-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, C0iHYFeOJi9rNVSvu4cntrtcefCE2X0qNrB2vcdxFSB4yaUzq6X5TzvpAeD93SLy uKgiHpr5n99HtaLS3xKksw== /in/edgar/work/20000609/0000950144-00-007709/0000950144-00-007709.txt : 20000919 0000950144-00-007709.hdr.sgml : 20000919 ACCESSION NUMBER: 0000950144-00-007709 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000429 FILED AS OF DATE: 20000609 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DYCOM INDUSTRIES INC CENTRAL INDEX KEY: 0000067215 STANDARD INDUSTRIAL CLASSIFICATION: [1623 ] IRS NUMBER: 591277135 STATE OF INCORPORATION: FL FISCAL YEAR END: 0729 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10613 FILM NUMBER: 652575 BUSINESS ADDRESS: STREET 1: 4440 PGA BLVD. STE 500 STREET 2: FIRST UNION CENTER CITY: PALM BEACH GARDENS STATE: FL ZIP: 33410 BUSINESS PHONE: 5616277171 MAIL ADDRESS: STREET 1: P O BOX 3524 STREET 2: SUITE 860 CITY: WEST PALM BEACH STATE: FL ZIP: 33402 FORMER COMPANY: FORMER CONFORMED NAME: MOBILE HOME DYNAMICS INC DATE OF NAME CHANGE: 19820302 10-Q 1 0001.txt DYCOM INDUSTRIES, INC. 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 29, 2000 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 500 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 2, 2000 ----- ------------------------------ Common Stock, par value $0.33 1/3 41,884,113 2 DYCOM INDUSTRIES, INC. INDEX
Page No. -------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets- April 29, 2000 and July 31, 1999 3 Condensed Consolidated Statements of Operations for the Three Months Ended April 29, 2000 and April 30, 1999 4 Condensed Consolidated Statements of Operations for the Nine Months Ended April 29, 2000 and April 30, 1999 5 Condensed Consolidated Statements of Cash Flows for the Nine Months Ended April 29, 2000 and April 30, 1999 6-7 Notes to Condensed Consolidated Financial Statements 8-15 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 16-20 Item 3. Quantitative and Qualitative Disclosures about Market Risk 20 PART II. OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds 21 Item 6. Exhibits and Reports on Form 8-K 21 SIGNATURES 22
3 DYCOM INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
April 29, July 31, 2000 1999 ------------ ------------ CURRENT ASSETS: Cash and equivalents $ 74,039,635 $ 97,995,283 Accounts receivable, net 131,308,771 104,482,445 Costs and estimated earnings in excess of billings 53,631,500 32,878,667 Deferred tax assets, net 5,109,601 3,336,479 Inventories 13,018,319 10,498,453 Other current assets 2,696,629 1,828,716 ------------ ------------ Total current assets 279,804,455 251,020,043 ------------ ------------ PROPERTY AND EQUIPMENT, net 99,926,628 83,641,090 ------------ ------------ OTHER ASSETS: Intangible assets, net 86,789,543 59,286,827 Other 4,602,409 5,724,151 ------------ ------------ Total other assets 91,391,952 65,010,978 ------------ ------------ TOTAL $471,123,035 $399,672,111 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 33,700,151 $ 21,177,427 Notes payable 2,712,877 3,315,760 Billings in excess of costs and estimated earnings 161,582 437,874 Accrued self-insured claims 4,573,960 3,728,947 Income taxes payable 2,840,701 5,027,519 Customer advances 15,137,347 24,576,700 Other accrued liabilities 35,208,772 24,674,237 ------------ ------------ Total current liabilities 94,335,390 82,938,464 ------------ ------------ NOTES PAYABLE 9,303,120 10,200,091 ACCRUED SELF-INSURED CLAIMS 5,615,887 4,823,396 DEFERRED TAX LIABILITIES, net 4,385,462 2,454,498 OTHER LIABILITIES 2,372,643 1,813,184 ------------ ------------ Total liabilities 116,012,502 102,229,633 ------------ ------------ 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: 150,000,000 shares authorized: 41,799,829 and 41,168,195 shares issued and outstanding, respectively 13,933,276 13,722,732 Additional paid-in capital 220,350,048 206,313,627 Unrealized gain on marketable securities -- 20,724 Retained earnings 120,827,209 77,385,395 ------------ ------------ Total stockholders' equity 355,110,533 297,442,478 ------------ ------------ TOTAL $471,123,035 $399,672,111 ============ ============
See notes to condensed consolidated financial statements--unaudited. 3 4 DYCOM INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
For the Three Months Ended --------------------------------- April 29, April 30, 2000 1999 ------------- ------------- Contract revenues earned $ 212,260,383 $ 128,899,939 ------------- ------------- Expenses: Costs of earned revenues, excluding depreciation 159,601,096 96,007,783 General and administrative 18,071,442 12,493,807 Depreciation and amortization 7,846,956 5,285,021 ------------- ------------- Total 185,519,494 113,786,611 ------------- ------------- Interest income, net 907,557 (133,584) Merger-related expenses (2,364,284) -- Other income, net 431,789 536,305 ------------- ------------- INCOME BEFORE INCOME TAXES 25,715,951 15,516,049 ------------- ------------- PROVISION FOR INCOME TAXES: Current 11,456,615 5,576,723 Deferred (237,117) 376,774 ------------- ------------- Total 11,219,498 5,953,497 ------------- ------------- NET INCOME $ 14,496,453 $ 9,562,552 ============= ============= EARNINGS PER COMMON SHARE: Basic $ 0.35 $ 0.26 ============= ============= Diluted $ 0.34 $ 0.26 ============= ============= SHARES USED IN COMPUTING EARNINGS PER COMMON SHARE: Basic 41,738,741 36,504,793 ============= ============= Diluted 42,579,451 37,165,574 ============= =============
See notes to condensed consolidated financial statements--unaudited 4 5 DYCOM INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
For the Nine Months Ended --------------------------------- April 29, April 30, 2000 1999 ------------- ------------- Contract revenues earned $ 566,959,976 $ 348,699,812 ------------- ------------- Expenses: Costs of earned revenues, excluding depreciation 423,407,440 258,777,049 General and administrative 48,230,166 34,829,080 Depreciation and amortization 22,755,372 14,080,228 ------------- ------------- Total 494,392,978 307,686,357 ------------- ------------- Interest income, net 2,479,753 (10,579) Merger-related expenses (2,364,284) -- Other income, net 971,162 950,350 ------------- ------------- INCOME BEFORE INCOME TAXES 73,653,629 41,953,226 ------------- ------------- PROVISION FOR INCOME TAXES: Current 30,080,470 16,326,792 Deferred 131,344 271,360 ------------- ------------- Total 30,211,814 16,598,152 ------------- ------------- NET INCOME $ 43,441,815 $ 25,355,074 ============= ============= EARNINGS PER COMMON SHARE: Basic $ 1.05 $ 0.70 ============= ============= Diluted $ 1.03 $ 0.69 ============= ============= SHARES USED IN COMPUTING EARNINGS PER COMMON SHARE: Basic 41,483,255 36,126,479 ============= ============= Diluted 42,175,372 36,740,632 ============= =============
See notes to condensed consolidated financial statements--unaudited. 5 6 DYCOM INDUSTRIES, INC.AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For the Nine Months Ended ------------------------------- April 29, April 30, 2000 1999 ------------ ------------ Increase (Decrease) in Cash and Equivalents from OPERATING ACTIVITIES: Net Income $ 43,441,815 $ 25,355,074 Adjustments to reconcile net cash provided by operating activities: Depreciation and amortization 22,755,372 14,080,228 Gain on disposal of assets (625,860) (494,284) Unrealized (gain) loss on marketable securities (20,724) 42,903 Deferred income taxes 131,344 271,360 Change in assets and liabilities: Accounts receivable, net (20,586,722) (393,431) Unbilled revenues, net (20,378,887) (17,061,209) Other current assets (2,965,122) (464,276) Other assets 4,236,342 (6,261,225) Accounts payable 11,725,569 4,600,000 Customer advances (9,439,353) 5,848,243 Accrued self-insured claims and other liabilities 8,883,957 2,080,447 Accrued income taxes (1,121,416) 161,781 ------------ ------------ Net cash inflow from operating activities 36,036,315 27,765,611 ------------ ------------ INVESTING ACTIVITIES: Capital expenditures (32,796,303) (37,850,570) Proceeds from sale of assets 2,198,638 1,302,738 Acquisition expenditures, net of cash acquired (29,619,779) (30,102,213) Equity investment (3,000,000) ------------ ------------ Net cash outflow from investing activities (60,217,444) (69,650,045) ------------ ------------ FINANCING ACTIVITIES: Borrowings on notes payable 31,750,000 Principal payments on notes payable and bank lines-of-credit (2,266,617) (3,042,046) Exercise of stock options 2,492,098 1,384,329 ------------ ------------ Net cash inflow from financing activities 225,481 30,092,283 ------------ ------------ NET CASH OUTFLOW FROM ALL ACTIVITIES (23,955,648) (11,792,151) CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 97,995,283 35,975,992 ------------ ------------ CASH AND EQUIVALENTS AT END OF PERIOD $ 74,039,635 $ 24,183,841 ============ ============
See notes to condensed consolidated financial statements--unaudited. 6 7 DYCOM INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) (Unaudited)
For the Nine Months Ended ---------------------------- April 29, April 30, 2000 1999 ----------- ----------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW AND NON-CASH INVESTING AND FINANCING ACTIVITIES: Cash paid during the period for: Interest $ 705,587 $ 1,470,844 Income taxes 32,398,632 16,202,590 Property and equipment acquired and financed with: Capital lease obligation $ -- $ 233,618 Notes payable -- 690,315 Income tax benefit from stock options exercised $ 1,065,402 $ 1,115,554 During the nine months ended April 29, 2000, the company acquired all of the capital stock of Lamberts' Cable Splicing Company, C-2 Utility Contractors, Inc. Artoff Construction Company, Inc., and K.H. Smith Communications, Inc. at a cost of $41.9 million. In conjunction with these acquisitions, assets acquired and liabilities assumed were as follows: Fair market value of assets acquired, including goodwill $44,660,499 Consideration paid (including $10.7 million of common stock issued) 41,948,181 ----------- Fair market value of liabilities assumed $ 2,712,318 ===========
See notes to condensed consolidated financial statements--unaudited. 7 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 April 29, 2000 and July 31, 1999, and the related condensed consolidated statements of operations for the three and nine months ended April 29, 2000 and April 30, 1999 and the condensed consolidated statements of cash flows for the nine months ended April 29, 2000 and April 30, 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 three and nine months ended April 29, 2000 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. During fiscal 1999, the Company acquired Locating, Inc. ("LOC"), Ervin Cable Construction, Inc. ("ECC"), Apex Digital TV, Inc. ("APX"), and Triple D Communications, Inc. ("DDD"). During fiscal 2000, the Company acquired Lamberts' Cable Splicing Company ("LCS"), C-2 Utility Contractors, Inc. ("C-2"), Artoff Construction Company, Inc. ("ACC"), and K.H. Smith Communications, Inc. ("KHS"). Each of these transactions was accounted for using the purchase method of accounting. The Company's results include the results of LOC, ECC, APX, DDD, LCS, C-2, ACC, and KHS from their respective acquisition dates until April 29, 2000. See Note 4. On March 8, 2000, Niels Fugal Sons Company ("NFS") merged with the Company in an exchange of common stock. This transaction was accounted for as a pooling of interests. Accordingly, the Company's condensed consolidated financial statements include the results of NFS for all periods presented. See Note 4. The Company's operations consist primarily of providing specialty contracting services to the telecommunications and electrical utility industries. All material intercompany accounts and transactions have been eliminated. CHANGE IN FISCAL YEAR -- On September 29, 1999, the Company changed to a fiscal year with 52 or 53 week periods ending on the Saturday nearest July 31. This Quarterly Report presents financial information for the first, second and third quarters of fiscal 2000, beginning August 1, 1999 and ending April 29, 2000. The unaudited results of operations and cash flows of the Company for the quarter ended April 29, 2000 contains 91 days compared to 89 days for the unaudited results of operations and cash flows for the quarter ended April 30, 1999. The unaudited results of operations and cash flows of the Company for the nine months ended April 29, 2000 and April 30, 1999 contain 273 days each. 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, depreciation and amortization, and in the estimated lives of assets, including intangibles. RECLASSIFICATIONS -- Certain prior year amounts have been reclassified in order to conform to current year presentation. REVENUE -- Income on short-term contracts is recognized as the related work is completed. Work-in-process on unit contracts is based on 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. INVENTORIES - Inventories consist primarily of materials and supplies used to complete certain of the Company's long-term contracts. The Company values these inventories using the first-in, first-out method. The Company periodically reviews the appropriateness of the carrying value of its inventories. The Company records a reserve for obsolescence if inventories are not expected to be used in the Company's normal course of business. No reserve has been recorded in the periods presented. 8 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. MARKETABLE SECURITIES -- As of July 31, 1999, all of the Company's investment holdings have been classified in the consolidated balance sheet as other assets. Unrealized holding gains are included as a separate component of shareholders' equity. The fair value of the Company's investment holdings at July 31, 1999 was $148,224 and no such investments were held as of April 29, 2000. 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 20-40 years. The appropriateness of the carrying value of goodwill is reviewed periodically by the Company at the subsidiary level. An impairment loss is recognized when the projected future cash flows are less than the carrying value of goodwill. No impairment loss has been recognized in the periods presented. As of April 29, 2000 and July 31, 1999, net intangible assets include $86.5 million and $58.9 million of net goodwill, respectively. Amortization expense was $1,144,107 and $350,725 for the three months ended April 29, 2000 and April 30, 1999, respectively, and was $2,943,382 and $434,466 for the nine months ended April 29, 2000 and April 30, 1999, respectively. The intangible assets are net of accumulated amortization of $5,416,327 at April 29, 2000 and $2,472,945 at July 31, 1999. SELF-INSURED CLAIMS LIABILITY -- The Company retains the risk, 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 $5,130,565 and $4,860,659 at April 29, 2000 and July 31, 1999, respectively. The determination of such claims and expenses and the appropriateness of the related liability is continually reviewed and updated. CUSTOMER ADVANCES -- Under the terms of certain contracts, the Company receives advances from customers that may be offset against future billings by the Company. The Company has recorded these advances as liabilities and has not recognized any revenue for these advances. INCOME TAXES -- The Company and its subsidiaries file a consolidated federal income tax return. Deferred income taxes are provided for the temporary differences between the financial reporting basis and the tax basis of the Company's assets and liabilities. 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. STOCK SPLITS -- On January 20, 2000, the Board of Directors declared a 3-for-2 split of the Company's common stock, effected in the form of a stock dividend paid on February 16, 2000 to stockholders of record on February 2, 2000. All agreements concerning stock options provide for the issuance of additional shares 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. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS -- In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("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. In June 1999, the FASB issued SFAS No. 137 which deferred the effective date of SFAS No. 133 by one year to periods beginning after June 15, 2000. Management is currently evaluating the requirements and related disclosures of SFAS No. 133. 9 10 3. COMPUTATION OF PER SHARE EARNINGS The following is a reconciliation of the numerators and denominators of the basic and diluted per share computation as required by SFAS No. 128.
For the Three Months Ended ---------------------------- April 29, April 30, 2000 1999 ----------- ----------- Net income available to common stockholders (numerator) $14,496,453 $ 9,562,552 =========== =========== Weighted-average number of common shares (denominator) 41,738,741 36,504,793 =========== =========== $ 0.35 $ 0.26 =========== =========== Weighted-average number of common shares 41,738,741 36,504,793 Potential common stock arising from stock options 840,710 660,781 ----------- ----------- Total shares (denominator) 42,579,451 37,165,574 =========== =========== Earnings per common share-diluted $ 0.34 $ 0.26 =========== ===========
For the Nine Months Ended ---------------------------- April 29, April 30, 2000 1999 ----------- ----------- Net income available to common stockholders (numerator) $43,441,815 $25,355,074 =========== =========== Weighted-average number of common shares (denominator) 41,483,255 36,126,479 =========== =========== $ 1.05 $ 0.70 =========== =========== Weighted-average number of common shares 41,483,255 36,126,479 Potential common stock arising from stock options 692,117 614,153 ----------- ----------- Total shares (denominator) 42,175,372 36,740,632 =========== =========== Earnings per common share-diluted $ 1.03 $ 0.69 =========== ===========
4. ACQUISITIONS On February 3, 1999, the Company acquired all of the outstanding common stock of LOC for $10.0 million and various transaction costs. Located in Issaquah, Washington, LOC'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 ECC for $21.8 million in cash and 387,099 shares of Dycom's common stock for an aggregate purchase price of $32.5 million before various transaction costs. ECC's primary service is the engineering, construction, and maintenance of cable television systems. On April 1, 1999, the Company issued 774,192 shares with an aggregate value of $21.4 million of Dycom's common stock to the shareholders of APX in exchange for all of the outstanding common stock of APX. APX's primary line of business is providing installation and maintenance services to direct broadcast satellite providers. Both ECC and APX are located in Sturgis, Kentucky. On June 30, 1999, the Company purchased all of the outstanding shares of common stock of DDD for $1.7 million in cash and 37,344 shares of Dycom's common stock for an aggregate purchase price of $2.9 million before various transaction costs. Located in Lexington, Kentucky, DDD's primary business is the construction and maintenance of telecommunications systems under master service agreements. On August 2, 1999, the Company acquired all of the outstanding common stock of LCS for $10.0 million in cash and 73,309 shares of Dycom's common stock for an aggregate purchase price of $12.4 million before various transaction costs. Located in Rocky Mount, North Carolina, LCS's primary business is the construction and maintenance of telecommunications systems under master service agreements. On January 4, 2000, the Company acquired all of the outstanding common stock of C-2 for $18.0 million in cash and 247,555 shares of Dycom's common stock for an aggregate purchase price of $25.2 million before various transaction costs. Located in Eugene, Oregon, C-2's primary business is the construction and maintenance of telecommunications systems under master service agreements. On January 4, 2000, the Company acquired all of the outstanding common stock of ACC for $2.2 million in cash and 30,081 shares of Dycom's common stock for 10 11 an aggregate purchase price of $3.0 million before various transaction costs. Located in Gold Hill, Oregon, ACC's primary business is the construction and maintenance of telecommunications systems. On February 1, 2000, the Company acquired all of the outstanding common stock of K.H. Smith Communications, Inc. for $1.0 million in cash and 5,431 shares of Dycom's common stock for an aggregate purchase price of $1.2 million before various transaction costs. Located in Rocky Mount, North Carolina, KHS primary business is the construction and maintenance of telecommunications systems. The Company has recorded the acquisitions of LOC, ECC, APX, DDD, LCS, C-2, ACC, and KHS using the purchase method of accounting. All acquired goodwill associated with these acquisitions is being amortized over a period of 20 years. The operating results of LOC, ECC, APX, DDD, LCS, C-2, ACC, and KHS are included in the accompanying consolidated condensed financial statements from the date of purchase. The following unaudited pro forma summary presents the consolidated results of operations of the Company as if the acquisitions of LOC, ECC, APX, DDD, LCS, C-2, ACC, and KHS had occurred on August 1, 1998: For the Nine Months Ended ------------------------------ April 29, April 30, 2000 1999 ------------ ------------ Total revenues $578,054,337 $422,462,887 Income before income taxes 75,883,431 50,102,863 Net income 45,671,617 30,726,836 Earnings per share: Basic $ 1.09 $ 0.82 Diluted $ 1.08 $ 0.80 On March 8, 2000, the Company consummated the acquisition of NFS. The Company issued 2,726,210 shares of common stock in exchange for all the outstanding capital stock of NFS. Dycom has accounted for the acquisition as a pooling of interests and, accordingly, the Company's historical condensed financial statements include the results of NFS for all periods presented. The Company incurred $2.4 million of merger-related expenses in connection with the NFS merger during the three and nine months ended April 29, 2000, respectively. These expenses consisted primarily of legal, accounting, and other professional fees related to the transaction. Prior to the acquisition, NFS used a fiscal year ending January 31 and as of March 8, 2000 adopted Dycom's fiscal year. All periods presented reflect the adoption of such fiscal year end as of the beginning of the period. The combined and separate results of Dycom and NFS for the three and nine month periods ending April 29, 2000 and April 30, 1999, respectively, are as follows:
Dycom NFS Combined ------------ ------------ ------------ Three month period ended April 29, 2000 Total revenues $193,564,041 $ 18,696,342 $212,260,383 Net income $ 12,434,970 $ 2,061,483 $ 14,496,453 April 30, 1999 Total revenues $121,401,998 $ 7,497,941 $128,899,939 Net income $ 8,766,460 $ 796,092 $ 9,562,552 Nine month period ended April 29, 2000 Total revenues $512,849,582 $ 54,110,394 $566,959,976 Net income $ 36,894,761 $ 6,547,054 $ 43,441,815 April 30, 1999 Total revenues $326,742,438 $ 21,957,374 $348,699,812 Net income $ 22,910,753 $ 2,444,321 $ 25,355,074
11 12 5. ACCOUNTS RECEIVABLE Accounts receivable consist of the following:
April 29, July 31, 2000 1999 ------------ ------------ Contract billings $124,080,912 $102,880,899 Retainage 9,392,875 4,497,307 Other receivables 2,540,900 1,233,519 ------------ ------------ Total 136,014,687 108,611,725 Less allowance for doubtful accounts 4,705,916 4,129,280 ------------ ------------ Accounts receivable, net $131,308,771 $104,482,445 ============ ============
For the periods indicated, the allowance for doubtful accounts changed as follows:
For the Three Months Ended ----------------------------- April 29, April 30, 2000 1999 ----------- ----------- Allowance for doubtful accounts at 1/29/2000 and 1/31/1999, respectively $ 3,423,619 $ 2,800,700 Allowance for doubtful account balances from acquisitions -- 884,862 Additions charged to bad debt expense 1,296,208 111,218 Amounts charged against the allowance, net of recoveries (13,911) (46,975) ----------- ----------- Allowance for doubtful accounts $ 4,705,916 $ 3,749,805 =========== ===========
For the Nine Months Ended ----------------------------- April 29, April 30, 2000 1999 ----------- ----------- Allowance for doubtful accounts at beginning of year $ 4,129,280 $ 2,210,978 Allowance for doubtful account balances from acquisitions -- 884,862 Additions charged to bad debt expense 957,062 777,502 Amounts charged against the allowance, net of recoveries (380,426) (123,537) ----------- ----------- Allowance for doubtful accounts $ 4,705,916 $ 3,749,805 =========== ===========
12 13 6. 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:
April 29, July 31, 2000 1999 ----------- ----------- Costs incurred on contracts in progress $49,505,308 $27,695,302 Estimated earnings thereon 13,691,395 8,259,242 ----------- ----------- 63,196,703 35,954,544 Less billings to date 9,726,785 3,513,751 ----------- ----------- Costs and estimated earnings in excess of billings $53,469,918 $32,440,793 =========== =========== Included in the accompanying consolidated balance sheets under the captions: Costs and estimated earnings in excess of billings $53,631,500 $32,878,667 Billings in excess of costs and estimated earnings 161,582 437,874 ----------- ----------- $53,469,918 $32,440,793 =========== ===========
As stated in Note 1, the Company performs services under short-term, unit based and long-term, percentage of completion contracts. The amounts presented above aggregate the effects of these two types of contracts. 7. PROPERTY AND EQUIPMENT The accompanying condensed consolidated balance sheets include the following property and equipment: April 29, July 31, 2000 1999 ------------ ------------ Land $ 3,283,523 $ 3,142,193 Buildings 6,026,476 5,554,542 Leasehold improvements 1,512,798 1,381,888 Vehicles 101,331,669 84,568,675 Equipment and machinery 65,669,312 55,737,019 Furniture and fixtures 9,647,741 8,232,417 ------------ ------------ Total 187,471,519 158,616,734 Less accumulated depreciation 87,544,891 74,975,644 ------------ ------------ Property and equipment, net $ 99,926,628 $ 83,641,090 ============ ============ 13 14 8. NOTES PAYABLE Notes payable are summarized by type of borrowings as follows: April 29, July 31, 2000 1999 ----------- ----------- Bank Credit Agreement: Term Loan $10,750,000 $11,750,000 Capital lease obligations 1,822 233,619 Equipment loans 1,264,175 1,532,232 ----------- ----------- Total 12,015,997 13,515,851 Less current portion 2,712,877 3,315,760 ----------- ----------- Notes payable - non-current $ 9,303,120 $10,200,091 =========== =========== 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 total outstanding standby letters of credit of $13.7 million at April 29, 2000, including letters of credit issued to the Company's insurance administrators as part of its self-insurance program of $13.4 million and miscellaneous letters of credit of $0.3 million. 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 29, 2000, there was no outstanding balance on this facility resulting in an available borrowing capacity of $50.0 million. The outstanding loans under the 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 1.5%. The advances under the 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. As of April 29, 2000, there was no outstanding balance on this facility resulting in an available borrowing capacity of $71.1 million. The available borrowing capacity on this nonrevolving facility has been reduced due to prior borrowings which have been repaid in full. The outstanding principal under the term loan bears interest at the bank's prime interest rate minus 0.50% (7.94% at April 29, 2000). Principal and interest is payable in semiannual installments through April 2003. The amount outstanding on the term loan was $10.8 million at April 29, 2000. 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 periods presented. At April 29, 2000, the Company was in compliance with all financial covenants and conditions. All obligations under the amended credit agreement are unconditionally guaranteed by the Company's subsidiaries and secured by security interest in certain property and assets of the Company and its subsidiaries. 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 September 2000. Interest costs incurred on notes payable, all of which were expensed during the three months ended April 29, 2000 and April 30, 1999 were $309,868 and $607,270, respectively. Interest costs for the nine months ended April 29, 2000 and April 30, 1999 were $775,596 and $1,484,543, respectively. 14 15 9. COMMITMENTS AND CONTINGENCIES The federal employment tax returns for one of the Company's subsidiaries are currently being audited by the Internal Revenue Service ("IRS"). As a result of the audit, the Company received an examination report from the IRS in October 1999 proposing a $6.1 million tax deficiency. At issue, according to the examination report, is the taxpayer's payment of certain employee allowances for the years 1995 through 1997 without reporting such payment as wages on the employees' W-2 Forms. The Company intends to vigorously defend its position in this matter and believes it has a number of legal defenses available to it, which would significantly reduce or possibly eliminate the proposed tax deficiency, although there can be no assurance in this regard. The Company believes that the ultimate disposition of this matter will not have a material adverse effect on its 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. In the normal course of business, the Company enters into employment agreements with certain members of the Company's executive management. It is the opinion of the Company's management based on the information available at this time, that these agreements will not have a material adverse impact on the Company's consolidated financial statements. 10. SEGMENT INFORMATION The Company operates in one reportable segment as a specialty contractor. The Company provides engineering, placement and maintenance of aerial, underground, and buried fiber-optic, coaxial and copper cable systems owned by local and long distance communications carriers, competitive local exchange carriers, and cable television multiple system operators. Additionally, the Company provides similar services related to the installation of integrated voice, data, and video local and wide area networks within office buildings and similar structures and also provides underground locating services to various utilities and provides construction and maintenance services to electrical utilities. Each of these services is provided by various of the Company's subsidiaries which provide management with monthly financial statements. All of the Company's subsidiaries have been aggregated into one reporting segment due to their similar customer bases, products and production methods, and distribution methods. The following table presents information regarding annual contract revenues by type of customer:
For the Three Months Ended ------------------------------ April 29, April 30, 2000 1999 ------------ ------------ Telecommunications $197,399,270 $114,912,935 Electrical utilities 5,261,919 5,352,253 Various customers - Utility line locating 9,599,194 8,634,751 ------------ ------------ Total contract revenues $212,260,383 $128,899,939 ============ ============
For the Nine Months Ended ------------------------------ April 29, April 30, 2000 1999 ------------ ------------ Telecommunications $519,295,187 $315,084,174 Electrical utilities 19,110,394 15,478,910 Various customers - Utility line locating 28,554,395 18,136,728 ------------ ------------ Total contract revenues $566,959,976 $348,699,812 ============ ============
15 16 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. In March 2000, the Company acquired Niels Fugal Sons Company ("NFS") in a transaction accounted for as a pooling-of-interest. Due to the pooling-of-interest, the condensed consolidated financial statements and related notes, included elsewhere in this Form 10-Q, have been restated to include the operations of NFS for all periods presented. Results of Operations 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:
For the Three Months Ended --------------------------- April 29, April 30, 2000 1999 -------- -------- Contract revenues earned 100.0% 100.0% Expenses: Cost of earned revenues, excluding depreciation 75.2 74.5 General and administrative 8.5 9.7 Depreciation and amortization 3.7 4.1 ----- ----- Total 87.4 88.3 Interest income, net 0.4 (0.1) Merger-related expenses (1.1) 0.0 Other income, net 0.2 0.4 ----- ----- Income before income taxes 12.1 12.0 ----- ----- Provision for income taxes 5.3 4.6 ----- ----- Net Income 6.8% 7.4% ===== =====
16 17
For the Nine Months Ended ------------------------- April 29, April 30, 2000 1999 ----------- ----------- Contract revenues earned 100.0% 100.0% Expenses: Cost of earned revenues, excluding depreciation 74.7 74.2 General and administrative 8.5 10.0 Depreciation and amortization 4.0 4.0 ----- ----- Total 87.2 88.2 Interest income, net 0.4 0.0 Merger-related expenses (0.4) 0.0 Other income, net 0.2 0.3 ----- ----- Income before income taxes 13.0 12.1 ----- ----- Provision for income taxes 5.3 4.8 ----- ----- Net Income 7.7% 7.3% ===== =====
REVENUES. Contract revenues increased $83.4 million, or 64.7%, to $212.3 million in the quarter ending April 29, 2000 from $128.9 million in the quarter ended April 30, 1999. Of this increase, $82.5 million was attributable to specialty contracting services provided to telecommunications companies and $1.0 million was attributable to underground utility locating services provided to various utilities, reflecting an increase in overall market demand for the Company's services. During the quarter ended April 29, 2000, the Company recognized $197.4 million of contract revenues from telecommunications services as compared to $114.9 million for the quarter ended April 30, 1999. The increase in the Company's telecommunications service revenues reflects an increased volume of projects and activities associated with cable television services, and an increase in services performed in the design and installation of broadband networks, telephone engineering services, telephony splicing services, premise wiring services, and revenues from services performed under master service agreements. The Company recognized contract revenues of $5.3 million from electric construction and maintenance services in the quarter ended April 29, 2000 as compared to $5.4 million in the quarter ended April 30, 1999. The Company recognized contract revenues of $9.6 million from underground utility locating services in the quarter ended April 29, 2000 as compared to $8.6 million in the quarter ended April 30, 1999, an increase of 11.6%. Acquisitions subsequent to April 30, 1999 contributed $30.4 million of contract revenues during the quarter ended April 29, 2000, primarily in contract revenues from telecommunications services. Contract revenues from multi-year master service agreements and other long-term agreements represented 79.8% of total contract revenues in the quarter ended April 29, 2000 as compared to 82.8% in the quarter ended April 30, 1999, of which contract revenues from multi-year master service agreements represented 52.0% of total contract revenues in the quarter ended April 29, 2000 as compared to 45.5% in the quarter ended April 30, 1999. Contract revenues increased $218.3 million, or 62.6%, to $567.0 million in the nine months ending April 29, 2000 from $348.7 million in the nine months ended April 30, 1999. Of this increase, $204.2 million was attributable to specialty contracting services provided to telecommunications companies, $3.6 million was attributable to construction and maintenance services provided to electrical utilities and $10.5 million was attributable to underground utility locating services provided to various utilities, reflecting an increase in overall market demand for the Company's services. During the nine months ended April 29, 2000, the Company recognized $519.3 million of contract revenues from telecommunications services as compared to $315.1 million for the nine months ended April 30, 1999. The increase in the Company's telecommunications service revenues reflects an increased volume of projects and activities associated with cable television services, and an increase in services performed in the 17 18 design and installation of broadband networks, telephone engineering services, telephony splicing services, premise wiring services, and revenues from services performed under master service agreements. The Company recognized contract revenues of $19.1 million from electric construction and maintenance services in the nine months ended April 30, 2000 as compared to $15.5 million in the nine months ended April 30, 1999. The Company recognized contract revenues of $28.6 million from underground utility locating services in the nine months ended April 29, 2000 as compared to $18.1 million in the nine months ended April 30, 1999, an increase of 58.0%. Acquisitions subsequent to April 30, 1999 contributed $80.4 million of contract revenues during the nine months ended April 29, 2000, primarily in contract revenues from telecommunications services. Contract revenues from multi-year master service agreements and other long-term agreements represented 77.6% of total contract revenues in the nine months ended April 29, 2000 as compared to 84.1% in the nine months ended April 30, 1999, of which contract revenues from multi-year master service agreements represented 48.3% of total contract revenues in the nine months ended April 29, 2000 as compared to 46.3% in the nine months ended April 30, 1999. COSTS OF EARNED REVENUES. Costs of earned revenues increased $63.6 million to $159.6 million in the quarter ended April 29, 2000 from $96.0 million in the quarter ended April 30, 1999, and increased as a percentage of contract revenues to 75.2% from 74.5%. The Company experienced no material changes in the composition of its costs of earned revenues during the quarter ended April 29, 2000. Costs of earned revenues increased $164.6 million to $423.4 million in the nine months ended April 29, 2000 from $258.8 million in the nine months ended April 30, 1999, and increased as a percentage of contract revenues to 74.7% from 74.2%. The Company experienced no material changes in the composition of its costs of earned revenues during the nine months ended April 29, 2000. GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses increased $5.6 million to $18.1 million in the quarter ended April 29, 2000 from $12.5 million in the quarter ended April 30, 1999. The increase in general and administrative expenses for the quarter ended April 29, 2000, as compared to the quarter ended April 30, 1999, was primarily attributable to increases in salaries, employee benefits, and payroll taxes of $2.8 million, legal and professional fees of $0.6 million, other general and administrative expenses of $1.0 million, and an a increase in the provision for doubtful accounts of $1.2 million. General and administrative expenses decreased as a percentage of contract revenues to 8.5% from 9.7% in the quarter ended April 29, 2000 as compared to the quarter ended April 30, 1999. General and administrative expenses increased $13.4 million to $48.2 million in the nine months ended April 29, 2000 from $34.8 million in the nine months ended April 30, 1999. The increase in general and administrative expenses for the nine months ended April 29, 2000, as compared to the nine months ended April 30, 1999, was primarily attributable to increases in salaries, employee benefits, and payroll taxes of $7.5 million, legal and professional fees of $1.4 million, other general and administrative expenses of $4.3 million and an increase in the provision for doubtful accounts of $0.2 million. General and administrative expenses decreased as a percentage of contract revenues to 8.5% from 10.0% in the nine months ended April 29, 2000 as compared to the nine months ended April 30, 1999. DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased $2.5 million to $7.8 million in the quarter ending April 29, 2000 as compared to $5.3 million in the quarter ended April 30, 1999, but decreased as a percentage of contract revenues to 3.7% from 4.1%. Depreciation and amortization increased $8.7 million to $22.8 million in the nine months ending April 29, 2000 as compared to $14.1 million in the nine months ended April 30, 1999, but remained consistent as a percentage of contract revenues at 4.0%. MERGER-RELATED EXPENSES. During the three and nine months ended April 29, 2000, the Company incurred merger-related expenses of $2.4 million in connection with the NFS merger. The expenses consisted primarily of legal, accounting, and other professional fees related to the transaction. INCOME TAXES. The provision for income taxes was $11.2 million in the three months ended April 29, 2000 as compared to $6.0 million in the same period last year. The Company's effective tax rate was 43.6% in the three months ended April 29, 2000 as compared to 38.4% in the same period last year. The effective tax rate differs from the statutory rate due to state income taxes, the amortization of intangible assets that do not provide a tax benefit, and other non-deductible expenses, for tax purposes. During the three months ended April 29, 2000, the Company incurred $2.4 million of merger-related expenses for which no tax benefit was recorded. The provision for income taxes was $30.2 million in the nine months ended April 29, 2000 as compared to $16.6 million in the same period last year. The Company's effective tax rate was 41.0% in the nine months ended April 29, 2000 as compared to 39.6% in the same period last year. The effective tax rate differs from the statutory rate due to state income taxes, the amortization of intangible assets that do not provide a tax benefit, and other non-deductible expenses, for tax purposes. During the nine months ended April 29, 2000, the Company incurred $2.4 million of merger-related expenses for which no tax benefit was recorded. 18 19 Liquidity and Capital Resources The Company's needs for capital are attributable primarily to its needs for equipment to support its contractual commitments to customers and its needs for working capital sufficient for general corporate purposes. Capital expenditures have been financed by operating and capital leases, bank borrowings and internal cash flow. To the extent that the Company seeks to grow by acquisitions that involve consideration other than Company stock, the Company's capital requirements may increase, although the Company is not currently subject to any commitments or obligations with respect to any acquisitions. The Company's sources of cash have historically been from operating activities, equity offerings, bank borrowings, and from proceeds arising from the sale of idle and surplus equipment and real property. For the nine months ended April 29, 2000, net cash provided by operating activities was $36.0 million compared to $27.8 million for the nine months ended April 30, 1999. Net income and non-cash charges are the primary sources of operating cash flow. Working capital items used $29.6 million of operating cash flow for the nine-month period ended April 29, 2000 principally through an increase in accounts receivable, unbilled revenues and other current assets, together with a decrease in customer advances, offset by an increase in accounts payable and a decrease in other long-term assets. In the nine months ended April 29, 2000, net cash used in investing activities was $60.2 million as compared to $69.7 million for the same period last year. For the nine months ended April 29, 2000, capital expenditures of $32.8 million were for the normal replacement of equipment and purchases for the start up of certain long-term contracts. 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. The Company's investment in Witten is being accounted for using the equity method of accounting. On August 2, 1999, the Company acquired all of the outstanding common stock of LCS for $10.0 million in cash and 73,309 shares of Dycom's common stock for an aggregate purchase price of $12.4 million before various transaction costs. Located in Rocky Mount, North Carolina, LCS's primary business is the construction and maintenance of telecommunications systems under master service agreements. On January 4, 2000, the Company acquired all of the outstanding common stock of C-2 for $18.0 million in cash and 247,555 shares of Dycom's common stock for an aggregate purchase price of $25.2 million before various transaction costs. Located in Eugene, Oregon, C-2's primary business is the construction and maintenance of telecommunications systems under master service agreements. On January 4, 2000, the Company acquired all of the outstanding common stock of ACC for $2.2 million in cash and 30,081 shares of Dycom's common stock for an aggregate purchase price of $3.0 million before various transaction costs. Located in Gold Hill, Oregon, ACC's primary business is the construction and maintenance of telecommunications systems. On February 1, 2000, the Company acquired all of the outstanding common stock of KHS for $1.0 million in cash and 5,431 shares of Dycom's common stock for an aggregate purchase price of $1.2 million before various transaction costs. Located in Rocky Mount, North Carolina, KHS's primary business is the construction and maintenance of telecommunications systems. In the nine months ended April 29, 2000, net cash provided by financing activities was $0.2 million, which was primarily attributable to the proceeds from the exercise of stock options net of principal payments on long-term notes. 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 total outstanding standby letters of credit of $13.7 million at April 29, 2000, including letters of credit issued to the Company's insurance administrators as part of its self-insurance program of $13.4 million and miscellaneous letters of credit of $0.3 million. 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 29, 2000, there was no outstanding balance on this facility resulting in an available borrowing capacity of $50.0 million. The outstanding loans under the equipment acquisition and small business purchase facility bear interest, at the option of the Company, at the 19 20 bank's prime interest rate minus 0.75% or LIBOR plus 1.50%. The advances under the 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 quarterly installments though February 2001. There were no amounts outstanding on the equipment acquisition and small business purchase facility at April 29, 2000, resulting in an available borrowing capacity of $71.1 million. The available borrowing capacity on this nonrevolving facility has been reduced due to prior borrowings which have been repaid in full. The outstanding principal under the term loan bears interest at the bank's prime interest rate minus 0.50% (7.94% at April 29, 2000). Principal and interest is payable in semiannual installments through April 2003. The amount outstanding on the term loan was $10.8 million at April 29, 2000. 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. No cash dividends were paid during the periods presented. At April 29, 2000, the Company was in compliance with all covenants and conditions under the credit agreement. The Company believes 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 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 acquisitions, 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. 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 had no holdings of derivative financial or commodity instruments at April 29, 2000. A review of the Company's other financial instruments and risk exposures at that date revealed that the Company had exposure to interest rate risk. At April 29, 2000, the Company performed sensitivity analyses to assess the potential effect of this risk and concluded that near-term changes in interest rates should not materially affect the Company's financial position, results of operations, or cash flows. 20 21 PART II. OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds On February 1, 2000, the Company issued 5,431 shares of the Company's common stock for the acquisition of KHS. These shares were issued in a manner not involving a public offering and therefore did not require registration under the Securities Act of 1933, as amended, pursuant to Section 4(2) thereof. On March 8, 2000, the Company issued 2,726,210 shares of the Company's common stock for the acquisition of all of the outstanding capital stock of Niels Fugal Sons Company, These shares were issued in a manner not involving a public offering and therefore did not require registration under the Securities Act of 1933, as amended, pursuant to Section 4(2) thereof. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibits furnished pursuant to the requirements of Form 10-Q: Number Description ------ ----------- (10.1) Employment Contract - Robert J. Delark, Senior Vice President and Chief Administrative Officer. (10.2) Employment Contract - Richard L. Dunn, Senior Vice President and Chief Financial Officer. (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 report on Form 8-K was filed on behalf of the Registrant during the quarter ended April 29, 2000: (i) The acquisition of NFS pursuant to an Agreement and Plan of Merger, dated February 14, 2000. Items Reported: 2 and 7 Date Filed: March 17, 2000 21 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 9, 2000 /s/ Steven E. Nielsen ------------------------------------- Steven E. Nielsen President and Chief Executive Officer Date: June 9, 2000 /s/ Thomas R. Pledger ------------------------------------- Thomas R. Pledger Executive Chairman Date: June 9, 2000 /s/ Richard L. Dunn ------------------------------------- Richard L. Dunn Senior Vice President and Chief Financial Officer Date: June 9, 2000 /s/ Randal L. Martin ------------------------------------- Randal L. Martin Vice President, Controller, and Principal Accounting Officer 22 EX-10.1 2 0002.txt EMPLOYMENT CONTRACT - ROBERT J. DELARK 1 EXHIBIT 10.1 EMPLOYMENT AGREEMENT This employment agreement (the "EMPLOYMENT AGREEMENT") is made this 21st day of January, 2000, by and between Robert Delark (the "EMPLOYEE") and Dycom Industries, Inc., a Florida corporation (the "COMPANY"). The Employment Agreement shall become effective as of the first day that the Employee commences full-time employment with the Company (the "EFFECTIVE DATE"), pursuant to the terms hereof. In the event that the Employee does not commence full-time employment with the Company, the Employment Agreement shall be null and void. The Employee, Company and any other person or entity shall not be entitled to damages or any other relief as a result of the Employment Agreement being null and void. 1. Employment. Subject to the terms and conditions hereof, as of the Effective Date, the Company hereby agrees to employ the Employee as the Company's Vice President and Chief Administrative Officer. The Employee agrees to perform such specific duties and accepts such responsibilities as the board of directors of the Company (the "BOARD") and the Chief Executive Officer may from time to time establish which are reasonably related and consistent with the Employee's position as a senior executive of the Company. The Employee hereby accepts employment by the Company as Vice President and Chief Administrative Officer, subject to the terms and conditions hereof, and agrees to devote his full business time and attention to his duties hereunder, to the best of his abilities. 2. Term of Employment. The term of the Employee's employment pursuant to the Employment Agreement shall commence on the Effective Date and shall terminate upon the earlier of (i) termination pursuant to paragraph 5 hereof or (ii) the third anniversary of the Effective Date (the "EMPLOYMENT TERM"). 3. Compensation, Benefits and Expenses. (a) During the Employment Term, the Company shall pay the Employee a base annual salary of $215,000 (the "BASE SALARY"). Payment will be made on the regularly scheduled pay dates of the Company, subject to all appropriate withholdings or other deductions required by applicable law or by the Company's established policies applicable to employees of the Company. The Board may increase the Base Salary in its sole discretion, but shall not reduce the Base Salary below the rate established by the Employment Agreement without the Employee's written consent. (b) During the Employment Term, the Employee shall be entitled to participate in the Company's annual incentive plan, under which the Employee shall be eligible to receive an annual target bonus equal to an amount between twenty percent (20%) and fifty percent (50%) of Base Salary if certain performance criteria and measures are satisfied, as determined by and within the sole discretion of the Board. 2 (c) During the Employment Term, the Company shall provide the Employee with an automobile allowance in the amount of six hundred dollars ($600) per month. (d) During the Employment Term, in addition to the compensation payable to the Employee as described above, the Employee shall be entitled to participate in all the employee benefit plans or programs of the Company that are available to senior executives of the Company generally and such other benefit plans or programs as may be specified by the Board ("EMPLOYEE Benefits"). (e) As of the Effective Date, the Board shall grant the Employee options (the "OPTIONS") to acquire 25,000 shares of common stock of the Company pursuant to the Company's 1998 Incentive Stock Option Plan (the "OPTION PLAN"), subject to the terms and conditions of the award agreement for the Option Plan, attached hereto as Exhibit A. During the Employment Term, the Employee shall be eligible for subsequent annual Option grants under the Option Plan, or any such successor stock option plan, at the time such grants are made under the Option Plan to management employees of the Company generally, with a targeted grant of between 6,000 to 8,000 Options per year. Notwithstanding any provision in the Option Plan (or any successor stock option plan) to the contrary, in the event the Employee's employment is terminated by the Company for any reason or if the Employee resigns his employment with the Company for any reason, the Employee shall be afforded the opportunity to exercise all vested Options for a period of ninety (90) days following the date of termination. The number of Options to be granted to the Employee as of the Effective Date and the number of Options targeted for future annual grants will be adjusted to reflect any stock split affecting the common stock of the Company that may be effective on or after the date the Employment Agreement is signed. (f) During the Employment Term, the Company shall reimburse the Employee for such reasonable out-of-pocket expenses as he may incur from time to time for and on behalf of the furtherance of the Company's business, PROVIDED that the Employee submits to the Company satisfactory documentation or other support for such expenses in accordance with the Company's expense reimbursement policy. (g) Pursuant to the Employee's termination of employment with Henkels & McCoy Inc. (the "FORMER EMPLOYER"), the Former Employer may elect not to purchase shares of restricted common stock of the Former Employer ("FORMER EMPLOYER STOCK") owned by the Employee. The Former Employer Stock owned by the Employee as of the Effective Date has a fair market value of $124,554 ("FAIR MARKET VALUE"). The Company agrees to provide the Employee with a one-time cash bonus ("RESTORATION BONUS") equal to the difference between the Fair Market Value and any amount received by the Employee in payment for the Former Employer Stock from the Former Employer or a third party. In no event will the Restoration Bonus exceed the Fair Market Value. The Employee agrees to exercise his best efforts to cause the Former Employer or a third party to purchase the Former Employer Stock in an arms length transaction(s). In the event the Restoration Bonus is paid before the Employee disposes of the Former Employer Stock, the Employee shall reimburse the Company with the amount realized in such transaction, up to the amount of the Restoration Bonus. 2 3 The Restoration Bonus shall be payable to the Employee in a single sum payment on the third anniversary of the Effective Date, PROVIDED, HOWEVER, that in the event the Employee is terminated by the Company for Cause or if the Employee resigns his employment with the Company before the second anniversary of the Effective Date for any reason other than as a result of a substantial and material breach by the Company of any of the terms of the Employment Agreement, then the Employee shall forfeit all rights and interests in the Restoration Bonus. Notwithstanding the foregoing, the Company shall pay the Employee the Restoration Bonus as soon as administratively practicable following: (i) his termination of employment by the Company without Cause (as defined in paragraph 5(a) hereof); (ii) his death; (iii) the Employee's resignation of employment following a substantial and material breach by the Company of its responsibilities and obligations under the Employment Agreement; or (iv) upon his becoming Disabled (as defined in paragraph 5(e) hereof). (h) The Company hereby agrees to indemnify and defend the Employee, if the Former Employer brings any claims or actions against the Employee during the Employment Term that in any way arise from or are in any way connected with the Employee's employment with the Company. 4. Covenants of the Employee. (a) The Employee agrees with the Company that, during the Employment Term, the Employee shall not directly or indirectly, whether as a proprietor, partner, joint venturer, employer, agent, employee, consultant, officer or beneficial or record owner of more than one percent (1%) of the stock of any corporation or association of any nature, engage in any business which is competitive to the business conducted by the Company, its subsidiaries or its affiliates (collectively, the "COMPANIES") in any geographic area in which the Companies have engaged or will engage during the Employment Term (including, without limitation, any area in which any customer of the Companies may be located). (b) The Employee agrees with the Company that at no time during the Employment Term, or for a three-year period following his termination of employment with the Company, will the Employee directly or indirectly divulge to any person, entity or other organization or appropriate for the Employee's own use or for the use of others any trade secrets or confidential information or confidential knowledge pertaining to the business of the Companies (collectively, the "PROPRIETARY INFORMATION"). The Employee shall retain all copies and extracts of any written confidential information acquired or developed by him during his employment for the sole benefit of the Companies. The Employee further agrees that he will not remove or take from the Companies' premises (or, if previously removed or taken, he will, at the Company's request, promptly return) any written confidential information or any copies or extracts thereof. The Employee shall promptly make all disclosures, execute all instruments and papers, and perform all acts reasonably necessary to vest and confirm to the Company, fully and completely, all rights created or contemplated by this paragraph 4(b). The restrictions contained herein shall not apply to, and Proprietary Information shall not include, any information which was already available to the public at the time of disclosure, or subsequently became available to the public, otherwise than by breach of the Employment Agreement. 3 4 (c) In the event the Employee resigns his employment with the Company for any reason other than as a result of a substantial and material breach by the Company of any of the terms of the Employment Agreement, or if the Company terminates his employment without Cause (as defined below), the Employee agrees, being fully aware that the performance of the Employment Agreement is important to preserve the present value of the property and business of the Company that for a period of twelve (12) calendar months following such termination or the balance of the Employment Term, whichever is less (the "RESTRICTED PERIOD"), the Employee shall not directly or indirectly engage in any business, whether as proprietor, partner, joint venturer, employer, agent, employee, consultant, officer or beneficial or record owner of more than one percent (1%) of the stock of any corporation or association of any nature which is competitive to the business conducted by the Companies in the geographical service area in which the Companies have engaged or will engage during such period (including, without limitation, any area in which any such customer of the Companies may be located). In the event the Employee is terminated for Cause or if there is a substantial and material breach by the Company of any of the terms of the Employment Agreement, the restrictions set forth in this paragraph 4(c) shall not apply. (d) As a separate and independent covenant, the Employee agrees with the Company that, for so long as the Employee is employed by the Company and for the Restricted Period, he will not in any way, directly or indirectly, for the purpose of conducting or engaging in any competitive business with the Companies, call upon, solicit, advise or otherwise do, or attempt to do, business with any person who is, or was, during the then most recent 12-month period, a customer of the Companies, or solicit, induce, hire, attempt to hire, interfere with or attempt to interfere with, any person who is, or was during the then most recent 12-month period, an employee, officer, representative or agent of the Companies. (e) The Employee agrees that the breach by the Employee of any of the foregoing covenants is likely to result in immediate and irreparable harm, directly or indirectly, to the Companies. The Employee, therefore, consents and agrees that if the Employee violates any of such covenants, the Companies shall be entitled, among and in addition to any other rights or remedies available under the Employment Agreement or at law or in equity, to temporary and permanent injunctive relief, without bond or other security, to prevent the Employee from committing or continuing a breach of such covenants. Such injunctive relief in any court shall be available to the Companies, in lieu of, or prior to or pending determination in, any arbitration proceeding. (f) It is the desire, intent and agreement of the Employee and the Company that the restrictions placed on the Employee by this paragraph 4 be enforced to the fullest extent permissible under the law and public policy applied by any jurisdiction in which enforcement is sought. Accordingly, if and to the extent that any portion of this paragraph 4 shall be adjudicated to be unenforceable, such portion shall be deemed amended to delete therefrom or to reform the portion thus adjudicated to be invalid or unenforceable, such deletion or reformation to apply only with respect to the operation of such portion in the particular jurisdiction in which such adjudication is made. (g) Except with respect to the equitable relief contemplated under paragraph 4(e), any controversy or claim arising out of or relating to the 4 5 Employment Agreement shall be resolved by arbitration in Palm Beach County, Florida, in accordance with the rules then in effect of the American Arbitration Association, and judgment upon the award rendered may be entered in any court having jurisdiction thereon. The arbitrator(s) have the right and ability to award attorneys' fees to the prevailing party in any such arbitration proceeding. 5. Termination. (a) TERMINATION FOR CAUSE. The Company shall have the right to terminate the Employee's employment at any time and for any reason. If the Employee is terminated for Cause (as defined below), the Company shall not have any obligation to pay the Employee any Base Salary or other compensation or to provide any employee benefits subsequent to the date of such Employee's termination of employment (unless required by applicable law), including, without limitation, Severance Benefits (as defined in paragraph 5(b) hereof). Termination for "CAUSE" shall mean termination of employment for any of the following reasons: (i) The Employee entering a plea of no-contest with respect to, or being convicted by a court of competent and final jurisdiction of, any crime, whether or not involving the Companies, that constitutes a felony in the jurisdiction involved; or (ii) any willful misconduct by the Employee that is injurious to the financial condition or business reputation of the Company. (b) TERMINATION WITHOUT CAUSE. Subject to the provisions of paragraph 5(c), if, prior to the expiration of the Employment Term, the Company terminates the Employee's employment without Cause, the Company shall, subject to the Employee's execution of a general release of claims against the Company in a form satisfactory to the Company, provide the Employee with Severance Benefits. "SEVERANCE BENEFITS" mean (a) the Base Salary (at the rate then in effect thirty (30) days prior to such termination) for the greater of (i) the remainder of the Employment Term or (ii) twelve (12) months (such period being referred to hereunder as the "SEVERANCE PERIOD"), at such intervals as the same would have been paid had the Employee remained in the active service of the Company, and (b) the Company shall also provide the Employee and his eligible dependents with group medical and life insurance after termination of the Employee's employment without Cause (to the extent such eligible dependents were participating in the Company's group medical and life insurance programs prior to the Employee's termination of employment), until the Employee becomes eligible for similar coverage as the result of the Employee accepting another position with a new employer or until the termination of the Severance Period, whichever shall occur first. (c) CONDITIONS APPLICABLE TO SEVERANCE PERIOD. If, during the Severance Period, the Employee substantially and materially breaches any of his obligations under the Employment Agreement (including, but not limited to, paragraph 4), the Company may, upon written notice to the Employee, terminate the Severance Period and cease to make any payments or provide the benefits in paragraph 5(b). (d) RESIGNATION BY THE EMPLOYEE. The Employee shall have the right to resign his employment with the Company for any reason. In the event the Employee resigns his employment with the Company, the Employee: (i) shall provide the Company with ninety (90) days' prior written notice; (ii) shall not make any 5 6 public announcements concerning his resignation prior to the resignation date without the written consent of the Company; and (iii) shall continue to perform faithfully the duties assigned to him under the Employment Agreement (or such other duties as the Company or Board may assign to the Employee) from the date of such notice until the resignation date. In the event the Employee resigns his employment with the Company because the Company substantially and materially breached any of the terms of the Employment Agreement, the Employee shall receive all Severance Benefits set forth in paragraph 5(b). In addition, in the event the Employee resigns his employment with the Company for any reason other than as a result of a substantial and material breach by the Company of any of the terms of the Employment Agreement, the Employee shall not receive the Severance Benefits set forth in paragraph 5(b). (e) TERMINATION UPON DEATH OR DISABILITY. Unless otherwise terminated earlier pursuant to the terms of the Employment Agreement, the Employee's employment under the Employment Agreement shall terminate upon his death and may be terminated by the Company upon giving not less than thirty (30) days' written notice to the Employee in the event that the Employee, because of physical or mental disability or incapacity, is unable to perform (or, in the opinion of a physician, is reasonably expected to be unable to perform) his duties hereunder for an aggregate of one hundred eighty (180) days during any twelve-month period ("Disabled"). All questions arising with respect to whether the Employee is Disabled shall be determined by a reputable physician mutually selected by the Company and the Employee at the time such question arises. If the Company and the Employee cannot agree upon the selection of a physician within a period of seven (7) days after such question arises, then the Chief of Staff of Good Samaritan Hospital in Palm Beach County, Florida shall be asked to select a physician to make such determination. The determination of the physician selected pursuant to the above provisions of this paragraph 5(e) as to such matters shall be conclusively binding upon the parties hereto. (f) TERMINATION UPON A CHANGE OF CONTROL. In the event of a "Change of Control," notwithstanding any provisions in the Option Plan or any successor stock option plan to the contrary, all outstanding Options under the Option Plan or any successor stock option plan, to the extent not already vested, shall become fully and immediately vested as of the date of the occurrence of a Change of Control. For purposes of the Employment Agreement, a "CHANGE OF CONTROL" shall be deemed to have occurred with respect to the Company if any one or more of the following events occur: (i) A tender offer is made and consummated for the ownership of fifty percent (50%) or more of the outstanding voting securities of the Company; (ii) a "person," within the meaning of Section 3(a)9 or Section 13(d) (as in effect on the date hereof) of the Securities Exchange Act of 1934, shall acquire fifty percent (50%) or more of the outstanding voting securities of the Company; (iii) substantially all of the assets of the Company are sold or transferred to another person, corporation or entity that is not a wholly owned subsidiary of the Company; or 6 7 (iv) a change in the Board such that a majority of the seats on the Board are occupied by individuals who were neither nominated by a majority of the directors of the Company as of the close of business on the Effective Date nor appointed by directors so nominated. 6. Assignment and Succession. (a) The services to be rendered and obligations to be performed by the Employee under the Employment Agreement are special and unique, and all such services and obligations and all of the Employee's rights under the Employment Agreement are personal to the Employee and shall not be assignable or transferable. In the event of the Employee's death, however, the Employee's personal representative shall be entitled to receive any and all payments then due under the Employment Agreement. (b) The Employment Agreement shall inure to the benefit of and be binding upon and enforceable by the Company and the Employee and their respective successors, permitted assigns, heirs, legal representatives, executors, and administrators. If the Company shall be merged into or consolidated with another entity, the provisions of the Employment Agreement shall be binding upon and inure to the benefit of the entity surviving such merger or resulting from such consolidation. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to expressly assume and agree to perform the Employment Agreement in the same manner that the Company would be required to perform it if no such succession had taken place. The provisions of this paragraph 6(b) shall continue to apply to each subsequent Company of the Employee hereunder in the event of any subsequent merger, consolidation, or transfer of assets of such subsequent Company. 7. Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by cable, telegram or telex or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this paragraph 7): if to the Company: Dycom Industries, Inc. First Union Center, Suite 500 4440 PGA Boulevard Palm Beach Gardens, Florida 33410 Attention: Marc R. Tiller if to the Employee: Mr. Robert Delark 939 Weadley Road Wayne, Pennsylvania 19087 7 8 8. Waiver of Breach. (a) The waiver by the Company or the Employee of a breach of any provision of the Employment Agreement shall not operate or be construed as a waiver by such party of any subsequent breach. (b) The parties hereto recognize that the laws and public policies of various jurisdictions may differ as to the validity and enforceability of covenants similar to those set forth herein. It is the intention of the parties that the provisions hereof be enforced to the fullest extent permissible under the laws and policies of each jurisdiction in which enforcement may be sought, and that the unenforceability (or the modification to conform to such laws or policies) of any provisions hereof shall not render unenforceable, or impair, the remainder of the provisions hereof. Accordingly, if, at the time of enforcement of any provision hereof, a court of competent jurisdiction holds that the restrictions stated herein are unreasonable under circumstances then existing, the parties hereto agree that the maximum period, scope or geographic area reasonable under such circumstances will be substituted for the stated period, scope or geographical area and that such court shall be allowed to revise the restrictions contained herein to cover the maximum period, scope and geographical area permitted by law. 9. Amendment. The Employment Agreement may be amended only by a written instrument signed by all parties hereto. 10. Full Settlement. The Company's obligation to pay the Employee the amounts required by the Employment Agreement shall be absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any setoff, counterclaim, recoupment, defense or other right which the Company may have against the Employee or anyone else. All payments and benefits to which the Employee is entitled under the Employment Agreement shall be made and provided without offset, deduction, or mitigation on account of income that the Employee may receive from employment from the Company or otherwise. 11. Other Severance Benefits. In consideration for the payments to be made to the Employee under the Employment Agreement, the Employee waives any and all rights to any payments or benefits under any other severance plan, program or arrangement of the Companies. 12. Governing Law; Jurisdiction and Service of Process. The Employment Agreement shall be governed by the laws of the State of Florida applicable to contracts executed in and to be performed in that State. 8 9 13. Authority to Enter into Employment Agreement. The Employee represents and warrants that he is not subject to any employment agreements, non-competition agreements or any other agreement or understanding, whether or not in writing, that would prevent him from entering into the Employment Agreement and performing the duties hereunder. 14. Partial Invalidity. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision. 15. Withholding. The payment of any amount pursuant to the Employment Agreement shall be subject to applicable withholding and payroll taxes, and such other deductions as may be required under the Company's employee benefit plans, if any. 16. Counterparts. This Employment Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. 17. Entire Agreement. All prior negotiations and agreements between the parties hereto with respect to the matters contained herein are superseded by the Employment Agreement, and there are no representations, warranties, understandings or agreements other than those expressly set forth herein. IN WITNESS WHEREOF, the parties have entered into the Employment Agreement as of the date set forth above. DYCOM INDUSTRIES, INC. By: /s/ Steven E. Nielsen ------------------------------------------------ Name: Steven E. Nielsen Title: President and Chief Executive Officer /s/ Robert Delark ---------------------------------------------------- Robert Delark, individually 9 EX-10.2 3 0003.txt EMPLOYMENT AGREEMENT - RICHARD L. DUNN 1 EXHIBIT 10.2 EMPLOYMENT AGREEMENT This employment agreement (the "EMPLOYMENT AGREEMENT") is made this 28th day of January, 2000 (the "EFFECTIVE DATE"), by and between Richard L. Dunn (the "EMPLOYEE") and Dycom Industries, Inc., a Florida corporation (the "COMPANY"), pursuant to the terms hereof. 1. EMPLOYMENT. Subject to the terms and conditions hereof, as of the Effective Date, the Company hereby agrees to employ the Employee as the Company's Vice President and Chief Financial Officer. The Employee agrees to perform such specific duties and accept such responsibilities as the board of directors of the Company (the "Board") and the Chief Executive Officer may from time to time establish that are reasonably related and consistent with the Employee's position as a senior officer of the Company. The Employee shall report directly to the Chief Executive Officer. The Employee hereby accepts employment by the Company as Vice President and Chief Financial Officer, subject to the terms and conditions hereof, and agrees to devote his full business time and attention to his duties hereunder, to the best of his abilities. 2. TERM OF EMPLOYMENT. The term of the Employee's employment pursuant to the Employment Agreement shall commence on the Effective Date and shall terminate upon the earlier of (i) termination pursuant to paragraph 5 hereof or (ii) the third anniversary of the Effective Date (the "EMPLOYMENT TERM"). 3. COMPENSATION, BENEFITS AND EXPENSES. (a) During the Employment Term, the Company shall pay the Employee a base annual salary of $215,000 (the "BASE SALARY"). Payment will be made on the regularly scheduled pay dates of the Company, subject to all appropriate withholdings or other deductions required by applicable law or by the Company's established policies applicable to employees of the Company. The Board may increase the Base Salary in its sole discretion, but shall not reduce the Base Salary below the rate established by the Employment Agreement without the Employee's written consent. (b) During the Employment Term, the Employee shall be entitled to participate in the Company's annual incentive plan, under which the Employee shall be eligible to receive an annual target bonus equal to an amount between twenty percent (20%) and fifty percent (50%) of Base Salary if certain performance criteria and measures are satisfied, as determined by and within the sole discretion of the Board. (c) The Company shall promptly reimburse the Employee upon receipt of appropriate documentation for all reasonable and customary relocation expenses that he may incur in relocating to Palm Beach Gardens, Florida in an amount not to exceed $5,000. 2 (d) During the Employment Term, in addition to the compensation payable to the Employee as described above, the Employee shall be entitled to participate in all the employee benefit plans or programs of the Company that are available to senior executives of the Company generally and such other benefit plans or programs in accordance with the terms thereof, as may be specified by the Board ("EMPLOYEE BENEFITS"). (e) As of the Effective Date, the Board shall grant the Employee options (the "OPTIONS") to acquire 25,000 shares of common stock of the Company, pursuant to the Company's 1998 Incentive Stock Option Plan (the "OPTION PLAN"). Such grant shall be subject to the terms and conditions of the award agreement for the Option Plan, attached hereto as Exhibit A. In addition, during the Employment Term, the Employee shall be eligible for subsequent annual option grants under the Option Plan, or any such successor stock option plan, at the time such grants are made under the Option Plan to management employees of the Company generally, with a targeted grant of between 6,000 to 8,000 shares per year, as determined by and within the sole discretion of the Board. Notwithstanding any provision in the Option Plan or any successor stock option plan to the contrary, in the event the Employee's employment is terminated by the Company, the employee shall be afforded the opportunity to exercise all vested Options for a period of ninety (90) days following the date of such termination. (f) During the Employment Term, the Company shall reimburse the Employee for such reasonable out-of-pocket expenses as he may incur from time to time for and on behalf of the furtherance of the Company's business, PROVIDED that the Employee submits to the Company satisfactory documentation or other support for such expenses in accordance with the Company's expense reimbursement policy. 4. COVENANTS OF THE EMPLOYEE. (a) The Employee agrees with the Company that, during the Employment Term, the Employee shall not directly or indirectly, whether as a proprietor, partner, joint venturer, employer, agent, employee, consultant, officer or beneficial or record owner of more than one percent (1%) of the stock of any corporation or association of any nature, engage in any business which is competitive to the business conducted by the Company, its subsidiaries or its affiliates (collectively, the "COMPANIES"), in any geographic area in which the Companies have engaged or will engage during the Employment Term (including, without limitation, any area in which any customer of the Companies may be located). 2 3 (b) The Employee agrees with the Company that at no time during the Employment Term, or following his termination of employment with the Company, will the Employee directly or indirectly divulge to any person, entity or other organization or appropriate for the Employee's own use or for the use of others any trade secrets or confidential information or confidential knowledge pertaining to the business of the Companies (collectively, the "PROPRIETARY INFORMATION"). The Employee shall retain all copies and extracts of any written confidential information acquired or developed by him during his employment for the sole benefit of the Companies. The Employee further agrees that he will not remove or take from the Companies' premises (or, if previously removed or taken, he will, at the Company's request, promptly return) any written confidential information or any copies or extracts thereof. The Employee shall promptly make all disclosures, execute all instruments and papers, and perform all acts reasonably necessary to vest and confirm to the Company, fully and completely, all rights created or contemplated by this paragraph 4(b). (c) In the event the Employee resigns his employment with the Company for any reason, or if the Company terminates his employment without Cause (as defined below), the Employee separately agrees, being fully aware that the performance of the Employment Agreement is important to preserve the present value of the property and business of the Company that for a period of twelve (12) calendar months following such termination or the balance of the Employment Term, whichever is less (the "RESTRICTED PERIOD"), the Employee shall not directly or indirectly engage in any business, whether as proprietor, partner, joint venturer, employer, agent, employee, consultant, officer or beneficial or record owner of more than one percent (1%) of the stock of any corporation or association of any nature which is competitive to the business conducted by the Companies, in the geographical service area in which the Companies have engaged or will engage during such period (including, without limitation, any area in which any such customer of the Companies may be located). (d) As a separate and independent covenant, the Employee agrees with the Company that, for so long as the Employee is employed by the Company and for the Restricted Period, he will not in any way, directly or indirectly, for the purpose of conducting or engaging in any competitive business with the Companies, call upon, solicit, advise or otherwise do, or attempt to do, business with any person who is, or was, during the then most recent 12-month period, a customer of the Companies, or solicit, induce, hire, attempt to hire, interfere with or attempt to interfere with, any person who is, or was during the then most recent 12-month period, an employee, officer, representative or agent of the Companies. (e) The Employee agrees that the breach by the Employee of any of the foregoing covenants is likely to result in immediate and irreparable harm, directly or indirectly, to the Companies. The Employee, therefore, consents and agrees that if the Employee violates any of such covenants, the Companies shall be entitled, among and in addition to any other rights or remedies available under the Employment Agreement or at law or in equity, to temporary and permanent injunctive relief, without bond or other security, to prevent the Employee from committing or continuing a breach of such covenants. Such injunctive relief in any court shall be available to the Companies, in lieu of, or prior to or pending determination in, any arbitration proceeding. 3 4 (f) It is the desire, intent and agreement of the Employee and the Company that the restrictions placed on the Employee by this paragraph 4 be enforced to the fullest extent permissible under the law and public policy applied by any jurisdiction in which enforcement is sought. Accordingly, if and to the extent that any portion of this paragraph 4 shall be adjudicated to be unenforceable, such portion shall be deemed amended to delete therefrom or to reform the portion thus adjudicated to be invalid or unenforceable, such deletion or reformation to apply only with respect to the operation of such portion in the particular jurisdiction in which such adjudication is made. (g) Except with respect to the equitable relief contemplated under paragraph 4(e), any controversy or claim arising out of or relating to the Employment Agreement shall be resolved by arbitration in Palm Beach County, Florida, in accordance with the rules then in effect of the American Arbitration Association, and judgment upon the award rendered may be entered in any court having jurisdiction thereon. The prevailing party in any such arbitration proceeding will be reimbursed by the other party hereto for its reasonable attorney fees and fees and costs incurred attributable to such arbitration. 5. TERMINATION. (a) TERMINATION FOR CAUSE. The Company shall have the right to terminate the Employee's employment at any time and for any reason. If the Employee is terminated for Cause (as defined below), the Company shall not have any obligation to pay the Employee any Base Salary or other compensation or to provide any employee benefits subsequent to the date of such Employee's termination of employment (unless required by applicable law), including, without limitation, Severance Benefits (as defined in paragraph 5(b) hereof). Termination for "CAUSE" shall mean termination of employment for any of the following reasons: (i) The Employee entering a plea of no-contest with respect to, or being convicted by a court of competent and final jurisdiction of, any crime, whether or not involving the Companies, that constitutes a felony in the jurisdiction involved; or (ii) any willful misconduct by the Employee that is injurious to the financial condition or business reputation of the Company. 4 5 (b) TERMINATION WITHOUT CAUSE. Subject to the provisions of paragraph 5(c), if, prior to the expiration of the Employment Term, the Company terminates the Employee's employment without Cause, the Company shall, subject to the Employee's execution of a general release of claims against the Company in a form satisfactory to the Company, provide the Employee with Severance Benefits. "SEVERANCE BENEFITS" mean (i) the Base Salary (at the rate then in effect thirty (30) days prior to such termination) for twelve (12) months, PROVIDED, HOWEVER, that if the Employee is entitled to more than twelve (12) months of severance payments pursuant to the Company's severance plan, if any, he will be entitled to receive the severance payments payable under such severance plan (such period being referred to hereunder as the "SEVERANCE PERIOD"), at such intervals as the same would have been paid had the Employee remained in the active service of the Company, and (ii) the Company shall also provide the Employee and his eligible dependents with group medical and life insurance after termination of the Employee's employment without Cause (to the extent such eligible dependents were participating in the Company's group medical and life insurance programs prior to the Employee's termination of employment), until the Employee becomes eligible for similar coverage as the result of the Employee accepting another position with a new employer or until the termination of the Severance Period, whichever shall occur first. (c) CONDITIONS APPLICABLE TO SEVERANCE PERIOD. If, during the Severance Period, the Employee breaches any of his obligations under the Employment Agreement (including, but not limited to, paragraph 4), the Company may, upon written notice to the Employee terminate the Severance Period and cease to make any payments or provide the benefits in paragraph 5(b). (d) RESIGNATION BY THE EMPLOYEE. In the event the Employee resigns his employment with the Company, the Employee: (i) shall provide the Company with sixty (60) days' prior written notice; (ii) shall not make any public announcements concerning his resignation prior to the resignation date without the written consent of the Company and (iii) shall continue to perform faithfully the duties assigned to him under the Employment Agreement (or such other duties as the Company or Board may assign to the Employee) from the date of such notice until the termination date. In addition, in the event the Employee resigns his employment with the Company for any reason, the Company shall not have any obligation to pay the Employee any Base Salary or other compensation or to provide any employee benefits subsequent to the date of such Employee's termination of Employment (unless required by applicable law), including, without limitation, Severance Benefits (as defined in paragraph 5(b) hereof). (e) TERMINATION UPON DEATH OR DISABILITY. Unless otherwise terminated earlier pursuant to the terms of the Employment Agreement, the Employee's employment under the Employment Agreement shall terminate upon his death and may be terminated by the Company upon giving not less than thirty (30) days' written notice to the Employee in the event that the Employee, because of physical or mental disability or incapacity, is unable to perform (or, in the opinion of a physician, is reasonably expected to be unable to perform) his duties hereunder for an aggregate of one hundred eighty (180) days during any twelve-month period ("DISABLED"). All questions arising with respect to whether the Employee is Disabled shall be determined by a reputable physician mutually selected by the Company and the Employee at the time such question arises. If the Company and the Employee cannot agree upon the selection of a physician within a period of seven (7) days after such question arises, then the Chief of Staff of Good Samaritan Hospital in Palm Beach County, Florida shall be asked to select a physician to make such determination. The determination of the physician selected pursuant to the above provisions of this paragraph 5(e) as to such matters shall be conclusively binding upon the parties hereto. 5 6 (f) TERMINATION UPON A CHANGE OF CONTROL. In the event of a "Change of Control," notwithstanding any provisions in the Option Plan or any successor stock option plan to the contrary, all outstanding Options under the Option Plan or any successor stock option plan, to the extent not already vested, shall become fully and immediately vested as of the date of the occurrence of a Change of Control. For purposes of the Employment Agreement, a "CHANGE OF CONTROL" shall be deemed to have occurred with respect to the Company if any one or more of the following events occur: (i) A tender offer is made and consummated for the ownership of fifty percent (50%) or more of the outstanding voting securities of the Company; (ii) a "person," within the meaning of Section 3(a)9 or Section 13(d) (as in effect on the date hereof) of the Securities Exchange Act of 1934, shall acquire fifty percent (50%) or more of the outstanding voting securities of the Company; (iii) substantially all of the assets of the Company are sold or transferred to another person, corporation or entity that is not a wholly owned subsidiary of the Company; or (iv) a change in the Board such that a majority of the seats on the Board are occupied by individuals who were neither nominated by a majority of the directors of the Company as of the close of business on the Effective Date nor appointed by directors so nominated. 6. ASSIGNMENT AND SUCCESSION. (a) The services to be rendered and obligations to be performed by the Employee under the Employment Agreement are special and unique, and all such services and obligations and all of the Employee's rights under the Employment Agreement are personal to the Employee and shall not be assignable or transferable. In the event of the Employee's death, however, the Employee's personal representative shall be entitled to receive any and all payments then due under the Employment Agreement. 6 7 (b) The Employment Agreement shall inure to the benefit of and be binding upon and enforceable by the Company and the Employee and their respective successors, permitted assigns, heirs, legal representatives, executors, and administrators. If the Company shall be merged into or consolidated with another entity, the provisions of the Employment Agreement shall be binding upon and inure to the benefit of the entity surviving such merger or resulting from such consolidation. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to expressly assume and agree to perform the Employment Agreement in the same manner that the Company would be required to perform it if no such succession had taken place. The provisions of this paragraph 6(b) shall continue to apply to each subsequent Company of the Employee hereunder in the event of any subsequent merger, consolidation, or transfer of assets of such subsequent Company. 7. NOTICES. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by cable, telegram or telex or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this paragraph 7): if to the Company: Dycom Industries, Inc. First Union Center, Suite 500 4440 PGA Boulevard Palm Beach Gardens, Florida 33410 Attention: Marc R. Tiller if to the Employee: Mr. Richard L. Dunn 2921 S.W. 120th Road Miami, Florida 33175 8. WAIVER OF BREACH. (a) The waiver by the Company or the Employee of a breach of any provision of the Employment Agreement shall not operate or be construed as a waiver by such party of any subsequent breach. (b) The parties hereto recognize that the laws and public policies of various jurisdictions may differ as to the validity and enforceability of covenants similar to those set forth herein. It is the intention of the parties that the provisions hereof be enforced to the fullest extent permissible under the laws and policies of each jurisdiction in which enforcement may be sought, and that the unenforceability (or the modification to conform to such laws or policies) of any provisions hereof shall not render unenforceable, or impair, the remainder of the provisions hereof. Accordingly, if, at the time of enforcement of any provision hereof, a court of competent jurisdiction holds that the restrictions stated herein are unreasonable under circumstances then existing, the parties hereto agree that the maximum period, scope or geographic area reasonable under such circumstances will be substituted for the stated period, scope or geographical area and that such court shall be allowed to revise the restrictions contained herein to cover the maximum period, scope and geographical area permitted by law. 7 8 9. AMENDMENT. The Employment Agreement may be amended only by a written instrument signed by all parties hereto. 10. FULL SETTLEMENT. The Company's obligation to pay the Employee the amounts required by the Employment Agreement shall be absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any setoff, counterclaim, recoupment, defense or other right which the Company may have against the Employee or anyone else. All payments and benefits to which the Employee is entitled under the Employment Agreement shall be made and provided without offset, deduction, or mitigation on account of income that the Employee may receive from employment from the Company or otherwise. 11. OTHER SEVERANCE BENEFITS. In consideration for the payments to be made to the Employee under the Employment Agreement, in the event the Employee receives twelve (12) months of severance payments pursuant to Section 5(b) of the Employment Agreement, the Employee agrees to waive any and all rights to any payments or benefits under any other severance plan, program or arrangement of the Companies. 12. GOVERNING LAW; JURISDICTION AND SERVICE OF PROCESS. The Employment Agreement shall be governed by the laws of the State of Florida applicable to contracts executed in and to be performed in that State. 13. AUTHORITY TO ENTER INTO EMPLOYMENT AGREEMENT. The Employee represents and warrants that he is not subject to any employment agreements, non-competition agreements or any other agreement or understanding, whether or not in writing, that would prevent him from entering into the Employment Agreement and performing the duties hereunder. 14. PARTIAL INVALIDITY. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision. 8 9 15. WITHHOLDING. The payment of any amount pursuant to the Employment Agreement shall be subject to applicable withholding and payroll taxes, and such other deductions as may be required under the Company's employee benefit plans, if any. 16. COUNTERPARTS. The Employment Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instruments. 17. ENTIRE AGREEMENT. All prior negotiations and agreements between the parties hereto with respect to the matters contained herein are superseded by the Employment Agreement, and there are no representations, warranties, understandings or agreements other than those expressly set forth herein. IN WITNESS WHEREOF, the parties have entered into this Employment Agreement as of the date set forth above. DYCOM INDUSTRIES, INC. By: /s/ Steven E. Nielsen --------------------------------------------------- Name: Steven E. Nielsen Title: President and Chief Executive Officer /s/ Richard L. Dunn ------------------------------------------------------ Richard L. Dunn, individually 9 EX-27 4 0004.txt FINANCIAL DATA SCHEDULE
5 9-MOS JUL-29-2000 APR-29-2000 74,039,635 0 133,473,787 4,705,916 66,649,819 279,804,455 187,471,519 87,544,891 471,123,035 94,335,390 12,015,997 0 0 13,993,276 341,177,257 471,123,035 0 566,959,976 0 423,407,440 22,755,372 0 755,596 73,653,629 30,211,814 43,441,815 0 0 0 43,441,815 1.05 1.03
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