-----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, McORaHm5aSO9FR52g2UJOvgP9EN7bm6Qr9EteIVsv4409XxHTkt+m9fnfDDa0OL7 QisFH9yTA+Ub0SWVSVWRow== 0000950144-97-010566.txt : 19971002 0000950144-97-010566.hdr.sgml : 19971002 ACCESSION NUMBER: 0000950144-97-010566 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19970731 FILED AS OF DATE: 19971001 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DYCOM INDUSTRIES INC CENTRAL INDEX KEY: 0000067215 STANDARD INDUSTRIAL CLASSIFICATION: WATER, SEWER, PIPELINE, COMM AND POWER LINE CONSTRUCTION [1623] IRS NUMBER: 591277135 STATE OF INCORPORATION: FL FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-10613 FILM NUMBER: 97689206 BUSINESS ADDRESS: STREET 1: 4440 PGA BLVD. SUITE 600 STREET 2: FIRST UNION CENTER CITY: PALM BEACH GARDENS STATE: FL ZIP: 33410 BUSINESS PHONE: (561) 627-7171 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-K 1 DYCOM INDUSTRIES FORM 10-K 7/31/97 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) FOR THE FISCAL YEAR ENDED JULY 31, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) 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 of incorporation) (I.R.S. Employer Identification No.) 4440 PGA BOULEVARD, SUITE 600 33410 PALM BEACH GARDENS, FLORIDA (Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (561) 627-7171 Securities registered pursuant to Section 12(b) of the Act: Title of each class Common Stock, Name of each exchange on which registered par value $.33 1/3 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE (Title of Class) 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 by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the voting common stock, par value $.33 1/3 per share, held by non-affiliates of the registrant, computed by reference to the closing price of such stock on September 26, 1997 was $213,408,461. Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. CLASS OUTSTANDING AS OF SEPTEMBER 26, 1997 Common Stock, $.33 1/3 10,870,252
The registrant's proxy statement for the Annual Meeting of Shareholders to be held on November 24, 1997 (the "Definitive Proxy Statement") to be filed with the Commission pursuant to Regulation 14A is incorporated by reference into Part III of this Form 10-K. ================================================================================ 2 PART I ITEM 1. BUSINESS OVERVIEW Dycom is a leading provider of engineering, construction and maintenance services to telecommunications providers that operate throughout the United States. The Company's comprehensive range of telecommunications infrastructure services include the engineering, placement and maintenance of aerial, underground, and buried fiber-optic, coaxial and copper cable systems owned by local and long distance communications carriers, competitive local exchange carriers, and cable television multiple system operators. Additionally, the Company provides similar services related to the installation of integrated voice, data, and video local and wide area networks within office buildings and similar structures. Dycom also performs underground utility locating and electric utility contracting services. For the fiscal year ended July 31, 1997, telecommunications services contributed approximately 87% of contract revenues, underground utility locating services contributed 6%, and electric utility contracting services contributed 7%. Through its nine active wholly-owned subsidiaries, Dycom has established relationships with many leading local exchange carriers, long distance providers, competitive access providers, cable television multiple system operators and electric utilities. Such key customers include BellSouth Telecommunications, Inc., Comcast Cable Communications, Inc., The Southern New England Telephone Company, GTE Corporation, U.S. West Communications, Inc., and Florida Power & Light Company. Approximately 40% of the Company's revenues come from multi-year master service agreements with large telecommunications providers and electric utilities. In July 1997, Dycom acquired Communications Construction Group, Inc. ("CCG"), a Pennsylvania-based provider of construction services to cable television multiple system operators (the "CCG Acquisition"). CCG generated revenues of $67.7 million in its fiscal year 1997. This transaction diversified Dycom's telephone company customer base to include a broader mix of work for cable television multiple system operators. The acquisition also created a greater geographic presence for Dycom in the Mid-Atlantic, Midwest and Northeast regions of the United States. SERVICES Telecommunications Services Engineering. Dycom provides outside plant engineers and drafters to local exchange carriers and competitive access providers. The Company designs aerial, buried and underground fiber optic and copper cable systems from the telephone central office to the ultimate consumer's home or business. Engineering services for local exchange carriers include the design of service area concept boxes, terminals, buried and aerial drops, transmission design and the proper administration of feeder and distribution cable pairs. For competitive access providers, Dycom designs building entrance laterals, fiber rings and conduit systems. The Company obtains rights of way and permits in support of engineering activities, and provides construction management and inspection personnel in conjunction with engineering services or on a stand alone basis. For cable television multiple system operators, Dycom performs make ready studies, strand mapping, field walk out, computer-aided radio frequency design and drafting, and fiber cable routing and design. Construction and Maintenance. The services provided by the Company include the placing and splicing of cable, excavation of trenches in which to place the cable, placement of related structures such as poles, anchors, conduits, manholes, cabinets and closures, placement of drop lines from the main distribution lines to the customer's home or business, and maintenance and removal of these facilities. The Company has the capacity to directionally bore the placement of cables, a highly specialized and increasingly necessary method of placing buried cable networks in congested urban and suburban markets where trenching is highly impractical. Premise Wiring. The Company also provides premise wiring services to a variety of large corporations and certain governmental agencies. These services, unlike the engineering, construction and maintenance services provided under various master service agreements and to cable television multiple system operators, 1 3 are limited to the installation, repair and maintenance of telecommunications infrastructure within improved structures. Projects include the placement and removal of various types of cable within buildings and individual offices. These services generally include the development of communication networks within a company or government agency related primarily to the establishment and maintenance of computer operations, telephone systems, Internet access and communications monitoring systems established for purposes of monitoring environmental controls or security procedures. Underground Utility Locating Services The Company is a provider of underground utility locating services, primarily to telecommunications providers. Under a variety of state laws, excavators are required to locate underground utilities prior to excavating. Utilities located include telephone, cable television, power and gas. Recently, excavators performing telecommunications network upgrades and expansions have generated significant growth in requests for underground utility locating, and the Company expects this trend to continue. The Company is currently a party to 30 underground utility locating contracts. These services are offered throughout the United States. Electrical Construction and Maintenance Services The Company performs electrical construction and maintenance services for electric companies. This construction is performed primarily as a stand alone service, although at times it is performed in conjunction with services for telecommunications providers. These services include installing and maintaining electrical transmission and distribution lines, setting utility poles and stringing electrical lines, principally above ground. The work performed often involves high voltage splicing and, on occasion, the installation of underground high voltage distribution systems. The Company also provides the repair and replacement of lines which are damaged or destroyed as a result of weather conditions. Revenues by Service Group For the fiscal years ended July 31, 1995, 1996 and 1997, the percentages of the Company's total contract revenues earned were derived from telecommunications services, underground utility locating services and electrical construction and maintenance services as set forth below.
YEAR ENDED JULY 31, -------------------- 1995 1996 1997 ---- ---- ---- Telecommunications services................................. 86% 87% 87% Underground utility locating services....................... 8 7 6 Electrical construction and maintenance services............ 6 6 7 --- --- --- Total............................................. 100% 100% 100% === === ===
CUSTOMER RELATIONSHIPS Dycom's current customers include local exchange carriers such as BellSouth Telecommunications, Inc., SBC Communications, Inc., U.S. West Communications, Inc., Sprint Corporation, Ameritech Corporation, GTE Corporation, The Southern New England Telephone Company, Citizen Utilities and Cincinnati Bell Telephone. Dycom also currently provides telecommunications engineering, construction and maintenance services to a number of cable television multiple system operators including Comcast Cable Communications Inc., Cablevision, Inc., Falcon Cable Media, Time Warner, Inc. and MediaOne, Inc. Dycom also provides it services to long distance carriers such as MCI Telecommunications Corporation and AT&T Corporation, as well as to competitive access providers such as MFS Communications Company, Inc. and Brooks Fiber Corporation. Premise wiring services have been provided to, among others, Lucent Technologies, Inc., Duke University, International Business Machines Corporation, and several state governments. The Company also provides construction and maintenance support to Lee County Electrical Cooperative, Florida Power & Light Company, and Florida Power Corporation. 2 4 The Company's customer base is highly concentrated, with its top three customers in fiscal years 1995, 1996 and 1997 accounting in the aggregate for approximately 66.8%, 72.8% and 64.0%, respectively, of the Company's total revenues. During fiscal 1997, approximately 34.3% of the Company's total revenues were derived from BellSouth Telecommunications, Inc., 23.3% from Comcast Cable Communications, Inc. and 6.4% from GTE Corporation. The Company believes that a substantial portion of its total revenues and operating income will continue to be derived from a concentrated group of customers. The loss of any of such customers could have a material adverse effect on the Company's business, financial condition and results of operations. A significant amount of the Company's business is performed under master service agreements. These agreements with telecommunications providers are exclusive requirement contracts, with certain exceptions, including the customer's option to perform the services with its own regularly employed personnel. The agreements are typically three to five years in duration, although the terms typically permit the customer to terminate the agreement upon 90 days prior written notice. Each agreement contemplates hundreds of individual construction and maintenance projects valued generally at less than $10,000 each. Other jobs are bid by the Company on a nonrecurring basis. Although historically master service agreements have been awarded through a competitive bidding process, recent trends have been toward securing or extending such contracts on negotiated terms. With the rapid expansion of the telecommunications market and the immediate need for upgrading existing, as well as constructing new, telecommunications infrastructure, the Company believes that more master service agreements will be awarded on the basis of negotiated terms as opposed to the competitive bidding process. Sales and marketing efforts of the Company are the responsibility of the management of Dycom and its operating subsidiaries. BACKLOG The Company's backlog at July 31, 1997 was $314.4 million. As of July 31, 1997, the Company expected to complete approximately 66% of this backlog within the next fiscal year. Due to the nature of its contractual commitments, in many instances the Company's customers do not commit to the volume of services to be purchased under the contract, but rather commit the Company to perform these services if requested by the customer and commit to obtain these services from the Company if they are not performed internally. Many of the contracts are multi-year agreements, and the Company includes the full amount of services projected to be performed over the life of the contract. The Company includes all services projected to be performed over the life of the contract in its backlog due to its historical relationships with its customers and experience in procurements of this nature. Historically, the Company has not experienced a material variance between the amount of services it expects to perform under a contract and the amount actually performed for a specified period. There can be no assurance, however, as to the customer's requirements during a particular period or that management's estimates of such estimates at any point in time are accurate. SAFETY AND RISK MANAGEMENT The Company is committed to ensuring that its employees perform their work in the safest possible manner. The Company regularly communicates with its employees to promote safety and to instill safe work habits. Dycom's risk manager, a holding company employee, reviews all accidents and claims throughout the operating subsidiaries, examines trends and implements changes in procedures or communications to address any safety issues. The primary claims rising in the Company's business are workers' compensation and other personal injuries, various general liabilities, and vehicle liability (personal injury and property damage). The Company is self-insured for automobile liability up to $1.0 million, for general liability up to $1.0 million, and for workers' compensation, in states where the Company elects to do so, up to $1.0 million per occurrence and $2.0 million in the aggregate. The Company has umbrella coverage up to a policy limit of $30.0 million. 3 5 The Company carefully monitors claims and participates actively in claims estimates and adjustments. The estimated costs of self-insured claims, which include estimates for incurred but not reported claims, are accrued as liabilities on the Company's balance sheet. Due to changes in the Company's loss experience in recent years, insurance accruals have varied from year to year and have had an effect on operating margins. See "Management's Discussion and Analysis of Financial Condition and Results of Operation" and Note 1 of Notes to Consolidated Financial Statements. COMPETITION The telecommunications engineering, construction and maintenance services industry in which the Company operates is highly competitive, requiring substantial resources and skilled and experienced personnel. The Company competes with other independent contractors in most of the markets in which it operates, several of which are large domestic companies that have greater financial, technical and marketing resources than the Company. In addition, there are relatively few, if any, barriers to entry into the markets in which the Company operates and, as a result, any organization that has adequate financial resources and access to technical expertise may become a competitor to the Company. A significant portion of the Company's revenues are currently derived from master service agreements and price is often an important factor in the award of such agreements. Accordingly, the Company could be outbid by its competitors in an effort to procure such business. There can be no assurance that the Company's competitors will not develop the expertise, experience and resources to provide services that are equal or superior in both price and quality to the Company's services, or that the Company will be able to maintain or enhance its competitive position. The Company may also face competition from the in-house service organizations of its existing or prospective customers, including telecommunications providers, which employ personnel who perform some of the same types of services as those provided by the Company. Although a significant portion of these services is currently outsourced, there can be no assurance that existing or prospective customers of the Company will continue to outsource telecommunications engineering, construction and maintenance services in the future. The Company believes that the principal competitive factors in the market for telecommunications engineering, construction and maintenance services include technical expertise, reputation, price, quality of service, availability of skilled technical personnel, geographic presence, breadth of service offerings, adherence to industry standards and financial stability. The Company believes that it competes favorably with its competitors on the basis of these competitive factors on a whole. EMPLOYEES As of July 31, 1997, the Company employed 2,864 persons. The number of employees of the Company and its subsidiaries varies according to the work in progress. As a matter of course, the Company maintains a nucleus of technical and managerial personnel from which it draws to supervise all projects. Additional employees are added as needed to complete specific projects. None of the Company's employees are represented by a labor union. CCG is currently a party to two collective bargaining agreements with local bargaining units in Philadelphia, Pennsylvania, and New York, New York, although none of its current employees are subject to the agreements. The Company has never experienced a work stoppage or strike. The Company believes that its employee relations are good. MATERIALS In many cases, the Company's customers supply most or all of the materials required for a particular contract; and the Company provides the personnel, tools, and equipment to perform the installation services. However, with respect to certain of its master services agreements the Company may supply part or all of the materials required. In these instances, the Company is not dependent upon any one source for the products which it customarily utilizes to complete the job. The Company is not presently experiencing, nor does it anticipate experiencing, any difficulties in procuring an adequate supply of materials. 4 6 ITEM 2. PROPERTIES The Company leases its executive office located in Palm Beach Gardens, Florida. The Company's subsidiaries operate from owned and leased administrative offices, district field offices, equipment yards and shop facilities, and temporary storage locations. The Company owns properties in Phoenix, Arizona, Durham, North Carolina, Pinellas Park, Florida, and West Palm Beach, Florida. The Company also leases, subject to long-term noncancelable leases, facilities in West Chester, Pennsylvania, Bridgeport and Wallingford, Connecticut, Knoxville, Tennessee, and Greensboro, North Carolina. The Company also leases and owns other smaller properties as necessary to enable it to effectively perform its operations under master service agreements and other specific contracts. The Company believes that its facilities are adequate for its current operations. ITEM 3. LEGAL PROCEEDINGS In September 1995, the State of New York commenced a sales and use tax audit of CCG for the years 1989 through 1995. As a result of the audit, certain additional taxes were paid by CCG in fiscal 1996. The State of New York has claimed additional amounts due from CCG for the periods through August 31, 1995. See Note 15 to the accompanying financial statements. In the normal course of business, certain subsidiaries of the Company have pending and unasserted claims. Although the ultimate resolution and liability of these claims cannot be determined, management believes the final disposition of these claims will not have a material adverse impact on the Company's consolidated financial statements. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS During the fourth quarter of the year covered by this report, no matters were submitted to a vote of the Company's security holders whether through the solicitation of proxies or otherwise. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's common stock is traded on the New York Stock Exchange ("NYSE") under the symbol "DY". The following table sets forth the range of the high and low closing sales prices for each quarter within the last two fiscal years as reported on the NYSE.
FISCAL 1996 FISCAL 1997 ------------------ ------------------ HIGH LOW HIGH LOW ------- ------- ------- ------- First Quarter............................................. $ 8 $ 6 3/8 $14 3/8 $11 1/2 Second Quarter............................................ 7 1/8 5 12 1/4 9 1/4 Third Quarter............................................. 9 1/4 5 7/8 12 1/4 10 Fourth Quarter............................................ 13 1/8 8 7/8 18 1/8 9 7/8
As of September 26, 1997, there were approximately 660 record holders of the Company's $.33 1/3 par value common stock. The common stock traded at a high of $23 1/8 and a low of $16 9/16 during the period August 1, 1997 through September 26, 1997. The Company currently intends to retain future earnings, and since 1982, no cash dividends have been paid by the Company. The Board of Directors will determine any future change in dividend policies based on financial conditions, profitability, cash flow, capital requirements, and business outlook, as well as other factors relevant at the time. The Company's credit facilities expressly limit the payment of cash dividends to fifty percent (50%) of each fiscal year's after-tax profits. The credit facilities' restrictions regarding the Company's debt to equity, quick and current ratios also affect the Company's ability to pay dividends. 5 7 ITEM 6. SELECTED FINANCIAL DATA The following table sets forth certain selected financial data of the Company for the years ended July 31, 1993, 1994, 1995, 1996, and 1997. The Company acquired CCG on July 29, 1997. The acquisition has been accounted for as a pooling of interest and accordingly, the consolidated financial statements for the periods presented include the accounts of CCG. This data should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this report.
1993(1) 1994(1) 1995 1996(2) 1997(2) -------- -------- -------- -------- -------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Revenues............................... $156,689 $152,647 $188,333 $195,260 $243,923 Income (loss) before income taxes...... (31,778) (6,710) 8,874 11,381 19,042 Net income (loss)...................... (31,013) (7,501) 5,141 7,664 11,219 Earnings (loss) per common and common equivalent share(3): Primary.............................. (2.93) (0.71) 0.49 0.71 1.02 Fully diluted........................ (2.93) (0.71) 0.49 0.70 1.02 Total assets........................... 65,890 59,542 62,218 66,195 88,162 Long-term obligations.................. 28,916 6,641(4) 21,344 17,490 15,430 Stockholders' equity................... 15,374 8,132 13,319 21,182 33,752 Cash dividends per share............... -- -- -- -- --
- --------------- (1) The Company changed its method of accounting for income taxes as of the beginning of fiscal 1993; the years prior to fiscal 1993 have not been restated. The cumulative effect of the accounting change increased the net loss by $2,286. The Company wrote-off $24,285 and $1,423 of intangible assets in 1993 and 1994, respectively. In fiscal 1994, the Company recorded a $1.7 million deferred tax asset valuation allowance. (2) The results of operations for fiscal 1996 and 1997 include a $1.1 million and $0.3 million reduction in the deferred tax valuation allowance. (3) The options to purchase common stock had an insignificant or anti-dilutive effect on the per share amounts. See Note 1 to the consolidated financial statements regarding the per share data. (4) The outstanding borrowings under the bank credit agreement were classified as a current liability at July 31, 1994 due to the likelihood of covenant violations within the following twelve months. But for the reclassification, the long-term obligations at July 31, 1994 would have been $25,515. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Dycom derives most of its contract revenues earned from engineering, construction and maintenance services to the telecommunications industry. In addition, contract revenues earned are derived from underground utility locating services and from maintenance and construction services provided to the electric utility industry. The Company currently performs work for more than 25 local exchange carriers, cable television multiple system operators, long distance carriers, competitive access providers, and electric utilities, principally in the Southeast, Northeast, Midwest and Mid-Atlantic United States. The Company expects that future growth in contract revenues earned will be generated from (i) increasing the volume of services to existing customers; (ii) expanding the scope of services to existing customers; (iii) broadening its customer base; and (iv) geographically expanding its service area. Growth is expected to result from internal sources as well as through acquisitions. Other revenues include gain on sale of surplus equipment and interest income. In July 1997, Dycom completed the CCG Acquisition in a transaction accounted for as a pooling of interest. CCG's revenues for fiscal 1997 were approximately $67.7 million. CCG provides engineering, construction, and maintenance services for cable television multiple system operators. Its principal customer is Comcast Cable Communications, Inc., which accounted for 81.0% of CCG's revenues and 23.3% of Dycom's 6 8 contract revenues in fiscal 1997. Dycom's financial statements and all financial and operating data derived therefrom have been combined for all periods presented herein to include the financial condition and results of operations of CCG. Dycom provides services to its customers pursuant to master service agreements and contracts for particular projects. Under master service agreements, Dycom agrees to provide, for a period of several years, all specified service requirements to its customer within a given geographical territory. The customer, with certain exceptions, agrees to purchase such requirements from Dycom. Materials to be used in these jobs are generally provided by the customer. Master service agreements generally provide that Dycom will furnish a specified unit of service for a specified unit price (e.g., fiber optic cable will be installed underground for a specified rate of dollars per foot). The Company recognizes revenue under master service agreements on the percentage of completion basis. Dycom is currently party to 15 master service agreements, which accounted for approximately 40% of fiscal 1997 revenues. Master service agreements are typically bid initially and may be extended by negotiation. The remainder of Dycom's services are provided pursuant to contracts for particular jobs, which are generally from three to four months in duration from the contract date, depending upon the size of the project. These contracts may be either bid or negotiated. Cost of earned revenues includes all direct costs of providing services under the Company's contracts, other than depreciation on fixed assets owned by the Company or utilized by the Company under capital leases, which are included in depreciation and amortization expense. Cost of earned revenues includes all costs of construction personnel, subcontractor costs, all costs associated with operation of equipment, excluding depreciation, materials not supplied by the customer and insurance. Because the Company is primarily self-insured for automobile, general liability, workers' compensation, and employee group health claims, a change in experience or actuarial assumptions that did not affect the rate of claims payments could nonetheless materially adversely affect results of operations in a particular period. General and administrative costs include all costs of holding company and subsidiary management personnel, rent, utilities, travel and centralized costs such as insurance administration, interest on debt, professional costs and certain clerical and administrative overhead. The Company's management personnel, including subsidiary management, undertake all sales and marketing functions as part of their management responsibilities, and, accordingly, the Company does not incur material selling expenses. Dycom, founded in 1969, witnessed significant growth during the 1980's as the result of increasing competitive growth in the long distance telephone market and the needs of the long distance carriers to replace their copper cabling with fiber optic cable. Through 1990, Dycom acquired nine operating subsidiaries. As long distance carriers completed most of their long haul lines in the late 1980's, the Company shifted its focus to the local exchange carrier market. During the early 1990's, Dycom's results of operations were materially adversely affected by a number of internal developments, including (i) adjustments taken to insurance reserves in 1991, (ii) write-offs of intangible assets, including goodwill, of $24.3 million and $1.4 million in 1993 and 1994, respectively, incurred in connection with four acquisitions, which contributed to net losses in those years, and (iii) significant costs and distraction of management attention associated with a range of litigation and a governmental investigation, including shareholder litigation and protracted litigation with a former officer involved in a takeover effort. See Selected Financial Data. All of these matters were concluded in or before the 1995 fiscal year. Management of the Company does not believe that any of the events or circumstances it faced in the early 1990's are indicative of the manner in which the Company currently operates or the Company's future prospects. 7 9 RESULTS OF OPERATIONS The following table sets forth, as a percentage of contract revenues earned, certain items in the Company's statement of operations for the periods indicated:
YEAR ENDED JULY 31, ------------------------ 1995 1996 1997 ------ ------ ------ Revenues: Contract revenues earned.................................. 100.0% 100.0% 100.0% Other, net................................................ 0.7 0.6 0.4 ------ ------ ------ Total revenues.................................... 100.7 100.6 100.4 ------ ------ ------ Expenses: Cost of earned revenue, excluding depreciation............ 82.0 80.3 79.2 General and administrative................................ 10.2 10.6 9.8 Depreciation and amortization............................. 3.8 3.9 3.6 ------ ------ ------ Total expenses.................................... 96.0 94.8 92.6 ------ ------ ------ Income before income taxes.................................. 4.7 5.8 7.8 Provision for income taxes.................................. 2.0 1.9 3.2 ------ ------ ------ Net income.................................................. 2.7% 3.9% 4.6% ====== ====== ======
YEAR ENDED JULY 31, 1997 COMPARED TO YEAR ENDED JULY 31, 1996 Revenues. Contract revenues increased $48.9 million or 25.2% to $243.0 million in fiscal 1997 from $194.1 million in fiscal 1996. Of this increase, $40.7 million was attributable to the telecommunications services group, $6.1 million was attributable to the electric services group and $2.1 million was attributable to the underground utility locating services group, reflecting an increased overall market demand for the Company's services. During fiscal 1997, the Company recognized $210.4 million of contract revenues from the telecommunications services group as compared to $169.7 million in fiscal 1996. The increase in the Company's telecommunications services group reflects an increased volume of projects and activity in fiscal 1997 associated with the cable television services group, which increased by $19.4 million to $70.6 million in fiscal 1997 from $51.2 million in fiscal 1996, the design and installation of broadband networks, telephone engineering services and premise wiring services, partially offset by a slight decline in contract revenues from services performed under master services agreements. Contract revenues from master services agreements, however, continue to be a significant source of the Company's revenues, representing approximately 40% of total contract revenues in fiscal 1997 as compared to 47.2% in fiscal 1996. The Company recognized contract revenues of $16.8 million from electric utilities services in fiscal 1997 as compared to $10.7 million in fiscal 1996, an increase of 57.0%. The Company recognized contract revenues of $15.8 million from underground utility locating services in fiscal 1997 as compared to $13.7 million in fiscal 1996, an increase of 15.2%. Cost of Earned Revenues. Cost of earned revenues increased $36.6 million to $192.4 million in fiscal 1997 from $155.8 million in fiscal 1996, but decreased slightly as a percentage of contract revenues to 79.2% from 80.3%. Direct labor, subcontract and materials costs declined slightly as a percentage of contract revenues as a result of improved productivity in the labor force and the utilization of more modern equipment. Additionally, insurance costs declined by approximately $1.6 million as a result of fewer claims arising in fiscal 1997. General and Administrative Expenses. General and administrative expenses increased $3.3 million to $23.8 million in fiscal 1997 from $20.5 million in fiscal 1996, but decreased as a percentage of contract revenues to 9.8% from 10.6%. The increase in general and administrative expenses was primarily attributable to a $2.1 million increase in administrative salaries, bonuses, employee benefits and payroll taxes and an increase of $300,000 in the provision for doubtful accounts. The Company also incurred professional and related expenses associated with the CCG Acquisition of $400,000 in fiscal 1997. 8 10 Depreciation and Amortization. Depreciation and amortization expense increased $1.1 million to $8.7 million in fiscal 1997 from $7.6 million in fiscal 1996, but decreased as a percentage of contract revenues to 3.6% from 3.9%. The increase in amount reflects the depreciation of additional capital expenditures incurred in the ordinary course of business. Income Taxes. The provision for income taxes was $7.8 million in fiscal 1997 as compared to $3.7 million in fiscal 1996. The provision for income taxes for 1996 reflects a reduction of $1.1 million in a valuation allowance relative to certain deferred tax assets. The Company's effective tax rate was 41.1% in fiscal 1997 as compared to 32.7% in fiscal 1996. The effective tax rate differs from the statutory tax rate due to state income taxes, the amortization of intangible assets that do not provide a tax benefit, other non-deductible expenses for tax purposes and, in fiscal 1996, the reduction in a valuation allowance relative to certain deferred tax assets. Net Income. Net income increased to $11.2 million in fiscal 1997 from $7.7 million in fiscal 1996, a 46.9% increase. YEAR ENDED JULY 31, 1996 COMPARED TO YEAR ENDED JULY 31, 1995 Revenues. Contract revenues increased $7.1 million or 3.8% to $194.1 million in fiscal 1996 from $187.0 million in fiscal 1995. For fiscal 1996, the telecommunications services group contract revenues increased by $8.8 million, which was offset by declines in contract revenues from the utility locating services and the electrical services groups of $1.1 million and $600,000, respectively. During fiscal 1996, the Company recognized $169.7 million of contract revenues from the telecommunications services group as compared to $160.9 million in fiscal 1995. The telecommunications services group experienced an increased volume of projects and activity in fiscal 1996 associated with the design and installation of broadband networks, telephony engineering and design services and premise wiring services, which was partially offset by a decline in contract revenues from services performed under master service agreements. Contract revenues from master service agreements represented 47.2% of contract revenues in fiscal 1996 as compared to 52.1% in fiscal 1995. The Company recognized contract revenues from electrical services of $10.7 million in fiscal 1996 as compared to $11.3 million in fiscal 1995, a decrease of 5.3%, as a result of lower volume from bid contracts, partially offset by improved volume and pricing under certain existing contracts. The Company recognized contract revenues from underground utility locating services of $13.7 million in fiscal 1996 as compared to $14.8 million in fiscal 1995, a decrease of 7.4%, as a result of the loss of a certain underground utility locating contract during the competitive bid process, partially offset by the realization of certain new underground utility locating business. Cost of Earned Revenues. Cost of earned revenues increased $2.5 million to $155.8 million in fiscal 1996 from $153.3 million in fiscal 1995, but decreased as a percentage of contract revenues to 80.3% from 82.0%. Direct labor, subcontract and materials costs declined slightly as a percentage of contract revenues as a result of improved productivity in the labor force and the utilization of more modern equipment on projects. Additionally, insurance costs increased by approximately $900,000 as a result of more claims arising in fiscal 1996. General and Administrative Expenses. General and administrative expenses increased $1.5 million to $20.5 million in fiscal 1996 from $19.0 million in fiscal 1995, and increased as a percentage of contract revenues to 10.6% from 10.2%. The increase in general and administrative expenses was primarily attributable to a $1.1 million increase in administrative salaries, wages and related payroll taxes and an increase of $300,000 in professional expenses. Depreciation and Amortization. Depreciation and amortization expense increased $459,000 to $7.6 million in fiscal 1996 from $7.2 million in fiscal 1995, and increased slightly as a percentage of contract revenues to 3.9% from 3.8%. The increase reflected the depreciation of additional capital expenditures incurred in the ordinary course of business. Income Taxes. The provision for income taxes was $3.7 million in fiscal 1996, as well as in fiscal 1995. The provision for income taxes for 1996 reflects a reduction of $1.1 million in a valuation allowance relative to certain deferred tax assets. The Company's effective tax rate was 32.7% in fiscal 1996 as compared to 42.1% in 9 11 fiscal 1995. The effective tax rate differed from the statutory tax rate due to state income taxes, the amortization of intangible assets that do not provide a tax benefit, other non-deductible expenses for tax purposes and, in fiscal 1996, the reduction in a valuation allowance relative to certain deferred tax assets. Net Income. Net Income increased to $7.7 million in fiscal 1996 from $5.1 million in fiscal 1995, a 49.1% increase. LIQUIDITY AND CAPITAL RESOURCES The Company's needs for capital are attributable primarily to its needs for equipment to support its contractual commitments to customers and its needs for working capital sufficient for general corporate purposes. Capital expenditures have been financed by operating and capital leases and by bank borrowings. To the extent that the Company seeks to grow by acquisitions that involve consideration other than Company stock, the Company's capital requirements may increase, although the Company is not currently subject to any commitments or obligations with respect to any acquisitions. The Company's sources of cash have historically been from operating activities, bank borrowings and from proceeds arising from the sale of idle and surplus equipment and real property. For 1997, net cash provided by operating activities was $9.8 million compared to $13.8 million for 1996 and $12.3 million for 1995. The decrease in 1997 was due primarily to an increase in accounts receivable. For 1997, net cash used in investing activities for capital expenditures was $12.1 million, compared to $10.7 million in 1996 and $8.7 million in 1995. For 1997, these expenditures were for the normal replacement of equipment and the buyout of certain operating leases on terms favorable to the Company. For 1996, these expenditures were for normal equipment replacement and for expansion in the underground utility locating group's geographic market. In addition to equipment purchases, the Company obtained approximately $3.3 million of equipment in 1997, $3.0 million of equipment in 1996, and $4.4 million of equipment in 1995 under noncancellable operating leases. On April 28, 1997, the Company signed a new $35 million credit agreement arranged by a group of banks led by Dresdner Bank Lateinamerika AG. The Company utilized $10.2 million of the new facilities to satisfy its then outstanding long-term debt, $4.2 million to finance its increased working capital requirements, and $800,000 for capital equipment expenditures. The new credit agreement, in total, provides for a (i) $10.0 million revolving working capital facility, (ii) $10.0 million standby letter of credit facility, (iii) $9.0 million five-year term loan, and (iv) $6.0 million revolving equipment acquisition facility. The new credit agreement increased the level of available financing by $11.2 million over the limits set in the Company's previous credit facility. The Company sought this increased borrowing to facilitate its ability to meet its working capital needs in order to sustain its current level of internal growth. The new credit agreement requires the Company to maintain certain financial covenants and conditions such as not more than a 3.0:1 debt-to-equity ratio, a current ratio of not less than 1.4:1, a quick ratio of not less than 0.75:1, and net profit levels of $4.0 million in the first year, increasing thereafter in $750,000 increments, as well as placing restrictions on encumbrances of assets and creation of additional indebtedness. The new credit agreement also limits the payment of cash dividends to 50% of the fiscal net after tax profits. At July 31, 1997, the Company was in compliance with all covenants and conditions under the credit facility. The revolving working capital facility is available for a one-year period and bears interest, at the option of the Company, at the bank's prime interest rate minus 1.00% or LIBOR plus 1.50%. As of July 31, 1997, the Company had borrowed $4.2 million against the revolving working capital facility to meet current working capital requirements, leaving an available borrowing capacity of $5.8 million. At July 31, 1997, the interest rate on the outstanding balance was at LIBOR plus 1.50% (7.56%). The term loan facility has a five-year maturity and bears interest at the bank's prime interest rate minus 0.50% (8.00% at July 31, 1997). The term loan principal and interest is payable in quarterly installments through April, 2002. The Company used $9.0 million of the facility to refinance the indebtedness under the previous revolving credit facility. During fiscal 1997, the Company repaid $500,000 on this facility. 10 12 The revolving equipment acquisition facility is available for a one-year period and bears interest, at the option of the Company, at the bank's prime interest rate minus 0.75% or LIBOR plus 1.75%. Advances against this facility are converted into term loans with maturities not to exceed 48 months. The outstanding principal on the equipment acquisition term loans is payable in monthly installments through January 2001. As of July 31, 1997, the Company had borrowed $1.2 million to refinance the indebtedness under the previous equipment acquisition term loans and an additional $0.8 million to finance the acquisition of new equipment. The Company repaid $100,000 and has remaining available borrowing capacity of $4.1 million under this facility. At July 31, 1997, the interest rate on the outstanding equipment acquisition term loans was at LIBOR plus 1.75% (7.81%). The standby letter of credit facility is available for a one-year period. At July 31, 1997, the Company had $9.2 million in outstanding standby letters of credit issued as security to the Company's insurance administrators, as part of its self-insurance program leaving $0.8 million of available borrowing capacity. CCG maintains a $6.6 million working capital bank credit facility. The interest rate on this credit facility is at the bank's prime rate plus 0.75% and is collateralized by 75% of the eligible trade accounts receivable and inventories. During 1997, certain financial covenants were breached and the bank waived such violations. At July 31, 1997, CCG was in compliance with the bank credit facility covenants and conditions. At July 31, 1997, the outstanding principal balance was $5.9 million. This credit facility was an existing arrangement made prior to the CCG Acquisition. Net days of contract revenues in trade accounts receivable, including retainage, was 52 days at July 31, 1997, compared to 41 days at July 31, 1996 and 48 days at July 31, 1995. The Company foresees its capital resources together with existing cash balances to be sufficient to meet its financial obligations, including the scheduled debt payments under the new credit agreement and operating lease commitments, and to support the Company's normal replacement of equipment at its current level of business for at least the next twelve months. The Company's future operating results and cash flows may be affected by a number of factors including the Company's success in bidding on future contracts and the Company's continued ability to effectively manage controllable costs. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In February 1997, the FASB issued SFAS No. 128 "Earnings per Share" which changes the method of calculating earnings per share and is effective for fiscal years ending after December 15, 1997. SFAS No. 128 requires the presentation of "basic" earnings per share and "diluted" earnings per share on the face of the income statement. Basic earnings per share is computed by dividing the net income available to common shareholders by the weighted average shares of outstanding common stock. The calculation of diluted earnings per share is similar to basic earnings per share except the denominator includes dilutive common stock equivalents such as stock options and warrants. The Company will adopt SFAS No. 128 in fiscal 1998 as early adoption is not permitted. The calculation of earnings per share under SFAS No. 128 is not expected to be materially different than the current disclosure of earnings per share. In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive Income" which establishes standards for reporting and display of comprehensive income and its components (revenues, expenses, gains and losses) in a full set of general-purpose financial statements. This statement requires that an enterprise classify items of other comprehensive income by their nature in a financial statement and display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in capital in the equity section of a statement of financial position. This statement is effective for fiscal years beginning after December 15, 1997. In June 1997, the FASB issued SFAS No. 131 "Disclosure about Segments of an Enterprise and Related Information" which establishes standards for public business enterprises to report information about operating segments in annual financial statements and requires those enterprises to report selected information about operating segments in interim financial reports issued to shareholders. It also establishes the standards for related disclosures about products and services, geographic areas, and major customers. This statement 11 13 requires that a public business enterprise report financial and descriptive information about its reportable operating segments. The financial information is required to be reported on the basis that it is used internally for evaluating segment performance and deciding how to allocate resources to segments. Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. This statement is effective for financial statements for periods beginning after December 15, 1997. Management is currently evaluating the requirements of SFAS No. 130 and No. 131, respectively. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Registrant's consolidated financial statements and related notes and independent auditors' reports follow on subsequent pages of this report. 12 14 DYCOM INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS JULY 31, 1996 AND 1997
1996 1997 ----------- ----------- ASSETS CURRENT ASSETS: Cash and equivalents........................................ $ 3,927,736 $ 6,645,972 Accounts receivable, net.................................... 21,747,268 34,353,367 Costs and estimated earnings in excess of billings.......... 7,519,284 10,479,974 Deferred tax assets, net.................................... 1,261,065 2,168,763 Other current assets........................................ 1,291,249 1,550,545 ----------- ----------- Total current assets.............................. 35,746,602 55,198,621 ----------- ----------- PROPERTY AND EQUIPMENT, net................................. 24,514,470 27,543,238 ----------- ----------- OTHER ASSETS: Intangible assets, net...................................... 4,839,447 4,684,358 Deferred tax assets......................................... 704,887 424,205 Other....................................................... 389,947 311,473 ----------- ----------- Total other assets................................ 5,934,281 5,420,036 ----------- ----------- TOTAL............................................. $66,195,353 $88,161,895 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable............................................ $ 5,567,512 $10,281,615 Notes payable............................................... 7,257,867 13,080,316 Billings in excess of costs and estimated earnings.......... 38,714 470,940 Accrued self-insured claims................................. 3,064,229 2,011,622 Income taxes payable........................................ 1,099,178 1,230,376 Other accrued liabilities................................... 10,496,020 11,904,304 ----------- ----------- Total current liabilities......................... 27,523,520 38,979,173 NOTES PAYABLE............................................... 10,427,837 9,012,066 ACCRUED SELF-INSURED CLAIMS................................. 7,062,150 6,418,400 ----------- ----------- Total liabilities................................. $45,013,507 $54,409,639 =========== =========== COMMITMENTS AND CONTINGENCIES, Note 15 STOCKHOLDERS' EQUITY: Common stock, par value $.33 1/3 per share: 50,000,000 shares authorized; 10,654,734 and 10,867,877 issued and outstanding, respectively................................. $ 3,551,578 $ 3,622,625 Additional paid-in capital.................................. 24,582,832 25,421,701 Retained earnings (deficit)................................. (6,952,564) 4,707,930 ----------- ----------- Total stockholders' equity........................ 21,181,846 33,752,256 ----------- ----------- TOTAL............................................. $66,195,353 $88,161,895 =========== ===========
See notes to consolidated financial statements. 13 15 DYCOM INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED JULY 31, 1995, 1996, AND 1997
1995 1996 1997 ------------ ------------ ------------ REVENUES: Contract revenues earned............................. $186,956,976 $194,053,617 $242,957,932 Other, net........................................... 1,376,398 1,206,624 965,549 ------------ ------------ ------------ Total...................................... 188,333,374 195,260,241 243,923,481 ------------ ------------ ------------ EXPENSES: Cost of earned revenues excluding depreciation....... 153,284,320 155,769,390 192,412,439 General and administrative........................... 19,009,530 20,485,022 23,779,913 Depreciation and amortization........................ 7,165,252 7,624,395 8,689,611 ------------ ------------ ------------ Total...................................... 179,459,102 183,878,807 224,881,963 ------------ ------------ ------------ INCOME BEFORE INCOME TAXES........................... 8,874,272 11,381,434 19,041,518 ------------ ------------ ------------ PROVISION (BENEFIT) FOR INCOME TAXES Current............................................ 3,732,893 5,297,772 8,018,951 Deferred........................................... (1,580,196) (196,241) ------------ ------------ ------------ Total...................................... 3,732,893 3,717,576 7,822,710 ------------ ------------ ------------ NET INCOME........................................... $ 5,141,379 $ 7,663,858 $ 11,218,808 ============ ============ ============ EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE: Primary............................................ $ 0.49 $ 0.71 $ 1.02 ============ ============ ============ Fully diluted...................................... $ 0.49 $ 0.70 $ 1.02 ============ ============ ============ SHARES USED IN COMPUTING EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE: Primary............................................ 10,588,766 10,859,819 10,948,689 ============ ============ ============ Fully diluted...................................... 10,588,766 10,928,284 10,994,500 ============ ============ ============
See notes to consolidated financial statements. 14 16 DYCOM INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED JULY 31, 1995, 1996, AND 1997
COMMON STOCK ADDITIONAL RETAINED ----------------------- PAID-IN EARNINGS SHARES AMOUNT CAPITAL (DEFICIT) ---------- ---------- ----------- ------------ Balances at July 31, 1994, as previously reported................................... 8,528,990 $2,842,997 $24,253,309 $(20,387,411) Acquisition accounted for as pooling of interests.................................. 2,053,242 684,414 109,563 629,610 ---------- ---------- ----------- ------------ Balances at July 31, 1994.................... 10,582,232 3,527,411 24,362,872 (19,757,801) Stock options exercised...................... 15,000 5,000 40,000 Net income................................... 5,141,379 ---------- ---------- ----------- ------------ Balances at July 31, 1995.................... 10,597,232 3,532,411 24,402,872 (14,616,422) Stock options exercised...................... 57,502 19,167 179,960 Net income................................... 7,663,858 ---------- ---------- ----------- ------------ Balances at July 31, 1996.................... 10,654,734 3,551,578 24,582,832 (6,952,564) Stock options exercised...................... 213,143 71,047 706,300 Income tax benefit from stock options exercised.................................. 132,569 Adjustment for change in fiscal year of pooled company............................. 441,686 Net income................................... 11,218,808 ---------- ---------- ----------- ------------ Balances at July 31, 1997.................... 10,867,877 $3,622,625 $25,421,701 $ 4,707,930 ========== ========== =========== ============
See notes to consolidated financial statements. 15 17 DYCOM INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JULY 31, 1995, 1996, AND 1997
1995 1996 1997 ----------- ------------ ------------ Increase (Decrease) in Cash and Equivalents from: OPERATING ACTIVITIES: Net income............................................ $ 5,141,379 $ 7,663,858 $ 11,218,808 Adjustments to reconcile net cash provided by operating activities: Depreciation and amortization....................... 7,165,252 7,624,395 8,689,611 Gain on disposal of assets.......................... (840,637) (763,104) (667,377) Deferred income taxes............................... (1,580,196) (196,241) Changes in assets and liabilities: Accounts receivable, net............................ (1,900,640) 2,842,893 (10,861,852) Unbilled revenues, net.............................. (1,300,412) (2,286,096) (2,429,995) Other current assets................................ (18,790) 205,641 (785,024) Other assets........................................ 123,780 49,570 93,350 Accounts payable.................................... 2,042,901 (2,767,120) 3,782,196 Accrued self-insured claims and other liabilities... 1,623,897 2,703,422 323,789 Accrued income taxes................................ 250,189 85,227 636,427 ----------- ------------ ------------ Net cash inflow from operating activities............. 12,286,919 13,778,490 9,803,692 ----------- ------------ ------------ INVESTING ACTIVITIES: Capital expenditures................................ (8,704,641) (10,684,195) (12,063,723) Proceeds from sale of assets........................ 2,569,307 2,195,774 1,685,069 ----------- ------------ ------------ Net cash outflow from investing activities............ (6,135,334) (8,488,421) (10,378,654) ----------- ------------ ------------ FINANCING ACTIVITIES: Borrowings on notes payable and bank lines-of-credit.................................. 1,504,982 1,690,917 17,321,661 Principal payments on notes payable and bank lines-of-credit.................................. (5,944,358) (7,671,189) (14,646,255) Exercise of stock options........................... 45,000 199,127 777,347 ----------- ------------ ------------ Net cash inflow (outflow) from financing activities... (4,394,376) (5,781,145) 3,452,753 ----------- ------------ ------------ Net cash outflow related to change in fiscal year of pooled company...................................... (159,555) ----------- ------------ ------------ NET CASH INFLOW (OUTFLOW) FROM ALL ACTIVITIES......... 1,757,209 (491,076) 2,718,236 CASH AND EQUIVALENTS AT BEGINNING OF YEAR............. 2,661,603 4,418,812 3,927,736 ----------- ------------ ------------ CASH AND EQUIVALENTS AT END OF YEAR................... $ 4,418,812 $ 3,927,736 $ 6,645,972 =========== ============ ============ SUPPLEMENTAL DISCLOSURE OF CASH FLOW AND NONCASH INVESTING AND FINANCING ACTIVITIES: Cash paid during the period for: Interest............................................ $ 2,493,381 $ 2,023,159 $ 1,798,093 Income taxes........................................ 3,411,785 5,364,539 8,158,759 Property and equipment acquired and financed with: Capital lease obligations........................... $ 360,242 $ 135,341 $ 601,024 Income tax benefit from stock options exercised....... $ 132,569
See notes to consolidated financial statements. 16 18 DYCOM INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION -- The consolidated financial statements include Dycom Industries, Inc. ("Dycom" or the "Company") and its subsidiaries, all of which are wholly owned. On July 29, 1997, Communications Construction Group, Inc. ("CCG") was merged with and into the Company through an exchange of common stock. The merger was accounted for as a pooling of interests. Accordingly, the Company's consolidated financial statements include the results of CCG for all periods presented. See Note 2. The Company's operations consist primarily of telecommunication and electric utility services contracting. All material intercompany accounts and transactions have been eliminated. USE OF ESTIMATES -- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates and such differences may be material to the financial statements. Estimates are used in the Company's revenue recognition of work-in-process, allowance for doubtful accounts, self-insured claims liability, deferred tax asset valuation allowance, depreciation and amortization, and in the estimated lives of assets, including intangibles. REVENUE -- Income on long-term contracts is recognized on the percentage-of-completion method based primarily on the ratio of contract costs incurred to date to total estimated contract costs. As some of these contracts extend over one or more years, revisions in cost and profit estimates during the course of the work are reflected in the accounting period as the facts that require the revision become known. At the time a loss on a contract becomes known, the entire amount of the estimated ultimate loss is accrued. Income on short-term unit contracts is recognized as the related work is completed. Work-in-process on unit contracts is based on management's estimate of work performed but not billed. "Costs and estimated earnings in excess of billings" represents the excess of contract revenues recognized under the percentage-of-completion method of accounting for long-term contracts and work-in-process on unit contracts over billings to date. For those contracts in which billings exceed contract revenues recognized to date, such excesses are included in the caption "billings in excess of costs and estimated earnings". CASH AND EQUIVALENTS -- Cash and equivalents include cash balances in excess of daily requirements which are invested in overnight repurchase agreements, certificates of deposits, and various other financial instruments having an original maturity of three months or less. For purposes of the consolidated statements of cash flows, the Company considers these amounts to be cash equivalents. The carrying amount reported in the balance sheet for cash and equivalents approximates its fair value. PROPERTY AND EQUIPMENT -- Property and equipment is stated at cost, reduced in certain cases by valuation reserves. Depreciation and amortization is computed over the estimated useful life of the assets utilizing the straight-line method. The estimated useful service lives of the assets are: buildings -- 20-31 years; leasehold improvements -- the term of the respective lease or the estimated useful life of the improvements, whichever is shorter; vehicles -- 3-7 years; equipment and machinery -- 3-10 years; and furniture and fixtures -- 3-10 years. Maintenance and repairs are expensed as incurred; expenditures that enhance the value of the property or extend its useful life are capitalized. When assets are sold or retired, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss is included in income. INTANGIBLE ASSETS -- The excess of the purchase price over the fair market value of the tangible net assets of acquired businesses (goodwill) is amortized on the straight-line method over 40 years. The appropriateness of the carrying value of goodwill is reviewed periodically by the Company at the subsidiary level. An impairment loss is recognized when the projected future cash flows is less than the carrying value of goodwill. 17 19 DYCOM INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Amortization expense was $155,088 for each of the fiscal years ended July 31, 1995, 1996, and 1997, respectively. The intangible assets are net of accumulated amortization of $996,270 and $1,151,358 at July 31, 1996 and 1997, respectively. LONG-LIVED ASSETS -- In March 1995, the Financial Accounting Standards Board ("FASB") issued the Statement of Financial Accounting Standards ("SFAS") No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of". SFAS No. 121 requires that the long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events and circumstances indicate that the carrying amount of an asset may not be recoverable. The Company adopted the provisions of SFAS No. 121 effective August 1, 1996 and has determined that no impairment loss need be recognized. SELF-INSURED CLAIMS LIABILITY -- The Company is primarily self-insured, up to certain limits, for automobile and general liability, workers' compensation, and employee group health claims. A liability for unpaid claims and the associated claim expenses, including incurred but not reported losses, is actuarially determined and reflected in the consolidated financial statements as an accrued liability. The self-insured claims liability includes incurred but not reported losses of $4,458,000 and $4,429,000 at July 31, 1996 and 1997, respectively. The determination of such claims and expenses and the appropriateness of the related liability is continually reviewed and updated. INCOME TAXES -- The Company and its subsidiaries, except for CCG, file a consolidated federal income tax return. CCG will be included in the Company's consolidated federal income tax return commencing in fiscal year 1998. Deferred income taxes are provided for the temporary differences between the financial reporting basis and the tax basis of the Company's assets and liabilities. PER SHARE DATA -- Earnings per common and common equivalent share are computed using the weighted average shares of common stock outstanding plus the common stock equivalents arising from the effect of dilutive stock options, using the treasury stock method. See Note 12. CHANGE IN ACCOUNTING PRINCIPLE -- In October 1995, the FASB issued SFAS No. 123 "Accounting for Stock Based Compensation," which was effective for the Company beginning August 1, 1996. SFAS No. 123 requires expanded disclosures of stock based compensation arrangements with employees and encourages, but does not require, compensation cost to be measured based on the fair value of the equity instrument awarded. Under SFAS No. 123, companies are permitted, however, to continue to apply Accounting Principle Board ("APB") Opinion No. 25, which recognizes compensation cost based on the intrinsic value of the equity instrument awarded. The Company will continue to apply APB Opinion No. 25 to its stock based compensation awards to employees and will disclose in the annual financial statements the required pro forma effect on net income and earnings per share. See Note 12. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS -- In February 1997, the FASB issued SFAS No. 128 "Earnings per Share" which changes the method of calculating earnings per share and is effective for fiscal years ending after December 15, 1997. SFAS No. 128 requires the presentation of "basic" earnings per share and "diluted" earnings per share on the face of the income statement. Basic earnings per share is computed by dividing the net income available to common shareholders by the weighted average shares of outstanding common stock. The calculation of diluted earnings per share is similar to basic earnings per share except the denominator includes dilutive common stock equivalents such as stock options and warrants. The Company will adopt SFAS No. 128 in fiscal 1998 as early adoption is not permitted. The calculation of earnings per share under SFAS No. 128 is not expected to be materially different than the 18 20 DYCOM INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) current calculation of earnings per share. The pro forma basic earnings per share and diluted earnings per share calculated in accordance with SFAS 128 for the years ended July 31, are as follows:
1995 1996 1997 ----- ----- ----- Pro forma basic earnings per share.......................... $0.49 $0.72 $1.04 Pro forma diluted earnings per share........................ $0.49 $0.71 $1.02
In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive Income" which establishes standards for reporting and display of comprehensive income and its components (revenues, expenses, gains and losses) in a full set of general-purpose financial statements. This statement requires that an enterprise classify items of other comprehensive income by their nature in a financial statement and display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in capital in the equity section of a statement of financial position. This statement is effective for fiscal years beginning after December 15, 1997. In June 1997, the FASB issued SFAS No. 131 "Disclosure about Segments of an Enterprise and Related Information" which establishes standards for public business enterprises to report information about operating segments in annual financial statements and requires those enterprises to report selected information about operating segments in interim financial reports issued to shareholders. It also establishes the standards for related disclosures about products and services, geographic areas, and major customers. This statement requires that a public business enterprise report financial and descriptive information about its reportable operating segments. The financial information is required to be reported on the basis that it is used internally for evaluating segment performance and deciding how to allocate resources to segments. Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. This statement is effective for financial statements for periods beginning after December 15, 1997. Management is currently evaluating the requirements of SFAS No.130 and No. 131, respectively. 2. ACQUISITION On July 29, 1997, the Company consummated the Communications Construction Group, Inc.("CCG") acquisition by merger. The Company issued 2,053,242 shares of common stock in exchange for all the outstanding capital stock of CCG. Dycom has accounted for the acquisition as a pooling of interests and, accordingly, the Company's historical financial statements include the results of CCG for all periods presented. Prior to the acquisition, CCG used a fiscal year ending May 31 and as of July 31 1997 adopted Dycom's fiscal year. The Company's consolidated statements of operations for years ending July 31, 1995, 1996, and 1997 combines the statements of operations of CCG for its fiscal years ending May 31, 1995, 1996, and 1997, respectively. The Company's consolidated balance sheet at July 31, 1996 includes the CCG balance sheet as of May 31, 1996. The total revenue and net income of CCG for the two-month period ended July 31, 1997 were $13.1 million and $0.4 million, respectively, with the net income reflected as an adjustment to retained earnings as of July 31, 1997. 19 21 DYCOM INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The combined and separate company results of Dycom and CCG for the fiscal years ended July 31 and May 31, 1995, 1996, and 1997 are as follows:
DYCOM CCG JULY 31, MAY 31, COMBINED ------------ ----------- ------------ Fiscal year 1995: Total revenues.............................. $145,283,116 $43,050,258 $188,333,374 Net income.................................. $ 4,433,204 $ 708,175 $ 5,141,379 Fiscal year 1996: Total revenues.............................. $145,135,380 $50,124,861 $195,260,241 Net income.................................. $ 6,390,144 $ 1,273,714 $ 7,663,858 Fiscal year 1997: Total revenues.............................. $176,204,581 $67,718,900 $243,923,481 Net income.................................. $ 8,268,502 $ 2,950,306 $ 11,218,808
The direct transaction costs resulting from the merger were $0.4 million. These costs, which include filing fees with regulatory agencies, legal, accounting and other professional costs, were charged to the combined operations for the fiscal year ended July 31, 1997. 3. ACCOUNTS RECEIVABLE Accounts receivable at July 31 consist of the following:
1996 1997 ----------- ----------- Contract billings........................................... $20,393,361 $32,586,289 Retainage................................................... 1,432,545 1,885,656 Other receivables........................................... 527,405 896,015 ----------- ----------- Total............................................. 22,353,311 35,367,960 Less allowance for doubtful accounts........................ 606,043 1,014,593 ----------- ----------- Accounts receivable, net.................................... $21,747,268 $34,353,367 =========== ===========
4. COSTS AND ESTIMATED EARNINGS ON CONTRACTS IN PROGRESS The accompanying consolidated balance sheets include costs and estimated earnings on contracts in progress, net of progress billings as follows:
1996 1997 ----------- ----------- Costs incurred on contracts in progress..................... $24,553,658 $16,894,451 Estimated earnings thereon.................................. 436,154 3,222,120 ----------- ----------- 24,989,812 20,116,571 Less billings to date....................................... 17,509,242 10,107,537 ----------- ----------- $ 7,480,570 $10,009,034 =========== =========== Included in the accompanying consolidated balance sheets under the captions: Costs and estimated earnings in excess of billings........ $ 7,519,284 $10,479,974 Billings in excess of costs and estimated earnings........ (38,714) (470,940) ----------- ----------- $ 7,480,570 $10,009,034 =========== ===========
20 22 DYCOM INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 5. PROPERTY AND EQUIPMENT The accompanying consolidated balance sheets include the following property and equipment:
1996 1997 ----------- ----------- Land........................................................ $ 1,711,464 $ 1,942,247 Buildings................................................... 2,236,322 2,346,993 Leasehold improvements...................................... 1,078,939 1,356,861 Vehicles.................................................... 28,385,347 32,232,343 Equipment and machinery..................................... 22,534,900 23,674,176 Furniture and fixtures...................................... 3,738,944 5,011,660 ----------- ----------- Total............................................. 59,685,916 66,564,280 Less accumulated depreciation and amortization.............. 35,171,446 39,021,042 ----------- ----------- Property and equipment, net................................. $24,514,470 $27,543,238 =========== ===========
During fiscal 1996 and 1997, certain subsidiaries of the Company entered into lease arrangements accounted for as capitalized leases. The carrying value of capital leases at July 31, 1996 and 1997 was $372,170 and $838,137, respectively, net of accumulated amortization of $874,937 and $881,336, respectively. Capital leases are included as a component of equipment and machinery. Maintenance and repairs of property and equipment amounted to $6,142,484, $6,280,575, and $6,116,397 for the fiscal years ended July 31, 1995, 1996, and 1997, respectively. 6. OTHER ACCRUED LIABILITIES Other accrued liabilities at July 31 consist of the following:
1996 1997 ----------- ----------- Accrued payroll and related taxes........................... $ 2,618,266 $ 3,281,376 Accrued employee benefit costs.............................. 2,385,969 3,406,400 Accrued construction costs.................................. 2,178,785 2,033,371 Accrued other liabilities................................... 3,313,000 3,183,157 ----------- ----------- Other accrued liabilities................................... $10,496,020 $11,904,304 =========== ===========
7. NOTES PAYABLE Notes payable at July 31 are summarized by type of borrowing as follows:
1996 1997 ----------- ----------- Bank Credit Agreements Revolving credit facilities............................... $12,985,119 $10,113,484 Term-loan................................................. 2,162,812 8,550,000 Equipment term-loans...................................... 704,168 1,907,216 Capital lease obligations................................... 344,445 722,927 Equipment loans............................................. 852,083 798,755 Other....................................................... 637,077 ----------- ----------- Total............................................. 17,685,704 22,092,382 Less current portion........................................ 7,257,867 13,080,316 ----------- ----------- Notes payable -- non-current................................ $10,427,837 $ 9,012,066 =========== ===========
21 23 DYCOM INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) On April 28, 1997 the Company signed a new $35.0 million credit agreement with a group of banks. The new credit facility provides for (i) a five-year term-loan in the principal amount of $9.0 million used to refinance the Company's previously existing bank credit facility, (ii) a $6.0 million revolving equipment facility used to refinance existing equipment term-loans and to provide financing for Company's future equipment requirements, (iii) a $10.0 million revolving credit facility used for financing working capital, and (iv) a $10.0 million standby letter of credit facility issued as security to the Company's insurance administrators as part of its self-insurance program. The revolving credit facility, the revolving equipment facility and the standby letter of credit facility are available for a one-year period. The outstanding principal under the term-loan bears interest at the prime interest rate minus 0.50% (8.00% at July 31, 1997). Principal and interest is payable in quarterly installments through April 2002. The loans outstanding under the revolving credit facility and the revolving equipment facility bear interest, at the option of the Company, at the prime interest rate minus 1.0% or LIBOR plus 1.50% and at the prime interest minus 0.75% or LIBOR plus 1.75%, respectively. At July 31, 1997, the interest rates on the outstanding revolving credit facility and revolving equipment facility loans were at the LIBOR options or 7.56% and 7.81%, respectively. At July 31, 1997, the outstanding amounts under the term-loan and the revolving credit facility were $8.6 million and $4.2 million, respectively. The advances under the revolving equipment facility are converted to term-loans with maturities not to exceed 48 months. The outstanding principal on the equipment term-loans is payable in monthly installments through January 2001. During the quarter ended April 30, 1997, the Company borrowed $1.2 million to refinance the then existing equipment term-loans and an additional $0.8 million for current equipment requirements. At July 31, 1997, the outstanding amount owed under the revolving equipment facility was $1.9 million. At July 31, 1997, the Company had outstanding $9.2 million in standby letters of credit issued to the Company's insurance administrators as part of its self-insurance program. The new bank credit arrangement contains restrictions which, among other things, require maintenance of certain financial ratios and covenants, restricts encumbrances of assets and creation of indebtedness, and limits the payment of cash dividends. Cash dividends are limited to 50% of each fiscal year's after-tax profits. No cash dividends have been paid during fiscal 1997. The credit facility is secured by the Company's assets. At July 31, 1997, the Company was in compliance with all the financial covenants and conditions. The Company's newly acquired subsidiary, CCG, maintains a $6.6 million revolving bank credit facility. The interest rate on this facility is at the bank's prime interest rate plus 0.75% and is collateralized by 75% of the eligible trade accounts receivable, inventory, and certain real property owned by a partnership, whose general partners are the former shareholders of CCG. In addition, the former shareholders of CCG are personal guarantors of this facility. The facility contains certain financial conditions and covenants including limitation on the amount of capital expenditures and the creation of additional indebtedness. During 1997, certain financial covenants were breached and the bank waived such violations. At July 31, 1997, CCG was in compliance with the bank credit facility covenants and conditions. The outstanding principal balance was $5.9 million at July 31, 1997. This facility was an existing arrangement made by CCG prior to the acquisition by Dycom. In addition to the borrowings under the bank credit agreement, certain subsidiaries have outstanding obligations under capital leases and other equipment financing arrangements. These obligations are payable in monthly installments expiring at various dates through December 2001. The estimated aggregate annual principal repayments for notes payable and capital lease obligations in the next five years are $13,080,316 in 1998, $2,869,834 in 1999, $2,592,735 in 2000, $2,160,155 in 2001, and $1,389,342 in 2002. 22 24 DYCOM INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Interest costs incurred on notes payable, all of which is expensed, for the years ended July 31, 1995, 1996, and 1997 were $2,348,574, $1,916,389, and $1,899,570, respectively. Such amounts are included in general and administrative expenses in the accompanying consolidated statements of operations. The interest rates on notes payable under the bank credit agreement are at current rates and, therefore, the carrying amount approximates fair value. 8. INCOME TAXES The components of the provision (benefit) for income taxes are:
1995 1996 1997 ---------- ---------- ---------- Current: Federal.......................................... $3,027,160 $4,265,617 $6,248,234 State............................................ 705,733 1,032,155 1,770,717 ---------- ---------- ---------- 3,732,893 5,297,772 8,018,951 ---------- ---------- ---------- Deferred: Federal.......................................... (74,145) (522,169) 191,765 State............................................ (134,700) Valuation allowance.............................. 74,145 (1,058,027) (253,306) ---------- ---------- ---------- (1,580,196) (196,241) ---------- ---------- ---------- Total tax provision...................... $3,732,893 $3,717,576 $7,822,710 ========== ========== ==========
The deferred tax provision (benefit) is the change in the deferred tax assets and liabilities representing the tax consequences of changes in the amount of temporary differences and changes in tax rates during the year. The change in the deferred tax assets and liabilities of CCG for the two-months ended July 31, 1997 is included in the Company's retained earnings as the adjustment for the change in fiscal year of pooled company. The deferred tax assets and liabilities at July 31 are comprised of the following:
1996 1997 ---------- ---------- Deferred tax assets: Self-insurance, warranty, and other non-deductible reserves............................................... $4,008,715 $3,943,356 Allowance for doubtful accounts........................... 172,340 346,993 Small tools............................................... 348,067 ---------- ---------- 4,181,055 4,638,416 Valuation allowance....................................... (728,491) (475,185) ---------- ---------- $3,452,564 $4,163,231 ========== ========== Deferred tax liabilities: Property and equipment.................................... $1,275,314 $1,357,721 Unamortized acquisition costs............................. 211,298 212,542 ---------- ---------- $1,486,612 $1,570,263 ========== ========== Net deferred tax assets..................................... $1,965,952 $2,592,968 ========== ==========
A valuation allowance is provided when it is more likely than not that some portion of the Company's deferred tax assets will not be realized. In fiscal 1996 and 1997, the Company reduced the valuation allowance by $1.1 million and $0.3 million, respectively. The valuation allowance recorded in the financial statements reduces deferred tax assets to an amount that represents management's best estimate of the amount of deferred tax assets that more likely than not will be realized. Management's estimate and conclusion is based 23 25 DYCOM INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) on the available evidence supporting the reversing deductible temporary differences being offset by reversing taxable temporary differences and the existence of sufficient taxable income within the current carryback periods. The difference between the total tax provision and the amount computed by applying the statutory federal income tax rates to pre-tax income is as follows:
1995 1996 1997 ---------- ----------- ---------- Statutory rate applied to pre-tax income.......... $3,017,252 $ 3,869,688 $6,664,531 State taxes, net of federal tax benefit........... 465,784 681,836 1,059,178 Amortization and write-off of intangible assets, with no tax benefit............................. 52,730 52,730 52,730 Tax effect of non-deductible items................ 169,161 139,101 374,564 Valuation allowance............................... 74,145 (1,058,027) (253,306) Other items, net.................................. (46,179) 32,248 (74,987) ---------- ----------- ---------- Total tax provision..................... $3,732,893 $ 3,717,576 $7,822,710 ========== =========== ==========
The Internal Revenue Service (the "IRS")has examined and closed the Company's consolidated federal income tax returns for all years through fiscal 1990. The Company has settled all assessments of additional taxes and believes that it has made adequate provision for income taxes that may become payable with respect to open tax years. The IRS has examined and closed the income tax returns for years through 1994 for CCG. On August 5, 1997, The Taxpayer Relief Act of 1997 (the "Act") was signed into law. The Act will not have a material effect on the Company's consolidated financial statements. 9. REVENUES -- OTHER The components of other revenues are as follows:
1995 1996 1997 ---------- ---------- -------- Interest income..................................... $ 266,392 $ 264,551 $190,181 Gain on sale of fixed assets........................ 840,637 763,104 667,377 Miscellaneous income................................ 269,369 178,969 107,991 ---------- ---------- -------- Total other revenues, net........................... $1,376,398 $1,206,624 $965,549 ========== ========== ========
10. CAPITAL STOCK On June 1, 1992, the Company approved a Shareholder Rights Plan. All shareholders of record on June 15, 1992 were issued a Right for each outstanding share of the Company's common stock. Each Right entitles the holder to purchase one-half share of common stock for an exercise price of $18 subject to adjustment. The Right is exercisable only when a triggering event occurs. The triggering events, among others, are a person or group's (1) acquisition of 20% or more of Dycom's common stock, (2) commencement of a tender offer which would result in the person or group owning 20% or more of Dycom's common stock, or (3) acquisition of at least 10% of Dycom's common stock and such acquisition is determined to have effects adverse to the Company. The Company can redeem the Rights at $0.01 per Right at any time prior to ten days after a triggering event occurs. Certain officers of the Company have change of control agreements with Dycom, which provide extraordinary compensation upon the change of control of the Company. The payments pursuant to these agreements would be triggered by any person's acquisition of more than 50% of the Company's outstanding 24 26 DYCOM INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) securities, the sale or transfer of substantially all of Dycom's assets to someone other than a wholly-owned subsidiary of the Company, or a change of control of the Board of Directors. At July 31, 1997, the Company has authorized 1,000,000 shares of preferred stock, par value $1.00, of which no shares are issued and outstanding. 11. EMPLOYEE BENEFIT PLAN The Company sponsors defined contribution plans that provide retirement benefits to all employees that elect to participate. Under the plans, participating employees may defer up to 15% of their base pre-tax compensation. The Company's contributions to the plans are discretionary. The Company's discretionary contributions were $60,039, $100,000 and $230,000 in fiscal years 1995, 1996, and 1997, respectively. 12. STOCK OPTION PLANS The Company has reserved 900,000 shares of common stock under its 1991 Incentive Stock Option Plan (the "1991 Plan") which was approved by the shareholders on November 25, 1991. The Plan provides for the granting of options to key employees until it expires in 2001. Options are granted at the fair market value on the date of grant and are exercisable over a period of up to five years. Since the Plan's adoption, certain of the options granted have lapsed as a result of employees terminating their employment with the Company. At July 31, 1995, 1996, and 1997, options available for grant under the 1991 Plan were 403,419 shares, 427,353 shares, and 384,118 shares, respectively. On August 25, 1997, the Company granted to key employees under the 1991 Plan options to purchase an aggregate of 192,059 shares of common stock. The options were granted at $18.25, the fair market value on the date of grant. The Company's previous Incentive Stock Option Plan (the "1981 Plan") expired on December 31, 1991. No further grants will be made under the 1981 Plan, and all outstanding options expired during the first quarter of fiscal 1996. In addition to the stock option plans discussed above, the Company has agreements outside of the plans with the non-employee members of the Board of Directors (the "Directors Plan"). On January 10, 1994, the Company granted to the non-employee Directors, non-qualified options to purchase an aggregate of 60,000 shares of common stock. The options were granted at $3.875, the fair market value on the date of grant, with vesting over a three-year period. 25 27 DYCOM INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table summarizes the stock option transactions under the 1991 Plan, the 1981 Plan, and the Directors Plan for the three years ended July 31, 1995, 1996, and 1997:
WEIGHTED AVERAGE NUMBER OF EXERCISE SHARES PRICE --------- -------- Options outstanding at July 31, 1994........................ 504,498 $ 4.78 Granted................................................... 161,300 $ 5.09 Terminated................................................ (106,625) $ 7.73 Exercised................................................. (15,000) $ 3.00 -------- ------ Options outstanding at July 31, 1995........................ 544,173 $ 4.29 Terminated................................................ (50,526) $ 7.43 Exercised................................................. (57,502) $ 3.46 -------- ------ Options outstanding at July 31, 1996........................ 436,145 $ 4.54 Granted................................................... 100,000 $13.50 Terminated................................................ (56,765) $ 4.57 Exercised................................................. (213,143) $ 4.02 -------- ------ Options outstanding at July 31, 1997........................ 266,237 $10.32 -------- ------ Exercisable options at July 31, 1995............................................. 138,069 $ 4.92 July 31, 1996............................................. 190,817 $ 3.78 July 31, 1997............................................. 69,933 $ 5.21 -------- ------
The range of exercise prices for options outstanding at July 31, 1997 was $2.75 to $13.50. The range of exercise prices for options is wide due primarily to the increasing price of the Company's stock over the period of the grants. The following summarizes information about options outstanding at July 31, 1997:
OUTSTANDING OPTIONS ---------------------------------- WEIGHTED WEIGHTED AVERAGE AVERAGE NUMBER OF CONTRACTUAL EXERCISE SHARES LIFE PRICE --------- ----------- -------- Range of exercise prices $ 2.00 to $ 4.00...................................... 107,357 5.3 3.44 $ 6.00 to $ 8.00...................................... 64,000 3.0 6.75 $12.00 to $14.00...................................... 94,880 4.1 13.50 ------- --- ------ 266,237 4.5 $10.32 ======= === ======
EXERCISABLE OPTIONS ------------------------ WEIGHTED EXERCISABLE AVERAGE AS OF EXERCISE JULY 31, 1997 PRICE ------------- -------- Range of exercise prices $2.00 to $4.00............................................ 44,683 $3.58 $6.00 to $8.00............................................ 25,250 $6.75 ------ ----- 69,933 $5.21 ====== =====
26 28 DYCOM INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) These options will expire if not exercised at specific dates ranging from November 1997 to August 2001. The prices for the options exercised during the three years ended July 31, 1997 ranged from $2.75 to $6.75. As discussed in Note 1, the Company has adopted the disclosure-only provisions of SFAS No. 123. The fair value of the options granted in fiscal 1997 has been estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions: expected stock volatility of 58.97%, risk-free interest rate of 6.57%, expected lives of 4 years, and no dividend yield, due to the Company's recent history of not paying cash dividends. The Company did not grant stock options in fiscal 1996. The Black-Scholes option valuation model was developed for estimating the fair value of traded options that have no vesting restrictions and are fully transferable. Because option valuation models require the use of subjective assumptions and changes in these assumptions can materially impact the fair value of the options and the Company's options do not have the characteristics of traded options, the option valuation models do not necessarily provide a reliable measure of the fair value of its options. The estimated fair value of stock options granted during fiscal 1997 was $6.98 per share. The pro forma disclosures amortize to expense the estimated compensation costs for its stock options granted subsequent to July 31, 1995 over the options vesting period. The Company's fiscal 1997 pro forma net earnings and earnings per share are reflected below:
1996 1997 ---------- ----------- Pro forma net income........................................ $7,663,858 $11,092,254 Pro forma earnings per share: Primary................................................... $ 0.71 $ 1.01 Fully diluted............................................. $ 0.70 $ 1.01
13. RELATED PARTY TRANSACTIONS The Company's newly acquired subsidiary leases administrative offices from a partnership of which certain officers of the subsidiary are the general partners. The total expense under these arrangements for the years ended July 31, 1995, 1996, and 1997 was $79,200, $112,200 and $115,200, respectively. The future minimum lease commitments under these arrangements are $163,200 in 1998, $163,200 in 1999, $163,200 in 2000, $67,200 in 2001, and $24,000 thereafter. In addition, two of the Company's subsidiaries lease land, office buildings, shop facilities, and other equipment from two of these subsidiaries' former owners, one of which is a former Director of the Company. The total expense under these arrangements when such individuals were considered related parties for the fiscal year ended July 31, 1995 was $404,767. The total expenses in fiscal 1996 and 1997 and the related future minimum lease commitments are disclosed in Note 15. 14. MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK The operating subsidiaries obtain contracts from both public and private concerns. For the years ended July 31, 1995, 1996, and 1997, approximately 44%, 44%, and 34%, respectively, of the contract revenues were from BellSouth Telecommunications, Inc. ("BellSouth") and 15%, 21%, and 23%, respectively, of the contract revenues were from Comcast Communications, Inc. ("Comcast"). Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of trade accounts receivable. BellSouth and Comcast represent a significant portion of the Company's customer base. At July 31, 1996, the total outstanding trade receivables from BellSouth and Comcast were $4.8 million or 22% and $6.9 million or 32%, respectively, of the Company's outstanding trade receivables. As of July 31, 1997, the total outstanding trade receivables from BellSouth and Comcast were $4.5 million or 13% and $11.5 million or 33% of the outstanding trade receivables. 27 29 DYCOM INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 15. COMMITMENTS AND CONTINGENCIES The Company and its subsidiaries have operating leases covering office facilities, vehicles, and equipment which have noncancelable terms in excess of one year. During fiscal 1995, 1996, and 1997, the Company entered into numerous operating leases for vehicles and equipment. Certain of these leases contain renewal provisions and generally require the Company to pay insurance, maintenance, and other operating expenses. Total expense incurred under operating lease agreements, excluding the transactions with related parties (see Note 13), for the years ended July 31, 1995, 1996, and 1997, was $3,358,108, $5,018,744, and $6,561,022, respectively. The future minimum obligations under these leases are $3,826,759 in 1998; $1,673,498 in 1999; $550,516 in 2000; $95,870 in 2001, and $323,860 thereafter. In September 1995, the State of New York commenced a sales and use tax audit of CCG for the years 1989 through 1995. As a result of the audit, certain additional taxes were paid by CCG in fiscal 1996. In addition, the State of New York concluded that cable television service providers are subject to New York State sales taxes for the construction of cable television distribution systems, and by a Notice dated January 1997, the asserted amounts due from CCG for sales taxes and interest for the periods through August 31, 1995, aggregated approximately $1.3 million. Any sales taxes asserted against the Company may be offset by use taxes already paid by customers of the Company. The Company intends to vigorously contest the assertion. The Company is unable to assess the likelihood of any particular outcome at this time or to quantify the effect a resolution of this matter may have on the Company's consolidated financial statements. In the normal course of business, certain subsidiaries of the Company have pending and unasserted claims. Although the ultimate resolution and liability of these claims cannot be determined, management believes the final disposition of these claims will not have a material adverse impact on the Company's consolidated financial statements. 16. LITIGATION SETTLEMENT During fiscal year 1995, a final settlement was reached in the complaint filed in March 1993 by BellSouth against Star Construction, Inc. ("Star"), a subsidiary of the Company. The settlement provided for the payment of $750,000 to BellSouth by Star. The settlement monies were paid in two installments of $375,000 each during the quarters ended January 31, 1995 and April 30, 1995, respectively. The Company previously recorded a liability of $1.2 million for this claim and as such, credited operations for the excess liability at the time the claim was settled. 17. QUARTERLY FINANCIAL DATA (UNAUDITED) In the opinion of management, the following unaudited quarterly data for the years ended July 31, 1996 and 1997 reflect all adjustments necessary for a statement of operations. All such adjustments are of a normal recurring nature other than as discussed below. The Company acquired CCG on July 29, 1997. The acquisition was accounted for as a pooling of interests and accordingly, the unaudited quarterly financial statements for the periods presented include the accounts of CCG. Earnings per common and common equivalent share calculation for each quarter is based on the weighted average shares of common stock outstanding plus the effect of dilutive stock options. The sum of the quarters earnings per common and common equivalent share may not necessarily be equal to the full year earnings per common and common equivalent share amounts. 28 30 DYCOM INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
IN WHOLE DOLLARS, EXCEPT PER SHARE AMOUNTS ----------------------------------------------------- FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER ----------- ----------- ----------- ----------- 1996: Revenues: Dycom..................................... $37,605,583 $32,648,532 $35,390,645 $39,307,689 CCG....................................... 13,248,340 12,641,609 9,824,440 14,593,403 ----------- ----------- ----------- ----------- $50,853,923 $45,290,141 $45,215,085 $53,901,092 =========== =========== =========== =========== Income Before Income Taxes: Dycom..................................... $ 1,715,485 $ 1,603,524 $ 2,965,713 $ 2,834,998 CCG....................................... 1,003,486 179,311 (459,847) 1,538,764 ----------- ----------- ----------- ----------- $ 2,718,971 $ 1,782,835 $ 2,505,866 $ 4,373,762 =========== =========== =========== =========== Net Income: Dycom..................................... $ 968,638 $ 984,232 $ 1,704,150 $ 2,733,124 CCG....................................... 553,486 129,311 (259,847) 850,764 ----------- ----------- ----------- ----------- $ 1,522,124 $ 1,113,543 $ 1,444,303 $ 3,583,888 =========== =========== =========== =========== Earnings per Common and Common Equivalent Share: Primary................................... 0.14 0.11 0.14 0.33 Fully Diluted............................. 0.14 0.11 0.14 0.33 1997: Revenues: Dycom..................................... $40,367,225 $40,012,074 $48,186,014 $47,639,268 CCG....................................... 16,047,187 17,263,237 14,995,292 19,413,184 ----------- ----------- ----------- ----------- $56,414,412 $57,275,311 $63,181,306 $67,052,452 =========== =========== =========== =========== Income Before Income Taxes: Dycom..................................... $ 2,888,362 $ 2,446,288 $ 4,019,975 $ 4,434,187 CCG....................................... 1,092,878 1,129,119 680,403 2,350,306 ----------- ----------- ----------- ----------- $ 3,981,240 $ 3,575,407 $ 4,700,378 $ 6,784,493 =========== =========== =========== =========== Net Income: Dycom..................................... $ 1,661,619 $ 1,641,478 $ 2,413,033 $ 2,552,372 CCG....................................... 574,422 672,688 405,340 1,297,856 ----------- ----------- ----------- ----------- $ 2,236,041 $ 2,314,166 $ 2,818,373 $ 3,850,228 =========== =========== =========== =========== Earnings per Common and Common Equivalent Share: Primary................................... $ 0.20 $ 0.21 $ 0.26 $ 0.35 Fully Diluted............................. $ 0.20 $ 0.21 $ 0.26 $ 0.35
The fiscal 1996 and 1997 fourth quarter results of operations include a $1.1 million and a $0.3 million reduction in the deferred tax asset valuation allowance. 29 31 INDEPENDENT AUDITORS' REPORT Dycom Industries, Inc. We have audited the consolidated balance sheets of Dycom Industries, Inc. and subsidiaries (the "Company") as of July 31, 1997 and 1996, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended July 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements based on our audits. The consolidated financial statements give retroactive effect to the merger of Communications Construction Group, Inc., which has been accounted for as a pooling of interests as described in Note 2 to the consolidated financial statements. We did not audit the balance sheet of Communications Construction Group, Inc. as of May 31, 1996 or the statements of operations, stockholders' equity, and cash flows of Communications Construction Group, Inc. for the years ended May 31, 1997, 1996 and 1995, which statements reflect total assets of $14,121,468 as of May 31, 1996, and total revenues of $67,717,326, $50,121,009 and $43,047,102 for the years ended May 31, 1997, 1996 and 1995, respectively. Those financial statements were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for Communications Construction Group, Inc. for such periods, is based solely on the reports of such other auditors. As described in Note 2 to the consolidated financial statements, subsequent to the issuance of the reports of the other auditors, Communications Construction Group, Inc. changed its fiscal year to conform to the fiscal year of Dycom Industries, Inc. for the period ended July 31, 1997. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the reports of the other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the reports of the other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Dycom Industries, Inc. and subsidiaries as of July 31, 1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended July 31, 1997 in conformity with generally accepted accounting principles. DELOITTE & TOUCHE LLP Certified Public Accountants West Palm Beach, Florida September 26, 1997 30 32 INDEPENDENT AUDITOR'S REPORT To the Board of Directors Communications Construction Group, Inc. We have audited the accompanying consolidated balance sheets of Communications Construction Group, Inc. (the "Company") as of May 31, 1997 and 1996, and the related consolidated statements of operations, cash flows and changes in stockholders' equity for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above (not presented separately herein) present fairly, in all material respects, the consolidated financial position of Communications Construction Group, Inc. as of May 31, 1997 and 1996, and the consolidated results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. /s/ NOWALK & ASSOCIATES -------------------------------------- Nowalk & Associates Cranbury, New Jersey July 23, 1997 31 33 INDEPENDENT AUDITOR'S REPORT To the Board of Directors Communications Construction Group, Inc. We have audited the accompanying consolidated balance sheets of Communications Construction Group, Inc. (the "Company") as of May 31, 1996 and 1995, and the related consolidated statements of operations, cash flows and changes in stockholders' equity for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above (not presented separately herein) present fairly, in all material respects, the consolidated financial position of Communications Construction Group, Inc. as of May 31, 1996 and 1995, and the consolidated results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. /s/ NOWALK & ASSOCIATES -------------------------------------- Norwalk & Associates Cranbury, New Jersey August 29, 1996 As to Notes 5 and 6, January 3, 1997 32 34 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES There have been no disagreements with accountants on accounting and financial disclosure within the meaning of Item 304 of Regulation S-K. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information concerning directors and nominees of the Registrant is hereby incorporated by reference from the Company's definitive proxy statement to be filed with the Commission pursuant to Regulation 14A. The following table sets forth certain information concerning the executive officers of the Company, all of whom serve at the pleasure of the Board of Directors.
EXECUTIVE OFFICER NAME AGE OFFICE SINCE - ---- --- ------ --------- Thomas R. Pledger................................ 59 Chairman and Chief Executive 1/4/84 Officer Steven E. Nielsen................................ 34 President and Chief Operating 2/26/96 Officer Douglas J. Betlach............................... 45 Vice President, Chief 10/6/93 Financial Officer and Treasurer Darline M. Richter............................... 36 Vice President and Controller 2/9/93 Patricia B. Frazier.............................. 62 Secretary 1/4/84
ITEM 11. EXECUTIVE COMPENSATION Information concerning executive compensation is hereby incorporated by reference from the Company's definitive proxy statement to be filed with the Commission pursuant to Regulation 14A. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information concerning the ownership of certain of the Registrant's beneficial owners and management is hereby incorporated by reference from the Company's definitive proxy statement to be filed with the Commission pursuant to Regulation 14A. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information concerning certain relationships and related transactions is hereby incorporated by reference from the Company's definitive proxy statement to be filed with the Commission pursuant to Regulation 14A. 33 35 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) The following documents are filed as a part of this report:
PAGE ----- 1. Consolidated financial statements: Consolidated balance sheets at July 31, 1996 and 1997..... 13 Consolidated statements of operations for the years ended July 31, 1995, 1996, and 1997.......................... 14 Consolidated statements of stockholders' equity for the years ended July 31, 1995, 1996, and 1997.............. 15 Consolidated statements of cash flows for the years ended July 31, 1995, 1996, and 1997.......................... 16 Notes to consolidated financial statements.................. 17-29 Independent auditors' reports............................... 30-32 2. Financial statement schedules: All schedules have been omitted because they are inapplicable, not required, or the information is included in the above referenced consolidated financial statements or the notes thereto. Exhibits furnished pursuant to the requirements of Form 3. 10-K: See Exhibit Index on page 36.
(B) REPORTS ON FORM 8-K: No reports on Form 8-K were filed on behalf of the Registrant during the quarter ended July 31, 1997. 34 36 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. By: /s/ THOMAS R. PLEDGER ------------------------------------ Thomas R. Pledger Chairman and Chief Executive Officer Date: September 30, 1997 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
NAME POSITION DATE ---- -------- ---- /s/ DOUGLAS J. BETLACH Vice President, Chief September 30, 1997 - --------------------------------------------------- Financial Officer, and Douglas J. Betlach Principal Accounting Officer /s/ STEVEN NIELSEN President, Chief Operating September 30, 1997 - --------------------------------------------------- Officer, and Director Steven Nielsen /s/ THOMAS R. PLEDGER Director September 30, 1997 - --------------------------------------------------- Thomas R. Pledger /s/ LOUIS W. ADAMS, JR. Director September 30, 1997 - --------------------------------------------------- Louis W. Adams, Jr. /s/ WALTER L. REVELL Director September 30, 1997 - --------------------------------------------------- Walter L. Revell /s/ RONALD L. ROSEMAN Director September 30, 1997 - --------------------------------------------------- Ronald L. Roseman /s/ RONALD P. YOUNKIN Director September 30, 1997 - --------------------------------------------------- Ronald P. Younkin
35 37 EXHIBIT INDEX
NUMBER DESCRIPTION - ------ ----------- (3)(i) -- Articles of Incorporation of the Company, as amended (3)(ii) -- Bylaws of the Company, as amended (11) -- Statement re computation of per share earnings (21) -- Subsidiaries of the Company (23)(i) -- Independent Auditors' Consent (23)(ii) -- Independent Auditors' Consent (27)(i) -- Financial Data Schedules for fiscal years ended July 31, 1995, 1996 and 1997 (27)(ii) -- Financial Data Schedules for fiscal quarters ended October 31, 1996, January 31, 1997 and April 30, 1997 (27)(iii) -- Financial Data Schedules for fiscal quarters ended October 31, 1995, January 31, 1996 and April 30, 1996 (99) -- Credit Facility Agreement, Security Agreement and Guaranty Agreement dated April 28, 1997 between Dycom Industries, Inc. and Dresdner Lateinamerika Aktiengesellschaft; Bank Leumi Trust Company of New York and Republic National Bank of Miami, N.A.
36 EX-3.I 2 ATRICLES OF INCORPORATION 1 EXHIBIT (3)(i) Articles of Incorporation of the Company, as amended The Articles of Incorporation of the Company are hereby incorporated by reference from the Company's Form S-1 Registration Statement filed with the Commission on October 29, 1986. At the 1990 Annual Meeting of Stockholders, the shareholders approved an amendment to the Company's Articles of Incorporation to increase the authorized shares of common stock from 10,000,000 to 50,000,000 par value $0.33 1/3 per share. The amendment to the Articles of Incorporation of the Company are hereby incorporated by reference from the Company's definitive Proxy Statement-Annual Meeting of Stockholders filed with the Commission on November 6, 1990. EX-3.II 3 BY LAWS 1 EXHIBIT (3)(ii) Bylaws of the Company, as amended The bylaws of the Company are hereby incorporated by reference from the Company's Form 8-K filed with the Commission on September 14, 1992. Amendments to the Bylaws of the Company were adopted on October 21, 1992 and February 3, 1993 and are hereby incorporated by reference from the Company's Annual Report on Form 10-K for the fiscal years ended July 31, 1992 and 1994, respectively. EX-11 4 COMPUTATION OF EARNINGS PER SHARE 1 EXHIBIT 11 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS THE FISCAL YEARS ENDED JULY 31, 1995, 1996 AND 1997 (WHOLE DOLLARS EXCEPT PER SHARE DATA)
1995 1996 1997 Net Income Applicable to Common stock $ 5,141,379 $7,663,858 $11,218,808 =========== ========== =========== Primary Earnings (Loss): Weighted average number of common shares outstanding 10,588,766 10,616,376 10,775,991 Common share equivalents arising from stock options(1) 0 243,443 172,698 ----------- ---------- ----------- Weighted average number of common shares as adjusted 10,588,766 10,859,819 10,948,689 =========== ========== =========== Net Income (Loss) per common and common equivalent share $ 0.49 $ 0.71 $ 1.02 =========== ========== =========== Fully Diluted Earnings (Loss): Weighted average number of common shares outstanding 10,588,766 10,616,376 10,775,991 Common share equivalents arising from stock options(1) 0 311,908 218,509 ----------- ---------- ----------- Weighted average number of Common shares as adjusted 10,588,766 10,928,284 10,994,500 =========== ========== =========== Net Income (Loss) per common and common equivalent share $ 0.49 $ 0.70 $ 1.02 =========== ========== ===========
(1) In the year ended July 31, 1995 common share equivalents arising from stock options did not impact the per share amounts as they were either insignificant or anti-dilutive. EX-21 5 SUBSIDIARIES 1 EXHIBIT (21) The following table sets forth the Registrant's subsidiaries and the jurisdiction of incorporation of each. Each subsidiary is 100% owned by the Registrant. ANSCO & ASSOCIATES, INC. A Florida corporation COMMUNICATIONS CONSTRUCTION GROUP, INC. A Pennsylvania corporation FIBER CABLE, INC. A Delaware corporation GLOBE COMMUNICATIONS, INC. A North Carolina corporation IVY H. SMITH COMPANY A Florida corporation KOHLER CONSTRUCTION COMPANY, INC. A Florida corporation SIGNAL CONSTRUCTION COMPANY, INC. A Florida corporation SOUTHEASTERN ELECTRIC CONSTRUCTION, INC. A Florida corporation STAR CONSTRUCTION, INC. A Tennessee corporation S.T.S., INC. A Florida corporation TESINC, INC. An Arizona corporation EX-23.I 6 CONSENT OF DELOITTE & TOUCHE LLP 1 EXHIBIT (23)(i) Independent Auditors' Consent We consent to the incorporation by reference in Registration Statement No. 33-46506 of Dycom Industries, Inc. on Form S-8 of our report dated September 26, 1997 appearing in this Annual Report on Form 10-K of Dycom Industries, Inc. for the year ended July 31, 1997. /s/ Deloitte & Touche LLP DELOITTE & TOUCHE LLP Certified Public Accountants West Palm Beach, Florida September 30, 1997 EX-23.II 7 CONSENT OF NOWALK & ASSOCIATES 1 EXHIBIT (23)(ii) Independent Auditors' Consent We consent to the incorporation by reference in Registration Statement No. 33-46506 of Dycom Industries, Inc. on Form S-8 of our reports related to the financial statements of Communications Construction Group, Inc. (not presented separately herein) dated July 23, 1997 and August 29, 1996 (which is also dated as of January 3, 1997 for Notes 5 and 6 of the financial statements of Communications Construction Group, Inc.) appearing in this Annual Report on Form 10-K of Dycom Industries, Inc. for the year ended July 31, 1997. /s/ Nowalk & Associates NOWALK & ASSOCIATES Certified Public Accountants Cranbury, New Jersey September 29, 1997 EX-27.I 8 FDS-JULY 31,1995, 1996, 1997
5 THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE DYCOM INDUSTRIES, INC. CONSOLIDATED FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED JULY 31, 1997, 1996, AND 1995. THE CONSOLIDATED FINANCIAL STATEMENTS INCLUDE THE FINANCIAL RESULTS OF COMMUNICATIONS CONSTRUCTION GROUP, INC. ACQUIRED ON JULY 29, 1997 AND ACCOUNTED FOR AS A POOLING OF INTERESTS. 1 US DOLLAR YEAR YEAR YEAR JUL-31-1995 JUL-31-1996 JUL-31-1997 JUL-31-1994 JUL-31-1995 JUL-31-1996 JUL-31-1995 JUL-31-1996 JUL-31-1997 1 1 1 4,418,812 3,927,736 6,645,972 0 0 0 24,604,548 21,825,906 34,471,945 939,798 606,043 1,014,593 5,194,474 7,480,570 10,009,034 36,187,044 35,746,602 55,198,621 55,378,032 59,685,916 66,564,280 32,781,121 35,171,446 39,021,042 64,218,007 66,195,353 88,161,895 29,555,639 27,523,520 38,979,173 23,530,725 17,685,704 22,092,382 0 0 0 0 0 0 3,532,411 3,551,578 3,622,625 9,786,450 17,630,268 30,129,631 64,218,007 66,195,353 88,161,895 0 0 0 186,956,976 194,053,617 242,957,932 0 0 0 153,284,320 155,769,390 192,412,439 7,165,252 7,624,395 8,689,611 0 0 0 2,348,574 1,916,389 1,889,570 8,874,272 11,381,434 19,041,518 3,732,893 3,717,576 7,822,710 5,141,379 7,663,858 11,218,808 0 0 0 0 0 0 0 0 0 5,141,379 7,663,858 11,218,808 0.49 0.71 1.02 0.49 0.70 1.02
EX-27.II 9 FDS-OCT 31,1996, JAN 31, 1997, APR 30, 1997
5 THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE DYCOM INDUSTRIES, INC. UNAUDITED QUARTERLY REPORTS ON FORM 10-Q FOR THE FISCAL QUARTERS ENDED OCTOBER, 31, 1996, JANUARY 31, 1997 AND APRIL 30, 1997. THESE QUARTERLY REPORTS HAVE BEEN RESTATED TO INCLUDE THE ACCOUNTS OF COMMUNICATIONS CONSTRUCTION GROUP, INC. WHICH HAS BEEN ACCOUNTED FOR AS A POOLING OF INTERESTS. 3-MOS 6-MOS 9-MOS JUL-31-1997 JUL-31-1997 JUL-31-1997 OCT-31-1996 JAN-31-1997 APR-30-1997 4,081,857 2,283,123 4,457,892 0 0 0 23,983,261 29,550,289 33,179,823 811,116 807,471 1,176,847 9,659,276 9,229,602 11,805,597 40,214,977 44,346,692 52,680,407 62,188,543 65,563,726 65,549,822 36,966,803 38,614,953 38,208,233 71,496,540 77,205,423 85,829,006 29,744,864 32,685,970 39,689,720 16,926,516 18,222,920 21,964,975 0 0 0 0 0 0 3,576,036 3,580,409 3,608,275 20,075,642 22,562,650 25,671,866 71,496,540 77,205,423 85,829,006 0 0 0 56,322,356 113,450,340 176,374,368 0 0 0 45,009,650 91,264,570 140,972,188 2,072,544 4,112,878 6,226,833 0 0 0 586,788 1,018,710 1,424,047 3,981,240 7,556,647 12,257,025 1,745,199 3,006,440 4,888,445 2,236,041 4,550,207 7,368,580 0 0 0 0 0 0 0 0 0 2,236,041 4,550,207 7,368,580 0.20 0.42 0.67 0.20 0.42 0.67
EX-27.III 10 FDS-OCT 31,1995, JAN 31, 1996, APR 30, 1996
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DYCOM INDUSTRIES, INC. UNAUDITED QUARTERLY FINANCIAL STATEMENTS REPORTED ON FORM 10-Q FOR THE QUARTERS ENDED OCTOBER 31, 1995, JANUARY 31, 1996 AND APRIL 30, 1996. THESE REPORTS INCLUDE THE ACCOUNTS OF COMMUNICATIONS CONSTRUCTION GROUP, INC. ACQUIRED ON JULY 29, 1997 AND ACCOUNTED FOR AS A POOLING OF INTERESTS. 3-MOS 6-MOS 9-MOS JUL-31-1996 JUL-31-1996 JUL-31-1996 OCT-31-1995 JAN-31-1996 APR-30-1996 6,265,085 4,962,315 4,845,011 0 0 0 22,218,380 21,087,163 18,372,485 988,670 913,711 852,426 6,831,413 5,548,614 7,376,985 37,219,144 33,456,243 32,671,781 55,845,452 57,922,385 57,215,752 33,744,540 34,228,961 33,670,120 64,753,864 62,539,750 61,510,234 29,762,976 27,321,439 26,513,134 22,716,177 21,828,185 17,836,872 0 0 0 0 0 0 3,534,678 3,535,886 3,544,168 11,329,315 12,452,625 13,972,370 64,754,044 62,539,750 61,510,234 0 0 0 50,614,163 95,721,165 140,073,205 0 0 0 40,938,779 77,604,791 113,643,330 1,919,720 3,865,904 5,555,246 0 0 102,902 555,800 1,080,001 1,506,395 2,718,971 4,501,806 7,007,672 1,196,847 1,866,139 2,927,702 1,522,124 2,635,667 4,079,970 0 0 0 0 0 0 0 0 0 1,522,124 2,635,667 4,079,970 0.14 0.25 0.38 0.14 0.25 0.38
EX-99 11 CREDIT FACILITY AGREEMENT 1 EXHIBIT (99) The Credit Facility Agreement dated April 28, 1997 between the Dycom Industries, Inc. and Dresdner Bank Lateinamerika Aktiengesellschaft; Bank Leumi Trust Company of New York; and Republic National Bank of Miami, N.A. is hereby incorporated by reference from the Company's Quarterly Report on Form 10-Q for the quarter ended April 30, 1997. Similar agreements were executed by each subsidiary of Dycom Industries, Inc. The Security Agreement dated April 28, 1997 between the Dycom Industries, Inc. and Dresdner Bank Lateinamerika Aktiengesellschaft; Bank Leumi Trust Company of New York; and Republic National Bank of Miami, N.A. is hereby incorporated by reference from the Company's Quarterly Report on Form 10-Q for the quarter ended April 30, 1997. Similar agreements were executed by each subsidiary of Dycom Industries, Inc. The Guaranty Agreement dated April 28, 1997 between the Dycom Industries, Inc. and Dresdner Bank Lateinamerika Aktiengesellschaft; Bank Leumi Trust Company of New York; and Republic National Bank of Miami, N.A. is hereby incorporated by reference from the Company's Quarterly Report on Form 10-Q for the quarter ended April 30, 1997. Similar agreements were executed by each subsidiary of Dycom Industries, Inc. -----END PRIVACY-ENHANCED MESSAGE-----