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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 October 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 December 5, 1997
_____ __________________________________
Common Stock, par value $0.33 1/3 12,869,825
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DYCOM INDUSTRIES, INC.
INDEX
Page No.
________
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets-
October 31, 1997 and July 31, 1997 3
Condensed Consolidated Statements of
Operations for the Three Months Ended
October 31, 1997 and 1996 4
Condensed Consolidated Statements of
Cash Flows for the Three Months Ended
October 31, 1997 and 1996 5-6
Notes to Condensed Consolidated
Financial Statements 7-13
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 14-17
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 19
EXHIBIT INDEX 20
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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
October 31, July 31,
1997 1997
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 3,279,190 $ 6,645,972
Accounts receivable, net 36,901,224 34,353,367
Costs and estimated earnings in
excess of billings 11,091,124 10,479,974
Deferred tax assets, net 2,156,781 2,168,763
Other current assets 1,459,650 1,550,545
Total current assets 54,887,969 55,198,621
PROPERTY AND EQUIPMENT, net 30,519,748 27,543,238
OTHER ASSETS:
Intangible assets, net 4,645,585 4,684,358
Deferred tax assets 622,916 424,205
Other 301,777 311,473
Total other assets 5,570,278 5,420,036
TOTAL $ 90,977,995 $ 88,161,895
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 7,780,554 $ 10,281,615
Notes payable 12,980,382 13,080,316
Billings in excess of costs and
estimated earnings 470,940
Accrued self-insured claims 2,440,889 2,011,622
Income taxes payable 2,675,901 1,230,376
Other accrued liabilities 10,384,904 11,904,304
Total current liabilities 36,262,630 38,979,173
NOTES PAYABLE 10,084,099 9,012,066
ACCRUED SELF-INSURED CLAIMS 7,339,363 6,418,400
Total liabilities 53,686,092 54,409,639
COMMITMENTS AND CONTINGENCIES, Note 9
STOCKHOLDERS' EQUITY:
Common stock, par value $.33 1/3 per share:
50,000,000 shares authorized; 10,871,480
and 10,867,877 shares issued and
outstanding, respectively 3,623,826 3,622,625
Additional paid-in capital 25,444,197 25,421,701
Retained earnings 8,223,880 4,707,930
Total stockholders' equity 37,291,903 33,752,256
TOTAL $ 90,977,995 $ 88,161,895
See notes to condensed consolidated financial statements--unaudited.
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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended
October 31, October 31,
1997 1996
REVENUES:
Contract revenues earned $ 70,507,759 $ 56,322,356
Other, net 285,932 92,056
Total 70,793,691 56,414,412
Expenses:
Costs of earned revenues
excluding depreciation 55,562,643 45,009,650
General and administrative 6,790,057 5,350,978
Depreciation and amortization 2,275,559 2,072,544
Total 64,628,259 52,433,172
INCOME BEFORE INCOME TAXES 6,165,432 3,981,240
PROVISION (BENEFIT) FOR INCOME TAXES:
Current 2,836,211 2,199,620
Deferred (186,729) (454,421)
Total 2,649,482 1,745,199
NET INCOME $ 3,515,950 $ 2,236,041
EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE:
Primary $0.32 $0.20
Fully diluted $0.32 $0.20
SHARES USED IN COMPUTING
EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE:
Primary 11,054,559 10,951,181
Fully diluted 11,066,972 10,951,460
See notes to condensed consolidated financial statements--unaudited.
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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three Months Ended
October 31, October 31,
1997 1996
Increase (Decrease) in Cash and Equivalents from:
OPERATING ACTIVITIES:
Net income $ 3,515,950 $ 2,236,041
Adjustments to reconcile net cash provided
by operating activities:
Depreciation and amortization 2,275,559 2,072,544
(Gain) on disposal of assets (50,412) (19,612)
Deferred income taxes (186,729) (454,421)
Changes in assets and liabilities:
Accounts receivable, net (2,547,857) (1,914,985)
Unbilled revenues, net (1,082,090) (2,178,706)
Other current assets 90,895 (18,032)
Other assets 9,696 10,566
Accounts payable (2,501,061) 2,629,987
Accrued self-insured claims and
other liabilities (169,170) 434,394
Accrued income taxes 1,445,525 599,905
Net cash inflow from operating activities 800,306 3,397,681
INVESTING ACTIVITIES:
Capital expenditures (5,265,198) (2,411,316)
Proceeds from sale of assets 102,314 84,734
Net cash outflow from investing activities (5,162,884) (2,326,582)
FINANCING ACTIVITIES:
Borrowings on notes payable
and bank lines-of-credit 7,811,741
Principal payments on notes payable
and bank lines-of-credit (6,839,642) (1,151,036)
Exercise of stock options 23,697 234,058
Net cash inflow (outflow)from financing activities 995,796 (916,978)
NET CASH INFLOW (OUTFLOW) FROM ALL ACTIVITIES (3,366,782) 154,121
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 6,645,972 3,927,736
CASH AND EQUIVALENTS AT END OF PERIOD $ 3,279,190 $ 4,081,857
See notes to condensed consolidated financial statements--unaudited.
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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Unaudited)
For the Three Months Ended
October 31, October 31,
1997 1996
SUPPLEMENTAL DISCLOSURES OF CASH FLOW AND
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Cash paid during the period for:
Interest $ 531,171 $ 607,964
Income taxes 1,392,751 1,673,757
Property and equipment acquired and
financed with:
Capital lease obligations $ 394,848
See notes to condensed consolidated financial statements--unaudited.
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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS--Unaudited
1. The accompanying condensed consolidated balance sheets of Dycom
Industries, Inc. ("Dycom" or the "Company") as of October 31, 1997 and July
31, 1997, and the related condensed consolidated statements of operations and
cash flows for the three months ended October 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 three months ended October 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. 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 condensed consolidated financial statements include the result of
CCG for all periods presented. See Note 3.
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".
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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 an
original 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.
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.
Amortization expense was $38,773 for each of the three month periods ended
October 31, 1997 and 1996. The intangible assets are net of accumulated
amortization of $1,190,131 at October 31, 1997 and $1,151,358 at July 31, 1997.
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 $5,009,000 and $4,429,000 at
October 31, 1997 and July 31, 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 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. The
valuation allowance recorded in the condensed consolidated 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 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.
Accordingly, at October 31, 1997 and July 31, 1997, deferred tax assets are
net of a valuation allowance of $475,185.
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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.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS-- In February 1997, the Financial
Accounting Standards Board ("FASB") issued Statement of Financial Accounting
Standards ("SFAS") No. 128 "Earnings per Share" which changes the method of
calculating earnings per share and is effective for financial statements
issued for periods ending after December 15, 1997, including interim periods.
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 option and warrants. The Company will adopt SFAS No. 128 in the
second quarter of 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 current calculation of earnings per share.
The pro forma basic earnings per share and diluted earnings per share
calculated in accordance with SFAS No. 128 for the three-month periods ended
October 31, are as follows:
1997 1996
Pro forma basic earnings per share $0.32 $0.21
Pro forma diluted earnings per share $0.32 $0.20
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
interim 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 beginning after December 15, 1997.
Management is currently evaluating the requirements of SFAS No. 130 and 131,
respectively.
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3. ACQUISITION
On July 29, 1997, the Company consummated the 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 condensed
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 first quarter
condensed consolidated statements of operations and cash flows for the period
ended October 31, 1996 combines the first quarter of operations and cash
flows for the period ended August 31, 1996 of CCG.
4. ACCOUNTS RECEIVABLE
Accounts receivable, net consist of the following:
October 31, July 31,
1997 1997
Contract billings $ 35,766,488 $ 32,586,289
Retainage 1,715,349 1,885,656
Other receivables 625,423 896,015
Total 38,107,260 35,367,960
Less allowance for doubtful accounts 1,206,036 1,014,593
Accounts receivable, net $ 36,901,224 $ 34,353,367
5. COSTS AND ESTIMATED EARNINGS ON CONTRACTS IN PROGRESS
The accompanying condensed consolidated balance sheets include costs and
estimated earnings on contracts in progress, net of progress billings as
follows:
October 31, July 31,
1997 1997
Costs incurred on contracts in progress $ 17,397,147 $ 16,894,451
Estimated earnings thereon 3,227,133 3,222,120
20,624,280 20,116,571
Less billings to date 9,533,156 10,107,537
$ 11,091,124 $ 10,009,034
Included in the accompanying condensed
consolidated balance sheets under
the captions:
Costs and estimated earnings in
excess of billings $ 11,091,124 $ 10,479,974
Billings in excess of costs and
estimated earnings (470,940)
$ 11,091,124 $ 10,009,034
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6. PROPERTY AND EQUIPMENT
The accompanying condensed consolidated balance sheets include the following
property and equipment:
October 31, July 31,
1997 1997
Land $ 1,942,247 $ 1,942,247
Buildings 2,350,868 2,346,993
Leasehold improvements 1,372,301 1,356,861
Vehicles 35,707,584 32,232,343
Equipment and machinery 24,825,972 23,674,176
Furniture and fixtures 5,298,455 5,011,660
Total 71,497,427 66,564,280
Less accumulated depreciation and
amortization 40,977,679 39,021,042
Property and equipment, net $ 30,519,748 $ 27,543,238
Certain subsidiaries of the Company entered into lease arrangements accounted
for as capitalized leases. The carrying value of capital leases at October
31, 1997 and July 31, 1997 was $769,851 and $838,137, respectively, net of
accumulated depreciation of $920,451 and $881,336 respectively. Capital
leases are included as a component of equipment and machinery.
7. NOTES PAYABLE
Notes payable are summarized by type of borrowings as follows:
October 31, July 31,
1997 1997
Bank Credit Agreements:
Revolving credit facility $ 9,111,553 $ 10,113,484
Term-loan 8,100,000 8,550,000
Equipment term-loans 4,454,841 1,907,216
Capital lease obligations 656,279 722,927
Equipment loans 741,808 798,755
Total 23,064,481 22,092,382
Less current portion 12,980,382 13,080,316
Notes payable--non-current $ 10,084,099 $ 9,012,066
At October 31, 1997, the Company's credit agreement provides for (i) a
five-year term-loan in the principal amount of $9.0 million, (ii) a $6.0
million revolving equipment facility, (iii) a $10.0 million revolving credit
facility, and (iv) a $10.0 million standby letter of credit facility. The
revolving credit facility, the revolving equipment facility and the standby
letter of credit facility are available for a one-year period.
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The outstanding principal under the term-loan bears interest at the prime
interest rate minus 0.50% (8.00% at October 31, 1997 and 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 1.00% or LIBOR plus 1.50% and at the prime
interest rate minus 0.75% or LIBOR plus 1.75%, respectively. At October 31,
1997, the interest rates on the outstanding revolving credit facility and
revolving equipment facility loans were at the LIBOR options ranging from
7.125% to 7.625%. During the quarter ending October 31, 1997, the Company
borrowed $4.9 million under the revolving credit facility to pay off a
subsidiary's previously existing credit facility. At October 31, 1997, the
outstanding amounts under the term-loan and revolving credit facility were $8.1
million and $9.1 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 February 2001. During the quarter ending October 31, 1997, the
Company borrowed $1.0 million to buyout existing operating leases and $1.7
million to refinance equipment under a subsidiary's previously existing bank
credit facility. At October 31, 1997, the outstanding amount owed under the
revolving equipment facility was $4.5 million.
At October 31, 1997, the Company had outstanding $8.9 million in standby
letters of credit issued to the Company's insurance administrators as part of
its self-insurance program.
The bank credit agreement 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 the three month
period ending October 31, 1997. The credit facility is secured by the
Company's assets. At October 31, 1997, the Company was in compliance with
all financial covenants and conditions.
At July 31, 1997, the Company's newly acquired subsidiary, CCG, had a $6.6
million revolving bank credit facility of which $5.9 million was outstanding.
The interest rate on this facility was at the bank's prime interest rate plus
0.75% and was 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. This facility was
an existing arrangement made by CCG prior to the acquisition by Dycom.
During the quarter ending October 31, 1997, the Company paid off the
outstanding balance of $6.6 million by borrowing $4.9 against its revolving
credit facility and $1.7 million against the revolving equipment facility.
In addition to the borrowings under the bank credit agreement, certain
subsidiaries have outstanding obligations under capital leases and other
equipment financing arrangements. The obligations are payable in monthly
installments expiring at various dates through December 2001.
<PAGE> 13
8. STOCK OFFERING
The Company concluded the public offering of 2,700,000 shares of its common
stock on November 4, 1997. The Company offered 1,573,378 shares and selling
shareholders offered 1,126,622 shares at an offering price of $20.00 per
share. The Company received $29,736,844 on November 10, 1997 which is net of
an underwriting discount of $1.10 per share. Additionally, the underwriters
exercised their option to purchase 405,000 shares to cover over-allotments.
The Company received $7,654,500 on November 25, 1997 as payment for the
over-allotments. On November 28, 1997, the Company repaid the outstanding
balance of its revolving working capital indebtedness of $9.1 million and
will use the balance of the proceeds to fund the Company's growth strategy,
including acquisitions, working capital and capital expenditures and for
other general corporate purposes.
9. COMMITMENTS AND CONTINGENCIES
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 CCG
may be offset by use taxes already paid by the customers of CCG. 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.
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of the Company's
consolidated financial condition and results of operations. The discussion
should be read in conjunction with the condensed consolidated financial
statements and notes thereto.
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:
For the Three Months Ended
OCTOBER 31, OCTOBER 31,
1997 1996
Revenues:
Contract revenues earned 100.0% 100.0%
Other, net 0.4 0.2
Total revenues 100.4 100.2
Expenses:
Cost of earned revenue, excluding depreciation 78.9 79.9
General and administrative 9.6 9.5
Depreciation and amortization 3.2 3.7
Total expenses 91.7 93.1
Income before income taxes 8.7 7.1
Provision for income taxes 3.7 3.1
Net Income 5.0% 4.0%
Revenues. Contract revenues increased $14.2 million, or 25.2%, to $70.5
million in the quarter ending October 31, 1997 from $56.3 million in the
quarter ended October 31, 1996. Of this increase, $11.1 million was
attributable to the telecommunications services group, $2.3 million was
attributable to the electric services group and $0.8 million was attributable
to the underground utility locating services group, reflecting an increased
market demand for the Company's services. During the quarter ending October
31, 1997, the Company recognized $60.8 million of contract revenues from the
telecommunications services group as compared to $49.7 million for the same
period last year. The increase in the Company's telecommunications services
group reflects an increased volume of projects and activity associated with
the cable television services group which increased by $6.9 million to $23.5
million in the quarter ending October 31, 1997 from $16.6 million in the same
period last year. Also, the telecommunications services group experienced an
increased volume in its telephone engineering services, premise wiring
services, and telephony splicing services which was partially offset by
declines in contract revenues in the design and installation of broadband
networks and outside plant services. The Company recognized contract
revenues of $5.0 million from electric utilities services in the quarter
ending October 31, 1997 as compared to $2.7 million in the quarter ended
October 31, 1996, an increase of 85.2%. The Company recognized contract
revenues of $4.7 million from underground utility locating services in the
quarter ending October 31, 1997 as compared to $3.9 million in the same
period last year, an increase of
<PAGE> 15
20.5%. Contract revenues from long-term agreements in all service groups,
continues to be a significant source of the Company's revenues, representing
approximately 82.9% of total contract revenues in the quarter ending
October 31, 1997 compared to 84.4% for the same period last year. In
addition, contract revenues from master service agreements represented
approximately 43.2% and 54.1% of total contract revenues in the quarter ended
October 31, 1997 and 1996, respectively.
Cost of Earned Revenues. Cost of earned revenues increased $10.6 million to
$55.6 million in the quarter ending October 31, 1997 from $45.0 million in
the quarter ended October 31, 1996, but decreased as a percentage of contract
revenues to 78.9% from 79.9%. Direct labor, subcontractor, equipment costs
and other direct 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.
General and Administrative Expenses. General and administrative expenses
increased $1.4 million to $6.8 million in the quarter ending October 31, 1997
from $5.4 million in the quarter ended October 31, 1996. The increase in
general and administrative expenses was primarily attributable to a $0.6
million increase in administrative salaries, bonuses, employee benefits and
payroll taxes and a $0.3 million increase in professional fees.
Depreciation and Amortization. Depreciation and amortization increased $0.2
million to $2.3 million in the quarter ending October 31, 1997 as compared to
$2.1 million in same period last year. This increase in depreciation and
amortization is due to the increase in capital expenditures of $5.3 million
in the quarter ending October 31, 1997 as compared to $2.4 million in the
quarter ended October 31, 1996, an increase of $2.9 million. The increase
represents capital expenditures acquired in the ordinary course of business
and the buyout of certain operating leases on terms favorable to the Company.
Income Taxes. The provision for income taxes was $2.6 million in the quarter
ending October 31, 1997 as compared to $1.7 million in the same period last
year. The Company's effective tax rate was 43.0% in the quarter ending
October 31, 1997 as compared to 43.8% in the quarter ended October 31, 1996.
The effective tax rate differs from the statutory rate due to state income
taxes, the amortization of intangible assets that do not provide a tax
benefit and other non-deductible expenses for tax purposes. On August 5, 1997,
The Taxpayer's 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.
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 leases and by bank borrowings.
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 the quarter ending October 31, 1997, net cash provided by operating
activities was $0.8 million compared to $3.4 million for the quarter ended
October 31, 1996. The decrease was due to a decrease in accounts payable and
an increase in accounts receivable. The increase in accounts receivable,
however, resulted in a decrease in the net days of contract revenues in trade
receivables, including retainage, from 49 days at October 31, 1997 compared
to 56 days at October 31, 1996.
<PAGE> 16
In the quarter ending October 31, 1997, net cash used in investing activities
was $5.2 million as compared to $2.3 million for the same period last year.
For the quarter ending October 31, 1997, these expenditures were for the
normal replacement of equipment and the buyout of certain operating leases on
terms favorable to the Company. In addition to equipment purchases, the
Company obtained approximately $0.5 million of equipment under noncancellable
operating leases in the quarter ending October 31, 1997.
At October 31, 1997, the Company's credit agreement provides for (i) a
five-year term-loan in the principal amount of $9.0 million, (ii) a $6.0
million revolving equipment facility, (iii) a $10.0 million revolving credit
facility, and (iv) a $10.0 million standby letter of credit facility.
The 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 $4.8 million increasing in $750,000
increments, as well as placing restrictions on encumbrances of assets and
creation of additional indebtedness. The credit agreement also limits the
payment of cash dividends to 50% of the fiscal net after tax profits. At
October 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%. During the quarter ending October 31,
1997, the Company borrowed $4.9 million to pay off a subsidiary's previously
existing credit facility. As of October 31, 1997, the Company had an
available borrowing capacity of $0.9 million. The interest rate on the
outstanding balance as of October 31, 1997 was at LIBOR plus 1.50%
(7.125% to 7.375%).
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 October 31, 1997). The term loan
principal and interest is payable in quarterly installments through April
2002. During the quarter ended October 31, 1997, the Company repaid $450,000
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 to term loans with maturities not to exceed 48 months.
The outstanding principal on the equipment acquisition term loans is payable
in monthly installments through February 2001. During the quarter ending
October 31, 1997, the Company borrowed $1.0 million to buyout existing
operating leases and $1.7 million to refinance equipment under a subsidiary's
previously existing bank credit facility. The Company repaid $0.1 million
and has available borrowing capacity of $1.5 million under this facility. At
October 31, 1997, the interest rate on the outstanding equipment acquisition
term loans was at LIBOR plus 1.75% (7.125% to 7.625%).
The standby letter of credit facility is available for a one-year period. At
October 31, 1997, the Company had $8.9 million in outstanding standby letters
of credit issued as security to the Company's insurance administrators as
part of its self-insurance program, leaving $1.1 million in available
borrowing capacity.
At July 31, 1997, the Company's newly acquired subsidiary, CCG, had a $6.6
million working capital bank credit facility. The interest rate on this
facility was at the bank's prime interest rate plus 0.75% and was
collateralized by 75% of eligible trade accounts receivable, inventory, and
certain real property owned by a partnership, whose general partners are the
former shareholders of CCG. This facility was an
<PAGE> 17
existing arrangement made by CCG prior to the acquisition by Dycom. During the
quarter ending October 31, 1997, the Company paid off the outstanding balance
of $6.6 million by borrowing $4.9 million under its revolving credit facility
and $1.7 million under the equipment facility.
The Company concluded the public offering of 2,700,000 shares of its common
stock on November 4, 1997. The Company offered 1,573,378 shares and selling
shareholders offered 1,126,622 shares at an offering price of $20.00 per
share. The Company received $29,736,844 on November 10, 1997 which is net of
an underwriting discount of $1.10 per share. Additionally, the underwriters
exercised their option to purchase 405,000 shares to cover over-allotments.
The Company received $7,654,500 on November 25, 1997 as payment for the
over-allotments. On November 28, 1997, the Company repaid the outstanding
balance of its revolving working capital indebtedness of $9.1 million and
will use the balance of the proceeds to fund the Company's growth strategy,
including acquisitions, working capital and capital expenditures and for
other general corporate purposes.
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 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.
<PAGE> 18
PART II. OTHER INFORMATION
__________________________
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibits furnished pursuant to the requirements of Form 10-Q:
See Exhibit Index on Page 20
(b) Reports On Form 8-K
The following reports on Form 8-K were filed on behalf of the Registrant
during the quarter ended October 31, 1997:
(i) The acquisition of Communications Construction Group, Inc. pursuant to an
agreement and plan of merger dated July 29, 1997.
Items Reported: 2, 7
Date Filed: August 13, 1997
Financial Statements Filed:
Audited financial statements of Communications Construction Group, Inc.
for the fiscal years ended May 31, 1997 and 1996.
Unaudited pro forma combined consolidated balance sheets as of April 30,
1997.
Unaudited pro forma combined consolidated statements of operations for
the nine months ended April 30, 1997 and 1996.
Unaudited pro forma combined consolidated balance sheets as of July 31,
1996 and 1995.
Unaudited pro forma combined consolidated statements of operations for
the fiscal years ended July 31, 1996, 1995, and 1994.
(ii) Form 8-K/A was filed on November 5, 1997 for the Form 8-K filed on
August 13, 1997 to correct a transmission error that appeared on Item 7.
(iii) On October 1, 1997, the registrant announced its operating results for
the month ending August 31, 1997.
Items Reported: 5
Date Filed: October 16, 1997
Financial Statements Filed: None
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DYCOM INDUSTRIES, INC.
Registrant
Date: December 12, 1997 /s/ Thomas R. Pledger
_________________ ____________________________
Thomas R. Pledger
Chairman and Chief Executive
Officer
Date: December 12, 1997 /s/ Steven Nielsen
_________________ ____________________________
Steven E. Nielsen
President and Chief Operating
Officer
Date: December 12, 1997 /s/ Douglas J. Betlach
_________________ ____________________________
Douglas J. Betlach
Vice President, Treasurer, and
Chief Financial Officer
<PAGE> 20
EXHIBIT INDEX
Number Description
______ ___________
(11) Statement re computation of per share earnings
(27) Financial Data Schedule
[DESCRIPTION] EXHIBIT 11
<TABLE>
<CAPTION>
EXHIBIT 11
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
THE QUARTERS ENDED OCTOBER 31, 1997 AND 1996
(WHOLE DOLLARS EXCEPT PER SHARE DATA)
October 31, October 31,
1997 1996
<S> <C> <C>
Net Income (Loss) Applicable
to Common stock $3,515,950 $2,236,041
========= ==========
Primary Earnings (Loss):
Weighted average number of
common shares outstanding 10,867,877 10,717,691
Common share equivalents arising
from stock options 186,682 233,490
---------- ----------
Weighted average number of
common shares as adjusted 11,054,559 10,951,181
========== ==========
Net Income (Loss) per common
and common equivalent share $ 0.32 $ 0.20
========== ==========
Fully Diluted Earnings (Loss):
Weighted average number of
common shares outstanding 10,867,877 10,717,691
Common share equivalents arising
from stock options 199,095 233,769
---------- ----------
Weighted average number of
Common shares as adjusted 11,066,972 10,951,460
========== ==========
Net Income (Loss) per common
and common equivalent share $ 0.32 $ 0.20
========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DYCOM
INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEET AT OCTOBER 31, 1997 AND
THE CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED
OCTOBER 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> 3-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-END> OCT-31-1997
<EXCHANGE-RATE> 1
<CASH> 3,279,190
<SECURITIES> 0
<RECEIVABLES> 37,481,837
<ALLOWANCES> 1,206,036
<INVENTORY> 11,091,124
<CURRENT-ASSETS> 54,887,969
<PP&E> 71,497,427
<DEPRECIATION> 40,977,679
<TOTAL-ASSETS> 90,977,995
<CURRENT-LIABILITIES> 36,262,630
<BONDS> 23,064,481
0
0
<COMMON> 3,623,826
<OTHER-SE> 33,668,077
<TOTAL-LIABILITY-AND-EQUITY> 90,977,995
<SALES> 0
<TOTAL-REVENUES> 70,507,759
<CGS> 0
<TOTAL-COSTS> 55,562,643
<OTHER-EXPENSES> 2,275,559
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 491,560
<INCOME-PRETAX> 6,165,432
<INCOME-TAX> 2,649,482
<INCOME-CONTINUING> 3,515,950
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,515,950
<EPS-PRIMARY> 0.32
<EPS-DILUTED> 0.32
</TABLE>
