DYCOM INDUSTRIES INC - 10-Q Quarterly Report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q


x		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JANUARY 24, 2004

		OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________________ TO ______________________

Commission file number 0-5423

DYCOM INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)


Florida		59-1277135

(State of incorporation)		(IRS Employer Identification No.)

4440 PGA Boulevard, Suite 500 Palm Beach Gardens, Florida		33410

(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (561) 627-7171

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No [ ]

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

Yes [X] No [ ]

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


Class Common Stock, par value $0.33 1/3 per share		Outstanding as of February 26, 2004 48,499,071

TABLE OF CONTENTS


	CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
	CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
	CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) (Unaudited)
	NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — Unaudited
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	Item 4. CONTROLS AND PROCEDURES
	PART II. OTHER INFORMATION
	Item 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES
	Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
	Item 6. EXHIBITS AND REPORTS ON FORM 8-K
EX-10.5 11/25/2003 Stock Agreement - Nielsen
EX-10.6 1/2/2004 Stock Agreement - Nielsen
EX-31.1 Section 302 CEO Certification
EX-31.2 Section 302 CFO Certification
EX-32.1 Section 906 CEO Certification
EX-32.2 Section 906 CFO Certification

DYCOM INDUSTRIES, INC.

INDEX


	Page No.
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Balance Sheets- January 24, 2004 and July 26, 2003		3

Condensed Consolidated Statements of Operations for the Three Months Ended January 24, 2004 and January 25, 2003		4

Condensed Consolidated Statements of Operations for the Six Months Ended January 24, 2004 and January 25, 2003		5

Condensed Consolidated Statements of Cash Flows for the Six Months Ended January 24, 2004 and January 25, 2003		6-7

Notes to Condensed Consolidated Financial Statements		8-19

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		20-29

Item 3. Quantitative and Qualitative Disclosures about Market Risk		29

Item 4. Controls and Procedures		29

PART II. OTHER INFORMATION

Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities		30

Item 4. Submission of Matters to a Vote of Security Holders		30

Item 6. Exhibits and Reports on Form 8-K		30-31

SIGNATURES		32

DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)


				January 24,			July 26,
				2004			2003

			ASSETS
CURRENT ASSETS:
Cash and equivalents				$	118,344,373		$	129,851,760
Accounts receivable, net					126,644,448			121,979,664
Costs and estimated earnings in excess of billings					40,509,963			34,814,130
Deferred tax assets, net					11,594,972			8,778,775
Inventories					3,741,617			2,669,796
Income taxes receivable					2,096,215			—
Other current assets					13,710,428			7,378,452

Total current assets					316,642,016			305,472,577

PROPERTY AND EQUIPMENT, net					98,167,997			86,893,826

OTHER ASSETS:
Goodwill, net					218,001,325			106,615,836
Intangible assets, net					37,440,935			729,646
Accounts receivable					—			21,567,480
Deferred tax assets, net non-current					12,313,435			7,167,117
Other					12,834,695			8,096,095

Total other assets					280,590,390			144,176,174

TOTAL				$	695,400,403		$	536,542,577

		LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable				$	26,048,793		$	22,734,971
Notes payable					4,850,490			9,537
Billings in excess of costs and estimated earnings					1,992,745			703,063
Accrued self-insured claims					27,881,340			17,676,780
Income taxes payable					—			5,168,984
Other accrued liabilities					31,400,297			24,440,415

Total current liabilities					92,173,665			70,733,750

NOTES PAYABLE					93,157,516			20,160
ACCRUED SELF-INSURED CLAIMS					20,426,961			14,175,209
OTHER LIABILITIES					931,515			1,273,889

Total liabilities					206,689,657			86,203,008

COMMITMENTS AND CONTINGENCIES, Note 10
STOCKHOLDERS’ EQUITY:
Preferred stock, par value $1.00 per share:
	1,000,000 shares authorized: no shares issued and outstanding				—			—
Common stock, par value $0.33 1/3 per share:
	150,000,000 shares authorized: 48,486,025 and 47,986,768 issued and outstanding, respectively				16,162,002			15,995,584
Additional paid-in capital					346,970,298			336,394,016
Deferred compensation					(2,740,904	)		—
Retained earnings					128,319,350			97,949,969

Total stockholders’ equity					488,710,746			450,339,569

TOTAL				$	695,400,403		$	536,542,577

See notes to condensed financial statements—unaudited.

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


		For the Six Months Ended

		January 24,			January 25,
		2004			2003

Increase (Decrease) in Cash and Equivalents from:
OPERATING ACTIVITIES:
Net Income		$	30,369,381		$	3,003,617
Adjustments to reconcile to net cash inflow from operating activities:
	Depreciation and amortization		20,342,940			21,290,050
	Bad debts expense		1,545,380			316,170
	Gain on disposal of assets		(898,173	)		(1,199,532	)
	Gain on sale of long-term accounts receivable		(11,359,379	)		—
	Deferred income taxes		(460,033	)		(1,941,179	)
	Other		98,922			—
Change in operating assets and liabilities, net of acquisitions:
(Increase) decrease in operating assets:
	Proceeds on sale of long-term accounts receivable, net		34,242,345			—
	Accounts receivable, net		16,622,279			(13,708,002	)
	Unbilled revenues, net		3,184,479			10,101,227
	Income tax receivable		—			238,634
	Other current assets		(3,692,929	)		2,053,852
	Other assets		478,913			294,546
Increase (decrease) in operating liabilities:
	Accounts payable		(416,069	)		(3,799,870	)
	Accrued self-insured claims and other liabilities		(544,460	)		(1,275,712	)
	Accrued income taxes		(6,583,834	)		—

Net cash inflow from operating activities			82,929,762			15,373,801

INVESTING ACTIVITIES:
	Capital expenditures		(9,480,394	)		(3,652,713	)
	Proceeds from sale of assets		2,518,867			3,424,392
	Acquisition expenditures, net of cash acquired		(174,667,063	)		—

Net cash outflow from investing activities			(181,628,590	)		(228,321	)

FINANCING ACTIVITIES:
	Borrowings on notes payable		85,000,000			—
	Principal payments on notes payable and capital leases		(845,779	)		(43,309	)
	Exercise of stock options		3,037,220			220,841

Net cash inflow from financing activities			87,191,441			177,532

NET CASH (OUTFLOW) INFLOW FROM ALL ACTIVITIES			(11,507,387	)		15,323,012
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD			129,851,760			116,052,139

CASH AND EQUIVALENTS AT END OF PERIOD		$	118,344,373		$	131,375,151

See notes to condensed financial statements—unaudited.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — Unaudited

The accompanying condensed consolidated balance sheets of Dycom Industries, Inc. (“Dycom” or the “Company”) as of January 24, 2004 and July 26, 2003, and the related condensed consolidated statements of operations and cash flows for the three and six months ended January 24, 2004 and January 25, 2003, reflect all normal recurring adjustments which are, in the opinion of management, necessary for a fair presentation of such statements. The results of operations for the three and six months ended January 24, 2004 are not necessarily indicative of the results that may be expected for the entire year.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION — The condensed consolidated financial statements are unaudited. These statements include Dycom Industries, Inc. and its subsidiaries, all of which are wholly owned.

In November 2003, the Company acquired substantially all of the assets of First South Utility Construction, Inc. (“First South”) and assumed certain liabilities associated with these assets. In December 2003, the Company acquired UtiliQuest Holdings Corp. (“UtiliQuest”). These acquisitions were accounted for using the purchase method of accounting; hence, the Company’s results include the results of these entities from their respective acquisition dates.

The Company’s operations consist primarily of providing engineering, placement and maintenance of various cable systems owned by local and long-distance communications carriers, and cable television multiple system operators, and similar services related to the installation of integrated voice, data, and video local and wide area networks within buildings, as well as underground locating services to various utilities and electrical and other construction and maintenance services to electric utilities and others. All material intercompany accounts and transactions have been eliminated.

ACCOUNTING PERIOD — The Company uses a fiscal year ending the last Saturday in July. Fiscal year 2003 consisted of 52 weeks, while fiscal year 2004 will consist of 53 weeks.

USE OF ESTIMATES — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates and such differences may be material to the financial statements.

Estimates are used in the Company’s revenue recognition and in the determination of the allowance for doubtful accounts, self-insured claims liability, and asset lives used in computing depreciation and amortization, including amortization of intangibles.

RECLASSIFICATIONS — Certain prior year amounts have been reclassified in order to conform to the current year presentation.

REVENUE RECOGNITION — The majority of the Company’s contracts are unit based. Revenue on unit based contracts is recognized as the unit is completed. Revenue on non-unit based contracts is recognized under the percentage-of-completion method based primarily on the ratio of contract costs incurred to date to total estimated contract costs. At the time a loss on a contract becomes known, the entire amount of the estimated ultimate loss is accrued.

“Costs and estimated earnings in excess of billings” primarily relates to revenues for completed but unbilled units under unit based contracts, as well as unbilled revenues recognized under the percentage-of-completion method for non-unit based contracts. For those contracts in which billings exceed contract revenues recognized to date, such excesses are included in the caption “billings in excess of costs and estimated earnings.”

CASH AND EQUIVALENTS — Cash and equivalents include cash balances on deposit in banks, overnight repurchase agreements, certificates of deposit, commercial paper, and various other financial instruments having an original maturity of three months or less. For purposes of the consolidated statements of cash flows, the Company considers these amounts to be cash equivalents.

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

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

INTANGIBLE ASSETS — In June 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangibles Assets”, which supersedes Accounting Principle Board “(APB”) Opinion No. 17, “Intangible Assets”. SFAS No. 142 establishes new standards for goodwill acquired in a business

combination, eliminates amortization of goodwill, and instead sets forth methods to periodically evaluate goodwill for impairment. The Company adopted SFAS No. 142 in the first quarter of 2002. In accordance with SFAS No. 142, the Company will conduct on at least an annual basis a review of its reporting units with goodwill to determine whether their carrying value exceeds their fair market value. Should this be the case, a detailed analysis of the reporting unit’s assets and liabilities is performed to determine whether the goodwill is impaired. Impairment losses are required to be reflected in operating income or loss in the consolidated statements of operations.

The Company’s annual valuation for fiscal year 2003 did not result in any impairment charge.

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


	Weighted
	Average Life
	In Years		January 24, 2004		July 26, 2003

Carrying amount:
Licenses		5	$	51,030	$	51,030
Covenants not to compete		7		1,250,843		450,843
Tradenames		3-4		5,540,000		—
Customer relationships		15		30,900,000		—
Backlog		4		1,236,154		1,236,154

				38,978,027		1,738,027
Accumulated amortization:
Licenses				40,701		35,600
Covenants not to compete				381,695		330,026
Tradenames				29,416		—
Customer relationships				343,334		—
Backlog				741,946		642,755

				1,537,092		1,008,381

Net			$	37,440,935	$	729,646

Amortization expense was $464,063 and $112,421 for the three months ended January 24, 2004 and January 25, 2003, respectively, and $528,711 and $261,393 for the six months ended January 24, 2004 and January 25, 2003, respectively. Estimated amortization expense for fiscal 2004 through 2008 is as follows:


Fiscal year ending July:	Amount:

2004	$	1,855,757
2005	$	2,701,960
2006	$	2,562,596
2007	$	2,396,500
2008	$	2,368,167

SELF INSURED CLAIMS LIABILITY — We retain the risk of loss, up to certain limits, for automobile, general liability including damage claims, and workers’ compensation claims. A liability for unpaid claims, excluding damage 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. With regard to the accrual for damage claims, we review quarterly the paid claims history of our damage claims to establish the validity of our accrual. Factors affecting the determination of amounts to be accrued for automobile, general liability and workers’ compensation claims include, but are not limited to, expected cost for existing and anticipated claims, frequency, or payment patterns resulting from new types of claims, the hazard level of our operations, tort reform or other legislative changes, unfavorable jury decisions, court interpretations, changes in the medical conditions of claimants and economic factors such as inflation.

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

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

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

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

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


	For the Three Months Ended						For the Six Months Ended

	January 24,			January 25,			January 24,			January 25,
	2004			2003			2004			2003

Net income (loss), as reported	$	16,442,142		$	(1,110,936	)	$	30,369,381		$	3,003,617
Deduct: Total stock-based employee compensation expense determined under fair value based methods for all awards, net of related tax effects*		(927,310	)		(1,312,333	)		(1,863,849	)		(2,922,470	)

Pro forma net income (loss)	$	15,514,832		$	(2,423,269	)	$	28,505,532		$	81,147

Earnings (loss) per share:
Basic — as reported	$	0.34		$	(0.02	)	$	0.63		$	0.06

Basic — pro forma	$	0.32		$	(0.05	)	$	0.59		$	—

Diluted — as reported	$	0.34		$	(0.02	)	$	0.62		$	0.06

Diluted — pro forma	$	0.32		$	(0.05	)	$	0.59		$	—

All awards refers to awards granted, modified, or settled in fiscal periods beginning after December 15, 1994 — that is, awards for which the fair value was required to be measured under SFAS No. 123.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS — In December 2003, FASB Interpretation No. (“FIN”) 46(R), “Consolidation of Variable Interest Entities” was issued. FIN 46(R) replaces FIN 46 and addresses consolidation by business enterprises of variable interest entities. The provisions of FIN 46(R) are effective for the first reporting period that ends after December 15, 2003 for variable interests in those entities commonly referred to as special-purpose entities. Application of the provisions of FIN 46(R) for all other entities is effective for the first reporting period ending after March 15, 2004. The Company does not have any interests in variable interest entities.

In May 2003, FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” This statement requires certain financial instruments that could previously be accounted for by issuers as equity be classified as liabilities or, in some cases, assets. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The Company does not have any financial instruments that are impacted by SFAS No. 150.

2. COMPUTATION OF PER SHARE EARNINGS

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


	For the Three Months Ended

	January 24,		January 25,
	2004		2003

Net income (loss) available to common stockholders (numerator)	$	16,442,142	$	(1,110,936	)

Weighted-average number of common shares (denominator)		48,285,294		47,869,706

Basic earnings (loss) per common share	$	0.34	$	(0.02	)

Weighted-average number of common shares		48,285,294		47,869,706
Potential common stock arising from stock options		637,087		—

Total shares-diluted (denominator)		48,922,381		47,869,706

Diluted earnings (loss) per common share	$	0.34	$	(0.02	)


	For the Six Months Ended

	January 24,		January 25,
	2004		2003

Net income available to common stockholders (numerator)	$	30,369,381	$	3,003,617

Weighted-average number of common shares (denominator)		48,157,178		47,866,387

Basic earnings per common share	$	0.63	$	0.06

Weighted-average number of common shares		48,157,178		47,866,387
Potential common stock arising from stock options		555,242		5,280

Total shares-diluted (denominator)		48,712,420		47,871,667

Diluted earnings per common share	$	0.62	$	0.06

For the three months ended January 25, 2003, the total number of stock options excluded because their effect would have been anti-dilutive was 11,945.

3. ACQUISITIONS

The Company made no acquisitions in fiscal 2003.

On November 25, 2003, the Company acquired substantially all of First South Utility Construction, Inc.’s (“First South”) assets and assumed certain liabilities associated with these assets, for approximately $51.4 million in cash and 175,840 shares of Dycom’s common stock. In conjunction with the acquisition, the Company also paid approximately $9 million for excess working capital consisting primarily of accounts receivable and unbilled revenue. The Company initially deposited approximately $6.4 million of such amount in escrow, to be returned to the Company to the extent certain accounts receivable and unbilled revenue amounts remain outstanding on April 15, 2004. At January 24, 2004, approximately $3.9 million remained in escrow. The Company paid the purchase price from cash on hand.

On December 3, 2003, the Company acquired UtiliQuest Holdings Corp. (“UtiliQuest”) for a purchase price of approximately $115.7 million. Under the terms of the merger agreement, UtiliQuest merged with a newly-formed subsidiary of the Company with UtiliQuest surviving as a wholly owned subsidiary of the Company. The Company borrowed approximately $85 million under its Credit Agreement in connection with this acquisition (see Note 9).

The Company recorded the above acquisitions using the purchase method of accounting. Accordingly, the purchase price has been allocated to the tangible and intangible assets acquired and the liabilities assumed on the basis of their respective fair values on the

The allowance for doubtful accounts changed as follows:


	For the Three Months Ended

	January 24,			January 25,
	2004			2003

Allowance for doubtful accounts at 10/25/2003 and 10/26/2002, respectively	$	4,939,644		$	5,047,927
Additions related to acquisitions		350,000			—
Additions (reductions) charged to (against) bad debt expense		731,969			(114,345	)
Amounts charged against the allowance, net of recoveries		(1,837,097	)		(447,434	)

Allowance for doubtful accounts	$	4,184,516		$	4,486,148


	For the Six Months Ended

	January 24,			January 25,
	2004			2003

Allowance for doubtful accounts at 7/26/2003 and 7/27/2002, respectively	$	3,978,538		$	4,826,124
Additions related to acquisitions		350,000			—
Additions charged to bad debt expense		1,545,380			316,170
Amounts charged against the allowance, net of recoveries		(1,689,402	)		(656,146	)

Allowance for doubtful accounts	$	4,184,516		$	4,486,148

As of January 24, 2004, the Company expected to collect all retainage balances within the next twelve months.

5. COSTS AND ESTIMATED EARNINGS ON CONTRACTS IN PROGRESS

The accompanying consolidated balance sheets include costs and estimated earnings on contracts in progress, net of progress billings as follows:


	January 24,			July 26,
	2004			2003

Costs incurred on contracts in progress	$	34,581,825		$	29,066,176
Estimated to date earnings		10,912,822			8,687,173

Total costs and estimated earnings		45,494,647			37,753,349
Less billings to date		6,977,429			3,642,282

	$	38,517,218		$	34,111,067

Included in the accompanying consolidated balance sheets under the captions:
Costs and estimated earnings in excess of billings	$	40,509,963		$	34,814,130
Billings in excess of costs and estimated earnings		(1,992,745	)		(703,063	)

	$	38,517,218		$	34,111,067

As stated in Note 1, the Company performs services under unit based and non-unit based contracts. The amounts presented above aggregate these types of contracts.

6. PROPERTY AND EQUIPMENT

The accompanying consolidated balance sheets include the following property and equipment:


	January 24,		July 26,
	2004		2003

Land	$	5,621,072	$	5,267,572
Buildings		11,337,915		10,752,264
Leasehold improvements		1,662,860		1,495,615
Vehicles		138,041,951		119,717,399
Furniture and fixtures		24,615,518		17,129,884
Equipment and machinery		86,772,662		89,214,913

Total		268,051,978		243,577,647
Less accumulated depreciation		169,883,981		156,683,821

Property and equipment, net	$	98,167,997	$	86,893,826

Maintenance and repairs of property and equipment amounted to $3,407,645 and $2,464,450 for the three months ended January 24, 2004 and January 25, 2003, respectively, and $6,466,362 and $5,160,049 for the six months ended January 24, 2004 and January 25, 2003, respectively. Depreciation expense amounted to $10,544,467 and $10,347,818 for the three months ended January 24, 2004 and January 25, 2003, respectively, and $19,814,229 and $21,028,657 for the six months ended January 24, 2004 and January 25, 2003, respectively.

7. ACCRUED SELF-INSURED CLAIMS

Accrued self-insured claims consist of the following:


	January 24,		July 26,
	2004		2003

Accrued auto, general liability and workers’ compensation	$	28,784,877	$	25,394,474
Accrued employee group health		4,575,911		4,152,785
Accrued damage claims		14,947,513		2,304,730

		48,308,301		31,851,989
Less current portion:
Accrued auto, general liability and workers’ compensation		12,994,927		11,219,265
Accrued employee group health		4,575,911		4,152,785
Accrued damage claims		10,310,502		2,304,730

		27,881,340		17,676,780

Accrued self-insured claims — non-current	$	20,426,961	$	14,175,209

8. OTHER ACCRUED LIABILITIES

Other accrued liabilities consist of the following:


	January 24,		July 26,
	2004		2003

Accrued payroll and related taxes	$	12,622,589	$	9,516,881
Accrued employee bonus and benefit costs		4,806,331		4,617,327
Accrued construction costs		4,213,221		3,474,217
Other		9,758,156		6,831,990

Accrued liabilities	$	31,400,297	$	24,440,415

9. NOTES PAYABLE

Notes payable are summarized as follows:


	January 24,		July 26,
	2004		2003

Credit agreement	$	85,000,000	$	—
Capital leases		9,382,462		—
Term loan		3,600,000		—
Equipment loans		25,544		29,697

		98,008,006		29,697
Less current portion		4,850,490		9,537

Notes payable — non-current	$	93,157,516	$	20,160

During fiscal year 2002, the Company entered into a three-year $200 million unsecured revolving Credit Agreement (the “Credit Agreement”) with a syndicate of banks that replaced the Company’s prior credit agreement. The Credit Agreement provides the Company with a commitment of $200 million for a three-year period and includes a $40 million sublimit for the issuance of letters of credit. During the second quarter of fiscal 2004, the Company borrowed $85,000,000 under the Credit Agreement in connection with the acquisition of UtiliQuest (see Note 3). Under the most restrictive covenants of the Credit Agreement, as of January 24, 2004, based on a multiple of EBITDA (as defined in the Credit Agreement), the available borrowing capacity is approximately $88.5 million, after considering the impact of borrowings and outstanding letters of credit. As of January 24, 2004, the Company had $26.5 million of outstanding letters of credit issued under the Credit Agreement. The outstanding letters of credit are all issued to insurance companies as part of the Company’s self-insurance program.

The Credit Agreement requires that the Company maintain certain financial covenants and imposes certain conditions including restricting its ability to encumber assets or incur certain types of indebtedness and maintaining a leverage ratio of not greater than 2.25:1.00, as measured at the end of each fiscal quarter. The Company must also maintain consolidated tangible net worth of not less than (i) $170,000,000 plus (ii) 50% of consolidated net income (positive or negative) from the date the acquisitions of both UtiliQuest and First South are completed plus (iii) 75% of the equity issuances made from that date to the date of computation. At January 24, 2004, the Company was in compliance with all financial covenants and conditions under the Credit Agreement.

Loans under the Credit Agreement bear interest, at the Company’s option, at the bank’s prime interest rate or LIBOR plus a spread of 1.25%, 1.50%, or 2.00% based upon the Company’s leverage ratio. Based upon the Company’s current leverage ratio, additional borrowings would be eligible for the 1.50% spread. The $85,000,000 in borrowings bears interest at three month and six month LIBOR, with a weighted average interest rate of 2.48%. The Company deferred approximately $1.1 million of fees related to the Credit Agreement, which are being amortized over its three year term. The Company is required to pay an annual non-utilization fee equal to 0.50% of the unused portion of the facilities. In addition, the Company pays an annual agent fee of $50,000.

As part of the acquisition of UtiliQuest (see Note 3), the Company assumed the obligations of UtiliQuest under a long-term note payable in the amount of $3.6 million. This seven-year note bears interest at 6%, payable semi-annually on March 31 and September 30. Additionally, as part of the acquisition, the Company acquired certain non-cancelable capital lease agreements with respect to certain vehicles and computer equipment.

10. COMMITMENTS AND CONTINGENCIES

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

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

11. CAPITAL STOCK

On January 2, 2004 and November 25, 2003, respectively, the Company granted 100,000 and 5,000 restricted shares of its common stock to the Chief Executive Officer of the Company. The restricted shares vest over a period of four years from the date of grant. Upon issuance of the restricted shares, deferred compensation of $2.8 million was charged to stockholders’ equity for the fair value of the restricted stock and is being recognized as compensation expense ratably over the four-year vesting period. Compensation expense with respect to these restricted shares for the three and six months ended January 24, 2004 was $60,996.

On November 25, 2003, the Company issued 175,840 shares of common stock in connection with the acquisition of substantially all of the assets of First South and the assumption of certain liabilities associated with these assets.

On February 24, 2003, the Board of Directors authorized the repurchase of up to $25 million worth of the Company’s 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 the Company to acquire any particular amount of common stock, and the plan may be suspended at any time. Pursuant to Florida law, any shares repurchased will be added to the Company’s authorized, unissued shares and would be available for future use. No shares have been repurchased under this program as of January 24, 2004.

On November 26, 2002, the shareholders of the Company approved the 2002 Directors Restricted Stock Plan whereby non-employee directors must elect to receive a minimum percentage of their annual fees in restricted shares of the Company’s common stock. The Company has reserved 100,000 shares of its common stock for issuance under the plan. The number of restricted shares of the Company’s common stock to be granted is based on the fair market value of a share of common stock on the date such fees are payable. As of January 24, 2004, an aggregate of 6,077 shares had been issued under this plan at a weighted average market price of $14.34 per share. For the quarter ended January 24, 2004, 894 shares were issued under the plan at a price of $21.22 per share.

12. SEGMENT INFORMATION

The Company operates in one reportable segment as a specialty contractor. The Company provides 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, the Company provides similar services related to the installation of integrated voice, data, and video local and wide area networks within buildings and also provides underground locating services to various utilities and provides electrical and other construction and maintenance services to electric utilities and others. These services are provided by the Company’s various subsidiaries, which provide management with monthly financial

ITEM 2. 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 electrical and other construction and maintenance services to electric utilities and others. The nature of the services we provide subjects our revenues to fluctuations as a result of changes in the capital expenditure and maintenance budgets of our customers, as well as to general levels of construction activity. Factors impacting the capital expenditure and maintenance budgets of our customers include consumer demands on telecom providers, actions of the Federal Communications Commission and general economic conditions. For the six months ended January 24, 2004, specialty contracting services related to the telecommunications industry, underground utility locating and electrical and other construction and maintenance to electric utilities and others contributed approximately 83.3%, 12.0% and 4.7%, respectively, to our total contract revenues.

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). In some cases, a customer may terminate these agreements for convenience with at least 90 days prior written notice. 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. We are currently a party to approximately 200 master service agreements including approximately 130 of these contracts from our UtiliQuest acquisition.

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 44.2% and 45.3% of total contract revenues for the six months ended January 24, 2004 and January 25, 2003, respectively, and contract revenues from long-term contracts, including multi-year master service agreements, represented 84.5% and 77.5% 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.

A significant portion of our revenue comes from several large customers. These revenues are generally derived from multiple contracts associated with a customer’s various service areas. The following table reflects the percentage of total contract revenue received from customers contributing at least 2.5% of our total contract revenue in either the three or six month period ending January 24, 2004 or January 25, 2003:


	For the three months ended

	January 24,			January 25,
	2004			2003

Comcast Corporation *		30.1	%		30.6	%
BellSouth		13.2	%		11.6	%
Sprint		11.0	%		6.1	%
Adelphia		7.2	%		4.0	%
Qwest		5.9	%		5.7	%
Charter Communications		3.5	%		3.3	%
DIRECTV		3.0	%		9.5	%
Alltel		2.5	%		2.1	%


	For the six months ended

	January 24,			January 25,
	2004			2003

Comcast Corporation *		32.5	%		26.2	%
Sprint		12.3	%		5.8	%
BellSouth		12.1	%		12.1	%
Adelphia		5.9	%		4.2	%
Qwest		5.8	%		5.3	%
Alltel		3.3	%		2.1	%
Charter Communications		3.2	%		4.9	%
DIRECTV		3.1	%		8.8	%

Comcast and AT&T Broadband revenues have been combined for periods prior to Comcast’s November 18, 2002 acquisition of AT&T Broadband.

Cost of earned revenues includes all direct costs of providing services under our contracts, including all costs of construction personnel, subcontractor costs, all costs associated with operation of equipment (excluding depreciation), 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, general liability including damage claims, worker’s compensation, and employee group health claims subject to certain limits, a change in experience or actuarial assumptions could materially affect results of operations in a particular period. As part of the UtiliQuest acquisition, we assumed $11.8 million of damage claims. The valuation of this acquired liability will remain preliminary until we have completed an actuarial study of the exposure.

General and administrative costs include all our costs at the parent 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.

Acquisitions

On November 25, 2003, we purchased substantially all of First South Utility Construction, Inc.’s (“First South”) assets and assumed certain liabilities associated with these assets for approximately $51.4 million in cash and 175,840 shares of our common stock. In conjunction with the acquisition, we also paid approximately $9 million for excess working capital consisting primarily of accounts receivable and unbilled revenue. We initially deposited approximately $6.4 million of such amount in escrow, to be returned to us to the extent certain accounts receivable and unbilled revenue amounts remain outstanding on April 15, 2004. At January 24, 2004, approximately $3.9 million remained in escrow.

On December 3, 2003, we acquired UtiliQuest Holdings Corp. (“UtiliQuest”) for a purchase price of approximately $115.7 million. Under the terms of the merger agreement, UtiliQuest merged with a newly-formed subsidiary of Dycom with UtiliQuest surviving as a wholly owned subsidiary of Dycom. We borrowed approximately $85 million under our Credit Agreement in connection with this acquisition.

The results of operations of these acquisitions are included in our consolidated financial statements from their respective dates of acquisition.

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 Condensed 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”, classified as a current asset, primarily relates to revenues for completed but unbilled units under unit based contracts, as well as unbilled revenues recognized under the percentage-of-completion method for non-unit based contracts. For those contracts in which billings exceed contract revenues recognized to date, such excesses are classified as a current liability in the caption “billings in excess of costs and estimated earnings.”

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 and 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 including damage claims, and workers’ compensation claims. A liability for unpaid claims, excluding damage 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. With regard to the accrual for damage claims, we review quarterly the paid claims history of our damage claims to establish the validity of our accrual. Factors affecting the determination of amounts to be accrued for automobile, general liability and workers’ compensation claims include, but are not limited to, expected cost for existing and anticipated claims, frequency, or payment patterns resulting from new types of claims, the hazard level of our operations, tort reform or other legislative changes, unfavorable jury decisions, court interpretations, changes in the medical conditions of claimants and economic factors such as inflation.

For losses occurring during fiscal years 2003 and 2004, excluding UtiliQuest, we have retained 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 2004, we have aggregate stop loss coverage for the above exposures at the stated retention of approximately $15.8 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 years 2003 and 2004. For UtiliQuest losses between April 4, 2002 and April 3, 2004, we have retained the risk of loss for general liability, workers’ compensation and automobile liability to $250,000. In addition we have umbrella liability coverage to a policy limit of $50 million for the policy period April 4, 2002 to April 3, 2003 and $35 million for the policy period April 4, 2003 to April 3, 2004.

For losses related to our employee health plan occurring during fiscal year 2004, we have retained the risk, on an annual basis, of $200,000 per participant. For fiscal year 2004, we have aggregate stop loss coverage for this exposure at the stated retention of approximately $25.3 million. For losses related to the UtiliQuest health plan during fiscal year 2004, we have retained the risk, on an annual basis, of $200,000 per participant.

The method of calculating the estimated accrued liability for automobile, general liability, including damage claims, and 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 is 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 basis 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 January 24, 2004 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 taxing authorities could have a material adverse effect on our consolidated financial condition and results of operations.

Contingencies and Litigation. In the ordinary course of our business we are 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. As required by SFAS No. 5, “Accounting for Contingencies,” where there is a range of loss and no amount within the range is a better estimate than any other amount, we record the minimum estimated liability related to those claims. As additional information becomes available, we assess the potential liability related to our pending litigation and revise our estimates. Revisions of our estimates of the potential liability could materially impact our results of operations. If the final outcome of such litigation and contingencies differs adversely from that currently expected, it would result in a charge to earnings when determined.

Results of Operations

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


					For the Three Months Ended

					(dollars in millions)
		January 24, 2004						January 25, 2003

Revenues:
Contract revenues earned		$	196.4			100.0	%	$	137.2		100.0	%
Expenses:
	Cost of earned revenues, excluding depreciation		151.2			77.0			111.4		81.2
	General and administrative		18.9			9.6			17.4		12.7
	Depreciation and amortization		11.0			5.6			10.5		7.6

Total expenses			181.1			92.2			139.3		101.5

Interest income, net			(0.3	)		—			0.4		0.3
Other income, net			0.6			—			0.6		0.4
Gain on sale of long-term accounts receivable			11.3			5.9			—		—

Income (loss) before income taxes			26.9			13.7			(1.1	)	(0.8	)

Provision for income taxes			10.5			5.3			—		—

Net income (loss)		$	16.4			8.4	%	$	(1.1	)	(0.8	)%


				For the Six Months Ended

				(dollars in millions)
		January 24, 2004					January 25, 2003

Revenues:
Contract revenues earned		$	392.4		100.0	%	$	295.6	100.0	%
Expenses:
	Cost of earned revenues, excluding depreciation		298.3		76.0			234.9	79.5
	General and administrative		36.4		9.3			35.7	12.1
	Depreciation and amortization		20.3		5.2			21.3	7.2

Total expenses			355.0		90.5			291.9	98.8

Interest income, net			—		—			0.6	0.2
Other income, net			1.4		0.4			1.7	0.6
Gain on sale of long-term accounts receivable			11.4		2.9			—	—

Income before income taxes			50.2		12.8			6.0	2.0

Provision for income taxes			19.8		5.1			3.0	1.0

Net income		$	30.4		7.7	%	$	3.0	1.0	%

Revenues. Contract revenues increased $59.2 million, or 43.2%, to $196.4 million in the quarter ended January 24, 2004 from $137.2 million in the quarter ended January 25, 2003. Of this increase, $38.0 million was attributable to an increase in demand for specialty contracting services provided to telecommunications companies, an increase of $18.2 million in underground utility locating services provided to various utilities, and an increase of $3.0 million attributable to construction and maintenance services provided to

electrical utilities and others. First South, acquired in November 2003, contributed $7.0 million of contract revenues during the quarter ended January 24, 2004, primarily in contract revenues from telecommunications services. UtiliQuest, acquired in December 2003, contributed $16.6 million of revenues during the quarter ended January 24, 2004 from underground utility locating services. Excluding revenues attributable to these two acquisitions, our total contract revenues for the current quarter would have been $172.8 million, an increase of 26.0% from the quarter ended January 25, 2003.

During the quarter ended January 24, 2004, we recognized $159.1 million of contract revenues, or 81.0% of our total contract revenues, from telecommunications services as compared to $121.1 million, or 88.3% for the quarter ended January 25, 2003. Excluding First South, contract revenues from telecommunications services for the current quarter would have been $152.2 million. The increase in our telecommunications service revenues, excluding the impact of First South, is attributable primarily to revenues from one of our significant customers engaged in a major upgrade project, and the impact of a major new construction and maintenance contract with another significant customer.

We recognized contract revenues of $29.8 million, or 15.2% of our total contract revenues, from underground utility locating services in the quarter ended January 24, 2004 as compared to $11.6 million, or 8.5%, in the quarter ended January 25, 2003. Excluding UtiliQuest, contract revenues from underground utility locating services for the current quarter would have been $13.2 million. This increase is primarily the result of the addition of a new customer in the Southeastern portion of the country.

We recognized contract revenues of $7.5 million, or 3.8% of our total contract revenues, from electrical utilities and other construction and maintenance services in the quarter ended January 24, 2004 as compared to $4.4 million, or 3.2%, in the quarter ended January 25, 2003.

Contract revenues from multi-year master service agreements and other long-term agreements represented 87.7% of total contract revenues in the quarter ended January 24, 2004 as compared to 78.7% in the quarter ended January 25, 2003. Contract revenues from multi-year master service agreements represented 47.1% of total contract revenues in the quarter ended January 24, 2004 as compared to 45.9% in the quarter ended January 25, 2003.

Contract revenues increased $96.8 million, or 32.7%, to $392.4 million for the six months ending January 24, 2004 from $295.6 million for the six months ended January 25, 2003. Of this increase, $66.0 million was attributable to an increase in demand for specialty contracting services provided to telecommunications companies, an increase of $20.3 million in underground utility locating services provided to various utilities, and an increase of $10.5 million attributable to construction and maintenance services provided to electrical utilities and others. First South contributed $6.9 million of contract revenues during the six months ended January 24, 2004, primarily in contract revenues from telecommunications services. UtiliQuest contributed $16.6 million of revenues during the six months ended January 24, 2004 from underground utility locating services. Excluding revenues attributable to these two acquisitions, our total contract revenues for the six months ended January 24, 2004 would have been $368.9 million, an increase of 24.8% from the six months ended January 25, 2003.

During the six months ended January 24, 2004, we recognized $326.9 million of contract revenues, or 83.3% of our total contract revenues, from telecommunications services as compared to $260.9 million, or 88.3% for the six months ended January 25, 2003. Excluding First South, contract revenues from telecommunications services for the first half of the current fiscal year would have been $320.0 million. The increase in our telecommunications service revenues, excluding the impact of First South, is attributable primarily to revenues from one of our significant customers engaged in a major upgrade project, and the impact of a major new construction and maintenance contract with another significant customer.

We recognized contract revenues of $47.1 million, or 12.0% of our total contract revenues, from underground utility locating services for the six months ended January 24, 2004 as compared to $26.8 million, or 9.1%, for the six months ended January 25, 2003. Excluding UtiliQuest, contract revenues from underground utility locating services for the first half of the current fiscal year would have been $30.5 million. This increase is primarily the result of the addition of a new customer in the Southeastern portion of the country.

We recognized contract revenues of $18.4 million, or 4.7% of our total contract revenues, from electrical utilities and other construction and maintenance services for the six months ended January 24, 2004 as compared to $7.9 million, or 2.6%, in the quarter ended January 25, 2003. The increase in revenues from electrical utilities and other construction and maintenance services is primarily attributable to new contracts during the first six months of fiscal 2004.

Contract revenues from multi-year master service agreements and other long-term agreements represented 84.5% of total contract revenues for the six months ended January 24, 2004 as compared to 77.5% for the six months ended January 25, 2003. Contract revenues from multi-year master service agreements represented 44.2% of total contract revenues for the six months ended January 24, 2004 as compared to 45.3% for the six months ended January 25, 2003.

Costs of Earned Revenues. Costs of earned revenues increased $39.8 million in the quarter ended January 24, 2004 from $111.4 million in the quarter ended January 25, 2003. The increase in cost of earned revenues was primarily the result of higher levels of operations during the quarter. As a percentage of contract revenues, costs of earned revenues decreased to 77.0% in the quarter ended January 24, 2004 from 81.2% in the quarter ended January 25, 2003. The decrease in cost of earned revenues as a percentage of revenues was primarily the result of lower billings to customers for direct materials and improving claims experience under our automobile and workers’ compensation self insurance programs, partially offset by increases in the overall costs of labor (combined employee and subcontract labor). Billings to customers for direct materials generally generate lower margins than other revenues.

Costs of earned revenues increased $63.4 million to $298.3 million for the six months ended January 24, 2004 from $234.9 million for the six months ended January 25, 2003. The increase in cost of earned revenues for the six-month period was a result of increased levels of operations during the period. As a percentage of contract revenues, costs of earned revenues decreased to 76.0% in the quarter ended January 24, 2004 from 79.5% for the six months ended January 25, 2003. The same factors mentioned above contributed to this decrease.

General and Administrative Expenses. General and administrative expenses increased $1.5 million to $18.9 million in the quarter ended January 24, 2004 from $17.4 million in the quarter ended January 25, 2003. General and administrative expenses decreased as a percentage of contract revenues to 9.6% in the quarter ended January 24, 2004 from 12.7% in the quarter ended January 25, 2003.

General and administrative expenses increased $0.7 million to $36.4 million for the six months ended January 24, 2004 from $35.7 million for the six months ended January 25, 2003. General and administrative expenses decreased as a percentage of contract revenues to 9.3% for the six months ended January 24, 2004 from 12.1% for the six months ended January 25, 2003. The percentage decreases for both the three and six month periods are a result of increased revenues on the relatively fixed general and administrative costs.

Depreciation and Amortization. Depreciation and amortization increased $0.5 million to $11.0 million in the quarter ended January, 24, 2004 as compared to $10.5 million in the quarter ended January 25, 2003, and decreased as a percentage of contract revenues to 5.6% from 7.6%. Depreciation and amortization decreased $1.0 million to $20.3 million for the six months ended January, 24, 2004 as compared to $21.3 million for the six months ended January 25, 2003, and decreased as a percentage of contract revenues to 5.2% from 7.2%. The percentage decreases for both the three and six month periods are a result of increased revenues on the relatively fixed depreciation and amortization costs.

Interest Income, Net. Interest expense, net was $0.3 million for the three months ended January 24, 2004 as compared to interest income, net of $0.4 million for the three months ended January 25, 2003. Interest income, net was negligible for the six months ended January 24, 2004 as compared to $0.6 million for the same period last year. The decrease was primarily the result of the use of cash on hand and increased borrowings in connection with the two acquisitions closed during the quarter.

Other Income, Net. Other income, net remained constant at $0.6 million for the quarters ended January 24, 2004 and January 25, 2003. Other income, net decreased $0.3 million to $1.4 million in the six months ended January 24, 2004 from $1.7 million in the six months ended January 25, 2003. Other income is derived primarily from the sale of idle assets.

Income Taxes. The provision for income taxes was $10.5 million for the three months ended January 24, 2004 and was negligible for the same period last year. The provision for income taxes increased $16.8 million to $19.8 million for the six months ended January 24, 2004 as compared to $3.0 million for the same period last year. Our effective tax rate was 38.2% and 39.5%, respectively, for the three and six months ended January 24, 2004 as compared to 1.2% and 50.2% for the same periods last year. The prior year’s period’s effective tax rates were impacted by the prior year’s loss in the second quarter, which resulted in non-meaningful rates. Based upon our current expectations for pre-tax income, we do not expect the tax rate to change significantly for the remainder of the year.

Liquidity and Capital Resources

Capital requirements. Our primary capital needs are for equipment to support our contractual commitments to customers and to maintain sufficient working capital. We have typically financed capital expenditures by internal cash flows, operating and capital leases, and bank borrowings. Our sources of cash 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.

Cash and cash equivalents totaled $118.3 million at January 24, 2004 compared to $129.9 million at July 26, 2003.


		For the Six Months Ended

		(dollars in millions)
		January 24, 2004			January 25, 2003

Net cash flows:
	Provided by operations	$	82.9		$	15.4
	Used in investment activities	$	(181.6	)		(0.2	)
	Provided by financing activities	$	87.2			0.2

Cash from operating activities. For the six months ended January 24, 2004, net cash provided from operating activities was $82.9 million compared to $15.4 million for the six months ended January 25, 2003. Net income, excluding the after tax gain on the sale of long-term receivables, plus non-cash items primarily consisting of depreciation, amortization, and provision for bad debts, contributed $44.2 million compared to $21.5 million for the six months ended January 25, 2003.

Changes in working capital items during the six-month period ended January 24, 2004 provided $9.1 million compared with the use of $6.1 million for the six months ended January 25, 2003. The sale of long-term receivables, described below, contributed $29.6 million, net of tax, to the current year’s operating cash flow. We do not anticipate generating significant proceeds from future sales of long-term receivables.

Components of the change in working capital were a decrease in accounts receivable, net of $22.8 million acquired receivables, of $16.6 million and a decrease in unbilled revenue, net of $3.2 million. These decreases were partially offset by a decrease in income taxes payable of $6.6 million and an increase in remaining assets and liabilities of $4.1 million. Accounts receivable, net of $22.8 million acquired receivables, declined during the current year primarily as a result of a reduction in our days sales outstanding associated with receivables. Overall economic conditions and customer mix are important factors effecting days sales outstanding for our accounts receivable.

Based on quarterly revenues, days sales outstanding was 58.7 days for the quarter ended January 24, 2004 compared to 66.3 days for the quarter ended January 25, 2003, for current accounts receivable, net. Based on quarterly revenues, days sales outstanding was 17.8 days for the quarter ended January 24, 2004 compared to 15.2 days for the quarter ended January 25, 2003, for unbilled revenues, net.

In the second quarter of fiscal 2004, the Company sold accounts receivable, classified as non-current, which consisted of pre-petition trade receivables due from Adelphia Communications Corporation (“Adelphia”) of $21.6 million. Adelphia filed for bankruptcy protection in the fourth quarter of fiscal 2002. The Company received proceeds on the sale of $34.2 million ($29.6 million net of tax) and recorded a pre-tax gain on the sale, net of expenses, of $11.4 million or $6.8 million after tax. Should any additional customers file for bankruptcy or experience financial difficulties, or if our efforts to recover outstanding 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.

Cash from investing activities. For the six months ended January 24, 2004, net cash used in investing activities was $181.6 million as compared to $0.2 million for the same period last year. For the six months ended January 24, 2004, investing activities consisted primarily of acquisition expenditures of $174.7 million and capital expenditures of $9.5 million, offset in part by $2.5 million in proceeds from the sale of idle assets.

Cash from financing activities. For the six months ended January 24, 2004, net cash provided by financing activities, primarily from the borrowings under the Credit Agreement, was $87.2 million compared to $0.2 million for the six months ended January 25, 2003.

On June 3, 2002, we entered into a $200 million unsecured revolving credit agreement (the “Credit Agreement”) with a syndicate of banks. The Credit Agreement provides us with a commitment of $200 million for a three-year period and includes a sublimit of $40 million for the issuance of letters of credit. During the second quarter of fiscal 2004, the Company borrowed $85,000,000 under the Credit Agreement in connection with the acquisition of UtiliQuest (see Note 3). Under the most restrictive covenants of our Credit Agreement, as of January 24, 2004, based on a multiple of EBITDA (as defined in the Credit Agreement), our available borrowing capacity is approximately $88.5 million, after considering the impact of borrowings and outstanding letters of credit. As of January 24, 2004 we had $26.5 million of outstanding letters of credit. The outstanding letters of credit are all issued to our insurance companies as part of our self-insurance program.

Loans under the 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 leverage ratio. Based on our current leverage ratio, additional borrowings would be eligible for the 1.50% spread. The $85,000,000 in borrowings bears interest at three month and six month LIBOR, with a weighted average interest rate of 2.48%. 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.

Under the Credit Agreement we are subject to certain financial covenants and conditions which restrict 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 January 24, 2004, this leverage ratio, defined as consolidated funded debt including any outstanding letters of credit divided by consolidated EBITDA (as defined in the Credit Agreement), was 1.10:1.00. We must also maintain consolidated tangible net worth of not less than (i) $170,000,000 plus (ii) 50% of consolidated net income (positive or negative) from the date the acquisitions of both UtiliQuest and First South Utility Construction are completed plus (iii) 75% of the equity issuances made from that date to the date of computation. At January 24, 2004, we were in compliance with all financial covenants and conditions under the Credit Agreement.

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 November 2023.

Interest costs incurred on notes payable, all of which were expensed, during the six months ended January 24, 2004 were $466,088.

Related party transactions. We lease some of our administrative offices from entities related to officers of our subsidiaries.

Stock Repurchase Program. On February 24, 2003, the Board of Directors authorized the repurchase of up to $25 million worth of the Company’s common stock over an eighteen-month period. 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 the Company to acquire any particular amount of common stock, and the plan may be suspended at any time. Pursuant to Florida law, any shares repurchased will be added to the Company’s authorized, unissued shares and are available for future issue. No shares have been repurchased under this program as of March 5, 2004.

We believe that our capital resources, together with existing cash balances, are sufficient to meet our acquisition commitments, 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.

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 January 24, 2004 and July 26, 2003 was $1.174 billion and $890.9 million, respectively. We expect to complete approximately 46.4% of our current backlog during the next twelve months. In many instances our customers are not contractually committed to specific volumes of services under a contract. Generally the customer is obligated to obtain these services from us if they are not performed by the customer’s employees and 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 terms of the contracts based on our historical relationships with customers and our experience in procurements of this nature. There can be no assurance, however, as to a customer’s requirements during a particular period or that such estimates at any point in time are accurate.

Seasonality and Quarterly Fluctuations

Our revenues can be affected by seasonality. Since most of the work we perform is done outdoors, our results of operations can be impacted by extended periods of inclement weather. Generally, inclement weather occurs during the winter months or in our second and third quarters of our fiscal year. In addition, a disproportionate number of holidays fall within our second quarter impacting our productivity. Accordingly, operating results for any fiscal period are not necessarily indicative of results that may be achieved for any subsequent fiscal period.

Special Note Concerning Forward-Looking Statements

This Quarterly Report on Form 10-Q, including the Notes to the Condensed 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,” “intend,” “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 including backlog, 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, the adequacy of our insurance and other reserves and allowances for doubtful accounts, whether the carrying value of our assets may be impaired, whether recent acquisitions can be efficiently integrated into our existing operations, the impact of any future acquisitions, the anticipated outcome of other contingent events, including litigation, liquidity needs and the availability of financing. Such forward-looking statements are within the meaning of that term in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

Recently Issued Accounting Pronouncements

In December 2003, FASB Interpretation No. (“FIN”) 46(R), “Consolidation of Variable Interest Entities” was issued. FIN 46(R) replaces FIN 46 and addresses consolidation by business enterprises of variable interest entities. The provisions of FIN 46(R) are effective for the first reporting period that ends after December 15, 2003 for variable interests in those entities commonly referred to as special-purpose entities. Application of the provisions of FIN 46(R) for all other entities is effective for the first reporting period ending after March 15, 2004. The Company does not have any interests in variable interest entities.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We considered the provisions 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 January 24, 2004. A review of our other financial instruments and risk exposures at that date revealed that we had exposure to interest rate risk. At January 24, 2004, 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.

Item 4. CONTROLS AND PROCEDURES

The Company, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report on Form 10-Q. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer each concluded that the Company’s disclosure controls and procedures are effective in providing reasonable assurance that information required to be disclosed by the Company in reports that it files under the Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the Securities and Exchange Commission.

There were no changes in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES

On November 25, 2003, the Company issued 175,840 shares of the Company’s common stock in connection with the acquisition of First South. These shares were issued in a manner not involving a public offering and therefore did not require registration under the Securities Act of 1933, as amended, pursuant to Section 4 (2) thereof.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

An annual meeting of shareholders of the Company was held on November 25, 2003 to consider and take action on the election of two directors and the adoption of the Dycom Industries, Inc. 2003 Long-Term Incentive Plan.

The Company’s nominee, Steven E. Nielsen, was elected as a director of the Company. Mr. Nielsen received 43,118,327 votes for and votes abstained totaled 353,141. The Company’s nominee, Stephen C. Coley, was elected as a director of the Company. Mr. Coley received 43,111,425 votes for and votes abstained totaled 360,043. Each of the following director’s term of office as a director of the Company continued after the annual meeting: Charles M. Brennan III, Kristina M. Johnson, Tony G. Werner, and Joseph M. Schell. Mr. Ronald P. Younkin retired as a director.

The Dycom Industries, Inc. 2003 Long-Term Incentive Plan was adopted by the shareholders. The votes were 35,791,652 for approval of the new plan, 2,086,891 votes against approval of the plan, and 135,006 votes abstained.

Item 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

Exhibits furnished pursuant to the requirements of Form 10-Q:


Number		Description

(10.1)		Second Amendment to Credit Agreement and Consent and Waiver dated as of November 10, 2003 (incorporated by reference to Dycom’s Form 10-Q filed with the Commission on December 5, 2003)

(10.2)		Amended and Restated Employment Agreement between Steven E. Nielsen and Dycom Industries, Inc. dated as of November 25, 2003 (incorporated by reference to Dycom’s Form 10-Q filed with the Commission on December 5, 2003)

(10.3)		Agreement and Plan of Merger among Dycom Industries, Inc., UtiliQuest Acquisition Corp., UtiliQuest Holdings Corp., and OCM/GFI Power Opportunities Fund, L.P. dated as of November 17, 2003 (incorporated by reference to Dycom’s Form 10-Q filed with the Commission on December 5, 2003)

(10.4)		2003 Long-Term Incentive Plan (incorporated by reference to Exhibit A of the Registrant’s Definitive Proxy Statement, filed with the Commission on October 30, 2003, File No. 001-10613)

(10.5)		Restricted Stock Agreement between Steven E. Nielsen and Dycom Industries, Inc. dated as of November 25, 2003

(10.6)		Restricted Stock Agreement between Steven E. Nielsen and Dycom Industries, Inc. dated as of January 2, 2004

(11)		Statement re computation of per share earnings; All information required by Exhibit 11 is presented within Note 2 of the Company’s condensed consolidated financial statements in accordance with the provisions of SFAS No. 128

(31.1)		Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

(31.2)		Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

(32.1)		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(32.2)		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(b) Reports on Form 8-K

The following reports on Form 8-K were filed on behalf of the Registrant during the quarter ended January 24, 2004:

(i) Press release with respect to proposed acquisition of substantially all of the assets of First South Utility Construction, Inc. (“First South”).

Item Reported: 5

Date Filed: November 6, 2003

(ii) Press release with respect to proposed acquisition of UtiliQuest Holdings Corp. (“UtiliQuest”).

Item Reported: 5

Date Filed: November 17, 2003

(iii) Press release reporting consummation of acquisition of substantially all of the assets of First South.

Item Reported: 5

Date Filed: November 25, 2003

(iv) Press release announcing earnings for the first quarter of 2004 and guidance for the second quarter of 2004.

Item Reported: 9

Date Filed: December 2, 2003

(v) Press release reporting consummation of acquisition of UtiliQuest..

Item Reported: 5

Date Filed: December 4, 2003

(vi) Press release updating the outlook for the second and third quarters of 2004

Item Reported: 5

Date Filed: December 9, 2003

(vii) Acquisition of UtiliQuest and substantially all of the assets of First South.

Item Reported: 2

Date Filed: December 10, 2003

(viii) Conference call to discuss the acquisition of UtiliQuest and substantially all of the assets of First South and to provide additional guidance for the second and third quarters of 2004.

Item Reported: 5

Date Filed: December 12, 2003

(ix) Acquisition of substantially all of the assets of First South, amended and to provide the financial information required by Item 7.

Item Reported: 2

Date Filed: February 9, 2004

(x) Acquisition of UtiliQuest, amended to provide the financial information required by Item 7.

Item Reported: 2

Date Filed: February 17, 2004

(xi) Press release announcing earnings for the second quarter of 2004 and guidance for the third and fourth quarters of 2004.

Item Reported: 9

Date Filed: February 27, 2004


	For the Three Months Ended

	January 24,			January 25,
	2004			2003

REVENUES:
Contract revenues earned	$	196,368,974		$	137,153,597

EXPENSES:
Costs of earned revenues, excluding depreciation		151,224,328			111,357,930
General and administrative		18,862,246			17,448,267
Depreciation and amortization		11,008,530			10,460,239

Total		181,095,104			139,266,436

Interest income		180,159			374,702
Interest expense		(464,621	)		(4,627	)
Other income, net		582,869			617,997
Gain on sale of long-term accounts receivable		11,359,379			—

INCOME (LOSS) BEFORE INCOME TAXES		26,931,656			(1,124,767	)

PROVISION (BENEFIT) FOR INCOME TAXES:
Current		10,364,592			808,450
Deferred		124,922			(822,281	)

Total		10,489,514			(13,831	)

NET INCOME (LOSS)	$	16,442,142		$	(1,110,936	)

EARNINGS (LOSS) PER COMMON SHARE:
Basic earnings (loss) per share	$	0.34		$	(0.02	)

Diluted earnings (loss) per share	$	0.34		$	(0.02	)

SHARES USED IN COMPUTING EARNINGS (LOSS) PER COMMON SHARE
Basic		48,285,294			47,869,706

Diluted		48,922,381			47,869,706


			For the Six Months Ended

			January 24,			January 25,
			2004			2003

SUPPLEMENTAL DISCLOSURE OF CASH FLOW AND NON-CASH INVESTING AND FINANCING ACTIVITIES:
Cash paid during the period for:
	Interest		$	156,249		$	9,826
	Income taxes		$	27,495,583		$	5,376,012
Issuance of restricted stock			$	2,801,900		$	—
Income tax benefit from stock options exercised			$	681,365		$	—
During the six months ended January 24, 2004, we acquired UtiliQuest Holdings Corp. and purchased substantially all of the assets of First South Utility Construction, Inc. and assumed certain liabilities associated with these assets. See Note 3
		Fair market value of net assets acquired, including goodwill	$	180,245,182
		Less: Common stock issued		(4,184,289	)

		Acquisition expenditures		176,060,893
		Cash acquired		(1,393,830	)

		Acquisition expenditures, net of cash acquired	$	174,667,063


	(in thousands)
	First South		UtiliQuest

Cash paid (including $9 million for excess working capital for First South)	$	59,967	$	115,085
Transaction costs		397		612
Dycom common stock issued		4,184		—

	$	64,548	$	115,697


		(in thousands)
		First South		UtiliQuest

Assets:
Cash and equivalents		$	—	$	1,394
Accounts receivable, net			7,429		15,402
Costs and estimated earnings in excess of billings			7,591		—
Deferred tax asset, net			—		7,503
Inventories			442		—
Other current assets			114		3,155
Property and equipment			7,511		15,717
Goodwill			39,570		71,789
Tradename			670		4,870
Intangibles — customer relationships			3,300		27,600
Other intangibles, net			800		—
Other assets			—		5,218

	Total assets		67,427		152,648

Liabilities:
Accounts payable			2,064		1,666
Capitalizable leases — short term			—		4,889
Accrued self-insured claims			—		11,611
Other accrued liabilities			815		5,141
Capitalizable leases — long term			—		5,335
Notes payable — long term			—		3,600
Accrued self-insured claims — long term			—		4,709

	Total liabilities		2,879		36,951

Net assets acquired		$	64,548	$	115,697


	For the Three Months Ended

	January 24, 2004		January 25, 2003

Total revenues	$	213,123,828	$	182,216,353
Income (loss) before income taxes		28,080,174		(8,211,926	)
Net income (loss)		17,116,633		(7,459,470	)
Earnings (loss) per share:
Basic	$	0.35	$	(0.16	)
Diluted	$	0.35	$	(0.16	)

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DYCOM INDUSTRIES, INC

Registrant


Date: March 9, 2004		/s/ Steven E. Nielsen Name: Steven E. Nielsen Title: President and Chief Executive Officer


Date: March 9, 2004		/s/ Richard L. Dunn Name: Richard L. Dunn Title: Senior Vice President and Chief Financial Officer