<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 April 30, 1999
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 June 4, 1999
----- ------------------------------
Common Stock, par value $0.33 1/3 25,554,081
<PAGE> 2
2
DYCOM INDUSTRIES, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets-
July 31, 1998 and April 30, 1999 3
Condensed Consolidated Statements of
Operations for the Three Months Ended
April 30, 1998 and 1999 4
Condensed Consolidated Statements of
Operations for the Nine Months Ended
April 30, 1998 and 1999 5
Condensed Consolidated Statements of
Cash Flows for the Nine Months Ended
April 30, 1998 and 1999 6-7
Notes to Condensed Consolidated
Financial Statements 8-14
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 15-19
Item 3. Quantitative and Qualitative Disclosures
about Market Risk 19
PART II. OTHER INFORMATION
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 20-21
SIGNATURES 22
</TABLE>
<PAGE> 3
3
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
July 31, April 30,
ASSETS 1998 1999
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and equivalents $ 35,927,307 $ 23,956,787
Accounts receivable, net 62,142,808 68,832,220
Costs and estimated earnings in
excess of billings 14,382,620 34,050,749
Deferred tax assets, net 2,726,348 2,961,075
Other current assets 3,014,199 10,097,277
------------ ------------
Total current assets 118,193,282 139,898,108
------------ ------------
PROPERTY AND EQUIPMENT, net 42,865,197 72,854,277
OTHER ASSETS:
Intangible assets, net 4,529,270 58,090,771
Other 730,342 3,934,594
------------ ------------
Total other assets 5,259,612 62,025,365
------------ ------------
TOTAL $166,318,091 $274,777,750
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 12,182,699 $ 18,092,924
Notes payable 4,727,782 13,177,379
Accrued self-insured claims 2,440,303 3,379,925
Billings in excess of costs
and estimated earnings -- 266,815
Income taxes payable 2,812,144 1,902,563
Other accrued liabilities 14,819,181 21,592,181
------------ ------------
Total current liabilities 36,982,109 58,411,787
NOTES PAYABLE 13,407,990 34,314,868
ACCRUED SELF-INSURED CLAIMS 7,454,849 8,427,903
OTHER LIABILITIES 10,094,195 17,680,487
------------ ------------
Total liabilities 67,939,143 118,835,045
------------ ------------
COMMITMENTS AND CONTINGENCIES, Note 9
STOCKHOLDERS' EQUITY:
Preferred stock, par value $1.00 per share: 1,000,000 shares
authorized; no shares issued and outstanding
Common stock, par value $.33 1/3 per share:
50,000,000 shares authorized; 22,084,097 and 23,047,187
shares issued and outstanding, respectively 7,361,366 7,682,396
Additional paid-in capital 60,042,463 94,374,437
Retained earnings 30,975,119 53,885,872
------------ ------------
Total stockholders' equity 98,378,948 155,942,705
------------ ------------
TOTAL $166,318,091 $274,777,750
============ ============
</TABLE>
See notes to condensed consolidated financial statements--unaudited.
<PAGE> 4
4
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended April 30,
------------------------------------
1998 1999
------------- --------------
<S> <C> <C>
REVENUES:
Contract revenues earned $ 95,928,640 $ 121,401,998
Other, net 944,186 962,866
------------- --------------
Total 96,872,826 122,364,864
------------- --------------
Expenses:
Costs of earned revenues
excluding depreciation 73,659,560 91,596,083
General and administrative 10,824,214 11,677,686
Depreciation and amortization 3,581,895 4,892,312
------------- --------------
Total 88,065,669 108,166,081
------------- --------------
INCOME BEFORE INCOME TAXES 8,807,157 14,198,783
------------- --------------
PROVISION FOR INCOME TAXES:
Current 3,178,535 5,020,824
Deferred 285,617 411,499
------------- --------------
Total 3,464,152 5,432,323
------------- --------------
NET INCOME $ 5,343,005 $ 8,766,460
============= ==============
EARNINGS PER COMMON SHARE:
Basic $ 0.24 $ 0.39
============= ==============
Diluted $ 0.24 $ 0.38
============= ==============
PRO FORMA NET INCOME AND EARNINGS
PER COMMON SHARE DATA:
Income before income taxes $ 8,807,157
Pro forma provision for
income taxes 3,374,916
-------------
PRO FORMA NET INCOME $ 5,432,241
=============
PRO FORMA EARNINGS PER COMMON SHARE:
Basic $ 0.25
=============
Diluted $ 0.24
=============
</TABLE>
See notes to condensed consolidated financial statements--unaudited.
<PAGE> 5
5
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Nine Months Ended April 30,
--------------------------------------
1998 1999
--------------- ---------------
<S> <C> <C>
REVENUES:
Contract revenues earned $ 267,741,732 $ 326,742,438
Other, net 2,028,090 2,379,228
--------------- ---------------
Total 269,769,822 329,121,666
--------------- ---------------
Expenses:
Costs of earned revenues
excluding depreciation 208,616,434 246,245,006
General and administrative 26,785,971 31,892,067
Depreciation and amortization 9,905,266 13,009,139
--------------- ---------------
Total 245,307,671 291,146,212
--------------- ---------------
INCOME BEFORE INCOME TAXES 24,462,151 37,975,454
--------------- ---------------
PROVISION FOR INCOME TAXES:
Current 8,056,132 14,648,066
Deferred 459,356 416,635
--------------- ---------------
Total 8,515,488 15,064,701
--------------- ---------------
NET INCOME $ 15,946,663 $ 22,910,753
=============== ===============
EARNINGS PER COMMON SHARE:
Basic $ 0.76 $ 1.03
=============== ===============
Diluted $ 0.75 $ 1.01
=============== ===============
PRO FORMA NET INCOME AND EARNINGS
PER COMMON SHARE DATA:
Income before income taxes $ 24,462,151
Pro forma provision for
income taxes 9,889,748
---------------
PRO FORMA NET INCOME $ 14,572,403
===============
PRO FORMA EARNINGS PER COMMON SHARE:
Basic $ 0.70
===============
Diluted $ 0.69
===============
</TABLE>
See notes to condensed consolidated financial statements--unaudited.
<PAGE> 6
6
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Nine Months Ended April 30,
------------------------------------
1998 1999
-------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND EQUIVALENTS FROM:
OPERATING ACTIVITIES:
Net income $ 15,946,663 $ 22,910,753
Adjustments to reconcile net cash provided
by operating activities:
Depreciation and amortization 9,905,266 13,009,139
Gain on disposal of assets (398,797) (494,284)
Deferred income taxes 459,356 (416,635)
Changes in assets and liabilities:
Accounts receivable, net (5,250,508) 2,486,020
Unbilled revenues, net (7,587,267) (17,057,919)
Other current assets (246,704) (6,337,849)
Other assets 317,487 (83,633)
Accounts payable (1,138,836) 4,253,152
Accrued self-insured claims and
other liabilities 2,251,678 8,232,570
Accrued income taxes 631,166 60,737
-------------- --------------
Net cash inflow from operating activities 14,889,504 26,562,051
-------------- --------------
INVESTING ACTIVITIES:
Capital expenditures (16,751,282) (36,717,730)
Proceeds from sale of assets 1,535,885 1,302,738
Net expenditures for businesses acquired -- (29,352,213)
Assets of acquired business -- (750,000)
Investment in unconsolidated affiliate -- (3,000,000)
-------------- --------------
Net cash outflow from investing activities (15,215,397) (68,517,205)
-------------- --------------
FINANCING ACTIVITIES:
Borrowings on notes payable
and bank lines-of-credit 14,398,865 31,750,000
Principal payments on notes payable
and bank lines-of-credit (22,887,995) (3,149,695)
Exercise of stock options 199,627 1,384,329
Proceeds from stock offering 36,958,618 --
Distributions to shareholders of pooled
companies (4,594,002) --
-------------- --------------
Net cash inflow from financing activities 24,075,113 29,984,634
-------------- --------------
NET CASH INFLOW (OUTFLOW) FROM ALL ACTIVITIES 23,749,220 (11,970,520)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 5,276,112 35,927,307
-------------- --------------
CASH AND EQUIVALENTS AT END OF PERIOD $ 29,025,332 $ 23,956,787
============== ==============
</TABLE>
See notes to condensed consolidated financial statements--unaudited.
<PAGE> 7
7
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Unaudited)
<TABLE>
<CAPTION>
For the Nine Months Ended April 30,
----------------------------------------
1998 1999
--------------- -----------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW AND
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Cash paid during the period for:
Interest $ 1,645,539 $ 1,230,300
Income taxes $ 7,488,328 $ 14,611,808
Property and equipment acquired and
financed with:
Capital lease obligation $ 233,618
Income tax benefit from stock options exercised $ 194,483 $ 1,115,554
During the nine month period ended April 30, 1999, the Company acquired all of
the capital stock of Locating, Inc., Ervin Cable Construction, Inc. And Apex
Digital TV, Inc. at a cost of $10,345,449, $32,706,655, and $21,446,169,
respectively. In conjunction with these acquisitions, assets acquired and
liabilities assumed were as follows:
Fair market value of assets acquired, including goodwill $ 74,691,937
Consideration paid 64,498,273
-----------------
Fair market value of liabilities assumed $ 10,193,664
=================
</TABLE>
See notes to condensed consolidated financial statements--unaudited.
<PAGE> 8
8
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS--Unaudited
1. The accompanying condensed consolidated balance sheets of Dycom Industries,
Inc. ("Dycom" or the "Company") as of July 31, 1998 and April 30, 1999, and the
related condensed consolidated statements of operations for the three and nine
months ended April 30, 1998 and 1999, respectively, and the condensed
consolidated statements of cash flows for the nine months ended April 30, 1998
and 1999 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 nine months ended April 30, 1999 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
are unaudited. These statements include Dycom Industries, Inc. and its
subsidiaries, all of which are wholly owned. On April 6, 1998, the Company
consummated the Cable Com Inc. ("CCI") and Installation Technicians, Inc.
("ITI") acquisitions and issued 1.8 million and 900,000 shares of common stock
in exchange for all the outstanding capital stock of CCI and ITI, respectively.
These acquisitions were accounted for as poolings of interests and accordingly,
the Company's condensed consolidated financial statements include the results of
CCI and ITI for all periods presented. Prior to the acquisitions, CCI and ITI
used a fiscal year consisting of a 52/53 week time period and, as a result of
the merger, have adopted Dycom's fiscal year end of July 31. All periods
presented reflect the adoption of such fiscal year end as of the beginning of
the period.
Dycom is a leading provider of engineering, construction and maintenance
services to telecommunications providers and also performs underground utility
locating services and electrical construction and maintenance contracting
services. All material intercompany accounts and transactions have been
eliminated.
PRO FORMA ADJUSTMENTS -- Prior to the acquisition by Dycom, CCI and ITI elected
under Subchapter S of the Internal Revenue Code to have the stockholders
recognize their proportionate share of CCI's and ITI's taxable income on their
personal tax returns in lieu of paying corporate income tax. The pro forma net
income and earnings per common share on the condensed consolidated statements of
operations reflect a provision for current and deferred income taxes for all
periods presented as if the corporations were included in Dycom's federal and
state income tax returns. At April 6, 1998, the consummation date of the
acquisition, CCI and ITI recorded deferred taxes on the temporary differences
between the financial reporting basis and the tax basis of their assets and
liabilities. The deferred tax (asset) liability recorded by CCI and ITI was
$616,358 and $(11,035), respectively.
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 short-term 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. 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. At the time a loss on
a contract becomes known, the entire amount of the estimated ultimate loss is
accrued.
"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 on deposit in
banks, overnight repurchase agreements, certificates of deposit, commercial
paper, 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.
<PAGE> 9
9
PROPERTY AND EQUIPMENT -- Property and equipment is stated at cost. 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--2-10 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 a
straight-line basis over a period of 20 to 40 years. The appropriateness of the
carrying value of goodwill is reviewed periodically by the Company. An
impairment loss is recognized when the projected future cash flows is less than
the carrying value of goodwill. No impairment loss has been recognized in the
periods presented. Non-compete agreements obtained through the purchase of
business assets are amortized on a straight-line basis over the term of the
agreements.
Amortization expense was $38,772 and $350,725 for the three month periods and
was $116,315 and $434,466 for the nine month periods ended April 30, 1998 and
1999, respectively. The intangible assets are net of accumulated amortization of
$1,306,466 at July 31, 1998 and $1,895,076 at April 30, 1999.
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 $7,360,000 at July 31, 1998 and April 30,
1999, 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 CCI and ITI, file a
consolidated federal income tax return. CCI and ITI were included in the
Company's consolidated federal income tax return effective April 6, 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 share-basic is computed using the
weighted-average common shares outstanding during the period. Earnings per
common share-diluted is computed using the weighted-average common shares
outstanding during the period and the dilutive effect of common stock options,
using the treasury stock method. See Note 3.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS -- In June 1997, the Financial
Accounting Standards Board ("FASB") issued Statement of Financial Accounting
Standards ("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 fiscal years beginning
after December 15, 1997.
In February 1998, the FASB issued SFAS No. 132 "Employers' Disclosures about
Pension and Other Postretirement Benefits", which revises certain disclosures
about pension and other postretirement benefit plans. This statement does not
change the measurement and recognition methods for pensions or postretirement
benefit costs reported in financial statements. This statement is effective for
fiscal years beginning after December 15, 1997.
In June 1998, the FASB issued SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities" which establishes standards for the
accounting and reporting of derivative instruments, including certain derivative
instruments embedded in other contracts, (collectively referred to as
derivatives) and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. This statement is
effective for all fiscal quarters of all fiscal years beginning after June 15,
1999. An exposure draft to amend the statement has been issued and, if adopted,
will defer the effective date one year.
Management is currently evaluating the requirements and related disclosures of
SFAS No. 130, 131, 132, and 133.
<PAGE> 10
10
3. EARNINGS PER SHARE
In February 1997, the FASB issued SFAS No. 128 "Earnings per Share" which
changes the method of calculating earnings per share and was effective for the
Company in the quarter ended January 31, 1998. All periods presented have been
restated in accordance with the provisions of SFAS No. 128.
On December 14, 1998, the Board of Directors declared a three-for-two split of
the Company's common stock, effected in the form of a stock dividend paid on
January 4, 1999 to shareholders of record on December 23, 1998. All agreements
concerning stock options provide for the adjustment of shares to be issued due
to the declaration of the stock split. An amount equal to the par value of the
common shares issued plus cash paid in lieu of fractional shares was transferred
from capital in excess of par value to the common stock account. All references
to number of shares and to per share information have been adjusted to reflect
the stock split on a retroactive basis.
The following is a reconciliation of the numerators and denominators of the
basic and diluted per share computation as required by SFAS No. 128.
<TABLE>
<CAPTION>
For the Three Months Ended April 30,
--------------------------------------
1998 1999
-------------- --------------
<S> <C> <C>
Net income available to common stockholders (numerator) $ 5,343,005 $ 8,766,460
============== ==============
Weighted-average number of common shares (denominator) 22,029,246 22,519,055
============== ==============
Earnings per common share - basic $ 0.24 $ 0.39
============== ==============
Weighed-average number of common shares 22,029,246 22,519,055
Potential common stock arising from stock options 315,510 440,521
-------------- --------------
Total shares (denominator) 22,344,756 22,959,576
============== ==============
Earnings per common share - diluted $ 0.24 $ 0.38
============== ==============
PRO FORMA EARNINGS PER SHARE DATA:
Pro forma net income available to common stockholders (numerator) $ 5,432,241
==============
Pro forma earnings per common share - basic $ 0.25
==============
Pro forma earnings per common share - diluted $ 0.24
==============
</TABLE>
<TABLE>
<CAPTION>
For the Nine Months Ended April 30,
----------------------------------------
1998 1999
--------------- ---------------
<S> <C> <C>
Net income available to common stockholders (numerator) $ 15,946,663 $ 22,910,753
=============== ===============
Weighted-average number of common shares (denominator) 20,872,413 22,266,846
=============== ===============
Earnings per common share - basic $ 0.76 $ 1.03
=============== ===============
Weighed-average number of common shares 20,872,413 22,266,846
Potential common stock arising from stock options 293,736 409,435
--------------- ---------------
Total shares (denominator) 21,166,149 22,676,281
=============== ===============
Earnings per common share - diluted $ 0.75 $ 1.01
=============== ===============
PRO FORMA EARNINGS PER SHARE DATA:
Pro forma net income available to common stockholders (numerator) $ 14,572,403
===============
Pro forma earnings per common share - basic $ 0.70
===============
Pro forma earnings per common share - diluted $ 0.69
===============
</TABLE>
<PAGE> 11
11
4. ACCOUNTS RECEIVABLE
Accounts receivable consist of the following:
<TABLE>
<CAPTION>
July 31, April 30,
1998 1999
----------------- ----------------
<S> <C> <C>
Contract billings $ 58,888,421 $ 66,838,158
Retainage 4,133,590 4,571,044
Other receivables 1,331,775 1,172,823
----------------- ----------------
Total 64,353,786 72,582,025
Less allowance for doubtful accounts 2,210,978 3,749,805
----------------- ----------------
Accounts receivable, net $ 62,142,808 $ 68,832,220
================= ================
</TABLE>
5. COSTS AND ESTIMATED EARNINGS ON CONTRACTS IN PROGRESS
The accompanying condensed consolidated balance sheets include costs and
estimated earnings on contracts in progress, net of progress billings as
follows:
<TABLE>
<CAPTION>
July 31, April 30,
1998 1999
---------------- --------------
<S> <C> <C>
Costs incurred on contracts in progress $ 15,056,642 $ 43,981,147
Estimated earnings thereon 3,387,933 14,209,942
---------------- --------------
18,444,575 58,191,089
Less billings to date 4,061,955 24,407,155
---------------- --------------
Costs and estimated earnings in excess of billings $ 14,382,620 $ 33,783,934
================ ==============
Included in the accompanying condensed consolidated
balance sheets under the captions:
Costs and estimated earnings in excess of billings $ 14,382,620 $ 34,050,749
Billings in excess of costs and estimated earnings -- 266,815
---------------- --------------
$ 14,382,620 $ 33,783,934
================ ==============
</TABLE>
6. PROPERTY AND EQUIPMENT
The accompanying condensed consolidated balance sheets include the following
property and equipment:
<TABLE>
<CAPTION>
July 31, April 30,
1998 1999
---------------- ----------------
<S> <C> <C>
Land $ 1,592,958 $ 3,122,155
Buildings 2,497,103 5,472,959
Leasehold improvements 1,459,543 1,504,167
Vehicles 52,287,135 74,391,803
Equipment and machinery 34,319,707 44,722,706
Furniture and fixtures 5,638,326 7,168,328
---------------- ----------------
Total 97,794,772 136,382,118
Less accumulated depreciation and amortization 54,929,575 63,527,841
---------------- ----------------
Property and equipment, net $ 42,865,197 $ 72,854,277
================ ================
</TABLE>
<PAGE> 12
12
7. NOTES PAYABLE
Notes payable are summarized by type of borrowings as follows:
<TABLE>
<CAPTION>
July 31, April 30,
1998 1999
--------------- --------------
<S> <C> <C>
Bank Credit Agreement:
Term loan $ 14,250,000 $ 12,750,000
Revolving working capital facilities -- 9,750,000
Equipment term loans 3,339,218 23,930,909
Capital lease obligations 60,931 253,001
Equipment and other loans 485,623 808,337
--------------- --------------
Total 18,135,772 47,492,247
Less current portion 4,727,782 13,177,379
--------------- --------------
Notes payable--non-current $ 13,407,990 $ 34,314,868
=============== ==============
</TABLE>
On April 27, 1999, the Company signed an amendment to its bank credit agreement
increasing the total facility to $175.3 million and extending the facility's
maturity to April 2002. The amended bank credit agreement provides for (i) a
$17.5 million standby letter of credit facility, (ii) a $50.0 million revolving
working capital facility, (iii) a $12.8 million five-year term loan, and (iv) a
$95.0 million equipment acquisition and small business purchase facility. The
Company is required to pay an annual non-utilization fee equal to 0.15% of the
unused portion of the revolving working capital and the equipment acquisition
and small business purchase facilities. In addition, the Company pays annual
agent and facility commitment fees of $15,000 and $135,000, respectively.
The Company had outstanding standby letters of credit issued to the Company's
insurance administrators as part of its self-insurance program of $11.4 million
at April 30, 1999.
The revolving working capital facility bears interest, at the option of the
Company, at the bank's prime interest rate minus 1.125% or LIBOR plus 1.25%. As
of April 30, 1999, there was $9.8 million outstanding balance on this facility
resulting in an available borrowing capacity of $40.2 million. The interest rate
on the outstanding principal was at the LIBOR option or 6.25% as of April 30,
1999.
The outstanding loans under the revolving equipment acquisition and small
business purchase facility bear interest, at the option of the Company, at the
bank's prime interest rate minus 0.75% or LIBOR plus 1.50%. At April 30, 1999,
the interest rate on the outstanding revolving equipment and small business
purchase facility was at the LIBOR option or 6.75%. The advances under the
revolving equipment acquisition and small business purchase 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. The amount outstanding on the revolving equipment acquisition and
small business purchase facility was $23.9 million at April 30, 1999, resulting
in an available borrowing capacity of $71.1 million.
The outstanding principal under the term loan bears interest at the bank's prime
interest rate minus 0.50% (7.25% at April 30, 1999). Principal and interest is
payable in quarterly installments through April 2003. The amount outstanding on
the term loan was $12.8 million at April 30, 1999.
The amended bank credit agreement contains restrictions which, among other
things, requires 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 were paid during the three and nine
month periods ended April 30, 1999. The amended bank credit facility is secured
by the Company's assets and guaranteed by each of its subsidiaries. At April 30,
1999, the Company was in compliance with all financial covenants and conditions.
In addition to the borrowings under the amended 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 March 2002.
<PAGE> 13
13
7. NOTES PAYABLE (CONTINUED)
Interest costs incurred on notes payable, all of which were expensed, were
$456,513 and $578,919, for the three month period ended April 30, 1998 and 1999,
respectively, and were $1,554,358 and $1,243,999, for the nine month period
ended April 30, 1998 and 1999, respectively. Such amounts are included in
general and administrative expenses in the accompanying condensed consolidated
statements of operations.
8. ACQUISITIONS
On February 3, 1999, the Company acquired all of the outstanding common stock of
Locating, Inc. ("Locating") for $10.0 million. Located in Issaquah, Washington,
Locating's primary line of business is the locating, marking, and mapping of
underground utility facilities for cable television multiple system operators,
telephone companies, and electrical and gas utilities. On March 31, 1999, the
Company purchased all of the outstanding shares of common stock of Ervin Cable
Construction, Inc. ("Ervin") for $21.8 million in cash and 258,066 shares of
Dycom's common stock for an aggregate purchase price of $32.5 million. Ervin's
primary line of business is the construction and installation of new cable
television systems as well as providing repair and expansion services to
existing cable television systems. On April 1, 1999, the Company issued 516,128
with an aggregate value of $21.4 million of Dycom's common stock to the
shareholders of Apex Digital TV, Inc. ("Apex") in exchange for all of the
outstanding common stock of Apex. Apex's primary line of business is providing
installation and maintenance services to direct broadcast satellite providers.
Both Ervin and Apex are located in Sturgis, Kentucky. The Company has recorded
the acquisitions of Locating, Ervin, and Apex using the purchase method of
accounting. The operating results of Locating, Ervin, and Apex are included in
the accompanying consolidated condensed financial statements from the date of
purchase.
The direct transaction costs resulting from the acquisitions of Locating, Ervin,
and Apex were approximately $590,000. These costs, which include filing fees
with regulatory agencies, legal, accounting, and other professional costs, were
capitalized as part of the purchase prices of Locating, Ervin, and Apex.
The following unaudited pro forma summary presents the consolidated results of
the operations of the Company as if the business combinations had occurred on
August 1, 1997:
<TABLE>
<CAPTION>
Nine months ended April 30,
1998 1999
-------------- --------------
<S> <C> <C>
Total revenues $ 319,571,835 $ 372,209,862
Income before income taxes $ 25,984,411 $ 40,500,256
Net income $ 17,078,403 $ 24,129,856
Earnings per share:
Basic $ 0.79 $ 1.08
Diluted $ 0.78 $ 1.06
</TABLE>
9. COMMITMENTS AND CONTINGENCIES
In September 1995, the State of New York commenced a sales and use tax audit of
Communications Construction Group, Inc. ("CCG"), a wholly-owned subsidiary, 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, asserted amounts due from CCG for sales taxes and
interest for the periods through August 31, 1995, aggregating approximately $1.3
million. Any sales taxes asserted against the Company may be offset by use taxes
already paid by the 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. It is the opinion of the Company's management,
based on the information available at this time, that these claims will not have
a material adverse impact on the Company's consolidated financial statements.
<PAGE> 14
14
10. COMMON STOCK OFFERING
In April 1999, the Company filed, at its cost, a registration statement for an
offering of 2.5 million shares and 200,000 shares of common stock, to be sold by
the Company and certain selling stockholders, respectively. The closing of the
offering, at $48.50 per share, was consummated on May 19, 1999. On that date,
the Company received $115.3 million in proceeds from the offering which was net
of an underwriting discount of $2.40 per share. The Company estimates that legal
fees and other expenses incurred for this transaction were approximately
$450,000. In addition to the shares sold above, the Company and the selling
stockholders have granted the underwriters an option to purchase within 30 days
after the offering an additional 375,000 and 30,000 shares, respectively, to
cover over-allotments.
On June 4, 1999, the Company repaid the outstanding balance of its revolving
credit facility of $33.7 million with proceeds of the common stock offering. The
remaining proceeds will be used to fund the Company's growth strategy, including
acquisitions, working capital and capital expenditures, and for other general
corporate purposes.
On June 11, 1999, the underwriters exercised a portion of their option to
purchase additional shares to cover over-allotments. The underwriters will
purchase 37,038 shares from the Company and 2,962 shares from certain selling
stockholders. The Company will receive approximately $1.7 million as payment for
the over-allotment.
<PAGE> 15
15
ITEM 2. 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
In April 1998, Dycom completed the acquisition of CCI and ITI in transactions
accounted for as poolings of interests. See Note 2 of the Notes to the Condensed
Consolidated Financial Statements--(Unaudited). 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 CCI and ITI.
In addition, Dycom completed the acquisitions of Locating, Ervin, and Apex
during the three month period ended April 30, 1999. The Company has recorded
these acquisitons using the purchase method of accounting and, accordingly, the
operating results of Locating, Ervin, and Apex are included in the Company's
consolidated condensed financial statements from the date of purchase.
The following table sets forth, as a percentage of contract revenues earned,
certain items in the Company's Condensed Consolidated Statements of Operations
for the periods indicated:
<TABLE>
<CAPTION>
For the Three Months Ended April 30,
-----------------------------------------
1998 1999
----------------- ------------------
<S> <C> <C>
Revenues:
Contract revenues earned 100.0% 100.0%
Other, net 1.0 0.8
--------------- ---------------
Total revenues 101.0 100.8
Expenses:
Cost of earned revenues, excluding depreciation 76.8 75.5
General and administrative 11.3 9.6
Depreciation and amortization 3.7 4.0
--------------- ---------------
Total expenses 91.8 89.1
--------------- ---------------
Income before income taxes 9.2 11.7
Provision for income taxes 3.6 4.5
--------------- ---------------
Historical Net Income 5.6 7.2%
===============
Pro forma adjustments to income tax provision (0.1)
---------------
Pro Forma Net Income 5.7%
===============
</TABLE>
<PAGE> 16
16
<TABLE>
<CAPTION>
For the Nine Months Ended April 30,
-----------------------------------------
1998 1999
----------------- ------------------
<S> <C> <C>
Revenues:
Contract revenues earned 100.0% 100.0%
Other, net 0.8 0.7
---------------- -----------------
Total revenues 100.8 100.7
Expenses:
Cost of earned revenues, excluding depreciation 77.9 75.4
General and administrative 10.0 9.7
Depreciation and amortization 3.7 4.0
---------------- -----------------
Total expenses 91.6 89.1
---------------- -----------------
Income before income taxes 9.2 11.6
Provision for income taxes 3.2 4.6
---------------- -----------------
Historical Net Income 6.0 7.0%
=================
Pro forma adjustments to income tax provision 0.6
----------------
Pro Forma Net Income 5.4%
================
</TABLE>
REVENUES. Contract revenues increased $25.5 million, or 26.6%, to $121.4 million
in the quarter ending April 30, 1999 from $95.9 million in the quarter ended
April 30, 1998. Of this increase, $20.9 million was attributable to the
telecommunications services group, $4.4 million was attributable to the
underground utility locating services group, and $0.2 million was attributable
to the electrical services group, reflecting a stronger market demand for the
Company's services. The companies acquired during the quarter ending April 30,
1999 contributed $8.1 million of the increase in contract revenues; $4.3 million
related to the telecommunications services group and $3.8 million related to the
underground utility locating services group.
During the quarter ended April 30, 1999, the Company recognized $107.4 million
of contract revenues from the telecommunications services group as compared to
$86.5 million for the same period last year. The increase in the Company's
telecommunications services group contract revenues reflects increased volume of
projects and activities associated with cable television construction services
which increased by $1.4 million to $48.6 million in the quarter ended April 30,
1999. Of the remaining $19.5 million increase in telecommunications contract
revenues, $14.1 million related to geographic expansion and an increased volume
of services to existing customers under the terms of several new master
contracts. Contract revenues recognized from the electrical construction and
maintenance services group was $5.4 million and $5.2 million, respectively, for
the quarters ended April 30, 1999 and 1998. The Company recognized contract
revenues of $8.6 million from the underground utility locating services group in
the quarter ended April 30, 1999 as compared to $4.2 million in the same period
last year, an increase of 103.6%.
Contract revenues from multi-year master service agreements and other long-term
agreements represented 91.6% and 84.0% of total contract revenues in the quarter
ended April 30, 1998 and 1999, respectively. Contract revenues from multi-year
master service agreements represented 48.1% and 46.2% of total contract revenues
in the quarters ended April 30, 1998 and 1999, respectively.
Contract revenues increased $59.0 million, or 22.0%, to $326.7 million in the
nine months ending April 30, 1999 from $267.7 million in the nine months ended
April 30, 1998. Of this increase, $53.2 million was attributable to the
telecommunications services group, $5.4 million was attributable to the
underground utility locating services group, and $0.4 million was attributable
to the electrical services group, reflecting a stronger market demand for the
Company's services. The companies acquired during the nine month period ending
April 30, 1999 contributed $8.1 million of the increase in contract revenues;
$4.3 million related to the telecommunications services group and $3.8 million
related to the underground utility locating services group.
During the nine months ended April 30, 1999, the Company recognized $293.1
million of contract revenues from the telecommunications services group as
compared to $239.9 million for the same period last year. The increase in the
Company's telecommunications services group contract revenues reflects increased
volume of projects and activities associated with cable television construction
services which increased by $14.3 million to $140.5 million in the nine months
ended April 30, 1999. Of the remaining $38.9 million increase in
telecommunications contract revenues, $40.5 million related to geographic
expansion and an increased volume of services to existing customers under the
terms of several new master contracts offset by a $1.6 million decline in
services provided under bid contracts. Contract revenues recognized from the
electrical construction and maintenance services group was $15.4 million and
$15.0 million, respectively, for the nine months ended April 30, 1999 and 1998.
The Company recognized contract revenues of $18.2 million from the underground
utility locating services group in the nine months ended April 30, 1999 as
compared to $12.8 million in the same period last year, an increase of 41.9%.
<PAGE> 17
17
REVENUES (CONTINUED).
Contract revenues from multi-year master service agreements and other long-term
agreements represented 90.5% and 86.6% of total contract revenues in the nine
months ended April 30, 1998 and 1999, respectively. Contract revenues from
multi-year master service agreements represented 47.5% and 46.9% of total
contract revenues in the nine months ended April 30, 1998 and 1999,
respectively.
COSTS OF EARNED REVENUES. Costs of earned revenues increased $17.9 million to
$91.6 million in the quarter ended April 30, 1999 from $73.7 million in the
quarter ended April 30, 1998, but decreased as a percentage of contract revenues
to 75.5% from 76.8%. Costs of earned revenues increased $37.6 million to $246.2
million in the nine months ended April 30, 1999 from $208.6 million in the nine
months ended April 30, 1998, but decreased as a percentage of contract revenues
to 75.4% from 77.9%. For the three and nine months ended April 30, 1999,
respectively, insurance and equipment costs declined as a percentage of contract
revenues as a result of more effective management of insurance claims, positive
results of the corporate safety program, and the buy-out of certain operating
leases. Other factors affecting the improved operating margin include increased
productivity of the Company's labor force combined with the more effective
utilization of subcontractors to meet labor demands.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased $0.9 million to $11.7 million in the quarter ended April 30, 1999 from
$10.8 million in the quarter ended April 30, 1998. The increase in general and
administrative expenses for the quarter ended April 30, 1999, as compared to the
same period last year, was primarily attributable to increases in administrative
salaries, employee benefits and payroll taxes of $1.6 million offset by a
reduction in other general and administrative expenses of $0.1 and a reduction
in the provision for doubtful accounts of $0.6 million.
General and administrative expenses increased $5.1 million to $31.9 million in
the nine months ended April 30, 1999 from $26.8 million in the nine months ended
April 30, 1998. The increase in general and administrative expenses for the
quarter ended April 30, 1999, as compared to the same period last year, was
primarily attributable to increases in administrative salaries, employee
benefits and payroll taxes of $4.6 million, registration costs of $0.4 million,
and other general and administrative expenses of $1.0 million offset by a
reduction in interest costs of $0.3 million and a reduction in the provision for
doubtful accounts of $0.6 million.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased $1.3
million to $4.9 million in the quarter ending April 30, 1999 as compared to $3.6
million in the same period last year. Depreciation and amortization increased
$3.1 million to $13.0 million in the nine months ending April 30, 1999 as
compared to $9.9 million in the same period last year. The increase in
depreciation and amortization was due to capital expenditures of $37.5 million
in the nine month period ended April 30, 1999 as compared to $16.8 million in
the nine month period ended April 30, 1998, an increase of $20.7 million. The
increased capital expenditures represent capital expenditures in the ordinary
course of business, equipment purchased for the start-up of certain long-term
contracts, and the buy-out of certain operating leases on terms favorable to the
Company.
INCOME TAXES. The provision for income taxes was $5.4 million in the three-month
period ended April 30, 1999 as compared to $3.5 million in the same period last
year. The Company's effective tax rate was 38.3% in the three-month period ended
April 30, 1999 as compared to 39.3% in the same period last year. The effective
tax rate differs from the statutory rate due to state income taxes, income of
Subchapter S Corporations (CCI and ITI) being taxed to their shareholders, the
amortization of intangible assets that do not provide a tax benefit, and other
non-deductible expenses for tax purposes.
The provision for income taxes was $15.1 million in the nine month period ended
April 30, 1999 as compared to $8.5 million in the same period last year. The
Company's effective tax rate was 39.7% in the nine month period ended April 30,
1999 as compared to 34.8% in the same period last year. The effective tax rate
differs from the statutory rate due to state income taxes, income of Subchapter
S Corporations (CCI and ITI) being taxed to their shareholders, the amortization
of intangible assets that do not provide a tax benefit, and other non-deductible
expenses for tax purposes.
For the three and nine month periods ended April 30, 1998, the provision for
income taxes has been adjusted to reflect a pro forma tax provision for pooled
companies which were previous Subchapter S Corporations. The pro forma provision
for income taxes was $3.5 million and 9.9 million and the pro forma effective
tax rate was 38.3% and 40.4% for the three and nine month periods ended April
30, 1998, respectively.
<PAGE> 18
18
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 to provide
working capital sufficient for general corporate purposes. Capital expenditures
have been financed by operating and capital leases, bank borrowings and internal
cash flow. The Company regularly reviews various strategic acquisition
opportunities and periodically engages in discussions regarding possible
acquisitions. 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. The Company's sources of cash have historically been from
operating activities, bank borrowings, proceeds arising from the sale of idle
and surplus equipment and real property, and the public offering of its common
stock.
For the nine month period ended April 30, 1999, net cash provided by operating
activities was $26.6 million compared to $14.9 million for the nine month period
ended April 30, 1998. Net income and non-cash charges are the primary sources of
operating cash flow. Working capital items decreased operating cash flow by $8.4
million for the nine month period ended April 30, 1999 principally through an
increase in other current assets and unbilled revenues offset by a decrease in
accounts receivable and increases in accounts payable, accrued self-insurance
claims, and other current liabilities.
In the nine month period ended April 30, 1999, net cash used in investing
activities was $68.5 million as compared to $15.2 million for the same period
last year. For the nine month period ended April 30, 1999, capital expenditures
of $36.7 million were for the normal replacement of equipment in the ordinary
course of business, equipment purchased for the start up of certain long-term
contracts, and the buy-out of certain operating leases on terms favorable to the
Company.
In August 1998, the Company purchased a 13.0% equity interest in Witten
Technologies, Inc. ("Witten") for $3.0 million. Witten has developed, and is the
owner of, various proprietary technologies and materials relating to
ground-penetrating radar and the use of other electromagnetic frequencies. In
addition to the equity received, the Company has acquired an exclusive license
to market certain technologies within the United States and Canada. Witten is
being accounted for as an unconsolidated affiliate. Additionally, the Company
purchased the assets of a business which included a non-compete agreement for
$750,000 for use in the telecommunications services group.
On February 3, 1999, the Company acquired all of the outstanding common stock of
Locating for $10.0 million. On March 31, 1999, the Company purchased all of the
outstanding shares of common stock of Ervin for $21.8 million in cash and
258,066 shares of Dycom's common stock for an aggregate purchase price of $32.5
million. On April 1, 1999, the Company issued 516,128 of Dycom's common stock
with a total value of $21.4 million to the shareholders of Apex in exchange for
all of the outstanding common stock of Apex. As part of these transactions, the
Company acquired cash balances of $2.4 million.
In the nine month period ended April 30, 1999, net cash provided by financing
activities was $30.0 million which was primarily attributable to new borrowings
from the amended bank credit agreement of $31.8 million used to finance the
Company's recent acquisitions and from stock options excercised during the
period of $1.4 million. Normal debt payments under the terms of the amended bank
credit agreement totalled $3.2 million during the nine month period.
On April 27, 1999, the Company signed an amendment to its bank credit agreement
increasing the total facility to $175.3 million and extending the facility's
maturity to 2002. The amended credit facility provides for (i) a $17.5 million
standby letter of credit facility; (ii) a $50.0 million revolving working
capital facility; (iii) a $12.8 million five-year term loan, and (iv) a $95.0
million revolving equipment acquisition and small business purchase facility.
The five-year term loan facility is payable in quarterly installments through
April 2002. During the nine months ended April 30, 1999, the Company repaid $1.5
million on this facility. The revolving equipment acquisition and small business
purchase facility, the revolving working capital facility and the standby letter
of credit facility are available for a two-year period. At April 30, 1999, the
Company had available borrowing capacity of $71.1 million under the revolving
equipment acquisition and small business purchase facility, $40.2 million under
the revolving working capital facility and $3.6 million under the standby letter
of credit facility.
The amended bank credit agreement requires the Company to maintain certain
financial covenants and conditions, as well as restricting the encumbrances of
assets and the creation of additional indebtedness and limits the payment of
cash dividends. The amended bank credit facility is secured by the Company's
assets and guaranteed by each of its subsidiaries. At April 30, 1999, the
Company was in compliance with all covenants and conditions under the credit
agreement.
In April 1999, the Company filed, at its cost, a registration statement for an
offering of 2.5 million shares and 200,000 shares of common stock, to be sold by
the Company and certain selling stockholders, respectively. The closing of the
offering, at $48.50 per share,
<PAGE> 19
19
Liquidity and Capital Resources (continued)
was consummated on May 19, 1999. On that date, the Company received $115.3
million in proceeds from the offering which was net of an underwriting discount
of $2.40 per share. The Company estimates that legal fees and other expenses
incurred for this transaction were approximately $450,000. In addition to the
shares sold above, the Company and the selling stockholders have granted the
underwriters an option to purchase within 30 days after the offering an
additional 375,000 and 30,000 shares, respectively, to cover over-allotments.
On June 4, 1999, the Company repaid the outstanding balance of its revolving
credit facility of $33.7 million with proceeds of the common stock offering. The
remaining proceeds will be used to fund the Company's growth strategy, including
acquisitions, working capital and capital expenditures, and for other general
corporate purposes.
On June 11, 1999, the underwriters exercised a portion of their option to
purchase additional shares to cover over-allotments. The underwriters will
purchase 37,038 shares from the Company and 2,962 shares from certain selling
stockholders. The Company will receive approximately $1.7 million as payment for
the over-allotment.
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 amended bank 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.
Special Note Concerning Forward Looking Statements
This Quarterly Report on Form 10-Q, including the Notes to Condensed
Consolidated Financial Statements and this Management's Discussion and Analysis
of Financial Condition and Results of Operations, contains forward looking
statements. The words "believe", "expect", "anticipate", "intends", "forecast",
" project", and similar expressions identify forward looking statements. Such
statements may include, but may not be limited to, the anticipated outcome of
contingent events, including litigation, projections of revenues, income or
loss, capital expenditures, plans for future operations, growth and aquisitions,
financial needs or plans and the availability of financing, and plans relating
to services of the Company, as well as assumptions relating to the foregoing.
Such forward looking statements are within the meaning of that term in Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended.
Year 2000 Compliance
The Company has reviewed its computer systems to identify those areas that could
be adversely affected by Year 2000 software failures. The Company has converted
approximately 85% of its information systems to be Year 2000 compliant. The
Company has incurred approximately $1.4 million through April 30, 1999 and
approximately $0.5 million will be incurred in the remainder of fiscal 1999 to
complete the information system conversions, including the implementation and
conversion cost of our recently acquired subsidiaries. Although the Company
expects that any additional expenditures that may be required in connection with
the Year 2000 conversions will not be material, there can be no assurance in
this regard. The Company believes that certain of its customers, particularly
local exchange and long distance carriers and cable multiple system operators,
may be impacted by the Year 2000 problem, which could in turn affect the
Company. Currently, the Company cannot predict the effect of the Year 2000
problem on these customers and there can be no assurance it will not have a
material adverse effect on the Company's business, financial condition, results
of operations or cash flows. The Company will be formulating a contingency plan
prior to the end of the current fiscal year to address the possible effects, if
any, of its customers experiencing Year 2000 problems.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company considered the provision of Financial Reporting Release No. 48
"Disclosure of Accounting Policies for Derivative Financial Instruments and
Derivative Commodity Instruments, and Disclosure of Quantitative and Qualitative
Information about Market Risk Inherent in Derivative Financial Instruments,
Other Financial Instruments and Derivative Commodity Instruments." The Company
has no holdings of derivative financial or commodity instruments at April 30,
1999 although it does have exposure to interest rate risk. At April 30, 1999,
the Company performed sensitivity analysis to assess the potential effect of
interest rate risk and concluded that near-term changes in interest rates should
not materially adversely affect the Company's financial position, results of
operations or cash flows.
<PAGE> 20
20
PART II. OTHER INFORMATION
- --------------------------
Item 5. Other Information.
Douglas J. Betlach, Vice President, Treasurer, and Chief Financial Officer, has
decided to pursue other opportunities and will leave the Company effective June
23, 1999. As of the effective date, the Company's Senior Vice President and
Chief Administrative Officer, Kenneth G. Geraghty, will assume the Chief
Financial Officer's responsibilities. The Company has initiated a search for a
new Chief Financial Officer.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibits furnished pursuant to the requirements of Form 10-Q:
Number Description
------ -----------
(3)(ii) By-Laws of Dycom Industries, Inc. as amended by the
Company's Board of Directors on May 24, 1999.
(11) Statement re computation of per share earnings
All information required by Exhibit 11 is presented within
Note 3 of the Company's condensed consolidated financial
statements in accordance with the provisions of SFAS No.
128.
(27) Financial Data Schedule
(b) Reports On Form 8-K
The following reports on Form 8-K were filed on behalf of the Registrant during
the quarter ended April 30, 1999:
(i) The press release announcing the execution of a stock purchase agreement and
a merger agreement for the acquisition of Ervin Cable Construction, Inc. and
Apex Digital TV, Inc.
Item Reported: 5
Date Filed: March 18, 1999
(ii) The acquisition of Ervin Cable Construction, Inc. and Apex Digital TV, Inc.
pursuant to a stock purchase agreement and a merger agreement dated March 12,
1999.
Items Reported: 2 and 7
Date Filed: April 15, 1999
Financial Statements Filed:
Audited financial statements of Ervin Cable Construction,
Inc. for the year ended December 31, 1998.
Audited financial statements of Apex Digital TV, Inc. for
the year ended December 31, 1998, and for the period from
September 22, 1997 (inception) to December 31, 1997.
Unaudited pro forma consolidated balance sheet as of
January 31, 1999.
Unaudited pro forma consolidated statement of operations
for the six months ended January 31, 1999.
Unaudited pro forma consolidated statement of operations
for the fiscal year ended July 31, 1998.
<PAGE> 21
21
(b) Reports On Form 8-K (Continued)
(iii) The press release announcing the execution of a Second Amended and
Restated Credit Facility Agreement dated April 27, 1999 and the backlog of the
Registrant as of January 31, 1999.
Item Reported: 5
Date Filed: April 29, 1999
<PAGE> 22
22
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DYCOM INDUSTRIES, INC.
Registrant
Date: June 14, 1999 /s/ Thomas R. Pledger
----------------- ----------------------------
Thomas R. Pledger
Executive Chairman
Date: June 14, 1999 /s/ Steven Nielsen
------------------ ----------------------------
Steven Nielsen
President and Chief Executive Officer
Date: June 14, 1999 /s/ Douglas J. Betlach
------------------ ----------------------------
Douglas J. Betlach
Vice President, Treasurer, and
Chief Financial Officer
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<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-END> APR-30-1999
<CASH> 23,956,787
<SECURITIES> 0
<RECEIVABLES> 71,409,202
<ALLOWANCES> 3,749,805
<INVENTORY> 34,050,749
<CURRENT-ASSETS> 139,898,108
<PP&E> 136,382,118
<DEPRECIATION> 63,527,841
<TOTAL-ASSETS> 274,777,750
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<BONDS> 47,492,247
0
0
<COMMON> 7,682,396
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<TOTAL-LIABILITY-AND-EQUITY> 274,777,750
<SALES> 0
<TOTAL-REVENUES> 326,742,438
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<TOTAL-COSTS> 246,245,006
<OTHER-EXPENSES> 13,009,139
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<INTEREST-EXPENSE> 1,243,999
<INCOME-PRETAX> 37,975,454
<INCOME-TAX> 15,064,701
<INCOME-CONTINUING> 22,910,753
<DISCONTINUED> 0
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</TABLE>
<PAGE> 1
EXHIBIT 99
BY-LAWS
OF
DYCOM INDUSTRIES, INC.
ARTICLE I
OFFICES
Section 1. REGISTERED OFFICE. The registered office of the
corporation shall be located in the City of Palm Beach Gardens, County of Palm
Beach, State of Florida.
Section 2. OTHER OFFICES. The corporation may also have
offices at such other places, both within and without the State of Florida, as
the board of directors may from time to time determine or the business of the
corporation may require.
ARTICLE II
ANNUAL MEETINGS OF SHAREHOLDERS
Section 1. PLACE OF MEETING. All meetings of shareholders for
the election of directors shall be held in the City of Palm Beach Gardens, State
of Florida, at such place as may be fixed from time to time by the board of
directors, or at such other place, either within or without the State of
Florida, as shall be designated from time to time by the board of directors and
stated in the notice of the meeting.
Section 2. DATE AND HOUR OF MEETING. Annual meetings of
shareholders, commencing with the year 1983, shall be held on the third Thursday
of November, if not a legal holiday, and if a legal holiday, then on the next
secular day following, at 10:00 A.M., or at such other date and hour as shall be
designated from time to time by the board of directors and stated in the notice
of the meeting.
Only such business shall be conducted as shall have been
brought before the meeting by or at the direction of the presiding officer.
Section 3. NOTICE OF MEETING. Written notice of the annual
meeting, stating the place, date and hour of the meeting, shall be delivered not
less than ten nor more than sixty days before the date of the meeting, either
personally or by mail, by or at the direction of the
<PAGE> 2
president, the secretary or the officer or persons calling the meeting, to each
shareholder of record entitled to vote at such meeting.
Section 4. PURPOSE OF MEETING. At the annual meeting, the
shareholders shall elect a board of directors and transact such other business
as may properly be brought before the meeting.
Section 5. MATTERS TO BE CONSIDERED AT ANNUAL MEETING. At an
annual meeting of shareholders, only such new business shall be conducted, and
only such proposals shall be acted upon as shall have been brought before the
annual meeting (a) by, or at the direction of, the board of directors or (b) by
any shareholder of record of the corporation who is such a shareholder at the
time of giving of notice pursuant to this Section 5, who is entitled to vote at
such meeting and with respect to such proposal and who complies with the notice
procedures set forth in this Section 5. For a proposal to be properly brought
before an annual meeting by a shareholder, the shareholder must have given
timely notice thereof in writing to the secretary of the corporation. To be
timely, a shareholder's notice must be delivered to, or mailed and received at,
the principal executive offices of the corporation not less than 60 days nor
more than 90 days prior to the first anniversary of the preceding year's annual
meeting; provided, however, that in the event that the date of the meeting is
changed by more than 30 days from such anniversary date, notice by the
shareholder to be timely must be received no later than the close of business of
the 10th day following the earlier of the day on which notice of the date of the
meeting was mailed or public disclosure of the date of the meeting was made. A
shareholder's notice to the secretary of the corporation shall set forth as to
each matter the shareholder proposes to bring before that annual meeting (a) a
brief description of the proposal desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting, (b)
the name and address, as they appear on the corporation's books, of the
shareholder proposing such business and any other shareholders known by such
shareholder to be supporting such proposal, (c) the class and number of shares
of the corporation's capital stock which are beneficially owned by (i) the
shareholder; (ii) any other person who beneficially owns,
2
<PAGE> 3
or shares beneficial ownership, of any shares owned of record or beneficially
owned by such shareholder; (iii) any group of which the shareholder is a member;
(iv) any person acting in concert with such shareholder or group; (v) any
affiliates or associates of the foregoing persons; and (vi) any other
shareholders known by such shareholder to be supporting such proposal on the
date of such shareholder notice and (d) any financial interest of the persons
referred to in clauses (i) through (v) of the foregoing clause (c) in, or with
respect to, the proposal which is to be made. Notwithstanding anything in the
by-laws to the contrary, no business shall be conducted at an annual meeting
except in accordance with this Section 5. As used in this paragraph: the term
"beneficial ownership" (or derivations thereof) shall include, without
limitation, "beneficial ownership" as defined in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or any successor
regulation thereto, and a person shall be deemed, without limitation to
beneficially own any shares which such person is deemed to beneficially own
under such Rule 13d-3 or any such successor regulation; the terms "affiliate"
and "associate" mean persons defined as such "affiliates" or "associates" in
accordance with Rule 12b-2 under the Exchange Act, or any successor regulation
thereto; and the term "group" means a "group" as defined in Rule 13d-5 under the
Exchange Act, or any successor regulation thereto.
A shareholder's notice to the secretary of the corporation
shall be submitted to the board of directors for review. The board of directors,
or a designated committee thereof, may determine whether a notice has complied
with the requirements of this Section 5, and may reject as invalid any
shareholder proposal which was not the subject of a notice timely made in
accordance with, and containing all information required by, the terms of this
Section 5. If neither the board of directors nor such committee makes a
determination as to the compliance with the requirements of this Section 5, the
presiding officer of the annual meeting shall determine and declare at the
annual meeting whether such notice has so complied and whether the shareholder
proposal described in such notice may be made in accordance with the terms of
this Section 5. If the board of directors or a designated committee thereof or
the presiding officer
3
<PAGE> 4
determines that a shareholder proposal was the subject of a notice made in
accordance with the terms of this Section 5, and if the shareholder giving such
notice shall make such proposal, the presiding officer shall so declare at the
annual meeting and ballots shall be provided for use at the meeting with respect
to any such proposal. If the board of directors or a designated committee
thereof or the presiding officer determines that a shareholder proposal was not
the subject of a notice made in accordance with the terms of this Section 5, and
if the shareholder giving such notice shall make such proposal, the presiding
officer shall so declare at the annual meeting and any such proposal shall not
be acted upon at the annual meeting.
This provision shall not prevent the consideration and
approval or disapproval at the annual meeting of reports of officers, the board
of directors and committees of the board of directors, but in connection with
such reports, no new business shall be acted upon at such annual meeting unless
stated, filed and received as herein provided.
Section 6. CONDUCT OF MEETINGS OF SHAREHOLDERS BY PRESIDING
OFFICER. The presiding officer at any meeting of the shareholders of the
corporation shall have the power (A) to determine the procedure to be followed
in presenting and voting upon all business that may be transacted at the meeting
and to adopt, to the extent he deems appropriate, rules for such purpose, (B) to
adjourn a meeting, duly called and noticed, at which a quorum is present in
person or by proxy if a matter to be considered and acted upon at the meeting
requires the affirmative vote of more than a majority of a quorum at the meeting
voting in person or by proxy and at the meeting as originally duly called and
noticed (i) the number of shares voted in person or by proxy in favor of such
matter is insufficient to approve it and (ii) the number of shares voted in
person or by proxy against such matter is insufficient to disapprove it. Shares
which are voted in person or by proxy as abstaining from voting on any such
matter shall be deemed not to have voted on such matter for the purposes of this
Section 6. At any adjourned meeting which has been adjourned by the presiding
officer as provided in this Section 6, any business may be transacted which
could have been transacted at the meeting as originally called if a quorum is
present.
4
<PAGE> 5
ARTICLE III
SPECIAL MEETINGS OF SHAREHOLDERS
Section 1. TIME AND PLACE OF MEETING. Special meetings of
shareholders for any purpose other than the election of directors may be held at
such time and place, within or without the State of Florida, as shall be stated
in the notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. PURPOSE OF MEETING: PERSONS ENTITLED TO CALL.
Special meetings of shareholders for any purpose or purposes, unless otherwise
prescribed by statute or by the articles of incorporation, may be called at any
time by the chairman of the board and shall be called by the chairman of the
board or the secretary at the request in writing of a majority of the board of
directors or of the holders of not less than one-tenth of all the shares
entitled to vote at the meeting. Any such request shall state the purpose or
purposes of the proposed meeting.
Only such business shall be conducted as shall have been
brought before the meeting by or at the direction of the presiding officer.
Section 3. NOTICE OF MEETING. Written notice of a special
meeting, stating the place, date and hour of the meeting and the purpose or
purposes for which the meeting is called, shall be delivered not less than ten
nor more than sixty days before the date of the meeting, either personally or by
mail, by or at the direction of the president, the secretary or the officer or
persons calling the meeting, to each shareholder of record entitled to vote at
such meeting.
Section 4. BUSINESS TRANSACTED AT MEETING. Business transacted
at any special meeting of shareholders shall be limited to the purpose or
purposes stated in the notice of the meeting.
ARTICLE IV
SHAREHOLDER LIST:
QUORUM AND VOTING OF STOCK
Section 1. SHAREHOLDER LIST. The officer or agent having
charge of the corporation's stock transfer books shall make, at least ten days
before each meeting of
5
<PAGE> 6
shareholders, a complete list of the shareholders entitled to vote at the
meeting or any adjournment thereof, with the address and number of shares held
by each shareholder. For a period of ten days prior to the meeting, the list
shall be kept on file at the registered office of the corporation, at the
principal place of business of the corporation or at the office of the transfer
agent or registrar of the corporation and shall be subject to inspection by any
shareholder at any time during usual business hours. The list shall also be
produced and kept open at the time and place of the meeting and shall be subject
to inspection by any shareholder at any time during the meeting.
Section 2. QUORUM. A majority of the shares of stock issued
and outstanding and entitled to vote, represented in person or by proxy, shall
constitute a quorum for the transaction of business at all meetings of
shareholders, except as otherwise provided by statute or by the articles of
incorporation. If a quorum shall not be present or represented at any meeting of
shareholders, the shareholders present in person or represented by proxy shall
have the power to adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally notified.
Section 3. VOTE REQUIRED FOR SHAREHOLDERS' ACTION. Except in
elections for directors, if a quorum is present, a vote shall be the act of the
shareholders if the affirmative vote of shares of stock represented at the
meeting and entitled to vote on the subject matter exceed the votes cast
opposing the action, unless the vote of a greater number of shares of stock is
required by statute or by the articles of incorporation. In elections for
directors, if a quorum is present, directors are elected by a plurality of the
votes cast by the shares of stock represented and entitled to vote at the
meeting, unless the vote of a greater number of shares of stock is required by
the articles of incorporation. The candidates for directors receiving the
highest number of votes, up to the number of directors to be elected, are
elected.
6
<PAGE> 7
Section 4. VOTING OF SHARES. Each outstanding share of stock
having voting power shall be entitled to one vote on each matter submitted to a
vote at a meeting of shareholders, unless otherwise provided in the articles of
incorporation. A shareholder may vote either in person or by proxy executed in
writing by the shareholder or by his duly authorized attorney-in-fact. In all
elections for directors, every shareholder entitled to vote shall have the right
to vote, in person or by proxy, the number of shares of stock owned by him for
as many persons as there are directors to be elected at that time and for whose
election he has a right to vote.
Section 5. ACTION BY SHAREHOLDERS WITHOUT A MEETING. Unless
otherwise provided in the articles of incorporation, any action required by
statute to be taken at any annual or special meeting of shareholders, or any
action which may be taken at any annual or special meeting of shareholders, may
be taken without a meeting, without prior notice and without a vote, if a
consent in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted. If any class of
shares is entitled to vote thereon as a class, such written consent shall be
required of the holders or a majority of the shares of each class of shares
entitled to vote as a class thereon and of the total shares entitled to vote
thereon. Within ten days after obtaining such authorization by written consent,
notice shall be given to those shareholders who have not consented in writing.
The notice shall fairly summarize the material features of the authorized action
and, if the action be a merger, consolidation, or sale or exchange of assets for
which dissenters' rights are provided by statute, the notice shall contain a
clear statement of the right of shareholders dissenting therefrom to be paid the
fair value of their shares upon compliance with further provisions of law
regarding the rights of dissenting shareholders.
7
<PAGE> 8
ARTICLE V
DIRECTORS
Section 1. NUMBER; TERM. The number of directors which shall
constitute the whole board shall be determined from time to time by resolution
of the board. Directors need not be residents of the State of Florida or
shareholders of the corporation. Unless otherwise provided in the articles of
incorporation, the directors shall be elected at the annual meeting of
shareholders and each director elected shall serve until the next succeeding
annual meeting and until his successor shall have been duly elected and shall
have qualified or until his earlier resignation, removal from office or death.
Section 2. VACANCIES. Any vacancy occurring in the board,
including any vacancy created by reason of an increase in the number of
directors, may be filled by the affirmative vote of a majority of the remaining
directors, though less than a quorum, and any director so chosen shall hold
office until the next annual election and until his successor shall have been
duly elected and shall have qualified.
Section 3. MANAGEMENT OF BUSINESS AND AFFAIRS. The business
and affairs of the corporation shall be managed under the direction of the board
of directors, which may exercise all such powers of the corporation and do all
such lawful acts and things as are not by statute or by the articles of
incorporation or by these by-laws directed or required to be exercised or done
by the shareholders.
Section 4. MAINTENANCE OF BOOKS AND RECORDS. The directors may
keep the books of the corporation, except such as are required by law to be kept
within the state, outside the State of Florida, at such place or places as they
may from time to time determine.
Section 5. COMPENSATION OF DIRECTORS. The board of directors,
by the affirmative vote of a majority of the directors then in office, and
irrespective of any personal interest of any of its members, shall have
authority to establish reasonable compensation of all directors for services to
the corporation as directors, officers or otherwise.
8
<PAGE> 9
Section 6. DIRECTOR NOMINATIONS. Nominations of candidates for
election as directors at any meeting of shareholders called for an election of
directors (an "Election Meeting") may be made (a) by, or at the direction of,
the nominating committee of the board of directors, or, if there is no such
nominating committee, by, or at the direction of, a majority of the board of
directors or (b) by any shareholder of the corporation who is a shareholder of
record at the time of giving notice provided in this Section 6, who is entitled
to vote at such Election Meeting, and who has given proper and timely notice of
his intention to make such nomination as provided in this Section 6. Only
persons nominated in accordance with the procedures set forth in this Section 6
shall be eligible for election as directors at an Election Meeting.
A shareholder desiring to make a nomination pursuant to clause
(b) of the preceding paragraph (a "Nominating Shareholder") shall give timely
notice in writing to the secretary of the corporation as set forth in this
Section 6. To be timely, a Nominating Shareholder's notice must be received at
the principal executive offices of the corporation not less than 60 days nor
more than 90 days prior to the first anniversary of the preceding year's annual
meeting; provided, however, that in the event that the date of the annual
meeting is changed by more than 30 days from such anniversary date, notice by
the Nominating Shareholder to be timely must be received not later than the
close of business on the 10th day following the earlier of the day on which
notice of the date of the meeting was mailed or public disclosure of the date of
the meeting was made.
A Nominating Shareholder's notice shall be signed by such
Nominating Shareholder and set forth, as of the date of such notice, as to each
person whom the Nominating Shareholder proposes to nominate for election or
re-election as a director and as to the Nominating Shareholder (or if such
notice is given by, or with respect to, a person who is part of a group, as to
each person in such group): (i) the name, age, business address and residence
address of such person; (ii) the principal occupation or employment of such
person; (iii) the class and number of shares of the corporation's capital stock
which are beneficially owned by (A) such person; (B) any other person who
beneficially owns, or shares beneficial ownership, of any
9
<PAGE> 10
shares owned of record or beneficially owned by such person; (C) any group of
which such person is a member; (D) any person acting in concert with such person
or group; (E) any affiliates or associates of the foregoing persons; and (F) any
other shareholders known by such Nominating Shareholder to be supporting such
nomination; (iv) a description of all arrangements or understandings between the
shareholder or any of the persons referred to in clauses (A) through (F) of the
foregoing clause (iii) and each nominee and any other person or persons (naming
such person or persons) pursuant to, or in connection with, which the nomination
or nominations proposed to be made by the Nominating Shareholder; and (v) any
other information relating to the persons referred to in clause (iv), or any of
the persons referred to in clauses (A) through (F) of the foregoing clause
(iii), that is or would be required to be disclosed to shareholders and/or
contained in materials required to be filed with the Securities and Exchange
Commission in connection with solicitations of proxies with respect to nominees
for election as directors pursuant to the applicable proxy rules then in effect
under the Exchange Act, or any successor regulations. Such notice shall also
include a representation of the Nominating Shareholder that such person is a
holder of record of shares of the corporation entitled to vote at such meeting
and intends to appear in person or by proxy at the meeting to nominate the
person or persons specified in such notice. The board of directors may require
any proposed nominee to furnish such other information as may reasonably be
required by the board of directors to determine the eligibility of such proposed
nominee to serve as a director of the corporation. As used in this paragraph:
the term "beneficial ownership" (or derivations thereof) shall include, without
limitation, "beneficial ownership" as defined in Rule 13d-3 under the Exchange
Act or any successor regulation thereto, and a person shall be deemed, without
limitation to beneficially own any shares which such person is deemed to
beneficially own under such Rule 13d-3 or any such successor regulation; the
terms "affiliate" and "associate" mean persons defined as such "affiliates" or
"associates" in accordance with Rule 12b-2 under the Exchange Act, or any
successor regulation thereto; and the term "group" means a "group" as defined in
Rule 13d-5 under the Exchange Act, or any successor regulation thereto.
10
<PAGE> 11
No person shall be elected as a director of the corporation at
an Election Meeting unless nominated in accordance with the procedures set forth
in this Section 6. No nomination shall be valid if the nominee is not duly
qualified, at the time of nomination, to serve as a director in compliance with
all provisions of the articles of incorporation, the by-laws and all applicable
laws. Ballots bearing the names of all persons who have been properly nominated
for election as directors at an Election Meeting in accordance with the
procedures set forth in this Section 6 shall be provided for use at the Election
Meeting.
A shareholder's notice to the secretary of the corporation
shall be submitted to the board of directors for review. The board of directors
may determine whether a notice has complied with all requirements of this
Section 6, and may reject as invalid any nomination by a shareholder who has not
given timely notice of his intention to make such nomination, containing all
information required by this Section 6, or whose notice is found to contain any
material misstatements. If the board of directors does not make a determination
as to the compliance of a shareholder's notice with the requirements of this
Section 6, the presiding officer of the Election Meeting shall determine and
declare at the Election Meeting whether such notice has so complied and whether
the nomination proposed in such notice may be made in accordance with the terms
of this Section 6. If the board of directors or the presiding officer determines
that such nomination may be made in accordance with the terms of this Section 6,
and if the shareholder giving such notice shall make such nomination at the
Election Meeting, the presiding officer shall so declare the nomination valid at
the Election Meeting. If the board of directors or the presiding officer
determines that a notice of a proposed nomination was not given in accordance
with the terms of this Section 6, and if a shareholder shall propose such
nomination at the Election Meeting, the presiding officer shall declare the
nomination invalid at the Election Meeting and the defective nomination shall be
disregarded. Nothing herein contained shall be construed to require the
inclusion of the name of any such nominee in any proxy materials distributed by
or on behalf of the corporation.
11
<PAGE> 12
ARTICLE VI
MEETINGS OF THE BOARD OF DIRECTORS
Section 1. PLACE. Meetings of the board of directors, regular
or special, may be held either within or without the State of Florida. At
meetings of the board of directors, the chairman of the board shall preside.
Section 2. FIRST MEETING. The first meeting of each newly
elected board shall be held at the time and place fixed for the annual meeting
of shareholders, and immediately following the same, and no notice of such
meeting shall be necessary to the newly elected directors in order legally to
constitute the meeting, provided a quorum shall be present, or the meeting may
convene at such place and time as shall be specified in a notice given as
hereinafter provided for special meetings of the board or as shall be fixed by
the written consent of all the directors.
Section 3. REGULAR MEETINGS; NOTICE. Regular meetings of the
board may be held upon such notice, or without notice, and at such time and such
place as shall from time to time be determined by the board.
Section 4. SPECIAL MEETINGS; NOTICE. Special meetings of the
board may be called by the chairman of the board on three days notice to each
director, delivered personally or by first-class mail, telegram or cablegram.
Special meetings shall be called by the chairman of the board or the secretary
in like manner and on like notice upon the written request of two directors.
Section 5. WAIVER OF NOTICE. Notice of a meeting of the board
need not be given to any director who signs a waiver of notice either before or
after the meeting. Attendance of a director at a meeting shall constitute a
waiver of notice of such meeting and waiver of any and all objections to the
place or time of the meeting or the manner in which it has been called or
convened, except when a director states, at the beginning of the meeting, any
objection to the transaction of business because the meeting is not lawfully
called or convened. Neither the
12
<PAGE> 13
business to be transacted at, nor the purpose of, any regular or special meeting
of the board need be specified in the notice or waiver of notice of such
meeting.
Section 6. QUORUM. A majority of the directors shall
constitute a quorum for the transaction of business unless a greater number is
required by statute or by the articles of incorporation. The act of a majority
of the directors present at any meeting at which a quorum is present shall be
the act of the board, unless the act of a greater number is required by statute
or by the articles of incorporation. Members of the board of directors may
participate in a meeting of the board by means of a conference telephone or
similar communications equipment whereby all persons participating in the
meeting can hear each other, and such participation shall constitute presence in
person at the meeting. If a quorum shall not be present at any meeting of
directors, a majority of the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present.
Section 7. ACTION BY DIRECTORS WITHOUT A MEETING. Any action
required by statute to be taken at a meeting of the board, or any action which
may be taken at a meeting of the board or a committee thereof, may be taken
without a meeting if a consent in writing, setting forth the action to be so
taken, signed by all the directors or all the members of the committee, as the
case may be, is filed in the minutes of the proceedings of the board or of the
committee. Such consent shall have the same effect as a unanimous vote.
ARTICLE VII
EXECUTIVE AND OTHER COMMITTEES
Section 1. DESIGNATION; AUTHORITY. The board of directors, by
resolution adopted by a majority of the board, may designate from among its
members an executive committee and one or more other committees, each of which,
to the extent provided in such resolution, shall have and may exercise all the
authority of the board in the management of the corporation, except as otherwise
required by law. Vacancies in the membership of any committee shall be filled by
the board of directors at a regular or special meeting of the board.
13
<PAGE> 14
Each committee shall keep regular minutes of its proceedings and report the same
to the board when required.
Section 2. ABSENCE OR DISQUALIFICATION OF COMMITTEE MEMBER. In
the absence or disqualification from voting of a member of the committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the board of directors to act at the meeting in the place of
such absent or disqualified member.
ARTICLE VIII
NOTICES
Section 1. HOW AND WHEN GIVEN. Whenever, under the provision
of the statutes or of the articles of incorporation or of these by-laws, notice
is required to be given to any director or shareholder, it shall not be
construed to mean personal notice, but such notice may be given in writing, by
mail, addressed to such director or shareholder at his address as it appears on
the records of the corporation, with postage thereon prepaid, and such notice
shall be deemed to be given when deposited in the United States mail. Notice to
directors may also be given by telegram or cablegram.
Section 2. WAIVER. Whenever any notice is required to be given
under the provisions of the statutes or the articles of incorporation or of
these by-laws, a waiver thereof in writing signed by the person or persons
entitled to such notice, whether before or after the time stated therein, shall
be deemed equivalent to the giving of such notice.
ARTICLE IX
OFFICERS, AGENTS AND EMPLOYEES
Section 1. TITLES. The officers of the corporation shall be
elected by the board of directors and shall consist of a chairman of the board
of directors, a president, a vice-president, a secretary and a treasurer. The
board may also elect additional vice-presidents and
14
<PAGE> 15
one or more assistant secretaries and assistant treasurers. Any two or more
offices may be held by the same person.
Section 2. MANNER OF APPOINTMENT. The board of directors at
its first meeting after each annual meeting of shareholders shall elect a
chairman of the board of directors, a president, one or more vice-presidents, a
secretary and a treasurer, none of whom need be a member of the board except the
chairman of the board of directors.
Section 3. OTHER OFFICERS AND AGENTS. The board of directors
may appoint such other officers and agents as it shall deem necessary, who shall
hold their offices for such terms and shall exercise such powers and perform
such duties as the board shall determine from time to time.
Section 4. COMPENSATION. The salaries of all officers and
agents of the corporation shall be fixed by the board of directors.
Section 5. TERM OF OFFICE. The officers of the corporation
shall hold office until their successors are chosen and qualified. Any officer
elected or appointed by the board of directors may be removed at any time by the
affirmative vote of a majority of the board. Any vacancy occurring in any office
of the corporation shall be filled by the board.
Section 6. THE CHAIRMAN OF THE BOARD OF DIRECTORS. There shall
be a chairman of the board of directors who shall be elected by the board of
directors from its members. The chairman of the corporation shall preside at all
meetings of the shareholders and the board of directors. The chairman shall see
that all orders and resolutions of the board are implemented and shall perform
such other functions as the board of directors may require from time to time.
The chairman shall be responsible to the board of directors and shall seek board
approval and guidance on major corporation strategies, policies, and objectives,
including long-range planning, mergers, acquisitions, consolidations and
liquidations. In addition, the chairman shall execute bonds, mortgages, and
other contracts requiring a seal, under the seal of the corporation, except
where required or permitted by law to be otherwise signed and executed
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and except where the signing and execution thereof shall be expressly delegated
by the board of directors to some other officer or agent of the corporation.
Section 7. THE PRESIDENT. The president shall be the chief
executive officer of the corporation. The president shall have the general
powers and duties of supervision and management usually vested in the office of
the president of a corporation and shall exercise such powers and perform such
duties as generally pertain or are necessarily incidental to the president's
office and shall have such other powers and perform such other duties as may be
specifically assigned to the president from time to time by the board of
directors. In addition, the president shall have general charge of, and shall
direct, and supervise the operations of the corporation's subsidiaries, subject
to the control and direction of the chairman of the board and the board of
directors, and the presidents of each of the corporation's subsidiaries will
report directly to the president. The president shall execute bonds, mortgages,
and other contracts requiring a seal, under the seal of the corporation, except
where required or permitted by law to be otherwise signed and executed and
except where the signing and execution thereof shall be expressly delegated by
the board to some other officer or agent of the corporation.
Section 8. THE VICE PRESIDENT. The vice-president, or if there
shall be more than one, the vice-presidents in the order determined by the board
of directors, shall, in the absence or disability of the president, perform the
duties and exercise the powers of the president and shall perform such other
duties and have such other powers as the board may from time to time prescribe.
Section 9. THE SECRETARY AND ASSISTANT SECRETARIES. The
secretary shall attend all meetings of the board of directors and all meetings
of the shareholders and shall record all the proceedings of the meetings of the
corporation and of the board in a book to be kept for that purpose and shall
perform like duties for the standing committees when required. The secretary
shall give, or cause to be given, notice of all meetings of the shareholders and
of special meetings of the board of directors and shall perform such other
duties as may be prescribed by
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the board of directors or the president, under whose supervision he shall be.
The secretary shall have custody of the corporate seal of the corporation and
he, or an assistant secretary, shall have authority to affix the same to any
instrument requiring it, and when so affixed it may be attested by his signature
or by the signature of such assistant secretary. The board of directors may give
general authority to any other officer to affix the seal of the corporation and
to attest the affixing by his signature. The assistant secretary, or if there be
more than one, the assistant secretaries in the order determined by the board of
directors, shall, in the absence or disability of the secretary, perform the
duties and exercise the powers of the secretary and shall perform such other
duties and have such other powers as the board may from time to time prescribe.
Section 10. THE TREASURER AND ASSISTANT TREASURER. The
treasurer shall have the custody of the corporate funds and securities and shall
keep full and accurate accounts of receipts and disbursements in books belonging
to the corporation and shall deposit all moneys and other valuable effects in
the name and to the credit of the corporation in such depositories as may be
designated by the board of directors. The treasurer shall disburse the funds of
the corporation as may be ordered by the board, taking proper vouchers for such
disbursements, and shall render to the chairman of the board of directors and
the board of directors, at its regular meetings, or when the board so requires,
an account of all his transactions as treasurer and of the financial condition
of the corporation. If required by the board of directors, the treasurer shall
give the corporation a bond in such sum and with such surety or sureties as
shall be satisfactory to the board for the faithful performance of the duties of
his office and for the restoration to the corporation, in case of his death,
resignation, retirement or removal from office, of all books, papers, vouchers,
money and other property of whatever kind in his possession or under his control
belonging to the corporation. The assistant treasurer, or, if there shall be
more than one, the assistant treasurers in the order determined by the board of
directors, shall, in the absence or disability of the treasurer, perform the
duties and exercise the powers of the treasurer and shall perform such other
duties and have such other powers as the board may from time to time prescribe.
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Section 11. GENERAL COUNSEL. The Board of Directors may, in
its discretion, appoint a General Counsel of the Corporation. That General
Counsel shall render such legal service and perform such duties as the Board of
Directors, Chairman of the Board of Directors, President or other elected or
appointed officer may request from time to time.
ARTICLE X
SHARES
Section 1. SHARES REPRESENTED BY CERTIFICATES. The shares of
the corporation shall be represented by certificates signed by the chairman of
the board of directors or the president or a vice-president of the corporation
and by the secretary or an assistant secretary of the corporation, and may be
sealed with the seal of the corporation or a facsimile thereof. Every
shareholder shall be entitled to have a certificate representing all shares to
which the shareholder is entitled. When the corporation is authorized to issue
shares of more than one class or more than one series of any class, there shall
be set forth or fairly summarized upon the face or back of the certificate, or
the certificate shall have a statement that the corporation will furnish to any
shareholder upon request and without charge, a full statement of, the
designations, preferences, limitations, and relative rights of the shares of
each class or series authorized to be issued and, if the corporation is
authorized to issue any preferred or special class in series, the variations in
the relative rights and preferences between the shares of each such series so
far as the same have been fixed and determined and the authority of the board of
directors to fix and determine the relative rights and preferences of subsequent
series.
Section 2. SIGNATURES. The signatures of the officers upon a
certificate may be facsimiles if the certificate is manually signed on behalf of
a transfer agent or a registrar, other than the corporation itself or an
employee of the corporation. In case any officer who has signed or whose
facsimile signature has been placed upon such certificate shall have ceased to
be such officer before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer at the date of its
issuance.
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Section 3. LOST CERTIFICATES. The board of directors may
direct a new certificate to be issued in place of any certificate theretofore
issued by the corporation alleged to have been lost or destroyed. When
authorizing such issue of a new certificate, the board of directors, in its
discretion and as a condition precedent to the issuance thereof, may prescribe
such terms and conditions as it deems expedient, and may require such
indemnities as it deems adequate, to protect the corporation from any claim that
may be made against it with respect to any such certificate alleged to have been
lost or destroyed.
Section 4. TRANSFERS OF SHARES. Upon surrender to the
corporation or to the transfer agent of the corporation of a certificate
representing shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, a new certificate shall be
issued to the person entitled thereto and the old certificate shall be canceled
and the transaction recorded upon the books of the corporation.
Section 5. FIXING OF RECORD DATE. For the purpose of
determining shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or entitled to receive payment of any
dividend, or in order to make a determination of shareholders for any other
purpose, the board of directors may fix in advance a date as the record date for
any such determination of shareholders, such date in any case to be not more
than sixty days and, in the case of a meeting of shareholders, not less than ten
days prior to the date on which the particular action requiring such
determination of shareholders is to be taken.
Section 6. REGISTERED SHAREHOLDERS. The corporation shall be
entitled to recognize the exclusive right of a person registered on its books as
the owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether or
not the corporation shall have express or other notice thereof, except as
otherwise provided by the laws of Florida.
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ARTICLE XI
MANDATORY RETIREMENT
Section 1. Unless otherwise provided in the articles of
incorporation or by statute, all members of the board of directors and all
officers of the corporation shall retire upon attaining sixty-five (65) years of
age. The resignation of a member of the board of directors pursuant to this
Section shall take effect at the annual meeting following said individual's
sixty-fifth birthday. The resignation of an officer of the corporation pursuant
to this Section shall take effect at the first meeting of the board of directors
following the officer's sixty-fifth birthday.
Section 2. Exceptions to the mandatory retirement described in
Section 1 shall be permitted only if approved by the unanimous vote of the board
of directors.
ARTICLE XII
REDEMPTION OF CONTROL SHARES
Section 1. AUTHORIZATION OF REDEMPTION. In the event (i) that
no acquiring person's statement that complies with Section 607.0902 of the
Florida Business Corporation Act, or any successor statute applicable to control
share acquisitions, as presently defined in such Section 607.0902, (the "Control
Share Act") has been delivered to the corporation with respect to a control
share acquisition on or before the date of mailing a notice of redemption of
control shares pursuant to this Article XII, or (ii) that any control shares are
not accorded full voting rights by the shareholders pursuant to the Control
Share Act, the board of directors shall have the power, at its option, to cause
the corporation to redeem any or all of such control shares at the fair value
thereof, in accordance with the time and other requirements specified by the
Control Share Act with respect to corporations, the articles or by-laws of which
authorize redemption of Control Shares and by this Article XII. "Fair value" for
purposes of the preceding sentence shall be deemed to be equal to the Fair
Market Value (as hereinafter defined) per share of the class or series of which
the control shares are part immediately prior to the first public announcement
of the intent or plan of the acquiring person to make a control share
acquisition (the "Announcement Date"), and "Fair Market Value" shall be equal to
(i) the average of the reported
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closing sale prices during the period of thirty consecutive days on which such
closing sale prices are reported immediately preceding the Announcement Date if
such shares are listed on a securities exchange registered under the Exchange
Act or if closing sales prices are reported in the National Market System of the
National Association of Securities Dealers, Inc. Automatic Quotation System
("NASDAQ"), or (ii) if such shares are not listed on any such exchange or such
closing sales prices are not so reported on the National Market System, the
average of the closing bid quotations with respect to such shares during such
thirty-day period immediately preceding the Announcement Date as reported on
NASDAQ or any similar system then in common use, or (iii) if no such quotations
are available, the fair market value of such shares immediately prior to the
Announcement Date as determined by the board of directors by such other
reasonable method as the board of directors shall, in its discretion, select and
apply.
Section 2. NOTICE. In case the board of directors shall desire
to exercise the corporation's right to redeem control shares pursuant to this
Article XII, a notice of such redemption shall be given to the holder or holders
of record of such control shares within the time period, if any, specified by
the Control Share Act, by first-class mail, postage prepaid, not less than ten
days prior to the date fixed for such redemption (the "Redemption Date"), to
such holder's or holders' last address(es) appearing upon the stock transfer
records of the corporation. Any notice which is mailed in the manner herein
provided shall be conclusively presumed to have been duly given, whether or not
any such holder receives the notice, as of the date of mailing of the notice. In
any case, failure to give notice by mail to the holder of any control shares, or
any defect in such notice, shall not affect the validity of the proceedings for
the redemption of any other control share. Each such notice shall specify the
redemption price at which the control shares subject to such redemption are to
be redeemed (the "Redemption Price").
Section 3. PAYMENT. Payment of the Redemption Price for
control shares redeemed pursuant to this Article XII shall be made upon
presentation and surrender of the certificate(s) representing the control shares
(with such instruments of transfer and other
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assurances as the board of directors may reasonably request) provided that
neither the corporation nor any director or officer of the corporation shall
have any liability, in contract or otherwise, to any person as the result of any
failure to make such payment of the Redemption Price, and the sole consequence
of such failure shall be that no such redemption shall occur on the Redemption
Date. Unless the corporation shall fail to pay the Redemption Price upon
presentation and surrender of the certificates representing control shares and
such instruments of transfer and other assurances as the board of directors may
request, from and after the Redemption Date, a holder of control shares which
are subject to redemption shall have no rights with respect to such control
shares (including no rights to vote or to receive distributions in respect
thereof with respect to matters for which the record date shall fall on or after
the Redemption Date) except the right to receive the Redemption Price (without
interest) upon compliance with the procedures specified by this Article XII.
Section 4. GENERAL. The board of directors may by resolution
specify such other procedures as may, in its discretion, be deemed necessary or
advisable for the purpose of implementing this Article XII and is hereby
empowered to determine, on the basis of the information known to it, all matters
with respect to which a determination is required under the Control Share Act in
connection with redemption of control shares.
Terms used in this Article XII and not otherwise defined
shall, unless the context otherwise requires, have the meanings assigned to them
by the Control Share Act.
ARTICLE XIII
GENERAL PROVISIONS
Section 1. DIVIDENDS. Subject to the provisions of the
articles of incorporation relating thereto, if any, dividends may be declared by
the board of directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property or in shares of the corporation's
capital stock, subject to any provisions of the articles of incorporation.
Before payment of any dividend, there may be set aside out of any funds of the
corporation available for dividends such sum or sums as the directors from time
to time, in their absolute
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discretion, think proper as a reserve fund to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation or for such other purpose as the directors shall think conducive to
the interest of the corporation, and the directors may modify or abolish any
such reserve in the manner in which it was created.
Section 2. CHECKS. All checks or demands for money and notes
of the corporation shall be signed by such officer or officers or such other
person or persons as the board of directors may from time to time designate.
Section 3. FISCAL YEAR. The fiscal year of the corporation
shall be fixed by resolution of the board of directors.
Section 4. SEAL. The corporate seal shall have inscribed
thereon the name of the corporation, the year of its incorporation, and the
words "Corporate Seal, Florida." The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or in any manner reproduced.
ARTICLE XIV
INDEMNIFICATION
Section 1. CORPORATION TO INDEMNIFY. Except as prohibited
under Florida law or this by-law, the corporation shall indemnify any person who
was or is made a party to any proceeding by reason of the fact that he or she
was or is a director, an officer or the General Counsel of the corporation, or a
director, an officer or the General Counsel of the corporation serving as a
trustee or fiduciary of an employee benefit plan of the corporation, and the
board of directors may indemnify any employee of the corporation with respect to
such circumstances by resolution, against liability incurred in connection with
such proceeding, including an appeal thereof. This obligation to indemnify shall
not apply, however, to any person against whom the corporation has commenced any
proceeding (other than as a nominal plaintiff in a shareholder's derivative
suit), including such proceeding by way of counterclaim, cross-claim or
third-party complaint; nor shall it apply to any person who has commenced any
proceeding against the corporation or who has solicited such proceeding or who,
in furtherance thereof, has actively
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assisted, participated or intervened, or who may derive a financial or other
benefit from such proceeding.
(a) A "proceeding" includes any threatened, pending or
completed action, suit or other type of proceeding, formal or informal, whether
civil, criminal, administrative or investigative, at all stages thereof,
including appeals.
(b) The term "liability" includes obligations to pay a
judgment, settlement, penalty, fine (including an excise tax assessed with
respect to any employee benefit plan), and reasonable expenses, including legal
and other professional fees, actually and reasonably incurred in defending a
proceeding.
Section 2. ADVANCEMENT OF REASONABLE EXPENSES. (a) The
corporation shall pay reasonable expenses, including legal and other
professional fees, actually and reasonably incurred by a person with respect to
a proceeding for which he or she is entitled to be indemnified under Section 1
of this by-law in advance of the final disposition thereof ("Advance Expenses").
(b) The payment of Advance Expenses shall be on a conditional
basis only and the person's acceptance of such Advance Expenses or the benefits
thereof constitutes his or her agreement to repay such Advance Expenses in the
event and to the extent that he or she is ultimately prohibited from being
indemnified by the corporation by reason of Florida law or by this by-law. No
security shall be required with respect to the obligation to repay and payment
shall be made without reference to the person's ability to make repayment.
Section 3. APPLICATION FOR INDEMNIFICATION AND ADVANCE
EXPENSES. (a) A person's application for payment of indemnification pursuant to
Section 1 or for payment of Advance Expenses pursuant to Section 2 of this
by-law shall be in writing and shall be submitted to the chairman of the board
of directors. The corporation may, but shall not be required to, make payment
pursuant to such application directly to the person or entity whom the applicant
is obliged to pay. An application for Advance Expenses shall include such
documents and other information as are reasonably available to the applicant and
as may be necessary to determine
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both the reasonableness of the expenses and whether they have been actually and
reasonably incurred.
(b) If the applicant for Advance Expenses and his or her
attorney certify to the corporation that the production of any documents or
other information as may be necessary to determine the reasonableness of the
expenses or the reasonableness of their being incurred may have the effect of
impairing or destroying the applicant's attorney-client privilege or attorney
work product protection, or both, the corporation shall make the payment applied
for without such documents or information. Such payment, however, shall be
without prejudice to the corporation's right to, upon the final disposition of
the related proceeding, obtain the documents and information which would have
been required by the corporation had the certification not been made. If such
documents and information are not promptly produced or to the extent the
production does not support the reasonableness of the expenses or that they were
reasonably incurred, the applicant shall immediately upon demand by the
corporation reimburse the corporation for the Advance Expenses paid.
Section 4. CONTRACTUAL NATURE OF INDEMNITY. The provisions of
this Article XIV shall continue as to a person who has ceased to be a director,
an officer or the General Counsel of the corporation, or an employee in the case
of such employee being entitled to indemnification hereunder by reason of a
resolution of the board of directors, and shall inure to the benefit of the
heirs, personal representatives and administrators of such person. This Article
XIV shall be deemed to be a contract between the corporation and each person
who, at any time that this Article XIV is in effect, serves or served in any
capacity which entitles him or her to indemnification hereunder and any repeal
or other modification of this Article XIV or any repeal or modification of the
Florida law, or any other applicable law, shall not limit any rights of
indemnification with respect to proceedings then existing or arising out of
events, acts or omissions occurring prior to such repeal or modification,
including without limitation, the right to indemnification for proceedings
commenced after such repeal or modification to enforce this Article XIV with
regard to proceedings arising out of acts, omissions or events arising prior to
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such repeal or modification. This Article XIV applies with respect to acts or
omissions occurring on, before and after the date this by-law is adopted.
Section 5. INSURANCE CONTRACTS AND FUNDING. The corporation
may maintain insurance, at its expense, to protect itself and any director,
officer, employee or agent of the corporation, or person serving in any capacity
with another corporation, partnership, joint venture, trust or other entity
(including serving as a trustee or fiduciary of any employee benefit plan)
against any expenses, liabilities or losses, whether or not the corporation
would have the power to indemnify such person against such expenses, liabilities
or losses under applicable law. The corporation may enter into contracts with
any director, officer, employee or agent of the corporation in furtherance of
the provisions of this Article XIV, and may create a trust fund, grant a
security interest or use other means (including, without limitation, a letter of
credit) to insure the payment of such amounts as may be necessary to effect the
advancing of expenses and indemnification as provided in this Article XIV.
Section 6. RIGHTS NOT EXCLUSIVE. The rights conferred on any
person by this Article XIV shall not be exclusive of any other rights which such
person may have or hereafter acquire under any statute, provision of the
articles of incorporation, by-laws, agreement, vote of shareholders or
disinterested directors or otherwise. The corporation may, except as may be
prohibited under Florida law or this by-law, by agreement in writing, grant
indemnification to a director, officer, employee or agent of the corporation or
to any person serving at the request of the corporation in any capacity with
another corporation, partnership, joint venture, trust or other entity
(including serving as a trustee or fiduciary of any employee benefit plan).
Section 7. PROTECTION OF RIGHTS. If a written application for
payment of indemnification under Section 1 or for payment of Advance Expenses
payable under Section 2 is not paid by the corporation in a reasonably prompt
manner, the applicant may bring an action against the corporation for the
payment thereof. If successful, in whole or in part, in such action, the
applicant shall also be entitled to be paid his or her reasonable expenses,
including attorneys' fees, thereby incurred. It shall be a defense to any such
action (other than an action brought to
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enforce an application for expenses incurred in defending any proceeding in
advance of its final disposition) that indemnification of the applicant is
prohibited by law or by this by-law, but the burden of proving such defense
shall be on the corporation. Neither the failure of the corporation (including
its board of directors or its shareholders) to have made a determination, if
required, prior to the commencement of such action that indemnification of the
applicant is proper in these circumstances, nor an actual determination by the
corporation (including its board of directors or its shareholders) that
indemnification of the applicant is prohibited or not authorized, shall be a
defense to the action or create a presumption that indemnification of the
applicant is prohibited or not authorized.
Section 8. SAVINGS CLAUSE. If this Article XIV or any portion
hereof shall be invalidated or held to be unenforceable on any ground by any
court of competent jurisdiction, the decision of which shall not have been
reversed on appeal, the corporation shall nevertheless indemnify each person
entitled to be indemnified under Section 1 of this by-law from liability with
respect to any proceeding to the fullest extent permitted by any applicable
portion of this Article that shall not have been invalidated and to the extent
not prohibited by Florida law.
Section 9. SECONDARY OBLIGATION. The corporation's
indemnification of any person who was or is serving at its request with another
corporation, partnership, joint venture, trust or other entity (including
serving as a trustee or fiduciary of any employee benefit plan), shall be
reduced by any amounts such person may collect as indemnification from such
other party.
Section 10. SUBROGATION. In the event of payment made to a
person pursuant to this Article XIV, the corporation shall be subrogated to the
extent of such payment to all of the rights of recovery of such person, who
shall execute all papers required and shall do everything that may be necessary
to secure such rights, including the execution of such documents necessary to
enable the corporation effectively to bring an action to enforce such rights.
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Section 11. NO DUPLICATION OF PAYMENTS. The corporation shall
not be liable under this by-law to make any payment with respect to the
liability of a person to the extent such person has otherwise actually received
payment.
ARTICLE XV
AMENDMENTS
Section 1. ALTERATION, AMENDMENT AND REPEAL. These by-laws may
be altered, amended or repealed or new by-laws may be adopted, by the
affirmative vote of a majority of the board of directors at any regular or
special meeting of the board.
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