, 1995 and 1994 was $77,545 and $146,740,
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 $1,737,092 at January 31, 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 six month periods ended January 31, 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
8,528,990 and 8,439,115 for the three month periods ended January 31, 1995
and 1994, respectively, and 8,528,990 and 8,447,990 for the six month
periods ended January 31, 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 six months ended January 31, 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.
As discussed in Note 7, the bank modified certain of the financial covenant
requirements under the bank credit agreement. At January 31, 1995, the
Company was in compliance with all covenants and conditions.
4. ACCOUNTS RECEIVABLE
Accounts receivable, net consist of the following:
<TABLE>
<CAPTION>
January 31, July 31,
1995 1994
____ ____
<S> <C> <C>
Contract billings, net of retainage $ 12,384,122 $ 12,975,307
Retainage 982,002 1,246,340
Refundable income taxes 1,091,967 1,092,375
Other receivables 588,755 739,427
------------ ------------
Total 15,046,846 16,053,449
Less allowance for doubtful accounts 1,307,287 1,167,852
------------ ------------
Accounts receivable, net $ 13,739,559 $ 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>
January 31, July 31,
1995 1994
____ ____
<S> <C> <C>
Costs incurred on contracts in progress $ 25,128,208 $ 22,244,850
Estimated earnings thereon 489,869 534,618
------------ ------------
25,618,077 22,779,468
Less billings to date 20,851,121 19,265,978
------------ ------------
$ 4,766,956 $ 3,513,490
============ ============
Included in the accompanying condensed
consolidated balance sheets under
the captions:
Costs and estimated earnings in
excess of billings $ 4,876,280 $ 3,765,931
Billings in excess of costs and
estimated earnings (109,324) (252,441)
------------ ------------
$ 4,766,956 $ 3,513,490
============ ============
</TABLE>
6. PROPERTY AND EQUIPMENT
The accompanying condensed consolidated balance sheets include the following
property and equipment:
<TABLE>
<CAPTION>
January 31, July 31,
1995 1994
____ ____
<S> <C> <C>
Land $ 1,789,527 $ 1,789,527
Buildings 2,313,627 2,304,730
Leasehold improvements 1,276,268 1,209,742
Vehicles 21,210,096 20,852,476
Equipment and machinery 20,935,856 20,477,127
Furniture and fixtures 2,981,647 2,802,377
------------ ------------
Total 50,507,021 49,435,979
Less accumulated depreciation and
amortization 31,437,840 29,480,928
------------ ------------
Property and equipment, net $ 19,069,181 $ 19,955,051
============ ============
</TABLE>
Idle assets consisting of land, office and shop facilities, and certain
leasehold improvements 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 January 31, 1995 and July 31, 1994 was
$111,000. 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>
January 31, July 31,
1995 1994
____ ____
<S> <C> <C>
Bank Credit Agreement:
Revolving credit facility $ 9,000,000 $ 9,000,000
Term-loan 10,747,190 12,461,306
Equipment acquisition term-loans 1,145,833 962,500
Due former shareholder of acquired company 110,000
Vehicle and equipment loans 25,237 60,601
------------ ------------
Total 20,918,260 22,594,407
Less current portion 4,225,168 22,594,407
------------ ------------
Notes payable--non-current $ 16,693,092 $ 0
============ ============
</TABLE>
At January 31, 1995, the Company had a bank credit agreement consisting of a
$10.7 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 $1.9 million was available and
unused. Substantially all of the Company's assets are pledged as
collateral under the terms of the agreement.
In September 1994, $0.5 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 September 1997. Quarterly principal payments of $41,667
began in December 1994.
At January 31, 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. During the quarter
ended January 31, 1995, the capital equipment acquisition facility and
standby letter of credit facility were renewed for a period of one year
expiring 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 January 31, 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.
A subsidiary of the Company has loans outstanding secured by equipment with
a net book value on January 31, 1995 of $30,138. The loans are payable in
monthly installments.
The interest on the term-loan and the revolving credit facility is at the
bank's prime rate plus one-half percent (9.00% at January 31, 1995). The
interest on the equipment acquisition term-loans is at the bank's prime rate
plus three-quarters of one percent (9.25% at January 31, 1995). Interest
costs incurred on notes payable, all of which were expensed, for the six
month periods ended January 31, 1995 and 1994 were $948,138 and $853,935
respectively. Such amounts are included in general and administrative
expenses in the accompanying condensed consolidated statements of
operations.
8. COMMITMENTS AND CONTINGENCIES
On June 25, 1991, a class action was filed in the United States District
Court for the Southern District of Florida, West Palm Beach Division, by
several shareholders of the Company alleging that the Company and certain of
its then directors and officers, violated Section 10(b) of the Securities
and Exchange Act of 1934 and made negligent misrepresentations by
disseminating public statements that included misrepresentations and taking
other actions which operated as a fraud and deceit upon the plaintiffs and
other class members. The Company filed its answer, denying all material
allegations of the plaintiffs' claims.
In August 1994, counsel for the parties and counsel for the Company's
insurance carrier, completed execution of a Stipulation of Settlement to
settle this matter. The Stipulation of Settlement provided for 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 1993, the Company
recorded a liability of $600,000 related to the settlement. Prior to July
31, 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. On December 6, 1994, the Court entered a final order approving the
settlement, dismissing all claims with prejudice.
On July 31, 1992, a derivative complaint was filed by a shareholder, Mr.
Milton Gerber, in the Circuit Court of Palm Beach County, Florida, naming as
defendants certain of the Company's then directors and officers. The
Company was named as a nominal defendant. The Complaint alleged that the
individual defendants, as the case may be, breached their fiduciary duties
by participation in mismanagement, violations of federal and state
securities laws, theft, and waste of corporate assets. The complaint also
alleged that due to the defendants' failure to disclose the alleged
mismanagement, theft, and waste of corporate assets, the Company's reported
earnings were materially misleading, again allegedly in breach of certain
defendants' fiduciary duties.
In September 1994, the parties executed a settlement agreement to resolve
this action. The settlement agreement provided for certain therapeutic
changes in the Company's corporate governance, but did not require any
additional payment of monies other than the cash settlement provided for in
<PAGE> 14
the context of the class action Stipulation of Settlement. On December 9,
1994, the Court entered a final order, approving the settlement and
dismissing this action with prejudice.
By letter dated March 26, 1992, J. Dennis Faucher, Esquire, on behalf of Mr.
H. Haskell Lurie, a Company shareholder, demanded that the Company undertake
an investigation into whether certain members of the Board of Directors
breached their fiduciary duties in connection with Burnup & Sims Inc.'s
stated intention to propose a merger with the Company and by participation
in the alleged mismanagement of the Company, which Mr. Faucher claims led to
the then pending shareholder class action and an SEC investigation (the SEC
closed the investigation in which no action against the Company was
recommended). A Special Committee of the Board of Directors was appointed
to investigate the matters raised by Mr. Faucher's demand. The Company
believes that this matter has now been concluded as a result of the
settlement reached in the class action and derivative complaint.
On March 1993, a complaint was filed in the United States District Court
for the Northern District of Alabama by BellSouth Telecommunications, Inc.
("BellSouth") against Star Construction, Inc. ("Star"), a subsidiary of the
Company. The complaint alleged that the defendant, in conjunction
with its employees and subcontractors, breached its contract with the
plaintiff, committed fraudulent misrepresentations and violated 18 U.S.C.
Section 1961 et.seq. All claims arose out of Star's allegedly defective
performance under a comprehensive services contract, which expired on
October 31, 1991. Before the complaint was filed in the matter, the Company
received notice of BellSouth's claim. As a result, the Company recorded a
liability for $1.2 million in the fiscal year ended July 31, 1992.
During the quarter ended January 31, 1995, a final settlement was reached in
the BellSouth v. Star litigation. The settlement provides for the payment
of $750,000 to BellSouth by Star. As of the quarter ended January 31, 1995
$375,000 of the settlement monies had been paid, the remaining payment of
$375,000 was made on March 3, 1995. The favorable settlement in this matter
resulted in a $450,000 reversal of the previously accrued liability.
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> 15
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. Net cash flow
increased significantly during the six months ended January 31, 1995 in
comparison to the same period last year. This increase was primarily
attributable to a $2.8 million increase in cash flow from operations for the
six month period ended January 31, 1995. In addition, the Company made a
draw against the capital equipment acquisition facility of $0.5 million
during the six months ended January 31, 1995. Funds generated internally
are the Company's primary source of liquidity.
Working capital at January 31, 1995 increased $20.5 million from a deficit
position of $13.5 million at July 31, 1994, to $7.0 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 $2.6
million during the six month period ended January 31, 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 financed approximately
$2.1 million of equipment under various noncancelable operating leases.
At January 31, 1995, the Company had outstanding borrowings under a
term-loan of $10.7 million, equipment acquisition term-loans aggregating
$1.1 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 (9.00% at January 31, 1995). The interest on the
equipment acquisition term-loans is at the bank's prime rate plus
three-quarters of one percent (9.25% at January 31, 1995). During the six
month period ended January 31, 1995, the Company reduced its outstanding
debt balance by $2.2 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 $1.9 million is available and unused at January 31, 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 January 31, 1995. During the quarter
ended January 31, 1995, both facilities were renewed for a period of one
year expiring November 30, 1995.
<PAGE> 16
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. During the quarter ended January 31, 1995 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 January 31, 1995, the Company was in compliance with
all covenants and conditions.
Cash flow generated from operations has shown significant improvement in
comparison to last year. 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 anticipates these available sources of funds and its
existing cash balances will be sufficient to meet its financial obligations,
including the scheduled debt payments under the bank credit agreement and
operating lease commitments, and will 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 six month period ended January 31,
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 has recorded earnings per common share of $0.13 and $0.24 for
the three and six month periods ended January 31, 1995, respectively, in
comparison to a loss per common share of $0.51 and $0.57, respectively, for
the corresponding periods last year. The results of operations for the
three and six month periods ended January 31, 1995 were achieved through
improved pricing and volume and as a result of the Company's efforts to
increase operating efficiencies and productivity.
Contract revenues for the quarter ended January 31, 1995 increased 24.0% to
$33.5 million, as compared to $27.0 million for the same quarter last year.
For the six month period ended January 31, 1995 contract revenues of $69.7
million increased 18.3% from the $59.0 million reported in the corresponding
period last year. Contract revenues from the telecommunications services
and utility line locating services groups increased 34.7% to $31.2
million and 31.1% to $63.9 for the quarter and six month periods ended
January 31, 1995, respectively. The electrical services group contract
revenues decreased $1.6 million to $2.3 million and $4.4 million to $5.8
million for the quarter and six month periods ended January 31, 1995,
respectively.
The increase in contract revenues from the telecommunications services and
utility line locating services groups was primarily attributable to improved
pricing and volume realized on multi-year comprehensive services
<PAGE> 17
contracts within the telecommunications services group. During the three
and six month periods ended January 31, 1994, the telecommunications
services group experienced lower volumes primarily as a result of prolonged
severe weather conditions. The electrical services group continues to
experience lower contract revenues as a result of lower volumes on existing
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 telecommunications 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 six month periods ended January
31, 1995 represented 71% and 70% of total contract revenues, respectively.
For the quarter ended January 31, 1995 the contract revenue mix between
telecommunication services, utility line locating services and electrical
services was 84%, 9%, and 7% of total contract revenues, respectively, and
82%, 10%, and 8% of total contract revenues, respectively, for the six month
period ended January 31, 1995.
The Company's backlog of uncompleted work at January 31, 1995 was $203
million as compared to $197 million at January 31, 1994. Contracts awarded
during the quarter ended January 31, 1995 include the renewal of two
significant multi-year telecommunications comprehensive services contracts
with a combined value of $46 million.
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, were 82% and 94% of contract revenues for
the quarters ended January 31, 1995 and 1994, respectively, and 81% and 89%
of contract revenues for the six month periods ended January 31, 1995 and
1994, respectively. Cost of earned revenues decreased as a percentage of
contract revenues 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 7.9% for the quarter ended
January 31, 1995 to $3.5 million as compared to $3.8 million for the same
quarter last year. For the six month period ended January 31, 1995 general
and administrative expenses decreased 5.7% to $7.0 million as compared to
$7.4 million for the corresponding period last year. These decreases are
primarily attributable to lower professional and legal fees, general
insurance and other general expenses. 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 $77,545 for the three
and six month periods ended January 31, 1995 decreased 47% as compared to
the corresponding periods last year. The lower expense resulted from the
Company's decision to write-off certain intangible assets during the fourth
quarter of fiscal 1994.
<PAGE> 18
The variance from the statutory income tax rates is due primarily to the
non-deductible expenses for tax purposes arising principally from prior
acquisitions. The lower effective rate for the three months ended January
31, 1995 was due to a reversal of a deferred tax asset for which a deferred
benefit had not been previously recognized. Deferred tax assets are net of
a valuation allowance of $1,737,092 at January 31, 1995 and $1,712,373 at
July 31, 1995.
A final settlement has been reached in the BellSouth v. Star lawsuit. The
settlement provides for the payment of $750,000 to BellSouth by Star. A
$1.2 million provision for the litigation was recorded in the fiscal year
ended July 31, 1992. During the quarter ended January 31, 1995 the Company
reversed $450,000 of the previously recorded accrued liability.
<PAGE> 19
PART II. OTHER INFORMATION
__________________________
Item 1. Legal Proceedings
The information concerning legal proceedings is hereby incorporated by
reference from Note 8, Commitments and Contingencies, to the condensed
consolidated financial statements included in Part I hereof.
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of shareholders of the Company was held on November 28,
1994 to consider and take action on the election of one director to the
Company's Board of Directors.
The Company's nominee, Mr. Ronald P. Younkin was elected. Mr. Younkin
received 6,640,528 votes for and 122,485 against. The directors whose terms
continued after the annual meeting are: Messrs. Walter L. Revell, Ronald L.
Roseman, Louis W. Adams, Jr., and Thomas R. Pledger.
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 21.
(b) Reports On Form 8-K
No reports on Form 8-K were filed on behalf of the Registrant during the
quarter ended January 31, 1995.
<PAGE> 20
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: March 16, 1995 /s/ Thomas R. Pledger
______________ ____________________________
Thomas R. Pledger
Chairman and Chief Executive
Officer
Date: March 16, 1995 /s/ Ronald L. Roseman
______________ ____________________________
Ronald L. Roseman
President and Chief
Operating Officer
Date: March 16, 1995 /s/ Douglas J. Betlach
______________ ____________________________
Douglas J. Betlach
Vice President and Chief
Financial Officer
</TABLE>
<PAGE> 21
EXHIBIT INDEX
<TABLE>
<CAPTION>
Number Description
______ ___________
<C> <C>
(27) Financial Data Schedule
(99)(I) Third Modification of Credit Agreement
and Consent by Guarantors as of
November 30, 1994, to Credit Agreement
dated as of April 28, 1993 between
Dycom Industries, Inc. and First Union
National Bank of Florida.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DYCOM
INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEET AT JANUARY 31, 1995 AND
THE CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED
JANUARY 31, 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> 6-MOS
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-END> JAN-31-1995
<EXCHANGE-RATE> 1
<CASH> 4,280,927
<SECURITIES> 0
<RECEIVABLES> 13,366,124
<ALLOWANCES> 1,307,287
<INVENTORY> 4,766,956
<CURRENT-ASSETS> 24,477,389
<PP&E> 50,507,021
<DEPRECIATION> 31,437,840
<TOTAL-ASSETS> 49,002,178
<CURRENT-LIABILITIES> 17,526,105
<BONDS> 20,918,260
<COMMON> 2,842,997
0
0
<OTHER-SE> 5,912,097
<TOTAL-LIABILITY-AND-EQUITY> 49,002,178
<SALES> 0
<TOTAL-REVENUES> 69,727,447
<CGS> 0
<TOTAL-COSTS> 56,693,045
<OTHER-EXPENSES> 3,106,804
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 948,138
<INCOME-PRETAX> 3,399,533
<INCOME-TAX> 1,353,334
<INCOME-CONTINUING> 2,046,199
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,046,199
<EPS-PRIMARY> 0.24
<EPS-DILUTED> 0.24
</TABLE>
THIRD MODIFICATION OF CREDIT AGREEMENT
THIS THIRD MODIFICATION OF CREDIT AGREEMENT (the "Modifica-
tion") is entered into as of the 30th day of November, 1994 by
and between DYCOM INDUSTRIES INC., a Florida corporation
("Borrower") and FIRST UNION NATIONAL BANK OF FLORIDA, a National
Banking Association ("Lender").
W I T N E S S E T H:
WHEREAS, Borrower and Lender entered into a certain Credit
Agreement dated as of April 28, 1993, which was amended by First
Modification dated December 13, 1993 and by Second Modification
dated April 7, 1994 (as amended, the "Credit Agreement"); and
WHEREAS, Borrower has requested that Lender amend the Credit
Agreement to (i) extend and modify the Standby Letter of Credit
Facility referenced in Section 4; and (ii) extend and modify the
Equipment Acquisition Facility referenced in Section 5; and (iii)
modify certain of the financial covenants contained in Section 9;
and
WHEREAS, Lender is willing to amend the Credit Agreement as
more particularly set forth herein.
NOW THEREFORE, for good and valuable considerations, the
receipt of which is hereby acknowledged, the parties do hereby
modify the Credit Agreement, as follows:
1. Standby Letter of Credit Facility. The expiration date
of the Standby Letter of Credit Facility referenced in Section 4
of the Credit Agreement is hereby extended to November 30, 1995.
Accordingly, Section 4.01 of the Credit Agreement is modified by
deleting the date of "November 30, 1994" which occurs therein and
inserting in lieu thereof the date "November 30, 1995." Sections
4.02 and 4.06 of the Credit Agreement are amended by deleting the
date of "November 30, 1995" which appears therein and inserting
in lieu thereof the date of "November 30, 1996."
2. Equipment Acquisition Facility. The expiration date of
the Equipment Acquisition Facility referenced in Section 5 of the
Credit Agreement is hereby extended to November 30, 1995. The
maximum term of any Equipment Acquisition Advance is hereby
limited to three years or March 30, 1998, whichever occurs first.
Accordingly, paragraph 5.01 of the Credit Agreement is amended to
delete the date "November 30, 1994" and insert in lieu thereof
the date "November 30, 1995," and Section 5.04 of the Credit
Agreement is amended to delete the words "or four years" which
appear in the sixth line of the subsection. Similarly, in
Section 5.07 of the Credit Agreement, the phrase "and in 16 equal
quarterly installments from the date of the Advance if the tenor
of such Equipment Acquisition Advance is four years" is hereby
deleted.
3. Section 9.01, Consolidated Tangible Net Worth is
modified to provide that Borrower shall not permit Consolidated
Tangible Net Worth on a date set forth below to be less than the
amount set forth opposite such date below:
PERIOD AMOUNT
April 30, 1995 $1,500,000.00
July 31, 1995 2,000,000.00
October 31, 1995 3,000,000.00
January 31, 1996 3,500,000.00
August 1, 1996 4,000,000.00
The minimum requirements for dates after August 1, 1996 shall
remain as set forth in the Credit Agreement.
4. Section 9.02, Working Capital is modified to provide
that Borrower shall not permit Consolidated Working Capital to be
less than $5,500,000.00 at any time after May 1, 1995.
5. Section 9.04, Liabilities to Net Worth Ratio is
modified to provide that Borrower shall not permit the ratio of
Consolidated Liabilities to Consolidated Tangible Net Worth at
any Quarter end during a period set forth below to exceed the
ratio set forth opposite such period below:
PERIOD RATIO
From August 1, 1995 to
July 31, 1996 15:1.0
From August 1, 1996 to
July 31, 1997 10:1.0
The requirements for dates after July 31, 1997 shall remain as
set forth in the Credit Agreement.
6. All requirements contained in Section 9 regarding
testing of compliance and the furnishing of Compliance
Certificates shall remain in effect and are hereby reaffirmed.
7. Except as expressly modified herein, the Credit
Agreement as previously amended is hereby reaffirmed in its
entirety.
DYCOM INDUSTRIES INC.
By: /s/ Thomas R. Pledger
----------------------------
Its: Chairman and CEO
---------------------------
Agreed:
FIRST UNION NATIONAL BANK
OF FLORIDA
By: /s/ John W. Lowery, Jr.
----------------------------
Its: Vice President
MIAMI 332360.1 - BJC(1)
CONSENT BY GUARANTORS
THIS CONSENT BY GUARANTORS is executed as of the 30th day of
November, 1994 by the following corporations:
a. Advance Leasing of Guilford, Inc., a Florida
corporation
b. Ansco & Associates, Inc., a Florida corporation
c. Coastal Plains, Inc., a Georgia corporation
d. Fiber Cable, Inc., a Delaware corporation
e. Globe Communications, Inc., a North Carolina
corporation
f. Ivy H. Smith Company, a Florida corporation
g. Kohler Construction Company, Inc., a Florida
corporation
h. Prime Utility Contractors, Inc., an Alabama
corporation
i. Signal Construction Company, Inc., a Florida
corporation
j. Southeastern Electric Construction, Inc., a
Florida corporation
k. Star Construction, Inc., a Tennessee corporation
l. S.T.S., Inc., a Florida corporation
m. TESINC, an Arizona corporation
(collectively the "Guarantors"), in favor of FIRST UNION NATIONAL
BANK OF FLORIDA (the "Lender").
W I T N E S S E T H:
WHEREAS, as of April 28, 1993, the Guarantors executed
Guaranty Agreements in favor of Lender pertaining to the Credit
Agreement and the Loan Documents referenced therein executed by
Dycom Industries Inc., a Florida corporation ("Borrower") and
Lender; and
WHEREAS, the Credit Agreement was modified by First
Amendment dated December 13, 1993 and by Second Modification
dated April 7, 1994; and
WHEREAS, Borrower has requested that Lender execute and
deliver and a Third Modification of Credit Agreement; and
WHEREAS, as a pre-condition to executing the Third
Modification of Credit Agreement, Lender has required that the
Guarantors consent to the Third Modification of Credit Agreement;
and
WHEREAS, it is to the benefit of Guarantors that Lender
consent and execute the Third Modification of Credit Agreement.
NOW THEREFORE, for good and valuable considerations, the
receipt of which is hereby acknowledged, the Guarantors hereby
agree as follows:
1. The Guarantors do hereby consent and agree to the terms
and conditions of the Third Modification of Credit Agreement, a
copy of which is attached hereto as Exhibit "A" and incorporated
by reference herein. Guarantors agree that the Guaranty
Agreements previously executed by Guarantors shall remain in full
force and effect and that the obligations of the Borrower under
the Credit Agreement shall be modified by the Third Modification
of Credit Agreement.
2. Guarantors do hereby reaffirm in full their respective
Guaranties.
IN WITNESS WHEREOF, this document has been duly executed as
of the day and year first set forth above.
Advance Leasing of Guilford, Inc.
By: /s/ Thomas R. Pledger
------------------------------
Its: Vice President
-----------------------------
Ansco & Associates, Inc.
By: /s/ Thomas R. Pledger
-----------------------------
Its: Vice President
----------------------------
Coastal Plains, Inc.
By: /s/ Thomas R. Pledger
-----------------------------
Its: Vice President
----------------------------
Fiber Cable, Inc.
By: /s/ Thomas R. Pledger
----------------------------
Its: Vice President
---------------------------
Globe Communications, Inc.
By: /s/ Thomas R. Pledger
----------------------------
Its: Vice President
---------------------------
Ivy H. Smith Company
By: /s/ Thomas R. Pledger
----------------------------
Its: Vice President
---------------------------
Kohler Construction Company, Inc.
By: /s/ Thomas R. Pledger
----------------------------
Its: Vice President
---------------------------
Prime Utility Contractors, Inc.
By: /s/ Thomas R. Pledger
----------------------------
Its: Vice President
---------------------------
Signal Construction Company, Inc.
By: /s/ Thomas R. Pledger
----------------------------
Its: Vice President
---------------------------
Southeastern Electric Construction,
Inc.
By: /s/ Thomas R. Pledger
----------------------------
Its: Vice President
---------------------------
Star Construction, Inc.
By: /s/ Thomas R. Pledger
----------------------------
Its: Vice President
---------------------------
S.T.S., Inc.
By: /s/ Thomas R. Pledger
----------------------------
Its: Vice President
---------------------------
TESINC
By: /s/ Thomas R. Pledger
----------------------------
Its: Vice President
---------------------------
MIAMI 332366.1 - WLK
