UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
| x |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JANUARY 24, 2004 |
|
| OR | ||
| o |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________________ TO ______________________ |
Commission file number 0-5423
DYCOM INDUSTRIES, INC.
| Florida | 59-1277135 | |
| (State of incorporation) | (IRS Employer Identification No.) | |
| 4440 PGA Boulevard, Suite 500 Palm Beach Gardens, Florida |
33410 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (561) 627-7171
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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| Class Common Stock, par value $0.33 1/3 per share |
Outstanding as of February 26, 2004 48,499,071 |
DYCOM INDUSTRIES, INC.
INDEX
| Page No. |
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PART I. FINANCIAL INFORMATION |
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Item 1. Financial Statements |
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Condensed Consolidated Balance Sheets-
January 24, 2004 and July 26, 2003
|
3 | |||
Condensed Consolidated Statements of
Operations for the Three Months Ended
January 24, 2004 and January 25, 2003
|
4 | |||
Condensed Consolidated Statements of
Operations for the Six Months Ended
January 24, 2004 and January 25, 2003
|
5 | |||
Condensed Consolidated Statements of
Cash Flows for the Six Months Ended
January 24, 2004 and January 25, 2003
|
6-7 | |||
Notes to Condensed Consolidated
Financial Statements
|
8-19 | |||
Item 2. Management’s Discussion and Analysis of
Financial Condition and Results of Operations
|
20-29 | |||
Item 3. Quantitative and Qualitative Disclosures
about Market Risk
|
29 | |||
Item 4. Controls and Procedures
|
29 | |||
PART II. OTHER INFORMATION |
||||
Item 2. Changes in Securities, Use of Proceeds and Issuer
Purchases of Equity Securities
|
30 | |||
Item 4. Submission of Matters to a Vote of Security Holders
|
30 | |||
Item 6. Exhibits and Reports on Form 8-K
|
30-31 | |||
SIGNATURES
|
32 | |||
2
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| January 24, | July 26, | ||||||||||
| 2004 | 2003 | ||||||||||
ASSETS |
|||||||||||
CURRENT ASSETS: |
|||||||||||
Cash and equivalents |
$ | 118,344,373 | $ | 129,851,760 | |||||||
Accounts receivable, net |
126,644,448 | 121,979,664 | |||||||||
Costs and estimated earnings in excess of billings |
40,509,963 | 34,814,130 | |||||||||
Deferred tax assets, net |
11,594,972 | 8,778,775 | |||||||||
Inventories |
3,741,617 | 2,669,796 | |||||||||
Income taxes receivable |
2,096,215 | — | |||||||||
Other current assets |
13,710,428 | 7,378,452 | |||||||||
Total current assets |
316,642,016 | 305,472,577 | |||||||||
PROPERTY AND EQUIPMENT, net |
98,167,997 | 86,893,826 | |||||||||
OTHER ASSETS: |
|||||||||||
Goodwill, net |
218,001,325 | 106,615,836 | |||||||||
Intangible assets, net |
37,440,935 | 729,646 | |||||||||
Accounts receivable |
— | 21,567,480 | |||||||||
Deferred tax assets, net non-current |
12,313,435 | 7,167,117 | |||||||||
Other |
12,834,695 | 8,096,095 | |||||||||
Total other assets |
280,590,390 | 144,176,174 | |||||||||
TOTAL |
$ | 695,400,403 | $ | 536,542,577 | |||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|||||||||||
CURRENT LIABILITIES: |
|||||||||||
Accounts payable |
$ | 26,048,793 | $ | 22,734,971 | |||||||
Notes payable |
4,850,490 | 9,537 | |||||||||
Billings in excess of costs and estimated earnings |
1,992,745 | 703,063 | |||||||||
Accrued self-insured claims |
27,881,340 | 17,676,780 | |||||||||
Income taxes payable |
— | 5,168,984 | |||||||||
Other accrued liabilities |
31,400,297 | 24,440,415 | |||||||||
Total current liabilities |
92,173,665 | 70,733,750 | |||||||||
NOTES PAYABLE |
93,157,516 | 20,160 | |||||||||
ACCRUED SELF-INSURED CLAIMS |
20,426,961 | 14,175,209 | |||||||||
OTHER LIABILITIES |
931,515 | 1,273,889 | |||||||||
Total liabilities |
206,689,657 | 86,203,008 | |||||||||
COMMITMENTS AND CONTINGENCIES, Note 10 |
|||||||||||
STOCKHOLDERS’ EQUITY: |
|||||||||||
Preferred stock, par value $1.00 per share: |
|||||||||||
1,000,000 shares authorized: no shares issued and outstanding |
— | — | |||||||||
Common stock, par value $0.33 1/3 per share: |
|||||||||||
150,000,000 shares authorized: 48,486,025 and 47,986,768
issued and outstanding, respectively |
16,162,002 | 15,995,584 | |||||||||
Additional paid-in capital |
346,970,298 | 336,394,016 | |||||||||
Deferred compensation |
(2,740,904 | ) | — | ||||||||
Retained earnings |
128,319,350 | 97,949,969 | |||||||||
Total stockholders’ equity |
488,710,746 | 450,339,569 | |||||||||
TOTAL |
$ | 695,400,403 | $ | 536,542,577 | |||||||
See notes to condensed financial statements—unaudited.
3
DYCOM INDUSTRIES, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| For the Three Months Ended | ||||||||
| January 24, | January 25, | |||||||
| 2004 | 2003 | |||||||
REVENUES: |
||||||||
Contract revenues earned |
$ | 196,368,974 | $ | 137,153,597 | ||||
EXPENSES: |
||||||||
Costs of earned revenues, excluding depreciation |
151,224,328 | 111,357,930 | ||||||
General and administrative |
18,862,246 | 17,448,267 | ||||||
Depreciation and amortization |
11,008,530 | 10,460,239 | ||||||
Total |
181,095,104 | 139,266,436 | ||||||
Interest income |
180,159 | 374,702 | ||||||
Interest
expense |
(464,621 | ) | (4,627 | ) | ||||
Other income, net |
582,869 | 617,997 | ||||||
Gain on sale of long-term accounts receivable |
11,359,379 | — | ||||||
INCOME (LOSS) BEFORE INCOME TAXES |
26,931,656 | (1,124,767 | ) | |||||
PROVISION (BENEFIT) FOR INCOME TAXES: |
||||||||
Current |
10,364,592 | 808,450 | ||||||
Deferred |
124,922 | (822,281 | ) | |||||
Total |
10,489,514 | (13,831 | ) | |||||
NET INCOME (LOSS) |
$ | 16,442,142 | $ | (1,110,936 | ) | |||
EARNINGS (LOSS) PER COMMON SHARE: |
||||||||
Basic earnings (loss) per share |
$ | 0.34 | $ | (0.02 | ) | |||
Diluted earnings (loss) per share |
$ | 0.34 | $ | (0.02 | ) | |||
SHARES USED IN COMPUTING EARNINGS (LOSS)
PER COMMON SHARE |
||||||||
Basic |
48,285,294 | 47,869,706 | ||||||
Diluted |
48,922,381 | 47,869,706 | ||||||
See notes to condensed financial statements—unaudited.
4
DYCOM INDUSTRIES, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| For the Six Months Ended | ||||||||
| January 24, | January 25, | |||||||
| 2004 | 2003 | |||||||
REVENUES: |
||||||||
Contract revenues earned |
$ | 392,390,416 | $ | 295,634,511 | ||||
EXPENSES: |
||||||||
Costs of earned revenues, excluding depreciation |
298,274,063 | 234,938,122 | ||||||
General and administrative |
36,369,888 | 35,723,686 | ||||||
Depreciation and amortization |
20,342,940 | 21,290,050 | ||||||
Total |
354,986,891 | 291,951,858 | ||||||
Interest income |
499,877 | 845,130 | ||||||
Interest
expense |
(466,088 | ) | (200,075 | ) | ||||
Other income, net |
1,428,412 | 1,703,269 | ||||||
Gain on sale of long-term accounts receivable |
11,359,379 | — | ||||||
INCOME BEFORE INCOME TAXES |
50,225,105 | 6,030,977 | ||||||
PROVISION (BENEFIT) FOR INCOME TAXES: |
||||||||
Current |
20,315,757 | 4,968,539 | ||||||
Deferred |
(460,033 | ) | (1,941,179 | ) | ||||
Total |
19,855,724 | 3,027,360 | ||||||
NET INCOME |
$ | 30,369,381 | $ | 3,003,617 | ||||
EARNINGS PER COMMON SHARE: |
||||||||
Basic earnings per share |
$ | 0.63 | $ | 0.06 | ||||
Diluted earnings per share |
$ | 0.62 | $ | 0.06 | ||||
SHARES USED IN COMPUTING EARNINGS
PER COMMON SHARE |
||||||||
Basic |
48,157,178 | 47,866,387 | ||||||
Diluted |
48,712,420 | 47,871,667 | ||||||
See notes to condensed financial statements—unaudited.
5
DYCOM INDUSTRIES, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Six Months Ended | |||||||||
| January 24, | January 25, | ||||||||
| 2004 | 2003 | ||||||||
Increase (Decrease) in Cash and Equivalents from: |
|||||||||
OPERATING ACTIVITIES: |
|||||||||
Net Income |
$ | 30,369,381 | $ | 3,003,617 | |||||
Adjustments
to reconcile to net cash inflow from operating activities: |
|||||||||
Depreciation and amortization |
20,342,940 | 21,290,050 | |||||||
Bad debts expense |
1,545,380 | 316,170 | |||||||
Gain on disposal of assets |
(898,173 | ) | (1,199,532 | ) | |||||
Gain on sale of long-term accounts receivable |
(11,359,379 | ) | — | ||||||
Deferred income taxes |
(460,033 | ) | (1,941,179 | ) | |||||
Other |
98,922 | — | |||||||
Change in operating assets and liabilities, net of acquisitions: |
|||||||||
(Increase) decrease in operating assets: |
|||||||||
Proceeds on sale of long-term accounts receivable, net |
34,242,345 | — | |||||||
Accounts receivable, net |
16,622,279 | (13,708,002 | ) | ||||||
Unbilled revenues, net |
3,184,479 | 10,101,227 | |||||||
Income tax receivable |
— | 238,634 | |||||||
Other current assets |
(3,692,929 | ) | 2,053,852 | ||||||
Other assets |
478,913 | 294,546 | |||||||
Increase (decrease) in operating liabilities: |
|||||||||
Accounts payable |
(416,069 | ) | (3,799,870 | ) | |||||
Accrued self-insured claims and other liabilities |
(544,460 | ) | (1,275,712 | ) | |||||
Accrued income taxes |
(6,583,834 | ) | — | ||||||
Net cash inflow from operating activities |
82,929,762 | 15,373,801 | |||||||
INVESTING ACTIVITIES: |
|||||||||
Capital expenditures |
(9,480,394 | ) | (3,652,713 | ) | |||||
Proceeds from sale of assets |
2,518,867 | 3,424,392 | |||||||
Acquisition expenditures, net of cash acquired |
(174,667,063 | ) | — | ||||||
Net cash outflow from investing activities |
(181,628,590 | ) | (228,321 | ) | |||||
FINANCING ACTIVITIES: |
|||||||||
Borrowings on notes payable |
85,000,000 | — | |||||||
Principal payments on notes payable and capital leases |
(845,779 | ) | (43,309 | ) | |||||
Exercise of stock options |
3,037,220 | 220,841 | |||||||
Net cash inflow from financing activities |
87,191,441 | 177,532 | |||||||
NET CASH (OUTFLOW) INFLOW FROM ALL ACTIVITIES |
(11,507,387 | ) | 15,323,012 | ||||||
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD |
129,851,760 | 116,052,139 | |||||||
CASH AND EQUIVALENTS AT END OF PERIOD |
$ | 118,344,373 | $ | 131,375,151 | |||||
See notes to condensed financial statements—unaudited.
6
DYCOM INDUSTRIES, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Unaudited)
| For the Six Months Ended | ||||||||||
| January 24, | January 25, | |||||||||
| 2004 | 2003 | |||||||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW AND NON-CASH
INVESTING AND FINANCING ACTIVITIES: |
||||||||||
Cash paid during the period for: |
||||||||||
Interest |
$ | 156,249 | $ | 9,826 | ||||||
Income taxes |
$ | 27,495,583 | $ | 5,376,012 | ||||||
Issuance of restricted stock |
$ | 2,801,900 | $ | — | ||||||
Income tax benefit from stock options exercised |
$ | 681,365 | $ | — | ||||||
During the six months ended January 24, 2004, we acquired UtiliQuest Holdings
Corp. and purchased substantially all of the assets of First South Utility
Construction, Inc. and assumed certain liabilities associated with these
assets. See Note 3 |
||||||||||
Fair market value of net assets acquired, including goodwill |
$ | 180,245,182 | ||||||||
Less: Common stock issued |
(4,184,289 | ) | ||||||||
Acquisition expenditures |
176,060,893 | |||||||||
Cash acquired |
(1,393,830 | ) | ||||||||
Acquisition expenditures, net of cash acquired |
$ | 174,667,063 | ||||||||
See notes to condensed financial statements—unaudited.
7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — Unaudited
The accompanying condensed consolidated balance sheets of Dycom Industries, Inc. (“Dycom” or the “Company”) as of January 24, 2004 and July 26, 2003, and the related condensed consolidated statements of operations and cash flows for the three and six months ended January 24, 2004 and January 25, 2003, reflect all normal recurring adjustments which are, in the opinion of management, necessary for a fair presentation of such statements. The results of operations for the three and six months ended January 24, 2004 are not necessarily indicative of the results that may be expected for the entire year.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION — The condensed consolidated financial statements are unaudited. These statements include Dycom Industries, Inc. and its subsidiaries, all of which are wholly owned.
In November 2003, the Company acquired substantially all of the assets of First South Utility Construction, Inc. (“First South”) and assumed certain liabilities associated with these assets. In December 2003, the Company acquired UtiliQuest Holdings Corp. (“UtiliQuest”). These acquisitions were accounted for using the purchase method of accounting; hence, the Company’s results include the results of these entities from their respective acquisition dates.
The Company’s operations consist primarily of providing engineering, placement and maintenance of various cable systems owned by local and long-distance communications carriers, and cable television multiple system operators, and similar services related to the installation of integrated voice, data, and video local and wide area networks within buildings, as well as underground locating services to various utilities and electrical and other construction and maintenance services to electric utilities and others. All material intercompany accounts and transactions have been eliminated.
ACCOUNTING PERIOD — The Company uses a fiscal year ending the last Saturday in July. Fiscal year 2003 consisted of 52 weeks, while fiscal year 2004 will consist of 53 weeks.
USE OF ESTIMATES — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 and in the determination of the allowance for doubtful accounts, self-insured claims liability, and asset lives used in computing depreciation and amortization, including amortization of intangibles.
RECLASSIFICATIONS — Certain prior year amounts have been reclassified in order to conform to the current year presentation.
REVENUE RECOGNITION — The majority of the Company’s contracts are unit based. Revenue on unit based contracts is recognized as the unit is completed. Revenue on non-unit based contracts is recognized under the percentage-of-completion method based primarily on the ratio of contract costs incurred to date to total estimated contract costs. At the time a loss on a contract becomes known, the entire amount of the estimated ultimate loss is accrued.
“Costs and estimated earnings in excess of billings” primarily relates to revenues for completed but unbilled units under unit based contracts, as well as unbilled revenues recognized under the percentage-of-completion method for non-unit based contracts. For those contracts in which billings exceed contract revenues recognized to date, such excesses are included in the caption