UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

(Mark One)

For the quarterly period ended January 29, 2005

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.

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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

1. Basis of Presentation

     Dycom Industries, Inc. (“Dycom” or 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 other construction and maintenance services to electric utilities and others. The Company uses a fiscal year ending the last Saturday in July. Fiscal year 2005 consists of 52 weeks, while fiscal year 2004 consisted of 53 weeks.

     The condensed consolidated financial statements are unaudited and include the results of Dycom and its subsidiaries, all of which are wholly owned. All material intercompany accounts and transactions have been eliminated. The accompanying condensed consolidated balance sheets of the Company and the related condensed consolidated statements of operations and cash flows for the three and six months 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 six months ended January 29, 2005 are not necessarily indicative of the results that may be expected for the entire year. For a better understanding of the Company and its financial statements, the Company recommends reading these condensed consolidated financial statements in conjunction with the Company’s audited financial statements for the year ended July 31, 2004, which are included in Dycom’s 2004 Annual Report on Form 10-K, filed on October 12, 2004.

     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. The more significant estimates relate to the Company’s revenue recognition of work-in-process, the allowance for doubtful accounts, self-insured claims liability, the valuation of goodwill and intangible assets, asset lives used in computing depreciation and amortization, including amortization of intangibles, and accounting for income taxes, contingencies and litigation. While the Company believes that such estimates are fair when considered in conjunction with the consolidated financial position and results of operations taken as a whole, the actual results could differ from those estimates and such differences may be material to the financial statements.

     Restricted Cash – At January 29, 2005 and July 31, 2004, the Company had approximately $8.3 million and $6.5 million, respectively, in restricted cash included in other current assets and other assets on the consolidated balance sheets. The amount primarily relates to cash held as collateral to support projected workers’ compensation, automobile and general liability obligations .

     Short-term Investments – Short-term investments consist of market auction rate debt securities that are classified as “available for sale” securities. The Company maintains its investments with various financial institutions and minimizes its credit risk associated with investments by only investing in investment grade, highly liquid securities. The securities are reported at fair value and the Company uses market quotes provided by third parties to adjust the carrying value of its investments to fair value at the end of each period with any related unrealized gains and losses included as a separate component of stockholders’ equity, net of applicable taxes. Realized gains and losses and interest and dividends are included in interest income or interest expense, as appropriate. There were no material realized or unrealized gains or losses related to the securities for any of the periods presented. The Company has reclassified approximately $20.0 million of short-term investments as of July 31, 2004 that were previously presented as cash and equivalents to conform to current period presentation. Additionally, for the six months ended January 29, 2005 and January 24, 2004, the net change in short-term investments of $0.6 million and $39.2 million, respectively, is included as a component of cash flows used in investing activities. At January 29, 2005, the available for sale securities had contractual maturities ranging from 2008 through 2039. Consistent with the Company’s past practice, management intends to sell the securities at the scheduled auction dates within the next twelve months and has classified the securities as current.

     Accounting for Stock-Based Compensation – Under Statement of Financial Accounting Standards (“SFAS”) No. 123 and No. 148, companies are permitted to continue to apply Accounting Principles Board (“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 fair value of the options granted in fiscal 2005 and 2004 has been estimated at the date of grant using the Black-Scholes option-pricing model. 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. The Company’s options do not have the characteristics of traded options and the option valuation models do not necessarily provide a reliable measure of the fair value as they require the use of subjective assumptions. Changes in these assumptions can materially impact the fair value of the Company’s options. No stock-based compensation cost for stock option grants 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. During the six months ended January 29, 2005 and January 24, 2004, 913,800 and 874,676 options were granted, respectively. The pro forma weighted average fair value of options granted during the six months ended January 29, 2005 was $19.93 per share based on a risk-free interest rate of 3.6%, an expected life of six years, expected volatility of 58.7% and no expected dividends. The pro forma weighted average fair value of options granted during the six months ended January 24, 2004 was $14.63 per share based on a risk-free interest rate of 3.6%, an expected life of six years, expected

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volatility of 59.6% and no expected dividends. The pro forma disclosures required by SFAS No. 148 are reflected below.

     In December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123(R), “Share-Based Payment”, an Amendment of SFAS No. 123. SFAS No. 123(R) requires measurement of the cost of share-based payment transactions to employees at the fair value of the award on the grant date and recognition of expense over the requisite service or vesting period. Prior to SFAS No. 123(R), only certain pro-forma disclosures of fair value were required. The pro forma compensation costs presented in the table above and in prior filings for the Company have been calculated using the Black-Scholes option pricing model and may not be indicative of amounts which should be expected in future years. SFAS No. 123(R) is effective for public companies at the beginning of the first interim or annual period beginning after June 15, 2005. The Company is currently evaluating the impact of SFAS No. 123(R) and believes the adoption of this statement could have a material impact on the financial statements of the Company commencing with fiscal 2006.

     Comprehensive Income — During the first six months of fiscal 2005 and fiscal 2004 the Company did not have any changes in its equity resulting from non-owner sources and, accordingly, comprehensive income was equal to the net income amounts presented for the respective periods in the accompanying Consolidated Statements of Operations.

2. Earnings Per Share

     Earnings per common share-basic is computed using the weighted average common shares outstanding during the period. Earnings per common share-diluted is computed with the treasury stock method 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.

     The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computation as required by SFAS No. 128.

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