UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

(Mark One)

For the quarterly period ended April 24, 2004

OR

For the transition period from ________to________

Commission file number 0-5423

DYCOM INDUSTRIES, INC.

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 o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes x No o

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

DYCOM INDUSTRIES, INC.

INDEX

PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

DYCOM INDUSTRIES, INC. AND SUBSIDIARIES

See notes to condensed consolidated financial statements—unaudited.

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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES

See notes to condensed consolidated financial statements—unaudited.

4

DYCOM INDUSTRIES, INC. AND SUBSIDIARIES

See notes to condensed consolidated financial statements—unaudited.

5

DYCOM INDUSTRIES, INC. AND SUBSIDIARIES

See notes to condensed consolidated financial statements— unaudited.

6

DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Unaudited)

See notes to condensed consolidated financial statements—unaudited.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—Unaudited

The accompanying condensed consolidated balance sheets of Dycom Industries, Inc. (“Dycom” or the “Company”) as of April 24, 2004 and July 26, 2003, and the related condensed consolidated statements of operations for the three and nine months ended April 24, 2004 and April 26, 2003 and the condensed consolidated statements of cash flows for the nine months ended April 24, 2004 and April 26, 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 nine months ended April 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 is a leading provider of specialty contracting services, including engineering, construction, installation and maintenance services, to telecommunications providers throughout the United States. The Company also provides 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, with the fourth quarter having 14 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 “billings in excess of costs and estimated earnings.”

CASH AND EQUIVALENTS — Cash and equivalents include cash balances on deposit in banks, overnight repurchase agreements, certificates of deposit, commercial paper, municipal bonds, 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.

RESTRICTED CASH — At April 24, 2004, we had approximately $5.0 million in restricted cash included in other current assets and other assets on our condensed consolidated balance sheets. This amount primarily relates to cash held as collateral to support projected workers’ compensation, automobile, and general liability obligations.

INVENTORIES — Inventories consist primarily of materials and supplies used in the Company’s business and are carried at the lower of cost (first in, first out) or market (net realizable value). No obsolescence reserve has been recorded in the periods presented.

PROPERTY AND EQUIPMENT — Property and equipment are stated at cost and depreciated on a straight-line basis over their estimated useful lives. Useful lives range from: buildings — 20-31 years; leasehold improvements — the term of the respective lease or the estimated useful life of the improvements, whichever is shorter; new vehicles — 3-7 years; used vehicles — 1-7 years; new equipment and machinery — 2-10 years; used equipment and machinery — 1-10 years; and furniture and fixtures — 3-10 years. Maintenance and repairs are expensed as incurred and major improvements 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 other income.

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INTANGIBLE ASSETS — In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets”, the Company will conduct on at least an annual basis a review of its reporting units with goodwill to determine whether their carrying value exceeds their fair market value. Should this be the case, a detailed analysis of the reporting unit’s assets and liabilities is performed to determine whether the goodwill is impaired. Impairment losses are required to be reflected in operating income or loss in the consolidated statements of operations.

The Company’s annual valuation for fiscal year 2003 did not result in any impairment charge. The Company will conduct its annual test for impairment, as required by SFAS No. 142, during the fourth quarter of fiscal 2004.

Information regarding the Company’s other intangible assets subject to testing for impairment in accordance with the provisions of SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” is as follows:

Amortization expense was $663,667 and $67,769 for the three months ended April 24, 2004 and April 26, 2003, respectively, and $1,192,378 and $329,162 for the nine months ended April 24, 2004 and April 26, 2003, respectively. Estimated amortization expense for fiscal 2004 through 2008 is as follows:

SELF INSURED CLAIMS LIABILITY — We retain the risk of loss, up to certain limits, for automobile, general liability, including damage claims, and workers’ compensation claims. A liability for unpaid claims and the associated claim expenses, including incurred but unreported losses, is actuarially determined and reflected in the consolidated financial statements as an accrued liability. Factors affecting the determination of amounts to be accrued for automobile, general liability and workers’ compensation claims include, but are not limited to the expected cost for existing and anticipated claims, frequency, or payment patterns resulting from new types of claims, the hazard level of our operations, tort reform or other legislative changes, unfavorable jury decisions, court interpretations, changes in the medical conditions of claimants and economic factors such as inflation.

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In addition, we retain the risk, up to certain limits, under a self-insured employee health plan. We review quarterly the paid claims history of our employee health plan and analyze our accrued liability for claims, including claims incurred but not yet paid. Factors affecting the determination of amounts to be accrued under the employee health plan include, but are not limited to, frequency of use, changes in medical costs, unfavorable jury decisions, legislative changes, changes in the medical conditions of claimants, court interpretations and economic factors such as inflation.

INCOME TAXES — The Company files a consolidated federal income tax return. Deferred income taxes are provided for the temporary differences between the financial reporting basis and the tax basis of its assets and liabilities.

PER SHARE DATA — Earnings per common share-basic is computed using the weighted average common shares outstanding during the period. Earnings per common share-diluted is computed using the weighted average number of common shares outstanding during the period plus all potentially dilutive common stock equivalents, except in cases where the effect would be anti-dilutive, using the treasury stock method. See Note 2.

RESTRICTED SHARES — On January 2, 2004 and November 25, 2003, respectively, the Company granted 100,000 and 5,000 restricted shares of its common stock to the Chief Executive Officer of the Company. The restricted shares vest over a period of four years from the date of grant. Upon issuance of the restricted shares, deferred compensation of $2.8 million was charged to stockholders’ equity for the fair value of the restricted stock and is being recognized as compensation expense ratably over the four-year vesting period.

On November 26, 2002, the shareholders of the Company approved the 2002 Directors Restricted Stock Plan whereby non-employee directors must elect to receive a minimum percentage of their annual fees in restricted shares of the Company’s common stock. The Company has reserved 100,000 shares of its common stock for issuance under the plan. The number of restricted shares of the Company’s common stock to be granted is based on the fair market value of a share of common stock on the date such fees are payable.

STOCK OPTION PLANS — Under SFAS No. 123 and No. 148, companies are permitted to continue to apply APB Opinion No. 25, which recognizes compensation cost based on the intrinsic value of the equity instrument awarded. The Company continues to apply APB Opinion No. 25 to its stock based compensation awards. The pro forma disclosures required by SFAS No. 148 are reflected below. No stock-based compensation cost for stock options is reflected in net income as all options granted had an exercise price equal to the market value of the underlying common stock on the date of grant.