<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended July 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _______ to _______
Commission File Number 0-5423
DYCOM INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Florida 59-1277135
(State of incorporation) (I.R.S. Employer Identification No.)
450 Australian Avenue South, West Palm Beach, Florida 33401
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (407) 659-6301
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, par value New York Stock Exchange
$.331/3 per share
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting common stock, par value $.33 1/3 per
share, held by non-affiliates of the registrant, computed by reference to
the closing price of such stock on October 12, 1995 was $65,189,335.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Class Outstanding as of October 12, 1995
Common Stock, $.33 1/3 8,549,421
The registrant's proxy statement for the Annual Meeting of Shareholders to
be held on November 27, 1995 (the "Definitive Proxy Statement") to be filed
with the Commission pursuant to Regulation 14A is incorporated by reference
into Part III of this Form 10-K.
<PAGE> 2
PART I
Item 1. Business
General
The business of Dycom Industries, Inc. ("Dycom" or the "Company") consists
primarily of providing a range of services to large companies in the
telecommunications and electric utility industry, private enterprise, and
governmental units. The services performed by Dycom can be categorized into
three broad groups: telecommunication services, utility line locating
services, and electrical services.
The telecommunication services performed by the Company consist primarily of
installation, maintenance, and other routine services performed under
comprehensive service contracts. To a lesser extent, the Company installs
fiber optic and copper wire systems for local telephone and other business
users. Prior to November of 1989, most of the Company's telecommunication
services business consisted of installing fiber optic transmission lines for
long-distance carriers which were converting their systems from copper wire.
This long-distance conversion from copper to fiber optic facilities has
essentially been completed. As this work declined, the Company moved into
the performance of services under comprehensive service contracts. This was
primarily accomplished through the acquisition of Ansco & Associates, Inc.
and Star Construction, Inc. in fiscal 1990.
Contracts originate with both local telephone companies and with business
users. Design work performed by the Company's telephone engineers and
draftspersons is used by local telephone companies in the modernization and
expansion of their telephone networks. The Company also provides services in
the area of indoor plants for office buildings, commercial parks and
governmental facilities, and the creation and maintenance of records.
The utility line locating services performed by the Company involve
identification of the exact location of underground utilities such as water,
sewer, gas, telephone, and cable television lines. These services are
performed under contracts with various utility companies for the benefit of
parties excavating in an area where underground utilities are located.
Electrical services performed by the Company include installing and
maintaining electrical transmission and distribution lines, setting utility
poles and stringing electrical lines principally above ground, and
constructing substation facilities and switchyards for public utilities and,
to a lesser extent, other private enterprises and governmental entities.
The work performed often involves high voltage splicing and, on occasion,
the installation of underground high voltage distribution systems. The
Company also services "hot lines" (energized high voltage electrical
systems). In addition to new construction, the Company provides
retrofitting services for obsolete and defective utility systems and
subsystems, and repair and replacement of lines which are damaged or
destroyed as a result of weather conditions.
Installation of sophisticated electrical systems for newly constructed
buildings, additions to existing buildings, and retrofitting of obsolete and
defective systems are also performed for general commercial businesses and
institutions, including hospitals, prisons, sports stadiums, and military
facilities.
<PAGE> 3
Dycom operates primarily in the southeastern United States but maintains
operations nationwide. Its operations are conducted through wholly-owned
subsidiaries which function essentially as independent units. Since November
1982, the Company or its subsidiaries have made eleven acquisitions.
Contracts
A majority of the Company's revenues are generated under comprehensive
service contracts. Under comprehensive service contracts, the Company
generally has the exclusive right to perform specified items of work during
the contract period. The customers may exclude certain work they perform
themselves and projects which exceed stipulated amounts. However, in the
cases where a project's scope exceeds these stipulated amounts, the Company
is typically permitted to bid for these projects. The Company may be
compensated on a unit or hourly basis or at a fixed price for services
performed. Comprehensive service contracts for telephone companies,
maintenance work, utility line locating services, and other service
contracts are generally for terms of one-to-three years. These contracts may
be extended for one-to-two additional years, but periodically they are
renewed through competitive bid. In addition to comprehensive service
contracts, the Company bids for other contract work. Contracts are
generally awarded on the basis of a number of factors, such as price
competitiveness, quality of work, on-time completion, and ability to
mobilize the needed work force. The weight attributed to each factor will
vary from contract-to-contract, but price is normally a major consideration.
The business of the Company is not generally seasonal but can be affected by
severe weather conditions and general economic conditions. Variations in
the level of utility companies' capital expenditures also affect the volume
of work performed by the Company.
Customers
The operating subsidiaries obtain contracts from public and private
concerns. Major customers include the Regional Bell Operating Companies,
GTE, U.S. West Communications, Florida Power and Light Company, and other
public and private utility companies, and various federal, state, and local
governmental units.
For the years ended July 31, 1995, 1994, and 1993, approximately 42%, 41%,
and 37%, respectively, of contract revenues were from Southern Bell
Telephone Company; 15%, 14%, and 13%, respectively, of contract revenues
were from South Central Bell Telephone Company; and 9%, 11%, and 10%,
respectively, of contract revenues were from GTE.
Backlog
The backlog of work on hand at July 31, 1995 amounted to approximately $175
million, of which approximately 51% is expected to be completed within the
next fiscal year. Backlog at July 31, 1994 and 1993 was $181 million and
$134 million, respectively.
<PAGE> 4
Competition
The telecommunication and utility services industry is highly competitive,
requiring substantial resources and experienced personnel. Depending upon
the size of a particular contract, competition in the bidding process varies
from intense for smaller contracts to less competitive on larger, more
technically complex assignments. Historically, the Company's financial
resources enabled it to satisfy the requirements for bonding, technical,
administrative, and financial prequalifications required in connection with
certain larger projects. There are no companies controlling substantial
market shares nationally in the telecommunication and utility services
industry. The leading telephone and utility companies have maintained a
high level of competition in the construction markets to help control
capital outlays, ensure high standards of quality and workmanship, and avoid
contractor dependence. Some of the Company's competitors are larger in size
and have greater financial resources; however, most are smaller than the
Company.
Employees
The number of employees of the Company and its subsidiaries varies according
to the contracts in progress. As a matter of course, the Company maintains
a nucleus of technical and managerial personnel from which it draws to
supervise all projects. Other employees are added from time-to-time as
needed to complete specific projects. Such employees are generally
available to the Company. At July 31, 1995, the Company had approximately
1,976 employees. The Company has no collective bargaining agreements. The
Company considers its relations with its employees to be good.
Materials
In many cases, the Company's customers supply most or all of the materials
required for a particular contract; and the Company provides the personnel,
tools, and equipment to perform the installation services. However, with
respect to certain of its comprehensive telephone service contracts and
electrical installation contracts, the Company may supply part or all of the
materials required. In these instances, the Company is not dependent upon
any one source for the products which it customarily utilizes to complete
the job. The Company is not presently experiencing, nor does it anticipate
experiencing, any difficulties in procuring an adequate supply of materials.
Item 2. Properties
The Company leases its 7,300 sq. ft. executive office in West Palm Beach,
Florida. The Company owns an 8,000 sq. ft. office building in Phoenix,
Arizona. The Company leases 13,000 sq. ft. of office and shop facilities in
Greensboro, North Carolina. Other smaller office facilities are leased as
required. The Company also owns combinations of office and shop facilities
of 19,100 sq. ft. in Durham, North Carolina; 18,000 sq. ft. in Pinellas
Park, Florida; and 9,000 sq. ft. in West Palm Beach, Florida. The Company
leases combinations of office and shop facilities of 21,000 sq. ft. in
Bridgeport, Connecticut; 12,500 sq. ft. in Knoxville, Tennessee; 12,000 sq.
ft. in West Hartford, Connecticut; and 8,200 sq. ft. in Port Reading, New
Jersey. The Company also leases or owns other combinations of office and
shop facilities in various locations as necessary to enable it to
effectively perform its operations under comprehensive services contracts
and major specific contracts. The Company believes that its facilities are
adequate for its current operations.
<PAGE> 5
Item 3. Legal Proceedings
During the fiscal year ended July 31, 1995, the Company settled a
shareholder class action lawsuit filed in June 1991, alleging that the
Company, two of its Directors, Messrs. Pledger and Stover (who subsequently
resigned from the Board of Directors), and its then Vice President/Finance,
Treasurer, and Chief Financial Officer, Mr. Owens (who resigned in September
1993), violated Section 10(b) of the Securities and Exchange Act of 1934.
The complaint was thereafter amended to allege manipulation of earnings and
negligent misrepresentation and to seek damages arising from the purchase of
the Company's stock by class members between February 26, 1990 and March 9,
1992. The settlement of the class action resulted in the creation of a $4.0
million settlement fund out of which all class claims and plaintiffs'
attorneys' fees were paid. In the fiscal year ended 1994, the Company paid
$600,000 into escrow for the settlement fund; and the balance of the
settlement monies was paid by the Company's insurance carrier. By Order
dated September 6, 1995, the Court approved distribution of the settlement
monies in accordance with the settlement.
The Company also settled a shareholder's derivative action filed in July
1992 and other related matters during the fiscal year ended July 31, 1995.
The derivative action named as defendants, certain directors and officers of
the Company, Messrs. Pledger, Adams, Kennedy (who subsequently resigned from
the Board of Directors), Roseman, Stover, Weingarten (who subsequently
resigned from the Board of Directors), Younkin, Owens, and Mr. Cypherd, the
former president of S.T.S., Inc., a subsidiary of the Company (Mr. Cypherd
retired in July 1993). The derivative action accused the defendants of,
among other things, breach of fiduciary duty, mismanagement, violations of
federal and state securities laws, misstatement of reported earnings, theft,
and waste of corporate assets. 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
settlements reached.
During the fiscal year ended July 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 installments of $375,000
each during the quarters ended April 30, 1995 and January 31, 1995,
respectively. The Company previously recorded a liability of $1.2 million
for this claim, and as such, credited operations for the excess liability at
the time the claim was settled.
In connection with the BellSouth v. Star matter discussed above, Aetna
Casualty & Surety Company ("Aetna") had filed a complaint in June 1994
against Star, BellSouth, Davis W. Davis and Davis Utility Construction Co.
of N.C., Inc. ("Davis"). In this action Aetna sought a declaratory judgment
that it has no defense or coverage obligation to Davis or Star. Aetna has
agreed to voluntarily dismiss this action, with prejudice and bearing its
own costs.
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.
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Item 4. Submission of Matters to a Vote of Security Holders
During the fourth quarter of the year covered by this report, no matters
were submitted to a vote of the Company's security holders whether through
the solicitation of proxies or otherwise.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
The Company's common stock is traded on the New York Stock Exchange ("NYSE")
under the symbol "DY". The following table sets forth the range of the high
and low sales prices for each quarter within the last two fiscal years as
reported on the NYSE Composite Tape.
<TABLE>
<CAPTION>
Fiscal 1995 Fiscal 1994
___________ ___________
High Low High Low
____ ___ ____ ___
<S> <C> <C> <C> <C>
First Quarter $3 $2 $4 $2
Second Quarter 4 3/8 2 1/8 4 1/8 2 3/4
Third Quarter 4 1/4 3 1/4 3 1/8 2 1/4
Fourth Quarter 7 1/2 3 5/8 3 1/8 2 3/8
</TABLE>
As of October 12, 1995, there were approximately 893 record holders of the
Company's $.33 1/3 par value common stock. The common stock traded at a high
of $8 1/4 and a low of $6 1/8 during the period August 1, 1995 through October
12, 1995.
Dycom has not paid any cash dividends on its common stock during the last
five fiscal years. For further discussion of dividend policy and
restrictions on the payment of dividends, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations".
<PAGE> 7
Item 6. Selected Financial Data
The following table sets forth certain selected financial data of the
Company for the years ended July 31, 1995, 1994, 1993, 1992, and 1991. All
per share amounts have been restated to reflect a three-for-two stock split
by means of a stock dividend paid on August 22, 1990. This data should be
read in conjunction with the consolidated financial statements and related
notes included elsewhere in this report.
<TABLE>
<CAPTION>
In Thousands, Except Per Share Amounts
______________________________________
1995 1994<F1> 1993<F1> 1992 1991
____ ____ ____ ____ ____
<S> <C> <C> <C> <C> <C>
Revenues $145,283 $122,492 $136,941 $134,253 $149,417
Net income (loss) 4,433 (7,777) (31,508) (4,573 (1,691)
Earnings (loss)
per share 0.52 (0.91) (3.68) (0.54) (0.19)
Total assets 51,793 48,699 60,178 94,845 96,683
Long-term obligations 20,468 5,137<F2> 27,358 27,627 27,426
Stockholders' equity 11,187 6,709 14,186 45,270 50,231
Cash dividends per share -0- -0- -0- -0- -0-
<FN>
<F1>
See Note 1 to the consolidated financial statements regarding the
change in accounting principle for income taxes; the years prior to
1993 have not been restated. Also, see Note 3 to the consolidated
financial statements regarding the write-off of $1,423 and $24,285
of intangible assets in 1994 and 1993, respectively.
<F2>
See Note 7 to the consolidated financial statements regarding the
classification of outstanding borrowings under the bank credit
agreement as a current liability at July 31, 1994. But for the
reclassification, the long-term obligation at July 31, 1994 would
have been $24,011.
</FN>
</TABLE>
Financial data includes the results of operations and financial position of
the following acquired companies as of the business combination date noted
below:
1992: Globe Communications, Inc. and Globe Equipment
Corporation--January 3, 1992.
1991: Ivy H. Smith Company--December 11, 1990.
<PAGE> 8
Item 7. 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 accompanying consolidated financial
statements and notes thereto.
Results of Operations
Fiscal 1995 compared to Fiscal 1994
The Company reported earnings per common share of $0.52 for the fiscal year
ended July 31, 1995. This compares to a loss per common share of $0.91 for
the fiscal year ended July 31, 1994. Contract revenues in fiscal 1995 were
$143.9 million or 18.5% higher than the contract revenues recorded in fiscal
1994. The increase in contract revenue is primarily attributable to
the increased volume experienced in the telecommunication services and
utility line locating services groups.
The telecommunications services and utility line locating services groups
contract revenue increased 25.6% or $27.0 million for the fiscal year ended
July 31, 1995. Contract revenues from the telecommunication services and
utility line locating services groups increased as a result of improved
pricing and volume realized on multi-year comprehensive services contracts.
The electrical services group contract revenue decreased 28.7% or $4.5
million for the fiscal year ended July 31, 1995. The electrical services
group experienced lower contract revenues as a result of lower volume on
existing master contracts and the decision in fiscal 1994 to terminate the
Company's business interest in the governmental electrical contracting
activities. The Company's success in bidding on future contracts is a key
factor 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 July 31, 1995 and July 31, 1994 represented 68%
and 66%, respectively, of total contract revenues. The contract revenue mix
between telecommunication services, utility line locating services, and
electrical services for the fiscal year ended July 31, 1995 was 82%, 10%,
and 8%, respectively, and 78%, 9%, and 13%, respectively, for the fiscal
year ended July 31, 1994.
The Company's backlog of uncompleted work at July 31, 1995 was $175 million
as compared to $181 million at July 31, 1994. During fiscal 1995, the
Company was awarded various multi-year comprehensive services contracts
totaling approximately $71 million in the telecommunication services group.
Other revenue is primarily comprised of earnings on short-term investments
and net gains and losses from property and equipment disposals. In fiscal
1995, other revenues included $0.8 million from the gains on the disposal of
idle and surplus property and equipment.
The Company's costs and operating expenses generally vary depending on
contract volume, character of services rendered, work locations,
competition, changes in productivity, and other factors. Cost of earned
<PAGE> 9
revenues, excluding depreciation, were 82% and 87% of contract revenues for
the fiscal years ended July 31, 1995 and 1994, respectively. The Company's
prime costs of direct labor, materials, subcontractors, and equipment costs
as a percentage of contract revenues remained relatively stable at 63% and
64% for the fiscal years ended July 31, 1995 and 1994, respectively. Cost
of earned revenue decreased as a percentage of contract revenues as compared
to fiscal 1994 due to 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 during fiscal
1995, the Company reversed $450,000 of a previously accrued $1.2 million
liability.
General and administrative expenses decreased 9.4% in fiscal 1995 to $14.1
million as compared to $15.6 million in fiscal 1994. This decrease is
primarily attributable to lower professional and legal fees which decreased
by $0.8 million. In fiscal 1994, a $0.4 million charge was recorded for
settlement of a lawsuit filed by BellSouth.
The provision for income taxes was $3.1 million in fiscal 1995 as compared
to $0.3 million in fiscal 1994. The Company's effective tax rate of 41% for
fiscal 1995 is the result of state income taxes, the amortization of
intangible assets with no tax benefit, other non-deductible expenses for tax
purposes, and the net increase in the deferred tax asset valuation
allowance. In fiscal 1994, the Company's tax provision includes a deferred
tax valuation allowance of $1.7 million.
Fiscal 1994 compared to Fiscal 1993
Contract revenues of $121.4 million for fiscal year 1994 reflect a decrease
of $14.2 million from the amount recorded for fiscal 1993. The decrease in
contract revenues was primarily attributable to lower volumes on bid work in
the electrical services group. The most significant factor leading to the
decrease in bid work resulted from the Company experiencing some difficulty
in obtaining bid and performance bond requirements. The expiration of
certain contracts and the cancellation by the Company of other less
profitable contracts in the telecommunication services group also
contributed to the decrease in revenues. Despite an overall decrease in the
Company's revenues, the utility line locating group's revenue increased $1.9
million from fiscal 1993 as a result of obtaining several new contracts
during fiscal 1994.
During fiscal 1994, the Company's revenue mix between telecommunication
services, utility line locating, and electrical services was 78%, 9%, and
13%, respectively. The contract revenue mix for fiscal 1994 reflects a
decrease in the electrical services group in comparison to fiscal 1993, due
to the difficulty in obtaining bonding requirements as described above. In
fiscal 1993, the revenue mix between telecommunication services, utility
line locating, and electrical services were 73%, 7%, and 20%, respectively.
The revenue earned from the multi-year comprehensive services contracts
included in the telecommunication services group represents approximately
66% and 58% of total contract revenues in fiscal 1994 and 1993,
respectively.
In fiscal 1994, other revenue included $0.3 million from the recovery of
damages received in the settlement of a breach of contract claim and $0.2
million from gains on the disposal of idle and surplus property and
equipment. In 1993, other revenue included the recovery of damages of $1.2
million in settlement of breach of contract claims.
<PAGE> 10
The Company's backlog of uncompleted work at July 31, 1994 was $181 million
as compared to $134 million at July 31, 1993. During fiscal 1994, the
Company was awarded various multi-year comprehensive services contracts in
the telecommunication services group totaling approximately $127 million of
which $73 million represents successful rebids of existing contracts.
Cost of earned revenues, excluding depreciation, constituted 87% of contract
revenues in fiscal 1994, and 85% in fiscal 1993. In fiscal 1994, the
Company's prime costs of direct labor, materials, subcontractors, and
equipment costs were 64% of contract revenues compared to 67% in fiscal
1993. The decrease in these prime costs during fiscal 1994 resulted from the
Company's effort to improve operating efficiencies and increase
productivity. However, increases in insurance and other indirect costs
partially offset these lower prime costs. In fiscal 1993, the Company's
major customers created a highly-competitive environment and placed
increased emphasis on the quality of services performed under the
comprehensive services contracts. Compliance with these new standards
increased operating costs.
General and administrative expenses in fiscal 1994 were $15.6 million, or
$5.3 million lower than fiscal 1993. The primary factors contributing to
the decrease were professional and legal fees which decreased by $2.9
million and administrative salaries and related payroll costs which
decreased by $1.0 million. Other general expenses also decreased,
principally the provision for doubtful accounts which decreased by $0.7
million due to improved collection efforts. These decreases were partially
offset by a $0.4 million charge recorded for the settlement of a lawsuit
filed by BellSouth during fiscal 1994.
During fiscal 1994, the Company wrote off $1.4 million of intangible assets
with no related tax benefit. Approximately, $1.3 million of the write-off
relates to the acquisition of Prime Utility Contractors, Inc. ("Prime").
During the quarter ending July 31, 1994, Prime voluntarily terminated its
only telecommunication services contract. Termination of the contract is
the result of the Company's involvement in certain litigation matters with
BellSouth in Alabama. Given the competitive environment in which the
Company and its subsidiaries operate, the Company could not predict with any
certainty whether Prime would be awarded service contracts in the future.
The remaining intangible asset write-off of $0.1 million relates to the
Company terminating certain business activities as described below.
In fiscal 1993, the Company wrote off $24.3 million of intangible assets,
with no related tax benefit, relating to the acquisitions of the Ansco Group
and Ivy H. Smith Company. The Company acquired these subsidiaries based on
their respective earning power, experienced management team and their
competitive advantages and knowledge in the telecommunications services
marketplace. The operating performance of these subsidiaries, since their
acquisition, was severely lower than anticipated and significant operating
losses were incurred. The loss of experienced management personnel,
declining backlog, increased operating costs, declining revenues, and
deteriorating profit margins contributed to the negative result of these
subsidiaries. In addition, the intense competitive pressures from smaller
contractors and the prolonged economic recessionary effects on the
telecommunication construction industry caused a major redirection in the
services provided by these businesses. The Company, after an evaluation of
these operating problems and concerns affecting the Ansco Group and Ivy H.
Smith Company, determined that the intangible assets, primarily goodwill,
were permanently impaired and would not be recoverable from future earnings
of these subsidiaries.
<PAGE> 11
During fiscal 1994, the Company recorded a deferred tax valuation allowance
of $1.7 million to recognize that the Company may not be able to generate
sufficient taxable income to realize the related deferred tax assets. The
variance between the statutory tax rates and the effective tax rates
resulted primarily from the impact of the deferred tax asset valuation
allowance, the write-off of intangible assets without any related tax
benefits, and other non-deductible expenses for tax purposes.
The Company adopted the Financial Accounting Standards Board ("FASB"),
Statement of Financial Accounting Standard No. 109, "Accounting For Income
Taxes", as of the beginning of fiscal year 1993. The cumulative effect on
prior years of this change in accounting principle increased the net loss by
$2.3 million. The prior years' financial statements have not been restated
to apply the provision of Statement No. 109.
On August 10, 1993, the Omnibus Budget Reconciliation Act of 1993 (the
"Act") was signed into law. The Act increased the federal tax rate to 35%
for taxable income in excess of $10 million and reduced the deductibility of
certain business expenses. The Act did not have a material effect on the
Company's consolidated financial statements.
During fiscal 1994, the Company decided to terminate its business interest
relating to the governmental electrical contracting and utility right-of-way
maintenance activities. For fiscal 1994, the loss from these activities
was $2.3 million, or $0.26 per share. The estimated costs of completing the
existing contracts, the write-off and disposal of certain assets, and the
administrative expenses required to shutdown these activities resulted in an
expense of $0.6 million being recorded during fiscal 1994.
At July 31, 1994, all contracts under the traffic signal and lighting
systems activities were completed. In fiscal 1993, an additional $0.9
million of costs associated with the phase-out of the traffic signal and
lighting systems activities were recorded.
Subsequent to July 31, 1994, several disputes between the Company and Mr.
Stover (a former Director of the Company) and affiliated parties were
resolved and settled. Among other claims resolved, the settlement required
the payment of $103,000 by the Company to Mr. Stover. In addition, the
settlement modified the terms of the lease agreements the Company had
previously entered into with Mr. Stover and affiliated parties. The
modifications reduced the monthly rental payments effective January 1995 and
accelerated the termination dates to be no later then June 30, 1998. As a
result, the Company recorded a charge against operations of $0.6 million,
including a $0.4 million reserve against certain leasehold improvements,
during the quarter ended July 31, 1994.
Liquidity and Capital Resources
The Company's sources of funds were 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 was $9.2 million in fiscal 1995, compared with $4.5
million in fiscal 1994 and $6.9 million in fiscal 1993. Strong operating
results during fiscal 1995 contributed to the Company's strengthening cash
flow position.
<PAGE> 12
Working capital at July 31, 1995 increased $21.0 million from a deficit
position of $13.5 million at July 31, 1994. 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.
Investing activities used $6.0 million of cash in fiscal 1995 for the normal
replacement of equipment, and the additional investment in equipment related
to the start-up of new comprehensive services contracts in the
telecommunication services group. These investing activities were offset by
proceeds of $2.6 million from the sale of certain real property and
equipment. Aside from the capital expenditures, the Company obtained
approximately $4.4 million of equipment under various noncancellable
operating leases ranging from one-to-three years. The Company's future
lease commitments are discussed in the Notes to Consolidated Financial
Statements.
Cash used for financing activities in fiscal 1995 was $5.5 million,
reflecting a reduction in debt, including a $1.5 million prepayment of the
term-loan principal, utilizing the proceeds received from the sale of
certain real property and equipment. During fiscal 1995, $1.4 million was
drawn against the capital equipment acquisition facility and converted to
equipment acquisition term-loans described below.
At July 31, 1995, the Company had outstanding borrowings under a term-loan
of $7.9 million, equipment acquisition term-loans aggregating $1.6 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 (9.25% at July 31, 1995 and 7.75% at July 31, 1994). The interest
on the equipment acquisition term-loans is at the bank's prime rate plus
three-quarters of one percent (9.50% at July 31, 1995 and 8.00% at July 31,
1994). The outstanding principal on the term-loan and equipment acquisition
term-loans are payable quarterly through June 1997 and January 1998,
respectively. The revolving credit facility is used to finance working
capital and is payable in March 1998. 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 $1.4 million is available and unused at July 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 July 31, 1995. Both facilities expire November
30, 1995. The Company currently intends to petition the lender for renewal
of these facilities and anticipates that the renewals will be granted.
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. The Company requested modification of these existing financial
covenant requirements going forward and the bank granted such modifications
<PAGE> 13
in December 1994. 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 July
31, 1995, the Company was in compliance with all financial covenants and
conditions of the bank credit agreement.
Cash flows generated from operating activities have been, and are expected
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, together 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. The Company's future operating results and
cash flows may be affected by a number of factors. These factors include
the Company's success in bidding on future contracts, and the Company's
ability to effectively manage controllable costs.
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. No cash dividends
have been paid during the last five fiscal years. In addition, the
Company's bank credit agreement prohibits, without prior approval of the
bank, the declaration or payment of any cash dividends until the term-loan
is reduced to $5.0 million; thereafter, cash dividends are limited to 331/3
percent of earnings available for distribution as dividends.
Item 8. Financial Statements and Supplementary Data
The Registrant's consolidated financial statements and related notes and
independent auditors' report follow on subsequent pages of this report.
<PAGE> 14
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JULY 31, 1995 and 1994
<TABLE>
<CAPTION>
Notes 1995 1994
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents 1 $ 4,306,675 $ 2,625,783
Accounts receivable, net 4 16,330,477 14,885,597
Costs and estimated earnings in
excess of billings 1,5 5,223,425 3,765,931
Deferred tax assets, net 1,8 385,755 613,402
Other current assets 1,396,201 1,263,604
------------ ------------
Total current assets 27,642,533 23,154,317
------------ ------------
PROPERTY AND EQUIPMENT, net 1,6,7 18,802,563 19,955,051
------------ ------------
OTHER ASSETS:
Intangible assets, net 1,3 4,994,535 5,149,623
Other 353,227 440,347
------------ ------------
Total other assets 5,347,762 5,589,970
------------ ------------
TOTAL $ 51,792,858 $ 48,699,338
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 5,607,567 $ 4,730,378
Notes payable 7 4,955,080 22,594,407
Billings in excess of costs and
estimated earnings 1,5 100,951 252,441
Accrued self-insured claims 1 2,266,855 2,388,642
Income taxes payable 1,8 621,483
Other accrued liabilities 6,585,387 6,660,198
------------ ------------
Total current liabilities 20,137,323 36,626,066
NOTES PAYABLE 7 13,870,064
ACCRUED SELF-INSURED CLAIMS 1 6,598,372 5,136,730
DEFERRED TAX LIABILITIES 1,8 227,647
------------ ------------
Total liabilities 40,605,759 41,990,443
------------ ------------
COMMITMENTS AND CONTINGENCIES 7,13,15,16
STOCKHOLDERS' EQUITY: 10,12,15
Common stock, par value $.33 1/3
per share: 50,000,000 shares
authorized; 8,543,990 and 8,528,990
issued and outstanding, respectively 2,847,997 2,842,997
Additional paid-in capital 24,293,309 24,253,309
Retained deficit (15,954,207) (20,387,411)
------------- ------------
Total stockholders' equity 11,187,099 6,708,895
------------ ------------
TOTAL $ 51,792,858 $ 48,699,338
============ ============
See notes to consolidated financial statements.
</TABLE>
<PAGE> 15
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JULY 31, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
Notes 1995 1994 1993
<S> <C> <C> <C> <C>
REVENUES:
Contract revenues earned 1,14 $143,909,874 $121,407,707 $135,572,609
Other, net 9 1,373,242 1,084,195 1,368,780
------------ ------------ ------------
Total 145,283,116 122,491,902 136,941,389
------------ ------------ ------------
EXPENSES:
Cost of earned revenues
excluding depreciation 117,742,300 105,607,777 115,823,157
General and administrative 7,16 14,113,615 15,582,953 20,894,304
Depreciation and
amortization 1,6 5,911,104 7,337,438 8,411,472
Intangible asset write-off 1,3 1,422,876 24,285,057
------------ ------------ ------------
Total 137,767,019 129,951,044 169,413,990
------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME
TAXES 7,516,097 (7,459,142) (32,472,601)
------------ ------------ ------------
PROVISION (BENEFIT) FOR
INCOME TAXES 1,8
Current 3,082,893 (1,445,880) (1,631,457)
Deferred 1,763,661 (1,619,745)
------------ ------------ ------------
Total 3,082,893 317,781 (3,251,202)
------------ ------------ ------------
INCOME (LOSS) BEFORE CUMULATIVE
EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 4,433,204 (7,776,923) (29,221,399)
CUMULATIVE EFFECT ON PRIOR
YEARS OF CHANGE IN
ACCOUNTING FOR INCOME TAXES 1,8 2,286,398
------------ ------------ ------------
NET INCOME (LOSS) $ 4,433,204 $ (7,776,923) $(31,507,797)
============ ============ ============
EARNINGS (LOSS) PER COMMON
SHARE: 1
Earnings (Loss) before
cumulative effect of change
in accounting principle $ 0.52 $ (0.91) $ (3.41)
Cumulative effect on prior
years of change in
accounting for income
taxes (0.27)
------------ ------------ ------------
Net income (loss) per
common share $ 0.52 $ (0.91) $ (3.68)
============ ============ ============
See notes to consolidated financial statements.
</TABLE>
<PAGE> 16
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JULY 31, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
Notes 1995 1994 1993
<S> <C> <C> <C> <C>
COMMON STOCK:
Balance at beginning of year $ 2,842,997 $ 2,842,997 $ 2,838,706
Stock options exercised 12 5,000
Shares issued for a business
acquisition 2 4,291
------------ ------------ ------------
Balance at end of year 2,847,997 2,842,997 2,842,997
------------ ------------ ------------
ADDITIONAL PAID-IN CAPITAL:
Balance at beginning of year 24,253,309 24,253,309 24,133,700
Stock options exercised 12 40,000
Shares issued for a business
acquisition 2 119,609
------------ ------------ ------------
Balance at end of year 24,293,309 24,253,309 24,253,309
------------ ------------ ------------
RETAINED EARNINGS (DEFICIT):
Balance at beginning of year (20,387,411) (12,610,488) 18,897,309
Net income (loss) 4,433,204 (7,776,923) (31,507,797)
------------ ------------ ------------
Balance at end of year (15,954,207) (20,387,411) (12,610,488)
------------ ------------ ------------
UNEARNED RESTRICTED STOCK
COMPENSATION:
Balance at beginning of year (300,000) (600,000)
Amortization of deferred
compensation 12 300,000 300,000
------------ ------------ ------------
Balance at end of year 0 0 (300,000)
------------ ------------ ------------
TOTAL STOCKHOLDERS' EQUITY $ 11,187,099 $ 6,708,895 $ 14,185,818
============ ============ ============
See notes to consolidated financial statements.
</TABLE>
<PAGE> 17
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JULY 31, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Increase (Decrease) in Cash and
Equivalents from:
OPERATING ACTIVITIES:
Net income (loss) $ 4,433,204 $ (7,776,923) $(31,507,797)
Adjustments to reconcile net cash
provided by operating activities:
Cumulative effect of change in
accounting principle 2,286,398
Intangible asset write-off 1,422,876 24,285,057
Depreciation and amortization 5,911,104 7,337,438 8,411,472
(Gain) loss on disposal of assets (837,942) 225,858 952,703
Deferred income taxes 1,763,661 (1,619,746)
Deferred compensation 300,000 300,000
Changes in assets and liabilities,
net of acquired business:
Accounts receivable, net (1,444,880) 852,796 2,768,456
Unbilled revenues, net (1,608,984) 109,120 1,087,587
Other current assets (132,597) (21,165) 657,471
Other assets 87,120 (247,911) 100,903
Accounts payable 877,189 91,564 308,577
Accrued self-insured claims
and other liabilities 1,245,941 487,331 (1,124,513)
Accrued income taxes 621,483
------------ ------------ ------------
Net cash inflow from operating
activities 9,151,638 4,544,645 6,906,568
------------ ------------ ------------
INVESTING ACTIVITIES:
Capital expenditures (5,971,966) (4,825,723) (6,932,812)
Proceeds from sales of assets 2,566,619 2,464,677 515,042
Other 250,358
------------ ------------ ------------
Net cash outflow from investing
activities (3,405,347) (2,361,046) (6,167,412)
------------ ------------ ------------
FINANCING ACTIVITIES:
Borrowings on notes payable and
bank lines-of-credit 1,350,000 1,100,000 1,014,735
Principal payments on notes
payable and bank lines-of-
credit (5,460,399) (5,090,555) (3,656,654)
Exercise of stock options 45,000
------------ ------------ ------------
Net cash outflow from financing
activities (4,065,399) (3,990,555) (2,641,919)
------------ ------------ ------------
NET CASH INFLOW (OUTFLOW) FROM
ALL ACTIVITIES 1,680,892 (1,806,956) (1,902,763)
CASH AND EQUIVALENTS AT BEGINNING
OF YEAR 2,625,783 4,432,739 6,335,502
CASH AND EQUIVALENTS AT END ------------ ------------ ------------
OF YEAR $ 4,306,675 $ 2,625,783 $ 4,432,739
============ ============ ============
See notes to consolidated financial statements.
</TABLE>
<PAGE> 18
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - (continued)
FOR THE YEARS ENDED JULY 31, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
AND NONCASH INVESTING AND FINANCING
ACTIVITIES:
Cash paid during the period for:
Interest $ 1,946,918 $ 1,725,832 $ 1,860,545
Income taxes 2,749,817 762,792 805,387
Property and equipment acquired
and financed with:
Capital lease obligations $ 360,242
Short-term notes payables $ 204,521
Adjustments to prior year's
shares issuable based on the
net worth of an acquired company $ 123,900
See notes to consolidated financial statements.
</TABLE>
<PAGE> 19
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION -- The consolidated financial statements include
Dycom Industries, Inc. ("Dycom" or the "Company") 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.
For comparative purposes, certain amounts in the 1994 and 1993 financial
statements have been reclassified to conform with the 1995 presentation.
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 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 daily requirements which are invested in overnight repurchase agreements,
certificates of deposits, and various other financial instruments having a
maturity of three months or less. For purposes of the 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 is
computed over the estimated useful life of the assets utilizing the
straight-line method. The estimated useful service lives of the assets are:
buildings -- 20-31 years; leasehold improvements -- the term of the
respective lease or the estimated useful life of the improvements, whichever
is shorter; vehicles -- 3-7 years; equipment and machinery -- 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 related accumulated depreciation are removed from the accounts
and the resulting gain or loss is included in income.
INTANGIBLE ASSETS -- The excess of the purchase price over the fair market
value of the tangible net assets of acquired businesses (goodwill) is
amortized on 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.
<PAGE> 20
Amortization expense, which is comprised primarily of goodwill, was
$155,088, $293,478, and $1,067,296 for the years ended July 31, 1995, 1994,
and 1993, respectively. The intangible assets are net of accumulated
amortization of $841,182 and $686,094 at July 31, 1995 and 1994,
respectively.
In fiscal 1994 and 1993, the Company wrote off the unamortized portion of
intangible assets, primarily goodwill, related to certain acquired
subsidiaries and terminated business activities totaling $1,422,876 and
$24,285,057, respectively. See Note 3.
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 consolidated financial
statements as an accrued liability. The self-insured claims liability
includes incurred but not reported losses of $5,072,000 and $4,905,000 at
July 31, 1995 and 1994, respectively. The determination of such claims and
expenses and the appropriateness of the related liability is continually
reviewed and updated.
INCOME TAXES -- The Company and its subsidiaries file a consolidated federal
income tax return. Deferred income taxes are provided for the temporary
differences between the financial reporting basis and the tax basis of the
Company's assets and liabilities.
CHANGE IN ACCOUNTING PRINCIPLE -- The Company adopted the Financial
Accounting Standards Board ("FASB"), Statement of Financial Accounting
Standard No. 109, "Accounting For Income Taxes", as of the beginning of
fiscal year 1993. Statement No. 109 required a change from the deferred
method to the liability method of accounting for income taxes. Under the
liability method, 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. Under Statement
No. 109, 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 cumulative effect on prior years of this change in accounting principle
increased the fiscal 1993 net loss by $2,286,398, or $0.27 per share, and is
reported separately in the consolidated statements of operations.
PER SHARE DATA -- Per common share amounts are computed on the basis of
weighted average shares of common stock outstanding, plus common stock
equivalent shares arising from the effect of dilutive stock options, using
the treasury stock method. In the years ended July 31, 1995, 1994, and
1993, stock options did not impact the per share amounts as they were either
insignificant or antidilutive. The weighted average number of shares for
the years ended July 31, 1995, 1994, and 1993 were 8,535,524, 8,528,990, and
8,566,648, respectively. See Note 12.
2. ACQUISITIONS
During fiscal 1993, the Company finalized the common stock consideration
related to the January 2, 1992 acquisition of Globe Communications, Inc. and
Globe Equipment Corporation ("GCI"). The final stock consideration resulted
in an increase to property and equipment and to total stockholders' equity
of $0.1 million.
<PAGE> 21
3. OPERATING DIFFICULTIES AND INTANGIBLE ASSET WRITE-OFF
In prior years, the Company and its subsidiaries experienced significant
operating difficulties resulting from work reductions in the construction
industry, increased operating costs, increased competition from smaller
contractors, loss of experienced operating personnel, as well as various
legal matters including shareholder class action and derivative lawsuits and
investigations involving Company executives.
Many of these operational problems and concerns affecting Dycom were also
specific to the Ansco Group and Ivy H. Smith Company. The Company acquired
these subsidiaries based on their respective earning power, experienced
management team and their competitive advantages and knowledge in the
telecommunications services marketplace. The operating performance of these
subsidiaries, since their acquisition, was severely lower than anticipated
and significant operating losses were incurred. The loss of experienced
management personnel, declining backlog, increased operating costs,
declining revenues, and deteriorating profit margins contributed to the
negative results of these subsidiaries. In addition, the intense competitive
pressure from smaller contractors and the prolonged economic recessionary
effects on the telecommunication construction industry caused a major
redirection in the services provided by these businesses. The Company, after
an evaluation of these operating problems and concerns affecting the Ansco
Group and Ivy H. Smith Company, determined that the intangible assets,
primarily goodwill, were permanently impaired and would not be recoverable
from the future earnings of these subsidiaries. As a result, the Company
wrote off $24,285,057 of intangible assets, with no related tax benefit, in
fiscal 1993.
In fiscal 1994, the Company wrote off $1,286,321 of goodwill, net of
accumulated amortization of $152,919, related to Prime Utility Contractors,
Inc. ("Prime"), a wholly-owned subsidiary of the Company. During the quarter
ending July 31, 1994, Prime voluntarily terminated its only
telecommunications services contract, due to Dycom's involvement in certain
litigation matters with BellSouth in Alabama. Given the severity of the
litigation matters and the competitive environment in which the Company and
its subsidiaries operate, Dycom could not predict with any certainty whether
Prime would be awarded service contracts in the future. These factors led
the Company to conclude that the intangible assets related to the
acquisition of Prime were permanently impaired and would not be recoverable
from future earnings. In addition, the Company wrote off $136,555 of
intangible assets, net of accumulated amortization of $375,495, related to
certain other terminated and discontinued business activities.
As shown in the accompanying consolidated financial statements, the
operating results for fiscal 1995 reflect significant improvements in
contract revenues, operating profit margins, net income and operating cash
flows as compared to the corresponding prior fiscal years. As discussed in
Notes 7 and 16, the Company has successfully resolved all financial covenant
violations of its bank credit agreement and is in compliance with all
covenants at July 31, 1995 and has settled all outstanding litigation
matters. Although the Company has made progress, cash flow generated from
operating activities will continue to be the primary source of funds as
available borrowing capabilities under the current bank credit agreement is
limited. The Company anticipates that these sources of funds will be
sufficient to meet its scheduled debt obligations, operating lease
commitments and support the Company's current capital equipment
requirements.
<PAGE> 22
4. ACCOUNTS RECEIVABLE
Accounts receivable at July 31 consist of the following:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Contract billings $15,222,897 $12,975,307
Retainage 1,201,454 1,246,340
Refundable income taxes 1,092,375
Other receivables 773,704 739,427
----------- -----------
Total 17,198,055 16,053,449
Less allowance for doubtful accounts 867,578 1,167,852
----------- -----------
Accounts receivable, net $16,330,477 $14,885,597
=========== ===========
</TABLE>
5. COSTS AND ESTIMATED EARNINGS ON CONTRACTS IN PROGRESS
The accompanying consolidated balance sheets include costs and estimated
earnings on contracts in progress, net of progress billings as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Costs incurred on contracts in progress $20,862,665 $22,244,850
Estimated earnings thereon 609,280 534,618
----------- -----------
21,471,945 22,779,468
Less billings to date 16,349,471 19,265,978
----------- -----------
$ 5,122,474 $ 3,513,490
=========== ===========
Included in the accompanying
consolidated balance sheets under
the captions:
Costs and estimated earnings in excess
of billings $ 5,223,425 $ 3,765,931
Billings in excess of costs and
estimated earnings (100,951) (252,441)
----------- -----------
$ 5,122,474 $ 3,513,490
=========== ===========
</TABLE>
<PAGE> 23
6. PROPERTY AND EQUIPMENT
The accompanying consolidated balance sheets include the following property
and equipment:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Land $ 1,723,527 $ 1,789,527
Buildings 2,223,627 2,304,730
Leasehold improvements 750,955 1,209,742
Vehicles 21,381,527 20,852,476
Equipment and machinery 19,711,023 20,477,127
Furniture and fixtures 2,930,467 2,802,377
----------- -----------
Total 48,721,126 49,435,979
Less accumulated depreciation and
amortization 29,918,563 29,480,928
----------- -----------
Property and equipment, net $18,802,563 $19,955,051
=========== ===========
</TABLE>
During fiscal 1995, certain subsidiaries of the Company entered into lease
arrangements accounted for as capitalized leases. The carrying value of
capital leases at July 31, 1995 was $326,704, net of accumulated
depreciation of $33,538. Capital leases are included as a component of
equipment and machinery.
In fiscal 1994, idle assets consisting primarily of land, office and shop
facilities, and certain leasehold improvements, were included in property
and equipment. These assets were sold during fiscal 1995. The carrying value
of idle assets at July 31, 1994 was $112,500, net of valuation reserves of
$426,148. There were no idle assets held for sale at July 31, 1995.
Maintenance and repairs of property and equipment amounted to $5,015,998,
$5,048,482, and $5,612,527 for the fiscal years ended July 31, 1995, 1994,
and 1993, respectively.
7. NOTES PAYABLE
Notes payable at July 31 are summarized by type of borrowing as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Bank Credit Agreement:
Revolving credit facility $ 9,000,000 $ 9,000,000
Term-loan 7,948,469 12,461,306
Equipment acquisition term-loan 1,566,667 962,500
Capital lease obligations 310,008
Due former shareholder of acquired
company 110,000
Vehicle and equipment loans 60,601
----------- -----------
Total 18,825,144 22,594,407
Less current portion 4,955,080 22,594,407
----------- -----------
Notes payable--non-current $13,870,064 $ 0
=========== ===========
</TABLE>
<PAGE> 24
At July 31, 1995, the Company's bank credit agreement consisted of a $7.9
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 acquisition
facility of which $1.4 million was available and unused. The bank credit
agreement contains restrictions which, among other things, require
maintenance of certain financial ratios and covenants, restrict encumbrance
of assets and creation of indebtedness, and limit the payment of cash
dividends. The bank credit agreement 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. Substantially all the Company's assets are pledged as collateral
under the terms of the agreement.
The interest rate on the term-loan and the revolving credit facility is at
the bank's prime rate plus one-half percent (9.25% at July 31, 1995 and
7.75% at July 31, 1994). The interest rate on the equipment acquisition
term-loan is at the bank's prime rate plus three-quarters percent (9.50% at
July 31, 1995 and 8.00% at July 31, 1994). Interest costs incurred on notes
payable, all of which were expensed, for the years ended July 31, 1995,
1994, and 1993, were $1,981,010, $1,704,265, and $1,823,610, respectively.
Such amounts are included in the general and administrative expenses in the
accompanying consolidated statements of operations.
During fiscal 1995, $1.4 million was drawn against the capital acquisition
facility and in accordance with the bank credit agreement, the draws were
converted to equipment acquisition term-loans. The outstanding balance of
the equipment acquisition term-loans is payable quarterly through January
1998. Also during fiscal 1995, the Company prepaid $1.5 million of the term-
loan principal utilizing the proceeds received from the sale of certain idle
real property and equipment. Beginning September 1995, the term-loan
quarterly principal payments increased to $1.0 million from $750,000. The
revolving credit facility is used to finance working capital and is payable
in March 1998.
At July 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. Both the standby letter of credit
facility and the capital acquisition facility expire in November 1995. The
Company currently intends to petition the bank for renewal of these
facilities and anticipates that the renewals will be granted.
At July 31, 1994, the Company was required to classify the outstanding
borrowings under the bank credit agreement as a current liability in the
accompanying consolidated financial statements. This classification resulted
from the likelihood of the Company violating certain of its financial
covenants within the subsequent twelve months. The Company requested
modification of these existing financial covenants going forward and the
bank granted such modifications in December 1994. As a result, the Company
is no longer required to classify the outstanding borrowings under the bank
credit agreement as a current liability. At July 31, 1995, the Company was
in compliance with all financial covenants and conditions.
In addition to the borrowings under the bank credit agreement, certain
subsidiaries have outstanding obligations under capital leases. The
obligations are payable in monthly installments expiring at various dates
through July 1998. At July 31, 1994, a subsidiary of the Company had loans
outstanding secured by equipment with a net book value of $164,714. These
loans were repaid during fiscal 1995.
<PAGE> 25
The amount shown in the above table as due former shareholder of an acquired
company results from the repurchase of the shareholder's stock upon his
retirement. This arrangement was an existing arrangement made by a
subsidiary prior to Dycom's acquisition of the subsidiary. This obligation
was repaid during fiscal 1995.
The estimated aggregate annual principal repayments for notes payable for
the next three years are $4,955,080 in 1996, $4,501,466 in 1997, and
$9,368,598 in 1998.
8.INCOME TAXES
The components of the provision (benefit) for income taxes are:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Current:
Federal $ 2,582,918 $ (1,287,506) $ (1,638,611)
State 499,975 (158,374) 7,154
------------ ------------ ------------
3,082,893 (1,445,880) (1,631,457)
------------ ------------ ------------
Deferred:
Federal (74,145) (138,875) (1,532,153)
State 190,163 (87,592)
Valuation allowance 74,145 1,712,373
------------ ------------ ------------
0 1,763,661 (1,619,745)
------------ ------------ ------------
Total tax provision (benefit) $ 3,082,893 $ 317,781 $ (3,251,202)
============ ============ ============
</TABLE>
As discussed in Note 1, Summary of Significant Accounting Policies, the
Company adopted FASB Statement No. 109 as of the beginning of fiscal year
1993. The cumulative effect on the prior years of this change in accounting
principle increased the 1993 net loss by $2,286,398 and is reported
separately in the consolidated statements of operations. In addition, the
effect of adoption of FASB Statement No. 109 decreased the net loss in 1993
by $1,057,058, or $0.12 per share.
<PAGE> 26
The deferred tax provision (benefit) is the change in the deferred tax
assets and liabilities representing the tax consequences of changes in the
amount of temporary differences and changes in tax rates during the year.
The deferred tax assets and liabilities at July 31 are comprised of the
following:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Deferred tax assets:
Self-insurance, warranty, and
other non-deductible reserves $ 3,610,217 $ 3,490,216
Allowance for doubtful accounts 294,977 412,336
Restricted stock compensation 145,350
Other 5,660 24,361
----------- -----------
3,910,854 4,072,263
Valuation allowance (1,786,518) (1,712,373)
----------- -----------
$ 2,124,336 $ 2,359,890
=========== ===========
Deferred tax liabilities:
Property and equipment $ 1,530,608 $ 1,781,225
Unamortized acquisition costs 207,973 192,910
----------- -----------
$ 1,738,581 $ 1,974,135
=========== ===========
Net deferred tax assets $ 385,755 $ 385,755
=========== ===========
</TABLE>
A valuation allowance is provided when it is more likely then not that some
portion of the deferred tax asset will not be realized. Management has
evaluated the available evidence about future taxable income and other
possible sources of realization of deferred tax assets. The valuation
allowance recorded in the financial statements reduces deferred tax assets
to an amount that represents management's best estimate of the amount of
such deferred tax assets that more likely than not will be realized.
The difference between the total tax provision and the amount computed by
applying the statutory federal income tax rates to pre-tax income is as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Statutory rate applied to
pre-tax income (loss) $ 2,555,473 $ (2,536,108) $(11,040,684)
State taxes, net of federal
tax benefit 329,984 20,981 (53,089)
Amortization and write-off of
intangible assets, with no tax
benefit 52,730 502,312 8,485,822
Tax effect of non-deductible
items, primarily purchase
accounting adjustments 70,561 27,686 (239,124)
Adjustment of prior years'
accrual 318,848
Valuation allowance 74,145 1,712,373
Deferred compensation--permanent
difference 191,250
Other items, net 80,439 (404,127)
----------- ------------ ------------
Total tax provision $ 3,082,893 $ 317,781 $ (3,251,202)
=========== ============ ============
</TABLE>
<PAGE> 27
On August 10,1993, the Omnibus Budget Reconciliation Act of 1993 (the "Act")
was signed into law. The Act increased the federal tax rate to 35% for
taxable income in excess of $10 million and reduced the deductibility of
certain business expenses. The Act did not have a material effect on the
Company's consolidated financial statements.
The Internal Revenue Service has examined and closed the Company's federal
income tax returns for all years through fiscal 1990. The Company has
settled all assessments of additional taxes and believes that it has made
adequate provision for income taxes that may become payable with respect to
open tax years.
9. REVENUES--OTHER
The components of other revenues for the fiscal years ending 1995,
1994, and 1993 are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Interest income $ 265,931 $ 315,094 $ 183,936
Gain (loss) on sale of
fixed assets 837,942 200,292 (192,648)
Settlement proceeds 250,000 1,201,669
Miscellaneous income 269,369 318,809 175,823
----------- ----------- ------------
Total other revenue, net $ 1,373,242 $ 1,084,195 $ 1,368,780
=========== =========== ============
</TABLE>
10. CAPITAL STOCK
On June 1, 1992, the Company approved a Shareholder Rights Plan. All
shareholders of record on June 15, 1992 were issued a Right for each
outstanding share of the Company's common stock. Each Right entitles the
holder to purchase one-half share of common stock for an exercise price of
$18 subject to adjustment. The Right is exercisable only when a triggering
event occurs. The triggering events, among others, are a person or group's
(1) acquisition of 20% or more of Dycom's common stock, (2) commencement of
a tender offer which would result in the person or group owning 20% or more
of Dycom's common stock or (3) acquisition of at least 10% of Dycom's common
stock and such acquisition is determined to have effects adverse to the
Company. The Company can redeem the Rights at $0.01 per Right at any time
prior to ten days after a triggering event occurs.
11. EMPLOYEE BENEFIT PLAN
Effective January 1, 1995, the Company adopted The Dycom Industries, Inc.
Retirement Savings Plan, a defined contribution plan that qualifies under
Section 401(k) of the Internal Revenue Code. The plan provides retirement
benefits to all employees who elect to participate. Under the plan,
participating employees may defer up to 10% of their pre-tax compensation,
but not more than $9,240 per calendar year. The Company's contributions to
the plan are discretionary.
<PAGE> 28
12. STOCK OPTION PLAN AND RESTRICTED STOCK AWARD
The Company has reserved 900,000 shares of common stock under its 1991
Incentive Stock Option Plan (the "1991 Plan") which was approved by the
shareholders on November 25, 1991. The Plan provides for the granting of
options to key employees until it expires in 2001. Options are granted at
the fair market value on the date of grant and are exercisable over a period
of up to five years. Certain of the options granted during the years ended
July 31, 1995, 1994, and 1993 have lapsed as a result of certain employees
terminating their employment with the Company. At July 31, 1995, 1994, and
1993, options available for grant under the 1991 Plan were 403,419 shares,
549,792 shares, and 823,560 shares, respectively.
The Company's previous Incentive Stock Option Plan (the "1981 Plan") expired
on December 31, 1991. No further grants will be made under the 1981 Plan,
and all outstanding options at July 31, 1995 will expire during the first
quarter of fiscal 1996.
The following table summarizes the stock option transactions under the 1991
Plan and the 1981 Plan for the three years ended July 31, 1995, 1994, and
1993:
<TABLE>
<CAPTION>
1991 Plan 1981 Plan
Number of Option Price Number of Option Price
Options Per Share Options Per Share
____________________________________________________
<S> <C> <C> <C> <C>
Options outstanding at
July 31, 1992 275,903 $5.08 to 11.50
Granted 198,800 $4.00 to 5.50
Terminated (122,360) (104,942)
Exercised
____________________________________________________
Options outstanding at
July 31, 1993 76,440 $4.00 170,961 $9.33 to 11.50
Granted 310,840 $2.875 to 3.875
Terminated (37,072) (76,671)
Exercised
_____________________________________________________
Options outstanding at
July 31, 1994 350,208 $2.875 to 4.00 94,290 $9.33 to 11.50
Granted 161,300 $2.75 to 6.75
Terminated (14,927) (67,698)
Exercised (15,000) $3.00
_____________________________________________________
Options outstanding at
July 31, 1995 481,581 $2.75 to 6.75 26,592 $10.75
_____________________________________________________
Exercisable options at
July 31, 1995 92,270 $2.875 to 4.00 26,592 $10.75
_____________________________________________________
</TABLE>
<PAGE> 29
In addition to the stock option plans discussed above, the Company has
agreements outside of the plans with the non-employee members of the Board
of Directors. On January 10, 1994, the Company granted to the non-employee
Directors, non-qualified options to purchase an aggregate of 60,000 shares
of common stock. The options were granted at $3.875, the fair market value
on the date of grant, with vesting over a three year period. During fiscal
1995, 24,000 options have lapsed as a result of certain resignations from
the Board of Directors. At July 31, 1995 36,000 options were outstanding of
which 12,000 were exercisable.
As part of an employment agreement with a key executive of the Company,
225,000 shares of Dycom common stock were awarded to the executive on August
1, 1989. A portion of the stock award contained various restrictions as to
the sale or transfer prior to July 31, 1994 when the restrictions lapsed.
Compensation expense based on the value of the stock at the date of grant
was amortized over the restricted period. The charge to compensation expense
for each of the two years ended July 31, 1994 and 1993 was $300,000.
13. RELATED PARTY TRANSACTIONS
Several of the Company's subsidiaries lease land, office buildings, shop
facilities, and other equipment from two of these subsidiaries' former
owners, one of which is a former Director of the Company. Total expense
under these arrangements for the years ended July 31, 1995, 1994, and 1993
was $404,767, $1,166,883, and $1,375,249, respectively. Future minimum lease
payments under the leases are $502,176 in 1996, $502,176 in 1997, and
$460,328 in 1998.
Subsequent to July 31, 1994, several disputes between the Company and Mr.
Stover (a former Director of the Company) and affiliated parties were
resolved and settled. Among other claims resolved, the settlement required
the payment of $103,000 by the Company to Mr. Stover. In addition, the
settlement modified the terms of the lease agreements the Company had
previously entered into with Mr. Stover and affiliated parties. The
modifications reduced the monthly rental payments effective January 1995 and
accelerated the termination dates to be no later then June 30, 1998. As a
result, the Company recorded a charge against operations of $0.6 million,
including a $0.4 million reserve against certain leasehold improvements,
during the year ended July 31, 1994.
14. MAJOR CUSTOMERS
The operating subsidiaries obtain contracts from both public and private
concerns. For the years ended July 31, 1995, 1994, and 1993, approximately
42%, 41%, and 37%, respectively, of the contract revenues were from Southern
Bell Telephone Company; 15%, 14%, and 13%, respectively, of the contract
revenues were from South Central Bell Telephone Company; and 9%, 11%, and
10%, respectively, of the contract revenues were from GTE.
15. COMMITMENTS AND CONTINGENCIES
The Company and its subsidiaries have operating leases covering office
facilities, vehicles, and equipment which have noncancellable terms in
excess of one year. During fiscal 1995 and 1994, the Company entered into
numerous operating leases for vehicles and equipment. Certain of these
<PAGE> 30
leases contain renewal provisions and generally require the Company to pay
insurance, maintenance, and other operating expenses. Total expense
incurred under operating lease agreements, excluding the transactions with
related parties (see Note 13), for the years ended July 31, 1995, 1994, and
1993, was $2,642,407, $1,102,641, and $447,861, respectively. The future
minimum obligations under these leases are $2,471,229 in 1996, $1,391,656 in
1997, $677,924 in 1998, $319,446 in 1999, $264,771 in 2000, and $597,371
thereafter.
As part of the Ansco Group acquisition, the Company was contingently liable
for additional consideration based on the cumulative earnings of the
acquired companies. As of October 31, 1994, the earn-out period was
complete. The Company determined that no additional consideration would be
payable to the former Ansco Group shareholders. Accordingly, no liability
for additional costs for the acquired companies is recorded in the
accompanying consolidated financial statements.
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.
16. LITIGATION SETTLEMENTS
During the fiscal year ended July 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 plaintiffs' attorneys' fees will be paid. In
the fiscal year ended 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 fiscal year ended July 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 installments of $375,000
each during the quarters ended April 30, 1995 and January 31, 1995,
respectively. The Company previously recorded a liability of $1.2 million
for this claim and as such, credited operations for the excess liability at
the time the claim was settled.
In connection with the BellSouth v. Star matter discussed above, Aetna
Casualty & Surety Company ("Aetna") had filed a complaint in June 1994
against Star, BellSouth, Davis W. Davis and Davis Utility Construction Co.
of N.C., Inc. ("Davis"). In this action Aetna sought a declaratory judgment
that it has no defense or coverage obligation to Davis or Star. Aetna has
agreed to voluntarily dismiss this action, with prejudice and bearing its
own costs.
<PAGE> 31
17. QUARTERLY FINANCIAL DATA (Unaudited)
In the opinion of management, the following unaudited quarterly data for the
years ended July 31, 1995 and 1994 reflect all adjustments necessary for a
statement of the results of operations. Income (loss) per share calculations
for each of the quarters is based on the weighted average number of shares
outstanding for each period and the sum of the quarters may not necessarily
be equal to the full year income (loss) per share amount. All such
adjustments are of a normal recurring nature other than as discussed below:
<TABLE>
<CAPTION>
Income Earnings
(Loss) (Loss)
Before Net Per
Income Income Common
Revenues Taxes (Loss) Share
<S> <C> <C> <C> <C>
1995:
First Quarter $36,422,599 $ 1,948,203 $ 939,227 $ 0.11
Second Quarter 33,792,883 1,451,330 1,106,972 0.13
Third Quarter 36,528,337 2,007,430 1,051,302 0.12
Fourth Quarter 38,539,297 2,109,134 1,335,703 0.16
1994:
First Quarter $32,017,955 $ (791,437) $ (546,140) $(0.06)
Second Quarter 26,991,053 (4,001,257) (4,279,948) (0.51)
Third Quarter 31,520,434 381,821 297,788 0.03
Fourth Quarter 31,962,460 (3,048,269) (3,248,623) (0.38)
</TABLE>
The fiscal 1995 second quarter results of operations include the favorable
settlement of the lawsuit between BellSouth and Star. The Company previously
recorded a liability of $1.2 million in fiscal 1992 for this lawsuit and as
such, credited operations for $0.5 million representing the excess liability
at the time the lawsuit was settled.
The fiscal 1994 quarterly results of operations were impacted by the Company
recording provisions of $0.4 million and $0.6 million to settle certain
complaints between BellSouth and Ansco in the third quarter and between Mr.
Stover and affiliated parties and the Company in the fourth quarter,
respectively. The Company, in the fourth quarter of fiscal 1994, wrote off
$1.3 million of intangible assets, primarily goodwill, related to Prime
Utility Contractors, Inc. after determining that the assets had been
permanently impaired. The Company also terminated the governmental
electrical contracting and utility right-of-way maintenance portion of its
business and as a result, a charge of $0.6 million for the cost to complete
existing contracts, disposal of certain assets, and the administrative cost
to shutdown the operations was recorded in the fourth quarter. Additionally,
the Company recorded a deferred tax valuation allowance of $1.0 million,
$0.3 million, and $0.4 million in the second, third, and fourth quarters of
1994, respectively.
<PAGE> 32
Independent Auditors' Report
Dycom Industries, Inc.
We have audited the accompanying consolidated balance sheets of
Dycom Industries, Inc. and subsidiaries (the "Company") as of
July 31, 1995 and 1994, and the related consolidated statements
of operations, stockholders' equity, and cash flows for each of
the three years in the period ended July 31, 1995. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of Dycom
Industries, Inc. and subsidiaries at July 31, 1995 and 1994 and
the results of their operations and their cash flows for each of
the three years in the period ended July 31, 1995 in conformity
with generally accepted accounting principles.
As discussed in Notes 1 and 8 to the consolidated financial
statements, in 1993 the Company changed its method of accounting
for income taxes to conform with Statement of Financial
Accounting Standards No. 109.
DELOITTE & TOUCHE LLP
Certified Public Accountants
West Palm Beach, Florida
October 11, 1995
<PAGE> 33
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
There have been no disagreements with accountants on accounting and
financial disclosure within the meaning of Item 304 of Regulation S-K.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information concerning directors and nominees of the Registrant is hereby
incorporated by reference from the Company's definitive proxy statement to
be filed with the Commission pursuant to Regulation 14A.
The following table sets forth certain information concerning the executive
officers of the Company, all of whom serve at the pleasure of the Board of
Directors.
<TABLE>
<CAPTION>
Executive
Officer
Name Age Office Since
<S> <C> <C> <C>
Thomas R. Pledger 57 Chairman and Chief Executive 1/4/84
Officer
Ronald L. Roseman 58 President and Chief Operating 8/1/93
Officer
Douglas J. Betlach 43 Vice President and Chief 10/6/93
Financial Officer
Patricia B. Frazier 60 Corporate Secretary 1/4/84
Darline M. Richter 34 Treasurer 2/9/93
</TABLE>
Information concerning delinquent filing of certain Securities and Exchange
Commission Reports by officers and directors of the Registrant is hereby
incorporated by reference from the Company's definitive proxy statement to
be filed with the Commission pursuant to Regulation 14A.
Item 11. Executive Compensation
Information concerning executive compensation is hereby incorporated by
reference from the Company's definitive proxy statement to be filed with the
Commission pursuant to Regulation 14A.
<PAGE> 34
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information concerning the ownership of certain of the Registrant's
beneficial owners and management is hereby incorporated by reference from
the Company's definitive proxy statement to be filed with the Commission
pursuant to Regulation 14A.
Item 13. Certain Relationships and Related Transactions
Information concerning certain relationships and related transactions is
hereby incorporated by reference from the Company's definitive proxy
statement to be filed with the Commission pursuant to Regulation 14A.
<PAGE> 35
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) The following documents are filed as a part of this report:
<TABLE>
<CAPTION>
Page
<S> <C>
1. Consolidated financial statements:
Consolidated balance sheets at July 31, 1995 and 1994 14
Consolidated statements of operations for the years
ended July 31, 1995, 1994, and 1993 15
Consolidated statements of stockholders' equity for
the years ended July 31, 1995, 1994, and 1993 16
Consolidated statements of cash flows for the years
ended July 31, 1995, 1994, and 1993 17-18
Notes to consolidated financial statements 19-31
Independent auditors' report 32
2. Financial statement schedules:
All schedules have been omitted because they are inapplicable,
not required, or the information is included in the above
referenced consolidated financial statements or the notes
thereto.
3. Exhibits furnished pursuant to the requirements of Form 10-K:
See Exhibit Index on page 37.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed on behalf of the Registrant
during the quarter ended July 31, 1995.
</TABLE>
<PAGE> 36
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
DYCOM INDUSTRIES, INC.
<TABLE>
<S> <C>
/s/ Thomas R. Pledger October 19, 1995
- - ----------------------- ----------------
By: Thomas R. Pledger Date
Chairman and Chief
Executive Officer
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Position Date
<S> <C> <C>
/s/ Douglas J. Betlach Vice President, Chief October 19, 1995
- - ----------------------- Financial Officer, and ----------------
Principal Accounting
Officer
/s/ Thomas R. Pledger Director October 19, 1995
- - ----------------------- ----------------
/s/ Louis W. Adams, Jr. Director October 18, 1995
- - ----------------------- ----------------
/s/ Walter L. Revell Director October 18, 1995
- - ----------------------- ----------------
/s/ Ronald L. Roseman Director October 18, 1995
- - ----------------------- ----------------
/s/ Ronald P. Younkin Director October 18, 1995
- - ----------------------- ----------------
</TABLE>
<PAGE> 37
EXHIBIT INDEX
<TABLE>
<CAPTION>
Number Description
------ -----------
<C> <C>
(3)(i) Articles of Incorporation of the Company,
as amended
(3)(ii) Bylaws of the Company, as amended
(21) Subsidiaries of the Company
(23) Independent Auditors' Consent
(27) Financial Data Schedule
(99)(i) Credit Agreement dated April 28, 1993 between
Dycom Industries, Inc. and First Union National
Bank of Florida, including the First, Second,
and Third Modifications and related Consent by
Guarantors dated December 13, 1993, April 7, 1994
and November 30, 1994, respectively.
(99)(ii) Security Agreement dated as of April 28, 1993
between Dycom Industries, Inc. and First Union
National Bank of Florida. Similar agreements
were executed by each subsidiary of Dycom.
(99)(iii) Guaranty Agreement dated as of April 28, 1993,
between Southeastern Electric Construction, Inc.
and First Union National Bank of Florida. Similar
agreements were executed by each subsidiary of
Dycom.
(99)(iv) Fourth Modification of Credit Agreement and
Consent by Guarantors as of July 31, 1995,
to Credit Agreement dated as of April 28, 1993,
as amended, between Dycom Industries, Inc. and
First Union National Bank of Florida.
</TABLE>
37
EXHIBIT (3)(i)
Articles of Incorporation of the Company, as amended
The Articles of Incorporation of the Company are hereby incorporated by
reference from the Company's form S-1 Registration Statement filed with the
Commission on October 29, 1986.
At the 1990 Annual Meeting of Stockholders, the shareholders approved an
amendment to the Company's Articles of Incorporation to increase the
authorized shares of common stock from 10,000,000 to 50,000,000 par value
$0.33 1/3 per share. The amendment to the Articles of Incorporation of the
Company are hereby incorporated by reference from the Company's definitive
Proxy Statement-Annual Meeting of Stockholders filed with the Commission on
November 6, 1990.
EXHIBIT (3)(ii)
Bylaws of the Company, as amended
The bylaws of the Company are hereby incorporated by reference from the
Company's Form 8-K filed with the Commission on September 14, 1992.
Amendments to the Bylaws of the Company were adopted on October 21, 1992 and
February 3, 1993 and are hereby incorporated by reference from the Company's
Annual Report on Form 10-K for the fiscal years ended July 31, 1992 and
1994, respectively.
EXHIBIT (21)
The following table sets forth the Registrant's subsidiaries and the
jurisdiction of incorporation of each. Each subsidiary is 100% owned by the
Registrant.
ANSCO & ASSOCIATES, INC.
A Florida corporation
FIBER CABLE, INC.
A Delaware corporation
GLOBE COMMUNICATIONS, INC.
A North Carolina corporation
IVY H. SMITH COMPANY
A Florida corporation
KOHLER CONSTRUCTION COMPANY, INC.
A Florida corporation
SIGNAL CONSTRUCTION COMPANY, INC.
A Florida corporation
SOUTHEASTERN ELECTRIC CONSTRUCTION, INC.
A Florida corporation
STAR CONSTRUCTION, INC.
A Tennessee corporation
S.T.S., INC.
A Florida corporation
TESINC, INC.
An Arizona corporation
EXHIBIT (23)
Independent Auditors' Consent
We consent to the incorporation by reference in Registration Statement No.
33-46506 of Dycom Industries, Inc. on Form S-8 of our report dated October
11, 1995 (which includes an explanatory paragraph relating to the adoption
of the Statement of Financial Accounting Standards No. 109) appearing in
this Annual Report on Form 10-K of Dycom Industries, Inc. for the year ended
July 31, 1995.
DELOITTE & TOUCHE LLP
Certified Public Accountants
West Palm Beach, Florida
October 18, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DYCOM
INDUSTRIES, INC. CONSOLIDATED BALANCE SHEET AT JULY 31, 1995 AND THE
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED JULY 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> YEAR
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-END> JUL-31-1995
<EXCHANGE-RATE> 1
<CASH> 4,306,675
<SECURITIES> 0
<RECEIVABLES> 16,424,351
<ALLOWANCES> 867,578
<INVENTORY> 5,122,474
<CURRENT-ASSETS> 27,642,533
<PP&E> 48,721,126
<DEPRECIATION> 29,918,563
<TOTAL-ASSETS> 51,792,858
<CURRENT-LIABILITIES> 20,137,323
<BONDS> 18,825,144
<COMMON> 2,847,997
0
0
<OTHER-SE> 8,339,102
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</TABLE>
EXHIBIT (99)(i)
The Credit Agreement dated April 28, 1993 between the Company and First
Union National Bank of Florida is hereby incorporated by reference from the
Company's Quarterly Report on Form 10-Q for the quarter ended April 30,
1993.
The First and Second Modifications and related Consent by Guarantors dated
December 13, 1993 and April 7, 1994, respectively, are hereby incorporated
by reference from the Company's Annual Report on Form 10-K for the fiscal
year ended July 31, 1994.
The Third Modification and related Consent by Guarantors dated November 30,
1994 is hereby incorporated by reference from the Company's Quarterly Report
on Form 10-Q for the quarter ended January 31, 1995.
EXHIBIT (99)(ii)
The Security Agreement dated as of April 28, 1993 between the Company and
First Union Nation Bank of Florida is hereby incorporated by reference from
the Company's Quarterly Report on Form 10-Q for the quarter ended April 30,
1993. Similar agreements were executed by each subsidiary of the Company.
EXHIBIT (99)(iii)
The Guaranty Agreement dated as of April 28, 1993 between Southeastern
Electric Construction, Inc. and First Union Nation Bank of Florida is hereby
incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the quarter ended April 30, 1993. Similar agreements were executed by
each subsidiary of the Company.
FOURTH MODIFICATION OF CREDIT AGREEMENT
THIS FOURTH MODIFICATION OF CREDIT AGREEMENT (the "Modifica-
tion") is entered into as of the 31st day of July, 1995 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 and by Third Modification dated November 30,
1994 (as amended, the "Credit Agreement"); and
WHEREAS, Borrower has requested that Lender amend the Credit
Agreement to modify the financial covenant contained in Section
9.03; 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. Section 9.03, Current Ratio is modified to provide that
Borrower shall not permit the ratio of Consolidated Current Assets
to Consolidated Current Liabilities (the "Current Ratio") to be
less than 1.29:1.0 at any time.
2. 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
MIA95 228.1 - FAM
CONSENT BY GUARANTORS
THIS CONSENT BY GUARANTORS is executed as of the 31st day of
July, 1995 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 by Third Amendment dated November 30, 1994; and
WHEREAS, Borrower has requested that Lender execute and
deliver and a Fourth Modification of Credit Agreement; and
WHEREAS, as a pre-condition to executing the Fourth
Modification of Credit Agreement, Lender has required that the
Guarantors consent to the Fourth Modification of Credit Agreement;
and
WHEREAS, it is to the benefit of Guarantors that Lender
consent and execute the Fourth 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 Fourth 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 Fourth 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
_______________________________
MIA95 224.1 - FAM
