Edgar Filing: DYCOM INDUSTRIES INC

DY Q1 2013 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended October 27, 2012



¨	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 001-10613

DYCOM INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)



Florida		59-1277135
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

11770 US Highway 1, Suite 101, Palm Beach Gardens, Florida		33408
(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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer x	Accelerated filer ¨	Non-accelerated filer ¨	Smaller reporting company ¨
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

There were 32,597,712 shares of common stock with a par value of $0.33 1/3 outstanding at November 19, 2012.

DYCOM INDUSTRIES, INC. TABLE OF CONTENTS


PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements	3
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	35

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 5.	Other Information	37
Item 6.	Exhibits	39
Signatures		40
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

DYCOM INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)



	October 27, 2012		July 28, 2012
	(Dollars in thousands)
ASSETS
CURRENT ASSETS:
Cash and equivalents	$	54,726	$	52,581
Accounts receivable, net	153,794		141,788
Costs and estimated earnings in excess of billings	118,409		127,321
Inventories	25,142		26,274
Deferred tax assets, net	16,074		15,633
Income taxes receivable	741		4,884
Other current assets	12,822		8,466
Total current assets	381,708		376,947

PROPERTY AND EQUIPMENT, NET	154,701		158,247
GOODWILL	174,849		174,849
INTANGIBLE ASSETS, NET	48,182		49,773
OTHER	12,093		12,377
TOTAL NON-CURRENT ASSETS	389,825		395,246
TOTAL ASSETS	$	771,533	$	772,193

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	38,485	$	36,823
Current portion of debt	55		74
Billings in excess of costs and estimated earnings	1,447		1,522
Accrued insurance claims	24,244		25,218
Income taxes payable	4,567		—
Other accrued liabilities	47,642		50,926
Total current liabilities	116,440		114,563

LONG-TERM DEBT	187,500		187,500
ACCRUED INSURANCE CLAIMS	22,847		23,591
DEFERRED TAX LIABILITIES, NET NON-CURRENT	48,792		49,537
OTHER LIABILITIES	3,959		4,071
Total liabilities	379,538		379,262

COMMITMENTS AND CONTINGENCIES, Notes 9, 10, and 15

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: 32,595,062 and 33,587,744 issued and outstanding, respectively	10,865		11,196
Additional paid-in capital	102,351		114,820
Accumulated other comprehensive income	140		138
Retained earnings	278,639		266,777
Total stockholders' equity	391,995		392,931
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	771,533	$	772,193
See notes to the condensed consolidated financial statements.

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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

	For the Three Months Ended
	October 27, 2012			October 29, 2011
	(Dollars in thousands, except per share amounts)
REVENUES:
Contract revenues	$	323,286		$	319,575

EXPENSES:
Costs of earned revenues, excluding depreciation and amortization	257,066			255,187
General and administrative (including stock-based compensation expense of $2.3 million and $1.3 million, respectively)	28,824			25,358
Depreciation and amortization	15,311			15,958
Total	301,201			296,503

Interest expense, net	(4,197		)	(4,173		)
Other income, net	1,614			2,959
INCOME BEFORE INCOME TAXES	19,502			21,858

PROVISION (BENEFIT) FOR INCOME TAXES:
Current	8,858			5,372
Deferred	(1,217		)	3,520
Total	7,641			8,892

NET INCOME	$	11,861		$	12,966

EARNINGS PER COMMON SHARE:
Basic earnings per common share	$	0.36		$	0.39

Diluted earnings per common share	$	0.35		$	0.38

SHARES USED IN COMPUTING EARNINGS PER COMMON SHARE:
Basic	33,089,959			33,508,193

Diluted	33,721,070			34,216,451
See notes to the condensed consolidated financial statements.

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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)


	For the Three Months Ended
	October 27, 2012		October 29, 2011
	(Dollars in thousands)
NET INCOME	$	11,861	$	12,966
Foreign currency translation gains (losses)	2		(87		)
COMPREHENSIVE INCOME	$	11,863	$	12,879

See notes to the condensed consolidated financial statements.

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

	For the Three Months Ended
	October 27, 2012			October 29, 2011
	(Dollars in thousands)
OPERATING ACTIVITIES:
Net income	$	11,861		$	12,966
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	15,311			15,958
Bad debt expense, net	9			36
Gain on sale of fixed assets	(1,581		)	(2,918		)
Deferred income tax provision	(1,217		)	3,520
Stock-based compensation	2,266			1,326
Amortization of debt issuance costs	329			323
Excess tax benefit from share-based awards	(64		)	(175		)
Change in operating assets and liabilities:
Accounts receivable, net	(12,015		)	(2,047		)
Costs and estimated earnings in excess of billings, net	8,838			(10,864		)
Other current assets and inventory	(3,509		)	(8,305		)
Other assets	(62		)	288
Income taxes receivable/payable	8,773			5,398
Accounts payable	3,879			3,563
Accrued liabilities, insurance claims, and other liabilities	(5,102		)	364
Net cash provided by operating activities	27,716			19,433

INVESTING ACTIVITIES:
Capital expenditures	(12,523		)	(20,857		)
Proceeds from sale of assets	2,006			6,417
Changes in restricted cash	—			550
Net cash used in investing activities	(10,517		)	(13,890		)

FINANCING ACTIVITIES:
Repurchases of common stock	(15,203		)	—
Exercise of stock options and other	166			940
Restricted stock tax withholdings	(62		)	(37		)
Excess tax benefit from share-based awards	64			175
Principal payments on capital lease obligations	(19		)	(75		)
Net cash (used in) provided by financing activities	(15,054		)	1,003

Net increase in cash and equivalents	2,145			6,546

CASH AND EQUIVALENTS AT BEGINNING OF PERIOD	52,581			44,766

CASH AND EQUIVALENTS AT END OF PERIOD	$	54,726		$	51,312

SUPPLEMENTAL DISCLOSURE OF OTHER CASH FLOW ACTIVITIES AND NON-CASH INVESTING AND FINANCING ACTIVITIES:
Cash paid during the period for:
Interest	$	489		$	511
Income taxes	$	85		$	632

Purchases of capital assets included in accounts payable or other accrued liabilities at period end	$	2,364		$	2,893
See notes to the condensed consolidated financial statements.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Accounting Policies

Basis of Presentation – Dycom Industries, Inc. (“Dycom” or the “Company”) is a leading provider of specialty contracting services. These services, which are provided throughout the United States and in Canada, include engineering, construction, maintenance and installation services to telecommunications providers, underground facility locating services to various utilities, including telecommunications providers, and other construction and maintenance services to electric and gas utilities and others.

The condensed consolidated financial statements include the results of Dycom and its subsidiaries, all of which are wholly-owned. All intercompany accounts and transactions have been eliminated and the financial statements reflect all adjustments, consisting of only normal recurring accruals that are, in the opinion of management, necessary for a fair presentation of such statements. These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Additionally, the results of operations for the three months ended October 27, 2012 are not necessarily indicative of the results that may be expected for the entire year. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements for the entire year ended July 28, 2012 included in the Company’s 2012 Annual Report on Form 10-K, filed with the SEC on September 4, 2012.

Accounting Period – The Company uses a fiscal year ending on the last Saturday in July.

Use of Estimates – The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. For the Company, key estimates include: recognition of revenue for costs and estimated earnings in excess of billings, the fair value of reporting units for goodwill impairment analysis, the assessment of impairment of intangibles and other long-lived assets, income taxes, accrued insurance claims, asset lives used in computing depreciation and amortization, allowance for doubtful accounts, stock-based compensation expense for performance-based stock awards, and accruals for contingencies, including legal matters. At the time they are made, 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. However, actual results could differ from those estimates and such differences may be material to the financial statements.

Restricted Cash – As of October 27, 2012 and July 28, 2012, the Company had approximately $3.7 million in restricted cash, which is held as collateral in support of the Company’s insurance obligations. Restricted cash is included in other current assets and other assets in the condensed consolidated balance sheets and changes in restricted cash are reported in cash flows used in investing activities in the condensed consolidated statements of cash flows.

Fair Value of Financial Instruments – Accounting Standards Codification ("ASC") Topic 820, Fair Value Measurements and Disclosures (“ASC Topic 820”) defines and establishes a measurement framework for fair value and expands disclosure requirements. ASC Topic 820 requires that assets and liabilities carried at fair value are classified and disclosed in one of the following three categories: (1) Level 1 - Quoted market prices in active markets for identical assets or liabilities; (2) Level 2 - Observable market-based inputs or unobservable inputs that are corroborated by market data; and (3) Level 3 - Unobservable inputs not corroborated by market data which require the reporting entity’s own assumptions. The Company’s financial instruments consist primarily of cash and equivalents, restricted cash, accounts and other receivables, income taxes receivable and payable, accounts payable and certain accrued expenses, and long-term debt. The carrying amounts of these items approximate fair value due to their short maturity, except for the Company’s outstanding 7.125% senior subordinated notes due 2021 (the “2021 Notes”). The Company determined that the fair value of the 2021 Notes as of October 27, 2012 and July 28, 2012 was $200.9 million and $192.0 million, respectively, as compared to the carrying value of $187.5 million. The fair value of the 2021 Notes is categorized as Level 2 as of October 27, 2012 and July 28, 2012, based on observable market-based inputs. The Company's cash and equivalents are categorized as Level 1 as of October 27, 2012 and July 28, 2012, based on quoted market prices in active markets for identical assets. During the three months ended October 27, 2012 and October 29, 2011, the Company had no non-recurring fair value measurements of assets or liabilities subsequent to their initial recognition.

Segment Information – The Company operates in one reportable segment as a specialty contractor, providing engineering, construction, maintenance and installation services to telecommunications providers, underground facility locating services to various utilities including telecommunications providers, and other construction and maintenance services to electric and gas utilities and others. All of the Company’s operating segments have been aggregated into one reporting segment due to their similar economic characteristics, nature of services and production processes, type of customers, and service distribution methods. The Company’s services are provided by its various subsidiaries throughout the United States and in Canada. One of

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the Company’s operating segments earned revenues from contracts in Canada of approximately $3.9 million and $3.8 million during the three months ended October 27, 2012 and October 29, 2011, respectively. The Company had no material long-lived assets in the Canadian operations at October 27, 2012 or July 28, 2012.

Recently Issued Accounting Pronouncements

Adoption of New Accounting Pronouncements

In June 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income (“ASU 2011-05”). ASU 2011-05 requires the total of comprehensive income, the components of net income, and the components of other comprehensive income to be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. This guidance eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. ASU 2011-05 also requires entities to present on the face of the financial statements reclassification adjustments for items that are reclassified from other comprehensive income to net income. The amendments of ASU 2011-05 do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. In December 2011, the FASB issued Accounting Standards Update No. 2011-12, Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Other Comprehensive Income in ASU 2011-05 (“ASU 2011-12”). ASU 2011-12 defers only those provisions in ASU 2011-05 relating to the presentation of the reclassification adjustments. ASU 2011-12 and the remaining provisions of ASU 2011-05 are effective retrospectively for annual periods, and interim periods within those years, beginning after December 15, 2011. The Company now presents condensed consolidated statements of comprehensive income as a result of adopting the update.

In September 2011, the FASB issued Accounting Standards Update No. 2011-08, Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment (“ASU 2011-08”). ASU 2011-08 permits entities testing for goodwill impairment to perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in ASC Topic 350. ASU 2011-08 does not change how goodwill is determined or assigned to reporting units, nor does it revise the requirement to assess goodwill at least annually for impairment. ASU 2011-08 is effective for goodwill impairment tests performed in interim and annual periods for fiscal years beginning after December 15, 2011. The adoption of this guidance did not have a material effect on the Company’s condensed consolidated financial statements.

Accounting Standards Not Yet Adopted

In July 2012, FASB issued Accounting Standards Update No. 2012-02, Intangibles-Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment ("ASU 2012-02"). ASU 2012-02 amends Topic 350 by establishing an optional two-step analysis for impairment testing of indefinite-lived intangibles other than goodwill. This update allows an entity the option to first assess qualitative factors to determine whether it is necessary to perform the quantitative impairment test. Under that option, an entity no longer would be required to calculate the fair value of the intangible asset unless the entity determines, based on that qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. ASU 2012-02 is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012 and early adoption is permitted. The Company is currently evaluating the impact this update may have on its impairment testing of indefinite-lived intangible assets. The adoption of this guidance is not expected to have a material effect on the Company’s condensed consolidated financial statements.

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2. Computation of Earnings Per Common Share

The following is a reconciliation of the numerator and denominator of the basic and diluted earnings per common share computation as required by ASC Topic 260, Earnings Per Share.



	For the Three Months Ended
	October 27, 2012		October 29, 2011
	(Dollars in thousands, except per share amounts)
Net income available to common stockholders (numerator)	$	11,861	$	12,966

Weighted-average number of common shares (denominator)	33,089,959		33,508,193

Basic earnings per common share	$	0.36	$	0.39

Weighted-average number of common shares	33,089,959		33,508,193
Potential common stock arising from stock options, and unvested restricted share units	631,111		708,258
Total shares-diluted (denominator)	33,721,070		34,216,451

Diluted earnings per common share	$	0.35	$	0.38

Anti-dilutive weighted shares excluded from the calculation of earnings per share	1,940,101		2,021,561

3. Accounts Receivable

Accounts receivable consists of the following:



	October 27, 2012			July 28, 2012
	(Dollars in thousands)
Contract billings	$	148,911		$	136,610
Retainage and other receivables	5,161			5,448
Total	154,072			142,058
Less: allowance for doubtful accounts	(278		)	(270		)
Accounts receivable, net	$	153,794		$	141,788

As of October 27, 2012, the Company expected to collect all retainage balances above within the next twelve months.

The allowance for doubtful accounts changed as follows:



	For the Three Months Ended
	October 27, 2012			October 29, 2011
	(Dollars in thousands)
Allowance for doubtful accounts at beginning of period	$	270		$	368
Bad debt expense, net	9			36
Amounts charged against the allowance	(1		)	(28		)
Allowance for doubtful accounts at end of period	$	278		$	376

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4. Costs and Estimated Earnings in Excess of Billings

Costs and estimated earnings in excess of billings, net, consist of the following:



	October 27, 2012			July 28, 2012
	(Dollars in thousands)
Costs incurred on contracts in progress	$	92,858		$	100,766
Estimated to date earnings	25,551			26,555
Total costs and estimated earnings	118,409			127,321
Less: billings to date	(1,447		)	(1,522		)
	$	116,962		$	125,799
Included in the accompanying condensed consolidated balance sheets under the captions:
Costs and estimated earnings in excess of billings	$	118,409		$	127,321
Billings in excess of costs and estimated earnings	(1,447		)	(1,522		)
	$	116,962		$	125,799

The above amounts include revenue for services from contracts based both on the units-of-delivery and the cost-to-cost measures of the percentage of completion method.

5. Property and Equipment

Property and equipment, including amounts for assets subject to capital leases, consists of the following:



	General Useful Lives	October 27, 2012			July 28, 2012
	(Years)	(Dollars in thousands)
Land	—	$	2,915		$	2,915
Buildings	15-35	10,630			10,630
Leasehold improvements	3-15	4,668			4,674
Vehicles	3-5	221,083			220,669
Computer hardware and software	3-10	59,694			57,965
Office furniture and equipment	3-5	5,649			5,552
Equipment and machinery	2-10	134,349			133,467
Total		438,988			435,872
Less: accumulated depreciation		(284,287		)	(277,625		)
Property and equipment, net		$	154,701		$	158,247

Depreciation expense and repairs and maintenance, including amounts for assets subject to capital leases, were as follows:



	For the Three Months Ended
	October 27, 2012		October 29, 2011
	(Dollars in thousands)
Depreciation expense	$	13,720	$	14,268
Repairs and maintenance expense	$	3,811	$	4,532

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6. Goodwill and Intangible Assets

The Company's goodwill balance was $174.8 million as of October 27, 2012 and July 28, 2012. There were no changes in the carrying amount of goodwill for the three months ended October 27, 2012. The Company’s intangible assets consist of the following:



	Weighted Average Remaining Useful Lives	October 27, 2012		July 28, 2012
	(Years)	(Dollars in thousands)
Carrying amount:
Customer relationships	9.2	$	89,145	$	89,145
UtiliQuest trade name	—	4,700		4,700
Trade names	7.9	2,860		2,860
Non-compete agreements	3.2	150		150
		96,855		96,855
Accumulated amortization:
Customer relationships		47,379		45,852
Trade names		1,238		1,182
Non-compete agreements		56		48
Net Intangible Assets		$	48,182	$	49,773

The Company’s goodwill resides in multiple reporting units. The reporting units and related indefinite-lived intangible assets are tested annually during the fourth fiscal quarter of each year in accordance with ASC Topic 350, Intangibles - Goodwill and Other, in order to determine whether their carrying value exceeds their fair value. The inputs used for fair value measurements of the reporting units and related indefinite-lived intangible assets are the lowest level (Level 3) inputs.

Amortization expense for finite-lived intangible assets for the three months ended October 27, 2012 and October 29, 2011 was $1.6 million and $1.7 million, respectively. Amortization of the Company’s customer relationships is recognized on an accelerated basis related to the expected economic benefit of the intangible asset, while amortization of other finite-lived intangibles is recognized on a straight-line basis over the estimated useful life.

The profitability of individual reporting units may periodically suffer from downturns in customer demand and other factors resulting from the cyclical nature of the Company’s business, the high level of competition existing within the Company’s industry, the concentration of the Company’s revenues from a limited number of customers, and the level of overall economic activity. During times of slowing economic conditions, the Company’s customers may reduce capital expenditures and defer or cancel pending projects. Individual reporting units may be relatively more impacted by these factors than the Company as a whole. As a result, demand for the services of one or more of the Company’s reporting units could decline resulting in an impairment of goodwill or intangible assets.

As a result of the fiscal 2012 annual impairment analysis, the Company concluded that no impairment of goodwill or the indefinite-lived intangible asset was indicated at any reporting unit. However, the UtiliQuest reporting unit, having a goodwill balance of approximately $35.6 million and an indefinite-lived trade name of $4.7 million, has recently been at lower operating levels as compared to historical levels. During the fiscal 2012 annual impairment analysis, the estimated fair value of the UtiliQuest reporting unit exceeded its carrying value but the margin of excess had declined to less than 30%. The UtiliQuest reporting unit provides services to a broad range of customers including utilities and telecommunication providers. These services are required prior to underground excavation and are influenced by overall economic activity, including construction activity. The goodwill balance of this reporting unit may have an increased likelihood of impairment if a downturn in customer demand were to occur, or if the reporting unit were not able to execute against customer opportunities, and the long-term outlook for their cash flows were adversely impacted. Furthermore, changes in the long-term outlook may result in changes to other valuation assumptions. As of October 27, 2012, the Company believes the goodwill is recoverable for all of the reporting units; however, there can be no assurances that the goodwill will not be impaired in future periods.

Certain of the Company’s reporting units also have other intangible assets including customer relationships, trade names, and non-compete intangibles. As of October 27, 2012, management believes that the carrying amounts of the intangible assets are recoverable. However, if adverse events were to occur or circumstances were to change indicating that the carrying amount of such assets may not be fully recoverable, the assets would be reviewed for impairment and the assets could be impaired.

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7. Accrued Insurance Claims

The Company retains the risk of loss, up to certain limits, for claims relating to automobile liability, general liability (including locate damages), workers’ compensation, and employee group health. With regard to losses occurring in fiscal 2013, the Company has retained the risk of loss up to $1.0 million on a per occurrence basis for automobile liability, general liability and workers’ compensation. These retention amounts are applicable to all of the states in which the Company operates, except with respect to workers’ compensation insurance in two states in which the Company participates in a state-sponsored insurance fund. Aggregate stop loss coverage for automobile liability, general liability and workers’ compensation claims is $41.8 million for fiscal 2013. For losses under the Company's employee health plan, the Company is party to a stop-loss agreement under which it retains the risk of loss, on an annual basis, of the first $250,000 of claims per participant. In addition, the Company retains the risk of loss for the first $550,000 of claim amounts that aggregate across all participants that exceed $250,000.

Accrued insurance claims consist of the following:



	October 27, 2012		July 28, 2012
	(Dollars in thousands)
Amounts expected to be paid within one year:
Accrued auto, general liability and workers' compensation	$	15,829	$	16,514
Accrued employee group health	2,624		2,867
Accrued damage claims	5,791		5,837
	24,244		25,218
Amounts expected to be paid beyond one year:
Accrued auto, general liability and workers' compensation	20,747		21,423
Accrued damage claims	2,100		2,168
	22,847		23,591
Total accrued insurance claims	$	47,091	$	48,809

8. Other Accrued Liabilities

Other accrued liabilities consist of the following:



	October 27, 2012		July 28, 2012
	(Dollars in thousands)
Accrued payroll and related taxes	$	18,882	$	19,248
Accrued employee benefit and incentive plan costs	4,606		12,488
Accrued construction costs	11,990		11,515
Other current liabilities	12,164		7,675
Total other accrued liabilities	$	47,642	$	50,926

9. Debt

The Company’s outstanding indebtedness consists of the following:



	October 27, 2012			July 28, 2012
	(Dollars in thousands)
7.125% senior subordinated notes due 2021	$	187,500		$	187,500
Capital leases	55			74
	187,555			187,574
Less: current portion	(55		)	(74		)
Long-term debt	$	187,500		$	187,500

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The Company has a five-year $225.0 million senior secured revolving credit agreement (the “Credit Agreement”) with a syndicate of banks. The Credit Agreement has an expiration date of June 4, 2015 and provides for maximum borrowings of $225.0 million, including a sublimit of $100.0 million for the issuance of standby letters of credit. In connection with the issuance of the 2021 Notes, the Company entered into an amendment to the Credit Agreement (the “Amended Credit Agreement”). Subject to certain conditions, the Amended Credit Agreement provides for the ability to enter into one or more incremental facilities, in an aggregate amount not to exceed $75.0 million, either by increasing the revolving commitments under the Credit Agreement and/or in the form of term loans.

The Company’s obligations under the Amended Credit Agreement are guaranteed by certain subsidiaries and secured by a pledge of (i) 100% of the equity of the Company’s material domestic subsidiaries and (ii) 100% of the non-voting equity and 65% of the voting equity of first-tier material foreign subsidiaries, if any, in each case excluding certain unrestricted subsidiaries.

Borrowings under the Amended Credit Agreement (other than swingline loans as defined in the Credit Agreement) bear interest at a rate equal to either (a) the administrative agent’s base rate, described in the Amended Credit Agreement as the highest of (i) the sum of the federal funds rate and 0.50%; (ii) the administrative agent’s prime rate; and (iii) the eurodollar rate (defined in the Amended Credit Agreement as the British Bankers’ Association LIBOR Rate, divided by the aggregate of 1.00% and one (1) less a reserve percentage (as defined in the Amended Credit Agreement), or (b) the eurodollar rate, in addition to an applicable margin based on the Company’s consolidated leverage ratio, in each case. Swingline loans bear interest at a rate equal to the administrative agent’s base rate and a margin based on the Company’s consolidated leverage ratio. Based on the Company’s current consolidated leverage ratio, revolving borrowings would be eligible for a margin of 1.25% for borrowings based on the administrative agent’s base rate and 2.25% for borrowings based on the eurodollar rate.

The Company incurs fees under the Amended Credit Agreement for the unutilized commitments at rates that range from 0.50% to 0.625% per annum, fees for outstanding standby letters of credit at rates that range from 2.00% to 2.75% per annum and fees for outstanding commercial letters of credit at rates that range from 1.00% to 1.375% per annum, in each case based on the Company's consolidated leverage ratio. As of October 27, 2012, fees for unutilized commitments and outstanding standby letters of credit were at rates per annum of 0.50% and 2.25%, respectively.

The Credit Agreement contains certain affirmative and negative covenants, including limitations with respect to indebtedness, liens, investments, distributions, mergers and acquisitions, dispositions of assets, sale-leaseback transactions, transactions with affiliates and capital expenditures. The Credit Agreement contains financial covenants that require the Company to (i) maintain a consolidated leverage ratio of not greater than 3.00 to 1.00, as measured on a trailing four-quarter basis at the end of each fiscal quarter and (ii) maintain a consolidated interest coverage ratio of not less than 2.75 to 1.00 for fiscal quarters ending July 31, 2010 through April 28, 2012 and not less than 3.00 to 1.00 for the fiscal quarter ending July 28, 2012 and each fiscal quarter thereafter, as measured on a trailing four-quarter basis at the end of each fiscal quarter. As of October 27, 2012, the Company had no outstanding borrowings and $44.1 million of outstanding standby letters of credit issued under the Credit Agreement. The outstanding standby letters of credit are issued as part of the Company’s insurance program. At October 27, 2012, the Company was in compliance with the financial covenants and had additional borrowing availability of up to $180.9 million, as determined by the most restrictive covenants of the Credit Agreement.

As of October 27, 2012, the principal amount outstanding under the 2012 Notes was $187.5 million. The 2021 Notes are guaranteed by certain of the Company’s subsidiaries. The indenture governing the 2021 Notes contains covenants that limit, among other things, the ability of the Company and its subsidiaries to incur additional debt and issue preferred stock, make certain restricted payments, consummate specified asset sales, enter into transactions with affiliates, incur liens, impose restrictions on the ability of the Company’s subsidiaries to pay dividends or make payments to the Company and its restricted subsidiaries, merge or consolidate with another person, and dispose of all or substantially all of its assets.

10. Income Taxes

The Company accounts for income taxes under the asset and liability method. This approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities. The Company’s effective income tax rate differs from the statutory rate for the tax jurisdictions where it operates primarily as the result of the impact of non-deductible and non-taxable items and tax credits recognized in relation to pre-tax results. Measurement of certain aspects of the Company’s tax positions are based on interpretations of tax regulations, federal and state case law and the applicable statutes.

The Company files income tax returns in the U.S. federal jurisdiction, multiple state jurisdictions and in Canada. With limited exceptions, the Company is no longer subject to U.S. federal and most state and local income tax examinations for

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fiscal years ended 2008 and prior. During fiscal 2012 the Company was notified by the Internal Revenue Service that its federal income tax return for a recent period was selected for examination. Management believes its provision for income taxes is adequate; however, any significant assessment could affect the Company’s results of operations and cash flows.

As of both October 27, 2012 and July 28, 2012, the Company had total unrecognized tax benefits of $2.2 million which would reduce the Company’s effective tax rate during future periods if it is subsequently determined that those liabilities are not required. The Company had approximately $0.6 million for the payment of interest and penalties accrued at both October 27, 2012 and July 28, 2012. The Company recognizes interest related to unrecognized tax benefits in interest expense and penalties in general and administrative expenses. Interest expense related to unrecognized tax benefits was immaterial for each of the three months ended October 27, 2012 and October 29, 2011.

11. Other Income, Net

The components of other income, net, are as follows:



	For the Three Months Ended
	October 27, 2012		October 29, 2011
	(Dollars in thousands)
Gain on sale of fixed assets	$	1,581	$	2,918
Miscellaneous income, net	33		41
Total other income, net	$	1,614	$	2,959

12. Capital Stock

On March 15, 2012, the Board of Directors authorized $40.0 million to repurchase shares of the Company’s outstanding common stock to be made over eighteen months in open market or private transactions. During fiscal 2010, fiscal 2011, fiscal 2012 and for the three months ended October 27, 2012, the Company made the following repurchases under its current and previously authorized share repurchase programs:



Period	Number of Shares Repurchased	Total Consideration (Dollars in thousands)		Average Price Per Share
Fiscal 2010	475,602	$	4,489	$	9.44
Fiscal 2011	5,389,500	$	64,548	$	11.98
Fiscal 2012	597,700	$	12,960	$	21.68
Three Months Ended October 27, 2012	1,047,000	$	15,203	$	14.52

All shares repurchased have been subsequently canceled. As of October 27, 2012, approximately $22.8 million remained authorized for repurchase through September 15, 2013.

13. Stock-Based Awards

The Company has certain stock-based compensation plans which provide for the grants of stock options, time based restricted share units (“RSUs”), and performance based restricted share units (“Performance RSUs”).

Compensation expense for stock-based awards is based on the fair value at the measurement date and is included in general and administrative expenses in the condensed consolidated statements of operations. Stock-based compensation expense and the related tax benefit recognized related to stock options and restricted share units during the three months ended October 27, 2012 and October 29, 2011 were as follows:

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	For the Three Months Ended
	October 27, 2012			October 29, 2011
	(Dollars in thousands)
Stock-based compensation	$	2,266		$	1,326
Tax benefit recognized	$	(765	)	$	(372	)

As of October 27, 2012, unrecognized compensation expense related to stock options, RSUs and Performance RSUs was $6.4 million, $2.2 million and $10.6 million, respectively. This expense will be recognized over a weighted-average period of 2.1, 2.5 and 2.2 years, respectively, which is the weighted average remaining contractual term for RSUs and Performance RSUs. For performance based awards, the unrecognized compensation expense is based on the maximum amount of restricted share units that can be earned under outstanding awards. If the performance goals are not met, no compensation expense will be recognized for these share units and compensation expense previously recognized will be reversed.

Stock Options - The following table summarizes stock option award activity during the three months ended October 27, 2012:



	Stock Options
	Shares		Weighted Average Exercise Price

Outstanding as of July 28, 2012	3,298,747		$	17.08
Granted	—		$	—
Options exercised	(21,230	)	$	7.81
Forfeited or cancelled	(98,095	)	$	24.65
Outstanding as of October 27, 2012	3,179,422		$	16.91

Exercisable options as of October 27, 2012	1,787,886		$	20.84

Options exercisable presented above reflect the approximate amount of options expected to vest after giving effect to estimated forfeitures at an insignificant rate.

RSUs and Performance RSUs - The following table summarizes RSU and Performance RSU activity during the three months ended October 27, 2012:



	Restricted Stock
	RSUs				Performance RSUs
	Share Units		Weighted Average Grant Price		Share Units		Weighted Average Grant Price

Outstanding as of July 28, 2012	222,760		$	14.49	774,264		$	18.76
Granted	1,280		$	17.80	101,568		$	13.85
Share units vested	(1,280	)	$	17.80	(36,341	)	$	14.53
Forfeited or cancelled	(3,000	)	$	7.98	(44,011	)	$	15.41
Outstanding as of October 27, 2012	219,760		$	14.58	795,480		$	18.51

The unvested time vesting share units reflect the approximate amount of units expected to vest after giving effect to estimated forfeitures. The RSUs in the above tables that were granted and vested during the three months ended October 27, 2012 relate to director quarterly retainer awards. The Performance RSUs in the above table represent the maximum number of awards that could vest, which is two hundred percent of the target award. Accordingly, the target amount of Performance RSUs outstanding as of October 27, 2012 was 397,740. Approximately 101,000 Performance RSUs outstanding as of October 27, 2012 will be canceled in December 2012 as a result of the fiscal 2012 performance criteria.

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14. Related Party Transactions

The Company leases administrative offices from entities related to officers of the Company’s subsidiaries. The total expense under these arrangements for the three months ended October 27, 2012 and October 29, 2011 was $0.3 million and $0.4 million, respectively. Additionally, there was a minimal amount paid in independent subcontracting services to entities related to officers of certain of the Company’s subsidiaries during the three months ended October 27, 2012 and October 29, 2011.

15. Commitments and Contingencies

As part of the Company’s insurance program, it retains the risk of loss, up to certain limits, for claims related to automobile liability, general liability, workers’ compensation, employee group health, and locate damages, and the Company has established reserves that it believes to be adequate based on current evaluations and experience with these types of claims. For these claims, the effect on the Company’s financial statements is generally limited to the amount needed to satisfy its insurance deductibles or retentions.

From time to time, the Company and its subsidiaries are parties to various other claims and legal proceedings. It is the opinion of the Company’s management, based on information available at this time, that such other pending claims or proceedings will not have a material effect on its condensed consolidated financial statements.

Performance Bonds and Guarantees

The Company has obligations under performance and other surety contract bonds related to certain of its customer contracts. Performance bonds generally provide the Company’s customer with the right to obtain payment and/or performance from the issuer of the bond if the Company fails to perform its contractual obligations. As of October 27, 2012, the Company had $237.6 million of outstanding performance and other surety contract bonds and no events have occurred in which the customers have exercised their rights under the bonds.

The Company has periodically guaranteed certain obligations of its subsidiaries, including obligations in connection with obtaining state contractor licenses and leasing real property.

Letters of Credit

The Company has standby letters of credit issued under its Credit Agreement as part of its insurance program. These standby letters of credit collateralize the Company’s obligations to its insurance carriers in connection with the settlement of potential claims. As of October 27, 2012, the Company had $44.1 million outstanding standby letters of credit issued under the Credit Agreement.

16. Concentration of Credit Risk

The Company’s customer base is highly concentrated. The top five customers accounted for approximately 59.6% and 59.9% of its total revenues for the three months ended October 27, 2012 and October 29, 2011, respectively. CenturyLink, Inc. (“CenturyLink”), AT&T Inc. (“AT&T”), Comcast Corporation (“Comcast”), and Verizon Communications, Inc. (“Verizon”) represent a significant portion of the Company’s customer base and each were over 10% of total revenue during the three months ended October 27, 2012 or October 29, 2011 as reflected in the following table:



	For the Three Months Ended
	October 27, 2012	October 29, 2011
CenturyLink	13.7%	13.3%
AT&T	13.5%	15.2%
Comcast	12.7%	12.9%
Verizon	10.2%	12.0%

The Company believes that none of its significant customers were experiencing financial difficulties that would materially impact the collectability of the Company’s trade accounts receivable and costs in excess of billings as of October 27, 2012. Customers representing 10% or more of combined amounts of trade accounts receivable and costs and estimated earnings in

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excess of billings as of October 27, 2012 or July 28, 2012 had the following outstanding balances and the related percentage of the Company’s total outstanding balances:



	October 27, 2012				July 28, 2012
	Amount		% of Total		Amount		% of Total
			(Dollars in millions)
CenturyLink	$	44.3	16.3	%	$	47.6	17.7	%
Windstream Corporation	$	35.1	12.9	%	$	35.4	13.2	%
AT&T	$	26.4	9.7	%	$	24.7	9.2	%

17. Supplemental Condensed Consolidating Financial Statements

As of October 27, 2012, the outstanding aggregate principal amount of the Company’s 2021 Notes was $187.5 million. The 2021 Notes were issued by Dycom Investments, Inc. (the “Issuer”) in fiscal 2011. The following condensed consolidating financial statements present, in separate columns, financial information for (i) Dycom Industries, Inc. (“Parent”) on a parent only basis, (ii) the Issuer, (iii) the guarantor subsidiaries for the 2021 Notes on a combined basis, (iv) other non-guarantor subsidiaries on a combined basis, (v) the eliminations and reclassifications necessary to arrive at the information for the Company on a consolidated basis, and (vi) the Company on a consolidated basis. The condensed consolidating financial statements are presented in accordance with the equity method. Under this method, the investments in subsidiaries are recorded at cost and adjusted for the Company’s share of subsidiaries’ cumulative results of operations, capital contributions, distributions and other equity changes. Intercompany charges (income) between the Parent and subsidiaries are recognized in the condensed consolidating financial statements during the period incurred and the settlement of intercompany balances is reflected in the condensed consolidating statement of cash flows based on the nature of the underlying transactions.

Each guarantor and non-guarantor subsidiary is wholly-owned, directly or indirectly, by the Issuer and the Parent. The Notes are fully and unconditionally guaranteed on a joint and several basis by each guarantor subsidiary and Parent. There are no contractual restrictions limiting transfers of cash from guarantor and non-guarantor subsidiaries to Issuer or Parent, within the meaning of Rule 3-10 of Regulation S-X.

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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED) OCTOBER 27, 2012

	Parent		Issuer		Subsidiary Guarantors		Non- Guarantor Subsidiaries		Eliminations and Reclassifications			Dycom Consolidated
	(Dollars in thousands)
ASSETS
CURRENT ASSETS:
Cash and equivalents	$	—	$	—	$	54,096	$	630	$	—		$	54,726
Accounts receivable, net	—		—		151,840		1,954		—			153,794
Costs and estimated earnings in excess of billings	—		—		116,301		2,108		—			118,409
Inventories	—		—		25,142		—		—			25,142
Deferred tax assets, net	2,423		—		13,962		84		(395		)	16,074
Income taxes receivable	741		—		—		—		—			741
Other current assets	6,878		54		5,080		810		—			12,822
Total current assets	10,042		54		366,421		5,586		(395		)	381,708

PROPERTY AND EQUIPMENT, NET	10,578		—		128,563		15,560		—			154,701
GOODWILL	—		—		174,849		—		—			174,849
INTANGIBLE ASSETS, NET	—		—		48,182		—		—			48,182
DEFERRED TAX ASSETS, NET NON-CURRENT	—		64		4,314		651		(5,029		)	—
INVESTMENT IN SUBSIDIARIES	746,311		1,439,481		—		—		(2,185,792		)	—
INTERCOMPANY RECEIVABLES	—		—		871,537		—		(871,537		)	—
OTHER	5,753		4,229		1,917		194		—			12,093
TOTAL NON-CURRENT ASSETS	762,642		1,443,774		1,229,362		16,405		(3,062,358		)	389,825
TOTAL ASSETS	$	772,684	$	1,443,828	$	1,595,783	$	21,991	$	(3,062,753	)	$	771,533

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	3,552	$	—	$	33,709	$	1,224	$	—		$	38,485
Current portion of debt	—		—		55		—		—			55
Billings in excess of costs and estimated earnings	—		—		1,447		—		—			1,447
Accrued insurance claims	588		—		23,559		97		—			24,244
Deferred tax liabilities	—		249		82		64		(395		)	—
Other accrued liabilities	3,873		3,929		38,386		1,454		—			47,642
Income taxes payable	4,567		—		—		—		—			4,567
Total current liabilities	12,580		4,178		97,238		2,839		(395		)	116,440

LONG-TERM DEBT	—		187,500		—		—		—			187,500
ACCRUED INSURANCE CLAIMS	715		—		22,040		92		—			22,847
DEFERRED TAX LIABILITIES, NET NON-CURRENT	811		—		51,553		1,457		(5,029		)	48,792
INTERCOMPANY PAYABLES	363,676		505,839		—		2,022		(871,537		)	—
OTHER LIABILITIES	2,907		—		1,049		3		—			3,959
Total liabilities	380,689		697,517		171,880		6,413		(876,961		)	379,538
Total stockholders' equity	391,995		746,311		1,423,903		15,578		(2,185,792		)	391,995
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	772,684	$	1,443,828	$	1,595,783	$	21,991	$	(3,062,753	)	$	771,533

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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET JULY 28, 2012

	Parent		Issuer		Subsidiary Guarantors		Non- Guarantor Subsidiaries		Eliminations and Reclassifications			Dycom Consolidated
	(Dollars in thousands)
ASSETS
CURRENT ASSETS:
Cash and equivalents	$	—	$	—	$	51,563	$	1,018	$	—		$	52,581
Accounts receivable, net	—		—		140,426		1,362		—			141,788
Costs and estimated earnings in excess of billings	—		—		125,869		1,452		—			127,321
Inventories	—		—		26,274		—		—			26,274
Deferred tax assets, net	2,390		—		13,566		80		(403		)	15,633
Income taxes receivable	4,884		—		—		—		—			4,884
Other current assets	2,211		10		5,458		787		—			8,466
Total current assets	9,485		10		363,156		4,699		(403		)	376,947

PROPERTY AND EQUIPMENT, NET	9,671		—		133,145		15,431		—			158,247
GOODWILL	—		—		174,849		—		—			174,849
INTANGIBLE ASSETS, NET	—		—		49,773		—		—			49,773
DEFERRED TAX ASSETS, NET NON-CURRENT	—		65		9,341		1,085		(10,491		)	—
INVESTMENT IN SUBSIDIARIES	734,451		1,425,451		—		—		(2,159,902		)	—
INTERCOMPANY RECEIVABLES	—		—		860,758		54		(860,812		)	—
OTHER	6,075		4,338		1,731		233		—			12,377
TOTAL NON-CURRENT ASSETS	750,197		1,429,854		1,229,597		16,803		(3,031,205		)	395,246
TOTAL ASSETS	$	759,682	$	1,429,864	$	1,592,753	$	21,502	$	(3,031,608	)	$	772,193

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	2,785	$	—	$	33,441	$	597	$	—		$	36,823
Current portion of debt	—		—		74		—		—			74
Billings in excess of costs and estimated earnings	—		—		1,522		—		—			1,522
Accrued insurance claims	588		—		24,551		79		—			25,218
Deferred tax liabilities	—		249		84		70		(403		)	—
Other accrued liabilities	5,054		565		43,772		1,535		—			50,926
Total current liabilities	8,427		814		103,444		2,281		(403		)	114,563

LONG-TERM DEBT	—		187,500		—		—		—			187,500
ACCRUED INSURANCE CLAIMS	708		—		22,815		68		—			23,591
DEFERRED TAX LIABILITIES, NET NON-CURRENT	1,020		—		57,140		1,868		(10,491		)	49,537
INTERCOMPANY PAYABLES	353,713		507,099		—		—		(860,812		)	—
OTHER LIABILITIES	2,883		—		1,185		3		—			4,071
Total liabilities	366,751		695,413		184,584		4,220		(871,706		)	379,262
Total stockholders' equity	392,931		734,451		1,408,169		17,282		(2,159,902		)	392,931
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	759,682	$	1,429,864	$	1,592,753	$	21,502	$	(3,031,608	)	$	772,193

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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) FOR THE THREE MONTHS ENDED OCTOBER 27, 2012

	Parent			Issuer			Subsidiary Guarantors			Non- Guarantor Subsidiaries			Eliminations and Reclassifications			Dycom Consolidated
	(Dollars in thousands)
REVENUES:
Contract Revenues	$	—		$	—		$	319,025		$	4,261		$	—		$	323,286

EXPENSES:
Costs of earned revenues, excluding depreciation and amortization	—			—			253,544			3,522			—			257,066
General and administrative	8,409			146			17,616			2,653			—			28,824
Depreciation and amortization	740			—			13,286			1,285			—			15,311
Intercompany charges (income), net	(9,925		)	—			10,272			(347		)	—			—
Total	(776		)	146			294,718			7,113			—			301,201

Interest expense, net	(776		)	(3,420		)	(1		)	—			—			(4,197		)
Other income, net	—			—			1,565			49			—			1,614

INCOME (LOSS) BEFORE INCOME TAXES AND EQUITY IN EARNINGS OF SUBSIDIARIES	—			(3,566		)	25,871			(2,803		)	—			19,502

PROVISION (BENEFIT) FOR INCOME TAXES	—			(1,397		)	10,136			(1,098		)	—			7,641

NET INCOME (LOSS) BEFORE EQUITY IN EARNINGS OF SUBSIDIARIES	—			(2,169		)	15,735			(1,705		)	—			11,861

EQUITY IN EARNINGS OF SUBSIDIARIES	11,861			14,030			—			—			(25,891		)	—

NET INCOME (LOSS)	$	11,861		$	11,861		$	15,735		$	(1,705	)	$	(25,891	)	$	11,861

Foreign currency translation gain	2			2			—			2			(4		)	2
COMPREHENSIVE INCOME (LOSS)	$	11,863		$	11,863		$	15,735		$	(1,703	)	$	(25,895	)	$	11,863

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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) FOR THE THREE MONTHS ENDED OCTOBER 29, 2011

	Parent			Issuer			Subsidiary Guarantors		Non-Guarantor Subsidiaries			Eliminations and Reclassifications			Dycom Consolidated
	(Dollars in thousands)
REVENUES:
Contract revenues	$	—		$	—		$	313,818	$	5,757		$	—		$	319,575

EXPENSES:
Costs of earned revenues, excluding depreciation and amortization	—			—			250,893		4,294			—			255,187
General and administrative	6,407			147			16,404		2,400			—			25,358
Depreciation and amortization	787			—			13,861		1,322			(12		)	15,958
Intercompany charges (income), net	(7,964		)	—			7,496		468			—			—
Total	(770		)	147			288,654		8,484			(12		)	296,503

Interest income (expense), net	(770		)	(3,414		)	11		—			—			(4,173		)
Other income, net	—			—			3,061		(102		)	—			2,959

INCOME (LOSS) BEFORE INCOME TAXES AND EQUITY IN EARNINGS OF SUBSIDIARIES	—			(3,561		)	28,236		(2,829		)	12			21,858

PROVISION (BENEFIT) FOR INCOME TAXES	—			(1,440		)	11,476		(1,144		)	—			8,892

NET INCOME (LOSS) BEFORE EQUITY IN EARNINGS OF SUBSIDIARIES	—			(2,121		)	16,760		(1,685		)	12			12,966

EQUITY IN EARNINGS OF SUBSIDIARIES	12,966			15,087			—		—			(28,053		)	—

NET INCOME (LOSS)	$	12,966		$	12,966		$	16,760	$	(1,685	)	$	(28,041	)	$	12,966

Foreign currency translation loss	(87		)	(87		)	—