<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________to________
Commission file number 0-5423
DYCOM INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Florida 59-1277135
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4440 PGA Boulevard, Suite 600
Palm Beach Gardens, Florida 33410
(Address of principal executive office) (Zip Code)
(561) 627-7171
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding as of March 10, 1997
_____ __________________________________
Common Stock, par value $0.33 1/3 8,764,836
<PAGE> 2
DYCOM INDUSTRIES, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
________
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets-
January 31, 1997 and July 31, 1996 3
Condensed Consolidated Statements of
Operations for the Three Months Ended
January 31, 1997 and 1996 4
Condensed Consolidated Statements of
Operations for the Six Months Ended
January 31, 1997 and 1996 5
Condensed Consolidated Statements of
Cash Flows for the Six Months Ended
January 31, 1997 and 1996 6-7
Notes to Condensed Consolidated
Financial Statements 8-12
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 13-15
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of
Security Holders 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
EXHIBIT INDEX 18
</TABLE>
<PAGE> 3
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
January 31, July 31,
1997 1996
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 2,041,607 $ 3,835,479
Accounts receivable, net 16,690,135 13,306,064
Costs and estimated earnings in
excess of billings 9,054,636 7,137,212
Deferred tax assets, net 1,388,949 1,261,065
Other current assets 1,334,106 1,248,405
Total current assets 30,509,433 26,788,225
PROPERTY AND EQUIPMENT, net 21,137,847 19,574,410
OTHER ASSETS:
Intangible assets, net 4,761,902 4,839,447
Deferred tax assets 716,885 598,887
Other 291,031 272,916
Total other assets 5,769,818 5,711,250
TOTAL $ 57,417,098 $ 52,073,885
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 8,341,821 $ 3,541,789
Notes payable 922,735 2,758,795
Billings in excess of costs and
estimated earnings 38,714
Accrued self-insured claims 2,712,464 3,064,229
Income taxes payable 22,280 227,619
Other accrued liabilities 6,035,546 8,151,589
Total current liabilities 18,034,846 17,782,735
NOTES PAYABLE 10,418,921 9,452,630
ACCRUED SELF-INSURED CLAIMS 7,472,858 7,062,150
Total liabilities 35,926,625 34,297,515
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, par value $.33 1/3 per share:
50,000,000 shares authorized; 8,687,901
and 8,601,492 shares issued and
outstanding, respectively 2,895,967 2,867,164
Additional paid-in capital 24,855,472 24,473,269
Retained deficit (6,260,966) (9,564,063)
Total stockholders' equity 21,490,473 17,776,370
TOTAL $ 57,417,098 $ 52,073,885
See notes to condensed consolidated financial statements--unaudited.
</TABLE>
<PAGE> 4
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
January 31, January 31,
1997 1996
<S> <C> <C>
REVENUES:
Contract revenues earned $ 39,864,847 $ 32,648,532
Other, net 147,227 182,931
Total 40,012,074 32,831,463
Expenses:
Costs of earned revenues
excluding depreciation 32,578,254 26,288,815
General and administrative 3,531,598 3,536,240
Depreciation and amortization 1,455,934 1,402,884
Total 37,565,786 31,227,939
INCOME BEFORE INCOME TAXES 2,446,288 1,603,524
PROVISION FOR INCOME TAXES:
Current 802,462 507,593
Deferred 2,348 111,699
Total 804,810 619,292
NET INCOME $ 1,641,478 $ 984,232
EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE:
Primary $0.19 $0.12
Fully diluted $0.18 $0.12
SHARES USED IN COMPUTING
EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE:
Primary 8,869,444 8,553,189
Fully diluted 8,879,222 8,553,189
See notes to condensed consolidated financial statements--unaudited.
</TABLE>
<PAGE> 5
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended
January 31, January 31,
1997 1996
<S> <C> <C>
REVENUES:
Contract revenues earned $ 80,140,079 $ 70,014,522
Other, net 239,220 422,524
Total 80,379,299 70,437,046
Expenses:
Costs of earned revenues
excluding depreciation 64,996,988 56,904,334
General and administrative 7,103,583 7,434,399
Depreciation and amortization 2,944,078 2,779,304
Total 75,044,649 67,118,037
INCOME BEFORE INCOME TAXES 5,334,650 3,319,009
PROVISION (BENEFIT) FOR INCOME TAXES:
Current 2,277,436 1,671,481
Deferred (245,883) (305,342)
Total 2,031,553 1,366,139
NET INCOME $ 3,303,097 $ 1,952,870
EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE:
Primary $0.37 $0.23
Fully diluted $0.37 $0.23
SHARES USED IN COMPUTING
EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE:
Primary 8,886,767 8,549,986
Fully diluted 8,886,902 8,549,986
See notes to condensed consolidated financial statements--unaudited.
</TABLE>
<PAGE> 6
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended
January 31, January 31,
1997 1996
<S> <C> <C>
Increase (Decrease) in Cash and Equivalents from:
OPERATING ACTIVITIES:
Net income $ 3,303,097 $ 1,952,870
Adjustments to reconcile net cash provided
by operating activities:
Depreciation and amortization 2,944,078 2,779,304
Gain on disposal of assets (86,506) (242,710)
Deferred income taxes (245,883) (305,342)
Changes in assets and liabilities:
Accounts receivable, net (3,384,071) 4,333,936
Unbilled revenues, net (1,956,138) (111,290)
Other current assets (85,701) 60,095
Other assets (18,115) 9,968
Accounts payable 4,800,032 (1,672,956)
Accrued self-insured claims and
other liabilities (2,057,464) (1,246)
Accrued income taxes (72,770) (379,351)
Net cash inflow from operating activities 3,140,559 6,423,278
INVESTING ACTIVITIES:
Capital expenditures (3,978,239) (3,436,122)
Proceeds from sale of assets 236,164 770,029
Net cash outflow from investing activities (3,742,075) (2,666,093)
FINANCING ACTIVITIES:
Borrowing on bank lines-of-credit 1,007,000
Principal payments on notes payable
and bank lines-of-credit (2,477,793) (3,159,872)
Exercise of stock options 278,437 33,984
Net cash outflow from financing activities (1,192,356) (3,125,888)
NET CASH INFLOW FROM ALL ACTIVITIES (1,793,872) 631,297
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 3,835,479 4,306,675
CASH AND EQUIVALENTS AT END OF PERIOD $ 2,041,607 $ 4,937,972
See notes to condensed consolidated financial statements--unaudited
</TABLE>
<PAGE> 7
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended
January 31, January 31,
1997 1996
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW AND
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Cash paid during the period for:
Interest $ 552,828 $ 851,364
Income taxes 2,545,823 2,061,403
Property and equipment acquired and
financed with:
Capital lease obligations $ 601,024
Income tax benefit related to incentive
stock options exercised $ 132,569
See notes to condensed consolidated financial statements--unaudited.
</TABLE>
<PAGE> 8
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS--Unaudited
1. The accompanying condensed consolidated balance sheets of Dycom
Industries, Inc. and subsidiaries ("Dycom" or the "Company") as of January
31, 1997 and July 31, 1996, the related condensed consolidated statements of
operations for the three and six months ended January 31, 1997 and 1996 and
the condensed consolidated statements of cash flows for the six months ended
January 31, 1997 and 1996 reflect all normal recurring adjustments which are,
in the opinion of management, necessary for a fair presentation of such
statements. The results of operations for the six months ended January 31,
1997 are not necessarily indicative of the results which may be expected for
the entire year.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION-- The condensed consolidated financial statements
include Dycom Industries, Inc. and its subsidiaries, all of which are wholly-
owned. The Company's operations consist primarily of telecommunication and
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 reported amount of assets and liabilities and
disclosure of contingent assets and liabilities as of the date of the
financial statements and revenues and expenses during the period reported.
Actual results could differ from those estimates.
Estimates are used for the revenue recognition of work-in-process, allowance
for doubtful accounts, self-insured claims liability, deferred tax asset
valuation allowance, depreciation and amortization, and the estimated lives
of assets, including intangible assets.
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" represent the excess of
contract revenues recognized under the percentage-of-completion method of
accounting for long-term contracts and work-in-process on unit contracts over
billings to date. For those contracts in which billings exceed contract
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
the daily requirements which are invested in overnight repurchase agreements,
certificates of deposits, and various other financial instruments having a
maturity of three months or less. For purposes of the condensed consolidated
statements of cash flows, the Company considers these amounts to be cash
equivalents. The carrying amount reported in the condensed consolidated
balance sheets for cash and equivalents approximates its fair value.
<PAGE> 9
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 lives of the assets are: buildings--20-31
years; leasehold improvements--the term of the respective lease or the
estimated useful life of the improvement, whichever is shorter; vehicles--3-7
years; equipment and machinery--3-10 years; and furniture and fixtures--3-10
years. Maintenance and repairs are expensed as incurred; expenditures that
enhance the value of the property or extend 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 intangible assets is continually reviewed and adjusted
where appropriate. The ongoing assessment of intangible assets for
impairment is based on the recoverability of such amounts through future
operations.
Amortization expense, which is comprised primarily of goodwill, was $77,545
for the six month periods ended January 31, 1997 and 1996. The intangible
assets are net of accumulated amortization of $1,073,815 at January 31, 1997
and $996,270 at July 31, 1996.
LONG-LIVED ASSETS-- In March 1995, the FASB issued 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 or
changes in 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 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 condensed consolidated financial
statements as an accrued liability. The self-insured claims liability
includes incurred but not reported losses of $5,120,000 and $4,458,000 at
January 31, 1997 and July 31, 1996, respectively. The determination of such
claims and expenses and the appropriateness of the related liability is
continually reviewed and updated.
INCOME TAXES-- The Company and its subsidiaries file a consolidated federal
income tax return. Deferred income taxes are provided for the temporary
differences between the financial reporting basis and the tax basis of the
Company's assets and liabilities.
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.
Management has evaluated the available evidence about the Company's future
taxable income and other possible sources of realization of deferred tax
assets. The valuation allowance recorded in the financial statements reduces
deferred tax assets to an amount that represents management's best estimate
of the amount of such deferred tax assets that more likely than not will be
realized. Accordingly, at January 31, 1997 and July 31, 1996, deferred tax
assets are net of a valuation allowance of $513,912 and $728,491, respectively.
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.
<PAGE> 10
CHANGE IN ACCOUNTING PRINCIPLE-- In October, 1995, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards
("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 Principles
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.
3. ACCOUNTS RECEIVABLE
Accounts receivable, net consist of the following:
<TABLE>
<CAPTION>
January 31, July 31,
1997 1996
<S> <C> <C>
Contract billings $ 15,263,161 $ 12,305,652
Retainage 1,544,299 1,138,619
Other receivables 581,475 368,677
Total 17,388,935 13,812,948
Less allowance for doubtful accounts 698,800 506,884
Accounts receivable, net $ 16,690,135 $ 13,306,064
</TABLE>
4. COSTS AND ESTIMATED EARNINGS ON CONTRACTS IN PROGRESS
The accompanying condensed consolidated balance sheets include costs and
estimated earnings on contracts in progress, net of progress billings as
follows:
<TABLE>
<CAPTION>
January 31, July 31,
1997 1996
<S> <C> <C>
Costs incurred on contracts in progress $ 26,117,956 $ 24,272,835
Estimated earnings thereon 525,199 334,905
26,643,155 24,607,740
Less billings to date 17,588,519 17,509,242
$ 9,054,636 $ 7,098,498
Included in the accompanying condensed
consolidated balance sheets under
the captions:
Costs and estimated earnings in
excess of billings $ 9,054,636 $ 7,137,212
Billings in excess of costs and
estimated earnings (38,714)
$ 9,054,636 $ 7,098,498
</TABLE>
<PAGE> 11
5. PROPERTY AND EQUIPMENT
The accompanying condensed consolidated balance sheets include the following
property and equipment:
<TABLE>
<CAPTION>
January 31, July 31,
1997 1996
<S> <C> <C>
Land $ 1,958,777 $ 1,711,464
Buildings 2,319,810 2,236,322
Leasehold improvements 802,821 743,101
Vehicles 23,328,341 22,153,365
Equipment and machinery 21,797,558 20,033,610
Furniture and fixtures 4,050,337 3,541,638
Total 54,257,644 50,419,500
Less accumulated depreciation and
amortization 33,119,797 30,845,090
Property and equipment, net $ 21,137,847 $ 19,574,410
</TABLE>
Certain subsidiaries of the Company entered into lease arrangements accounted
for as capitalized leases. The carrying value of capital leases at January
31, 1997 and July 31, 1996 was $915,907 and $372,170, respectively, net of
accumulated depreciation of $180,700 and $123,413 respectively. Capital
leases are included as a component of equipment and machinery.
6. NOTES PAYABLE
Notes and loans payable are summarized by type of borrowings as follows:
<TABLE>
<CAPTION>
January 31, July 31,
1997 1996
<S> <C> <C>
Bank Credit Agreement:
Revolving credit facility $ 9,000,000 $ 9,000,000
Term-loan 2,162,812
Equipment acquisition term-loans 1,486,163 704,167
Capital lease obligations 855,493 344,446
Total 11,341,656 12,211,425
Less current portion 922,735 2,758,795
Notes payable--non-current $ 10,418,921 $ 9,452,630
</TABLE>
At January 31, 1997, the Company had a bank credit agreement consisting of a
$9.0 million revolving credit facility, a $5.0 million equipment acquisition
facility of which $2.7 million was available, and a $9.8 million standby
letter of credit facility of which $0.6 million was available. The bank
credit agreement contains restrictions which, among other things, require
maintenance of certain financial ratios and covenants, restrict encumbrances
of assets and creation of indebtedness, and limit the payment of cash
dividends. Cash dividends are limited to 33 1/3 percent of earnings
available for distribution as dividends. No cash dividends have been paid
during the six month period ending January 31, 1997. Substantially all the
Company's assets are pledged as collateral under the terms of the agreement.
At January 31, 1997, the Company was in compliance with all financial
covenants and conditions.
<PAGE> 12
The interest rate on the term-loan and the revolving credit facility is at the
bank's prime interest rate plus 0.50% (8.75% at January 31, 1997 and July 31,
1996). The interest rate on the outstanding equipment acquisition term-loans
are at the bank's prime interest rate plus 0.50% (8.75% at January 31, 1997).
The interest rate on equipment acquisition term-loans prior to November 30,
1995 was at the bank's prime interest rate plus 0.75%. The outstanding
balance at January 31, 1997 and July 31, 1996 of equipment acquisition term-
loans issued prior to November 30, 1995 was $479,000 and $704,000,
respectively.
Interest costs incurred on notes payable and capital lease obligations, all
of which were expensed, for the six month periods ended January 31, 1997 and
1996 were $513,883 and $818,957, respectively. Such amounts are included in
general and administrative expenses in the accompanying condensed
consolidated statements of operations.
The outstanding balance of the equipment acquisition term-loans is payable
quarterly through January 2001. The revolving credit facility is used to
finance working capital and is payable in March 1998. The term-loan was fully
paid in December, 1996.
At January 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. The capital equipment
acquisition facility and standby letter of credit facility were renewed until
February 28, 1997.
In addition to the borrowings under the bank credit agreement, certain
subsidiaries have outstanding obligations under capital leases. The
obligations are payable in monthly installments expiring at various dates
through December 2001.
Subsequent to January 31, 1997, the Company concluded negotiations with a
group of banks and signed a commitment letter for a new $35.0 million
unsecured revolving and term-loan credit facility. This new facility will
replace the Company's current bank credit facilities. The new bank credit
facility provides the Company credit availability of $10.0 million for
revolving working capital loans, $10.0 million for standby letters of credit,
$6.0 million for equipment acquisitions, and $9.0 million for a five-year
term-loan. The borrowings bear interest at floating interest rates depending
on the type of loan. The Company may select interest rates for up to six
months at LIBOR plus 1.50% to LIBOR plus 1.75% or, at the prime rate less
1.00% to the prime rate less 0.50%. The new credit agreement requires the
Company to meet certain financial ratios and covenants, including debt to
tangible net worth ratio, quick ratio, and current ratio. The agreement
contains other covenants which limits the payment of cash dividends and
restricts the creation of additional indebtedness and encumbrances of assets.
7. COMMITMENTS AND CONTINGENCIES
In the normal course of business, certain subsidiaries of the Company have
pending and unasserted claims. Although the ultimate resolution and
liability of these claims cannot be determined, management believes the final
disposition of these claims will not have a material adverse impact on the
Company's consolidated financial condition or results of operations.
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of the Company's
consolidated financial condition and results of operations. The discussion
should be read in conjunction with the condensed consolidated financial
statements and notes thereto.
Results of Operations
The Company reported earnings per common and common equivalent share of $0.19
and $0.12 for the quarters ended January 31, 1997 and 1996, respectively.
Earnings per common and common equivalent share for the six month periods
ended January 31, 1997 and 1996 was $0.37 and $0.23, respectively. Earnings
per common share assuming full dilution for the three and six month periods
ended January 31, 1997 was $0.18 and $0.37, respectively. This compares to
earnings per common and common equivalent share assuming full dilution of
$0.12 and $0.23 for the three and six month period ended January 31, 1996.
Contract revenues for the quarter ended January 31, 1997 increased 22.1% to
$39.9 million as compared to $32.6 million for the same quarter last year.
The increase in contract revenues is attributable to increased volume
experienced in all service groups. The telecommunication services group
contract revenues increased 15.8% to $31.5 million, the utility line locating
services group contract revenues increased 32.9% to $3.4 million and the
electrical services group contract revenues increased 71.3% to $5.0 million
for the current quarter compared to the same quarter last year. For the six
month period ended January 31, 1997, contract revenues increased 14.5% to
$80.1 million as compared to $70.0 million for the corresponding period last
year. The contract revenue growth reflects higher volume in all service
groups. Contract revenues increased 10.9% to $64.9 million in the
telecommunication services group, 34.5% to $7.8 million in the utility line
locating services group, and 31.6% to $7.4 million in the electrical services
group.
The contract revenue mix between telecommunication services, utility line
locating services and electrical services for the quarter ended January 31,
1997 was 79%,8%, and 13%, respectively, and 83%, 8% and 9%, respectively, for
the quarter ended January 31, 1996. The contract revenue mix reflects a
significant increase in the electrical services group due to increased volume
in bid jobs. For the six month period ended January 31, 1997, the contract
revenue mix between the telecommunication services group, the utility line
locating services group and the electrical services group was 81%, 10% and
9%, respectively, compared to 84%, 8%, and 8%, respectively, for the
corresponding period last year. Multi-year comprehensive service contracts
continue to be the primary source of revenue for the telecommunication services
group. For the three and six month periods ended January 31, 1997, multi-year
comprehensive service contracts represented 86% and 85% of telecommunication
services group contract revenues, respectively, as compared to 88% and 90%
for the comparable periods last year. The decline is offset by higher volume
associated with premise wiring, inside network installations for office
buildings, and other telephony contracting services.
The Company's backlog of uncompleted work at January 31, 1997 was $268
million as compared to $201 million at January 31, 1996. During the three
month period ending January 31, 1997 various contracts were awarded in the
telecommunication services and electrical services group. The contract awards
in the telecommunication services group included an extension of a multi-year
broadband network installation contract totaling $35 million, a master
contract and an extension of an existing master contract totaling $12 million
and several bid contracts totaling $6 million. The electrical services group
was awarded master contract extensions and bid contracts totaling $4 million.
<PAGE> 14
The Company's costs and operating expenses may be affected by a number of
factors including contract volumes, character of services rendered, work
locations, competition, and changes in productivity. Costs of earned
revenues, excluding depreciation, were 82% and 81% of contract revenues for
the quarters ended January 31, 1997 and 1996, respectively, and 81% for both
six month periods ended January 31, 1997 and 1996. As a percentage of
contract revenues, the Company's prime costs of direct labor, materials,
subcontractors, and equipment costs were 61% and 59% for the three and six
month periods ended January 31, 1997, respectively. This compares to 62% and
61% for the corresponding periods last year. The Company's continued efforts
to control costs resulted in improved operating margins.
General and administrative expenses remained constant at $3.5 million for the
quarter ended January 31, 1997 and 1996. For the six month period ended
January 31, 1997 general and administrative expenses decreased $0.3 million
to $7.1 million as compared to $7.4 million for the same period last year.
This reduction is attributable to lower interest costs of $0.3 million, a
reduction in general and group insurance costs of $0.3 million, offset by an
increase of $0.1 million in the provision for doubtful accounts and $0.2 in
other general and administrative expenses.
The Company's 38% effective income tax rate for the six month period ended
January 31, 1997 differs from the statutory rate due to state income taxes,
the amortization of intangible assets with no tax benefit, other non-
deductible expenses for tax purposes and the reduction of $0.2 million in the
Company's deferred tax asset valuation allowance.
Liquidity and Capital Resources
The Company's primary sources of cash and equivalents has historically been
from operating activities and the proceeds from the sale of idle and surplus
property and equipment. Strong operating results and existing cash balances
continued to finance the Company's working capital and capital expenditure
requirements. Internally generated sources of funds continue to be the
Company's primary source of liquidity as available borrowing capabilities
under the bank credit agreement are limited. Net cash flows from operating
activities were $3.1 million for the six month period ended January 31, 1997
as compared to $6.4 million for the comparable period last year. This
reduction in cash flow from operating activities resulted from the internal
financing of revenue growth as noted by the increase in accounts receivable and
unbilled revenues which was partially offset by a net increase in accounts
payable and other accrued liabilities.
The Company's sources of funds provided for capital expenditures of $4.0 million
during the six month period ended January 31, 1997. During this period, an
additional $0.6 million of equipment was financed by capital leases. These
capital expenditures represent the normal replacement of equipment and the
start up of a new contract in the telecommunication services group. Aside
from these capital expenditures, the Company obtained approximately $1.4
million of equipment under various noncancelable operating leases.
At January 31, 1997, the Company had outstanding borrowings under equipment
acquisition term-loans aggregating $1.5 million and a revolving credit
facility of $9.0 million. During the quarter ended January 31, 1997, the
Company paid the final $1.2 million principal payment on its term-loan. This
repayment was earlier than the initial scheduled repayment date of March,
1998. The Company borrowed $1.0 million on the equipment acquisition facility
to finance the purchase of equipment for the start up of a new master
contract during the quarter ended January 31, 1997. The interest rate on the
revolving credit facility is at the bank's prime interest rate plus one-half
percent (8.75% at January 31, 1997).
<PAGE> 15
The interest rate on the outstanding equipment acquisition term-loans is at the
bank's prime interest rate plus 0.50% (8.75% at January 31, 1997). The
interest rate on the equipment acquisition term-loans prior to November 30,
1995 was at the bank's prime interest rate plus 0.75%. The outstanding
principal on equipment acquisition term-loans is payable quarterly through
January 2001. The revolving credit facility is used to finance working
capital and is payable in March 1998. Substantially all of the Company's
assets are pledged as collateral in support of these facilities.
In addition, the Company has available a $9.8 million standby letter of credit
facility of which $0.6 million was available and a $5.0 million capital
equipment acquisition facility of which $2.7 million was available at January
31, 1997. The standby letter of credit facility is issued as security to the
Company's insurance administrators as part of its self-insurance program.
Both facilities were renewed until February 28, 1997.
The bank credit agreement contains provisions regarding minimum working capital,
tangible net worth, debt-to-equity ratios and certain other financial
covenants. At January 31, 1997, the Company was in compliance with all
financial covenants and conditions.
No cash dividends have been paid during the quarter ended January 31, 1997. The
Board will determine future dividend policies based on financial condition,
profitability, cash flow, capital requirements, and business outlook, as well as
other factors relevant at the time. The Company's bank credit agreement
limits the payment of cash dividends to 33 1/3 percent of earnings available
for distribution as dividends.
Subsequent to January 31, 1997, the Company concluded negotiations with a
group of banks and signed a commitment letter for a new $35.0 million
unsecured revolving and term-loan credit facility. This new facility will
replace the Company's current bank credit facilities. The new bank credit
facility provides the Company credit availability of $10.0 million for
revolving working capital loans, $10.0 million for standby letters of credit,
$6.0 million for equipment acquisitions, and $9.0 million for a five-year
term-loan. The borrowings bear interest at floating interest rates depending
on the type of loan. The Company may select interest rates for up to six
months at LIBOR plus 1.50% to LIBOR plus 1.75% or, at the prime rate less
1.00% to the prime rate less 0.50%. The new credit agreement requires the
Company to meet certain financial ratios and covenants, including debt to
tangible net worth ratio, quick ratio, and current ratio. The agreement
contains other covenants which limits the payment of cash dividends and
restricts the creation of additional indebtedness and encumbrances of assets.
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 ability to effectively manage controllable costs.
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 existing bank credit agreement and capital
and operating lease commitments. The new credit agreement negotiated
subsequent to January 31, 1997 is expected to support the Company's normal
replacement of equipment at its current level of business and to finance
internal revenue growth.
<PAGE> 16
PART II. OTHER INFORMATION
__________________________
Item 4. Submission of Matters to a Vote of Security Holders.
The annual meeting of shareholders of the Company was held on November 25, 1996
to consider and take action on the election of three directors to the
Company's Board of Directors.
The Company's nominees, Messrs. Louis W. Adams, Jr., Steven E. Nielsen, and
Thomas R. Pledger were elected. Mr. Adams received 8,034,532 votes for and
48,444 against, Mr. Nielsen received 8,069,532 votes for and 13,444 votes
against and Mr. Pledger received 8,067,308 votes for and 15,668 votes
against. The directors whose terms continued after the annual meeting are
Messrs. Revell, Roseman and Younkin.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibits furnished pursuant to the requirements of Form 10-Q:
See Exhibit Index on Page 18
(b) Reports On Form 8-K
No reports on Form 8-K were filed on behalf of the Registrant during the
quarter ended January 31, 1997.
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DYCOM INDUSTRIES, INC.
Registrant
<TABLE>
<S> <C>
Date: March 17, 1997 /s/ Thomas R. Pledger
_________________ ____________________________
Thomas R. Pledger
Chairman and Chief Executive
Officer
Date: March 17, 1997 /s/ Steven Nielsen
_________________ ____________________________
Steven Nielsen
President and Chief Operating
Officer
Date: March 17, 1997 /s/ Douglas J. Betlach
_________________ ____________________________
Douglas J. Betlach
Vice President and Chief
Financial Officer
</TABLE>
<PAGE> 18
EXHIBIT INDEX
<TABLE>
<CAPTION>
Number Description
______ ___________
<C> <C>
(11) Statement re computation of per share earnings
(27) Financial Data Schedule
(99) Sixth Modification of Credit Agreement and
Consent by Guarantors as of November 30, 1996 to
Credit Agreement dated as of April 28, 1993, as
Amended, between Dycom Industries, Inc. and
First Union National Bank of Florida.
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT 11
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(WHOLE DOLLARS EXCEPT PER SHARE DATA)
January 31, January 31,
1997 1996
<S> <C> <C>
THE QUARTERS ENDED JANUARY 31, 1997 AND 1996:
Net Income Applicable to Common Stock $ 1,641,478 $ 984,232
========= =========
Primary Earnings:
Weighted average number of common shares outstanding 8,681,410 8,553,189
Common share equivalents arising from stock options<F1> 188,034 0
--------- ---------
Weighted average number of common shares as adjusted 8,869,444 8,553,189
========= =========
Net Income per common and common equivalent share $ 0.19 $ 0.12
========= =========
Fully Diluted Earnings:
Weighted average number of common shares outstanding 8,681,410 8,553,189
Common share equivalents arising from stock options<F1> 197,812 0
--------- ---------
Weighted average number of common shares as adjusted 8,879,222 8,553,189
========= =========
Net Income per common and common equivalent share $ 0.18 $ 0.12
========= =========
THE SIX MONTHS ENDED JANUARY 31, 1997 AND 1996:
Net Income Applicable to Common Stock $ 3,303,097 $ 1,952,870
========= =========
Primary Earnings:
Weighted average number of common shares outstanding 8,672,931 8,549,986
Common share equivalents arising from stock options<F1> 213,836 0
--------- ---------
Weighted average number of common shares as adjusted 8,886,767 8,549,986
========= =========
Net Income per common and common equivalent share $ 0.37 $ 0.23
========= =========
Fully Diluted Earnings:
Weighted average number of common shares outstanding 8,672,931 8,549,986
Common share equivalents arising from stock options<F1> 213,971 0
--------- ---------
Weighted average number of common shares as adjusted 8,886,902 8,549,986
========= =========
Net Income per common and common equivalent share $ 0.37 $ 0.23
========= =========
<FN>
<F1>
In the quarter and six month periods ended January 31, 1996, common share
equivalents arising from stock options did not impact the per share amounts
as they were either insignificant or anti-dilutive.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DYCOM
INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEET AT JANUARY 31, 1997 AND
THE CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED
JANUARY 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000067215
<NAME> DYCOM INDUSTRIES, INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-END> JAN-31-1997
<EXCHANGE-RATE> 1
<CASH> 2,041,607
<SECURITIES> 0
<RECEIVABLES> 16,807,460
<ALLOWANCES> 698,800
<INVENTORY> 9,054,636
<CURRENT-ASSETS> 30,509,433
<PP&E> 54,257,644
<DEPRECIATION> 33,119,797
<TOTAL-ASSETS> 57,417,098
<CURRENT-LIABILITIES> 18,034,846
<BONDS> 11,341,656
0
0
<COMMON> 2,895,967
<OTHER-SE> 18,594,506
<TOTAL-LIABILITY-AND-EQUITY> 57,417,098
<SALES> 0
<TOTAL-REVENUES> 80,140,079
<CGS> 0
<TOTAL-COSTS> 64,996,988
<OTHER-EXPENSES> 2,944,078
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 541,029
<INCOME-PRETAX> 5,334,650
<INCOME-TAX> 2,031,553
<INCOME-CONTINUING> 3,303,097
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,303,097
<EPS-PRIMARY> .37
<EPS-DILUTED> .37
</TABLE>
<PAGE> 1
EXHIBIT 99
SIXTH MODIFICATION OF CREDIT AGREEMENT
THIS SIXTH MODIFICATION OF CREDIT AGREEMENT (the
"Modification") is entered into as of the 30th day of November,
1996 by and between DYCOM INDUSTRIES INC., a Florida corporation
("Borrower") and FIRST UNION NATIONAL BANK OF FLORIDA, a National
Banking Association ("Lender").
W I T N E S S E T H:
WHEREAS, Borrower and Lender entered into a certain Credit
Agreement dated as of April 28, 1993, which was amended by First
Modification dated December 13, 1993 and by Second Modification
dated April 7, 1994 and by Third Modification dated November 30,
1994, and by Fourth Modification dated July 31, 1995, and by Fifth
Modification dated November 30, 1995 (as amended, the "Credit
Agreement"); and
WHEREAS, Borrower has requested that Lender amend the Credit
Agreement to (i) extend and modify the Standby Letter of Credit
Facility referenced in Section 4; and (ii) extend and modify the
Equipment Acquisition Facility referenced in Section 5;
WHEREAS, Lender is willing to amend the Credit Agreement as
more particularly set forth herein.
NOW THEREFORE, for good and valuable considerations, the
receipt of which is hereby acknowledged, the parties do hereby
modify the Credit Agreement, as follows:
1. Standby Letter of Credit Facility. The expiration date
of the Standby Letter of Credit Facility referenced in Section 4 of
the Credit Agreement is hereby extended to February 28, 1997.
Accordingly, Section 4.01 of the Credit Agreement as previously
modified is modified by inserting therein the date "February 28,
1997." Sections 4.02 and 4.06 of the Credit Agreement as
previously modified are amended by inserting therein the date of
"February 28, 1997."
<PAGE> 2
2. Equipment Acquisition Facility.
(a) Expiration. The expiration date of the Equipment
Acquisition Facility referenced in Section 5 of the Credit
Agreement as previously modified is hereby extended to February 28,
1997. Accordingly, paragraph 5.01 of the Credit Agreement as
previously modified is amended to insert the date "February 28,
1997."
(b) Term. The maximum term of any Equipment Acquisition
Advance is four years or February 28, 2001, whichever occurs first.
The principal of each Equipment Acquisition Advance shall be
payable in equal quarterly installments with the Borrower selecting
a term of either one, two, three or four years from the date of the
Advance, provided that in any event the final quarterly payment
cannot be due later than February 28, 2001. Accrued interest shall
be payable quarterly as specified in Section 5 of the Credit
Agreement.
3. Except as expressly modified herein, the Credit Agreement
as previously amended is hereby reaffirmed in its entirety.
DYCOM INDUSTRIES INC.
By: /s/ Thomas R. Pledger
_________________________________
Its: Chairman and CEO
Agreed:
FIRST UNION NATIONAL BANK
OF FLORIDA
By: /s/ Robert D. Bridges
__________________________________
Its: Sr. Vice President
<PAGE> 3
CONSENT BY GUARANTORS
THIS CONSENT BY GUARANTORS is executed as of the 30th day of
November, 1996 by the following corporations:
a. Advance Leasing of Guilford, Inc., a Florida
corporation
b. Ansco & Associates, Inc., a Florida corporation
c. Coastal Plains, Inc., a Georgia corporation
d. Fiber Cable, Inc., a Delaware corporation
e. Globe Communications, Inc., a North Carolina
corporation
f. Ivy H. Smith Company, a Florida corporation
g. Kohler Construction Company, Inc., a Florida
corporation
h. Prime Utility Contractors, Inc., an Alabama
corporation
i. Signal Construction Company, Inc., a Florida
corporation
j. Southeastern Electric Construction, Inc., a Florida
corporation
k. Star Construction, Inc., a Tennessee corporation
l. S.T.S., Inc., a Florida corporation
m. TESINC, Inc., an Arizona corporation
(collectively the "Guarantors"), in favor of FIRST UNION NATIONAL
BANK OF FLORIDA (the "Lender").
W I T N E S S E T H:
WHEREAS, as of April 28, 1993, the Guarantors executed
Guaranty Agreements in favor of Lender pertaining to the Credit
Agreement and the Loan Documents referenced therein executed by
Dycom Industries Inc., a Florida corporation ("Borrower") and
Lender; and
WHEREAS, the Credit Agreement was modified by First Amendment
dated December 13, 1993, Second Amendment dated April 7, 1994,
Third Amendment dated November 30, l994, Fourth Modification dated
July 31, 1995, and Fifth Amendment dated November 30, 1995; and
WHEREAS, Borrower has requested that Lender execute and
deliver a Sixth Modification of Credit Agreement; and
WHEREAS, as a pre-condition to executing the Sixth
Modification of Credit Agreement, Lender has required that the
Guarantors consent to the Sixth Modification of Credit Agreement;
and
<PAGE> 4
WHEREAS, it is to the benefit of Guarantors that Lender
consent and execute the Sixth Modification of Credit Agreement.
NOW THEREFORE, for good and valuable considerations, the
receipt of which is hereby acknowledged, the Guarantors hereby
agree as follows:
1. The Guarantors do hereby consent and agree to the terms
and conditions of the Sixth Modification of Credit Agreement, a
copy of which is attached hereto as Exhibit "A" and incorporated by
reference herein. Guarantors agree that the Guaranty Agreements
previously executed by Guarantors shall remain in full force and
effect and shall apply to all advances under the Sixth Modification
of Credit Agreement.
2. Guarantors do hereby reaffirm in full their respective
Guaranties.
IN WITNESS WHEREOF, this document has been duly executed as of
the day and year first set forth above.
Advance Leasing of Guilford, Inc.
By: /s/ Thomas R. Pleder
_______________________________
Its:Vice President
Ansco & Associates, Inc.
By: /s/ Thomas R. Pleder
_______________________________
Its:Vice President
Coastal Plains, Inc.
By: /s/ Thomas R. Pleder
_______________________________
Its:Vice President
Fiber Cable, Inc.
By: /s/ Thomas R. Pleder
_______________________________
Its:Vice President
<PAGE> 5
Globe Communications, Inc.
By: /s/ Thomas R. Pleder
_______________________________
Its:Vice President
Ivy H. Smith Company
By: /s/ Thomas R. Pleder
_______________________________
Its:Vice President
Kohler Construction Company, Inc.
By: /s/ Thomas R. Pleder
_______________________________
Its:Vice President
Prime Utility Contractors, Inc.
By: /s/ Thomas R. Pleder
_______________________________
Its:Vice President
Signal Construction Company, Inc.
By: /s/ Thomas R. Pleder
_______________________________
Its:Vice President
Southeastern Electric Construction,
Inc.
By: /s/ Thomas R. Pleder
_______________________________
Its:Vice President
Star Construction, Inc.
By: /s/ Thomas R. Pleder
_______________________________
Its:Vice President
<PAGE> 6
S.T.S., Inc.
By: /s/ Thomas R. Pleder
_______________________________
Its:Vice President
TESINC, Inc.
By: /s/ Thomas R. Pleder
_______________________________
Its:Vice President
