<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 30, 1997
REGISTRATION NO. 333-36883
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
DYCOM INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
---------------------
<TABLE>
<S> <C>
FLORIDA 59-1277135
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
FIRST UNION CENTER
4440 PGA BOULEVARD, SUITE 600
PALM BEACH GARDENS, FLORIDA 33410
(561) 627-7171
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
THOMAS R. PLEDGER
FIRST UNION CENTER
4440 PGA BOULEVARD, SUITE 600
PALM BEACH GARDENS, FLORIDA 33410
(561) 627-7171
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------------
COPIES TO:
<TABLE>
<S> <C>
L. FRANK CHOPIN, ESQUIRE HENRY D. KAHN, ESQUIRE
CHOPIN, MILLER & YUDENFREUND PIPER & MARBURY L.L.P.
440 ROYAL PALM WAY, SUITE 200 36 SOUTH CHARLES STREET
PALM BEACH, FLORIDA 33480 BALTIMORE, MARYLAND 21201-3018
(561) 655-9500 (410) 539-2530
</TABLE>
---------------------
Approximate date of commencement of proposed sale to public: as soon as
practicable after this registration statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE> 2
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such State.
SUBJECT TO COMPLETION, DATED OCTOBER 30, 1997
2,700,000 SHARES
LOGO
COMMON STOCK
Of the 2,700,000 shares of Common Stock, offered hereby, 1,573,378 shares
are being sold by Dycom Industries, Inc. ("Dycom" or the "Company") and
1,126,622 shares are being sold by certain stockholders of the Company (the
"Selling Stockholders"). The Company will not receive any proceeds from the sale
of shares by the Selling Stockholders. See "Principal and Selling Stockholders."
The Company's Common Stock is traded on the New York Stock Exchange under the
symbol "DY". On October 27, 1997, the last reported sale price of the Common
Stock on the New York Stock Exchange was $22 3/4 per share. See "Price Range of
Common Stock and Dividend Policy."
SEE "RISK FACTORS" COMMENCING ON PAGE 5 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
================================================================================
<TABLE>
<CAPTION>
Price to Underwriting Proceeds to Proceeds to Selling
Public Discount(1) Company(2) Stockholders(2)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share.................... $ $ $ $
Total(3)..................... $ $ $ $
==============================================================================================
</TABLE>
(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other matters.
(2) Before deducting offering expenses payable by the Company, estimated at
$310,000, and by the Selling Stockholders, estimated at $190,000.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 405,000 additional shares of Common Stock solely to cover
over-allotments, if any. If the Underwriters exercise this option in full,
the Price to Public will total $ , the Underwriting Discount will
total $ and the Proceeds to Company will total $ . See
"Underwriting".
The shares of Common Stock are offered by the several Underwriters named
herein, subject to receipt and acceptance by them and subject to their right to
reject any order in whole or in part. It is expected that delivery of the
certificates representing such shares will be made against payment therefor at
the office of NationsBanc Montgomery Securities, Inc. on or about ,
1997.
------------------------
NATIONSBANC MONTGOMERY SECURITIES, INC.
MORGAN KEEGAN & COMPANY, INC.
THE ROBINSON-HUMPHREY COMPANY
, 1997
<PAGE> 3
[MAP OF THE UNITED STATES SHOWING
LOCATION OF DYCOM OFFICES]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SUCH TRANSACTIONS MAY INCLUDE STABILIZING THE PURCHASE OF COMMON STOCK TO COVER
SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION
OF THESE ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and the Consolidated
Financial Statements, including the Notes thereto, appearing elsewhere in this
Prospectus and incorporated by reference into this Prospectus including
information under "Risk Factors." Unless otherwise indicated, the information in
this Prospectus assumes no exercise of the Underwriters' over-allotment option.
Unless the text otherwise requires, all references to the "Company" or "Dycom"
in this Prospectus shall include Dycom Industries, Inc. and its subsidiaries.
THE COMPANY
Dycom is a leading provider of engineering, construction and maintenance
services to telecommunications providers that operate throughout the United
States. The Company's comprehensive range of telecommunications infrastructure
services include the engineering, placement and maintenance of aerial,
underground, and buried fiber-optic, coaxial and copper cable systems owned by
local and long distance communications carriers, competitive local exchange
carriers, and cable television multiple system operators. Additionally, the
Company provides similar services related to the installation of integrated
voice, data, and video local and wide area networks within office buildings and
similar structures. Dycom also performs underground utility locating and
electric utility contracting services. For the fiscal year ended July 31, 1997,
telecommunications services contributed approximately 87% of the Company's
contract revenues, underground utility locating services contributed 6%, and
electric utility contracting services contributed 7%.
Through its nine active wholly-owned subsidiaries, Dycom has established
relationships with many leading local exchange carriers, long distance
providers, competitive access providers, cable television multiple system
operators and electric utilities. Such key customers include BellSouth
Telecommunications, Inc., Comcast Cable Communications, Inc., The Southern New
England Telephone Company, GTE Corporation, U.S. West Communications, Inc., and
Florida Power & Light Company. Approximately 40% of the Company's revenues come
from multi-year master service agreements with large telecommunications
providers and electric utilities.
In July 1997, Dycom acquired Communications Construction Group, Inc.
("CCG"), a Pennsylvania-based provider of construction services to cable
television multiple system operators (the "CCG Acquisition"). CCG generated
revenues of $67.7 million in its fiscal year 1997. This transaction diversified
Dycom's telephone company customer base to include a broader mix of work for
cable television multiple system operators. The acquisition also created a
greater geographic presence for Dycom in the Mid-Atlantic, Midwest and Northeast
regions of the United States.
The telecommunications industry is undergoing rapid change due to
deregulation, increased competition and growing consumer demand for enhanced
telecommunications services, thereby creating the need for construction of
additional telecommunications infrastructure for new and existing providers. To
meet the increasing need for telecommunications infrastructure,
telecommunications providers have been increasingly outsourcing their
infrastructure engineering, construction and maintenance requirements. As the
industry becomes more competitive, outsourcing allows providers to reduce costs
and focus on their core competencies.
Dycom has a four pronged internal growth strategy: (i) increase the volume
of services to existing customers; (ii) expand the scope of services to existing
customers; (iii) broaden its customer base; and (iv) geographically expand its
service area. The competitive pressures of deregulation have prompted several
existing customers to increase the outsourcing of noncore activities which can
provide opportunities for the Company to enhance internal growth without
necessarily requiring the Company to achieve market share gains from
competitors.
In addition to internal growth, Dycom believes a variety of attractive
consolidation opportunities exist within its industry. Historically, the
telecommunications engineering, construction and maintenance services industry
has been highly fragmented, largely consisting of small, privately-held
companies with annual revenues of less than $100 million. For its acquisition
targets, the Company's key acquisition criteria are profitability in excess of
industry standards, stable and growing customer bases, proven operational and
technical competence, and experienced management that fits within Dycom's
decentralized operating structure. Dycom also seeks to use its acquisition
strategy to provide geographic as well as customer diversification.
3
<PAGE> 5
THE OFFERING
Common Stock offered by the Company... 1,573,378 Shares
Common Stock offered by Selling
Stockholders.......................... 1,126,622 Shares
Total Shares to be offered.......... 2,700,000 Shares
Common Stock outstanding after the
Offering.............................. 12,443,630 Shares(1)
Use of proceeds....................... To fund the Company's growth
strategy, including acquisitions,
working capital and capital
expenditures and for other general
corporate purposes. The Company may
also reduce certain indebtedness,
subject to reborrowing.
New York Stock Exchange Symbol........ DY
SUMMARY CONSOLIDATED FINANCIAL DATA
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-----------------------------------------
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Total revenues.................................... $ 188,333 $ 195,260 $ 243,923
Income before income taxes........................ 8,874 11,381 19,042
Net income........................................ 5,141 7,664 11,219
Fully diluted earnings per common and common
equivalent share................................ $ 0.49 $ 0.70 $ 1.02
Shares used in computing earnings per common and
common equivalent share......................... 10,588,766 10,928,284 10,994,500
</TABLE>
<TABLE>
<CAPTION>
AT JULY 31, 1997
AT JULY 31, 1997 AS ADJUSTED(2)
----------------- -----------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................ $ 6,646 $ 40,162
Working capital.......................................... 16,219 49,735
Total assets............................................. 88,162 121,678
Long-term debt, including current portion................ 11,979 11,979
Total stockholders' equity............................... 33,752 67,268
</TABLE>
- ---------------
(1) As of September 26, 1997; 647,980 shares of Common Stock reserved for
issuance under the Company's 1991 Incentive Stock Option Plan, under which
options to purchase 455,921 shares of Common Stock have been granted, 91,778
of which are currently exercisable.
(2) Adjusted to reflect the sale of 1,573,378 shares of Common Stock offered by
the Company hereby at an assumed offering price of $22 3/4 and the
anticipated application of the estimated net proceeds therefrom. See "Use of
Proceeds" and "Capitalization."
---------------
The Company's executive offices are located at 4440 PGA Boulevard, Palm
Beach Gardens, Florida 33410 and its telephone number is (561) 627-7171.
4
<PAGE> 6
RISK FACTORS
Certain statements included in this Prospectus, including, without
limitation, statements regarding the effects of recent legislation on the
telecommunications industry, the continuation of trends favoring outsourcing of
telecommunications engineering, construction and maintenance services, the
Company's objective to grow through strategic acquisitions, the Company's
internal growth strategy, the Company's ability to realize cost savings upon the
completion of acquisitions that may occur in the future, the Company's ability
to expand and diversify its customer base, trends in the Company's future
operating performance and statements as to the Company's or management's
beliefs, expectations, opinions and the like are forward-looking statements. The
factors discussed below and elsewhere in this Prospectus could cause actual
results and developments to be materially different from those expressed in or
implied by such statements. Accordingly, in addition to the other information
contained in "Management's Discussion and Analysis of Financial Condition and
Results of Operations," elsewhere in this Prospectus and in other documents
filed by the Company with the Securities and Exchange Commission and
incorporated by reference herein, the following factors should be considered
carefully in evaluating an investment in the shares of Common Stock offered by
this Prospectus.
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
The Company has experienced and expects to continue to experience quarterly
variations in revenues, income before income taxes and net income as a result of
many factors, including the timing and volume of customers' construction and
maintenance projects, the budgetary spending patterns of customers, the
commencement of new master service agreements, the termination of existing
master service agreements, costs incurred by the Company to support growth by
acquisition or otherwise, the change in mix of customers and business,
fluctuations in insurance expense accruals due to changes in claims experience
and actuarial assumptions, the effect of the change of business between
negotiated contracts as opposed to bid contracts and the timing of additional
general and administrative expenses to support the growth of the business.
Revenues and income before income taxes in the Company's second quarter and
occasionally third quarter have in the past been, and may in the future be,
adversely affected by weather conditions and the year-end budgetary spending
patterns of its customers.
SUBSTANTIAL RELIANCE ON KEY CUSTOMERS; DEPENDENCE ON MAJOR CONTRACTS;
UNCERTAINTIES RELATING TO BACKLOG
The Company's customer base is highly concentrated, with its top three
customers in fiscal years 1995, 1996 and 1997 accounting in the aggregate for
approximately 66.8%, 72.8% and 64.0%, respectively, of the Company's total
revenues. During fiscal 1997, approximately 34.3% of the Company's total
revenues were derived from BellSouth Telecommunications, Inc., 23.3% from
Comcast Cable Communications, Inc. and 6.4% from GTE Corporation. The Company
believes that a substantial portion of its total revenues and operating income
will continue to be derived from a concentrated group of customers. The loss of
any of such customers, if not replaced, could have a material adverse effect on
the Company's business, financial condition and results of operations. The
Company derives a substantial portion of its revenues from its customers
pursuant to multi-year master service agreements. The Company is currently a
party to 15 master service agreements with its customers, including 12 such
agreements with BellSouth Telecommunications, Inc. and GTE Corporation,
collectively. Under the terms of such agreements the customer can typically
terminate the agreement on 90 days prior written notice. The termination or
renegotiation of any such contracts or the Company's failure to enter into new
master service agreements with its customers could have a material adverse
effect on the Company's business, financial condition and results of operations.
The Company's current backlog generally consists of estimates of the services to
be provided to customers under master service agreements. The master service
agreements are generally exclusive requirement contracts with certain
exceptions, including the customer's option to perform the services with its own
regularly employed personnel. Accordingly, there can be no assurance as to the
customer's requirements during a particular period or that management's
estimates of such requirements, including those used to formulate backlog, at
any point in time are accurate. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business -- Customer
Relationships" and "-- Backlog."
5
<PAGE> 7
RISKS ASSOCIATED WITH ACQUISITIONS
An element of the Company's growth strategy is to pursue strategic
acquisitions that expand, complement or diversify the Company's business. The
Company regularly reviews various strategic acquisition opportunities and
periodically engages in discussions regarding such possible acquisitions.
Currently, the Company is not a party to any agreements, understandings, or
arrangements regarding any material acquisitions; however, as a result of the
Company's process of regularly reviewing acquisition prospects, negotiations may
occur from time to time if appropriate opportunities arise. There can be no
assurance that the Company will be able to identify additional acquisition
candidates on terms favorable to the Company or in a timely manner, enter into
acceptable agreements or close any such transactions. There can be no assurance
that the Company will be able to achieve its acquisition strategy, and any
failure to do so could have a material adverse effect on the Company's ability
to sustain growth and maintain its competitive position. In addition, the
Company believes that it will compete for attractive acquisition candidates with
other companies or investors in the telecommunications services industry.
Increased competition for such acquisition candidates could have the effect of
increasing the cost to the Company of pursuing this growth strategy or could
reduce the number of attractive candidates to be acquired. Future acquisitions
could divert management's attention from the daily operations of the Company and
otherwise require additional management, operational and financial resources.
Moreover, there is no assurance that the Company will successfully integrate
acquired companies or their management teams into its decentralized operating
structure, retain management teams of acquired companies on a long term basis,
or operate acquired companies profitably. Acquisitions may also involve a number
of other risks, including adverse short-term effects on the Company's operating
results, dependence on retaining key personnel and customers, amortization of
acquired intangible assets, and risks associated with unanticipated liabilities
or contingencies. See "Business -- Growth Strategy."
In the past, the Company has experienced difficulties in integrating and
managing certain of its acquisitions. Most recently, the Company determined to
write-off intangible assets, including goodwill, of $24.3 million in 1993 and
$1.4 million in 1994 in connection with four acquisitions, contributing to a net
loss of $31.0 million for the fiscal year ended July 31, 1993 and a net loss of
$7.5 million for the fiscal year ended July 31, 1994. Litigation with the
management team of two acquired operating subsidiaries and related shareholder
litigation and a governmental investigation also had a material adverse effect
on the Company for several years through and including the fiscal year ended
July 31, 1994. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Selected Financial Data contained in the
Company's Annual Report on Form 10-K for the year ended July 31, 1997
incorporated by reference herein. While the Company believes that it has
improved its acquisition due diligence process and its supervision of acquired
companies, no assurance can be given that the Company will not experience
difficulties in the future with its acquired companies, whether or not similar
to those discussed herein.
The Company may require additional debt or equity financing for future
acquisitions, which may not be available on terms favorable to the Company, if
at all. To the extent the Company utilizes its capital stock for all or a
portion of the consideration to be paid for future acquisitions, dilution may be
experienced by existing stockholders. If the Company is not able to use its
capital stock as consideration for acquisitions or does not have sufficient cash
resources, its growth through acquisitions could be limited. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
COMPETITION
The telecommunications services industry in which the Company operates is
highly competitive, requiring substantial resources and skilled and experienced
personnel. The Company competes with other independent contractors in most of
the markets in which it operates, several of which are large domestic companies
that have greater financial, technical and marketing resources than the Company.
In addition, there are relatively few, if any, barriers to entry into the
markets in which the Company operates and, as a result, any organization that
has adequate financial resources and access to technical expertise may become a
competitor to the Company. A significant portion of the Company's revenues are
currently derived from master service agreements and price is often an important
factor in the award of such agreements.
6
<PAGE> 8
Accordingly, the Company could be outbid by its competitors in an effort to
procure such business. There can be no assurance that the Company's competitors
will not develop the expertise, experience and resources to provide services
that achieve or that are superior in both price and quality to the Company's
services, or that the Company will be able to maintain or enhance its
competitive position. The Company may also compete for business opportunities
against the in-house service organizations of its existing or prospective
customers, including telecommunications providers, which employ personnel who
perform some of the same types of services as those provided by the Company.
There can be no assurance that existing or prospective customers of the Company
will continue to outsource telecommunications infrastructure services in the
future.
RISKS ASSOCIATED WITH THE TELECOMMUNICATIONS INDUSTRY
The Company's future success, financial condition and results of operations
will depend to a significant degree upon purchasing decisions by existing and
new telecommunications providers and other prospective customers of the Company
within the telecommunications industry. The purchasing decisions by
telecommunications providers and other telecommunications companies with respect
to services provided by the Company may be affected by a number of factors,
including without limitation, the regulatory environment within the
telecommunications industry, the public's demand for Internet access and other
interactive multimedia services, the preference toward outsourcing
telecommunications infrastructure services and their ability to raise the
capital necessary to develop telecommunications networks. Although the
regulatory environment within the telecommunications industry does not affect
the Company directly, the effects of such regulation on the Company's customers
may, in turn, adversely impact the Company's business and results of operations.
For example, although the Telecommunications Act of 1996 (the "Telecom Act")
lifted certain restrictions on telecommunications providers' ability to provide
enhanced telecommunications services, which would appear to be favorable, the
rules to implement the new statutory provisions of the Telecom Act are still
being considered by the Federal Communications Commission and other regulatory
agencies and it is uncertain at this time how the regulatory environment will
affect telecommunications providers' demand for the Company's services. The
demand for the Company's services could also be adversely affected to the extent
that the public's demand for Internet access and other interactive multimedia
services is less than currently anticipated. Additionally, the demand for the
Company's services is affected by the extent to which telecommunications
providers and other organizations determine to outsource their
telecommunications infrastructure services needs. To the extent that the current
trend favoring outsourcing of such services is reversed or reduced, the
Company's business, financial condition and results of operations may be
materially adversely affected.
RISKS ASSOCIATED WITH TECHNOLOGICAL CHANGE
The telecommunications industry is subject to rapid changes in technology.
Wireline systems used for transmission of video, voice and data face potential
displacement by various technologies, including wireless technologies. In
addition, the demand for the Company's services could be adversely affected in
the event that alternative technologies are developed and implemented that
enable telecommunications providers or other organizations to provide enhanced
telecommunications services without significantly upgrading their networks.
RISKS ASSOCIATED WITH SELF-INSURANCE
The Company is primarily self-insured, up to certain limits, for
automobile, 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
Company's consolidated balance sheet as an accrued liability. The determination
of such claims and expenses and the extent of the accrued liability are
continually reviewed and updated. If the Company were to experience numerous
claims in significant amounts for which it is self-insured, or if significant
increases in insurance costs occur which are not able to be offset by increases
in contract revenues earned, the Company's results of operations and financial
condition could be materially adversely affected.
7
<PAGE> 9
DEPENDENCE ON KEY PERSONNEL
The Company is highly dependent upon the continued services and experience
of its senior management team, including Thomas R. Pledger, the Company's
Chairman and Chief Executive Officer, Steven E. Nielsen, the Company's President
and Chief Operating Officer and one or more managers of key operating
subsidiaries. The loss of the services of these individuals or other members of
the Company's senior management could have a material adverse effect on the
business, financial condition and results of operations of the Company. See
"Management."
CONTROL BY CERTAIN STOCKHOLDERS
Upon completion of the Offering, executive officers and directors of the
Company will beneficially own an aggregate of approximately 13.5% of the
outstanding shares of Common Stock (approximately 13.1% if the Underwriters'
over-allotment option is exercised in full). Accordingly, such persons, if they
were to act in concert, would likely be in a position to influence significantly
the outcome of matters requiring a stockholders' vote, including the election of
members of the Board of Directors, and thereby exercise a significant degree of
control over the affairs and management of the Company. See "Principal and
Selling Stockholders."
VOLATILITY OF STOCK PRICE
The market price of the shares of Common Stock has been, and may continue
to be, highly volatile. Numerous factors, such as announcements of fluctuations
in the Company's or competitors' operating results, market conditions for
telecommunications or telecommunications services company stocks in general,
changes in recommendations or earnings estimates by securities analysts,
announcements of new contracts or customers by the Company or its competitors,
the timing and announcement of acquisitions by the Company or its competitors
and government regulatory action, could have a significant effect on the market
price of the Common Stock. In addition, the stock market in recent years has
experienced significant price and volume fluctuations that often have been
unrelated or disproportionate to the operating performance of companies. These
broad fluctuations may adversely affect the market price of the Common Stock.
There can be no assurance that purchasers of Common Stock in this Offering will
be able to resell their Common Stock at prices equal to or greater than the
offering price hereunder.
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of the Common Stock in the public market,
whether by purchasers in the Offering or other stockholders of the Company, or
the perception that such sales could occur, may adversely affect the market
price of the Common Stock and could impair the Company's future ability to raise
capital through an offering of its equity securities. Upon completion of this
Offering, the Company will have outstanding 12,443,630 shares of Common Stock,
plus 455,921 shares of Common Stock reserved for issuance upon exercise of
outstanding options, including 91,778 options which are currently exercisable.
Substantially all of the shares of Common Stock to be outstanding after
completion of this Offering will be either freely salable or salable subject to
certain volume and manner of sale restrictions pursuant to Rule 144 of the
Securities Act of 1933, as amended (the "Securities Act"). The Company and its
directors, executive officers and the Selling Stockholders, who will
beneficially own in the aggregate 3,495,301 shares of Common Stock, 28.1% of the
shares outstanding after the Offering, have agreed not to offer, sell or
otherwise dispose of any shares of Common Stock for a period of 180 days after
the closing of the Offering without the prior written consent of NationsBanc
Montgomery Securities, Inc.
8
<PAGE> 10
ANTI-TAKEOVER PROVISIONS
The Company's Articles of Incorporation (the "Articles") and By-Laws (the
"By-Laws") contain provisions which may be deemed to be "anti-takeover" in
nature in that such provisions may deter, discourage or make more difficult the
assumption of control of the Company by another corporation or person through a
tender offer, merger, proxy contest or similar transaction. The Articles permit
the Board of Directors to establish the rights, preferences, privileges and
restrictions of, and to issue, up to 1,000,000 shares of Preferred Stock without
stockholder approval. The Articles also provide for the staggered election of
directors to serve for successive three-year terms. The Company has also adopted
a Shareholder Rights Plan and executed certain change of control agreements with
key officers which may make it more difficult to effect a change in control of
the Company and replace incumbent management. In addition, the Company is
subject to certain anti-takeover provisions of the Florida Business Corporation
Act. The provisions of the Company's Articles and By-Laws, the existence of the
Shareholder Rights Plan and the change of control agreements and the application
of the anti-takeover provisions of the Florida Business Corporation Act could
have the effect of discouraging, delaying or preventing a change of control of
the Company not approved by the Board of Directors, which could adversely affect
the market price of the Company's Common Stock. See "Description of Capital
Stock -- Anti-takeover Provisions."
9
<PAGE> 11
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Common Stock offered
by the Company, at an assumed public offering price of $22 3/4 per share, are
estimated to be $33.5 million ($42.2 million if the Underwriters' over-allotment
option is exercised in full) after deduction of the underwriting discount and
the estimated offering expenses payable by the Company. The Company will not
receive any of the net proceeds of the sale of Common Stock by the Selling
Stockholders. See "Principal and Selling Stockholders."
The net proceeds of the Offering to the Company will be used to fund the
Company's growth strategy, including acquisitions, working capital and capital
expenditures and for other general corporate purposes. The Company may also
reduce certain indebtedness, subject to reborrowing. These facilities have been
used for working capital purposes and equipment purchases. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and Note 7 of the Notes to
Consolidated Financial Statements for a further description of the Company's
indebtedness, including these facilities.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Common Stock is traded on the New York Stock Exchange under the symbol
"DY." The following table sets forth, for the periods indicated, the high and
low closing sale prices of the Common Stock as reported on the New York Stock
Exchange.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C> <C> <C>
FISCAL YEAR ENDED JULY 31, 1996
First Quarter............................................... $ 8 $ 6 3/8
Second Quarter.............................................. 7 1/8 5
Third Quarter............................................... 9 1/4 5 7/8
Fourth Quarter.............................................. 13 1/8 8 7/8
FISCAL YEAR ENDED JULY 31, 1997
First Quarter............................................... 14 3/8 11 1/2
Second Quarter.............................................. 12 1/4 9 1/4
Third Quarter............................................... 12 1/4 10
Fourth Quarter.............................................. 18 1/8 9 7/8
FISCAL YEAR ENDED JULY 31, 1998
First Quarter............................................... 27 7/16 16 9/16
(through October 27, 1997)
</TABLE>
On October 27, 1997, the closing sale price of the Common Stock as reported
on the New York Stock Exchange was $22 3/4 per share. The number of shareholders
of record on September 29, 1997 was approximately 660.
The Company currently intends to retain future earnings, and since 1982, no
cash dividends have been paid by the Company. The Board of Directors will
determine any future change in dividend policies based on financial conditions,
profitability, cash flow, capital requirements, and business outlook, as well as
other factors relevant at the time. The Company's credit facilities expressly
limit the payment of cash dividends to fifty percent of each fiscal year's
after-tax profits. The credit facilities' restrictions regarding the Company's
debt to equity, quick and current ratios also affect the Company's ability to
pay dividends.
10
<PAGE> 12
CAPITALIZATION
The following table sets forth the actual capitalization of the Company as
of July 31, 1997 and the capitalization as adjusted to reflect the sale of
1,573,378 shares of Common Stock offered hereby, at an assumed public offering
price of $22 3/4 per share, and the application of the estimated net proceeds
therefrom as described in "Use of Proceeds." The information set forth in the
table below should be read in conjunction with the Consolidated Financial
Statements of the Company and the notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
JULY 31, 1997
--------------------------
ACTUAL AS ADJUSTED
----------- ------------
<S> <C> <C>
Long-term debt, including current portion(1)................ $11,978,898 $ 11,978,898
Stockholders' equity:
Preferred Stock, $1.00 par value, 1,000,000 shares
authorized; no shares issued and outstanding........... -- --
Common Stock, $0.33 1/3 par value; 50,000,000 shares
authorized; 10,867,877 shares issued and outstanding;
12,441,255 shares issued and outstanding as
adjusted(2)............................................ 3,622,625 4,147,084
Additional paid-in capital................................ 25,421,701 58,412,902
Retained earnings......................................... 4,707,930 4,707,930
----------- ------------
Total stockholders' equity........................ 33,752,256 67,267,916
----------- ------------
Total capitalization......................... $45,731,154 $ 79,246,814
=========== ============
</TABLE>
- ---------------
(1) Long-term debt, including current maturities of $2,966,832. For information
concerning the Company's long-term debt, see Note 7 of the Notes to
Consolidated Financial Statements.
(2) Excludes 647,980 shares of Common Stock reserved for issuance under the
Company's 1991 Incentive Stock Option Plan, under which options to purchase
455,921 shares of Common Stock have been granted, 91,778 of which are
currently exercisable.
11
<PAGE> 13
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table summarizes certain summary consolidated financial data
and is qualified by reference to and should be read in conjunction with the
Company's Consolidated Financial Statements and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere
herein and with the Selected Financial Data contained in the Company's Annual
Report on Form 10-K for the fiscal year ended July 31, 1997 incorporated by
reference herein. The selected consolidated financial data for each of the years
in the three-year period ended July 31, 1997 are derived from consolidated
financial statements included herein and incorporated by reference from the
Company's Annual Report on Form 10-K for the year ended July 31, 1997 and that
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report, which is included herein and incorporated herein by reference.
The financial statements of CCG (consolidated with those of the Company)
have been audited by Nowalk & Associates, independent auditors, as stated in
their reports, which are included herein and incorporated herein by reference.
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
---------------------------------------
1995 1996 1997
----------- ----------- -----------
(IN THOUSANDS, EXCEPT SHARE AND PER
SHARE DATA)
<S> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues:
Contract revenues earned.............................. $ 186,957 $ 194,053 $ 242,958
Other, net............................................ 1,376 1,207 966
----------- ----------- -----------
Total revenues................................ 188,333 195,260 243,924
----------- ----------- -----------
Expenses:
Cost of earned revenues, excluding depreciation....... 153,284 155,770 192,412
General and administrative............................ 19,010 20,485 23,780
Depreciation and amortization......................... 7,165 7,624 8,690
----------- ----------- -----------
Total expenses................................ 179,459 183,879 224,882
----------- ----------- -----------
Income before income taxes.............................. 8,874 11,381 19,042
Provision for income taxes.............................. 3,733 3,717 7,823
----------- ----------- -----------
Net income.............................................. $ 5,141 $ 7,664 $ 11,219
=========== =========== ===========
Earnings per common and common equivalent share:
Primary............................................... $ 0.49 $ 0.71 $ 1.02
=========== =========== ===========
Fully diluted......................................... $ 0.49 $ 0.70 $ 1.02
=========== =========== ===========
Shares used in computing earnings per common and common
equivalent share:
Primary............................................... 10,588,766 10,859,819 10,948,689
=========== =========== ===========
Fully diluted......................................... 10,588,766 10,928,284 10,994,500
=========== =========== ===========
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents............................... $ 4,419 $ 3,928 $ 6,646
Working capital......................................... 6,631 8,223 16,219
Total assets............................................ 64,218 66,195 88,162
Long-term debt, including current portion............... 21,380 13,701 11,979
Total stockholders' equity.............................. 13,319 21,182 33,752
</TABLE>
12
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Dycom derives most of its contract revenues earned from engineering,
construction and maintenance services to the telecommunications industry. In
addition, contract revenues earned are derived from underground utility locating
services and from maintenance and construction services provided to the electric
utility industry. The Company currently performs work for more than 25 local
exchange carriers, cable television multiple system operators, long distance
carriers, competitive access providers, and electric utilities, principally in
the Southeast, Northeast, Midwest and Mid-Atlantic United States. The Company
expects that future growth in contract revenues earned will be generated from
(i) increasing the volume of services to existing customers; (ii) expanding the
scope of services to existing customers; (iii) broadening its customer base; and
(iv) geographically expanding its service area. Growth is expected to result
from internal sources as well as through acquisitions. Other revenues include
gain on sale of surplus equipment and interest income.
In July 1997, Dycom completed the CCG Acquisition in a transaction
accounted for as a pooling of interest. CCG's revenues for fiscal 1997 were
approximately $67.7 million. CCG provides engineering, construction, and
maintenance services for cable television multiple system operators. Its
principal customer is Comcast Cable Communications, Inc., which accounted for
81.0% of CCG's revenues and 23.3% of Dycom's contract revenues in fiscal 1997.
Dycom's financial statements and all financial and operating data derived
therefrom have been combined for all periods presented herein to include the
financial condition and results of operations of CCG.
Dycom provides services to its customers pursuant to master service
agreements and contracts for particular projects. Under master service
agreements, Dycom agrees to provide, for a period of several years, all
specified service requirements to its customer within a given geographical
territory. The customer, with certain exceptions, agrees to purchase such
requirements from Dycom. Materials to be used in these jobs are generally
provided by the customer. Master service agreements generally provide that Dycom
will furnish a specified unit of service for a specified unit price (e.g., fiber
optic cable will be installed underground for a specified rate of dollars per
foot). The Company recognizes revenue under master service agreements on the
percentage of completion basis. Dycom is currently party to 15 master service
agreements, which accounted for approximately 40% of the Company's fiscal 1997
revenues. Master service agreements are typically bid initially and may be
extended by negotiation. The remainder of Dycom's services are provided pursuant
to contracts for particular jobs, which are generally from three to four months
in duration from the contract date, depending upon the size of the project.
These contracts may be either bid or negotiated.
Cost of earned revenues includes all direct costs of providing services
under the Company's contracts, other than depreciation on fixed assets owned by
the Company or utilized by the Company under capital leases, which are included
in depreciation and amortization expense. Cost of earned revenues includes all
costs of construction personnel, subcontractor costs, all costs associated with
operation of equipment, excluding depreciation, materials not supplied by the
customer and insurance. Because the Company is primarily self-insured for
automobile, general liability, workers' compensation, and employee group health
claims, a change in experience or actuarial assumptions that did not affect the
rate of claims payments could nonetheless materially adversely affect results of
operations in a particular period. General and administrative costs include all
costs of holding company and subsidiary management personnel, rent, utilities,
travel and centralized costs such as insurance administration, interest on debt,
professional costs and certain clerical and administrative overhead. The
Company's management personnel, including subsidiary management, undertake all
sales and marketing functions as part of their management responsibilities, and,
accordingly, the Company does not incur material selling expenses.
Dycom, founded in 1969, witnessed significant growth during the 1980's as
the result of increasing competitive growth in the long distance telephone
market and the needs of the long distance carriers to replace their copper
cabling with fiber optic cable. Through 1990, Dycom acquired nine operating
subsidiaries. As long distance carriers completed most of their long haul lines
in the late 1980's, the Company shifted its focus to the local exchange carrier
market. During the early 1990's, Dycom's results of operations were materially
13
<PAGE> 15
adversely affected by a number of internal developments, including (i)
adjustments taken to insurance reserves in 1991, (ii) write-offs of intangible
assets, including goodwill, of $24.3 million and $1.4 million in 1993 and 1994,
respectively, incurred in connection with four acquisitions, which contributed
to net losses in those years, and (iii) significant costs and distraction of
management attention associated with a range of litigation and a governmental
investigation, including shareholder litigation and protracted litigation with a
former officer involved in a takeover effort. See Selected Financial Data for
the five years ended July 31, 1997 in the Company's Annual Report on Form 10-K
for the year ended July 31, 1997 incorporated by reference herein. All of these
matters were concluded in or before the 1995 fiscal year. Management of the
Company does not believe that any of the events or circumstances it faced in the
early 1990's are indicative of the manner in which the Company currently
operates or the Company's future prospects.
RESULTS OF OPERATIONS
The following table sets forth, as a percentage of contract revenues
earned, certain items in the Company's statement of operations for the periods
indicated:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
------------------------
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Revenues:
Contract revenues earned.................................. 100.0% 100.0% 100.0%
Other, net................................................ 0.7 0.6 0.4
------ ------ ------
Total revenues.................................... 100.7 100.6 100.4
Expenses:
Cost of earned revenue, excluding depreciation............ 82.0 80.3 79.2
General and administrative................................ 10.2 10.6 9.8
Depreciation and amortization............................. 3.8 3.9 3.6
------ ------ ------
Total expenses.................................... 96.0 94.8 92.6
------ ------ ------
Income before income taxes.................................. 4.7 5.8 7.8
Provision for income taxes.................................. 2.0 1.9 3.2
------ ------ ------
Net income.................................................. 2.7% 3.9% 4.6%
====== ====== ======
</TABLE>
YEAR ENDED JULY 31, 1997 COMPARED TO YEAR ENDED JULY 31, 1996
Revenues. Contract revenues increased $48.9 million, or 25.2%, to $243.0
million in fiscal 1997 from $194.1 million in fiscal 1996. Of this increase,
$40.7 million was attributable to the telecommunications services group, $6.1
million was attributable to the electric services group and $2.1 million was
attributable to the underground utility locating services group, reflecting an
increased overall market demand for the Company's services. During fiscal 1997,
the Company recognized $210.4 million of contract revenues from the
telecommunications services group as compared to $169.7 million in fiscal 1996.
The increase in the Company's telecommunications services group reflects an
increased volume of projects and activity in fiscal 1997 associated with the
cable television services group, which increased by $19.4 million to $70.6
million in fiscal 1997 from $51.2 million in fiscal 1996, the design and
installation of broadband networks, telephone engineering services and premise
wiring services, which was partially offset by a slight decline in contract
revenues from services performed under master service agreements. Contract
revenues from master service agreements, however, continue to be a significant
source of the Company's revenues, representing approximately 40% of total
contract revenues in fiscal 1997 as compared to 47.2% in fiscal 1996. The
Company recognized contract revenues of $16.8 million from electric utilities
services in fiscal 1997 as compared to $10.7 million in fiscal 1996, an increase
of 57.0%. The Company recognized contract revenues of $15.8 million from
underground utility locating services in fiscal 1997 as compared to $13.7
million in fiscal 1996, an increase of 15.2%.
Cost of Earned Revenues. Cost of earned revenues increased $36.6 million
to $192.4 million in fiscal 1997 from $155.8 million in fiscal 1996, but
decreased as a percentage of contract revenues to 79.2%
14
<PAGE> 16
from 80.3%. Direct labor, subcontractor and materials costs declined slightly as
a percentage of contract revenues as a result of improved productivity in the
labor force and the utilization of more modern equipment. Additionally,
insurance costs declined by approximately $1.6 million as a result of fewer
claims arising in fiscal 1997.
General and Administrative Expenses. General and administrative expenses
increased $3.3 million to $23.8 million in fiscal 1997 from $20.5 million in
fiscal 1996, but decreased as a percentage of contract revenues to 9.8% from
10.6%. The increase in general and administrative expenses was primarily
attributable to a $2.1 million increase in administrative salaries, bonuses,
employee benefits and payroll taxes and an increase of $300,000 in the provision
for doubtful accounts. The Company also incurred professional and related
expenses associated with the CCG Acquisition of $400,000 in fiscal 1997.
Depreciation and Amortization. Depreciation and amortization expense
increased $1.1 million to $8.7 million in fiscal 1997 from $7.6 million in
fiscal 1996, but decreased as a percentage of contract revenues to 3.6% from
3.9%. The increase in amount reflects the depreciation of additional capital
expenditures incurred in the ordinary course of business.
Income Taxes. The provision for income taxes was $7.8 million in fiscal
1997 as compared to $3.7 million in fiscal 1996. The provision for income taxes
for fiscal 1996 reflects a reduction of $1.1 million in a valuation allowance
relative to certain deferred tax assets. The Company's effective tax rate was
41.1% in fiscal 1997 as compared to 32.7% in fiscal 1996. The effective tax rate
differs from the statutory tax rate due to state income taxes, the amortization
of intangible assets that do not provide a tax benefit, other non-deductible
expenses for tax purposes and, in fiscal 1996, the reduction in a valuation
allowance relative to certain deferred tax assets.
Net Income. Net income increased to $11.2 million in fiscal 1997 from $7.7
million in fiscal 1996, a 46.4% increase.
YEAR ENDED JULY 31, 1996 COMPARED TO YEAR ENDED JULY 31, 1995
Revenues. Contract revenues increased $7.1 million, or 3.8%, to $194.1
million in fiscal 1996 from $187.0 million in fiscal 1995. For fiscal 1996, the
telecommunications services group contract revenues increased by $8.8 million,
which was offset by declines in contract revenues from the underground utility
locating services and the electrical services groups of $1.1 million and
$600,000, respectively. During fiscal 1996, the Company recognized $169.7
million of contract revenues from the telecommunications services group as
compared to $160.9 million in fiscal 1995. The telecommunications services group
experienced an increased volume of projects and activity in fiscal 1996
associated with the design and installation of broadband networks, telephony
engineering and design services and premise wiring services, which was partially
offset by a decline in contract revenues from services performed under master
service agreements. Contract revenues from master service agreements represented
47.2% of contract revenues in fiscal 1996 as compared to 52.1% in fiscal 1995.
The Company recognized contract revenues from electrical services of $10.7
million in fiscal 1996 as compared to $11.3 million in fiscal 1995, a decrease
of 5.3%, as a result of lower volume from bid contracts, partially offset by
improved volume and pricing under certain existing contracts. The Company
recognized contract revenues from underground utility locating services of $13.7
million in fiscal 1996 as compared to $14.8 million in fiscal 1995, a decrease
of 7.4%, as a result of the loss of a certain underground utility locating
contract during the competitive bid process, partially offset by the realization
of certain new underground utility locating business.
Cost of Earned Revenues. Cost of earned revenues increased $2.5 million to
$155.8 million in fiscal 1996 from $153.3 million in fiscal 1995, but decreased
as a percentage of contract revenues to 80.3% from 82.0%. Direct labor,
subcontractor and materials costs declined slightly as a percentage of contract
revenues as a result of improved productivity in the labor force and the
utilization of more modern equipment on projects. Additionally, insurance costs
increased by approximately $900,000 as a result of more claims arising in fiscal
1996.
General and Administrative Expenses. General and administrative expenses
increased $1.5 million to $20.5 million in fiscal 1996 from $19.0 million in
fiscal 1995, and increased as a percentage of contract revenues to 10.6% from
10.2%. The increase in general and administrative expenses was primarily
attributable
15
<PAGE> 17
to a $1.1 million increase in administrative salaries, wages and related payroll
taxes and an increase of $300,000 in professional expenses.
Depreciation and Amortization. Depreciation and amortization expense
increased $459,000 to $7.6 million in fiscal 1996 from $7.2 million in fiscal
1995, and increased slightly as a percentage of contract revenues to 3.9% from
3.8%. The increase reflected the depreciation of additional capital expenditures
incurred in the ordinary course of business.
Income Taxes. The provision for income taxes was $3.7 million in fiscal
1996, as well as in fiscal 1995. The provision for income taxes for 1996
reflects a reduction of $1.1 million in a valuation allowance relative to
certain deferred tax assets. The Company's effective tax rate was 32.7% in
fiscal 1996 as compared to 42.1% in fiscal 1995. The effective tax rate differed
from the statutory tax rate due to state income taxes, the amortization of
intangible assets that do not provide a tax benefit, other non-deductible
expenses for tax purposes and, in fiscal 1996, the reduction in a valuation
allowance relative to certain deferred tax assets.
Net Income. Net income increased to $7.7 million in fiscal 1996 from $5.1
million in fiscal 1995, a 49.1% increase.
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth historical financial data for the fiscal
quarters of 1996 and 1997. This quarterly information is unaudited, but has been
prepared on a basis consistent with the Company's audited financial statements
presented elsewhere herein and, in the Company's opinion, includes all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of the information for the quarters presented. The operating
results for any quarter are not necessarily indicative of the results for any
future period.
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------------------------------
OCT. 31, JAN. 31, APR. 30, JULY 31, OCT. 31, JAN. 31, APR. 30, JULY 31,
1995 1996 1996 1996 1996 1997 1997 1997
-------- -------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Total revenues............................ $50,854 $45,290 $45,215 $53,901 $56,414 $57,275 $63,181 $67,053
Expenses:
Cost of earned revenues................. 40,939 36,666 36,039 42,126 45,010 46,255 49,707 51,440
General and administrative.............. 5,276 4,895 4,981 5,332 5,351 5,405 6,659 6,365
Depreciation and amortization........... 1,920 1,946 1,689 2,069 2,073 2,040 2,114 2,463
------- ------- ------- ------- ------- ------- ------- -------
Total expenses.................... 48,135 43,507 42,709 49,527 52,434 53,700 58,480 60,268
------- ------- ------- ------- ------- ------- ------- -------
Income before income taxes................ 2,719 1,783 2,506 4,374 3,980 3,575 4,701 6,785
Provision for income taxes................ 1,197 669 1,062 790 1,745 1,261 1,882 2,934
------- ------- ------- ------- ------- ------- ------- -------
Net income................................ $ 1,522 $ 1,114 $ 1,444 $ 3,584 $ 2,235 $ 2,314 $ 2,819 $ 3,851
======= ======= ======= ======= ======= ======= ======= =======
Earnings per share
Primary................................. $ 0.14 $ 0.11 $ 0.14 $ 0.33 $ 0.20 $ 0.21 $ 0.26 $ 0.35
Fully diluted........................... $ 0.14 $ 0.11 $ 0.14 $ 0.33 $ 0.20 $ 0.21 $ 0.26 $ 0.35
AS A PERCENTAGE OF TOTAL REVENUES:
Total revenues............................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Expenses:
Cost of earned revenues................. 80.5 81.0 79.7 78.2 79.8 80.8 78.7 76.7
General and administrative.............. 10.4 10.8 11.0 9.9 9.5 9.4 10.5 9.5
Depreciation and amortization........... 3.8 4.3 3.7 3.8 3.7 3.6 3.4 3.7
------- ------- ------- ------- ------- ------- ------- -------
Total expenses.................... 94.7 96.1 94.4 91.9 93.0 93.8 92.6 89.9
------- ------- ------- ------- ------- ------- ------- -------
Income before income taxes................ 5.3 3.9 5.6 8.1 7.0 6.2 7.4 10.1
Provision for income taxes................ 2.3 1.5 2.4 1.5 3.0 2.2 3.0 4.4
------- ------- ------- ------- ------- ------- ------- -------
Net income................................ 3.0% 2.4% 3.2% 6.6% 4.0% 4.0% 4.4% 5.7%
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
The Company has historically experienced variability in revenues, income
before income taxes and net income on a quarterly basis. A significant amount of
this variability is due to the fact that the Company's business is subject to
seasonal fluctuations, with activity in its second and occasionally third fiscal
quarter (the quarters ended January 31 and April 30 in a given fiscal year)
being adversely affected by winter weather. For example, the Company's revenues,
income before income taxes and net income for the second and third fiscal
quarters of 1996 were adversely affected by severe winter weather, including
significant snowfall, experienced at that time. In addition, budgetary spending
patterns of significant customers, which often run on a calendar year basis,
have resulted in greater volatility of second fiscal quarter results. The
Company has witnessed
16
<PAGE> 18
increased sales of engineering services in recent years, and an increase in the
level of such services may offset the effect of these seasonal factors, although
no assurance can be given.
The Company has experienced and expects to continue to experience quarterly
fluctuations in revenues, income before income taxes and net income as a result
of other factors, including the timing and volume of customers' construction and
maintenance projects, the commencement, renewal or termination of master service
agreements, safety performance and the timing of additional costs to support
growth by acquisition or otherwise.
LIQUIDITY AND CAPITAL RESOURCES
The Company's needs for capital are attributable primarily to its needs for
equipment to support its contractual commitments to customers and its needs for
working capital sufficient for general corporate purposes. Capital expenditures
have been financed by operating and capital leases and by bank borrowings. To
the extent that the Company seeks to grow by acquisitions that involve
consideration other than Company stock, the Company's capital requirements may
increase, although the Company is not currently subject to any commitments or
obligations with respect to any acquisitions. The Company's sources of cash have
historically been from operating activities, bank borrowings and from proceeds
arising from the sale of idle and surplus equipment and real property.
For fiscal 1997, net cash provided by operating activities was $9.8 million
compared to $13.8 million for fiscal 1996 and $12.3 million for fiscal 1995. The
decrease in fiscal 1997 was due primarily to an increase in accounts receivable.
For fiscal 1997, net cash used in investing activities for capital
expenditures was $12.1 million, compared to $10.7 million in fiscal 1996 and
$8.7 million in fiscal 1995. For fiscal 1997, these expenditures were for the
normal replacement of equipment and the buyout of certain operating leases on
terms favorable to the Company. For fiscal 1996, these expenditures were for
normal equipment replacement and for expansion in the underground utility
locating group's geographic market. In addition to equipment purchases, the
Company obtained approximately $3.3 million of equipment in fiscal 1997, $3.0
million of equipment in fiscal 1996, and $4.4 million of equipment in fiscal
1995 under noncancellable operating leases.
On April 28, 1997, the Company signed a new $35 million credit agreement
arranged by a group of banks led by Dresdner Bank Lateinamerika AG. The Company
utilized $10.2 million of the new facilities to satisfy its then outstanding
long-term debt, $4.2 million to finance its increased working capital
requirements, and $800,000 for capital equipment expenditures. The new credit
agreement, in total, provides for a (i) $10.0 million revolving working capital
facility, (ii) $10.0 million standby letter of credit facility, (iii) $9.0
million five-year term loan, and (iv) $6.0 million revolving equipment
acquisition facility. The new credit agreement increased the level of available
financing by $11.2 million over the limits set in the Company's previous credit
facility. The Company sought this increased borrowing to facilitate its ability
to meet its working capital needs in order to sustain its current level of
internal growth.
The new credit agreement requires the Company to maintain certain financial
covenants and conditions such as not more than a 3.0:1 debt-to-equity ratio, a
current ratio of not less than 1.4:1, a quick ratio of not less than 0.75:1, and
net profit levels of $4.0 million in the first year, increasing thereafter in
$750,000 increments, as well as placing restrictions on encumbrances of assets
and creation of additional indebtedness. The new credit agreement also limits
the payment of cash dividends to 50% of the fiscal net after tax profits. At
July 31, 1997, the Company was in compliance with all covenants and conditions
under the credit facility.
The revolving working capital facility is available for a one-year period
and bears interest, at the option of the Company, at the bank's prime interest
rate minus 1.00% or LIBOR plus 1.50%. As of July 31, 1997, the Company had
borrowed $4.2 million against the revolving working capital facility to meet
current working capital requirements, leaving an available borrowing capacity of
$5.8 million. At July 31, 1997, the interest rate on the outstanding balance was
at LIBOR plus 1.50% (7.56%).
The term loan facility has a five-year maturity and bears interest at the
bank's prime interest rate minus 0.50% (8.00% at July 31, 1997). The term loan
principal and interest is payable in quarterly installments
17
<PAGE> 19
through April, 2002. The Company used $9.0 million of the facility to refinance
the indebtedness under the previous revolving credit facility. During fiscal
1997, the Company repaid $500,000 on this facility.
The revolving equipment acquisition facility is available for a one-year
period and bears interest, at the option of the Company, at the bank's prime
interest rate minus 0.75% or LIBOR plus 1.75%. Advances against this facility
are converted into term loans with maturities not to exceed 48 months. The
outstanding principal on the equipment acquisition term loans is payable in
monthly installments through January 2001. As of July 31, 1997, the Company had
borrowed $1.2 million to refinance the indebtedness under the previous equipment
acquisition term loans and an additional $0.8 million to finance the acquisition
of new equipment. The Company repaid $100,000 and has remaining available
borrowing capacity of $4.1 million under this facility. At July 31, 1997, the
interest rate on the outstanding equipment acquisition term loans was at LIBOR
plus 1.75% (7.81%).
The standby letter of credit facility is available for a one-year period.
At July 31, 1997, the Company had $9.2 million in outstanding standby letters of
credit issued as security to the Company's insurance administrators as part of
its self-insurance program, leaving $0.8 million of available borrowing
capacity.
CCG maintains a $6.6 million working capital bank credit facility. The
interest rate on this credit facility is at the bank's prime rate plus 0.75% and
is collateralized by 75% of the eligible trade accounts receivable and
inventories. During 1997, certain financial covenants were breached and the bank
waived such violations. At July 31, 1997, CCG was in compliance with the bank
credit facility covenants and conditions. At July 31, 1997, the outstanding
principal balance was $5.9 million. This credit facility was an existing
arrangement made prior to the CCG Acquisition.
Net days of contract revenues in trade accounts receivable, including
retainage, was 52 days at July 31, 1997, compared to 41 days at July 31, 1996
and 48 days at July 31, 1995.
The Company foresees its capital resources together with existing cash
balances to be sufficient to meet its financial obligations, including the
scheduled debt payments under the new credit agreement and operating lease
commitments, and to support the Company's normal replacement of equipment at its
current level of business for at least the next twelve months. The Company's
future operating results and cash flows may be affected by a number of factors
including the Company's success in bidding on future contracts and the Company's
continued ability to effectively manage controllable costs.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In February 1997, the FASB issued SFAS No. 128 "Earnings per Share" which
changes the method of calculating earnings per share and is effective for fiscal
years ending after December 15, 1997. SFAS No. 128 requires the presentation of
"basic" earnings per share and "diluted" earnings per share on the face of the
income statement. Basic earnings per share is computed by dividing the net
income available to common shareholders by the weighted average shares of
outstanding common stock. The calculation of diluted earnings per share is
similar to basic earnings per share except the denominator includes dilutive
common stock equivalents such as stock options and warrants. The Company will
adopt SFAS No. 128 in fiscal 1998 as early adoption is not permitted. The
disclosure of earnings per share under SFAS No. 128 is not expected to be
materially different than the current disclosure of earnings per share.
In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive Income"
which establishes standards for reporting and display of comprehensive income
and its components (revenues, expenses, gains and losses) in a full set of
general purpose financial statements. This statement requires that an enterprise
classify items of other comprehensive income by their nature in a financial
statement and display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital in the equity
section of a statement of financial position. This statement is effective for
fiscal years beginning December 15, 1997.
In June 1997, the FASB issued SFAS No. 131 "Disclosure about Segments of an
Enterprise and Related Information" which establishes standards for public
business enterprises to report information about operating segments in annual
financial statements and requires those enterprises to report selected
information about
18
<PAGE> 20
operating segments in interim financial reports issued to shareholders. It also
establishes the standards for related disclosures about products and services,
geographic areas, and major customers. This statement requires that a public
business enterprise report financial and descriptive information about its
reportable operating segments. The financial information is required to be
reported on the basis that it is used internally for evaluating segment
performance and deciding how to allocate resources to segments. Operating
segments are components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance. This statement is effective for financial statements for periods
beginning after December 15, 1997.
Management is currently evaluating the requirements of SFAS No. 130 and No.
131, respectively.
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<PAGE> 21
BUSINESS
OVERVIEW
Dycom is a leading provider of engineering, construction and maintenance
services to telecommunications providers that operate throughout the United
States. The Company's comprehensive range of telecommunications infrastructure
services include the engineering, placement and maintenance of aerial,
underground, and buried fiber-optic, coaxial and copper cable systems owned by
local and long distance communications carriers, competitive local exchange
carriers, and cable television multiple system operators. Additionally, the
Company provides similar services related to the installation of integrated
voice, data, and video local and wide area networks within office buildings and
similar structures. Dycom also performs underground utility locating and
electric utility contracting services. For the fiscal year ended July 31, 1997,
telecommunications services contributed approximately 87% of the Company's
contract revenues, underground utility locating services contributed 6%, and
electric utility contracting services contributed 7%.
Through its nine active wholly-owned subsidiaries, Dycom has established
relationships with many leading local exchange carriers, long distance
providers, competitive access providers, cable television multiple system
operators and electric utilities. Such key customers include BellSouth
Telecommunications, Inc., Comcast Cable Communications, Inc., The Southern New
England Telephone Company, GTE Corporation, U.S. West Communications, Inc., and
Florida Power & Light Company. Approximately 40% of the Company's revenues come
from multi-year master service agreements with large telecommunications
providers and electric utilities.
In July 1997, Dycom acquired CCG, a Pennsylvania-based provider of
construction services to cable television multiple system operators. CCG
generated revenues of $67.7 million in its fiscal year 1997. This transaction
diversified Dycom's telephone company customer base to include a broader mix of
work for cable television multiple system operators. The acquisition also
created a greater geographic presence for Dycom in the Mid-Atlantic, Midwest and
Northeast regions of the United States.
INDUSTRY OVERVIEW
The telecommunications industry is undergoing rapid change. Deregulation,
competitive deployment of networks and growth in consumer demand for enhanced
telecommunications services create the need for the construction of additional
telecommunications infrastructure for new and existing providers. As a result of
this increased need for upgraded and expanded telecommunications infrastructure
and the focus on reducing costs, telecommunications providers have been
outsourcing and are expected to continue to outsource, telecommunications
infrastructure engineering, construction and maintenance services.
Deregulation. The Telecom Act, enacted on February 8, 1996, substantially
revised the Federal Communications Act of 1934. It established a dual
federal-state regulatory framework for eliminating certain barriers to
competition faced by competitors of incumbent local exchange carriers. Among
other things, it preempts state and local government control over access to the
telecommunications market and opens such market to new entrants. The elimination
of entry barriers will lead to increased construction of competing
telecommunications networks as competitive telecommunications providers,
existing as well as new, expand into new markets and offer services that once
were reserved for incumbents. The competition generated by the Telecom Act is
expected to continue to spur existing service providers to expand and improve
their existing facilities.
While the Telecom Act significantly removed barriers to competition, many
state regulatory commissions have modified regulation of telecommunications
providers. Historically, telecommunications providers were limited by state
regulations to earning a predetermined return on capital investments. Since
1994, a significant majority of the states have repealed such regulations,
substituting in their place regulations which limit the price telecommunications
providers may charge consumers, while eliminating the caps on the profits they
may earn. These new state regulatory frameworks eliminate profit guarantees for
telecommunications providers, while offering the potential for enhanced
profitability. The combined effect of increased competition and the
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<PAGE> 22
prospects for greater profitability will lead new and existing
telecommunications providers to become increasingly efficient in constructing
and maintaining telecommunications infrastructure.
Competitive Deployment of Networks. Telecommunications providers and cable
television multiple system operators are actively expanding networks to provide
their customers with a combined offering of voice, video and data communications
services. Additionally, electric utilities are currently using fiber optic
technology to develop and maintain demand monitoring systems. These systems can
be used as a means of controlling the need to build additional generation
capacity and also provide electric utilities opportunities to market excess
communications capacity to telecommunications providers. Once built, these
systems will require continuous maintenance and periodic upgrading. Such
additional telecommunications infrastructure will also permit long distance
carriers and content providers to connect customers without the need to pay
exchange access fees to their competitors, local exchange carriers or cable
companies.
While data specific to the telecommunications engineering, construction and
maintenance industry is not readily available, one indication of the industry's
growth opportunity is the level of sales of fiber optic cable. According to KMI
Corporation, an independent industry research firm, approximately 11 million
kilometers of fiber optic cable were sold in 1996 in North America, an increase
of 22% from slightly over 9 million kilometers in 1995. By 2001, annual fiber
optic demand is expected to exceed 20 million kilometers. KMI estimates that
capital expenditures relating to the purchase of fiber optic cable will grow
from $2.1 billion in 1997 to $3.3 billion in 2001.
Growth in Consumer Demand. Increasing consumer demand is also spurring
growth in the telecommunications industry. Not only has the amount of
traditional telephone voice traffic increased, but the growth of personal
computers and modems has created significant data traffic from a wide variety of
sources. For example, businesses with multiple locations increasingly require
geographically dispersed local area networks to be linked in sophisticated wide
area networks handling large volumes of telecommunications traffic. In addition,
the Internet has expanded beyond its traditional data transmission and
file-sharing functions to offer e-mail, new data sources, commercial services,
transaction processing, independent bulletin boards, the World Wide Web and
voice transmission. To handle the growing volume of communications traffic and
to provide faster and higher quality transmission, telecommunications providers
will be required to upgrade and expand their telecommunications networks and
related infrastructure.
Consumer demand for services provided over fiber optic cable has resulted
in a demand for broader bandwidth. Limited by the size of the cable or other
facilities through which communications flow, bandwidth controls both the speed
and breadth of voice, video and data communications. Because of the physical
limitations of the existing network facilities, there is an immediate need to
upgrade facilities with new and innovative technology, expanding and, in many
cases, replacing existing telecommunications infrastructure to allow for
increased bandwidth and the resultant faster and greater volume of
communications flow.
Even local governments are increasingly becoming directly involved in
telecommunications network construction because of the perception that
telecommunications infrastructure is essential to economic growth. Local
governments spur increased demand for cable television construction services by
imposing requirements for improved services as a precondition to renewal of
franchises. Additionally, in some cases, local governments view the construction
of such infrastructure as an appropriate governmental response to private
enterprises' failure to act in a timely manner, and the cost of expanding and
upgrading telecommunications infrastructure is appearing more frequently in
governmental budgets.
Increased Outsourcing. The need to upgrade and expand telecommunications
infrastructure as a result of deregulation, competitive deployment of networks
and the growth in consumer demand for enhanced telecommunications services have
stimulated, and are expected to continue to stimulate, telecommunications
providers to increase the current level of outsourcing to the telecommunications
engineering, construction and maintenance services industry. The outsourcing
trend has largely been driven by the efforts of telecommunications providers to
reduce costs and to focus on their core competencies. Independent contractors,
such as the Company, typically have lower cost structures than the
telecommunications providers, primarily as a result of the independent
contractors' lower direct and overhead cost structures. In addition, the Company
believes that
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<PAGE> 23
telecommunications providers are seeking comprehensive solutions to their
infrastructure needs by utilizing fewer qualified contractors to provide a full
range of telecommunications infrastructure services.
Participant Consolidation. Historically, the telecommunications
engineering, construction and maintenance services industry has been highly
fragmented. Although industry annual revenues are estimated to be several
billions of dollars, few of these companies are publicly traded. Most
engineering, construction and maintenance service companies are small,
privately-held companies with annual revenues of less than $100 million. While
the industry has attracted some participation in the past from pipeline and
power plant construction firms, to date these firms have not significantly
impacted the industry.
In response to the newly deregulated operating environment, the industry
has experienced some increase in business combinations among the smaller private
firms. The resulting combinations, for the most part, however, may be unable,
due to resource constraints, to adequately meet the standards demanded by
telecommunications providers seeking to outsource their telecommunications
infrastructure services function. Going forward, service firms will need
significant management expertise, technical capabilities and capital resources
to provide the level of service necessary to gain significant market share. As a
result, the Company believes that the industry will experience consolidation in
the future and that strategic acquisition opportunities will continue to become
available.
THE DYCOM SOLUTION
Dycom provides a comprehensive solution to telecommunications providers
operating throughout the United States who need to deploy large and complex
telecommunications infrastructure quickly and with a high level of quality. The
Company's ability to serve a wide and diverse geographic area and its
demonstrated expertise in engineering and construction project management give
Dycom a distinct competitive advantage in obtaining customer service contracts.
As telecommunications providers begin to offer new and expanded services on a
global basis, the time to market for these services is a critical factor in
their success. Dycom is able to rapidly mobilize its capital equipment,
financial assets and personnel resources to effectively respond to the
increasing scale and time constraints of customer demands. Dycom has offered its
telecommunications engineering, construction and maintenance services solution
on a national basis to local and long distance communications carriers,
competitive access providers, cable television multiple system operators and
electric utilities since 1984.
BUSINESS STRATEGY
Dycom's objective is to be a leading high quality and cost effective
provider of engineering, construction and maintenance services to the
telecommunications industry. To meet this objective, Dycom has identified the
following key business strategies:
Leverage Expertise and Leadership Position. Dycom believes that in this
highly fragmented industry, its technical expertise and reputation should give
it a competitive advantage in securing new business from its current customers,
as well as from new customers. The Company believes that its reputation for
quality and reliability, operating efficiency, financial and personnel
resources, and technical expertise (e.g., ability to serve a wide geographic
area and ability to provide customers with a comprehensive solution) provide it
with a competitive advantage in bidding for and winning new contracts. The
Company intends to pursue the larger, more technically complex
telecommunications infrastructure projects where its technical expertise and
reputation should have a greater impact.
Effectively Utilize Decentralized Management. In order to enhance customer
service, the Company maintains a focused, decentralized management structure.
Dycom's holding company structure emphasizes the importance of local
subsidiary-based management teams, which are granted significant operating
flexibility in running their business. The Company believes that this
decentralized operating structure enables management to make decisions and
mobilize resources more quickly based on knowledge of the local markets and the
specific needs of their customers. The Company complements the decentralized
operating structure by sharing operating information among its subsidiaries.
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<PAGE> 24
Reduce Operating Costs and Increase Productivity. Dycom believes that the
cost savings in centralizing administrative tasks, such as insurance, asset
management, and information technology through Dycom's holding company
structure, combined with decentralized operating management, enables the Company
to be a more cost-effective provider of telecommunications engineering,
construction and maintenance services. As a service provider, the productivity
of its own work force and the work of its subcontractors has the single largest
impact on the Company's cost structure. High quality, decentralized management
assists the Company in maintaining quality performance from its work force, as
well as managing its costs. In order to respond to peak demands for its services
and to control labor expenses, Dycom also redeploys manpower among its
subsidiaries.
Refine and Enhance Formal Estimating Process. The Company utilizes
proprietary software to collect, maintain and statistically analyze extensive
amounts of historical cost and pricing information. The Company's operating
subsidiaries collect detailed cost and pricing information on a state by state,
customer by customer and job by job basis. The Company uses this data and
analysis as part of a formal estimating process when reviewing new business
opportunities. Dycom believes that, as a result of this process, it is able to
price jobs more accurately and more effectively allocate its resources. The
Company will continually seek to enhance the effectiveness of its proprietary
software system by expanding the amount of information that it gathers and
improving the analysis of the data.
GROWTH STRATEGY
As a result of the increased demand for telecommunications engineering,
construction and maintenance services, greater emphasis on outsourcing of such
services by telecommunications providers, and the fragmented nature of the
industry, the Company believes there are significant opportunities to expand its
business internally and through acquisitions.
Internal Growth. Dycom is focused on generating internal growth by: (i)
increasing the volume of services to existing customers; (ii) expanding the
scope of services to existing customers; (iii) broadening its customer base; and
(iv) geographically expanding its service area. The Company is also seeking to
reduce operating expenses and improve operating margins by centralizing costs
such as insurance administration, asset management and information technology,
thereby eliminating redundancies at the subsidiary level. Additionally, the
competitive pressures of deregulation have prompted several existing customers
to increase the outsourcing of noncore activities, which can provide
opportunities for enhancing internal growth without necessarily requiring the
Company to achieve market share gains.
Growth Through Acquisitions. Dycom intends to capitalize on the current
opportunity to make strategic acquisitions of engineering, construction and
maintenance services companies serving the telecommunications industry. Dycom
believes that as competition intensifies, smaller companies will seek to
consolidate with companies such as Dycom. Dycom will target acquisitions that
provide complementary services in existing Dycom markets or allow expansion into
new geographic areas. For its acquisition targets, the Company's key criteria
are profitability in excess of industry standards, stable and growing customer
bases, proven operational and technical competence, and experienced management
that fits within Dycom's decentralized operating structure. Further, the Company
seeks the opportunity to realize cost savings through the elimination of
redundant costs and economies of scale in certain items such as insurance,
information technologies and administrative functions. Dycom believes that
significant revenue and earnings growth are attainable through acquisitions;
however, there can be no assurance that the Company will be able to acquire and
integrate such businesses successfully or that such acquisitions will have a
positive effect on the Company's operating results.
The Company believes that a variety of attractive consolidation
opportunities exist within the currently fragmented telecommunications
engineering, construction and maintenance services industry. The Company
believes that additional acquisition opportunities may be available to implement
its acquisition strategy upon completion of this Offering. See "Use of
Proceeds."
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<PAGE> 25
SERVICES
Telecommunications Services
Engineering. Dycom provides outside plant engineers and drafters to local
exchange carriers and competitive access providers. The Company designs aerial,
buried and underground fiber optic and copper cable systems from the telephone
central office to the ultimate consumer's home or business. Engineering services
for local exchange carriers include the design of service area concept boxes,
terminals, buried and aerial drops, transmission design and the proper
administration of feeder and distribution cable pairs. For competitive access
providers, Dycom designs building entrance laterals, fiber rings and conduit
systems. The Company obtains rights of way and permits in support of engineering
activities, and provides construction management and inspection personnel in
conjunction with engineering services or on a stand alone basis. For cable
television multiple system operators, Dycom performs make ready studies, strand
mapping, field walk out, computer-aided radio frequency design and drafting, and
fiber cable routing and design.
Construction and Maintenance. The services provided by the Company include
the placing and splicing of cable, excavation of trenches in which to place the
cable, placement of related structures such as poles, anchors, conduits,
manholes, cabinets and closures, placement of drop lines from the main
distribution lines to the customer's home or business, and maintenance and
removal of these facilities. The Company has the capacity to directionally bore
the placement of cables, a highly specialized and increasingly necessary method
of placing buried cable networks in congested urban and suburban markets where
trenching is highly impractical.
Premise Wiring. The Company also provides premise wiring services to a
variety of large corporations and certain governmental agencies. These services,
unlike the engineering, construction and maintenance services provided under
various master service agreements and to cable television multiple system
operators, are limited to the installation, repair and maintenance of
telecommunications infrastructure within improved structures. Projects include
the placement and removal of various types of cable within buildings and
individual offices. These services generally include the development of
communication networks within a company or government agency related primarily
to the establishment and maintenance of computer operations, telephone systems,
Internet access and communications monitoring systems established for purposes
of monitoring environmental controls or security procedures.
Underground Utility Locating Services
The Company is a provider of underground utility locating services,
primarily to telecommunications providers. Under a variety of state laws,
excavators are required to locate underground utilities prior to excavating.
Utilities located include telephone, cable television, power and gas. Recently,
excavators performing telecommunications network upgrades and expansions have
generated significant growth in requests for underground utility locating, and
the Company expects this trend to continue. The Company is currently a party to
30 underground utility locating contracts. These services are offered throughout
the United States.
Electrical Construction and Maintenance Services
The Company performs electrical construction and maintenance services for
electric companies. This construction is performed primarily as a stand alone
service, although at times it is performed in conjunction with services for
telecommunications providers. These services include installing and maintaining
electrical transmission and distribution lines, setting utility poles and
stringing electrical lines, principally above ground. The work performed often
involves high voltage splicing and, on occasion, the installation of underground
high voltage distribution systems. The Company also provides the repair and
replacement of lines which are damaged or destroyed as a result of weather
conditions.
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Revenues by Service Group
For the fiscal years ended July 31, 1995, 1996 and 1997, the percentages of
the Company's total contract revenues earned were derived from
telecommunications services, underground utility locating services and
electrical construction and maintenance services as set forth below.
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
--------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Telecommunications services................................. 86% 87% 87%
Underground utility locating services....................... 8 7 6
Electrical construction and maintenance services............ 6 6 7
--- --- ---
Total............................................. 100% 100% 100%
=== === ===
</TABLE>
CUSTOMER RELATIONSHIPS
Dycom's current customers include local exchange carriers such as BellSouth
Telecommunications, Inc., SBC Communications, Inc., U.S. West Communications,
Inc., Sprint Corporation, Ameritech Corporation, GTE Corporation, The Southern
New England Telephone Company, Citizen Utilities and Cincinnati Bell Telephone.
Dycom also currently provides telecommunications engineering, construction and
maintenance services to a number of cable television multiple system operators
including Comcast Cable Communications Inc., Cablevision, Inc., Falcon Cable
Media, Time Warner, Inc. and MediaOne, Inc. Dycom also provides its services to
long distance carriers such as MCI Telecommunications Corporation and AT&T
Corporation, as well as to competitive access providers such as MFS
Communications Company, Inc. and Brooks Fiber Corporation. Premise wiring
services have been provided to, among others, Lucent Technologies, Inc., Duke
University, International Business Machines Corporation, and several state
governments. The Company also provides construction and maintenance support to
Lee County Electrical Cooperative, Florida Power & Light Company, and Florida
Power Corporation.
The Company's customer base is highly concentrated, with its top three
customers in fiscal years 1995, 1996 and 1997 accounting in the aggregate for
approximately 66.8%, 72.8% and 64.0%, respectively, of the Company's total
revenues. During fiscal 1997, approximately 34.3% of the Company's total
revenues were derived from BellSouth Telecommunications, Inc., 23.3% from
Comcast Cable Communications, Inc. and 6.4% from GTE Corporation. The Company
believes that a substantial portion of its total revenues and operating income
will continue to be derived from a concentrated group of customers. The loss of
any of such customers could have a material adverse effect on the Company's
business, financial condition and results of operations.
A significant amount of the Company's business is performed under master
service agreements. These agreements with telecommunications providers are
generally exclusive requirement contracts, with certain exceptions, including
the customer's option to perform the services with its own regularly employed
personnel. The agreements are typically three to five years in duration,
although the terms typically permit the customer to terminate the agreement upon
90 days prior written notice. Each agreement contemplates hundreds of individual
construction and maintenance projects valued generally at less than $10,000
each. Other jobs are bid by the Company on a nonrecurring basis.
Although historically master service agreements have been awarded through a
competitive bidding process, recent trends have been toward securing or
extending such contracts on negotiated terms. With the rapid expansion of the
telecommunications market and the immediate need for upgrading existing, as well
as constructing new, telecommunications infrastructure, the Company believes
that more master service agreements will be awarded on the basis of negotiated
terms as opposed to the competitive bidding process.
Sales and marketing efforts of the Company are the responsibility of the
management of Dycom and its operating subsidiaries.
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<PAGE> 27
BACKLOG
The Company's backlog at July 31, 1997 was $314.4 million. As of July 31,
1997, the Company expected to complete approximately 66% of this backlog within
the next fiscal year. Due to the nature of its contractual commitments, in many
instances the Company's customers do not commit to the volume of services to be
purchased under the contract, but rather commit the Company to perform these
services if requested by the customer and commit to obtain these services from
the Company if they are not performed internally. Many of the contracts are
multi-year agreements, and the Company includes the full amount of services
projected to be performed over the life of the contract. The Company includes
all services projected to be performed over the life of the contract in its
backlog due to its historical relationships with its customers and experience in
procurements of this nature. Historically, the Company has not experienced a
material variance between the amount of services it expects to perform under a
contract and the amount actually performed for a specified period. There can be
no assurance, however, as to the customer's requirements during a particular
period or that such estimates at any point in time are accurate.
SAFETY AND RISK MANAGEMENT
The Company is committed to ensuring that its employees perform their work
in the safest possible manner. The Company regularly communicates with its
employees to promote safety and to instill safe work habits. Dycom's risk
manager, a holding company employee, reviews all accidents and claims throughout
the operating subsidiaries, examines trends and implements changes in procedures
or communications to address any safety issues.
The primary claims rising in the Company's business are workers'
compensation and other personal injuries, various general liabilities, and
vehicle liability (personal injury and property damage). The Company is
self-insured for automobile liability up to $1.0 million, for general liability
up to $1.0 million, and for workers' compensation, in states where the Company
elects to do so, up to $1.0 million per occurrence and $2.0 million in the
aggregate. The Company has umbrella coverage up to a policy limit of $30.0
million.
The Company carefully monitors claims and participates actively in claims
estimates and adjustments. The estimated costs of self-insured claims, which
include estimates for incurred but not reported claims, are accrued as
liabilities on the Company's balance sheet. Due to changes in the Company's loss
experience in recent years, insurance accruals have varied from year to year and
have had an effect on operating margins. See "Management's Discussion and
Analysis of Financial Condition and Results of Operation" and Note 1 of the
Notes to Consolidated Financial Statements.
COMPETITION
The telecommunications engineering, construction and maintenance services
industry in which the Company operates is highly competitive, requiring
substantial resources and skilled and experienced personnel. The Company
competes with other independent contractors in most of the markets in which it
operates, several of which are large domestic companies that have greater
financial, technical and marketing resources than the Company. In addition,
there are relatively few, if any, barriers to entry into the markets in which
the Company operates and, as a result, any organization that has adequate
financial resources and access to technical expertise may become a competitor to
the Company. A significant portion of the Company's revenues are currently
derived from master service agreements and price is often an important factor in
the award of such agreements. Accordingly, the Company could be outbid by its
competitors in an effort to procure such business. There can be no assurance
that the Company's competitors will not develop the expertise, experience and
resources to provide services that are equal or superior in both price and
quality to the Company's services, or that the Company will be able to maintain
or enhance its competitive position. The Company may also face competition from
the in-house service organizations of its existing or prospective customers,
including telecommunications providers, which employ personnel who perform some
of the same types of services as those provided by the Company. Although a
significant portion of these services is currently outsourced, there can be no
assurance that existing or prospective customers of the Company will continue to
outsource telecommunications engineering, construction and maintenance services
in the future.
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<PAGE> 28
The Company believes that the principal competitive factors in the market
for telecommunications engineering, construction and maintenance services
include technical expertise, reputation, price, quality of service, availability
of skilled technical personnel, geographic presence, breadth of service
offerings, adherence to industry standards and financial stability. The Company
believes that it competes favorably with its competitors on the basis of these
competitive factors.
EMPLOYEES
As of July 31, 1997, the Company employed 2,864 persons. The number of
employees of the Company and its subsidiaries varies according to the work 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.
Additional employees are added as needed to complete specific projects.
None of the Company's employees are represented by a labor union. CCG is
currently a party to two collective bargaining agreements with local bargaining
units in Philadelphia, Pennsylvania, and New York, New York, although none of
its current employees are subject to the agreements. The Company has never
experienced a work stoppage or strike. The Company believes that its employee
relations are good.
FACILITIES
The Company leases its executive offices in Palm Beach Gardens, Florida.
The Company's subsidiaries operate from owned or leased administrative offices,
district field offices, equipment yards, shop facilities and temporary storage
locations. The Company owns facilities in Phoenix, Arizona; Durham, North
Carolina; Pinellas Park, Florida; and West Palm Beach, Florida. It also leases,
pursuant to long-term noncancelable leases, facilities in West Chester,
Pennsylvania; Bridgeport and Wallingford, Connecticut; Knoxville, Tennessee; and
Greensboro, North Carolina. The Company also leases and owns other smaller
properties as necessary to enable it to efficiently perform its obligations
under master service agreements and other specific contracts. The Company
believes that its facilities are adequate for its current operations.
LEGAL PROCEEDINGS
In September 1995, the State of New York commenced a sales and use tax
audit of CCG for the years 1989 through 1995. As a result of the audit, certain
additional taxes were paid by CCG in fiscal 1996. The State of New York has
claimed additional amounts due from CCG for sales taxes and interest for the
periods through August 31, 1995. See Note 15 of the Notes to Consolidated
Financial Statements.
In the normal course of business, certain subsidiaries of the Company have
other 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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<PAGE> 29
MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
The table below sets forth the names and ages of the directors, executive
officers and key employees of the Company as well as the positions and offices
held by such persons. A summary of the background and experience of each of
these individuals is set forth after the table. Each director holds office for a
three year term and until his successor has been elected and qualified. A number
of key employees, including officers, have employment agreements, while others
serve at the discretion of the Company's Board of Directors. There are no family
relationships among the directors or officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Thomas R. Pledger....................... 59 Chairman of the Board of Directors and Chief
Executive Officer
Steven E. Nielsen....................... 34 President, Chief Operating Officer and Director
Louis W. Adams, Jr...................... 59 Director
Walter L. Revell........................ 62 Director
Ronald L. Roseman....................... 60 Director
Ronald P. Younkin....................... 55 Director
Douglas J. Betlach...................... 45 Vice President, Chief Financial Officer and Treasurer
Darline M. Richter...................... 36 Vice President and Controller
Patricia B. Frazier..................... 62 Corporate Secretary
George H. Tamasi........................ 49 President and Chief Executive Officer of CCG, a
Company subsidiary
Thomas J. Polis......................... 53 Executive Vice President, Secretary and Treasurer of
CCG, a Company subsidiary
</TABLE>
Thomas R. Pledger is Chairman of the Board of Directors and Chief Executive
Officer of Dycom. Mr. Pledger has been in the industry since 1960, and in 1968
became President of Burnup & Sims, Inc., which went public that year and was
acquired by MasTec, Inc. in 1994. Mr. Pledger left Burnup & Sims in 1976. Mr.
Pledger's relationship with Dycom began in 1979 as a consultant. He became a
Director in 1981 and President and Chief Executive Officer in 1984. His current
employment contract as Chief Executive Officer with the Company expires November
30, 2000. He serves on the Board's Executive and Nominating Committees, as well
as on the Board of Directors for each of the Company's subsidiaries.
Steven E. Nielsen is President and Chief Operating Officer of Dycom. His
employment contract expires on March 10, 1999. Mr. Nielsen has held this
position since August 1996 and has been with Dycom since 1993. As a member of
Dycom's Board of Directors since 1996, he serves on the Board's Executive
Committee and on the Board of Directors of CCG. He previously served as
President of Ansco & Associates, Inc. and Fiber Cable, Inc., two of Dycom's
subsidiaries. Prior to joining the Company, Mr. Nielsen was Division
Manager/Regional Manager of Henkels & McCoy, Inc., a gas, power and telephone
utility contractor, from 1991 to 1993, and was employed in various positions
with this company or a predecessor since 1985.
Louis W. Adams, Jr. is a retired attorney and formerly a partner with the
law firm of Adams & Adams. Mr. Adams has been on the Board since 1969 and
currently serves on the Board's Audit and Compensation, Executive, Nominating
and Finance Committees. Mr. Adams is also a member of the Board of Directors of
each of the Company's subsidiaries, other than CCG.
Walter L. Revell has been a Director since 1993 and currently serves on the
Board's Audit and Compensation, and Finance Committees. He has been Chairman and
Chief Executive Officer of H.J. Ross Associates, Inc. since 1991. The firm
provides consulting engineering, architectural and planning services. Mr. Revell
also serves on the Board of Directors of RISCORP, Inc., which provides managed
care workers' compensation, St. Joe Corporation, a diversified corporation in
sugar and real estate, and Hotelecopy, Inc., an international fax mail service
company.
28
<PAGE> 30
Ronald L. Roseman has been a Director since 1982. He formerly served as
President and Chief Operating Officer of Dycom from August 1, 1993 through
August 26, 1996. He has been President of Coastal Electric Constructors, Inc.
since 1991.
Ronald P. Younkin is President of Greenlawn Mobile Home Sales, Inc., which
sells mobile homes and operates mobile home parks. Mr. Younkin has been a
Director of the Company since 1975. Mr. Younkin serves on the Board's Audit and
Compensation, Finance, and Nominating Committees.
Douglas J. Betlach is Vice President, Chief Financial Officer and
Treasurer. Mr. Betlach has been with Dycom since 1992. He previously served as
Controller for Cal-Central Marketing Corporation, Del Monte Processed Foods and
RJR Nabisco, Inc.
Darline M. Richter has been Vice President and Controller since 1996. She
has been employed by the Company since 1991 and previously was employed by
Deloitte & Touche LLP as a tax accountant.
Patricia B. Frazier has been employed by Dycom since 1983. She has served
as Corporate Secretary since 1984. She previously served as Corporate Secretary
at Rubin Construction Company and Burnup & Sims, Inc.
George H. Tamasi is President and Chief Executive Officer of CCG, the
Company's newly acquired subsidiary. Mr. Tamasi has entered into a five year
employment contract with CCG, which may be canceled upon mutual consent after
July 29, 2000. Mr. Tamasi also serves on the Board of Directors of CCG.
Thomas J. Polis is Executive Vice President, Secretary and Treasurer of
CCG. Also a Director of CCG, Mr. Polis has a five year employment contract with
CCG, which may be canceled upon mutual consent after July 29, 2000.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CCG, the Company's newly-acquired subsidiary, leases administrative office
facilities from a partnership of which Mr. Tamasi and Mr. Polis, officers of
CCG, are general partners. The properties are located in West Chester,
Pennsylvania, and West Palm Beach, Florida. The leases expire on August 1, 2000
and February 1, 2002 and the rental rates are consistent with prevailing rates
in the respective markets. During fiscal 1997, CCG incurred annual expenses of
$115,200 in connection with the leases.
29
<PAGE> 31
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth, as of September 26, 1997, and adjusted at
that date to reflect the sale of the Company's Common Stock offered hereby,
information with respect to the beneficial ownership of the Company's Common
Stock by, as indicated by the letter next to each such beneficial owner, (a)
each Selling Stockholder, (b) each person known to the Company to beneficially
own more than 5% of the outstanding shares of the Company's Common Stock, (c)
each director of the Company and each executive officer, and (d) all executive
officers and directors of the Company as a group. Unless otherwise indicated,
each such stockholder has (i) sole voting and investment power with respect to
the shares beneficially owned by such stockholder and (ii) the same address as
the Company.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED BEFORE THE OWNED AFTER THE
OFFERING(1) NUMBER OF OFFERING
------------------------ SHARES BEING -------------------
NAME OF OWNER NUMBER PERCENT(1) OFFERED NUMBER PERCENT
- ------------- --------- ---------- ------------ --------- -------
<S> <C> <C> <C> <C> <C>
Thomas J. Polis (a), (b)................... 1,026,621(2) 9.4% 513,311 513,310 4.1%
235 East Gay Street
West Chester, PA 19380
George H. Tamasi (a), (b).................. 1,026,621(2) 9.4% 513,311 513,310 4.1%
235 East Gay Street
West Chester, PA 19380
Mary Irene Younkin, Individually........... 881,378(3) 8.1% 100,000 781,278 6.3%
and as Executor of the Estate of
Floyd E. Younkin (a), (b)
555 Greenlawn Avenue
Columbus, OH 43223
Thomas R. Pledger (b), (c)................. 698,027(4) 6.4% 0 698,027 5.6%
Steven E. Nielsen (c)...................... 23,950(5) * 0 23,950 *
Louis W. Adams, Jr. (c).................... 12,234(5) * 0 12,234 *
3108 Vistamar Street, Apt. 7
Ft. Lauderdale, FL 33304
Walter L. Revell (c)....................... 13,000(5) * 0 13,000 *
3770 S.W. 8th Street, Suite 200
Coral Gables, FL 33134
Ronald L. Roseman (b), (c)................. 742,546 6.8% 0 742,546 6.0%
4708 West Cayuga, Suite D
Tampa, FL 33614
Ronald P. Younkin (c)...................... 161,597(6)(7) 1.5% 0 161,597 1.3%
555 Greenlawn Avenue
Columbus, OH 43223
Douglas J. Betlach (c)..................... 7,004(5) * 0 7,004 *
Darline M. Richter (c)..................... 1,684(5) * 0 1,684 *
Patricia B. Frazier (c).................... 27,361(5) * 0 27,361 *
All executive officers and directors as a
group(d)................................. 1,687,403(5) 15.5% 0 1,687,403 13.5%
</TABLE>
- ---------------
* Less than 1%
(1) Class includes outstanding shares and presently exercisable stock option
held by directors and executive officers.
(2) Shares were acquired by Messrs. Tamasi and Polis through the exchange of
stock as a result of the CCG Acquisition.
30
<PAGE> 32
(3) Includes 565,461 shares from the Estate of Floyd E. Younkin inherited by
Mary Irene Younkin, Mr. Younkin's wife, as well as 315,917 shares previously
owned by Mrs. Younkin. Mrs. Younkin disclaims any beneficial interest in the
161,597 shares owned by her son, Ronald P. Younkin, a director of the
Company, and 12,661 shares owned by Ronald P. Younkin's wife and children.
Mrs. Younkin serves as the Executor of the Estate of her late husband, Floyd
E. Younkin. Mr. Younkin served as the President and Chief Executive Officer
of the Company from 1969 until 1971 and from 1972 until 1984. He also served
on the Board of Directors from 1969 until 1990.
(4) Excludes 12,252 shares owned by Thomas R. Pledger, Jr., Mr. Pledger's son,
as to which Mr. Pledger disclaims any beneficial interest.
(5) Includes shares that may be acquired within 60 days after September 15, 1997
upon exercise of stock options as follows: Mr. Nielsen 18,250 shares; Mr.
Adams 12,000 shares; Mr. Revell 12,000 shares; Mr. Betlach 2,375 shares; Ms.
Richter 750 shares; Ms. Frazier 750 shares; and all directors and officers
as a group 46,125 shares.
(6) Mr. Younkin exercised 4,000 shares of an exercisable stock option which was
granted to him as a director of the Company. Mr. Younkin gifted said
exercised shares and disclaims any beneficial ownership.
(7) Excludes 12,661 shares owned by Mr. Younkin's wife and children, as to which
Mr. Younkin disclaims any beneficial interest. Excludes 881,378 shares owned
beneficially by Mary Irene Younkin, individually and as Executor of the
Estate of Floyd E. Younkin as to which Mr. Younkin disclaims any beneficial
interest. Mr. Younkin is the son of Mary Irene Younkin.
31
<PAGE> 33
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 50,000,000 shares
of Common Stock, $0.33 1/3 par value, and 1,000,000 shares of preferred stock,
$1.00 par value per share (the "Preferred Stock"). Upon completion of the
Offering, there will be 12,443,630 shares of Common Stock issued and
outstanding. No shares of Preferred Stock are outstanding.
COMMON STOCK
At September 29, 1997, there were 10,870,252 shares of Common Stock
outstanding held by approximately 660 stockholders.
The holders of Common Stock are entitled to one vote per share on all
matters submitted to a vote of the stockholders. Holders of Common Stock do not
have cumulative rights, so that holders of more than 50% of the shares of Common
Stock are able to elect all of the Company's directors eligible for election in
a given year. The holders of Common Stock are entitled to dividends and other
distributions if and when declared by the Board of Directors out of assets
legally available therefor. See "Price Range of Common Stock and Dividend
Policy." Upon the liquidation, dissolution or winding up of the Company, the
holders of shares of Common Stock are entitled to share pro rata in the
distribution of all of the Company's assets remaining available for distribution
after satisfaction of all the Company's liabilities, including any prior rights
of any Preferred Stock which may be outstanding. There are no redemption or
sinking fund provisions applicable to the Common Stock. Immediately upon
consummation of this Offering, all of the then outstanding shares of Common
Stock will be validly issued, fully paid and nonassessable.
The transfer agent and registrar for the Common Stock is First Union
National Bank of North Carolina, Charlotte, North Carolina.
PREFERRED STOCK
The Company is authorized to issue up to 1,000,000 shares of Preferred
stock, $1.00 par value. There are no shares of Preferred Stock outstanding.
Series of the Preferred Stock may be created and issued from time to time by the
Board of Directors, with such rights and preferences as may be determined by the
Board. The Board of Directors may, without stockholder approval, issue a series
of Preferred Stock with voting and conversion rights which could have the effect
of discouraging a takeover and which could adversely affect the rights of
holders of Common Stock, as it could be used by incumbent management to make a
change in control of the Company more difficult. Under certain circumstances
such shares could be used to create voting impediments or to frustrate persons
seeking to effect a takeover or otherwise gain control of the Company.
ANTI-TAKEOVER PROVISIONS
On June 1, 1992, the Company approved a Shareholder Rights Plan. All
stockholders 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 to reflect any stock split, stock dividend or similar transaction.
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, subject to adjustment to reflect any stock split,
stock dividend or similar transaction, at any time prior to ten days after a
triggering event occurs.
Certain officers of the Company have change of control agreements with the
Company, which provide for extraordinary compensation (in general terms, double
the officer's salary and bonuses paid the previous year), upon a change of
control in the Company. Mr. Pledger's employment agreement also permits him to
terminate his employment in the event of a change of control. The total cost to
the Company as a result of these agreements in the event of a change in control
would be approximately $2.07 million. The payment pursuant to these agreements
would be triggered by any person's acquisition of more than fifty percent of the
32
<PAGE> 34
Company's outstanding securities, the sale or transfer of substantially all of
Dycom's assets to someone other than a wholly-owned subsidiary of Dycom, or a
change of control of the Board of Directors.
The Articles of Incorporation of the Company provides that the Board of
Directors is divided into three classes, as nearly equal in number as possible,
with one class of directors being elected each year for a three-year term. The
classification of the Board may have the effect of delaying a change in a
majority of the members of the Company's Board of Directors.
The Company's Articles of Incorporation provides that the affirmative vote
of 80% of the outstanding shares of capital stock of the Company entitled to
vote in elections of directors is required to approve any merger of the Company
with or into another corporation or any sale or transfer of all or a substantial
part of the assets of the Company to, or any sale or transfer to the Company or
any subsidiary in exchange for securities of the Company of any assets (except
assets valued at less than $1,000,000) of, any other corporation or person, if
at the time such other corporation or person is the beneficial owner, or is
affiliated with the beneficial owner, of more than 20% of the outstanding shares
of capital stock of the Company entitled to vote in elections of directors. This
provision is not applicable to any such transaction with another corporation
which was approved by the Company's Board of Directors prior to the time that
such other corporation became a holder of more than 20% of the outstanding
shares of capital stock of the Company.
The Florida Business Corporation Act contains provisions eliminating the
voting rights of "control shares", defined as shares which give any person,
directly or indirectly, ownership of, or the power to direct the exercise of
voting power with respect to, 20% or more of the outstanding voting power of an
"issuing public corporation." A corporation is an issuing public corporation if
it has at least 100 shareholders, its principal place of business, principal
office or substantial assets in Florida and either more than 10% of its
shareholders reside in Florida, more than 10% of its shares are owned by Florida
residents or 1,000 shareholders reside in Florida. The voting rights of control
shares are not eliminated if the articles of incorporation or the bylaws of the
corporation prior to the acquisition provide that the statute does not apply.
Voting rights are restored to control shares if, subsequent to their
acquisition, the corporation's shareholders (other than the holder of control
shares, officers of the corporation and employee directors) vote to restore such
voting rights.
The Florida Business Corporation Act also restricts "affiliated
transactions" (mergers, consolidations, transfers of assets and other
transactions) between "interested shareholders" (the beneficial owners of 10% or
more of the corporation's outstanding shares) and the corporation or any
subsidiary. Affiliated transactions must be approved by two-thirds of the voting
shares not beneficially owned by the interested shareholder or by a majority of
the corporation's "disinterested" directors. The statutory restrictions do not
apply if the corporation has had fewer than 300 shareholders of record for three
years, the interested shareholder has owned at least 80% of the outstanding
shares for five years, the interested shareholder owns at least 90% of the
corporation's outstanding voting shares, or certain consideration is paid to all
shareholders.
The provisions of the Company's Articles and By-Laws, the existence of the
Shareholder Rights Plan and the change of control agreements and the application
of the anti-takeover provisions of the Florida Business Corporation Act could
have the effect of discouraging, delaying or preventing a change of control not
approved by the Board of Directors which could affect the market price of the
Company's Common Stock.
INDEMNIFICATION
The By-Laws of the Company provide that the Company shall indemnify each
director and officer of the Company to the fullest extent permitted by law and
limits the liability of directors to the Company and its stockholders for
monetary damages in certain circumstances.
The provisions of the Florida Business Corporation Act that authorize
indemnification do not eliminate the duty of care of a director and, in
appropriate circumstances, equitable remedies such as injunctive or other forms
of nonmonetary relief will remain available under Florida law. In addition, each
director will continue to be subject to liability for (a) violations of the
criminal law, unless the director had reasonable cause to believe his conduct
was lawful or had no reasonable cause to believe his conduct was unlawful, (b)
deriving an improper personal benefit from a transaction, (c) voting for or
assenting to an unlawful distribution, and
33
<PAGE> 35
(d) willful misconduct or a conscious disregard for the best interests of the
Registrant in a proceeding by or in the right of the Registrant to procure a
judgment in its favor or in a proceeding by or in the right of a shareholder.
The statute does not affect a director's responsibilities under any other law,
such as the federal securities laws or state or federal environmental laws.
DIVIDEND RESTRICTIONS
The Company's credit facilities currently limit the Company's ability to
pay dividends on the Common Stock to 50% of net after-tax profits for the fiscal
year. The credit agreement's restrictions on the Company's debt-to-equity, quick
and current ratios also affect the Company's ability to pay dividends. The
payment of dividends on the Common Stock is also subject to the preference that
may be applicable to any then outstanding Preferred Stock.
34
<PAGE> 36
UNDERWRITING
The Underwriters named below (the "Underwriters"), have severally agreed,
subject to the terms and conditions in the underwriting agreement (the
"Underwriting Agreement"), by and among the Company, the Selling Stockholders
and the Underwriters, to purchase from the Company and the Selling Stockholders
the number of shares of Common Stock indicated below opposite their respective
names, at the public offering price less the underwriting discount set forth on
the cover page of this Prospectus. The Underwriting Agreement provides that the
obligations of the Underwriters are subject to certain conditions precedent and
that the Underwriters are committed to purchase all of the shares of Common
Stock, if they purchase any.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ----------- ---------
<S> <C>
NationsBanc Montgomery Securities, Inc......................
Morgan Keegan & Company, Inc................................
The Robinson-Humphrey Company, LLC..........................
---------
Total............................................. 2,700,000
=========
</TABLE>
The Underwriters have advised the Company and the Selling Stockholders that
they propose to offer the Common Stock to the public on the terms set forth on
the cover page of this Prospectus. The Underwriters may allow selected dealers a
concession of not more than $ per share; and the Underwriters may
allow, and such dealers may reallow, a concession of not more than $
per share to certain other dealers. After the public offering, the public
offering price and other selling terms may be changed by the Underwriters. The
Common Stock is offered subject to receipt and acceptance by the Underwriters,
and to certain other conditions, including the right to reject orders in whole
or in part.
The Company has granted an option to the Underwriters, exercisable during
the 30-day period after the date of this Prospectus to purchase up to a maximum
of 405,000 additional shares of Common Stock to cover over-allotments, if any,
at the same price per share as the initial shares to be purchased by the
Underwriters. To the extent that the Underwriters exercise such over-allotment
option, the Underwriters will be committed, subject to certain conditions, to
purchase such additional shares in approximately the same proportion as set
forth in the above table. The Underwriters may purchase such shares only to
cover over-allotments made in connection with the Offering.
The Underwriting Agreement provides that the Company and the Selling
Stockholders will indemnify the Underwriters against certain liabilities,
including civil liabilities under the Securities Act, or will contribute to
payments the Underwriters may be required to make in respect thereof.
The Company, the Selling Stockholders and the Company's officers and
directors who are also stockholders of the Company and who, immediately
following the Offering (assuming no exercise of the Underwriters' over-allotment
option) collectively will beneficially own an aggregate of 3,495,301 outstanding
shares of Common Stock, have agreed that for a period of 180 days after the
effective date of the Offering they will not, without the prior written consent
of NationsBanc Montgomery Securities, Inc., directly or indirectly, sell, offer,
contract or grant an option to sell (including without limitation any short
sale), pledge (other than to a pledgee who acknowledges to NationsBanc
Montgomery Securities, Inc. that it has taken subject to the lock-up
restrictions), transfer, establish an open put equivalent position or otherwise
dispose of any shares of Common Stock, options or warrants to acquire shares of
Common Stock or securities exchangeable or exercisable or convertible into
shares of Common Stock held by them. The Company has also agreed not to issue,
offer, sell, grant options to purchase or otherwise dispose of any of the
Company's equity securities or any other securities convertible into or
exchangeable for its equity securities for a period of 180 days after the
effective date of the Offering without the prior written consent of NationsBanc
Montgomery Securities, Inc., subject to limited exceptions and grants and
exercises of stock options or pursuant to acquisitions. In evaluating any
request for a waiver of the lock-up period, the Underwriters will consider, in
accordance with their customary practice, all relevant facts and circumstances
at the time of the request, including, without limitation, the recent trading
market of the Common Stock, the size of the request and, with respect to a
request by the Company to issue additional equity securities, the purpose of
such an issuance.
35
<PAGE> 37
Until the distribution of the Common Stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the Underwriters and
certain selling group members to bid for and purchase the Common Stock. As an
exception to these rules, the Underwriters are permitted to engage in certain
transactions that stabilize the price of the Common Stock. Such transactions
consist of bids or purchases for the purpose of pegging, fixing or maintaining
the price of the Common Stock.
If the Underwriters create a short position in the Common Stock in
connection with the Offering, i.e., if they sell more shares of Common Stock
than are set forth on the cover page of this Prospectus, the Underwriters may
reduce that short position by purchasing Common Stock in the open market. The
Underwriters may also elect to reduce any short position by exercising all or
part of the over-allotment option described above.
The Underwriters may also impose a penalty bid on certain selling group
members. This means that if the Underwriters purchase shares of Common Stock in
the open market to reduce the Underwriters' short position or to stabilize the
price of the Common Stock, they may reclaim the amount of the selling concession
from the selling group members who sold those shares as part of the Offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security. Neither the Company nor any of the
Underwriters makes any representation or predictions as to the direction or
magnitude of any effect that the transactions described above may have on the
price of the Common Stock. In addition, neither the Company nor any of the
Underwriters makes any representation that the Underwriters will engage in such
transactions or that such transactions, once commenced, will not be discontinued
without notice.
The public offering price of the Common Stock will be determined by
negotiations among the Underwriters, the Company, and the Selling Stockholders
and will be based largely upon the market price for the Common Stock as reported
on the New York Stock Exchange.
CERTAIN LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Chopin, Miller & Yudenfreund, Palm Beach, Florida.
Certain legal matters in connection with the Common Stock offered hereby will be
passed upon for the Underwriters by Piper & Marbury L.L.P., Baltimore, Maryland.
EXPERTS
The consolidated financial statements included herein and incorporated in
this prospectus by reference from the Company's Annual Report on Form 10-K for
the year ended July 31, 1997 have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report, which is included herein and
incorporated herein by reference. The financial statements of CCG (consolidated
with those of the Company and not presented separately herein) have been audited
by Nowalk & Associates, independent auditors, as stated in their reports, which
are included herein and incorporated herein by reference. Such financial
statements of the Company and its consolidated subsidiaries have been so
included and incorporated in reliance upon the reports of such firms given upon
their authority as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
following Regional Offices of the Commission: Seven World Trade Center, Suite
1300, New York,
36
<PAGE> 38
New York 10048; and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material can be obtained at prescribed
rates by writing to the Commission, Public Reference Section, 450 Fifth Street,
N.W., Washington, D.C. 20549. The Common Stock is listed on the New York Stock
Exchange under the symbol "DY." Reports, proxy and information statements and
other information concerning the Company can also be inspected at the Library of
the New York Stock Exchange at 20 Broad Street, New York, New York 10005. The
Commission maintains a World Wide Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. The address of the site is
http://www.sec.gov.
This Prospectus constitutes part of a Registration Statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") and does not contain all of the information set forth in the
Registration Statement, certain parts of which have been omitted in accordance
with the rules and regulations of the Commission. For further information with
respect to the Company and the securities offered hereby, reference is made to
the Registration Statement and to the exhibits and schedules thereto. Statements
made in this Prospectus as to the contents of any contract, agreement or other
document referred to herein are not necessarily complete. With respect to each
such contract, agreement or other document filed as an exhibit to the
Registration Statement, reference is made to the exhibit for a more complete
description of the matter involved, and such statement is qualified in its
entirety by such reference. Copies of the Registration Statement may be
inspected, without charge, at the offices of the Commission or obtained at
prescribed rates from the Public Reference Section of the Commission at the
address set forth above.
INFORMATION INCORPORATED BY REFERENCE
The following documents, previously filed by the Company with the
Commission pursuant to the Exchange Act, are incorporated herein by reference:
(i) The Company's Annual Report on Form 10-K for the fiscal year ended
July 31, 1997, filed October 1, 1997;
(ii) the Company's Annual Report on Form 10-K/A for the fiscal year
ended July 31, 1997, filed October 28, 1997;
(iii) the Company's Current Report on Form 8-K, filed August 13, 1997;
and
(iv) the Company's Current Report on Form 8-K, filed October 16, 1997.
Each document filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act, subsequent to the date of this
Prospectus and prior to the termination of the offering to which this Prospectus
relates, shall be deemed to be incorporated by reference into this Prospectus
and to be a part hereof from the date any such document is filed. Any statements
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein (or in any other
subsequently filed document which also is incorporated or deemed to be
incorporated by reference herein) specifically modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed to
constitute a part of this Prospectus except as so modified or superseded.
The Company hereby undertakes to provide without charge to each person to
whom a copy of this Prospectus has been delivered, upon written or oral request
of such person to Corporate Secretary, Dycom Industries, Inc., First Union
Center, 4440 PGA Boulevard, Suite 600, Palm Beach Gardens, Florida 33410, (561)
627-7171, a copy of any or all of the documents described above (other than
exhibits to such documents) that have been incorporated by reference in this
Prospectus.
37
<PAGE> 39
DYCOM INDUSTRIES, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
Consolidated Financial Statements for the three years ended
July 31, 1997
Report of Independent Auditors............................ F-2
Consolidated Balance Sheets as of July 31, 1996 and
1997................................................... F-5
Consolidated Statements of Operations for the years ended
July 31, 1995, 1996 and 1997........................... F-6
Consolidated Statements of Stockholders' Equity for the
years ended July 31, 1995, 1996 and 1997............... F-7
Consolidated Statements of Cash Flows for the years ended
July 31, 1995, 1996 and 1997........................... F-8
Notes to Consolidated Financial Statements................ F-9
</TABLE>
F-1
<PAGE> 40
INDEPENDENT AUDITORS' REPORT
Dycom Industries, Inc.
We have audited the consolidated balance sheets of Dycom Industries, Inc.
and subsidiaries (the "Company") as of July 31, 1997 and 1996, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended July 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statements based on our
audits. The consolidated financial statements give retroactive effect to the
merger of Communications Construction Group, Inc., which has been accounted for
as a pooling of interests as described in Note 2 to the consolidated financial
statements. We did not audit the balance sheet of Communications Construction
Group, Inc. as of May 31, 1996 or the statements of operations, stockholders'
equity, and cash flows of Communications Construction Group, Inc. for the years
ended May 31, 1997, 1996 and 1995, which statements reflect total assets of
$14,121,468 as of May 31, 1996, and total revenues of $67,717,326, $50,121,009
and $43,047,102 for the years ended May 31, 1997, 1996 and 1995, respectively.
Those financial statements were audited by other auditors whose reports have
been furnished to us, and our opinion, insofar as it relates to the amounts
included for Communications Construction Group, Inc. for such periods, is based
solely on the reports of such other auditors. As described in Note 2 to the
consolidated financial statements, subsequent to the issuance of the reports of
the other auditors, Communications Construction Group, Inc. changed its fiscal
year to conform to the fiscal year of Dycom Industries, Inc. for the period
ended July 31, 1997.
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 and the report of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the reports of the other auditors,
the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Dycom Industries, Inc. and
subsidiaries as of July 31, 1997 and 1996, and the results of their operations
and their cash flows for each of the three years in the period ended July 31,
1997 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Certified Public Accountants
West Palm Beach, Florida
September 26, 1997
F-2
<PAGE> 41
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Communications Construction Group, Inc.
We have audited the accompanying consolidated balance sheets of
Communications Construction Group, Inc. (the "Company") as of May 31, 1997 and
1996, and the related consolidated statements of operations, cash flows and
changes in stockholders' equity for the years then ended. 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, the financial statements referred to above (not presented
separately herein) present fairly, in all material respects, the consolidated
financial position of Communications Construction Group, Inc. as of May 31, 1997
and 1996, and the consolidated results of its operations and its cash flows for
the years then ended in conformity with generally accepted accounting
principles.
NOWALK & ASSOCIATES
Nowalk & Associates
Cranbury, New Jersey
July 23, 1997
F-3
<PAGE> 42
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Communications Construction Group, Inc.
We have audited the accompanying consolidated balance sheets of
Communications Construction Group, Inc. (the "Company") as of May 31, 1996 and
1995, and the related consolidated statements of operations, cash flows and
changes in stockholders' equity for the years then ended. 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, the financial statements referred to above (not presented
separately herein) present fairly, in all material respects, the consolidated
financial position of Communications Construction Group, Inc. as of May 31, 1996
and 1995, and the consolidated results of its operations and its cash flows for
the years then ended in conformity with generally accepted accounting
principles.
NOWALK & ASSOCIATES
Nowalk & Associates
Cranbury, New Jersey
August 29, 1996
As to Notes 5 and 6, January 3, 1997
F-4
<PAGE> 43
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JULY 31, 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents........................................ $ 3,927,736 $ 6,645,972
Accounts receivable, net.................................... 21,747,268 34,353,367
Costs and estimated earnings in excess of billings.......... 7,519,284 10,479,974
Deferred tax assets, net.................................... 1,261,065 2,168,763
Other current assets........................................ 1,291,249 1,550,545
----------- -----------
Total current assets.............................. 35,746,602 55,198,621
----------- -----------
PROPERTY AND EQUIPMENT, net................................. 24,514,470 27,543,238
----------- -----------
OTHER ASSETS:
Intangible assets, net...................................... 4,839,447 4,684,358
Deferred tax assets......................................... 704,887 424,205
Other....................................................... 389,947 311,473
----------- -----------
Total other assets................................ 5,934,281 5,420,036
----------- -----------
TOTAL............................................. $66,195,353 $88,161,895
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable............................................ $ 5,567,512 $10,281,615
Notes payable............................................... 7,257,867 13,080,316
Billings in excess of costs and estimated earnings.......... 38,714 470,940
Accrued self-insured claims................................. 3,064,229 2,011,622
Income taxes payable........................................ 1,099,178 1,230,376
Other accrued liabilities................................... 10,496,020 11,904,304
----------- -----------
Total current liabilities......................... 27,523,520 38,979,173
NOTES PAYABLE............................................... 10,427,837 9,012,066
ACCRUED SELF-INSURED CLAIMS................................. 7,062,150 6,418,400
----------- -----------
Total liabilities................................. $45,013,507 $54,409,639
----------- -----------
COMMITMENTS AND CONTINGENCIES, Note 15
STOCKHOLDERS' EQUITY:
Common stock, par value $.33 1/3 per share: 50,000,000
shares authorized; 10,654,734 and 10,867,877 issued and
outstanding, respectively................................. $ 3,551,578 $ 3,622,625
Additional paid-in capital.................................. 24,582,832 25,421,701
Retained earnings (deficit)................................. (6,952,564) 4,707,930
----------- -----------
Total stockholders' equity........................ 21,181,846 33,752,256
----------- -----------
TOTAL............................................. $66,195,353 $88,161,895
=========== ===========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 44
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JULY 31, 1995, 1996, AND 1997
<TABLE>
<CAPTION>
1995 1996 1997
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES:
Contract revenues earned............................. $186,956,976 $194,053,617 $242,957,932
Other, net........................................... 1,376,398 1,206,624 965,549
------------ ------------ ------------
Total...................................... 188,333,374 195,260,241 243,923,481
------------ ------------ ------------
EXPENSES:
Cost of earned revenues excluding depreciation....... 153,284,320 155,769,390 192,412,439
General and administrative........................... 19,009,530 20,485,022 23,779,913
Depreciation and amortization........................ 7,165,252 7,624,395 8,689,611
------------ ------------ ------------
Total...................................... 179,459,102 183,878,807 224,881,963
------------ ------------ ------------
INCOME BEFORE INCOME TAXES........................... 8,874,272 11,381,434 19,041,518
------------ ------------ ------------
PROVISION (BENEFIT) FOR INCOME TAXES
Current............................................ 3,732,893 5,297,772 8,018,951
Deferred........................................... (1,580,196) (196,241)
------------ ------------ ------------
Total...................................... 3,732,893 3,717,576 7,822,710
------------ ------------ ------------
NET INCOME........................................... $ 5,141,379 $ 7,663,858 $ 11,218,808
============ ============ ============
EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE:
Primary............................................ $ 0.49 $ 0.71 $ 1.02
============ ============ ============
Fully diluted...................................... $ 0.49 $ 0.70 $ 1.02
============ ============ ============
SHARES USED IN COMPUTING EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE:
Primary............................................ 10,588,766 10,859,819 10,948,689
============ ============ ============
Fully diluted...................................... 10,588,766 10,928,284 10,994,500
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 45
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JULY 31, 1995, 1996, AND 1997
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED
----------------------- PAID-IN EARNINGS
SHARES AMOUNT CAPITAL (DEFICIT)
---------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Balances at July 31, 1994, as previously
reported................................... 8,528,990 $2,842,997 $24,253,309 $(20,387,411)
Acquisition accounted for as pooling of
interests.................................. 2,053,242 684,414 109,563 629,610
---------- ---------- ----------- ------------
Balances at July 31, 1994.................... 10,582,232 3,527,411 24,362,872 (19,757,801)
Stock options exercised...................... 15,000 5,000 40,000
Net income................................... 5,141,379
---------- ---------- ----------- ------------
Balances at July 31, 1995.................... 10,597,232 3,532,411 24,402,872 (14,616,422)
Stock options exercised...................... 57,502 19,167 179,960
Net income................................... 7,663,858
---------- ---------- ----------- ------------
Balances at July 31, 1996.................... 10,654,734 3,551,578 24,582,832 (6,952,564)
Stock options exercised...................... 213,143 71,047 706,300
Income tax benefit from stock options
exercised.................................. 132,569
Adjustment for change in fiscal year of
pooled company............................. 441,686
Net income................................... 11,218,808
---------- ---------- ----------- ------------
Balances at July 31, 1997.................... 10,867,877 $3,622,625 $25,421,701 $ 4,707,930
========== ========== =========== ============
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE> 46
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JULY 31, 1995, 1996, AND 1997
<TABLE>
<CAPTION>
1995 1996 1997
----------- ------------ ------------
<S> <C> <C> <C>
Increase (Decrease) in Cash and Equivalents from:
OPERATING ACTIVITIES:
Net income............................................ $ 5,141,379 $ 7,663,858 $ 11,218,808
Adjustments to reconcile net cash provided by
operating activities:
Depreciation and amortization....................... 7,165,252 7,624,395 8,689,611
Gain on disposal of assets.......................... (840,637) (763,104) (667,377)
Deferred income taxes............................... (1,580,196) (196,241)
Changes in assets and liabilities:
Accounts receivable, net............................ (1,900,640) 2,842,893 (10,861,852)
Unbilled revenues, net.............................. (1,300,412) (2,286,096) (2,429,995)
Other current assets................................ (18,790) 205,641 (785,024)
Other assets........................................ 123,780 49,570 93,350
Accounts payable.................................... 2,042,901 (2,767,120) 3,782,196
Accrued self-insured claims and other liabilities... 1,623,897 2,703,422 323,789
Accrued income taxes................................ 250,189 85,227 636,427
----------- ------------ ------------
Net cash inflow from operating activities............. 12,286,919 13,778,490 9,803,692
----------- ------------ ------------
INVESTING ACTIVITIES:
Capital expenditures................................ (8,704,641) (10,684,195) (12,063,723)
Proceeds from sale of assets........................ 2,569,307 2,195,774 1,685,069
----------- ------------ ------------
Net cash outflow from investing activities............ (6,135,334) (8,488,421) (10,378,654)
----------- ------------ ------------
FINANCING ACTIVITIES:
Borrowings on notes payable and bank
lines-of-credit.................................. 1,504,982 1,690,917 17,321,661
Principal payments on notes payable and bank
lines-of-credit.................................. (5,944,358) (7,671,189) (14,646,255)
Exercise of stock options........................... 45,000 199,127 777,347
----------- ------------ ------------
Net cash inflow (outflow) from financing activities... (4,394,376) (5,781,145) 3,452,753
----------- ------------ ------------
Net cash outflow related to change in fiscal year of
pooled company...................................... (159,555)
----------- ------------ ------------
NET CASH INFLOW (OUTFLOW) FROM ALL ACTIVITIES......... 1,757,209 (491,076) 2,718,236
CASH AND EQUIVALENTS AT BEGINNING OF YEAR............. 2,661,603 4,418,812 3,927,736
----------- ------------ ------------
CASH AND EQUIVALENTS AT END OF YEAR................... $ 4,418,812 $ 3,927,736 $ 6,645,972
=========== ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW AND NONCASH
INVESTING AND FINANCING ACTIVITIES:
Cash paid during the period for:
Interest............................................ $ 2,493,381 $ 2,023,159 $ 1,798,093
Income taxes........................................ 3,411,785 5,364,539 8,158,759
Property and equipment acquired and financed with:
Capital lease obligations........................... $ 360,242 $ 135,341 $ 601,024
Income tax benefit from stock options exercised....... $ 132,569
</TABLE>
See notes to consolidated financial statements.
F-8
<PAGE> 47
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. On July 29, 1997, Communications Construction
Group, Inc. ("CCG") was merged with and into the Company through an exchange of
common stock. The merger was accounted for as a pooling of interests.
Accordingly, the Company's consolidated financial statements include the results
of CCG for all periods presented. See Note 2.
The Company's operations consist primarily of telecommunication and
electric utility services contracting. All material intercompany accounts and
transactions have been eliminated.
USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates and such differences may be material to the financial statements.
Estimates are used in the Company's revenue recognition of work-in-process,
allowance for doubtful accounts, self-insured claims liability, deferred tax
asset valuation allowance, depreciation and amortization, and in the estimated
lives of assets, including intangibles.
REVENUE -- Income on 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 as the facts that
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" represents the excess
of contract revenues recognized under the percentage-of-completion method of
accounting for long-term contracts and work-in-process on unit contracts over
billings to date. For those contracts in which billings exceed contract revenues
recognized to date, such excesses are included in the caption "billings in
excess of costs and estimated earnings".
CASH AND EQUIVALENTS -- Cash and equivalents include cash balances in
excess of daily requirements which are invested in overnight repurchase
agreements, certificates of deposits, and various other financial instruments
having an original maturity of three months or less. For purposes of the
consolidated statements of cash flows, the Company considers these amounts to be
cash equivalents. The carrying amount reported in the balance sheet for cash and
equivalents approximates its fair value.
PROPERTY AND EQUIPMENT -- Property and equipment is 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 its useful life
are capitalized. When assets are sold or retired, the cost and related
accumulated depreciation are removed from the accounts and the resulting gain or
loss is included in income.
INTANGIBLE ASSETS -- The excess of the purchase price over the fair market
value of the tangible net assets of acquired businesses (goodwill) is amortized
on the straight-line method over 40 years. The appropriateness of the carrying
value of goodwill is reviewed periodically by the Company at the subsidiary
level. An impairment loss is recognized when the projected future cash flows is
less than the carrying value of goodwill.
F-9
<PAGE> 48
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Amortization expense was $155,088 for each of the fiscal years ended July
31, 1995, 1996, and 1997, respectively. The intangible assets are net of
accumulated amortization of $996,270 and $1,151,358 at July 31, 1996 and 1997,
respectively.
LONG-LIVED ASSETS -- In March 1995, the Financial Accounting Standards
Board ("FASB") issued the Statement of Financial Accounting Standards ("SFAS")
No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of". SFAS No. 121 requires that the long-lived assets and
certain identifiable intangibles be reviewed for impairment whenever events and
circumstances indicate that the carrying amount of an asset may not be
recoverable. The Company adopted the provisions of SFAS No. 121 effective August
1, 1996 and has determined that no impairment loss need be recognized.
SELF-INSURED CLAIMS LIABILITY -- The Company is primarily self-insured, up
to certain limits, for automobile and general liability, workers' compensation,
and employee group health claims. A liability for unpaid claims and the
associated claim expenses, including incurred but not reported losses, is
actuarially determined and reflected in the consolidated financial statements as
an accrued liability. The self-insured claims liability includes incurred but
not reported losses of $4,458,000 and $4,429,000 at July 31, 1996 and 1997,
respectively. The determination of such claims and expenses and the
appropriateness of the related liability is continually reviewed and updated.
INCOME TAXES -- The Company and its subsidiaries, except for CCG, file a
consolidated federal income tax return. CCG will be included in the Company's
consolidated federal income tax return commencing in fiscal year 1998. Deferred
income taxes are provided for the temporary differences between the financial
reporting basis and the tax basis of the Company's assets and liabilities.
PER SHARE DATA -- Earnings per common and common equivalent share are
computed using the weighted average shares of common stock outstanding plus the
common stock equivalents arising from the effect of dilutive stock options,
using the treasury stock method. See Note 12.
CHANGE IN ACCOUNTING PRINCIPLE -- In October 1995, the FASB issued SFAS No.
123 "Accounting for Stock Based Compensation," which was effective for the
Company beginning August 1, 1996. SFAS No. 123 requires expanded disclosures of
stock based compensation arrangements with employees and encourages, but does
not require, compensation cost to be measured based on the fair value of the
equity instrument awarded. Under SFAS No. 123, companies are permitted, however,
to continue to apply Accounting Principle Board ("APB") Opinion No. 25, which
recognizes compensation cost based on the intrinsic value of the equity
instrument awarded. The Company will continue to apply APB Opinion No. 25 to its
stock based compensation awards to employees and will disclose in the annual
financial statements the required pro forma effect on net income and earnings
per share. See Note 12.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS -- In February 1997, the FASB
issued SFAS No. 128 "Earnings per Share" which changes the method of calculating
earnings per share and is effective for fiscal years ending after December 15,
1997. SFAS No. 128 requires the presentation of "basic" earnings per share and
"diluted" earnings per share on the face of the income statement. Basic earnings
per share is computed by dividing the net income available to common
shareholders by the weighted average shares of outstanding common stock. The
calculation of diluted earnings per share is similar to basic earnings per share
except the denominator includes dilutive common stock equivalents such as stock
options and warrants. The Company will adopt SFAS No. 128 in fiscal 1998 as
early adoption is not permitted. The calculation of earnings per share under
SFAS No. 128 is not expected to be materially different than the
F-10
<PAGE> 49
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
current calculation of earnings per share. The pro forma basic earnings per
share and diluted earnings per share calculated in accordance with SFAS 128 for
the years ended July 31, are as follows:
<TABLE>
<CAPTION>
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
Pro forma basic earnings per share.......................... $0.49 $0.72 $1.04
Pro forma diluted earnings per share........................ $0.49 $0.71 $1.02
</TABLE>
In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive Income"
which establishes standards for reporting and display of comprehensive income
and its components (revenues, expenses, gains and losses) in a full set of
general-purpose financial statements. This statement requires that an enterprise
classify items of other comprehensive income by their nature in a financial
statement and display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital in the equity
section of a statement of financial position. This statement is effective for
fiscal years beginning after December 15, 1997.
In June 1997, the FASB issued SFAS No. 131 "Disclosure about Segments of an
Enterprise and Related Information" which establishes standards for public
business enterprises to report information about operating segments in annual
financial statements and requires those enterprises to report selected
information about operating segments in interim financial reports issued to
shareholders. It also establishes the standards for related disclosures about
products and services, geographic areas, and major customers. This statement
requires that a public business enterprise report financial and descriptive
information about its reportable operating segments. The financial information
is required to be reported on the basis that it is used internally for
evaluating segment performance and deciding how to allocate resources to
segments. Operating segments are components of an enterprise about which
separate financial information is available that is evaluated regularly by the
chief operating decision maker in deciding how to allocate resources and in
assessing performance. This statement is effective for financial statements for
periods beginning after December 15, 1997.
Management is currently evaluating the requirements of SFAS No.130 and No.
131, respectively.
2. ACQUISITION
On July 29, 1997, the Company consummated the Communications Construction
Group, Inc.("CCG") acquisition by merger. The Company issued 2,053,242 shares of
common stock in exchange for all the outstanding capital stock of CCG. Dycom has
accounted for the acquisition as a pooling of interests and, accordingly, the
Company's historical financial statements include the results of CCG for all
periods presented.
Prior to the acquisition, CCG used a fiscal year ending May 31 and as of
July 31 1997 adopted Dycom's fiscal year. The Company's consolidated statements
of operations for years ending July 31, 1995, 1996, and 1997 combines the
statements of operations of CCG for its fiscal years ending May 31, 1995, 1996,
and 1997, respectively. The Company's consolidated balance sheet at July 31,
1996 includes the CCG balance sheet as of May 31, 1996. The total revenue and
net income of CCG for the two-month period ended July 31, 1997 were $13.1
million and $0.4 million, respectively, with the net income reflected as an
adjustment to retained earnings as of July 31, 1997.
F-11
<PAGE> 50
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The combined and separate company results of Dycom and CCG for the fiscal
years ended July 31 and May 31, 1995, 1996, and 1997 are as follows:
<TABLE>
<CAPTION>
DYCOM CCG
JULY 31, MAY 31, COMBINED
------------ ----------- ------------
<S> <C> <C> <C>
Fiscal year 1995:
Total revenues.............................. $145,283,116 $43,050,258 $188,333,374
Net income.................................. $ 4,433,204 $ 708,175 $ 5,141,379
Fiscal year 1996:
Total revenues.............................. $145,135,380 $50,124,861 $195,260,241
Net income.................................. $ 6,390,144 $ 1,273,714 $ 7,663,858
Fiscal year 1997:
Total revenues.............................. $176,204,581 $67,718,900 $243,923,481
Net income.................................. $ 8,268,502 $ 2,950,306 $ 11,218,808
</TABLE>
The direct transaction costs resulting from the merger were $0.4 million.
These costs, which include filing fees with regulatory agencies, legal,
accounting and other professional costs, were charged to the combined operations
for the fiscal year ended July 31, 1997.
3. ACCOUNTS RECEIVABLE
Accounts receivable at July 31 consist of the following:
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Contract billings........................................... $20,393,361 $32,586,289
Retainage................................................... 1,432,545 1,885,656
Other receivables........................................... 527,405 896,015
----------- -----------
Total............................................. 22,353,311 35,367,960
Less allowance for doubtful accounts........................ 606,043 1,014,593
----------- -----------
Accounts receivable, net.................................... $21,747,268 $34,353,367
=========== ===========
</TABLE>
4. 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>
1996 1997
----------- -----------
<S> <C> <C>
Costs incurred on contracts in progress..................... $24,553,658 $16,894,451
Estimated earnings thereon.................................. 436,154 3,222,120
----------- -----------
24,989,812 20,116,571
Less billings to date....................................... 17,509,242 10,107,537
----------- -----------
$ 7,480,570 $10,009,034
=========== ===========
Included in the accompanying consolidated balance sheets
under the captions:
Costs and estimated earnings in excess of billings........ $ 7,519,284 $10,479,974
Billings in excess of costs and estimated earnings........ (38,714) (470,940)
----------- -----------
$ 7,480,570 $10,009,034
=========== ===========
</TABLE>
F-12
<PAGE> 51
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. PROPERTY AND EQUIPMENT
The accompanying consolidated balance sheets include the following property
and equipment:
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Land........................................................ $ 1,711,464 $ 1,942,247
Buildings................................................... 2,236,322 2,346,993
Leasehold improvements...................................... 1,078,939 1,356,861
Vehicles.................................................... 28,385,347 32,232,343
Equipment and machinery..................................... 22,534,900 23,674,176
Furniture and fixtures...................................... 3,738,944 5,011,660
----------- -----------
Total............................................. 59,685,916 66,564,280
Less accumulated depreciation and amortization.............. 35,171,446 39,021,042
----------- -----------
Property and equipment, net................................. $24,514,470 $27,543,238
=========== ===========
</TABLE>
During fiscal 1996 and 1997, certain subsidiaries of the Company entered
into lease arrangements accounted for as capitalized leases. The carrying value
of capital leases at July 31, 1996 and 1997 was $372,170 and $838,137,
respectively, net of accumulated amortization of $874,937 and $881,336,
respectively. Capital leases are included as a component of equipment and
machinery.
Maintenance and repairs of property and equipment amounted to $6,142,484,
$6,280,575, and $6,116,397 for the fiscal years ended July 31, 1995, 1996, and
1997, respectively.
6. OTHER ACCRUED LIABILITIES
Other accrued liabilities at July 31 consist of the following:
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Accrued payroll and related taxes........................... $ 2,618,266 $ 3,281,376
Accrued employee benefit costs.............................. 2,385,969 3,406,400
Accrued construction costs.................................. 2,178,785 2,033,371
Accrued other liabilities................................... 3,313,000 3,183,157
----------- -----------
Other accrued liabilities................................... $10,496,020 $11,904,304
=========== ===========
</TABLE>
7. NOTES PAYABLE
Notes payable at July 31 are summarized by type of borrowing as follows:
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Bank Credit Agreements
Revolving credit facilities............................... $12,985,119 $10,113,484
Term-loan................................................. 2,162,812 8,550,000
Equipment term-loans...................................... 704,168 1,907,216
Capital lease obligations................................... 344,445 722,927
Equipment loans............................................. 852,083 798,755
Other....................................................... 637,077
----------- -----------
Total............................................. 17,685,704 22,092,382
Less current portion........................................ 7,257,867 13,080,316
----------- -----------
Notes payable -- non-current................................ $10,427,837 $ 9,012,066
=========== ===========
</TABLE>
F-13
<PAGE> 52
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On April 28, 1997 the Company signed a new $35.0 million credit agreement
with a group of banks. The new credit facility provides for (i) a five-year
term-loan in the principal amount of $9.0 million used to refinance the
Company's previously existing bank credit facility, (ii) a $6.0 million
revolving equipment facility used to refinance existing equipment term-loans and
to provide financing for Company's future equipment requirements, (iii) a $10.0
million revolving credit facility used for financing working capital, and (iv) a
$10.0 million standby letter of credit facility issued as security to the
Company's insurance administrators as part of its self-insurance program. The
revolving credit facility, the revolving equipment facility and the standby
letter of credit facility are available for a one-year period.
The outstanding principal under the term-loan bears interest at the prime
interest rate minus 0.50% (8.00% at July 31, 1997). Principal and interest is
payable in quarterly installments through April 2002. The loans outstanding
under the revolving credit facility and the revolving equipment facility bear
interest, at the option of the Company, at the prime interest rate minus 1.0% or
LIBOR plus 1.50% and at the prime interest minus 0.75% or LIBOR plus 1.75%,
respectively. At July 31, 1997, the interest rates on the outstanding revolving
credit facility and revolving equipment facility loans were at the LIBOR options
or 7.56% and 7.81%, respectively. At July 31, 1997, the outstanding amounts
under the term-loan and the revolving credit facility were $8.6 million and $4.2
million, respectively.
The advances under the revolving equipment facility are converted to
term-loans with maturities not to exceed 48 months. The outstanding principal on
the equipment term-loans is payable in monthly installments through January
2001. During the quarter ended April 30, 1997, the Company borrowed $1.2 million
to refinance the then existing equipment term-loans and an additional $0.8
million for current equipment requirements. At July 31, 1997, the outstanding
amount owed under the revolving equipment facility was $1.9 million.
At July 31, 1997, the Company had outstanding $9.2 million in standby
letters of credit issued to the Company's insurance administrators as part of
its self-insurance program.
The new bank credit arrangement contains restrictions which, among other
things, require maintenance of certain financial ratios and covenants, restricts
encumbrances of assets and creation of indebtedness, and limits the payment of
cash dividends. Cash dividends are limited to 50% of each fiscal year's
after-tax profits. No cash dividends have been paid during fiscal 1997. The
credit facility is secured by the Company's assets. At July 31, 1997, the
Company was in compliance with all the financial covenants and conditions.
The Company's newly acquired subsidiary, CCG, maintains a $6.6 million
revolving bank credit facility. The interest rate on this facility is at the
bank's prime interest rate plus 0.75% and is collateralized by 75% of the
eligible trade accounts receivable, inventory, and certain real property owned
by a partnership, whose general partners are the former shareholders of CCG. In
addition, the former shareholders of CCG are personal guarantors of this
facility. The facility contains certain financial conditions and covenants
including limitation on the amount of capital expenditures and the creation of
additional indebtedness. During 1997, certain financial covenants were breached
and the bank waived such violations. At July 31, 1997, CCG was in compliance
with the bank credit facility covenants and conditions. The outstanding
principal balance was $5.9 million at July 31, 1997. This facility was an
existing arrangement made by CCG prior to the acquisition by Dycom.
In addition to the borrowings under the bank credit agreement, certain
subsidiaries have outstanding obligations under capital leases and other
equipment financing arrangements. These obligations are payable in monthly
installments expiring at various dates through December 2001.
The estimated aggregate annual principal repayments for notes payable and
capital lease obligations in the next five years are $13,080,316 in 1998,
$2,869,834 in 1999, $2,592,735 in 2000, $2,160,155 in 2001, and $1,389,342 in
2002.
F-14
<PAGE> 53
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Interest costs incurred on notes payable, all of which is expensed, for the
years ended July 31, 1995, 1996, and 1997 were $2,348,574, $1,916,389, and
$1,899,570, respectively. Such amounts are included in general and
administrative expenses in the accompanying consolidated statements of
operations.
The interest rates on notes payable under the bank credit agreement are at
current rates and, therefore, the carrying amount approximates fair value.
8. INCOME TAXES
The components of the provision (benefit) for income taxes are:
<TABLE>
<CAPTION>
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Current:
Federal.......................................... $3,027,160 $4,265,617 $6,248,234
State............................................ 705,733 1,032,155 1,770,717
---------- ---------- ----------
3,732,893 5,297,772 8,018,951
---------- ---------- ----------
Deferred:
Federal.......................................... (74,145) (522,169) 191,765
State............................................ (134,700)
Valuation allowance.............................. 74,145 (1,058,027) (253,306)
---------- ---------- ----------
(1,580,196) (196,241)
---------- ---------- ----------
Total tax provision...................... $3,732,893 $3,717,576 $7,822,710
========== ========== ==========
</TABLE>
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
change in the deferred tax assets and liabilities of CCG for the two-months
ended July 31, 1997 is included in the Company's retained earnings as the
adjustment for the change in fiscal year of pooled company. The deferred tax
assets and liabilities at July 31 are comprised of the following:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Deferred tax assets:
Self-insurance, warranty, and other non-deductible
reserves............................................... $4,008,715 $3,943,356
Allowance for doubtful accounts........................... 172,340 346,993
Small tools............................................... 348,067
---------- ----------
4,181,055 4,638,416
Valuation allowance....................................... (728,491) (475,185)
---------- ----------
$3,452,564 $4,163,231
========== ==========
Deferred tax liabilities:
Property and equipment.................................... $1,275,314 $1,357,721
Unamortized acquisition costs............................. 211,298 212,542
---------- ----------
$1,486,612 $1,570,263
========== ==========
Net deferred tax assets..................................... $1,965,952 $2,592,968
========== ==========
</TABLE>
A valuation allowance is provided when it is more likely than not that some
portion of the Company's deferred tax assets will not be realized. In fiscal
1996 and 1997, the Company reduced the valuation allowance by $1.1 million and
$0.3 million, respectively. 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 deferred tax assets that more likely than not
will be realized. Management's estimate and conclusion is based
F-15
<PAGE> 54
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
on the available evidence supporting the reversing deductible temporary
differences being offset by reversing taxable temporary differences and the
existence of sufficient taxable income within the current carryback periods.
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 1996 1997
---------- ----------- ----------
<S> <C> <C> <C>
Statutory rate applied to pre-tax income.......... $3,017,252 $ 3,869,688 $6,664,531
State taxes, net of federal tax benefit........... 465,784 681,836 1,059,178
Amortization and write-off of intangible assets,
with no tax benefit............................. 52,730 52,730 52,730
Tax effect of non-deductible items................ 169,161 139,101 374,564
Valuation allowance............................... 74,145 (1,058,027) (253,306)
Other items, net.................................. (46,179) 32,248 (74,987)
---------- ----------- ----------
Total tax provision..................... $3,732,893 $ 3,717,576 $7,822,710
========== =========== ==========
</TABLE>
The Internal Revenue Service (the "IRS")has examined and closed the
Company's consolidated 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. The IRS has examined and closed the income tax
returns for years through 1994 for CCG.
On August 5, 1997, The Taxpayer Relief Act of 1997 (the "Act") was signed
into law. The Act will not have a material effect on the Company's consolidated
financial statements.
9. REVENUES -- OTHER
The components of other revenues are as follows:
<TABLE>
<CAPTION>
1995 1996 1997
---------- ---------- --------
<S> <C> <C> <C>
Interest income..................................... $ 266,392 $ 264,551 $190,181
Gain on sale of fixed assets........................ 840,637 763,104 667,377
Miscellaneous income................................ 269,369 178,969 107,991
---------- ---------- --------
Total other revenues, net........................... $1,376,398 $1,206,624 $965,549
========== ========== ========
</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.
Certain officers of the Company have change of control agreements with
Dycom, which provide extraordinary compensation upon the change of control of
the Company. The payments pursuant to these agreements would be triggered by any
person's acquisition of more than 50% of the Company's outstanding
F-16
<PAGE> 55
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
securities, the sale or transfer of substantially all of Dycom's assets to
someone other than a wholly-owned subsidiary of the Company, or a change of
control of the Board of Directors.
At July 31, 1997, the Company has authorized 1,000,000 shares of preferred
stock, par value $1.00, of which no shares are issued and outstanding.
11. EMPLOYEE BENEFIT PLAN
The Company sponsors defined contribution plans that provide retirement
benefits to all employees that elect to participate. Under the plans,
participating employees may defer up to 15% of their base pre-tax compensation.
The Company's contributions to the plans are discretionary. The Company's
discretionary contributions were $60,039, $100,000 and $230,000 in fiscal years
1995, 1996, and 1997, respectively.
12. STOCK OPTION PLANS
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. Since the Plan's adoption, certain of the options granted have
lapsed as a result of employees terminating their employment with the Company.
At July 31, 1995, 1996, and 1997, options available for grant under the 1991
Plan were 403,419 shares, 427,353 shares, and 384,118 shares, respectively.
On August 25, 1997, the Company granted to key employees under the 1991
Plan options to purchase an aggregate of 192,059 shares of common stock. The
options were granted at $18.25, the fair market value on the date of grant.
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 expired during the first quarter of fiscal
1996.
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 (the "Directors Plan"). 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.
F-17
<PAGE> 56
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes the stock option transactions under the 1991
Plan, the 1981 Plan, and the Directors Plan for the three years ended July 31,
1995, 1996, and 1997:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER OF EXERCISE
SHARES PRICE
--------- --------
<S> <C> <C>
Options outstanding at July 31, 1994........................ 504,498 $ 4.78
Granted................................................... 161,300 $ 5.09
Terminated................................................ (106,625) $ 7.73
Exercised................................................. (15,000) $ 3.00
-------- ------
Options outstanding at July 31, 1995........................ 544,173 $ 4.29
Terminated................................................ (50,526) $ 7.43
Exercised................................................. (57,502) $ 3.46
-------- ------
Options outstanding at July 31, 1996........................ 436,145 $ 4.54
Granted................................................... 100,000 $13.50
Terminated................................................ (56,765) $ 4.57
Exercised................................................. (213,143) $ 4.02
-------- ------
Options outstanding at July 31, 1997........................ 266,237 $10.32
-------- ------
Exercisable options at
July 31, 1995............................................. 138,069 $ 4.92
July 31, 1996............................................. 190,817 $ 3.78
July 31, 1997............................................. 69,933 $ 5.21
-------- ------
</TABLE>
The range of exercise prices for options outstanding at July 31, 1997 was
$2.75 to $13.50. The range of exercise prices for options is wide due primarily
to the increasing price of the Company's stock over the period of the grants.
The following summarizes information about options outstanding at July 31,
1997:
<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
----------------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
NUMBER OF CONTRACTUAL EXERCISE
SHARES LIFE PRICE
--------- ----------- --------
<S> <C> <C> <C>
Range of exercise prices
$ 2.00 to $ 4.00...................................... 107,357 5.3 3.44
$ 6.00 to $ 8.00...................................... 64,000 3.0 6.75
$12.00 to $14.00...................................... 94,880 4.1 13.50
------- --- ------
266,237 4.5 $10.32
======= === ======
</TABLE>
<TABLE>
<CAPTION>
EXERCISABLE OPTIONS
------------------------
WEIGHTED
EXERCISABLE AVERAGE
AS OF EXERCISE
JULY 31, 1997 PRICE
------------- --------
<S> <C> <C>
Range of exercise prices
$2.00 to $4.00............................................ 44,683 $3.58
$6.00 to $8.00............................................ 25,250 $6.75
------ -----
69,933 $5.21
====== =====
</TABLE>
F-18
<PAGE> 57
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
These options will expire if not exercised at specific dates ranging from
November 1997 to August 2001. The prices for the options exercised during the
three years ended July 31, 1997 ranged from $2.75 to $6.75.
As discussed in Note 1, the Company has adopted the disclosure-only
provisions of SFAS No. 123. The fair value of the options granted in fiscal 1997
has been estimated at the date of grant using the Black-Scholes option-pricing
model with the following assumptions: expected stock volatility of 58.97%,
risk-free interest rate of 6.57%, expected lives of 4 years, and no dividend
yield, due to the Company's recent history of not paying cash dividends. The
Company did not grant stock options in fiscal 1996.
The Black-Scholes option valuation model was developed for estimating the
fair value of traded options that have no vesting restrictions and are fully
transferable. Because option valuation models require the use of subjective
assumptions and changes in these assumptions can materially impact the fair
value of the options and the Company's options do not have the characteristics
of traded options, the option valuation models do not necessarily provide a
reliable measure of the fair value of its options. The estimated fair value of
stock options granted during fiscal 1997 was $6.98 per share.
The pro forma disclosures amortize to expense the estimated compensation
costs for its stock options granted subsequent to July 31, 1995 over the options
vesting period. The Company's fiscal 1997 pro forma net earnings and earnings
per share are reflected below:
<TABLE>
<CAPTION>
1996 1997
---------- -----------
<S> <C> <C>
Pro forma net income........................................ $7,663,858 $11,092,254
Pro forma earnings per share:
Primary................................................... $ 0.71 $ 1.01
Fully diluted............................................. $ 0.70 $ 1.01
</TABLE>
13. RELATED PARTY TRANSACTIONS
The Company's newly acquired subsidiary leases administrative offices from
a partnership of which certain officers of the subsidiary are the general
partners. The total expense under these arrangements for the years ended July
31, 1995, 1996, and 1997 was $79,200, $112,200 and $115,200, respectively. The
future minimum lease commitments under these arrangements are $163,200 in 1998,
$163,200 in 1999, $163,200 in 2000, $67,200 in 2001, and $24,000 thereafter.
In addition, two 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. The total
expense under these arrangements when such individuals were considered related
parties for the fiscal year ended July 31, 1995 was $404,767. The total expenses
in fiscal 1996 and 1997 and the related future minimum lease commitments are
disclosed in Note 15.
14. MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK
The operating subsidiaries obtain contracts from both public and private
concerns. For the years ended July 31, 1995, 1996, and 1997, approximately 44%,
44%, and 34%, respectively, of the contract revenues were from BellSouth
Telecommunications, Inc. ("BellSouth") and 15%, 21%, and 23%, respectively, of
the contract revenues were from Comcast Communications, Inc. ("Comcast").
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of trade accounts receivable.
BellSouth and Comcast represent a significant portion of the Company's customer
base. At July 31, 1996, the total outstanding trade receivables from BellSouth
and Comcast were $4.8 million or 22% and $6.9 million or 32%, respectively, of
the Company's outstanding trade receivables. As of July 31, 1997, the total
outstanding trade receivables from BellSouth and Comcast were $4.5 million or
13% and $11.5 million or 33% of the outstanding trade receivables.
F-19
<PAGE> 58
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. COMMITMENTS AND CONTINGENCIES
The Company and its subsidiaries have operating leases covering office
facilities, vehicles, and equipment which have noncancelable terms in excess of
one year. During fiscal 1995, 1996, and 1997, the Company entered into numerous
operating leases for vehicles and equipment. Certain of these 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, 1996, and 1997, was $3,358,108,
$5,018,744, and $6,561,022, respectively. The future minimum obligations under
these leases are $3,826,759 in 1998; $1,673,498 in 1999; $550,516 in 2000;
$95,870 in 2001, and $323,860 thereafter.
In September 1995, the State of New York commenced a sales and use tax
audit of CCG for the years 1989 through 1995. As a result of the audit, certain
additional taxes were paid by CCG in fiscal 1996. In addition, the State of New
York concluded that cable television service providers are subject to New York
State sales taxes for the construction of cable television distribution systems,
and by a Notice dated January 1997, the asserted amounts due from CCG for sales
taxes and interest for the periods through August 31, 1995, aggregated
approximately $1.3 million. Any sales taxes asserted against the Company may be
offset by use taxes already paid by customers of the Company. The Company
intends to vigorously contest the assertion. The Company is unable to assess the
likelihood of any particular outcome at this time or to quantify the effect a
resolution of this matter may have on the Company's consolidated financial
statements.
In the normal course of business, certain subsidiaries of the Company have
pending and unasserted claims. 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 statements.
16. LITIGATION SETTLEMENT
During fiscal year 1995, a final settlement was reached in the complaint
filed in March 1993 by 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 January 31, 1995 and April 30, 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.
17. QUARTERLY FINANCIAL DATA (UNAUDITED)
In the opinion of management, the following unaudited quarterly data for
the years ended July 31, 1996 and 1997 reflect all adjustments necessary for a
statement of operations. All such adjustments are of a normal recurring nature
other than as discussed below. The Company acquired CCG on July 29, 1997. The
acquisition was accounted for as a pooling of interests and accordingly, the
unaudited quarterly financial statements for the periods presented include the
accounts of CCG. Earnings per common and common equivalent share calculation for
each quarter is based on the weighted average shares of common stock outstanding
plus the effect of dilutive stock options. The sum of the quarters earnings per
common and common equivalent share may not necessarily be equal to the full year
earnings per common and common equivalent share amounts.
F-20
<PAGE> 59
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
IN WHOLE DOLLARS, EXCEPT PER SHARE AMOUNTS
-----------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1996:
Revenues:
Dycom..................................... $37,605,583 $32,648,532 $35,390,645 $39,307,689
CCG....................................... 13,248,340 12,641,609 9,824,440 14,593,403
----------- ----------- ----------- -----------
$50,853,923 $45,290,141 $45,215,085 $53,901,092
=========== =========== =========== ===========
Income Before Income Taxes:
Dycom..................................... $ 1,715,485 $ 1,603,524 $ 2,965,713 $ 2,834,998
CCG....................................... 1,003,486 179,311 (459,847) 1,538,764
----------- ----------- ----------- -----------
$ 2,718,971 $ 1,782,835 $ 2,505,866 $ 4,373,762
=========== =========== =========== ===========
Net Income:
Dycom..................................... $ 968,638 $ 984,232 $ 1,704,150 $ 2,733,124
CCG....................................... 553,486 129,311 (259,847) 850,764
----------- ----------- ----------- -----------
$ 1,522,124 $ 1,113,543 $ 1,444,303 $ 3,583,888
=========== =========== =========== ===========
Earnings per Common and Common Equivalent
Share:
Primary................................... 0.14 0.11 0.14 0.33
Fully Diluted............................. 0.14 0.11 0.14 0.33
1997:
Revenues:
Dycom..................................... $40,367,225 $40,012,074 $48,186,014 $47,639,268
CCG....................................... 16,047,187 17,263,237 14,995,292 19,413,184
----------- ----------- ----------- -----------
$56,414,412 $57,275,311 $63,181,306 $67,052,452
=========== =========== =========== ===========
Income Before Income Taxes:
Dycom..................................... $ 2,888,362 $ 2,446,288 $ 4,019,975 $ 4,434,187
CCG....................................... 1,092,878 1,129,119 680,403 2,350,306
----------- ----------- ----------- -----------
$ 3,981,240 $ 3,575,407 $ 4,700,378 $ 6,784,493
=========== =========== =========== ===========
Net Income:
Dycom..................................... $ 1,661,619 $ 1,641,478 $ 2,413,033 $ 2,552,372
CCG....................................... 574,422 672,688 405,340 1,297,856
----------- ----------- ----------- -----------
$ 2,236,041 $ 2,314,166 $ 2,818,373 $ 3,850,228
=========== =========== =========== ===========
Earnings per Common and Common Equivalent
Share:
Primary................................... $ 0.20 $ 0.21 $ 0.26 $ 0.35
Fully Diluted............................. $ 0.20 $ 0.21 $ 0.26 $ 0.35
</TABLE>
The fiscal 1996 and 1997 fourth quarter results of operations include a
$1.1 million and a $0.3 million reduction in the deferred tax asset valuation
allowance.
F-21
<PAGE> 60
======================================================
No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in or
incorporated by reference in this Prospectus and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Company of by any of the Underwriters. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that there has been no change in the affairs of the Company
since the dates as of which information is given in this Prospectus. This
Prospectus does not constitute an offer or solicitaion by any one in any
jurisdiction in which such offer or solicitation is not authorized or in which
the person making such offer or solicitation is not qualified to do so or to any
person to whom it is unlawful to make such solicitation.
----------------------------
TABLE OF CONTENTS
----------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 5
Use of Proceeds....................... 10
Price Range of Common Stock and
Dividend Policy..................... 10
Capitalization........................ 11
Summary Consolidated Financial Data... 12
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 13
Business.............................. 20
Management............................ 28
Principal and Selling Stockholders.... 30
Description of Capital Stock.......... 32
Underwriting.......................... 35
Certain Legal Matters................. 36
Experts............................... 36
Available Information................. 36
Information Incorporated by
Reference........................... 37
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
======================================================
======================================================
2,700,000 SHARES
LOGO
COMMON STOCK
----------------------------
PROSPECTUS
----------------------------
NATIONSBANC MONTGOMERY
SECURITIES, INC.
MORGAN KEEGAN &
COMPANY, INC.
THE ROBINSON-HUMPHREY COMPANY
, 1997
======================================================
<PAGE> 61
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The Company will incur the following expenses in connection with the
Offering. None of the Offering expenses incurred by the Selling Stockholders
will be borne by the Company.
<TABLE>
<S> <C>
Registration Fees........................................... $ 20,549
Transfer Agent Fees......................................... $ 1,500
Printing and Engraving Costs................................ $ 90,000
Legal Fees.................................................. $140,000
Accounting Fees............................................. $100,000
New York Stock Exchange Listing............................. $ 14,111
NASD Review................................................. $ 7,281
Blue Sky.................................................... $ 2,000
Miscellaneous............................................... $124,559
</TABLE>
UNDERTAKINGS
1. The undersigned registrant hereby undertakes that for purposes of
determining any liability under the Securities Act of 1933, the information
omitted from the form of prospectus filed as part of this registration statement
in reliance upon Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) and (4) or 497(h) under the Securities Act
shall be deemed to be part of this registration statement as of the time it was
declared effective.
2. The undersigned registrant hereby undertakes that for the purpose of
determining any liability under the Securities Act of 1933, each post-effective
amendment that contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
3. Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Securities Act"), may be permitted to directors,
officers and controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
1 -- Underwriting Agreement
4 -- Portions of Articles and By-Laws Defining Rights of
Shareholder*
5 -- Legal Opinion of Chopin, Miller & Yudenfreund
23.1 -- Consent of Chopin, Miller & Yudenfreund (included in its
opinion filed as Exhibit 5)
23.2 -- Consent of Deloitte & Touche LLP
23.3 -- Consent of Nowalk & Associates
27.1 -- Financial Data Schedule*
27.2 -- Financial Data Schedule*
27.3 -- Financial Data Schedule*
</TABLE>
- ---------------
* Previously filed
II-1
<PAGE> 62
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO. 1 TO
THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF PALM BEACH GARDENS, STATE OF FLORIDA
ON THE 29TH DAY OF OCTOBER, 1997.
DYCOM INDUSTRIES, INC.
By: /s/ THOMAS R. PLEDGER
------------------------------------
Thomas R. Pledger
Chairman and Chief
Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Thomas R. Pledger, Steven E. Nielsen and Douglas
J. Betlach, or any of them, his true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign any and all amendments to this
Registration Statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact, agent, or their substitutes may lawfully do or cause to be
done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
/s/ THOMAS R. PLEDGER Chairman, Chief Executive October 29, 1997
- --------------------------------------------------- Officer and Director
Thomas R. Pledger
* President, Chief Operating October 29, 1997
- --------------------------------------------------- Officer and Director
Steven Nielsen
* Vice President, Treasurer and October 29, 1997
- --------------------------------------------------- Chief Financial Officer
Douglas J. Betlach
* Vice President and Controller October 29, 1997
- ---------------------------------------------------
Darline M. Richter
* Director October 29, 1997
- ---------------------------------------------------
Louis W. Adams, Jr.
* Director October 29, 1997
- ---------------------------------------------------
Walter L. Revell
</TABLE>
II-2
<PAGE> 63
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
* Director October 29, 1997
- ---------------------------------------------------
Ronald L. Roseman
* Director October 29, 1997
- ---------------------------------------------------
Ronald P. Younkin
</TABLE>
*By: /s/ THOMAS R. PLEDGER
-------------------------------
Thomas R. Pledger
II-3
<PAGE> 1
Exhibit 1
2,700,000 SHARES
DYCOM INDUSTRIES, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
DATED [____________], 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 1. REPRESENTATIONS AND WARRANTIES ................................................. 2
A. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLING STOCKHOLDERS........... 2
COMPLIANCE WITH REGISTRATION REQUIREMENTS............................................ 2
OFFERING MATERIALS FURNISHED TO UNDERWRITERS......................................... 3
DISTRIBUTION OF OFFERING MATERIALS BY THE COMPANY.................................... 3
THE UNDERWRITING AGREEMENT........................................................... 3
AUTHORIZATION OF THE COMMON SHARES................................................... 3
NO APPLICABLE REGISTRATION OR OTHER SIMILAR RIGHTS................................... 3
NO MATERIAL ADVERSE CHANGE........................................................... 4
INDEPENDENT ACCOUNTANTS.............................................................. 4
PREPARATION OF THE FINANCIAL STATEMENTS.............................................. 4
INCORPORATION AND GOOD STANDING OF THE COMPANY AND ITS SUBSIDIARIES.................. 5
CAPITALIZATION AND OTHER CAPITAL STOCK MATTERS....................................... 5
STOCK EXCHANGE LISTING............................................................... 6
NON-CONTRAVENTION OF EXISTING INSTRUMENTS; NO FURTHER AUTHORIZATIONS OR
APPROVALS REQUIRED.............................................................. 6
NO MATERIAL ACTIONS OR PROCEEDINGS................................................... 6
INTELLECTUAL PROPERTY RIGHTS......................................................... 7
ALL NECESSARY PERMITS, ETC........................................................... 7
TITLE TO PROPERTIES.................................................................. 7
TAX LAW COMPLIANCE................................................................... 7
COMPANY NOT AN INVESTMENT COMPANY.................................................... 8
INSURANCE............................................................................ 8
NO PRICE STABILIZATION OR MANIPULATION............................................... 8
RELATED PARTY TRANSACTIONS........................................................... 8
NO UNLAWFUL CONTRIBUTIONS OR OTHER PAYMENTS.......................................... 8
COMPANY'S ACCOUNTING SYSTEM.......................................................... 9
COMPLIANCE WITH ENVIRONMENTAL LAWS................................................... 9
ERISA COMPLIANCE..................................................................... 10
EXCHANGE ACT COMPLIANCE.............................................................. 11
ACQUISITION OF COMMUNICATIONS CONSTRUCTION GROUP, INC................................ 11
B. REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDERS........................... 10
THE UNDERWRITING AGREEMENT........................................................... 10
THE CUSTODY AGREEMENT AND POWER OF ATTORNEY.......................................... 11
TITLE TO COMMON SHARES TO BE SOLD; ALL AUTHORIZATIONS OBTAINED....................... 11
DELIVERY OF THE COMMON SHARES TO BE SOLD............................................. 11
NON-CONTRAVENTION; NO FURTHER AUTHORIZATIONS OR APPROVALS REQUIRED................... 11
NO REGISTRATION OR OTHER SIMILAR RIGHTS.............................................. 12
NO FURTHER CONSENTS, ETC............................................................. 12
DISCLOSURE MADE BY SUCH SELLING STOCKHOLDER IN THE PROSPECTUS........................ 12
NO PRICE STABILIZATION OR MANIPULATION............................................... 12
CONFIRMATION OF COMPANY REPRESENTATIONS AND WARRANTIES............................... 12
SECTION 2. PURCHASE, SALE AND DELIVERY OF COMMON SHARES.................................... 13
THE FIRM COMMON SHARES............................................................... 13
THE FIRST CLOSING DATE............................................................... 13
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
THE OPTIONAL COMMON SHARES; THE SECOND CLOSING DATE................................ 13
PUBLIC OFFERING OF THE COMMON SHARES............................................... 14
PAYMENT FOR THE COMMON SHARES...................................................... 14
DELIVERY OF THE COMMON SHARES...................................................... 15
DELIVERY OF PROSPECTUS TO THE UNDERWRITERS......................................... 15
SECTION 3. ADDITIONAL COVENANTS.......................................................... 16
A. COVENANTS OF THE COMPANY........................................................... 16
REPRESENTATIVES' REVIEW OF PROPOSED AMENDMENTS AND SUPPLEMENTS..................... 16
SECURITIES ACT COMPLIANCE.......................................................... 16
AMENDMENTS AND SUPPLEMENTS TO THE PROSPECTUS AND OTHER SECURITIES ACT
MATTERS....................................................................... 16
COPIES OF ANY AMENDMENTS AND SUPPLEMENTS TO THE PROSPECTUS......................... 17
BLUE SKY COMPLIANCE................................................................ 17
USE OF PROCEEDS.................................................................... 17
TRANSFER AGENT..................................................................... 17
EARNINGS STATEMENT................................................................. 17
PERIODIC REPORTING OBLIGATIONS..................................................... 18
AGREEMENT NOT TO OFFER OR SELL ADDITIONAL SECURITIES............................... 18
FUTURE REPORTS TO THE REPRESENTATIVES.............................................. 18
B. COVENANTS OF THE SELLING STOCKHOLDERS.............................................. 18
AGREEMENT NOT TO OFFER OR SELL ADDITIONAL SECURITIES............................... 19
DELIVERY OF FORMS W-8 AND W-9...................................................... 19
SECTION 4. PAYMENT OF EXPENSES........................................................... 19
SECTION 5. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS............................. 20
ACCOUNTANTS' COMFORT LETTER........................................................ 20
COMPLIANCE WITH REGISTRATION REQUIREMENTS; NO STOP ORDER, NO OBJECTION FROM
NASD.......................................................................... 21
NO MATERIAL ADVERSE CHANGE OR RATINGS AGENCY CHANGE................................ 21
OPINION OF COUNSEL FOR THE COMPANY................................................. 21
OPINION OF COUNSEL FOR THE UNDERWRITERS............................................ 22
OFFICERS' CERTIFICATE.............................................................. 22
BRING-DOWN COMFORT LETTER.......................................................... 22
OPINION OF COUNSEL FOR THE SELLING STOCKHOLDERS.................................... 22
SELLING STOCKHOLDERS' CERTIFICATE.................................................. 23
SELLING STOCKHOLDERS' DOCUMENTS.................................................... 23
LOCK-UP AGREEMENT FROM CERTAIN SHAREHOLDERS OF THE COMPANY OTHER THAN
SELLING STOCKHOLDERS.......................................................... 23
ADDITIONAL DOCUMENTS............................................................... 23
SECTION 6. REIMBURSEMENT OF UNDERWRITERS' EXPENSES....................................... 24
SECTION 7. EFFECTIVENESS OF THIS AGREEMENT............................................... 24
SECTION 8. INDEMNIFICATION............................................................... 24
INDEMNIFICATION OF THE UNDERWRITERS................................................ 24
INDEMNIFICATION OF THE COMPANY, ITS DIRECTORS AND OFFICERS......................... 26
NOTIFICATIONS AND OTHER INDEMNIFICATION PROCEDURES................................. 27
</TABLE>
- ii -
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C>
SETTLEMENTS........................................................................ 27
SECTION 9. CONTRIBUTION................................................................... 28
SECTION 10. DEFAULT OF ONE OR MORE OF THE SEVERAL UNDERWRITERS............................. 29
SECTION 11. TERMINATION OF THIS AGREEMENT.................................................. 30
SECTION 12. REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY............................ 31
SECTION 13. NOTICES........................................................................ 31
SECTION 14. SUCCESSORS..................................................................... 32
SECTION 15. PARTIAL UNENFORCEABILITY....................................................... 32
SECTION 16. GOVERNING LAW PROVISIONS....................................................... 32
SECTION 17. FAILURE OF ONE OR MORE OF THE SELLING STOCKHOLDERS TO SELL AND
DELIVER COMMON SHARES....................................................... 32
SECTION 18. GENERAL PROVISIONS............................................................. 33
</TABLE>
- iii -
<PAGE> 5
UNDERWRITING AGREEMENT
___________, 1997
NATIONSBANC MONTGOMERY SECURITIES, INC.
MORGAN KEEGAN & COMPANY, INC.
THE ROBINSON-HUMPHREY COMPANY, LLC
As Representatives of the several Underwriters
c/o NATIONSBANC MONTGOMERY SECURITIES, INC.
600 Montgomery Street
San Francisco, California 94111
Ladies and Gentlemen:
INTRODUCTORY. Dycom Industries, Inc., a Florida corporation
(the "Company"), proposes to issue and sell to the several underwriters named in
SCHEDULE A (the "Underwriters") an aggregate of 1,573,378 shares of its Common
Stock, par value $.33 1/3 per share (the "Common Stock"); and the stockholders
of the Company named in SCHEDULE B (collectively, the "Selling Stockholders")
severally propose to sell to the Underwriters an aggregate of 1,126,622 shares
of Common Stock. The 1,573,378 shares of Common Stock to be sold by the Company
and the 1,126,622 shares of Common Stock to be sold by the Selling Stockholders
are collectively called the "Firm Common Shares". In addition, the Company has
granted to the Underwriters an option to purchase up to an additional 405,000
shares of Common Stock. The additional 405,000 shares to be sold by the Company
pursuant to such option are collectively called the "Optional Common Shares".
The Firm Common Shares and, if and to the extent such option is exercised, the
Optional Common Shares are collectively called the "Common Shares". NationsBanc
Montgomery Securities, Inc., Morgan Keegan & Company, Inc. and The
Robinson-Humphrey Company, LLC have agreed to act as representatives of the
several Underwriters (in such capacity, the "Representatives") in connection
with the offering and sale of the Common Shares.
<PAGE> 6
The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") a registration statement on Form S-3
(File No. 333-36883), which contains a form of prospectus to be used in
connection with the public offering and sale of the Common Shares. Such
registration statement, as amended, including the financial statements, exhibits
and schedules thereto, in the form in which it was declared effective by the
Commission under the Securities Act of 1933 and the rules and regulations
promulgated thereunder (collectively, the "Securities Act"), including all
documents incorporated or deemed to be incorporated by reference therein and any
information deemed to be a part thereof at the time of effectiveness pursuant to
Rule 430A or Rule 434 under the Securities Act or the Securities Exchange Act of
1934 and the rules and regulations promulgated thereunder (collectively, the
"Exchange Act"), is called the "Registration Statement". Any registration
statement filed by the Company pursuant to Rule 462(b) under the Securities Act
is called the "Rule 462(b) Registration Statement", and from and after the date
and time of filing of the Rule 462(b) Registration Statement the term
"Registration Statement" shall include the Rule 462(b) Registration Statement.
Such prospectus, in the form first used by the Underwriters to confirm sales of
the Common Shares, is called the "Prospectus"; PROVIDED, HOWEVER, if the Company
has, with the consent of NationsBanc Montgomery Securities, Inc., elected to
rely upon Rule 434 under the Securities Act, the term "Prospectus" shall mean
the Company's prospectus subject to completion (each, a "preliminary
prospectus") dated October 14, 1997 (such preliminary prospectus is called the
"Rule 434 preliminary prospectus"), together with the applicable term sheet (the
"Term Sheet") prepared and filed by the Company with the Commission under Rules
434 and 424(b) under the Securities Act and all references in this Agreement to
the date of the Prospectus shall mean the date of the Term Sheet. All references
in this Agreement to the Registration Statement, the Rule 462(b) Registration
Statement, a preliminary prospectus, the Prospectus or the Term Sheet, or any
amendments or supplements to any of the foregoing, shall include any copy
thereof filed with the Commission pursuant to its Electronic Data Gathering,
Analysis and Retrieval System ("EDGAR"). All references in this Agreement to
financial statements and schedules and other information which is "contained,"
"included" or "stated" in the Registration Statement or the Prospectus (and all
other references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which is or is deemed
to be incorporated by reference in the Registration Statement or the Prospectus,
as the case may be; and all references in this Agreement to amendments or
supplements to the Registration Statement or the Prospectus shall be deemed to
mean and include the filing of any document under the Exchange Act which is or
is deemed to be incorporated by reference in the Registration Statement or the
Prospectus, as the case may be.
The Company and each of the Selling Stockholders hereby
confirm their respective agreements with the Underwriters as follows:
SECTION 1. REPRESENTATIONS AND WARRANTIES.
- 2 -
<PAGE> 7
A. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
SELLING STOCKHOLDERS . Each of the Company and each of the Selling Stockholders
represents, warrants and covenants to each Underwriter as follows:
(a) COMPLIANCE WITH REGISTRATION REQUIREMENTS. The
Registration Statement and any Rule 462(b) Registration Statement have been
declared effective by the Commission under the Securities Act. The Company
has complied to the Commission's satisfaction with all requests of the
Commission for additional or supplemental information. No stop order
suspending the effectiveness of the Registration Statement or any Rule
462(b) Registration Statement is in effect and no proceedings for such
purpose have been instituted or are pending or, to the best knowledge of
the Company, are contemplated or threatened by the Commission.
Each preliminary prospectus and the Prospectus when filed
complied in all material respects with the Securities Act and, if filed by
electronic transmission pursuant to EDGAR (except as may be permitted by
Regulation S-T under the Securities Act), was identical to the copy thereof
delivered to the Underwriters for use in connection with the offer and sale
of the Common Shares. Each of the Registration Statement, any Rule 462(b)
Registration Statement and any post-effective amendment thereto, at the
time it became effective and at all subsequent times, complied and will
comply in all material respects with the Securities Act and did not and
will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading. The Prospectus, as amended or
supplemented, as of its date and at all subsequent times, did not and will
not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. The
representations and warranties set forth in the two immediately preceding
sentences do not apply to statements in or omissions from the Registration
Statement, any Rule 462(b) Registration Statement, or any post-effective
amendment thereto, or the Prospectus, or any amendments or supplements
thereto, made in reliance upon and in conformity with information relating
to any Underwriter furnished to the Company in writing by the
Representatives expressly for use therein. There are no contracts or other
documents required to be described in the Prospectus or to be filed as
exhibits to the Registration Statement which have not been described or
filed as required.
(b) OFFERING MATERIALS FURNISHED TO UNDERWRITERS. The Company
has delivered to the Representatives three complete manually signed copies
of the Registration Statement and of each consent and certificate of
experts filed as a part thereof, and conformed copies of the Registration
Statement (without exhibits) and preliminary prospectuses and the
Prospectus, as amended or supplemented, in such quantities and at such
places as the Representatives have reasonably requested for each of the
Underwriters.
- 3 -
<PAGE> 8
(c) DISTRIBUTION OF OFFERING MATERIALS BY THE COMPANY. The
Company has not distributed and will not distribute, prior to the later of
the Second Closing Date (as defined below) and the completion of the
Underwriters' distribution of the Common Shares, any offering material in
connection with the offering and sale of the Common Shares other than a
preliminary prospectus, the Prospectus or the Registration Statement.
(d) THE UNDERWRITING AGREEMENT. This Agreement has been duly
authorized, executed and delivered by, and is a valid and binding agreement
of, the Company, enforceable in accordance with its terms, except as rights
to indemnification hereunder may be limited by applicable law and except as
the enforcement hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
the rights and remedies of creditors or by general equitable principles.
(e) AUTHORIZATION OF THE COMMON SHARES. The Common Shares to
be purchased by the Underwriters from the Company have been duly authorized
for issuance and sale pursuant to this Agreement and, when issued and
delivered by the Company pursuant to this Agreement, will be validly
issued, fully paid and nonassessable.
(f) NO APPLICABLE REGISTRATION OR OTHER SIMILAR RIGHTS. There
are no persons with registration or other similar rights to have any equity
or debt securities registered for sale under the Registration Statement or
included in the offering contemplated by this Agreement, except for such
rights as have been duly waived.
(g) NO MATERIAL ADVERSE CHANGE. Except as otherwise disclosed
in the Prospectus, subsequent to the respective dates as of which
information is given in the Prospectus: (i) there has been no material
adverse change, or any development that could reasonably be expected to
result in a material adverse change, in the condition, financial or
otherwise, or in the earnings, business, operations or prospects, whether
or not arising from transactions in the ordinary course of business, of the
Company and its subsidiaries, considered as one entity (any such change is
called a "Material Adverse Change"); (ii) the Company and its subsidiaries,
considered as one entity, have not incurred any material liability or
obligation, indirect, direct or contingent, not in the ordinary course of
business nor entered into any material transaction or agreement not in the
ordinary course of business; and (iii) there has been no dividend or
distribution of any kind declared, paid or made by the Company or, except
for dividends paid to the Company or other subsidiaries, any of its
subsidiaries on any class of capital stock or repurchase or redemption by
the Company or any of its subsidiaries of any class of capital stock.
(h) INDEPENDENT ACCOUNTANTS. Deloitte & Touche LLP, who have
expressed their opinion with respect to the financial statements (which
term as used in
- 4 -
<PAGE> 9
this Agreement includes the related notes thereto) and supporting schedules
of the Company filed with the Commission as a part of the Registration
Statement and included in the Prospectus, are independent public or
certified public accountants as required by the Securities Act and the
Exchange Act. Nowalk & Associates, who have expressed their opinion with
respect to the financial statements (which term as used in this Agreement
includes the related notes thereto) and supporting schedules of
Communications Construction Group, Inc. ("CCG") filed with the Commission
incorporated by reference in the Registration Statement, are independent
public or certified public accountants as required by the Securities Act
and the Exchange Act.
(i) PREPARATION OF THE FINANCIAL STATEMENTS. The financial
statements filed with the Commission as a part of the Registration
Statement and included in the Prospectus present fairly the consolidated
financial position of the Company and its subsidiaries as of and at the
dates indicated and the results of their operations and cash flows for the
periods specified. The financial statements filed with the Commission as
part of the Registration Statement and included or incorporated by
reference in the Prospectus present fairly the consolidated financial
position of CCG and its subsidiaries as of and at the dates indicated and
the results of their operations and cash flows for the periods specified.
The supporting schedules, if any, included in the Registration Statement
present fairly the information required to be stated therein. Such
financial statements and supporting schedules, if any, have been prepared
in conformity with generally accepted accounting principles applied on a
consistent basis throughout the periods involved, except as may be
expressly stated in the related notes thereto. No other financial
statements or supporting schedules are required to be included in the
Registration Statement. The financial data set forth in the Prospectus
under the captions "Prospectus Summary--Summary Consolidated Financial
Data", "Summary Consolidated Financial Data" and "Capitalization" fairly
present the information set forth therein on a basis consistent with that
of the audited financial statements contained in the Registration
Statement. The pro forma financial statements of the Company and its
subsidiaries and the related notes thereto included in the Prospectus and
in the Registration Statement present fairly the information contained
therein, have been prepared in accordance with the Commission's rules and
guidelines with respect to pro forma financial statements and have been
properly presented on the bases described therein, and the assumptions used
in the preparation thereof are reasonable and the adjustments used therein
are appropriate to give effect to the transactions and circumstances
referred to therein.
(j) INCORPORATION AND GOOD STANDING OF THE COMPANY AND ITS
SUBSIDIARIES. Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation and has corporate
power and authority to own, lease and operate its properties and to conduct
its business as described in the Prospectus and, in the case of the
Company, to enter into and perform its obligations under this
- 5 -
<PAGE> 10
Agreement. Each of the Company and each subsidiary is duly qualified as a
foreign corporation to transact business and is in good standing in each
other jurisdiction in which such qualification is required, whether by
reason of the ownership or leasing of property or the conduct of business,
except for such jurisdictions where the failure to so qualify or to be in
good standing would not, individually or in the aggregate, result in a
Material Adverse Change. All of the issued and outstanding capital stock of
each subsidiary has been duly authorized and validly issued, is fully paid
and nonassessable and is owned by the Company, directly or through
subsidiaries, free and clear of any security interest, mortgage, pledge,
lien, encumbrance or claim, except such as may arise pursuant to credit
facilities described in the Prospectus. The Company does not own or
control, directly or indirectly, any corporation, association or other
entity other than the subsidiaries listed in Exhibit 21 to the Company's
Annual Report on Form 10-K for the year ended July 31, 1997 which is
incorporated by reference in the Registration Statement.
(k) CAPITALIZATION AND OTHER CAPITAL STOCK MATTERS. The
authorized, issued and outstanding capital stock of the Company is as set
forth in the Prospectus under the caption "Capitalization" as of the dates
set forth therein (other than for subsequent issuances, if any, pursuant to
employee benefit plans described in the Prospectus or upon exercise of
outstanding options described in the Prospectus). The Common Stock
(including the Common Shares) conforms in all material respects to the
description thereof contained in the Prospectus. All of the issued and
outstanding shares of Common Stock (including the shares of Common Stock
owned by Selling Stockholders) have been duly authorized and validly
issued, are fully paid and nonassessable and have been issued in compliance
with federal and state securities laws. None of the outstanding shares of
Common Stock were issued in violation of any preemptive rights, rights of
first refusal or other similar rights to subscribe for or purchase
securities of the Company. There are no authorized or outstanding options,
warrants, preemptive rights, rights of first refusal or other rights to
purchase, or equity or debt securities convertible into or exchangeable or
exercisable for, any capital stock of the Company or any of its
subsidiaries other than those accurately described in the Prospectus. The
description of the Company's stock option, stock bonus and other stock
plans or arrangements, and the options or other rights granted thereunder,
set forth in the Prospectus accurately and fairly presents the information
required to be shown with respect to such plans, arrangements, options and
rights.
(l) STOCK EXCHANGE LISTING. The Common Stock, including the
Common Shares, is registered pursuant to Section 12(b) of the Exchange Act
and is listed on the New York Stock Exchange ("NYSE"), and the Company has
taken no action designed to, or likely to have the effect of, terminating
the registration of the Common Stock under the Exchange Act or delisting
the Common Stock from the NYSE, nor has the Company received any
notification that the Commission or the NYSE) is contemplating terminating
such registration or listing.
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<PAGE> 11
(m) NON-CONTRAVENTION OF EXISTING INSTRUMENTS; NO FURTHER
AUTHORIZATIONS OR APPROVALS REQUIRED. Neither the Company nor any of its
subsidiaries is in violation of its charter or by-laws or is in default
(or, with the giving of notice or lapse of time, would be in default)
("Default") under any indenture, mortgage, loan or credit agreement, note,
contract, franchise, lease or other instrument to which the Company or any
of its subsidiaries is a party or by which it or any of them may be bound
(including, without limitation, the Company's Bank Credit Agreement and
Term Loans with Dresdner Bank Lateinamerika AG, as lender), or to which any
of the property or assets of the Company or any of its subsidiaries is
subject (each, an "Existing Instrument"), except for such Defaults as would
not, individually or in the aggregate, result in a Material Adverse Change.
The Company's execution, delivery and performance of this Agreement and
consummation of the transactions contemplated hereby and by the Prospectus
(i) have been duly authorized by all necessary corporate action and will
not result in any violation of the provisions of the charter or by-laws of
the Company or any subsidiary, (ii) will not conflict with or constitute a
breach of, or Default under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company or
any of its subsidiaries pursuant to, or require the consent of any other
party to, any Existing Instrument, except for such conflicts, breaches,
Defaults, liens, charges or encumbrances as would not, individually or in
the aggregate, result in a Material Adverse Change and (iii) will not
result in any violation of any law, administrative regulation or
administrative or court decree applicable to the Company or any subsidiary.
No consent, approval, authorization or other order of, or registration or
filing with, any court or other governmental or regulatory authority or
agency, is required for the Company's execution, delivery and performance
of this Agreement and consummation of the transactions contemplated hereby
and by the Prospectus, except such as have been obtained or made by the
Company and are in full force and effect under the Securities Act,
applicable state securities or blue sky laws and from the NASD.
(n) NO MATERIAL ACTIONS OR PROCEEDINGS. There are no legal or
governmental actions, suits or proceedings pending or, to the best of the
Company's knowledge, threatened (i) against or affecting the Company or any
of its subsidiaries, (ii) which has as the subject thereof any officer or
director of, or property owned or leased by, the Company or any of its
subsidiaries or (iii) relating to environmental or discrimination matters,
where in any such case (A) there is a reasonable possibility that such
action, suit or proceeding might be determined adversely to the Company or
such subsidiary and (B) any such action, suit or proceeding, if so
determined adversely, would reasonably be expected to result in a Material
Adverse Change or adversely affect the consummation of the transactions
contemplated by this Agreement. No material labor dispute with the
employees of the Company or any of its subsidiaries, or with the employees
of any principal supplier of the Company, exists or, to the best of the
Company's knowledge, is threatened or imminent.
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<PAGE> 12
(o) INTELLECTUAL PROPERTY RIGHTS. The Company and its
subsidiaries own no trademarks, trade names, patent rights, copyrights,
licenses, approvals, trade secrets and other similar rights (collectively,
"Intellectual Property Rights"). lNeither the Company nor any of its
subsidiaries has received any notice of infringement or conflict with
asserted Intellectual Property Rights of others, which infringement or
conflict, if the subject of an unfavorable decision, would result in a
Material Adverse Change.
(p) ALL NECESSARY PERMITS, ETC. The Company and each
subsidiary possess such valid and current certificates, authorizations or
permits issued by the appropriate state, federal or foreign regulatory
agencies or bodies necessary to conduct their respective businesses, and
neither the Company nor any subsidiary has received any notice of
proceedings relating to the revocation or modification of, or
non-compliance with, any such certificate, authorization or permit which,
singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, could result in a Material Adverse Change.
(q) TITLE TO PROPERTIES. The Company and each of its
subsidiaries has good and marketable title to all the properties and assets
reflected as owned in the financial statements referred to in Section
1(A)(i) above (or elsewhere in the Prospectus), in each case free and clear
of any security interests, mortgages, liens, encumbrances, equities, claims
and other defects, except such as do not materially and adversely affect
the value of such property and do not materially interfere with the use
made or proposed to be made of such property by the Company or such
subsidiary or such as may arise pursuant to credit facilities described in
the Prospectus. The real property, improvements, equipment and personal
property held under lease by the Company or any subsidiary are held under
valid and enforceable leases, with such exceptions as are not material and
do not materially interfere with the use made or proposed to be made of
such real property, improvements, equipment or personal property by the
Company or such subsidiary.
(r) TAX LAW COMPLIANCE. The Company and its subsidiaries have
filed all necessary federal, state and foreign income and franchise tax
returns and have paid all taxes required to be paid by any of them and, if
due and payable, any related or similar assessment, fine or penalty levied
against any of them to the extent shown to be due on such tax returns The
Company has made adequate charges, accruals and reserves in the applicable
financial statements referred to in Section 1(A)(i) above in respect of all
federal, state and foreign income and franchise taxes for all periods as to
which the tax liability of the Company or any of its subsidiaries has not
been finally determined.
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<PAGE> 13
(s) COMPANY NOT AN "INVESTMENT COMPANY". The Company has been
advised of the rules and requirements under the Investment Company Act of
1940, as amended (the "Investment Company Act"). The Company is not, and
after receipt of payment for the Common Shares will not be, an "investment
company" within the meaning of Investment Company Act and will conduct its
business in a manner so that it will not become subject to the Investment
Company Act.
(t) INSURANCE. Each of the Company and its subsidiaries are
insured by recognized, financially sound and reputable institutions with
policies in such amounts and with such deductibles and covering such risks
as are described in the Prospectus, which the Company deems to be adequate
and customary for the businesses conducted. The Company has no reason to
believe that it or any subsidiary will not be able to (i) renew its
existing insurance coverage as and when such policies expire, (ii) obtain
comparable coverage from similar institutions as may be necessary or
appropriate to conduct its business as now conducted and at a cost that
would not result in a Material Adverse Change, or (iii) maintain its large
deductible or self-insurance programs substantially as in effect currently.
The accrued liability for unpaid claims and associated expenses reflected
on the Company's balance sheet at July 31, 1997 pursuant to the Company's
self-insurance program reflects, to the Company's knowledge, its best
estimate, based on an actuarial determination, of the full extent of the
Company's losses for outstanding claims not otherwise covered by insurance,
including any unasserted claims which management of the Company believes
are probable of assertion. Neither the Company nor any subsidiary has been
denied any excess loss which it has sought or for which it has applied.
(u) NO PRICE STABILIZATION OR MANIPULATION. The Company has
not taken and will not take, directly or indirectly, any action designed to
or that might be reasonably expected to cause or result in stabilization or
manipulation of the price of the Common Stock to facilitate the sale or
resale of the Common Shares.
(v) RELATED PARTY TRANSACTIONS. There are no material business
relationships or material related party transactions involving the Company
or any subsidiary or any other person required to be described in the
Prospectus which have not been described as required.
(w) NO UNLAWFUL CONTRIBUTIONS OR OTHER PAYMENTS. Neither the
Company nor any of its subsidiaries nor, to the best of the Company's
knowledge, any employee or agent of the Company or any subsidiary, has made
any contribution or other payment to any official of, or candidate for, any
federal, state or foreign office in violation of any law or of the
character required to be disclosed in the Prospectus.
(x) COMPANY'S ACCOUNTING SYSTEM. The Company maintains a
system of accounting controls sufficient to provide reasonable assurances
that (i) transactions are executed in accordance with management's general
or specific authorization; (ii) transactions are recorded as necessary to
permit preparation of financial statements in
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<PAGE> 14
conformity with generally accepted accounting principles and to maintain
accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv)
the recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(y) COMPLIANCE WITH ENVIRONMENTAL LAWS. Except as would not,
individually or in the aggregate, result in a Material Adverse Change (i)
neither the Company nor any of its subsidiaries is in violation of any
federal, state, local or foreign law or regulation relating to pollution or
protection of human health or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or
subsurface strata) or wildlife, including without limitation, laws and
regulations relating to emissions, discharges, releases or threatened
releases of chemicals, pollutants, contaminants, wastes, toxic substances,
hazardous substances, petroleum and petroleum products (collectively,
"Materials of Environmental Concern"), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern (collectively,
"Environmental Laws"), which violation includes, but is not limited to,
noncompliance with any permits or other governmental authorizations
required for the operation of the business of the Company or its
subsidiaries under applicable Environmental Laws, or noncompliance with the
terms and conditions thereof, nor has the Company or any of its
subsidiaries received any written communication, whether from a
governmental authority, citizens group, employee or otherwise, that alleges
that the Company or any of its subsidiaries is in violation of any
Environmental Law; (ii) there is no claim, action or cause of action filed
with a court or governmental authority, no investigation with respect to
which the Company has received written notice, and no written notice by any
person or entity alleging potential liability for investigatory costs,
cleanup costs, governmental responses costs, natural resources damages,
property damages, personal injuries, attorneys' fees or penalties arising
out of, based on or resulting from the presence, or release into the
environment, of any Material of Environmental Concern at any location
owned, leased or operated by the Company or any of its subsidiaries, now or
in the past (collectively, "Environmental Claims"), pending or, to the best
of the Company's knowledge, threatened against the Company or any of its
subsidiaries or any person or entity whose liability for any Environmental
Claim the Company or any of its subsidiaries has retained or assumed either
contractually or by operation of law; and (iii) to the best of the
Company's knowledge, there are no past or present actions, activities,
circumstances, conditions, events or incidents, including, without
limitation, the release, emission, discharge, presence or disposal of any
Material of Environmental Concern, that reasonably could result in a
violation of any Environmental Law or form the basis of a potential
Environmental Claim against the Company or any of its subsidiaries or
against any person or entity whose liability for any Environmental Claim
the Company or any of its subsidiaries has retained or assumed either
contractually or by operation of law.
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<PAGE> 15
(z) ERISA COMPLIANCE. The Company and its subsidiaries and any
"employee benefit plan" (as defined under the Employee Retirement Income
Security Act of 1974, as amended, and the regulations and published
interpretations thereunder (collectively, "ERISA")) established or
maintained by the Company, its subsidiaries or their "ERISA Affiliates" (as
defined below) are in compliance in all material respects with ERISA.
"ERISA Affiliate" means, with respect to the Company or a subsidiary, any
member of any group of organizations described in Sections 414(b),(c),(m)
or (o) of the Internal Revenue Code of 1986, as amended, and the
regulations and published interpretations thereunder (the "Code") of which
the Company or such subsidiary is a member. No "reportable event" (as
defined under ERISA) has occurred or is reasonably expected to occur with
respect to any "employee benefit plan" established or maintained by the
Company, its subsidiaries or any of their ERISA Affiliates. No "employee
benefit plan" established or maintained by the Company, its subsidiaries or
any of their ERISA Affiliates, if such "employee benefit plan" were
terminated, would have any "amount of unfunded benefit liabilities" (as
defined under ERISA). Neither the Company, its subsidiaries nor any of
their ERISA Affiliates has incurred or reasonably expects to incur any
liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "employee benefit plan" or (ii) Sections 412, 4971,
4975 or 4980B of the Code. Each "employee benefit plan" established or
maintained by the Company, its subsidiaries or any of their ERISA
Affiliates that is intended to be qualified under Section 401(a) of the
Code is so qualified and nothing has occurred, whether by action or failure
to act, which would cause the loss of such qualification.
(aa) EXCHANGE ACT COMPLIANCE. The documents incorporated or
deemed to be incorporated by reference in the Prospectus, at the time they
were or hereafter are filed with the Commission, complied and will comply
in all material respects with the requirements of the Exchange Act, and,
when read together with the other information in the Prospectus, at the
time the Registration Statement and any amendments thereto become effective
and at the First Closing Date and the Second Closing Date, as the case may
be, will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(bb) ACQUISITION OF COMMUNICATIONS CONSTRUCTION GROUP, INC.
The agreements necessary to effect the acquisition of CCG have been duly
authorized, executed and delivered by each of the parties thereto and
constitute the valid, legal and binding agreements of each such party, and
the acquisition of CCG by the Company and the related transactions
contemplated thereby have been consummated as described in the Prospectus.
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<PAGE> 16
Any certificate signed by an officer of the Company and
delivered to the Representatives or to counsel for the Underwriters shall be
deemed to be a representation and warranty by the Company to each Underwriter as
to the matters set forth therein.
B. REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDERS.
In addition to the representations, warranties and covenants set forth in
Section 1(A), each Selling Stockholder represents, warrants and covenants to
each Underwriter as follows:
(a) THE UNDERWRITING AGREEMENT. This Agreement has been duly
authorized, executed and delivered by or on behalf of such Selling
Stockholder and is a valid and binding agreement of such Selling
Stockholder, enforceable in accordance with its terms, except as rights to
indemnification hereunder may be limited by applicable law and except as
the enforcement hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
the rights and remedies of creditors or by general equitable principles.
(b) THE CUSTODY AGREEMENT AND POWER OF ATTORNEY. Each of the
(i) Custody Agreement signed by such Selling Stockholder and the Company,
as custodian (the "Custodian"), relating to the deposit of the Common
Shares to be sold by such Selling Stockholder (the "Custody Agreement") and
(ii) Power of Attorney appointing certain individuals named therein as such
Selling Stockholder's attorneys-in-fact (each, an "Attorney-in-Fact") to
the extent set forth therein relating to the transactions contemplated
hereby and by the Prospectus (the "Power of Attorney"), of such Selling
Stockholder has been duly authorized, executed and delivered by such
Selling Stockholder and is a valid and binding agreement of such Selling
Stockholder, enforceable in accordance with its terms, except as rights to
indemnification thereunder may be limited by applicable law and except as
the enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
the rights and remedies of creditors or by general equitable principles.
(c) TITLE TO COMMON SHARES TO BE SOLD; ALL AUTHORIZATIONS
OBTAINED. Such Selling Stockholder has, and on the First Closing Date and
the Second Closing Date (as defined below) will have, good and valid title
to all of the Common Shares which may be sold by such Selling Stockholder
pursuant to this Agreement on such date and the legal right and power, and
all authorizations and approvals required by law and under its trust
agreement or other organizational documents to enter into this Agreement
and its Custody Agreement and Power of Attorney, to sell, transfer and
deliver all of the Common Shares which may be sold by such Selling
Stockholder pursuant to this Agreement and to comply with its other
obligations hereunder and thereunder.
(d) DELIVERY OF THE COMMON SHARES TO BE SOLD. Delivery of the
Common Shares which are sold by such Selling Stockholder pursuant to this
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<PAGE> 17
Agreement will pass good and valid title to such Common Shares, free and
clear of any security interest, mortgage, pledge, lien, encumbrance or
other claim.
(e) NON-CONTRAVENTION; NO FURTHER AUTHORIZATIONS OR APPROVALS
REQUIRED. The execution and delivery by such Selling Stockholder of, and
the performance by such Selling Stockholder of its obligations under, this
Agreement, the Custody Agreement and the Power of Attorney will not
contravene or conflict with, result in a breach of, or constitute a Default
under, or require the consent of any other party to, the trust agreement or
other organizational documents of such Selling Stockholder or any other
agreement or instrument to which such Selling Stockholder is a party or by
which it is bound or under which it is entitled to any right or benefit,
any provision of applicable law or any judgment, order, decree or
regulation applicable to such Selling Stockholder of any court, regulatory
body, administrative agency, governmental body or arbitrator having
jurisdiction over such Selling Stockholder. No consent, approval,
authorization or other order of, or registration or filing with, any court
or other governmental authority or agency, is required for the consummation
by such Selling Stockholder of the transactions contemplated in this
Agreement, except such as have been obtained or made and are in full force
and effect under the Securities Act, applicable state securities or blue
sky laws and from the NASD.
(f) NO REGISTRATION OR OTHER SIMILAR RIGHTS. Such Selling
Stockholder does not have any registration or other similar rights to have
any equity or debt securities registered for sale by the Company under the
Registration Statement or included in the offering contemplated by this
Agreement, except for such rights as are described in the Prospectus under
"Risk Factors - Shares Eligible for Future Sale".
(g) NO FURTHER CONSENTS, ETC. No consent, approval or waiver
is required under any instrument or agreement to which such Selling
Stockholder is a party or by which it is bound or under which it is
entitled to any right or benefit, in connection with the offering, sale or
purchase by the Underwriters of any of the Common Shares which may be sold
by such Selling Stockholder under this Agreement or the consummation by
such Selling Stockholder of any of the other transactions contemplated
hereby.
(h) DISCLOSURE MADE BY SUCH SELLING STOCKHOLDER IN THE
PROSPECTUS. All information furnished by or on behalf of such Selling
Stockholder in writing expressly for use in the Registration Statement and
Prospectus is, and on the First Closing Date and the Second Closing Date
will be, true, correct, and complete in all material respects, and does
not, and on the First Closing Date and the Second Closing Date will not,
contain any untrue statement of a material fact or omit to state any
material fact necessary to make such information not misleading. Such
Selling Stockholder confirms as accurate the number of shares of Common
Stock set forth opposite such Selling Stockholder's name in the Prospectus
under the caption
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<PAGE> 18
"Principal and Selling Stockholders" (both prior to and after giving effect
to the sale of the Common Shares).
(i) NO PRICE STABILIZATION OR MANIPULATION. Such Selling
Stockholder has not taken and will not take, directly or indirectly, any
action designed to or that might be reasonably expected to cause or result
in stabilization or manipulation of the price of the Common Stock to
facilitate the sale or resale of the Common Shares.
(j) CONFIRMATION OF COMPANY REPRESENTATIONS AND WARRANTIES.
Such Selling Stockholder has no reason to believe that the representations
and warranties of the Company contained in Section 1(A) hereof are not true
and correct, is familiar with the Registration Statement and the Prospectus
and has no knowledge of any material fact, condition or information not
disclosed in the Registration Statement or the Prospectus which has had or
may have a Material Adverse Effect and is not prompted to sell shares of
Common Stock by any information concerning the Company which is not set
forth in the Registration Statement and the Prospectus.
Any certificate signed by or on behalf of any Selling Stockholder and
delivered to the Representatives or to counsel for the Underwriters shall be
deemed to be a representation and warranty by such Selling Stockholder to each
Underwriter as to the matters covered thereby.
SECTION 2. PURCHASE, SALE AND DELIVERY OF THE COMMON SHARES.
THE FIRM COMMON SHARES. Upon the terms herein set forth, (i)
the Company agrees to issue and sell to the several Underwriters an aggregate of
1,573,378 Firm Common Shares and (ii) the Selling Stockholders agree to sell to
the several Underwriters an aggregate of 1,126,622 Firm Common Shares, each
Selling Stockholder selling the number of Firm Common Shares set forth opposite
such Selling Stockholder's name on SCHEDULE B. On the basis of the
representations, warranties and agreements herein contained, and upon the terms
but subject to the conditions herein set forth, the Underwriters agree,
severally and not jointly, to purchase from the Company and the Selling
Stockholders the respective number of Firm Common Shares set forth opposite
their names on SCHEDULE A. The purchase price per Firm Common Share to be paid
by the several Underwriters to the Company and the Selling Stockholders shall be
$[_____] per share.
THE FIRST CLOSING DATE. Delivery of certificates for the Firm
Common Shares to be purchased by the Underwriters and payment therefor shall be
made at the offices of NationsBanc Montgomery Securities, Inc., 600 Montgomery
Street, San Francisco, California 94111 (or such other place as may be agreed to
by the Company and the Representative) at 6:00 a.m. San Francisco time, on
____________, 1997, or such other time and date not later than 10:30 a.m. San
Francisco time, on ____________, 1997 as the Representative shall designate by
notice to the
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<PAGE> 19
Company (the time and date of such closing are called the "First
Closing Date"). The Company and the Selling Stockholders hereby acknowledge that
circumstances under which the Representatives may provide notice to postpone the
First Closing Date as originally scheduled include, but are in no way limited
to, any determination by the Company, the Selling Stockholders or the
Representatives to recirculate to the public copies of an amended or
supplemented Prospectus or a delay as contemplated by the provisions of Section
10.
THE OPTIONAL COMMON SHARES; THE SECOND CLOSING DATE. In
addition, on the basis of the representations, warranties and agreements herein
contained, and upon the terms but subject to the conditions herein set forth,
the Company hereby grant an option to the several Underwriters to purchase,
severally and not jointly, up to an aggregate of 405,000 Optional Common Shares
from the Company at the purchase price per share to be paid by the Underwriters
for the Firm Common Shares. The option granted hereunder is for use by the
Underwriters solely in covering any over-allotments in connection with the sale
and distribution of the Firm Common Shares. The option granted hereunder may be
exercised at any time (but not more than once) upon notice by the
Representatives to the Company, which notice may be given at any time within 30
days from the date of this Agreement. Such notice shall set forth (i) the
aggregate number of Optional Common Shares as to which the Underwriters are
exercising the option, (ii) the names and denominations in which the
certificates for the Optional Common Shares are to be registered and (iii) the
time, date and place at which such certificates will be delivered (which time
and date may be simultaneous with, but not earlier than, the First Closing Date;
and in such case the term "First Closing Date" shall refer to the time and date
of delivery of certificates for the Firm Common Shares and the Optional Common
Shares). Such time and date of delivery, if subsequent to the First Closing
Date, is called the "Second Closing Date" and shall be determined by the
Representatives and shall not be earlier than three nor later than five full
business days after delivery of such notice of exercise. If any Optional Common
Shares are to be purchased, (a) each Underwriter agrees, severally and not
jointly, to purchase the number of Optional Common Shares (subject to such
adjustments to eliminate fractional shares as the Representatives may determine)
that bears the same proportion to the total number of Optional Common Shares to
be purchased as the number of Firm Common Shares set forth on SCHEDULE A
opposite the name of such Underwriter bears to the total number of Firm Common
Shares and (b) the Company agrees to sell the number of Optional Common Shares
(subject to such adjustments to eliminate fractional shares as the
Representative may determine) that bears the same proportion to the total number
of Optional Common Shares to be sold as the number of Optional Common Shares set
forth in SCHEDULE B opposite the name of such Selling Stockholder (or, in the
case of the Company, as the number of Optional Common Shares to be sold by the
Company as set forth in the paragraph "Introductory" of this Agreement) bears to
the total number of Optional Common Shares. The Representatives
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<PAGE> 20
may cancel the option at any time prior to its expiration by giving written
notice of such cancellation to the Company and the Selling Stockholders.
PUBLIC OFFERING OF THE COMMON SHARES. The Representatives
hereby advise the Company and the Selling Stockholders that the Underwriters
intend to offer for sale to the public, as described in the Prospectus, their
respective portions of the Common Shares as soon after this Agreement has been
executed and the Registration Statement has been declared effective as the
Representatives, in their sole judgment, have determined is advisable and
practicable.
PAYMENT FOR THE COMMON SHARES. Payment for the Common Shares
to be sold by the Company shall be made at the First Closing Date (and, if
applicable, at the Second Closing Date) by wire transfer of immediately
available funds to the order of the Company. Payment for the Common Shares to be
sold by the Selling Stockholders shall be made at the First Closing Date (and,
if applicable, at the Second Closing Date) by wire transfer of immediately
available funds to the order of the Custodian.
It is understood that the Representatives have been
authorized, for their own account and the accounts of the several Underwriters,
to accept delivery of and receipt for, and make payment of the purchase price
for, the Firm Common Shares and any Optional Common Shares the Underwriters have
agreed to purchase. NationsBanc Montgomery Securities, Inc., individually and
not as the Representative of the Underwriters, may (but shall not be obligated
to) make payment for any Common Shares to be purchased by any Underwriter whose
funds shall not have been received by the First Closing Date or the Second
Closing Date, as the case may be, for the account of such Underwriter, but any
such payment shall not relieve such Underwriter from any of its obligations
under this Agreement.
Each Selling Stockholder hereby agrees that (i) it will pay
all stock transfer taxes, stamp duties and other similar taxes, if any, payable
upon the sale or delivery of the Common Shares to be sold by such Selling
Stockholder to the several Underwriters, or otherwise in connection with the
performance of such Selling Stockholder's obligations hereunder and (ii) the
Custodian is authorized to deduct for such payment any such amounts from the
proceeds to such Selling Stockholder hereunder and to hold such amounts for the
account of such Selling Stockholder with the Custodian under the Custodian
Agreement.
DELIVERY OF THE COMMON SHARES. The Company and the Selling
Stockholders shall deliver, or cause to be delivered, to the Representatives for
the accounts of the several Underwriters certificates for the Firm Common Shares
to be sold by them at the First Closing Date, against the irrevocable release of
a wire transfer of immediately available funds for the amount of the purchase
price therefor. The Company and the Selling Stockholders shall also deliver, or
cause to be delivered, to the Representatives for the accounts of the several
Underwriters, certificates for the Optional
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<PAGE> 21
Common Shares the Underwriters have agreed to purchase from them at the First
Closing Date or the Second Closing Date, as the case may be, against the
irrevocable release of a wire transfer of immediately available funds for the
amount of the purchase price therefor. The certificates for the Common Shares
shall be in definitive form and registered in such names and denominations as
the Representatives shall have requested at least two full business days prior
to the First Closing Date (or the Second Closing Date, as the case may be) and
shall be made available for inspection on the business day preceding the First
Closing Date (or the Second Closing Date, as the case may be) at a location in
New York City as the Representatives may designate. Time shall be of the
essence, and delivery at the time and place specified in this Agreement is a
further condition to the obligations of the Underwriters.
DELIVERY OF PROSPECTUS TO THE UNDERWRITERS. Not later than
12:00 p.m. on the second business day following the date the Common Shares of
released by the Underwriters for sale to the public, the Company shall delivery
or cause to be delivered copies of the Prospectus in such quantities and at such
places as the Representatives shall request.
SECTION 3. ADDITIONAL COVENANTS.
A. COVENANTS OF THE COMPANY. The Company further covenants and
agrees with each Underwriter as follows:
(a) REPRESENTATIVES' REVIEW OF PROPOSED AMENDMENTS AND
SUPPLEMENTS. During such period beginning on the date hereof and ending on
the later of the First Closing Date or such date, as in the opinion of
counsel for the Underwriters, the Prospectus is no longer required by law
to be delivered in connection with sales by an Underwriter or dealer (the
"Prospectus Delivery Period"), prior to amending or supplementing the
Registration Statement (including any registration statement filed under
Rule 462(b) under the Securities Act) or the Prospectus (including any
amendment or supplement through incorporation by reference of any report
filed under the Exchange Act, the Company shall furnish to the
Representatives for review a copy of each such proposed amendment or
supplement, and the Company shall not file any such proposed amendment or
supplement to which the Representatives reasonably object.
(b) SECURITIES ACT COMPLIANCE. After the date of this
Agreement, the Company shall promptly advise the Representatives in writing
(i) of the receipt of any comments of, or requests for additional or
supplemental information from, the Commission, (ii) of the time and date of
any filing of any post-effective amendment to the Registration Statement or
any amendment or supplement to any preliminary prospectus or the
Prospectus, (iii) of the time and date that any post-effective amendment to
the Registration Statement becomes effective and (iv) of
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the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or any post-effective amendment
thereto or of any order preventing or suspending the use of any preliminary
prospectus or the Prospectus, or of any proceedings to remove, suspend or
terminate from listing or quotation the Common Stock from any securities
exchange upon which it is listed for trading or included or designated for
quotation, or of the threatening or initiation of any proceedings for any
of such purposes. If the Commission shall enter any such stop order at any
time, the Company will use its best efforts to obtain the lifting of such
order at the earliest possible moment. Additionally, the Company agrees
that it shall comply with the provisions of Rules 424(b), 430A and 434, as
applicable, under the Securities Act and will use its reasonable efforts to
confirm that any filings made by the Company under such Rule 424(b) were
received in a timely manner by the Commission.
(c) AMENDMENTS AND SUPPLEMENTS TO THE PROSPECTUS AND OTHER
SECURITIES ACT MATTERS. If, during the Prospectus Delivery Period, any
event shall occur or condition exist as a result of which it is necessary
to amend or supplement the Prospectus in order to make the statements
therein, in the light of the circumstances when the Prospectus is delivered
to a purchaser, not misleading, or if in the opinion of the Representatives
or counsel for the Underwriters it is otherwise necessary to amend or
supplement the Prospectus to comply with law, the Company agrees to
promptly prepare (subject to Section 3(A)(a) hereof), file with the
Commission and furnish at its own expense to the Underwriters and to
dealers, amendments or supplements to the Prospectus so that the statements
in the Prospectus as so amended or supplemented will not, in the light of
the circumstances when the Prospectus is delivered to a purchaser, be
misleading or so that the Prospectus, as amended or supplemented, will
comply with law.
(d) COPIES OF ANY AMENDMENTS AND SUPPLEMENTS TO THE
PROSPECTUS. The Company agrees to furnish the Representatives, without
charge, during the Prospectus Delivery Period, as many copies of the
Prospectus and any amendments and supplements thereto (including any
documents incorporated or deemed incorporated by reference therein) as the
Representatives may request.
(e) BLUE SKY COMPLIANCE. The Company shall cooperate with the
Representatives and counsel for the Underwriters to qualify or register the
Common Shares for sale under (or obtain exemptions from the application of)
the Blue Sky or state securities laws of those jurisdictions designated by
the Representatives, shall comply with such laws and shall continue such
qualifications, registrations and exemptions in effect so long as required
for the distribution of the Common Shares. The Company shall not be
required to qualify as a foreign corporation or to take any action that
would subject it to general service of process in any such jurisdiction
where it is not presently qualified or where it would be subject to
taxation as a foreign corporation. The Company will advise the
Representatives promptly of the
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<PAGE> 23
suspension of the qualification or registration of (or any such exemption
relating to) the Common Shares for offering, sale or trading in any
jurisdiction or any initiation or threat of any proceeding for any such
purpose, and in the event of the issuance of any order suspending such
qualification, registration or exemption, the Company shall use its best
efforts to obtain the withdrawal thereof at the earliest possible moment.
(f) USE OF PROCEEDS. The Company shall apply the net proceeds
from the sale of the Common Shares sold by it in the manner described under
the caption "Use of Proceeds" in the Prospectus.
(g) TRANSFER AGENT. The Company shall engage and maintain, at
its expense, a registrar and transfer agent for the Common Stock.
(h) EARNINGS STATEMENT. As soon as practicable, the Company
will make generally available to its security holders and to the
Representatives an earnings statement (which need not be audited) covering
the twelve-month period ending __________, 1998 that satisfies the
provisions of Section 11(a) of the Securities Act.
(j) PERIODIC REPORTING OBLIGATIONS. During the Prospectus
Delivery Period the Company shall file, on a timely basis, with the
Commission and the New York Stock Exchange all reports and documents
required to be filed under the Exchange Act.
(k) AGREEMENT NOT TO OFFER OR SELL ADDITIONAL SECURITIES.
During the period of 180 days following the date of the Prospectus, the
Company will not, without the prior written consent of NationsBanc
Montgomery Securities, Inc. (which consent may be withheld at the sole
discretion of NationsBanc Montgomery Securities, Inc.), directly or
indirectly, sell, offer, contract or grant any option to sell, pledge,
transfer or establish an open "put equivalent position" within the meaning
of Rule 16a-1(h) under the Exchange Act, or otherwise dispose of or
transfer, or announce the offering of, or file any registration statement
under the Securities Act in respect of, any shares of Common Stock, options
or warrants to acquire shares of the Common Stock or securities
exchangeable or exercisable for or convertible into shares of Common Stock
(other than as contemplated by this Agreement with respect to the Common
Shares); PROVIDED, HOWEVER, that the Company may issue shares of its Common
Stock pursuant to acquisitions of companies in the telecommunications
engineering, construction and maintenance services industry and may issue
shares of its Common Stock or options to purchase its Common Stock, or
Common Stock upon exercise of options, pursuant to any stock option, stock
bonus or other stock plan or arrangement described in the Prospectus, but
only if the holders of such shares, options, or shares issued upon exercise
of such options, agree in writing not to sell, offer, dispose of or
otherwise transfer any such shares or options during such 180 day period
without the prior written consent of NationsBanc Montgomery Securities,
Inc.
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<PAGE> 24
(which consent may be withheld at the sole discretion of the NationsBanc
Montgomery Securities, Inc.).
(m) FUTURE REPORTS TO THE REPRESENTATIVES. During the period
of five years hereafter the Company will furnish to the Representatives at
600 Montgomery Street, San Francisco, CA 94111 Attention: Mark A. Roberts:
(i) as soon as practicable after the end of each fiscal year, copies of the
Annual Report of the Company containing the balance sheet of the Company as
of the close of such fiscal year and statements of income, stockholders'
equity and cash flows for the year then ended and the opinion thereon of
the Company's independent public or certified public accountants; (ii) as
soon as practicable after the filing thereof, copies of each proxy
statement, Annual Report on Form 10-K, Quarterly Report on Form 10-Q,
Current Report on Form 8-K or other report filed by the Company with the
Commission, the NASD or any securities exchange; and (iii) as soon as
available, copies of any report or communication of the Company mailed
generally to holders of its capital stock.
(n) EXCHANGE ACT COMPLIANCE. During the Prospectus Delivery
Period, the Company will file all documents required to be filed with the
Commission pursuant to Section 13, 14 or 15 of the Exchange Act in the
manner and within the time periods required by the Exchange Act.
B. COVENANTS OF THE SELLING STOCKHOLDERS. Each Selling
Stockholder further covenants and agrees with each Underwriter:
(a) AGREEMENT NOT TO OFFER OR SELL ADDITIONAL SECURITIES. Such
Selling Stockholder will not, without the prior written consent of NationsBanc
Montgomery Securities, Inc. (which consent may be withheld in its sole
discretion), directly or indirectly, sell, offer, contract or grant any option
to sell (including without limitation any short sale), pledge, transfer,
establish an open "put equivalent position" within the meaning of Rule 16a-1(h)
under the Exchange Act, or otherwise dispose of any shares of Common Stock,
options or warrants to acquire shares of Common Stock, or securities
exchangeable or exercisable for or convertible into shares of Common Stock
currently or hereafter owned either of record or beneficially (as defined in
Rule 13d-3 under the Exchange Act) by the undersigned, or publicly announce the
undersigned's intention to do any of the foregoing, for a period commencing on
the date hereof and continuing through the close of trading on the date 180 days
after the date of the Prospectus; provided that a Selling Stockholder may pledge
shares of Common Stock if the pledgee agrees in writing not to sell, offer,
dispose of or otherwise transfer any pledged shares during said 180-day period
without the prior written consent of NationsBanc Montgomery Securities, Inc.
(which consent may be withheld at the sole discretion of NationsBanc Montgomery
Securities, Inc.).
(b) DELIVERY OF FORMS W-8 AND W-9. To deliver to the
Representatives prior to the First Closing Date a properly completed and
executed United States Treasury
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<PAGE> 25
Department Form W-8 (if the Selling Stockholder is a non-United States person)
or Form W-9 (if the Selling Stockholder is a United States Person).
NationsBanc Montgomery Securities, Inc., on behalf of the
several Underwriters, may, in its sole discretion, waive in writing the
performance by the Company or any Selling Stockholder of any one or more of the
foregoing covenants or extend the time for their performance.
SECTION 4. PAYMENT OF EXPENSES. The Company and the Selling
Stockholders, jointly and severally, agree to pay in such proportions as they
may agree upon among themselves all costs, fees and expenses incurred in
connection with the performance of their obligations hereunder and in connection
with the transactions contemplated hereby, including without limitation (i) all
expenses incident to the issuance and delivery of the Common Shares (including
all printing and engraving costs), (ii) all fees and expenses of the registrar
and transfer agent of the Common Stock, (iii) all necessary issue, transfer and
other stamp taxes in connection with the issuance and sale of the Common Shares
to the Underwriters, (iv) all fees and expenses of the Company's counsel,
independent public or certified public accountants and other advisors, (v) all
costs and expenses incurred in connection with the printing, filing, shipping
and distribution of the Registration Statement (including financial statements,
exhibits, schedules, consents and certificates of experts), each preliminary
prospectus and the Prospectus, and all amendments and supplements thereto, and
this Agreement, (vi) all filing fees, attorneys' fees and expenses incurred by
the Company or the Underwriters in connection with qualifying or registering (or
obtaining exemptions from the qualification or registration of) all or any part
of the Common Shares for offer and sale under the Blue Sky laws, and, if
requested by the Representatives, preparing and printing a "Blue Sky Survey" or
memorandum, and any supplements thereto, advising the Underwriters of such
qualifications, registrations and exemptions, (vii) the filing fees incident to,
and the reasonable fees and expenses of counsel for the Underwriters in
connection with, the NASD's review and approval of the Underwriters'
participation in the offering and distribution of the Common Shares, (viii) the
fees and expenses associated with listing the Common Shares on the New York
Stock Exchange, Inc., and (ix) all other fees, costs and expenses referred to in
Part II of the Registration Statement. Except as provided in this Section 4,
Section 6, Section 8 and Section 9 hereof, the Underwriters shall pay their own
expenses, including the fees and disbursements of their counsel.
The Selling Stockholders further agree with each Underwriter
to pay (directly or by reimbursement) all fees and expenses incident to the
performance of their obligations under this Agreement which are not otherwise
specifically provided for herein, including but not limited to (i) fees and
expenses of counsel and other advisors for such Selling Stockholders (ii) fees
and expenses of the Custodian and (iii) expenses and taxes incident to the sale
and delivery of the Common Shares to be sold by such Selling
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<PAGE> 26
Stockholders to the Underwriters hereunder (which taxes, if any, may be deducted
by the Custodian under the provisions of Section 2 of this Agreement).
This Section 4 shall not affect or modify any separate, valid
agreement relating to the allocation of payment of expenses between the Company,
on the one hand, and the Selling Stockholders, on the other hand.
SECTION 5. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS.
The obligations of the several Underwriters to purchase and pay for the Common
Shares as provided herein on the First Closing Date and, with respect to the
Optional Common Shares, the Second Closing Date, shall be subject to the
accuracy of the representations and warranties on the part of the Company and
the Selling Stockholders set forth in Sections 1(A) and 1(B) hereof as of the
date hereof and as of the First Closing Date as though then made and, with
respect to the Optional Common Shares, as of the Second Closing Date as though
then made, to the timely performance by the Company and the Selling Stockholders
of their respective covenants and other obligations hereunder, and to each of
the following additional conditions:
(a) ACCOUNTANTS' COMFORT LETTER. On the date hereof, the
Representatives shall have received from each of Deloitte & Touche LLP,
independent public or certified public accountants for the Company, and
Nowalk & Associates, independent public or certified public accountants for
CCG, a letter dated the date hereof addressed to the Underwriters, in form
and substance satisfactory to the Representatives, containing statements
and information of the type ordinarily included in accountant's "comfort
letters" to underwriters, delivered according to Statement of Auditing
Standards No. 72 (or any successor bulletin), with respect to the audited
and unaudited financial statements and certain financial information
contained in the Registration Statement and the Prospectus (and the
Representatives shall have received an additional three conformed copies of
such accountants' letter for each of the several Underwriters).
(b) COMPLIANCE WITH REGISTRATION REQUIREMENTS; NO STOP ORDER;
NO OBJECTION FROM NASD. For the period from and after effectiveness of this
Agreement and prior to the First Closing Date and, with respect to the
Optional Common Shares, the Second Closing Date:
(i) the Company shall have filed the Prospectus with
the Commission (including the information required by Rule 430A under
the Securities Act) in the manner and within the time period required
by Rule 424(b) under the Securities Act; or the Company shall have
filed a post-effective amendment to the Registration Statement
containing the information required by such Rule 430A, and such
post-effective amendment shall have become effective; or, if the
Company elected to rely upon Rule 434 under the Securities Act and
obtained the Representatives' consent thereto, the Company shall have
filed a
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<PAGE> 27
Term Sheet with the Commission in the manner and within the time period
required by such Rule 424(b);
(ii) no stop order suspending the effectiveness of
the Registration Statement, any Rule 462(b) Registration Statement, or
any post-effective amendment to the Registration Statement, shall be in
effect and no proceedings for such purpose shall have been instituted
or threatened by the Commission; and
(iii) the NASD shall have raised no objection to the
fairness and reasonableness of the underwriting terms and arrangements.
(c) NO MATERIAL ADVERSE CHANGE OR RATINGS AGENCY CHANGE. For
the period from and after the date of this Agreement and prior to the
First Closing Date and, with respect to the Optional Common Shares, the
Second Closing Date:
(i) in the judgment of the Representatives there
shall not have occurred any Material Adverse Change; and
(ii) there shall not have occurred any downgrading,
nor shall any notice have been given of any intended or potential
downgrading or of any review for a possible change that does not
indicate the direction of the possible change, in the rating accorded
any securities of the Company or any of its subsidiaries by any
"nationally recognized statistical rating organization" as such term is
defined for purposes of Rule 436(g)(2) under the Securities Act.
(d) OPINION OF COUNSEL FOR THE COMPANY. On each of the First
Closing Date and the Second Closing Date the Representatives shall have
received the favorable opinion of Chopin, Miller & Yudenfreund, counsel for
the Company, dated as of such Closing Date, the form of which is attached
as EXHIBIT A (and the Representatives shall have received an additional
three conformed copies of such counsel's legal opinion for each of the
several Underwriters).
(e) OPINION OF COUNSEL FOR THE UNDERWRITERS. On each of the
First Closing Date and the Second Closing Date the Representatives shall
have received the favorable opinion of Piper & Marbury L.L.P., counsel for
the Underwriters, dated as of such Closing Date, with respect to the
matters set forth in paragraphs (i), (vi), (vii), (viii), (x), (xi), and
the next-to-last paragraph of EXHIBIT A (and the Representatives shall have
received an additional three conformed copies of such counsel's legal
opinion for each of the several Underwriters).
(f) OFFICERS' CERTIFICATE. On each of the First Closing Date
and the Second Closing Date the Representatives shall have received a
written certificate executed by the Chairman of the Board, Chief Executive
Officer or President of the
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<PAGE> 28
Company and the Chief Financial Officer or Chief Accounting Officer of
the Company, dated as of such Closing Date, to the effect set forth in
subsections (b)(ii) and (c)(ii) of this Section 5, and further to the
effect that:
(i) for the period from and after the date of this
Agreement and prior to such Closing Date, there has not occurred any
Material Adverse Change;
(ii) the representations, warranties and covenants of
the Company set forth in Section 1(A) of this Agreement are true and
correct with the same force and effect as though expressly made on and
as of such Closing Date; and
(iii) the Company has complied with all the
agreements and satisfied all the conditions on its part to be performed
or satisfied at or prior to such Closing Date.
(g) BRING-DOWN COMFORT LETTER. On each of the First Closing
Date and the Second Closing Date the Representatives shall have received
from each of Deloitte & Touche LLP, independent public or certified public
accountants for the Company, and Nowalk & Associates, independent public or
certified public accountants for CCG, a letter dated such date, in form and
substance satisfactory to the Representatives, to the effect that they
reaffirm the statements made in the letter furnished by them pursuant to
subsection (a) of this Section 5, except that the specified date referred
to therein for the carrying out of procedures shall be no more than three
business days prior to the First Closing Date or Second Closing Date, as
the case may be (and the Representatives shall have received an additional
three conformed copies of such accountants' letter for each of the several
Underwriters).
(h) OPINION OF COUNSEL FOR THE SELLING STOCKHOLDERS. On each
of the First Closing Date and the Second Closing Date the Representatives
shall have received the favorable opinion of ______________, counsel for
the Selling Stockholders, dated as of such Closing Date, the form of which
is attached as EXHIBIT B (and the Representatives shall have received an
additional three conformed copies of such counsel's legal opinion for each
of the several Underwriters).
(i) SELLING STOCKHOLDERS' CERTIFICATE. On each of the First
Closing Date and the Second Closing Date the Representatives shall have
received a written certificate executed by each Selling Stockholder, dated
as of such Closing Date, to the effect that:
(i) the representations, warranties and covenants of
such Selling Stockholder set forth in Section 1(B) of this Agreement
are true and correct with the same force and effect as though expressly
made by such Selling Stockholder on and as of such Closing Date; and
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<PAGE> 29
(ii) such Selling Stockholder has complied with all
the agreements and satisfied all the conditions on its part to be
performed or satisfied at or prior to such Closing Date.
(j) SELLING STOCKHOLDERS' DOCUMENTS. On the date hereof, the
Company and the Selling Stockholders shall have furnished for review by the
Representatives copies of the Powers of Attorney and Custodian Agreements
executed by each of the Selling Stockholders and such further information,
certificates and documents as the Representatives may reasonably request.
(k) LOCK-UP AGREEMENT FROM CERTAIN SHAREHOLDERS OF THE COMPANY
OTHER THAN SELLING STOCKHOLDERS. On the date hereof, the Company shall have
furnished to the Representatives an agreement in the form of EXHIBIT C
hereto from each director and each officer of the Company, and such
agreement shall be in full force and effect on each of the First Closing
Date and the Second Closing Date.
(l) ADDITIONAL DOCUMENTS. On or before each of the First
Closing Date and the Second Closing Date, the Representatives and counsel
for the Underwriters shall have received such information, documents and
opinions as they may reasonably require for the purposes of enabling them
to pass upon the issuance and sale of the Common Shares as contemplated
herein, or in order to evidence the accuracy of any of the representations
and warranties, or the satisfaction of any of the conditions or agreements,
herein contained.
If any condition specified in this Section 5 is not satisfied when and
as required to be satisfied, this Agreement may be terminated by the
Representatives by notice to the Company and the Selling Stockholders at any
time on or prior to the First Closing Date and, with respect to the Optional
Common Shares, at any time prior to the Second Closing Date, which termination
shall be without liability on the part of any party to any other party, except
that Section 4, Section 6, Section 8 and Section 9 shall at all times be
effective and shall survive such termination.
SECTION 6. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If this
Agreement is terminated by the Representatives pursuant to Section 5, Section 7,
Section 10 or Section 11 or Section 17, or if the sale to the Underwriters of
the Common Shares on the First Closing Date is not consummated because of any
refusal, inability or failure on the part of the Company or the Selling
Stockholders to perform any agreement herein or to comply with any provision
hereof, the Company agrees to reimburse the Representatives and the other
Underwriters (or such Underwriters as have terminated this Agreement with
respect to themselves), severally, upon demand for all out-of-pocket expenses
that shall have been reasonably incurred by the Representatives and the
Underwriters in connection with the proposed purchase and the offering and sale
of the
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<PAGE> 30
Common Shares, including but not limited to fees and disbursements of counsel,
printing expenses, travel expenses, postage, facsimile and telephone charges.
SECTION 7. EFFECTIVENESS OF THIS AGREEMENT.
This Agreement shall not become effective until the later of
(i) the execution of this Agreement by the parties hereto and (ii) notification
by the Commission to the Company and the Representatives of the effectiveness of
the Registration Statement under the Securities Act.
Prior to such effectiveness, this Agreement may be terminated
by any party by notice to each of the other parties hereto, and any such
termination shall be without liability on the part of (a) the Company or the
Selling Stockholders to any Underwriter, except that the Company and the Selling
Stockholders shall be obligated to reimburse the expenses of the Representatives
and the Underwriters pursuant to Sections 4 and 6 hereof, (b) of any Underwriter
to the Company or the Selling Stockholders, or (c) of any party hereto to any
other party except that the provisions of Section 8 and Section 9 shall at all
times be effective and shall survive such termination.
SECTION 8. INDEMNIFICATION.
(a) INDEMNIFICATION OF THE UNDERWRITERS. Each of the Company and
each of the Selling Stockholders, jointly and severally, agrees to
indemnify and hold harmless each Underwriter, its officers and employees,
and each person, if any, who controls any Underwriter within the meaning of
the Securities Act and the Exchange Act against any loss, claim, damage,
liability or expense, as incurred, to which such Underwriter or such
controlling person may become subject, under the Securities Act, the
Exchange Act or other federal or state statutory law or regulation, or at
common law or otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of the Company), insofar as
such loss, claim, damage, liability or expense (or actions in respect
thereof as contemplated below) arises out of or is based (i) upon any
untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement, or any amendment thereto, including any
information deemed to be a part thereof pursuant to Rule 430A or Rule 434
under the Securities Act, or the omission or alleged omission therefrom of
a material fact required to be stated therein or necessary to make the
statements therein not misleading; or (ii) upon any untrue statement or
alleged untrue statement of a material fact contained in any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto), or
the omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading; or (iii) in whole or in part
upon any inaccuracy in the representations and warranties of the Company or
the Selling Stockholders contained herein; or (iv) in whole or in part upon
any failure of the Company or the Selling Stockholders to perform their
respective obligations
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<PAGE> 31
hereunder or under law; or (v) any act or failure to act or any alleged act
or failure to act by any Underwriter in connection with, or relating in any
manner to, the Common Stock or the offering contemplated hereby, and which
is included as part of or referred to in any loss, claim, damage, liability
or action arising out of or based upon any matter covered by clause (i) or
(ii) above, PROVIDED that the Company shall not be liable under this clause
(v) to the extent that a court of competent jurisdiction shall have
determined by a final judgment that such loss, claim, damage, liability or
action resulted directly from any such acts or failures to act undertaken
or omitted to be taken by such Underwriter through its gross negligence or
willful misconduct; and to reimburse each Underwriter and each such
controlling person for any and all expenses (including the fees and
disbursements of counsel chosen by NationsBanc Montgomery Securities, Inc.)
as such expenses are reasonably incurred by such Underwriter or such
controlling person in connection with investigating, defending, settling,
compromising or paying any such loss, claim, damage, liability, expense or
action; PROVIDED, HOWEVER, that the foregoing indemnity agreement shall not
apply to any loss, claim, damage, liability or expense to the extent, but
only to the extent, arising out of or based upon any untrue statement or
alleged untrue statement or omission or alleged omission made in reliance
upon and in conformity with written information furnished to the Company
and the Selling Stockholders by the Representatives expressly for use in
the Registration Statement, any preliminary prospectus or the Prospectus
(or any amendment or supplement thereto); and provided, further, that with
respect to any preliminary prospectus, the foregoing indemnity agreement
shall not inure to the benefit of any Underwriter from whom the person
asserting any loss, claim, damage, liability or expense purchased Common
Shares, or any person controlling such Underwriter, if copies of the
Prospectus were timely delivered to the Underwriter pursuant to Section 2
and a copy of the Prospectus (as then amended or supplemented if the
Company shall have furnished any amendments or supplements thereto) was not
sent or given by or on behalf of such Underwriter to such person, if
required by law so to have been delivered, at or prior to the written
confirmation of the sale of the Common Shares to such person, and if the
Prospectus (as so amended or supplemented) would have cured the defect
giving rise to such loss, claim, damage, liability or expense. The
indemnity agreement set forth in this Section 8(a) shall be in addition to
any liabilities that the Company and the Selling Stockholders may otherwise
have.
(b) INDEMNIFICATION OF THE COMPANY, ITS DIRECTORS AND
OFFICERS. Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, each of its directors, each of its officers
who signed the Registration Statement, the Selling Stockholders and each
person, if any, who controls the Company or any Selling Stockholder within
the meaning of the Securities Act or the Exchange Act, against any loss,
claim, damage, liability or expense, as incurred, to which the Company, or
any such director, officer, Selling Stockholder or controlling person may
become subject, under the Securities Act, the Exchange Act, or other
federal or state statutory law or regulation, or at common law or otherwise
(including
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<PAGE> 32
in settlement of any litigation, if such settlement is effected with the
written consent of such Underwriter), insofar as such loss, claim, damage,
liability or expense (or actions in respect thereof as contemplated below)
arises out of or is based upon any untrue or alleged untrue statement of a
material fact contained in the Registration Statement, any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto), or
arises out of or is based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in the Registration Statement, any
preliminary prospectus, the Prospectus (or any amendment or supplement
thereto), in reliance upon and in conformity with written information
furnished to the Company and the Selling Stockholders by the
Representatives expressly for use therein; and to reimburse the Company, or
any such director, officer, Selling Stockholder or controlling person for
any legal and other expense reasonably incurred by the Company, or any such
director, officer, Selling Stockholder or controlling person in connection
with investigating, defending, settling, compromising or paying any such
loss, claim, damage, liability, expense or action. Each of the Company and
each of the Selling Stockholders, hereby acknowledges that the only
information that the Underwriters have furnished to the Company and the
Selling Stockholders expressly for use in the Registration Statement, any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto) are the statements set forth [(A) as the last two paragraphs on
the inside front cover page of the Prospectus concerning stabilization and
passive market making by the Underwriters and (B) in the table in the first
paragraph and as the second and seventh paragraphs under the caption
"Underwriting" in the Prospectus;] and the Underwriters confirm that such
statements are correct. The indemnity agreement set forth in this Section
8(b) shall be in addition to any liabilities that each Underwriter may
otherwise have.
(c) NOTIFICATIONS AND OTHER INDEMNIFICATION PROCEDURES.
Promptly after receipt by an indemnified party under this Section 8 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party under
this Section 8, notify the indemnifying party in writing of the
commencement thereof, but the omission so to notify the indemnifying party
will not relieve it from any liability which it may have to any indemnified
party for contribution or otherwise than under the indemnity agreement
contained in this Section 8 or to the extent it is not prejudiced as a
proximate result of such failure. In case any such action is brought
against any indemnified party and such indemnified party seeks or intends
to seek indemnity from an indemnifying party, the indemnifying party will
be entitled to participate in, and, to the extent that it shall elect,
jointly with all other indemnifying parties similarly notified, by written
notice delivered to the indemnified party promptly after receiving the
aforesaid notice from such indemnified party, to assume the defense thereof
with counsel reasonably satisfactory to such indemnified party; PROVIDED,
HOWEVER, if the
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<PAGE> 33
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably
concluded that a conflict may arise between the positions of the
indemnifying party and the indemnified party in conducting the defense of
any such action or that there may be legal defenses available to it and/or
other indemnified parties which are different from or additional to those
available to the indemnifying party, the indemnified party or parties shall
have the right to select separate counsel to assume such legal defenses and
to otherwise participate in the defense of such action on behalf of such
indemnified party or parties. Upon receipt of notice from the indemnifying
party to such indemnified party of such indemnifying party's election so to
assume the defense of such action and approval by the indemnified party of
counsel, the indemnifying party will not be liable to such indemnified
party under this Section 8 for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense thereof
unless (i) the indemnified party shall have employed separate counsel in
accordance with the proviso to the next preceding sentence (it being
understood, however, that the indemnifying party shall not be liable for
the expenses of more than one separate counsel (together with local
counsel), approved by the indemnifying party (NationsBanc Montgomery
Securities, Inc. in the case of Section 8(b) and Section 9), representing
the indemnified parties who are parties to such action) or (ii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable
time after notice of commencement of the action, in each of which cases the
fees and expenses of counsel shall be at the expense of the indemnifying
party.
(d) SETTLEMENTS. The indemnifying party under this Section 8
shall not be liable for any settlement of any proceeding effected without
its prior written consent, but if settled with such consent or if there be a
final judgment for the plaintiff, the indemnifying party agrees to indemnify
the indemnified party against any loss, claim, damage, liability or expense
by reason of such settlement or judgment. Notwithstanding the foregoing
sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses
of counsel as contemplated by Section 8(c) hereof, the indemnifying party
agrees that it shall be liable for any settlement of any proceeding effected
without its written consent if (i) such settlement is entered into more than
30 days after receipt by such indemnifying party of the aforesaid request
and (ii) such indemnifying party shall not have reimbursed the indemnified
party in accordance with such request prior to the date of such settlement.
No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement, compromise or consent to the entry
of judgment in any pending or threatened action, suit or proceeding in
respect of which any indemnified party is or could have been a party and
indemnity was or could have been sought hereunder by such indemnified party,
unless such settlement, compromise or consent includes an unconditional
release of such indemnified party from all liability on claims that are the
subject matter of such action, suit or proceeding.
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<PAGE> 34
SECTION 9. CONTRIBUTION.
If the indemnification provided for in Section 8 is for any
reason held to be unavailable to or otherwise insufficient to hold harmless an
indemnified party in respect of any losses, claims, damages, liabilities or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount paid or payable by such indemnified party, as incurred, as
a result of any losses, claims, damages, liabilities or expenses referred to
therein (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company and the Selling Stockholders, on the one hand,
and the Underwriters, on the other hand, from the offering of the Common Shares
pursuant to this Agreement or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Company and the Selling Stockholders, on the one
hand, and the Underwriters, on the other hand, in connection with the statements
or omissions or inaccuracies in the representations and warranties herein which
resulted in such losses, claims, damages, liabilities or expenses, as well as
any other relevant equitable considerations. The relative benefits received by
the Company and the Selling Stockholders, on the one hand, and the Underwriters,
on the other hand, in connection with the offering of the Common Shares pursuant
to this Agreement shall be deemed to be in the same respective proportions as
the total net proceeds from the offering of the Common Shares pursuant to this
Agreement (before deducting expenses) received by the Company and the Selling
Stockholders, and the total underwriting discount received by the Underwriters,
in each case as set forth on the front cover page of the Prospectus (or, if Rule
434 under the Securities Act is used, the corresponding location on the Term
Sheet) bear to the aggregate initial public offering price of the Common Shares
as set forth on such cover. The relative fault of the Company and the Selling
Stockholders, on the one hand, and the Underwriters, on the other hand, shall be
determined by reference to, among other things, whether any such untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact or any such inaccurate or alleged inaccurate
representation or warranty relates to information supplied by the Company or the
Selling Stockholders, on the one hand, or the Underwriters, on the other hand,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses referred to above shall be
deemed to include, subject to the limitations set forth in Section 8(c), any
legal or other fees or expenses reasonably incurred by such party in connection
with investigating or defending any action or claim. The provisions set forth in
Section 8(c) with respect to notice of commencement of any action shall apply if
a claim for contribution is to be made under this Section 9; PROVIDED, HOWEVER,
that no additional notice shall be required with respect to any action for which
notice has been given under Section 8(c) for purposes of indemnification.
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<PAGE> 35
The Company, the Selling Stockholders and the Underwriters
agree that it would not be just and equitable if contribution pursuant to this
Section 9 were determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to in this
Section 9.
Notwithstanding the provisions of this Section 9, no
Underwriter shall be required to contribute any amount in excess of the
underwriting commissions received by such Underwriter in connection with the
Common Shares underwritten by it and distributed to the public. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations to
contribute pursuant to this Section 9 are several, and not joint, in proportion
to their respective underwriting commitments as set forth opposite their names
in SCHEDULE A. For purposes of this Section 9, each officer and employee of an
Underwriter and each person, if any, who controls an Underwriter within the
meaning of the Securities Act and the Exchange Act shall have the same rights to
contribution as such Underwriter, and each director of the Company, each officer
of the Company who signed the Registration Statement, and each person, if any,
who controls the Company with the meaning of the Securities Act and the Exchange
Act shall have the same rights to contribution as the Company.
SECTION 10. DEFAULT OF ONE OR MORE OF THE SEVERAL
UNDERWRITERS. If, on the First Closing Date or the Second Closing Date, as the
case may be, any one or more of the several Underwriters shall fail or refuse to
purchase Common Shares that it or they have agreed to purchase hereunder on such
date, and the aggregate number of Common Shares which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase does not
exceed 10% of the aggregate number of the Common Shares to be purchased on such
date, the other Underwriters shall be obligated, severally, in the proportions
that the number of Firm Common Shares set forth opposite their respective names
on SCHEDULE A bears to the aggregate number of Firm Common Shares set forth
opposite the names of all such non-defaulting Underwriters, or in such other
proportions as may be specified by the Representatives with the consent of the
non-defaulting Underwriters, to purchase the Common Shares which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase on such
date. If, on the First Closing Date or the Second Closing Date, as the case may
be, any one or more of the Underwriters shall fail or refuse to purchase Common
Shares and the aggregate number of Common Shares with respect to which such
default occurs exceeds 10% of the aggregate number of Common Shares to be
purchased on such date, and arrangements satisfactory to the Representatives and
the Company for the purchase of such Common Shares are not made within 48 hours
after such default, this Agreement shall terminate without liability of any
party to any other party except that the provisions of Section 4, Section 6,
Section 8 and Section 9 shall at all times be effective and shall survive such
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<PAGE> 36
termination. In any such case either the Representatives or the Company shall
have the right to postpone the First Closing Date or the Second Closing Date, as
the case may be, but in no event for longer than seven days in order that the
required changes, if any, to the Registration Statement and the Prospectus or
any other documents or arrangements may be effected.
As used in this Agreement, the term "Underwriter" shall be
deemed to include any person substituted for a defaulting Underwriter under this
Section 10. Any action taken under this Section 10 shall not relieve any
defaulting Underwriter from liability in respect of any default of such
Underwriter under this Agreement.
SECTION 11. TERMINATION OF THIS AGREEMENT. Prior to the First
Closing Date this Agreement may be terminated by the Representatives by notice
given to the Company and the Selling Stockholders if at any time (i) trading or
quotation in any of the Company's securities shall have been suspended or
limited by the Commission or by the New York Stock Exchange, or trading in
securities generally on either the Nasdaq Stock Market or the New York Stock
Exchange shall have been suspended or limited, or minimum or maximum prices
shall have been generally established on any of such stock exchanges by the
Commission or the NASD; (ii) a general banking moratorium shall have been
declared by any of federal, Florida, New York or California authorities; (iii)
there shall have occurred any outbreak or escalation of national or
international hostilities or any crisis or calamity, or any change in the United
States or international financial markets, or any substantial change or
development involving a prospective substantial change in United States' or
international political, financial or economic conditions, as in the judgment of
the Representatives is material and adverse and makes it impracticable to market
the Common Shares in the manner and on the terms described in the Prospectus or
to enforce contracts for the sale of securities; (iv) in the judgment of the
Representatives there shall have occurred any Material Adverse Change; or (v)
the Company shall have sustained a loss by strike, fire, flood, earthquake,
accident or other calamity of such character as in the judgment of the
Representatives may interfere materially with the conduct of the business and
operations of the Company regardless of whether or not such loss shall have been
insured. Any termination pursuant to this Section 11 shall be without liability
on the part of (a) the Company or the Selling Stockholders to any Underwriter,
except that the Company and the Selling Stockholders shall be obligated to
reimburse the expenses of the Representatives and the Underwriters pursuant to
Sections 4 and 6 hereof, (b) any Underwriter to the Company or the Selling
Stockholders, or (c) of any party hereto to any other party except that the
provisions of Section 8 and Section 9 shall at all times be effective and shall
survive such termination.
SECTION 12. REPRESENTATIONS AND INDEMNITIES TO SURVIVE
DELIVERY. The respective indemnities, agreements, representations, warranties
and other statements of the Company, of its officers, of the Selling
Stockholders and of the several Underwriters set forth in or made pursuant to
this Agreement will remain in full force and effect, regardless of any
investigation made by or on behalf of any Underwriter or the Company
- 32 -
<PAGE> 37
or any of its or their partners, officers or directors or any controlling
person, or the Selling Stockholders, as the case may be, and will survive
delivery of and payment for the Common Shares sold hereunder and any termination
of this Agreement.
SECTION 13. NOTICES. All communications hereunder shall be in
writing and shall be mailed, hand delivered or telecopied and confirmed to the
parties hereto as follows:
If to the Representatives:
NationsBanc Montgomery Securities, Inc.
600 Montgomery Street
San Francisco, California 94111
Facsimile: 415-249-5558
Attention: Richard A. Smith
with a copy to:
NationsBanc Montgomery Securities, Inc.
600 Montgomery Street
San Francisco, California 94111
Facsimile: (415) 249-5553
Attention: David A. Baylor, Esq.
If to the Company:
Dycom Industries, Inc.
4440 PGA Boulevard, Suite 600
Palm Beach Gardens, Florida 33410
Facsimile: (561) 627-7709
Attention:
If to the Selling Stockholders:
L. Frank Chopin, Esquire
Chopin, Miller & Yudenfreund
440 Royal Palm Way, Suite 200
Palm Beach, Florida 33480
Facsimile: (561) 655-9508
Any party hereto may change the address for receipt of communications
by giving written notice to the others.
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<PAGE> 38
SECTION 14. SUCCESSORS. This Agreement will inure to the
benefit of and be binding upon the parties hereto, including any substitute
Underwriters pursuant to Section 10 hereof, and to the benefit of the employees,
officers and directors and controlling persons referred to in Section 8 and
Section 9, and in each case their respective successors, and personal
representatives, and no other person will have any right or obligation
hereunder. The term "successors" shall not include any purchaser of the Common
Shares as such from any of the Underwriters merely by reason of such purchase.
SECTION 15. PARTIAL UNENFORCEABILITY. The invalidity or
unenforceability of any Section, paragraph or provision of this Agreement shall
not affect the validity or enforceability of any other Section, paragraph or
provision hereof. If any Section, paragraph or provision of this Agreement is
for any reason determined to be invalid or unenforceable, there shall be deemed
to be made such minor changes (and only such minor changes) as are necessary to
make it valid and enforceable.
SECTION 16. GOVERNING LAW PROVISIONS. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SUCH STATE.
SECTION 17. FAILURE OF ONE OR MORE OF THE SELLING STOCKHOLDERS
TO SELL AND DELIVER COMMON SHARES. If one or more of the Selling Stockholders
shall fail to sell and deliver to the Underwriters the Common Shares to be sold
and delivered by such Selling Stockholders at the First Closing Date pursuant to
this Agreement, then the Underwriters may at their option, by written notice
from the Representatives to the Company and the Selling Stockholders, either (i)
terminate this Agreement without any liability on the part of any Underwriter
or, except as provided in Sections 4, 6, 8 and 9 hereof, the Company or the
Selling Stockholders, or (ii) purchase the shares which the Company and other
Selling Stockholders have agreed to sell and deliver in accordance with the
terms hereof. If one or more of the Selling Stockholders shall fail to sell and
deliver to the Underwriters the Common Shares to be sold and delivered by such
Selling Stockholders pursuant to this Agreement at the First Closing Date or the
Second Closing Date, then the Underwriters shall have the right, by written
notice from the Representatives to the Company and the Selling Stockholders, to
postpone the First Closing Date or the Second Closing Date, as the case may be,
but in no event for longer than seven days in order that the required changes,
if any, to the Registration Statement and the Prospectus or any other documents
or arrangements may be effected.
SECTION 18. GENERAL PROVISIONS. This Agreement constitutes the
entire agreement of the parties to this Agreement and supersedes all prior
written or oral and all contemporaneous oral agreements, understandings and
negotiations with respect to the subject matter hereof. This Agreement may be
executed in two or more counterparts, each one of which shall be an original,
with the same effect as if the signatures thereto
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<PAGE> 39
and hereto were upon the same instrument. This Agreement may not be amended or
modified unless in writing by all of the parties hereto, and no condition herein
(express or implied) may be waived unless waived in writing by each party whom
the condition is meant to benefit. The Table of Contents and the Section
headings herein are for the convenience of the parties only and shall not affect
the construction or interpretation of this Agreement.
Each of the parties hereto acknowledges that it is a
sophisticated business person who was adequately represented by counsel during
negotiations regarding the provisions hereof, including, without limitation, the
indemnification provisions of Section 8 and the contribution provisions of
Section 9, and is fully informed regarding said provisions. Each of the parties
hereto further acknowledges that the provisions of Sections 8 and 9 hereto
fairly allocate the risks in light of the ability of the parties to investigate
the Company, its affairs and its business in order to assure that adequate
disclosure has been made in the Registration Statement, any preliminary
prospectus and the Prospectus (and any amendments and supplements thereto), as
required by the Securities Act and the Exchange Act.
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<PAGE> 40
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to the Company and the Custodian the enclosed
copies hereof, whereupon this instrument, along with all counterparts hereof,
shall become a binding agreement in accordance with its terms.
Very truly yours,
DYCOM INDUSTRIES, INC.
By:__________________________
President and Chief Executive
Officer
SELLING STOCKHOLDERS
NAMED IN SCHEDULE __
By:__________________________
(Attorney-in-fact)
The foregoing Underwriting Agreement is hereby confirmed and accepted
by the Representatives in San Francisco, California as of the date first above
written.
NATIONSBANC MONTGOMERY SECURITIES, INC.
MORGAN KEEGAN & COMPANY, INC.
THE ROBINSON-HUMPHREY COMPANY, LLC
Acting as Representatives of the
several Underwriters named in
the attached Schedule A.
By: NATIONSBANC MONTGOMERY SECURITIES, INC.
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<PAGE> 41
By:___________________________
Richard A. Smith
Authorized Signatory
SCHEDULE A
NUMBER OF
FIRM COMMON SHARES
UNDERWRITERS TO BE PURCHASED
NationsBanc Montgomery Securities, Inc. .................
Morgan Keegan & Company, Inc. ...........................
The Robinson-Humphrey Company, LLC ...................... _________
Total............................................
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<PAGE> 42
SCHEDULE B
<TABLE>
<CAPTION>
NUMBER OF MAXIMUM NUMBER OF
SELLING STOCKHOLDER FIRM COMMON SHARES OPTIONAL COMMON SHARES
TO BE SOLD TO BE SOLD
<S> <C> <C>
Thomas J. Polis 513,311 0
235 East Gay Street
West Chester, PA.
George H. Tamasi 513,311 0
235 East Gay Street
West Chester, PA.
Mary Irene Younkin, as Executor 100,000 0
of the Estate of Floyd E. Younkin
555 Greenlawn Avenue
Columbus, Ohio
Total: 1,126,622 0
</TABLE>
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<PAGE> 43
EXHIBIT A
Opinion of counsel for the Company to be delivered pursuant to
Section 5(d) of the Underwriting Agreement.
References to the Prospectus in this EXHIBIT A include any
supplements thereto at the Closing Date.
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Florida.
(ii) The Company has corporate power and authority to own,
lease and operate its properties and to conduct its business as described
in the Prospectus and to enter into and perform its obligations under the
Underwriting Agreement.
(iii) The Company is duly qualified as a foreign corporation
to transact business and is in good standing in each other jurisdiction in
which such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except for such
jurisdictions where the failure to so qualify or to be in good standing
would not, individually or in the aggregate, result in a Material Adverse
Change.
(iv) Each significant subsidiary (as defined in Rule 405 under
the Securities Act) has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has corporate power and authority to own, lease and operate
its properties and to conduct its business as described in the Prospectus
and, to the best knowledge of such counsel, is duly qualified as a foreign
corporation to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by reason of
the ownership or leasing of property or the conduct of business, except for
such jurisdictions where the failure to so qualify or to be in good
standing would not, individually or in the aggregate, result in a Material
Adverse Change.
(v) All of the issued and outstanding capital stock of each
such significant subsidiary has been duly authorized and validly issued, is
fully paid and non-assessable and is owned by the Company, directly or
through subsidiaries, free and clear of any security interest, mortgage,
pledge, lien, encumbrance or, to the best knowledge of such counsel, any
pending or threatened claim, except such as may arise pursuant to credit
facilities described in the Prospectus.
(vi) The authorized, issued and outstanding capital stock of
the Company (including the Common Stock) conform to the descriptions
thereof set forth in the Prospectus. All of the outstanding shares of
Common Stock (including the shares of Common Stock owned by Selling
Stockholders) have been duly authorized
<PAGE> 44
and validly issued, are fully paid and nonassessable and, to the best of
such counsel's knowledge, have been issued in compliance with the
registration and qualification requirements of federal and state securities
laws. The form of certificate used to evidence the Common Stock is in due
and proper form and complies with all applicable requirements of the
charter and by-laws of the Company and the Florida General Corporation Act.
The description of the Company's stock option, stock bonus and other stock
plans or arrangements, and the options or other rights granted and
exercised thereunder, set forth in the Prospectus accurately and fairly
presents the information required to be shown with respect to such plans,
arrangements, options and rights.
(vii) No stockholder of the Company or any other person has
any preemptive right, right of first refusal or other similar right to
subscribe for or purchase securities of the Company arising (i) by
operation of the charter or by-laws of the Company or the Florida General
Corporation Act or (ii) to the best knowledge of such counsel, otherwise.
(viii) The Underwriting Agreement has been duly authorized,
executed and delivered by, and is a valid and binding agreement of, the
Company, enforceable in accordance with its terms, except as rights to
indemnification thereunder may be limited by applicable law and except as
the enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally or by general equitable principles.
(ix) The Common Shares to be purchased by the Underwriters
from the Company have been duly authorized for issuance and sale pursuant
to the Underwriting Agreement and, when issued and delivered by the Company
pursuant to the Underwriting Agreement against payment of the consideration
set forth therein, will be validly issued, fully paid and nonassessable.
(x) Each of the Registration Statement and the Rule 462(b)
Registration Statement, if any, has been declared effective by the
Commission under the Securities Act. To the best knowledge of such counsel,
no stop order suspending the effectiveness of either of the Registration
Statement or the Rule 462(b) Registration Statement, if any, has been
issued under the Securities Act and no proceedings for such purpose have
been instituted or are pending or are contemplated or threatened by the
Commission. Any required filing of the Prospectus and any supplement
thereto pursuant to Rule 424(b) under the Securities Act has been made in
the manner and within the time period required by such Rule 424(b).
(xi) The Registration Statement, including any Rule 462(b)
Registration Statement, the Prospectus, and each amendment or supplement to
the Registration Statement and the Prospectus, as of their respective
effective or issue
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<PAGE> 45
dates (other than the financial statements and supporting schedules
included therein or in exhibits to or excluded from the Registration
Statement, as to which no opinion need be rendered) comply as to form in
all material respects with the applicable requirements of the Securities
Act.
(xii) The Common Shares have been approved for listing on the
New York Stock Exchange.
(xiii) The statements (i) in the Prospectus under the captions
"Risk Factors--Shares Eligible for Future Sale," "Risk
Factors--Anti-takeover Considerations," "Management's Discussion and
Analysis of Results of Operations and Financial Condition--Liquidity and
Capital Resources", "Business--Legal Proceedings", "Management--Certain
Relationships and Related Transactions," and "Description of Capital
Stock", and "Shares Eligible for Future Sale" and (ii) in Item 14 and Item
15 of the Registration Statement, insofar as such statements constitute
matters of law, summaries of legal matters, the Company's charter or by-law
provisions, documents or legal proceedings, or legal conclusions, has been
reviewed by such counsel and fairly present and summarize, in all material
respects, the matters referred to therein. [we will consider further
deletions when we have considered the proxy statement]
(xiv) To the best knowledge of such counsel, there are no
legal or governmental actions, suits or proceedings pending or threatened
which are required to be disclosed in the Registration Statement, other
than those disclosed therein.
(xv) To the best knowledge of such counsel, there are no
Existing Instruments required to be described or referred to in the
Registration Statement or to be filed as exhibits thereto other than those
described or referred to therein or filed or incorporated by reference as
exhibits thereto; and the descriptions thereof and references thereto are
correct in all material respects.
(xvi) No consent, approval, authorization or other order of,
or registration or filing with, any court or other governmental authority
or agency, is required for the Company's execution, delivery and
performance of the Underwriting Agreement and consummation of the
transactions contemplated thereby and by the Prospectus, except as required
under the Securities Act, applicable state securities or blue sky laws and
from the NASD.
(xvii) The execution and delivery of the Underwriting
Agreement by the Company and the performance by the Company of its
obligations thereunder (other than performance by the Company of its
obligations under the indemnification section
- 3 -
<PAGE> 46
of the Underwriting Agreement, as to which no opinion need be rendered),
assuming due authorization, execution and delivery by each other party
thereto, (i) have been duly authorized by all necessary corporate action on
the part of the Company; (ii) will not result in any violation of the
provisions of the charter or by-laws of the Company or any subsidiary;
(iii) will not constitute a breach of, or Default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any property
or assets of the Company or any of its subsidiaries pursuant to, (A) the
Company's Bank Credit Agreement and Term Loan with _________________, as
lender, or (B) to the best knowledge of such counsel, any other material
Existing Instrument; or (iv) to the best knowledge of such counsel, will
not result in any violation of any law, administrative regulation or
administrative or court decree applicable to the Company or any subsidiary.
(xviiii) The Company is not, and after receipt of payment for
the Common Shares will not be, an "investment company" within the meaning
of Investment Company Act.
(xix) To the best knowledge of such counsel, there are no
persons with registration or other similar rights to have any equity or
debt securities registered for sale under the Registration Statement or
included in the offering contemplated by the Underwriting Agreement, except
for such rights as have been duly waived.
(xx) To the best knowledge of such counsel, neither the
Company nor any subsidiary is in violation of its charter or by-laws or any
law, administrative regulation or administrative or court decree applicable
to the Company or any subsidiary or is in Default in the performance or
observance of any obligation, agreement, covenant or condition contained in
any material Existing Instrument, except in each such case for such
violations or Defaults as would not, individually or in the aggregate,
result in a Material Adverse Change.
(xxi) To the best knowledge of such counsel, except as
described in the Prospectus, no claims have been asserted against the
Company by any person to the use of any such rights or challenging or
questioning the validity or effectiveness of any such rights.
(xxii) Each document filed pursuant to the Exchange Act (other
than the financial statements and supporting schedules included therein, as
to which no opinion need be rendered) and incorporated or deemed to be
incorporated by
- 4 -
<PAGE> 47
reference in the Prospectus complied when so filed as to form in all
material respects with the Exchange Act.
(xxiii) The agreements necessary to effect the acquisition of
CCG have been duly authorized, executed and delivered by each of the
parties thereto and constitute the valid, legal and binding agreements of
each party thereto, and the acquisition of CCG by the Company and the
related transactions contemplated thereby have been consummated as
described in the Prospectus.
In addition, such counsel shall state that they have
participated in conferences with officers and other representatives of the
Company, representatives of the independent public or certified public
accountants for the Company and with representatives of the Underwriters
duringch the contents of the Registration Statement and the Prospectus, and
any supplements or amendments thereto, and related matters were discussed
and, although such counsel has not undertaken to investigate or verify
independently and is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement or the Prospectus (other than as
indicated above), including all documents incorporated or deemed to be
incorporated by reference therein, and any supplements or amendments
thereto, on the basis of the foregoing, no facts have come to their
attention which would lead them to believe that either the Registration
Statement or any amendments thereto, at the time the Registration Statement
or such amendments became effective, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or that
the Prospectus, as of its date or at the First Closing Date or the Second
Closing Date, as the case may be, contained an untrue statement of a
material fact or omitted to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under which
they were made, not misleading (it being understood that such counsel need
express no belief or opinion as to the financial statements and related
notes, the financial statement schedules or other financial or statistical
data included in the Registration Statement or the Prospectus or any
amendments or supplements thereto).
In rendering such opinion, such counsel may rely (A) as to
matters involving the application of laws of any jurisdiction other than the
General Corporation Law of the State of Delaware, the Florida General
Corporation Act or the federal law of the United States, to the extent they deem
proper and specified in such opinion, upon the opinion (which shall be dated the
First Closing Date or the Second Closing Date, as the case may be, shall be
satisfactory in form and substance to the Underwriters, shall expressly state
that the Underwriters may rely on such opinion as if it were addressed to them
and shall be furnished to the Representatives) of other counsel of good standing
whom they believe to be reliable and who are satisfactory to counsel for the
- 5 -
<PAGE> 48
Underwriters; PROVIDED, HOWEVER, that such counsel shall further state that they
believe that they and the Underwriters are justified in relying upon such
opinion of other counsel, and (B) as to matters of fact, to the extent they deem
proper, on certificates of responsible officers of the Company and public
officials.
- 6 -
<PAGE> 49
EXHIBIT B
The opinion of such counsel pursuant to Section 5(h) shall be
rendered to the Representatives at the request of the Company and shall so state
therein. References to the Prospectus in this EXHIBIT B include any supplements
thereto at the Closing Date.
(i) The Underwriting Agreement has been duly authorized,
executed and delivered by or on behalf of, and, assuming due authorization,
execution and delivery by each other party thereto, is a valid and binding
agreement of Stockholder, enforceable in accordance with its terms, except
as rights to indemnification thereunder may be limited by applicable law
and except as the enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally or by general equitable principles.
(ii) The execution and delivery by such Selling Stockholder
of, and the performance by such Selling Stockholder of its obligations
under, the Underwriting Agreement and its Custody Agreement and its Power
of Attorney will not contravene or conflict with, result in a breach of, or
constitute a default under, the charter or by-laws, partnership agreement,
trust agreement or other organizational documents, as the case may be, of
such Selling Stockholder, or, to the best of such counsel's knowledge,
violate or contravene any provision of applicable law or regulation, or
violate, result in a breach of or constitute a default under the terms of
any other agreement or instrument to which such Selling Stockholder is a
party or by which it is bound, or any judgment, order or decree applicable
to such Selling Stockholder of any court, regulatory body, administrative
agency, governmental body or arbitrator having jurisdiction over such
Selling Stockholder.
(iii) Such Selling Stockholder has good and valid title to all
of the Common Shares which may be sold by such Selling Stockholder under
the Underwriting Agreement and has the legal right and power, and all
authorizations and approvals required by the trust agreement or other
organizational documents, as the case may be, to enter into the
Underwriting Agreement and its Custody Agreement and its Power of Attorney,
to sell, transfer and deliver all of the Common Shares which may sold by
such Selling Stockholder under the Underwriting Agreement and to comply
with its other obligations under the Underwriting Agreement, its Custody
Agreement and its Power of Attorney.
(iv) Each of the Custody Agreement and Power of Attorney of
such Selling Stockholder has been duly authorized, executed and delivered
by such Selling Stockholder and is a valid and binding agreement of such
Selling Stockholder, enforceable in accordance with its terms, except as
rights to indemnification thereunder may be limited by applicable law and
except as the enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other
<PAGE> 50
similar laws relating to or affecting creditors' rights generally or by
general equitable principles.
(v) Assuming that the Underwriters purchase the Common Shares
which are sold by such Selling Stockholder pursuant to the Underwriting
Agreement for value, in good faith and without notice of any adverse claim,
the delivery of such Common Shares pursuant to the Underwriting Agreement
will pass good and valid title to such Common Shares, free and clear of
either any security interest, mortgage, pledge, lieu encumbrance or other
claim.
(vi) To the best of such counsel's knowledge, no consent,
approval, authorization or other order of, or registration or filing with,
any court or governmental authority or agency, is required for the
consummation by such Selling Stockholder of the transactions contemplated
in the Underwriting Agreement, except as required under the Securities Act,
applicable state securities or blue sky laws, and from the NASD.
In rendering such opinion, such counsel may rely (A) as to
matters involving the application of laws of any jurisdiction other than the
General Corporation Law of the State of Delaware, the Florida General
Corporation Act or the federal law of the United States, to the extent they deem
proper and specified in such opinion, upon the opinion (which shall be dated the
First Closing Date or the Second Closing Date, as the case may be, shall be
satisfactory in form and substance to the Underwriters, shall expressly state
that the Underwriters may rely on such opinion as if it were addressed to them
and shall be furnished to the Representatives) of other counsel of good standing
whom they believe to be reliable and who are satisfactory to counsel for the
Underwriters; PROVIDED, HOWEVER, that such counsel shall further state that they
believe that they and the Underwriters are justified in relying upon such
opinion of other counsel, and (B) as to matters of fact, to the extent they deem
proper, on certificates of the Selling Stockholders and public officials.
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<PAGE> 51
EXHIBIT C
[Date]
NationsBanc Montgomery Securities, Inc.
Morgan Keegan & Company, Inc.
The Robinson-Humphrey Company, LLC
As Representatives of the Several Underwriters
c/o NationsBanc Montgomery Securities, Inc.
600 Montgomery Street
San Francisco, California 94111
RE: Dycom Industries, Inc. (the "Company")
Ladies & Gentlemen:
The undersigned is an owner of record or beneficially of
certain shares of Common Stock of the Company ("Common Stock") or securities
convertible into or exchangeable or exercisable for Common Stock. The Company
proposes to carry out a public offering of Common Stock (the "Offering") for
which you will act as the representatives of the underwriters. The undersigned
recognizes that the Offering will be of benefit to the undersigned and will
benefit the Company by, among other things, raising additional capital for its
operations. The undersigned acknowledges that you and the other underwriters are
relying on the representations and agreements of the undersigned contained in
this letter in carrying out the Offering and in entering into underwriting
arrangements with the Company with respect to the Offering.
In consideration of the foregoing, the undersigned hereby
agrees that the undersigned will not, without the prior written consent of
NationsBanc Montgomery Securities, Inc. (which consent may be withheld in its
sole discretion), directly or indirectly, sell, offer, contract or grant any
option to sell (including without limitation any short sale), pledge, transfer,
establish an open "put equivalent position" within the meaning of Rule 16a-1(h)
under the Securities Exchange Act of 1934, or otherwise dispose of any shares of
Common Stock, options or warrants to acquire shares of Common Stock, or
securities exchangeable or exercisable for or convertible into shares of Common
Stock currently or hereafter owned either of record or beneficially (as defined
in Rule 13d-3 under Securities Exchange Act of 1934, as amended) by the
undersigned, or publicly announce the undersigned's intention to do any of the
foregoing, for a period commencing on the date hereof and continuing through the
close of trading on the date 180 days after the date of the Prospectus. The
undersigned also agrees and consents to the entry of stop transfer instructions
with the Company's transfer agent and registrar against the transfer of shares
of Common Stock or securities convertible into or exchangeable or exercisable
for Common Stock held by the undersigned except in compliance with the foregoing
restrictions; provided that the
<PAGE> 52
undersigned may pledge shares of Common Stock if the pledgee agrees in writing
not to sell, offer, dispose of or otherwise transfer any pledged shares during
said 180-day period without the prior written consent of NationsBanc Montgomery
Securities, Inc. (which consent may be withheld at the sole discretion of
NationsBanc Montgomery Securities, Inc.). .
With respect to the Offering only, the undersigned waives any
registration rights relating to registration under the Securities Act of any
Common Stock owned either of record or beneficially by the undersigned,
including any rights to receive notice of the Offering.
This agreement is irrevocable and will be binding on the
undersigned and the respective successors, heirs, personal representatives, and
assigns of the undersigned.
- ------------------------------------
Printed Name of Holder
By:
---------------------------------
Signature
- ------------------------------------
Printed Name of Person Signing
(AND INDICATE CAPACITY OF PERSON SIGNING IF
SIGNING AS CUSTODIAN, TRUSTEE, OR ON BEHALF
OF AN ENTITY)
- 2 -
<PAGE> 1
Exhibit 5
October 28, 1997
Dycom Industries, Inc.
4440 PGA Boulevard, Suite 600
Palm Beach Gardens, Florida
Re: Registration Statement on Form S-3/A (Registration No. 333-36883)
of Dycom Industries, Inc.
Dear Sir or Madam:
We serve as counsel to Dycom Industries, Inc, a Florida corporation (the
"Company"). We have reviewed the referenced registration statement, as amended,
relating to the sale by the Company of up to 1,573,378 shares of the Company's
voting common stock, $.33 1/3 par value (the "Shares"). It is our opinion that
the Shares have been duly and validly authorized and, when issued, delivered and
paid for, will be validly issued, fully paid and nonassessable.
We consent to the use of this opinion in the referenced registration
statement, as amended, and to the reference to our opinion under the caption
"Legal Matters" in the prospectus constituting part of the registration
statement, as amended.
Sincerely,
Chopin, Miller & Yudenfreund
CMY/bj
<PAGE> 1
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 1 to
Registration Statement No. 333-36883 of Dycom Industries, Inc. on Form S-3 of
our report dated September 26, 1997, included in the Annual Report on Form 10-K
of Dycom Industries, Inc. for the year ended July 31, 1997, and to the use of
our report dated September 26, 1997, appearing in the Prospectus, which is part
of such Registration Statement. We also consent to the reference to us under the
headings "Summary Consolidated Financial Data" and "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
Certified Public Accountants
West Palm Beach, Florida
October 27, 1997
<PAGE> 1
Exhibit 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 1 to the
Registration Statement of Dycom Industries, Inc. (Form S-3, No. 333-36883) of
our reports related to the financial statements of Communications Construction
Group, Inc. (not presented separately herein) dated July 23, 1997 and August 29,
1996 (which is also dated as of January 3, 1997 for Notes 5 and 6 of the
financial statements of Communications Construction Group, Inc.), included in
the Annual Report on Form 10-K of Dycom Industries, Inc. for the year ended July
31, 1997, and to the use of our reports related to the financial statements of
Communications Construction Group, Inc. (not presented separately herein) dated
July 23, 1997 and August 29, 1996 (which is also dated as of January 3, 1997 for
Notes 5 and 6 of the financial statements of Communications Construction Group,
Inc.), appearing in the Prospectus, which is part of this Amendment No. 1 to the
Registration Statement. We also consent to the reference to us under the
headings "Selected Consolidated Financial Data" and "Experts" in the Prospectus.
NOWALK & ASSOCIATES
Certified Public Accountants
Cranbury, New Jersey
October 25, 1997
