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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Form 10-K

Commission File Number 0-5423

Dycom Industries, Inc.

Registrant’s telephone number, including area code:

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

      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 þ          No o

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     o

      The aggregate market value of the common stock, par value $0.33 1/3 per share, held by non-affiliates of the registrant, computed by reference to the closing price of such stock on September 27, 2002 was $430,344,593.

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

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PART I

Item 1.     Business

Overview

      We are a leading provider of specialty contracting services, including engineering, construction, installation, and maintenance services to telecommunications providers throughout the United States. We provide a comprehensive range of telecommunications infrastructure services including the engineering, placement and maintenance of aerial, underground, and buried fiber-optic, coaxial and copper cable systems owned by local and long distance communications carriers and cable television multiple system operators. Additionally, we provide similar services related to the installation of integrated voice, data, and video local and wide area networks within office buildings. We also provide underground locating services to various utilities and construction and maintenance services to electrical utilities. For the fiscal year ended July 27, 2002, specialty contracting services related to the telecommunications industry, underground utility locating, and electrical construction and maintenance contributed approximately 89.2%, 8.8%, and 2.0%, respectively, to our total contract revenues.

      Through our 28 wholly-owned subsidiaries and divisions, we have established relationships with many leading local exchange carriers, long distance providers, cable television multiple system operators and electric utilities. Our key customers include BellSouth Corporation (“BellSouth”), Comcast Cable Corporation (“Comcast”), Adelphia Communications Corporation (“Adelphia”), AT&T Broadband Inc. (“AT&T Broadband”), DIRECTV, Inc. (“DIRECTV”), Charter Communications, Inc. (“Charter”), Qwest Communications, Inc. (“Qwest”), Sprint Corporation (“Sprint”), Verizon Communications, Inc. (“Verizon”), MediaCom Communications Corp. (“MediaCom.”), Cablevision Systems Corporation (“Cablevision”) and Insight Communications. During fiscal 2002, approximately 83.4% of our total contract revenues came from multi-year master service agreements and other long-term agreements with large telecommunications providers and electric utilities.

Recent Acquisitions

      In February 2002, we acquired all of the outstanding capital stock of Arguss Communications, Inc. (“Arguss”) in exchange for approximately 4.9 million shares of our common stock. The aggregate purchase price was approximately $85.4 million, before various transaction costs. Arguss provides infrastructure services to cable and telecommunications companies. Subsequent to our acquisition of Arguss, we paid off all of its bank debt of approximately $58.0 million. Our acquisition of Arguss expanded our geographical presence within our existing customer base.

      See “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional information regarding this acquisition.

Specialty Contracting Services

     Telecommunications Services

      Engineering. We provide outside plant engineers and drafters to local exchange carriers. We also design aerial, underground and buried fiber optic and copper cable systems that extend from the telephone central office to the consumer’s home or business. The engineering services we provide to local exchange carriers include the design of service area concept boxes, terminals, buried and aerial drops, transmission and central office equipment design and the proper administration of feeder and distribution cable pairs. For competitive access providers, we design building entrance laterals, fiber rings and conduit systems. We obtain rights of way and permits in support of engineering activities, and provide construction management and inspection personnel in conjunction with engineering services or on a stand alone basis. Also, for cable television multiple system operators, we perform make ready studies, strand mapping, field walk out, computer-aided radio frequency design and drafting, and fiber cable routing and design.

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      Construction, Installation, and Maintenance. We place and splice cable, excavate trenches in which to place the cable, place related structures such as poles, anchors, conduits, manholes, cabinets and closures, place drop lines from the main distribution lines to the customer’s home or business, and monitor and remove these facilities. In addition, we install and maintain transmission and central office equipment. We have the capability to directionally bore the placement of cables, a highly specialized and increasingly necessary method of placing buried cable networks in congested urban and suburban markets where trenching is impractical.

      Premise Wiring. We provide premise wiring services to a variety of large corporations and certain governmental agencies. These services, unlike the engineering, construction and maintenance services provided to telecommunication companies, are predominantly limited to the installation, repair and maintenance of telecommunications infrastructure within improved structures. Projects include the placement and removal of various types of cable within buildings and individual offices. These services generally include the development of communication networks within a company or government agency and relate primarily to the establishment and maintenance of computer operations, telephone systems, internet access and communications monitoring systems established for purposes of monitoring environmental controls or security procedures.

     Underground Utility Locating Services

      Under a variety of state laws, excavators are required to request the location of underground utilities such as telephone, cable television, power and gas prior to excavating. Utilities must respond to these requests from excavators to mark their underground and buried facilities. We provide these underground utility locating services.

     Electrical Construction and Maintenance Services

      We perform electrical construction and maintenance services for electric companies. This construction is performed primarily as a stand alone service, although at times it is performed in conjunction with other services we provide to telecommunications providers. These services include installing and maintaining electrical transmission and distribution lines, setting utility poles and stringing electrical lines, principally above ground. The work performed may involve high voltage splicing and, on occasion, the installation of underground high voltage distribution systems. We also repair and replace lines that are damaged or destroyed as a result of weather conditions.

     Revenues by Type of Customer

      For the 2002, 2001 and 2000 fiscal years, the percentages of our total contract revenues derived from specialty contracting services related to the telecommunications industry, underground utility locating, and electrical construction and maintenance were as set forth below:

Customer Relationships

      Our current customers include local exchange carriers such as BellSouth, Qwest, Sprint, SBC Communications, Inc., Alltel Corporation, and Verizon. We also currently provide telecommunications engineering, construction and maintenance services to a number of cable television multiple system operators or direct satellite operators including Adelphia, AT&T Broadband, Comcast, DIRECTV, Charter, Cablevision, Insight Communications, MediaCom, Cox Communications, Inc., and Time Warner. Premise wiring services have

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      Our customer base is highly concentrated with our top five customers in fiscal years 2002, 2001, and 2000 accounting for approximately 53%, 52%, and 53%, respectively, of our total revenues. During fiscal 2002, approximately 16.6% of our total revenues were derived from BellSouth, 12.3% from Comcast, and 11.9% from Adelphia. We believe that a substantial portion of our total revenues and operating income will continue to be derived from a concentrated group of customers.

      A significant amount of our business is performed under master service agreements. These agreements are generally exclusive requirement contracts, with certain exceptions, including the customer’s option to perform the services with its own employees. The agreements are typically three to five years in duration, although the terms generally permit the customer to terminate the agreement upon 90 days prior written notice. Each agreement contemplates hundreds of individual construction and maintenance projects valued generally at less than $10,000 each. Other jobs are bid by us on a nonrecurring basis. Although historically master service agreements have been awarded through a competitive bidding process, recent trends have been toward securing or extending such contracts on negotiated terms.

      Our sales and marketing efforts are the responsibility of our management and that of our operating subsidiaries.

      On May 20, 2002, we announced that we had been notified by a major cable customer, Adelphia, to suspend work on substantially all of Adelphia’s projects. Subsequently, on June 25, 2002, Adelphia announced that it, together with its subsidiaries, had filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code. At July 27, 2002, we had outstanding pre-petition receivables from Adelphia of $40.4 million. We have filed liens on various properties to secure substantially all of the receivables and have undertaken an analysis of the value of the receivables. Based on our analysis, we increased our allowance for doubtful accounts by $18.5 million for these receivables. This allowance reflects management’s best estimate of amounts owed to us by Adelphia based on our understanding of the current status of the Adelphia bankruptcy proceeding and a number of assumptions, including assumptions about the validity, priority and enforceability of our security interests and the value of other similarly secured assets. Should any of the factors underlying our estimate change, the amount of the allowance could change significantly.

      On July 21, 2002 another customer, WorldCom, Inc. (“WorldCom”) and its subsidiaries, filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code. At July 27, 2002, we had outstanding pre-petition receivables from WorldCom of $2.1 million. Management determined that the likelihood of payment is low and, accordingly, we fully reserved this receivable.

      Should any additional customers file for bankruptcy or experience financial difficulties, or if recovery efforts relating to the Adelphia receivables fail to materialize, we could experience reduced cash flows and losses in excess of the allowances currently provided. In addition, material changes in our customers’ revenues or cash flows could affect our ability to collect amounts due from them.

Backlog

      Our backlog is comprised of the uncompleted portion of services to be performed under job-specific contracts and the estimated value of future services that we expect to provide under long-term requirements contracts. Our backlog at July 27, 2002 and July 28, 2001 was $795.1 million and $1.013 billion, respectively. The decline was primarily due to the general slowdown in the telecommunications industry and specific reductions associated with our business with Adelphia, DIRECTV and WorldCom, partially offset by an increase in backlog from AT&T Broadband. We expect to complete approximately 49.1% of this backlog during fiscal year 2003. In many instances our customers are not contractually committed to specific volumes of services under a contract. However, the customer is obligated to obtain these services from us if they are not performed by the customer’s employees. Additionally, we are committed to perform these services if requested by the customer. Many of these contracts are multi-year agreements, and we include in our backlog the amount of services projected to be performed over the term of the contract based on our historical

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Safety and Risk Management

      We are committed to ensuring that our employees perform their work in the safest possible manner. We regularly communicate with our employees to promote safety and to instill safe work habits. Our safety director, a holding company employee, reviews all accidents and claims throughout our operating subsidiaries, examines trends and implements changes in procedures or communications to address any safety issues. Claims arising in our business are generally workers’ compensation, various general liabilities, and vehicle liabilities including personal injury and property damage. For losses occurring during fiscal years 2002 and 2003, we retain the risk on a per occurrence basis for automobile liability to $500,000, for general liability to $250,000, and for worker’s compensation, in states where we are allowed to retain risk, to $500,000. For fiscal year 2002, we had aggregate stop loss coverage for the above exposures at the stated retentions of approximately $20 million and $17.4 million for fiscal year 2003. In addition, we have umbrella liability coverage to a policy limit for each year of $75 million. Within the umbrella coverage, we have retained the risk of loss between $2.0 and $5.0 million, on a per occurrence basis, with an aggregate stop loss for this layer of $10.0 million for each of fiscal year 2002 and 2003.

      We carefully monitor claims and participate actively in claims estimates and adjustments. The estimated costs of self-insured claims, which include estimates for incurred but not reported claims, are accrued as liabilities. Due to fluctuations in our loss experience in recent years, insurance accruals have varied from year to year and have had an effect on operating margins. Additionally, if we were to experience insurance claims in excess of our umbrella coverage limit, our business could be materially and adversely affected. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 1 of Notes to Consolidated Financial Statements.

Competition

      The telecommunications engineering, construction and maintenance services industry, electrical contracting industry, and utility locating industry in which we operate are highly competitive. We compete with other independent contractors in the markets in which we operate, including several that are large domestic companies that may have financial, technical, and marketing resources that exceed our own. In addition, there are relatively few barriers to entry into the markets in which we operate and, as a result, any organization that has adequate financial resources and access to technical expertise may become a competitor.

      A significant portion of our revenue is currently derived from master service agreements and price is often an important factor in the award of such agreements. Accordingly, we could be outbid by our competitors in an effort to procure such business. There can be no assurance that our competitors will not develop the expertise, experience and resources to provide services that are equal or superior in both price and quality to our services, or that we will be able to maintain or enhance our competitive position. We may also face competition from the in-house service organizations of our existing or prospective customers, particularly telecommunications providers that employ personnel who perform some of the same types of services as those provided by us. Although a significant portion of these services is currently outsourced, there can be no assurance that our existing or prospective customers will continue to outsource telecommunications engineering, construction and maintenance services in the future.

      We believe that the principal competitive factors resulting in our market reputation for telecommunications engineering, construction and maintenance services, electrical contracting services, and utility locating services include technical expertise, price, quality of service, availability of skilled technical personnel, worker and general public safety, geographic presence, breadth of service offerings, adherence to industry standards, and financial stability. We believe that we compete favorably with our competitors on the basis of these factors.

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Employees

      As of July 27, 2002, we employed approximately 5,700 persons. The number of our employees varies according to the work in progress. We maintain a nucleus of technical and managerial personnel from which to draw to supervise all projects. Additional employees are added as needed to complete specific projects.

Materials

      Generally, our customers supply most or all of the materials required for a particular contract and we provide the personnel, tools, and equipment to perform the installation services. However, with respect to a portion of our contracts, we may supply part or all of the materials required. In these instances, we are not dependent upon any one source for the materials that we customarily utilize to complete the job. We are not presently experiencing, nor do we anticipate experiencing, any difficulties in procuring an adequate supply of materials.

Item 2.     Properties

      We lease our executive offices located in Palm Beach Gardens, Florida. Our subsidiaries operate from owned or leased administrative offices, district field offices, equipment yards, shop facilities, and temporary storage locations. We own facilities in Phoenix, Arizona; Durham, North Carolina; Knoxville, Tennessee; Sturgis, Kentucky; Pinellas Park, Florida; Broussard, Louisiana; West Chester, Pennsylvania; West Palm Beach, Florida; Epsom, New Hampshire; Costa Mesa, California; Albuquerque, New Mexico; and Woodinville, Washington. We also lease, subject to long-term noncancelable leases, facilities in Kimberling City, Missouri; Lithonia, Georgia; Issaquah, Washington; Greensboro, North Carolina; Rocky Mount, North Carolina; Nicholasville, Kentucky; Coburg, Oregon; Pleasant Grove, Utah; Daytona Beach, Florida; Jupiter, Florida; Greenwood, South Carolina; Vansant, Virginia; Lawrenceville, Georgia; Salem, Oregon; Tomball, Texas; Springfield, Vermont; and Englewood, Colorado. We also lease and own other smaller properties as necessary to enable us to effectively perform our obligations under master service agreements and other specific contracts. We believe that our facilities are adequate for our current operations.

Item 3.     Legal Proceedings

      The federal employment tax returns for one of our subsidiaries were audited by the Internal Revenue Service (“IRS”). As a result of the audit, we received an examination report from the IRS in October 1999 proposing a $6.1 million tax deficiency. At issue, according to the examination report, was the taxpayer’s payment of certain employee allowances for the years 1995 through 1997 without reporting such payment as wages on its employees’ W-2 forms. In April 2002, we reached a settlement agreement with the IRS. This settlement, which was paid in full to the IRS on May 6, 2002, resulted in a decrease to our payroll tax reserve of approximately $1.5 million. This reduced our cost of earned revenues for fiscal 2002.

      On September 10, 2001, as amended on November 9, 2001 and June 7, 2002, Williams Communications LLC (“Williams”) filed suit against one of our subsidiaries, Niels Fugal Sons Company (“NFS”), in the United States District Court of the Northern District of Oklahoma for claims that include breach of contract with respect to fiber-optic cable installation projects that NFS had constructed for Williams. Williams seeks an unspecified amount of damages, including compensatory, liquidated and punitive damages. We have answered and asserted affirmative defenses to their complaints and have filed a counterclaim for unpaid amounts of approximately $8 million due under the contract which is primarily recorded in retainage as of July 27, 2002. Trial is currently set for March 2003. Management believes we have meritorious defenses against these claims and intends to defend them vigorously. Management believes that this litigation will not materially affect our financial position or future operating results, although we cannot give you any assurance about the ultimate outcome of this or any other litigation.

      In the normal course of business, certain of our subsidiaries have pending claims and legal proceedings. It is the opinion of our management, based on information available at this time, that none of the current claims or proceedings will have a material adverse effect on our consolidated financial statements.

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      In the normal course of business, we enter into employment agreements with certain members of our executive management. It is the opinion of our management, based on information available at this time, that these agreements will not have a material adverse effect on our consolidated financial statements.

Item 4.     Submission of Matters to a Vote of Security Holders

      During the fourth quarter of the year covered by this report, no matters were submitted to a vote of our security holders whether through the solicitation of proxies or otherwise.

PART II

Item 5.     Market for Registrant’s Common Equity and Related Stockholder Matters

      Our common stock is traded on the New York Stock Exchange (“NYSE”) under the symbol “DY”. The following table shows the range of the high and low closing sales prices for each quarter within the last two fiscal years as reported on the NYSE.

      As of September 27, 2002, there were approximately 688 holders of record of our $0.33 1/3 par value per share common stock. The common stock closed at a high of $10.95 and a low of $8.85 during the period July 28, 2002 through September 27, 2002.

      We currently intend to retain future earnings, and since 1982, we have paid no cash dividends. Our Board of Directors continues to evaluate the dividend policies based on our financial condition including profitability, cash flow, capital requirements, and the outlook of the business. Our credit agreement precludes the payment of cash dividends.

      On February 21, 2002, we issued 4,853,031 shares of our common stock in connection with the acquisition of Arguss.

      Information concerning our equity compensation plans is hereby incorporated by reference to our definitive proxy statement to be filed with the Commission pursuant to Regulation 14A.

Item 6.     Selected Financial Data

      The following table sets forth certain selected financial data of us for the years ended July 27, 2002, July 28, 2001, July 29, 2000 and July 31, 1999, and 1998. We acquired Cable Com Inc. (“CCI”) and Installation Technicians, Inc. (“ITI”) in April 1998, and NFS in March 2000. These acquisitions were accounted for as pooling of interests and accordingly, the consolidated financial statements include the accounts of CCI, ITI and NFS for all periods presented. All other acquisitions referred to in the footnotes to this table were accounted for under the purchase method of accounting and amounts include the results and balances of the acquired company from its acquisition date. The table has been adjusted to reflect the 3-for-2 stock split effected in the form of a stock dividend and paid on January 4, 1999 and the 3-for-2 stock split

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(1)	Amounts include the results and balances of Arguss from its acquisition date until July 27, 2002.
(2)	Amounts include the results and balances of Cable Connectors, Inc. (“CAB”), Schaumberg Enterprises, Inc. (“SEI”), Point to Point Communications, Inc. (“PTP”), Stevens Communications, Inc. (“SCI”), and Nichols Holding, Inc. (“NCI”) from their respective acquisition dates until July 28, 2001.
(3)	Amounts include the results and balances of Lamberts’ Cable Splicing Company (“LCS”), C-2 Utility Contractors, Inc. (“C-2”), Artoff Construction Co., Inc. (“ACC”), K.H. Smith Communications, Inc. (“KHS”), and Selzee Solutions, Inc. (“SSI”) from their respective acquisition dates until July 29, 2000.
(4)	Amounts include the results and balances of Locating, Inc. (“LOC”), Ervin Cable Construction, Inc. (“ECC”), Apex Digital, Inc. (“APX”), and Triple D Communications, Inc. (“DDD”) from their respective acquisition dates until July 31, 1999.
(5)	The results of operations for fiscal 1998 include a $0.4 million reduction in the deferred tax valuation allowance.
(6)	The provision for income taxes has been adjusted to reflect a pro forma tax provision for pooled companies that were previously “S Corporations.”
(7)	For fiscal 1998, certain customer advances have been reclassified as current liabilities in order to present comparable periods.

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Item 7.     Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

      We are a leading provider of specialty contracting services, including engineering, construction, installation and maintenance services to telecommunications providers throughout the United States. We also provide underground locating services to various utilities and maintenance and construction services to electrical utilities. For the fiscal year ended July 27, 2002, specialty contracting services related to the telecommunications industry, underground utility locating and construction and maintenance to electrical utilities contributed approximately 89.2%, 8.8% and 2.0%, respectively, to our total contract revenues.

      In February 2002, we acquired all of the outstanding stock of Arguss for approximately 4.9 million shares of our common stock. The aggregate purchase price was approximately $85.4 million before various transaction costs. The acquisition was accounted for under the purchase method of accounting and accordingly, the acquired assets and liabilities were recorded at their estimated fair value at the date of acquisition. The purchase price has been allocated to the assets acquired and liabilities assumed including $98.2 million of goodwill. Subsequent to our acquisition of Arguss, we paid off all of its bank debt of approximately $58.0 million. The results of operations of Arguss are included in our consolidated financial statements from the date of acquisition.

      We provide a significant portion of our services pursuant to multi-year master service agreements. Under master service agreements, we generally agree to provide for a period of one or more years, generally on an exclusive basis, a customer’s specified service requirements within a given geographical area. Master service agreements generally provide that we will furnish a specified unit of service for a specified unit price (e.g., fiber optic cable will be installed underground for a specified rate of dollars per foot). A customer may generally terminate these agreements for convenience with at least 90 days prior written notice. Master service agreements are usually awarded on a competitive bid basis but in some cases are extended by negotiation rather than re-bid. We are currently a party to approximately 60 master service agreements.

      The remainder of our services are provided pursuant to contracts for particular jobs. Long-term contracts relate to specific projects with terms in excess of one year from the contract date. Short-term contracts are generally from three to four months in duration, depending upon the size of the project. A portion of our contracts include retainage provisions under which 5% to 10% of the contract invoicing is withheld subject to project completion and acceptance by the customer.

      Contract revenues from multi-year master service agreements represented 47.8% and 51.3% of total contract revenues in fiscal 2002 and 2001, respectively, and contract revenues from long-term contracts, including multi-year master service agreements, represented 83.4% and 81.2% of total contract revenues, respectively.

      We recognize revenue on unit based contracts 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.

      We derive a significant amount of our revenue from telecommunications companies. Beginning in the latter part of 2000 and continuing throughout fiscal 2002, certain segments of the telecommunications industry suffered a severe downturn that has resulted in a number of our customers experiencing financial difficulties. Several of our customers have filed for bankruptcy protection, including Adelphia and WorldCom. At July 27, 2002, we had pre-petition outstanding receivables from Adelphia and WorldCom of approximately $40.4 million and $2.1 million, respectively.

      The downturn in the telecommunications industry has adversely affected capital expenditures for infrastructure projects even among customers that are not experiencing financial difficulties. Capital expenditures by telecommunications customers during the remainder of calendar 2002 are expected to remain at low levels in comparison with prior years, and there can be no assurance that additional customers will not file for bankruptcy protection or otherwise experience severe financial difficulties in fiscal 2003. Additional bankrupt-

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      A significant portion of our revenue comes from several large customers. For fiscal 2002 and 2001, approximately 16.6% and 17.9%, respectively, of our contract revenues were from BellSouth; 12.3% and 15.9%, respectively, of our contract revenues were from Comcast; 11.9% and 3.6%, respectively, of our contract revenues were from Adelphia; 6.3% and 4.1%, respectively, of the contract revenues were from AT&T Broadband; 6.2% and 4.0%, respectively, of our contract revenues were from DIRECTV. On May 20, 2002, we announced that we were notified by several subsidiaries of Adelphia to suspend work on substantially all of their projects. In August 2002, in accordance with our contractual rights, we notified DIRECTV of our intention to cease performing services for them effective March 1, 2003.

      Cost of earned revenues includes all direct costs of providing services under our contracts. Cost of earned revenues includes all costs of construction personnel, subcontractor costs, all costs associated with operation of equipment (excluding depreciation) and insurance and materials not supplied by the customer. Generally the customer provides the materials that are to be used for its job. Because we retain the risk for automobile and general liability, worker’s compensation, and employee group health claims subject to certain limits, a change in experience or actuarial assumptions that did not affect the rate of claims payments could nonetheless materially affect results of operations in a particular period.

      General and administrative costs include all our costs at the holding company level, as well as subsidiary management personnel and administrative overhead. Our management personnel, including subsidiary management, perform substantially all sales and marketing functions as part of their management responsibilities and, accordingly, we have not incurred material selling expenses.

Critical Accounting Policies and Estimates

      The discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the related disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we evaluate these estimates, including those related to revenue recognition, bad debts, self-insured claims liability, income taxes, intangible assets, investments, contingencies and litigation. We base our estimates on current information, historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recognition of revenue that are not readily apparent from other sources. We cannot assure you that actual results will not differ from those estimates.

      We have identified the accounting policies below as critical to the accounting for our business operations and the understanding of our results of operations. The impact of these policies on our operations is discussed throughout “Management’s Discussion and Analysis of Financial Condition and Results of Operations” where such policies affect our reported and expected financial results. Our key accounting estimates and policies are reviewed with our Audit Committee. For a further discussion of the application of these and other accounting policies, see Note 1 to the Notes to the Consolidated Financial Statements.

      Revenue Recognition. The majority of our 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

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      Estimation of the Allowance for Doubtful Accounts. We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. We record an increase in the allowance for doubtful accounts when it is probable that the receivable has been impaired at the date of the financial statements and the loss can be reasonably estimated. Any increase in the allowance account has a corresponding negative effect on our results of operations. Estimates of uncollectable amounts are reviewed each period, and changes are recorded in the period they become known. Management analyzes accounts receivable and historical bad debts, customer creditworthiness, current economic trends and considers changes in customer payment terms and other factors when evaluating the adequacy of the allowance for doubtful accounts. Should any of these factors change, the estimate made by management may also change, which could affect the level of our future provision for doubtful accounts.

      Self-Insured Claims Liability. We retain the risk of loss, up to certain limits, for automobile, general liability 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, cost, 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.

      In addition, we retain the risk, up to certain limits, under a self-insured employee health plan. We periodically review the paid claims history of our employee health plan and analyze our accrued liability for claims, including claims incurred but not yet paid, reflected in our consolidated financial statements. 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.

      The method of calculating the estimated accrued liability for automobile, general liability workers’ compensation and employee group health claims is subject to inherent uncertainty. If actual results are less favorable than what we use to calculate the accrued liability, we would have to record expenses in excess of what we have already accrued.

      Valuation of Intangible Assets and Investments. We have adopted SFAS No. 142, “Goodwill and Other Intangible Assets.” In accordance with that statement, we conduct on at least an annual basis a review of our reporting units to determine whether their carrying value exceeds their fair market value. Should this be the case, the value of our goodwill may be impaired and written down. The valuations employ a combination of present value techniques to measure fair value corroborated by comparisons to estimated market multiples. When necessary, we engage third party specialists to assist us with our valuations. Impairment losses are reflected in operating income or loss in the consolidated statements of operations.

      Accounting for Income Taxes. We account 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 bases of assets and liabilities. Developing our provision for income taxes requires significant judgment and expertise in federal and state income tax laws, regulations and strategies, including the determination of deferred tax assets and liabilities and, if necessary, any valuation allowances that may be required for deferred tax assets. We have not recorded any valuation allowances as of July 27, 2002 because management believes that future taxable income will, more likely than not, be sufficient to realize the benefits of those assets as the temporary differences in basis reverse over time. Our judgments and tax strategies are subject to audit by various taxing authorities. While the Company believes it has provided adequately for its income tax liabilities in its consolidated financial statements, adverse determinations by these taxing authorities could have a material adverse effect on our consolidated financial condition and results of operations.

      Contingencies and Litigation. We are currently involved in certain legal proceedings. We estimate the range of liability related to pending litigation where the amount and range of loss can be estimated. Where

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Results of Operations

      The following table sets forth, as a percentage of contract revenues earned, certain items in our consolidated statement of operations for the periods indicated:

Year Ended July 27, 2002 Compared to Year Ended July 28, 2001

      Revenues. Contract revenues decreased $202.7 million, or 24.5%, to $624.0 million in fiscal 2002 from $826.7 million in fiscal 2001. Of this decrease, $207.3 million was attributable to a decline in demand for specialty contracting services provided to telecommunications companies and $2.7 million was attributable to a decline in demand for construction and maintenance services provided to electrical utilities, offset by an increase of $7.3 million in underground utility location services. The decrease in our telecommunications service revenues is attributable to lower revenues, primarily from telecommunication and cable customers, due in part to the continued decrease in capital spending by our customers, bankruptcies of certain customers, and the overall downturn in the economy. Acquisitions made subsequent to July 29, 2001 contributed $55.4 million of contract revenues during fiscal 2002. Excluding revenues attributable to these acquisitions, contract revenues would have decreased $258.1 million, or 45.4%, during fiscal 2002.

      During fiscal 2002, we recognized $556.4 million of contract revenues, or 89.2% of our total contract revenues, from telecommunications services as compared to $763.7 million or 92.4% for fiscal 2001. The decrease in our telecommunications service revenue is primarily due to lower demand from several cable customers, and emerging telecommunications providers and several incumbent local exchange carriers.

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      We recognized contract revenues of $55.2 million, or 8.8% of our total contract revenues, from underground utility locating services in fiscal 2002 as compared to $47.9 million, or 5.8% in fiscal 2001. Additional contract awards in fiscal 2002 increased our revenues from these services. We recognized contract revenues of $12.4 million, or 2.0% of our total contract revenues, from electrical construction and maintenance services in fiscal 2002 as compared to $15.2 million or 1.8% in fiscal 2001.

      Contract revenues from multi-year master service agreements and other long-term agreements represented 83.4% of total contract revenues in fiscal 2002 as compared to 81.2% in fiscal 2001, of which contract revenues from multi-year master services agreements represented 47.8% of total contract revenues in fiscal 2002 as compared to 51.3% in fiscal 2001.

      For the year ended July 27, 2002 and July 28, 2001, approximately 16.6% and 17.9%, respectively, of the contract revenues were from BellSouth; 12.3% and 15.9%, respectively, of the contract revenues were from Comcast; 11.9% and 3.6%, respectively, of the contract revenues were from Adelphia; 6.3% and 4.1%, respectively, of the contract revenues were from AT&T Broadband; and 6.2% and 4.0%, respectively, of the contract revenues were from DIRECTV.

      On May 20, 2002, we announced that we had been notified by a major cable customer, Adelphia, to suspend work on substantially all of Adelphia’s projects. Subsequently, on June 25, 2002, Adelphia announced that it, together with its subsidiaries, had filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code. At July 27, 2002, we had outstanding pre-petition receivables from Adelphia of $40.4 million. We have filed liens on various properties to secure substantially all of the receivables and have undertaken an analysis of the value of the receivables. Based on our analysis, we increased our allowance for doubtful accounts by $18.5 million for these receivables. Adelphia accounted for 11.9% of our revenues for the year ended July 27, 2002.

      On July 21, 2002 another customer, WorldCom and its subsidiaries, filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code. At July 27, 2002, we had outstanding pre-petition receivables from WorldCom of $2.1 million. Management determined that the likelihood of payment is low and, accordingly, we fully reserved this receivable. WorldCom accounted for 2.1% of our revenues for the year ended July 27, 2002.

      Should any additional customers file for bankruptcy or experience financial difficulties, or if our efforts to recover outstanding Adelphia and other receivables fail, we could experience reduced cash flows and losses in excess of current allowances provided. In addition, material changes in our customer’s revenues or cash flows could affect our ability to collect amounts due from them.

      Cost of Earned Revenues. Costs of earned revenues decreased $136.2 million to $479.0 million in fiscal 2002 from $615.2 million in fiscal 2001, and increased as a percentage of contract revenues to 76.8% from 74.4%. Direct labor and subcontractor costs declined by 1.2% and 1.7%, respectively, as a percentage of contract revenues. This decrease was more than offset as a percentage of contract revenues by an increase in other direct costs and insurance of 5.2%.

      General and Administrative Expenses. General and administrative expenses decreased $6.1 million, or 8.3%, to $67.4 million in fiscal 2002 from $73.5 million in fiscal 2001. The decrease in general and administrative expenses for fiscal 2002, as compared to fiscal 2001, was primarily attributable to decreases in group insurance, bonuses, and payroll taxes of $7.1 million, partially offset by increases in franchise taxes and other general and administrative expenses. General and administrative expenses increased as a percentage of contract revenues to 10.8% from 8.9% in fiscal 2002 as compared to fiscal 2001.

      Bad Debt Expense. Bad debt expense increased $21.5 million to $21.6 million in fiscal 2002 from $0.1 million in fiscal 2001. This increase is primarily attributable to $20.6 million of bad debt expense recorded on receivables due from Adelphia and WorldCom.

      Depreciation and Amortization. Depreciation and amortization decreased $1.3 million to $38.8 million in fiscal 2002 as compared to $40.1 million in fiscal 2001, and increased as a percentage of contract revenues to

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      Interest Income, Net. Interest income, net, decreased $1.9 million to $2.6 million in fiscal 2002 from $4.5 million in fiscal 2001. The decrease was primarily due to lower interest rates partially offset by higher average outstanding cash balances.

      Income Taxes. The provision for income taxes was $9.5 million in fiscal 2002 as compared to $43.6 million in the same period last year. The effective tax rate differs from the statutory rate due to non-deductible impairment losses recorded in connection with the adoption of SFAS No. 142, non-deductible impairment losses recorded in connection with the annual review of our reporting units and an event related review of certain reporting units under SFAS No. 142, state income taxes and other non-deductible expense for tax purposes.

      Cumulative Effect of Change in Accounting Principle for SFAS No. 142 and Impairment Write-Off. The adoption of SFAS No. 142 is a required change in accounting principal, and in accordance with SFAS No. 142, we conducted a review of our reporting units to determine whether their carrying value exceeded their fair market value. We engaged a third party specialist to assist in the valuation process and as a result of that valuation identified the following reporting units in which an impairment loss was recognized: Apex Digital, Inc., Globe Communications, Inc., Locating, Inc., Point-to-Point Communications, Inc., Tesinc, Inc., Nichols Constructions, Inc., C-2 Utility Contractors, Inc. and Lamberts’ Cable Splicing Co. As a result of the valuations, we recorded a non-cash impairment charge of $99.0 million ($86.9 million after tax) as of the beginning of the first quarter of fiscal 2002. The impairment loss has been recorded as a cumulative effect of change in accounting principles in our accompanying consolidated statement of operations for the year ended July 27, 2002.

      SFAS No. 142 requires us to conduct a valuation when an event occurs that would indicate that the goodwill of a reporting unit might be impaired. Because Adelphia filed for bankruptcy protection in fiscal 2002 and was a significant customer of several of our reporting units, we conducted a review for goodwill impairment at those units. As a consequence we recorded an impairment charge of $45.1 million.

      SFAS No. 142 requires us to conduct an annual valuation of operating units to determine whether the carrying value of their assets exceeds their fair market value. This review resulted in an impairment charge at our PTP reporting unit of $2.5 million. This impairment was primarily the result of PTP’s loss of business associated with WorldCom.

      Net (Loss) Income. Net loss was $123.0 million in fiscal 2002 as compared to net income of $61.4 million in fiscal 2001.

Year Ended July 28, 2001 Compared to Year Ended July 29, 2000

      Revenues. Contract revenues increased $20.4 million, or 2.5%, to $826.7 million in fiscal 2001 from $806.3 million in fiscal 2000. Of this increase, $20.0 million was attributable to specialty contracting services provided to telecommunications companies and $9.5 million was attributable to underground utility locating services provided to various utilities. This increase in contract revenues was partially offset by a decrease of $9.1 million in construction, installation and maintenance services provided to electrical utilities. The companies we acquired in fiscal 2001 contributed $50.8 million to our total contract revenues. Excluding revenues attributable to these acquisitions, our total contract revenues would have decreased $30.4 million during fiscal 2001.

      During fiscal 2001, we recognized $763.7 million of contract revenues, or 92.4% of our total contract revenues, from telecommunications services as compared to $743.7 million, or 92.2% of total contract revenues, in fiscal 2000. Acquisitions subsequent to July 29, 2000 contributed $50.8 million of contract revenues from telecommunications services during fiscal 2001. The increase in our telecommunications service revenues reflects an increased volume of projects and activity associated with cable television services, and an increase in services performed in the design and installation of broadband networks, telephone engineering

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      We recognized contract revenues of $15.2 million from the electric construction and maintenance services group in fiscal 2001 as compared to $24.3 million in fiscal 2000, a decrease of 37.6%. We recognized contract revenues of $47.9 million from underground utility locating services in fiscal 2001 as compared to $38.3 million in fiscal 2000, an increase of 25.0%.

      Contract revenues from multi-year master service agreements and other long-term agreements represented 81.2% of total contract revenues in fiscal 2001 as compared to 74.7% in fiscal 2000, of which contract revenues from multi-year master service agreements represented 51.3% of total contract revenues in fiscal 2001 as compared to 45.8% in fiscal 2000.

      Cost of Earned Revenues. Cost of earned revenues increased $14.7 million to $615.2 million in fiscal 2001 from $600.5 million in fiscal 2000, yet decreased slightly as a percentage of contract revenues to 74.4% from 74.5%. Direct labor and other direct costs increased as a percentage of contract revenues as a result of increased projects for which we supplied labor, while subcontractor costs and direct materials decreased as a percentage of contract revenues.

      General and Administrative Expenses. General and administrative expenses increased $8.7 million to $73.5 million in fiscal 2001 from $64.8 million in fiscal 2000, and increased as a percentage of contract revenues to 8.9% in fiscal 2001 from 8.0% in fiscal 2000. The increase in general and administrative expenses was primarily attributable to an $8.7 million increase in administrative salaries, payroll taxes and employee benefits.

      Depreciation and Amortization. Depreciation and amortization expense increased $8.3 million to $40.1 million in fiscal 2001 from $31.8 million in fiscal 2000, and increased as a percentage of contract revenues to 4.8% from 3.9%. The $8.3 million increase reflects the depreciation of additional capital expenditures incurred in the ordinary course of business and amortization of goodwill related to acquisitions made in 2001 and 2000.

      Interest Income, Net. Interest income, net increased $1.0 million to $4.5 million in fiscal 2001 from $3.5 million in fiscal 2000. This increase was due to increased cash and cash equivalents, offset by decreases in short term interest rates.

      Income Taxes. The provision for income taxes was $43.6 million in fiscal 2001 as compared to $44.2 million in fiscal 2000. Our effective tax rate was 41.5% in fiscal 2001 as compared to 40.5% in fiscal 2000. The effective tax rate differs from the statutory tax rate due to state income taxes, the amortization of intangible assets that do not provide a tax benefit, and other non-deductible expenses for tax purposes. During fiscal 2000, we incurred $2.4 million of merger-related expenses for which no tax benefit was recorded.

      Net Income. Net income decreased to $61.4 million in fiscal 2001 from $65.0 million in fiscal 2000, a 5.5% decrease.

Liquidity and Capital Resources

      Capital Requirements. Our primary capital needs are for equipment to support our contractual commitments to customers and for sufficient working capital for general corporate purposes. We have typically financed capital expenditures by operating and capital leases, bank borrowings and internal cash flows. Our cash sources have historically been operating activities, equity offerings, bank borrowings, and proceeds from the sale of idle and surplus equipment and real property. To the extent we seek to grow by acquisitions that involve consideration other than our stock, our capital requirements may increase.

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      Our principal sources of liquidity are from operations, borrowings under our credit facilities and cash reserves. Cash and cash equivalents totaled $116.1 million at July 27, 2002 compared to $130.5 million at July 28, 2001.

      Cash from operating activities. For fiscal 2002, net cash provided by operating activities was $65.3 million compared to $133.2 million for fiscal 2001 and $76.0 million for fiscal 2000. Net loss adjusted for non-cash items primarily consisting of cumulative effect of change in accounting principle, depreciation, amortization, provision for bad debts, goodwill impairment charges and deferred income tax provision was our main source of operating cash flow. Working capital items net of the change in long-term accounts receivable generated $2.2 million of operating cash flow for fiscal 2002.

      Cash from investing activities. For fiscal 2002, net cash used in investing activities was $11.4 million primarily for capital expenditures, as compared to $105.3 million in fiscal 2001. The decrease in fiscal 2002 was due primarily to lower acquisition expenditures and capital expenditures as compared to fiscal 2001.

      During fiscal 2002, 2001 and 2000, we used $3.8 million, $79.8 million and $32.7 million of cash, respectively, and issued 4,853,031, 854,603 and 3,082,586 shares of common stock, respectively, in connection with acquisitions of other businesses.

      Cash from financing activities. For fiscal 2002, net cash used in financing activities was $68.3 million primarily attributable to principal payments on long-term notes. Included in this amount is $58.0 million related to the repayment of Arguss’ indebtedness subsequent to its acquisition.

      On June 3, 2002, we entered into a new $200 million unsecured revolving credit agreement (the “New Credit Agreement”) with a syndicate of banks. This new facility replaces our prior credit agreement, the revolving facility portion of which expired on April 27, 2002. On April 30, 2002, we prepaid the outstanding term loan balance of approximately $6.8 million borrowed under the prior agreement that would have expired on April 27, 2004. In addition, on April 30, 2002 the outstanding letters of credit issued under the prior credit agreement were reissued by another financial institution, at which time the prior agreement was terminated. On June 3, 2002, these letters of credit were rolled into the New Credit Agreement.

      The New Credit Agreement provides us with a commitment of $200 million for a three-year period. Included in the $200 million commitment is a sublimit of $40 million for the issuance of letters of credit. As of July 27, 2002 we had no amounts outstanding under the New Credit Agreement and $17.8 million of outstanding letters of credit. The outstanding letters of credit are all issued to our insurance administrators as part of our self-insurance program. Under the most restrictive covenants of our New Credit Agreement, as of July 27, 2002, the available borrowing capacity is approximately $117.4 million.

      Loans under the New Credit Agreement bear interest, at our option, at the bank’s prime interest rate or LIBOR plus a spread of 1.25%, 1.50% or 2.00% based upon our current leverage ratio. Based on our current leverage ratio, borrowings would be eligible for the 1.25% spread. We are required to pay an annual non-utilization fee equal to 0.50% of the unused portion of the facilities. In addition, we pay an annual agent fee of $50,000.

      The New Credit Agreement requires that we maintain certain financial covenants and conditions, as well as restricts our ability to encumber our assets or incur certain types of indebtedness. We must maintain a leverage ratio of not greater than 2.25:1.00, as measured at the end of each fiscal quarter. At July 27, 2002, this leverage ratio, defined as consolidated funded debt including any outstanding letters of credit divided by consolidated EBIDTA, was 0.31%. In addition, the New Credit Agreement precludes the payment of cash dividends. At July 27, 2002, we were in compliance with all financial covenants and conditions under the New Credit Agreement.

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      Certain subsidiaries have outstanding obligations under real estate leases and equipment and vehicle financing arrangements. The obligations are payable in monthly installments, expiring at various dates through June 2012.

      Interest costs incurred on notes payable, all of which were expensed, during the year ended July 27, 2002 were $315,246.

      The following table sets forth our contractual commitments as of July 27, 2002:

      Related party transactions. We lease administrative offices from entities related to officers of certain of our subsidiaries. We believe these lease commitments are on terms substantially similar to terms available from third parties.

      Stock repurchase program. On June 4, 2001, we announced that the Board of Directors had authorized a program to repurchase up to $25 million worth of our common stock over an eighteen-month period. Any such repurchases will be made in the open market or in privately negotiated transactions from time to time, subject to market conditions, applicable legal requirements and other factors. This plan does not obligate us to acquire any particular amount of our common stock, and the plan may be suspended at any time at our discretion. As of July 27, 2002, we had repurchased approximately 82,000 shares of our common stock for an aggregate cost of approximately $1.2 million. Pursuant to Florida law, these repurchased shares have been added to our authorized, unissued shares and are available for future issue.

      We believe that our capital resources, together with existing cash balances, are sufficient to meet our financial obligations, operating lease commitments, and to support our normal replacement of equipment at our current level of business for at least the next twelve months. Our future operating results and cash flows may be affected by a number of factors including our success in bidding on future contracts and our continued ability to manage controllable costs effectively.

Special Note Concerning Forward Looking Statements

      This Annual Report on Form 10-K, including the Notes to the Consolidated Financial Statements and this Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains forward looking statements. The words “believe”, “expect”, “anticipate”, “intends”, “forecast”, “project”, and similar expressions identify forward looking statements. Such statements may include, but may not be limited to, the anticipated outcome of contingent events, including litigation, projections of revenues, income or loss, capital expenditures, plans for future operations, growth and acquisitions, financial needs or plans and the availability of financing, and plans relating to our services, as well as assumptions relating to the foregoing. These forward looking statements are based on management’s current expectations, estimates and projections. Forward-looking statements are subject to risks and uncertainties that may cause actual results in the future to differ materially from the results projected or implied in any forward-looking statements contained in this report. Such risks and uncertainties include: business and economic conditions in the telecommunications industry affecting our customers, continued deterioration in our customers’ financial condition, the adequacy of our reserves and allowances for doubtful accounts, whether the carrying value of our assets may be

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Recently Issued Accounting Pronouncements

      In June 2002, SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities” was issued. This statement requires the recording of costs associated with exit or disposal activities at their fair values only once a liability exists. Under previous guidance, certain exit costs were accrued when management committed to an exit plan, which may have been before an actual liability arose. The provisions of this Statement are effective for exit or disposal activities that are initiated after December 31, 2002, with early adoption encouraged. Management is in the process of evaluating the impact of implementing SFAS No. 146 and is unable to estimate the effect, if any, on the Company’s financial statements.

      In August 2001, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” This statement supercedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets to be Disposed of”, and the accounting and reporting provisions of APB Opinion No. 20, “Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequent Occurring Events and Transactions.” SFAS No. 144 is effective for financial statements issued for fiscal years beginning after December 15, 2001. Management is in the process of evaluating the impact of implementing SFAS No. 144 and is unable to estimate the effect, if any, on the Company’s financial statements.

      In June 2001, the FASB issued SFAS No. 142, “Goodwill and Other Intangible Assets,” which supersedes APB Opinion No. 17, “Intangible Assets”. SFAS No. 142 establishes new standards for goodwill acquired in a business combination and eliminates amortization of goodwill and instead sets forth methods to periodically evaluate goodwill for impairment. We have adopted SFAS No. 142, “Goodwill and Other Intangible Assets.” In accordance with the statement, we will conduct on an annual basis (or interim basis if circumstances warrant) a review of our reporting units to determine whether their carrying value exceeds their fair market value. Should this be the case, the value of our goodwill may be impaired and written down. In implementing SFAS No. 142 we engaged a third party specialist to assist in the valuation process and as a result of that valuation identified the following reporting units in which an impairment loss was recognized: Apex Digital, Inc., Globe Communications, Inc., Locating, Inc., Point-to-Point Communications, Inc., Tesinc, Inc., Nichols Constructions, Inc., C-2 Utility Contractors, Inc. and Lamberts’ Cable Splicing Co. The valuations performed employed a combination of present value techniques to measure fair value corroborated by comparisons to estimated market multiples. As a result of the valuations, we recorded a non-cash impairment charge of $99.0 million ($86.9 million after tax) as of the end of fiscal 2002. The impairment loss has been recorded as a cumulative effect of change in accounting principles on our accompanying consolidated statement of operations for the year ended July 27, 2002. Impairment losses subsequent to adoption are required to be reflected in operating income or loss in the consolidated statements of operations.

      We considered the provision of Financial Reporting Release No. 48 “Disclosure of Accounting Policies for Derivative Financial Instruments and Derivative Commodity Instruments, and Disclosure of Quantitative and Qualitative Information about Market Risk Inherent in Derivative Financial Instruments, Other Financial Instruments and Derivative Commodity Instruments” in determining our market risk. We had no significant holdings of derivative financial or commodity instruments at July 27, 2002. A review of our other financial instruments and risk exposures at that date revealed that we had exposure to interest rate risk. At July 27, 2002, we performed sensitivity analyses to assess the potential effect of this risk and concluded that reasonably possible near-term changes in interest rates should not materially affect our financial position, results of operations or cash flows.

      Our consolidated financial statements and related notes and independent auditors’ report follow on subsequent pages of this report.

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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

See notes to consolidated financial statements

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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

See notes to consolidated financial statements.

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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY