Attached files
| file | filename |
|---|---|
| EX-99.2 - EXHIBIT 99.2 - DYCOM INDUSTRIES INC | ex99_2.htm |
| 8-K - DYCOM 8-K 2-24-2010 - DYCOM INDUSTRIES INC | form8k.htm |
Exhibit 99.1
CORPORATE
PARTICIPANTS
Steven
Nielsen
Dycom
Industries - President, Chief Executive Officer
Rick
Vilsoet
Dycom
Industries - General Counsel
Drew
DeFerrari
Dycom
Industries – Chief Financial Officer
CONFERENCE
CALL PARTICIPANTS
Simon
Leopold
Morgan
Keegan & Co., Inc. - Analyst
Adam
Thalhimer
BB&T
Capital Markets - Analyst
John
Rogers
D.
A. Davidson & Co. - Analyst
Alex
Rygiel
Friedman,
Billings, Ramsey Group, Inc. - Analyst
Michael
Funk
BofA
Merrill Lynch - Analyst
Alan
Mitrani
Sylvan
Lake Management - Analyst
PRESENTATION
Operator
Ladies
and gentlemen, thank you for standing by, and welcome to the Dycom results
conference call. (Operator Instructions).
I would
now like to turn the conference over to Mr. Steven Nielsen. Please go
ahead.
Steven
Nielsen - Dycom Industries -
President, CEO
Thank
you, Cindy. Good morning, everyone. I’d would like to
thank you for attending our second quarter fiscal 2010 Dycom results conference
call. During the call, we will be referring to a slide presentation which can be
found on our website, www.dycomind.com under the heading Investors and
sub-heading Event Details. Relevant slides will be identified by number
throughout our presentation.
Going to
slide 1. Today we have on the call Drew DeFerrari, our Chief Financial Officer,
and Rick Vilsoet, our General Counsel. Now I will turn the call over to Rick
Vilsoet, Rick?
Rick
Vilsoet - Dycom Industries -
General Counsel
Thank
you, Steve. Turning to slide 2, except for historical information, statements
made by Company management during this call may be forward-looking, and are made
pursuant to the Safe Harbor provision of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements are based on management's
current expectations, estimates, and projections and involve known and unknown
risks and uncertainties, which may cause actual results to differ materially
from forecasted results. These risks and uncertainties are more fully described
in the Company's filings with the Securities and Exchange Commission. The
Company does not undertake to update forward-looking information.
Steve?
1
Steven Nielsen - Dycom Industries - President, CEO
Thanks,
Rick. Yesterday, we issued a press release announcing our second quarter
results. As you review this release, it is important to note the following.
During the second quarter of fiscal 2009, we recorded a pre-tax gain of
approximately $1.3 million, related to the buyback of $4.65 million aggregate
principal amount of the Company's senior subordinated notes, and a pre-tax
goodwill impairment charge of $94.4 million. For clarity and to enable
comparability between periods, my comments will be limited to results from
continuing operations excluding these items. A reconciliation of the non-GAAP
results to our GAAP results for the year-ago period has been provided with our
press release, as well as on slides 10 and 11.
Results
of a loss of $0.10 per share for the second quarter, increased from last year's
loss of $0.04 per share.
Revenue
decreased sequentially by 16.5% to $216.3 million, and declined year-over-year
by 11.9%, reflecting customer reductions in capital spending plans, and the lack
of any meaningful storm restoration services during the quarter. Excluding storm
restoration services from the year-ago quarter, revenue declined approximately
10.7%. Volumes during the quarter were slow for most telephone companies, with
one notable exception, as customers deployed capital for new network initiatives
at a slowing pace, and most other customers tightly managed routine capital and
maintenance expenditures. Construction spending and installation activity by
cable customers was also slow.
Margins
decreased sequentially but improved by 21 basis points year-over-year. Cash flow
from operations was strong, reflecting a four-day decline in days sales
outstanding and during the
quarter, we secured a number of contract awards. We did not repurchase any of
our common stock or senior subordinated notes, and finished the quarter in a
slight net cash position.
Going to
slide 4. During the quarter, we experienced the effects of a weak overall
economy, revenue from AT&T was down sequentially, and down year-over-year.
At $42.8 million, or 19.8% of revenue, AT&T was our largest customer.
Revenue from Comcast was down sequentially and down year-over-year. Comcast was
our second largest customer at $28.9 million, or 13.3% of total revenue. Revenue
from Verizon was $27.0 million; Verizon was Dycom's third largest customer for
the quarter, at 12.5% of revenue.
CenturyLink
was our fourth largest customer with revenues of $24.0 million or 11.1% of total
revenue. CenturyLink was up 10.5% sequentially, and over 57% year-over-year.
Revenue from Time Warner Cable was down sequentially and year-over-year. Time
Warner Cable was our fifth largest customer at 8.4% of total revenue. All
together, our top five customers represented 65.1% of revenue, and were down
10.8% year-over-year. All other customers declined 13.9%.
Now,
moving to slide 5. Backlog at the end of the second quarter was $1.078 billion,
versus $819 million at the end of the first quarter, an increase of
approximately $259 million. Of this backlog, approximately $684 million is
expected to be completed in the next 12 months.
During
the quarter, we continued to book new work, and renew existing work. From
AT&T, we received a new three-year master service agreement in Florida,
covering West Palm Beach through Orlando. From Comcast, a new three-year master
service agreement for construction and maintenance services in the Bay Area of
California. For Verizon, a one-year extension to our FTTP contract in the
Northeast. For Comcast and Charter, annual renewals of a number of installation
related contracts, and from AT&T, a new three-year contract extending our
locate services in Atlanta and west Georgia.
Headcount
decreased during the quarter to 8,360, reflecting continued right-sizing of our
work force, a weak overall economy, and normal seasonal factors. Now, I will
turn the call over to Drew for his financial review.
Drew
DeFerrari - Dycom Industries -
CFO
Thanks
Steve and good morning everyone. As I discuss the financial results for the
quarter, please note that there were several items that impacted our results in
2009 that will be excluded from my comments. We have provided a reconciliation
of the non-GAAP measures to the GAAP measures in the press release and also in
the Appendix of the slide presentation for today's call.
Going to
slide number 6 of the presentation. Contract revenues for the second quarter of
2010 were $216.3 million, which was down 11.9% from last year's Q2 revenue of
$245.5 million. Customer reductions in capital spending and lack of storm
restoration services generated the current period
decrease.
2
Loss from
continuing operations for the current quarter was $4.0 million, compared to a
loss of $1.7 million on a non-GAAP basis in the second quarter of last year.
Loss per share was $0.10 per share, compared to a loss of $0.04 per share on a
non-GAAP basis in Q2-09. As a reminder, non-GAAP amounts exclude the adjusting
items set forth in our GAAP reconciliation, in the Appendix to today's slide
presentation.
Turning
to slide number 7. Costs of earned revenues as a percentage of contract revenue
decreased during the current period compared to Q2-09 from improved safety
performance and lower equipment costs. Offsetting the decline was higher fuel
costs of 75 basis points, primarily from increases in the price of gasoline and
diesel fuel.
General
and administrative costs increased from Q2-09, primarily from increased
stock-based compensation in the current period, higher incentive bonus costs for
subsidiaries that outperformed the prior year results, and higher
software-related costs for enterprise licenses that switched to a maintenance
mode during the current period.
Depreciation
and amortization was lower in the current quarter due to the sale of assets and
the impact of assets reaching the end of their depreciable lives in 2009 and
2010. Interest expense was lower on a year-over-year basis, as we had lower debt
balances outstanding during 2010. On a non-GAAP basis, our effective tax rate
was approximately 40% for the three month period, and close to 50% year-to-date.
The current period operating loss has contributed to the increase in our
year-to-date effective tax rate, due to the impact of nondeductible items in
relation to lower pre-tax results.
Now,
turning to slide number 8. Our balance sheet strength continued during the
quarter and we ended the period with approximately $136.0 million of cash on
hand, which puts us in a net cash position, after subtracting our outstanding
debt balance. During the quarter, operating cash flows contributed $32.3
million. Based on average daily revenue in each period, day sales outstanding
improved to 56 days, which was four days lower than the end of
Q1-2010.
Capital
expenditures net of disposals were $16.4 million for the quarter, bringing our
six-month total up to $24.7 million. Gross capital expenditures for the quarter
was approximately $17.3 million.
We ended
the quarter with no borrowings outstanding under our senior credit facility and
$153.4 million of availability, after providing for letters of credit related to
our insurance program. Now, I will turn the call back to Steve.
Steven
Nielsen - Dycom Industries -
President, CEO
Thanks,
Drew. Going to slide 9. In summary, during the quarter we were challenged by a
weak economy, yet continued to demonstrate strengths.
First and
foremost, we maintained solid customer relationships throughout our markets. We
continued to win projects and extend contracts at acceptable pricing. These
successes were reflected in a sizable sequential increase in backlog. In
addition, as demand has slowed, we have generally increased market share as our
customers are consolidating vendor relationships.
Secondly,
the strength of those relationships and the values we can generate for our
customers has allowed us to be at the forefront of evolving industry
opportunities. The long-term drivers of these opportunities are as strong as
ever, and in fact, may further strengthen. The government's response to a weak
economy includes increased funding for broadband initiatives, and industry
mergers and acquisition activities may expand new technology deployments and in
one instance already have.
Additionally,
we remain encouraged that cable operators have begun to deploy a number of new
technologies which will enable them to significantly increase the effective
bandwidth of their networks, and offer new products to consumers and businesses.
And finally, we are strong financially, maintaining ample liquidity, a robust
balance sheet, and a net cash position, all of which position Dycom well to
weather a difficult overall economic climate. As our industry continues to
evolve, we believe our fundamental strength will allow us to remain one of the
best positioned firms in our industry, able to exploit profitable growth
opportunities.
And
finally, as we look ahead, we expect revenues which increase sequentially due to
seasonality but still reflect slow customer activity and weather impacts,
margins which improve but are pressured by poor weather during the beginning of
the quarter, both of these factors contributing to a sequential improvement in
earnings per share that is expected to be near break-even to a slight
profit.
As the
nation's economy appears to be emerging from recession, we remain encouraged
that our major customers possess significant financial strength and remain
committed to multi-year capital spending initiatives. We are adjusting our
business to address a weak economic environment and slowing expenditures from a
key customer and these adjustments have fortified our strong balance sheet and
meaningfully increased our liquidity. We remain confident in our strategies, the
prospects for our Company, the capabilities of our able employees and the
experience of our management team, who have successfully managed through
difficult economic times before. Now Cindy, we will open the call for
questions.
3
QUESTION
AND ANSWER
Operator
Thank
you.
(Operator
Instructions).
And our
first question will come from the line of Simon Leopold from Morgan Keegan.
Please go ahead.
Simon
Leopold - Morgan Keegan &
Co., Inc. - Analyst
Thank
you. Just wanted to first get a clarification on what you mean by normal
sequential seasonality. And this is just given observing the last several years.
I think we've seen anywhere from kind of a mid-low single digits to a double
digit sequential move, pretty broad range. So what are you thinking is
normal?
Steven
Nielsen - Dycom Industries -
President, CEO
Well,
what we said Simon, is we always see a sequential improvement in the quarter,
just because you have less holidays and more available work time. We've
obviously had some impacts in February, due to the heavy snow on the East coast.
And at this point, we have not had any storm restoration services. In the
year-ago period, which is the way we're thinking about it, we had better
weather, and we had a slight sequential increase in storm restoration services.
So I would look to last year's increase and then scale it back somewhat from
there.
Simon
Leopold - Morgan Keegan &
Co., Inc. - Analyst
Great.
That's very helpful then. And then in terms of trying to get a sense of your
business with Verizon, and the FiOS slowing, obviously Verizon down a bit, and
I'm trying to get a sense of how to quantify how much of that is FiOS related,
and how much is other activities you have with that customer?
Steven
Nielsen - Dycom Industries -
President, CEO
Generally,
most of the slowness is on FiOS. In fact during the quarter, at the first of the
year, we actually started a new master services contract with them. Not a big
contract, but we did actually add some revenue from them during the month of
January. So it is still generally FiOS-related. Although, I think as we said in
our comments, all of our customers continue to tightly manage routine
expenditures.
Simon
Leopold - Morgan Keegan &
Co., Inc. - Analyst
Okay. And
one last one please, is we have heard a lot of chatter about backhaul
initiatives, and the carriers running fiber to cell sites. I guess we have maybe
300,000 cell sites in the US, and trying to get a sense of how material that
business, the construction opportunities are for you, in terms of what you have
seen over the past year, and then what your outlook is for the coming
year?
Steven
Nielsen - Dycom Industries -
President, CEO
Sure.
Well, as we have talked about on prior calls, we have seen a number of different
industry participants accelerate their fiber to the cell site initiatives. So
we're seeing it through all of our telco Master Service Agreements. That work
generally flows through those agreements. It is not sometimes specifically
identified that way, but we're certainly seeing increased activity there. We
have commented in the past, that we have seen a number of the cable operators
participate. I can tell you that as we look into kind of calendar 2010, this is
an approximate number, but I mean we're well north of 1,000 of known sites that
we will be installing fiber to for cable operators. And then we also have had
some projects for what I’ll call less
traditional suppliers of backhaul services. So for example, we talked on a prior
call about some services for an electric utility’s fiber subsidiary that was 500
to 600 sites and we're also, Simon, in a new development, seeing a number of new
participants who are installing fiber to serve distributed antenna systems, in a
number of metropolitan areas around the country. That is just emerging, but
certainly a new source of industry demand.
4
Simon
Leopold - Morgan Keegan &
Co., Inc. - Analyst
Thank you
very much.
Operator
Our next
question comes from the line of Adam Thalhimer from BB&T Capital Markets.
Please go ahead.
Adam
Thalhimer - BB&T Capital
Markets - Analyst
Good
morning, Steve. Good morning, Drew.
Steven
Nielsen - Dycom Industries -
President, CEO
Hey,
Adam.
Adam Thalhimer - BB&T Capital Markets - Analyst
First of
all, can you give us an update on stimulus? It looks like the first tranche is
coming out. Are any of those projects in your wheelhouse?
Steven
Nielsen - Dycom Industries -
President, CEO
We have
actually, on all of the larger projects that have been announced, since the
first announcement that talked about projects in Georgia and Maine, we do have a
presence for -- and have had conversations on a number of the larger projects.
Because they have generally been new entities or emerging entities, Adam,
they're still generally in the early phases of engineering, and permitting and
routing. And so I would not expect any material pickup in actual construction
spend for the most part until over the summer.
Adam Thalhimer - BB&T Capital Markets - Analyst
Okay.
Steve, can you update us on M&A activity? Are you seeing anything
interesting come across your desk?
Steven Nielsen - Dycom Industries - President, CEO
There is
always activity in this industry. We have seen a number of things that have come
through. I think in general, as the economy is still weak, we have generally
seen things, who have similar revenue profiles to our own business. And so,
we're still looking and evaluating to see where there may be some good growth
opportunities. But it is -- there is activity out there, but I wouldn't call it
robust at the moment.
Adam Thalhimer - BB&T
Capital Markets - Analyst
And
you're still happy with your current end market mix? You're not trying to enter
any new markets?
5
Steven Nielsen - Dycom Industries - President, CEO
Well, I
think, Adam, one way to evaluate it, and there are a number of ways to look at
this, obviously. But we announced a number of new contracts; several of those
were in fact new. So we're either gaining share, through some competitive
outcomes or through vendor consolidations. If we look at the organic decline,
year-over-year, adjusting for storm, I think we're -- it doesn't appear that our
end markets are any less or more challenged than a number of our peers. And so I
think that the key here is to continue to work hard on the business. You get --
you improve your intermediate and long-term prospects, at least in my experience
in the industry, by working hard in the down cycle and we continue to do
that.
Adam Thalhimer - BB&T Capital Markets - Analyst
Great.
And then lastly, you mentioned a new emerging technology the cable companies are
using. Is that something that requires -- I mean is that kind of a technology
software upgrade? Or is that something more that impacts your business in terms
of --
Steven Nielsen - Dycom Industries - President, CEO
Adam, are
you referring to the distributed antenna systems?
Adam Thalhimer - BB&T Capital Markets - Analyst
I meant,
I was just asking. You mentioned --
Steven Nielsen - Dycom Industries - President, CEO
Well,
yes, I mean, I think what we've seen is with Comcast going to DOCSIS 3.0, and a
number of other cable operators doing that, that's certainly enabling them to
expand their bandwidth. They've also, in Comcast case, they have gone all
digital. Time Warner is I believe doing that in New York, and considering doing
it elsewhere. There is just a number of initiatives by cable operators that are
augmenting, not only the bandwidth to their traditional consumer base, but also
really expanding to small and medium enterprises, or like these cell sites. I
think Comcast talked on their last earnings call, they saw the cell site, fiber
to the cell site opportunity as a $1 billion dollar a year in revenue business.
And so it is a nice sign when you have clients who are looking at new growth
opportunities that are squarely within the services that we offer to
them.
Adam Thalhimer - BB&T Capital Markets - Analyst
Great.
Thanks, Steve.
Steven Nielsen - Dycom Industries - President, CEO
Thank
you.
Operator
Our next
question comes from the line of John Rogers from D. A. Davidson. Please go
ahead.
John Rogers - D. A. Davidson & Co. - Analyst
Hi, good
morning.
Steven Nielsen - Dycom Industries - President, CEO
Good
morning, John.
6
John Rogers - D. A. Davidson & Co. - Analyst
First of
all, Steve, the bookings growth that you had in the quarter, if I calculated
this right, it is one of the strongest quarters you've had in a number. Is it
that your customers are willing to look out a little bit further, or give you
more Master Service Agreements, or is it that market share gain you referred
to?
Steven Nielsen - Dycom Industries - President, CEO
Well, I
think if I --
John Rogers - D. A. Davidson & Co. - Analyst
Or is it
a real signs that things are turning.
Steven Nielsen - Dycom Industries - President, CEO
There
were a number of contracts that were new, so rather than extensions. And in
those cases, I think they were -- there were two factors. I mean one, they were
comfortable with us in expanding our market share kind of in a traditional way.
There were also some situations where, as part of clients kind of revisiting
their own administrative costs, that they have encouraged some of their
operating units to deal with less vendors, so that they can streamline their own
headcount internally. So that is a situation where we may have been one of as
many as eight or ten vendors, and they consolidated that business to us. And
then we'd also talked about, in our installation business, we have a number of
those contracts that are renewed annually. And we talked about this in November,
and sure enough, the calendar changed, and so those renewed. But there are some
fundamental drivers that were somewhat new in the quarter, particularly around
vendor consolidation that were driving backlog growth.
John Rogers - D. A. Davidson & Co. - Analyst
Okay. And
of those, I don't know whether you can do this, of those six contract awards and
extensions that you highlighted, how many of those are actual extensions versus
new --
Steven Nielsen - Dycom Industries - President, CEO
It was
about 50/50. And we did -- there were a number of -- Those are just some of the
noteworthy ones.
John Rogers - D. A. Davidson & Co. - Analyst
Yes.
Steven Nielsen - Dycom Industries - President, CEO
There
were a number of other contracts that we didn't list. I think the other thing is
-- and in the particular areas that we renewed with Verizon, we expect activity
to be pretty solid this year, and that impacted the number also.
John Rogers - D. A. Davidson & Co. - Analyst
Okay. And
then secondly, just looking out a little bit further, and I want to make sure I
word this the right way. How much of this decline that we experienced over the
last couple of years, do you think is part of a normal economic cycle versus a
structural change? I mean are we through the big build-out of telecom
infrastructure, and is it just a question of waiting for the rebound? Or do you,
as Dycom, have to look at developing, attacking another aspect of telecom
infrastructure?
7
Steven Nielsen - Dycom Industries - President, CEO
I think,
John, you have to -- there is no perfect answer to that question. I think it is
difficult in this recession, because of both the severity of the overall
economic decline, as well as the duration. Now, I had some minor experience in
the early 80s, and that's probably the only recession that is comparable. And so
I think in recessions, we sometimes think that what we see as cyclical downturns
are going to be structural, that is why you usually have a boom on the other
side, that doesn't work well, so that same psychology can be at the bottom. I
think we continue to see device growth and application growth which requires
bandwidth. I think the competition amongst our customers is certainly going to
increase. That will, at least in certain of our customers, that has encouraged
them to seek out larger vendor relationships.
And I
think that the history, John, of our industry in particular, has been that there
are always emerging catalysts that seem to coincide with an economic recovery.
So your question is almost identical to the questions, we received in 2001 and
2002, about the quote-unquote fiber glut, that would mean that nobody would ever
build robust telecom networks ever again. And obviously, that didn't turn out to
be that way. So the thing from my experience that you do is you obviously stay
in front of all of the opportunities that are out there, like wireless backhaul.
And you continue to work on your own business, so that when the economy gets
better, opportunity seems to increase.
John Rogers - D. A. Davidson & Co. - Analyst
Okay.
Well, I appreciate your thoughts. Thank you.
Steven Nielsen - Dycom Industries - President, CEO
Thanks,
John.
Operator
The next
question comes from the line of Alex Rygiel from FBR Capital. Please go
ahead.
Alex Rygiel - FBR Capital. - Analyst
Good
morning, and thanks for taking my call, Steve.
Steven Nielsen - Dycom Industries - President, CEO
Hey,
Alex.
Alex Rygiel - FBR Capital - Analyst
Last
year, third quarter revenue increased about 5% sequentially. It sounds like you
just suggested that this third quarter, your sequential growth will be less than
that. Is that correct?
Steven Nielsen - Dycom Industries - President, CEO
Well,
what we said was that some of that sequential increase was storm-related, a
little over a couple million, if you go back and check. And we think it will be
a little bit less than that storm adjusted increase. Hard to say. As you know,
given where you live, it has been a tough last couple of weeks in the mid
Atlantic, from a weather perspective.
8
Alex Rygiel - FBR Capital - Analyst
Yes, it
has been a tough few weeks all right. When we look at your 12-month backlog, it
is down about 6% year-over-year. What is the year-over-year charge in Verizon in
that 12-month backlog?
Steven Nielsen - Dycom Industries - President, CEO
That
certainly has come in faster than 6%. Because as we talked about on the last
call, I mean this is a year where they're really transitioning the program, with
their stated goal of essentially being complete by the end of the year. So it
certainly is more in, than the overall backlog.
Alex Rygiel - FBR Capital - Analyst
Is it
safe to say that your all other customer base is flat to up
year-over-year?
Steven Nielsen - Dycom Industries - President, CEO
I would
-- we haven't run the numbers but intuitively, I think that is exactly
right.
Alex Rygiel - FBR Capital - Analyst
And if we
look at the revenue contribution from Verizon this current quarter of $27
million, what portion of that was from FiOS?
Steven Nielsen - Dycom Industries - President, CEO
We do a
number of things, some of which are directly related, and some are not. And so
last quarter, we had talked about a number of kind of $8 million to $12 million
that was FiOS impacted, and I think that is still safe to say. Now, this is
always a difficult quarter, because the work that we do in New York and New
England, really doesn't get started until April. And so the season there is kind
of April to November. The other thing to keep in mind on backlog is that we had
a couple of large gas pipeline projects in the third and fourth quarter last
year that were in backlog. And burned off over those quarters, and essentially,
we have no major gas pipeline work under way, currently.
Alex Rygiel - FBR Capital - Analyst
Given
that Verizon has publicly stated that, I guess, they're going to wind down FiOS
by year-end. And you've commented that and provided color to help us better
understand the FiOS contribution to your revenue, could you help us to get an
understanding of how much FiOS is embedded into your backlog
currently?
Steven Nielsen - Dycom Industries - President, CEO
It is not
significant.
Alex Rygiel - FBR Capital - Analyst
And
lastly, how should we think about CapEx this year versus last year in light of
the revenue decline?
Steven Nielsen - Dycom Industries - President, CEO
Well,
there are a number of things that we continue to spend some money on. We have
some opportunities around some attractive pricing on some of our asset
replacement programs. And so last call, we had said kind of on a net basis, $40
million to $50 million, and I think we're still comfortable that that's the
right number.
9
Alex Rygiel - FBR Capital - Analyst
Great.
Thank you.
Operator
Our next
question will come from the line of Michael Funk from Bank of America. Please go
ahead.
Michael Funk - BofA Merrill Lynch - Analyst
Good
morning. And thank you for taking the question. I think that the earlier analyst
asked about FiOS and how much FiOS is embedded in your current numbers. Looking
forward atAT&T, we project they're going to be wrapping up their U-Verse
build within the next year and a half to two years. So similarly, how much of
U-Verse is currently embedded in your revenue from AT&T? And then second,
you mentioned DOCSIS 3.0 and DAS earlier. I was wondering if you could give me
some more color on the type of work that you're doing with the cable companies
for DOCSIS 3.0. And then DAS as well, what kind of build you're doing for the
distributing antenna systems, if that's what you're referring
to.
Steven Nielsen - Dycom Industries - President, CEO
Yes, I
mean the U-Verse initiative flows through all of our Master Service Agreements,
and it comes at us in thousands of individual work orders, Michael. So there is
no way for us to really break it out, other than to say that it is certainly a
driver of demand. There are a number of areas, as AT&T has talked about,
that they plan on rotating the build to, so there are areas where we've been at
it for two or three years. And there are other areas that we're just starting
right now. Particularly as you will recall, and AT&T has commented on this,
that they started later in the former BellSouth territory, which is our primary
construction area.
The other
thing that we will await to see, but I believe I have read comments that from
AT&T, that they're actually considering expanding the footprint, as they
have previously with other DSL-type initiatives. So I'm not sure the premise of
the question is consistent with their -- at least what I've seen in their public
comments. And also about the focus on the Southeast. On the DOCSIS initiatives
from the cable operators, that entails a certain number of truck rolls to do box
upgrades and box installations, which is a significant business of ours. And so
we are a major participant there. And then on the DAS work, that is generally
for entities that have contracts to provide cell site connectivity for carriers,
oftentimes in areas where the permitting cycle from macro-cells is lengthy or
difficult to complete. And its basic fiber placement, splicing, and connection
to the antennas so it is really right up our core fiber placement and
installation core competency.
Michael Funk - BofA Merrill Lynch - Analyst
Is that
like, NextG, is that the company you're working with there?
Steven Nielsen - Dycom Industries - President, CEO
We're not
going to identify individual customers but there are a number of folks that are
in that business.
Michael Funk - BofA Merrill Lynch - Analyst
Great.
Thank you, guys.
Operator
Thank
you. And at this time, I am showing no further questions. Please continue. And
actually, one moment. We have a few that have queued up.
Steven Nielsen - Dycom Industries - President, CEO
Okay, go
ahead.
10
Operator
We will
go to the line of Alan Mitrani from Sylvan Lake. Please go ahead.
Alan Mitrani - Sylvan Lake Management - Analyst
Hi, thank
you. You can give us the next top five customers?
Drew DeFerrari - Dycom Industries - CFO
Good
morning, Alan. This is Drew. I will.
Alan Mitrani - Sylvan Lake Management - Analyst
Good
morning.
Drew DeFerrari - Dycom Industries - CFO
Charter
was at 6.2%; Windstream was at 3.2%; Cablevision, 1.6%; Qwest, 1.5%; and West
Carolina Rural Telephone at 1.2%.
Alan Mitrani - Sylvan Lake Management - Analyst
Great.
And can you talk a bit about -- it seems like the demand environment is getting
worse, as we get through the recession, or it is not just getting any better and
a couple of your customers are going to come -- a couple of the projects are
going to come into life. Maybe you could talk then, about what you're doing on
the cost side, besides cutting heads, which we see. Are there other costs that
can be taken out of the business? Or should we expect the SG&A levels to
remain fairly consistent here, and we're just waiting for an increase in
demand?
Steven Nielsen - Dycom Industries - President, CEO
Well,
we're always addressing our G&A, Alan, where it makes sense. You don't carry
people that are not productive. But in those areas where we have projects that
we think have a beneficial impact in the future on cost of goods, we're going to
continue to fund those. Once again, I am not sure that the demand environment,
as you've characterized it, is just on the numbers, correct. I mean we see a
decelerating change in negative organic growth; at least we did this quarter.
And that's the precursor to things getting better. And there are a number of
things, as we have talked about in our new contracts, where there may be changes
in the way customers procure services from folks like us, that are beneficial to
us. So certainly, we've got to work through the Verizon. But I think there will
be a lot of businesses that have to work through the structure of their
companies, if we forecast 10% plus unemployment out for five or ten years. I
don't expect that to be that way. But if that becomes more evident, then we will
adjust G&A and the size of the Company.
Alan Mitrani - Sylvan Lake Management - Analyst
And on
the M&A front, can you tell us are you looking at ancillary businesses? Or
is it still the same old related businesses or certain areas, or buying
competitors that maybe you can help leverage? Just talk a little bit more about
that.
Steven Nielsen - Dycom Industries - President, CEO
We
continued to look in our core businesses, which are actually fairly broad, for
cable, telephone, the locating business, and some ancillary power and gas
business. It is still, on a relative basis, I don't know that the end market
demand from our customers currently, is any less attractive or more attractive
than other businesses. And so we're going to be careful about where we deploy
the capital, while that is still the case.
11
Alan Mitrani - Sylvan Lake Management - Analyst
And then
on the stock buyback, I was surprised you didn't really buy much stock at all
this past quarter. Maybe it is -- I guess you're working through some of the
weaker quarters you've had. Can you talk to us about the philosophy of having
the buyback, and actually putting it to use?
Steven Nielsen - Dycom Industries - President, CEO
Well,
we've actually, obviously, we have used it. The last time we made any
substantial repurchases -was last April. We think it is, given the liquidity and
the strength of the Company's balance sheet, that we should have one in place.
We're going to evaluate it, as a use of cash, against other opportunities to
either invest in the business, or invest in capital equipment that will make us
better, or acquisitions. And it is a balancing act. I wish there was a magic
formula that told you when to buy, but it is more a matter of judgment when that
makes sense.
Alan Mitrani - Sylvan Lake Management - Analyst
Thank
you.
Operator
Thank
you.
(Operator
Instructions).
We will
go to a follow-up from the line of John Rogers from D. A. Davidson. Please go
ahead.
John Rogers - D. A. Davidson & Co. - Analyst
Hi, yes,
just in the past, have you given us a breakdown between cable and telecom
revenue. Do you have that?
Drew DeFerrari - Dycom Industries - CFO
I do,
John. Telecom was 48.7%.
John Rogers - D. A. Davidson & Co. - Analyst
48.7%?
Drew DeFerrari - Dycom Industries - CFO
Correct.
Cable was 31.6%.
John Rogers - D. A. Davidson & Co. - Analyst
Okay. All
right. And then the others are in the --
Drew DeFerrari - Dycom Industries - CFO
Yes,
exactly. They're in the slide.
12
John Rogers - D. A. Davidson & Co. - Analyst
Okay.
Thank you.
Operator
And we
have a follow-up from the line of Alex Rygiel from FBR Capital. Please go
ahead.
Alex Rygiel - FBR Capital - Analyst - Analyst
Hey,
Steve, inside your locating business, what is the locating business telling you
about the general economy right now?
Steven Nielsen - Dycom Industries - President, CEO
Well, I
mean I think you can see where the revenue came in, in the quarter. I mean
ticket activity is still flat to down slightly, as a general rule. There are
always parts of the country where that is different. I would tell you that it is
not getting worse. So from that perspective, I think it shows that the economy
is stabilizing. And it does show particularly on the water and sewer side, that
there are a number of projects that seem to be, my guess is stimulus funded, or
some kind of government program that seem to be fairly active around the
country.
Alex Rygiel - FBR Capital - Analyst - Analyst
And it
sounded like you might have picked up some new markets in the locating business.
Is that correct?
Steven Nielsen - Dycom Industries - President, CEO
Well,
now, we renewed our Atlanta and west Georgia contract which we have been there
for -- it will be almost a decade. But we have layered on some additional
customers, which is always an important part of making -- optimizing that
business.
Alex Rygiel - FBR Capital - Analyst
Great.
Thank you.
Operator
And I am
showing no other questions in queue. Please continue.
Steven Nielsen - Dycom Industries - President, CEO
Thanks,
Cindy. We appreciate everybody's time and attention, and we look forward to
speaking to you at the end of May. Thank you.
Operator
Thank
you. And ladies and gentlemen, that does conclude your conference call for
today. Thank you for your participation, and for using AT&T executive
teleconference service. You may now disconnect.
13
|
DISCLAIMER
Thomson
Reuters reserves the right to make changes to documents, content, or other
information on this web site without obligation to notify any person of
such changes.
In
the conference calls upon which Event Transcripts are based, companies may
make projections or other forward-looking statements regarding a variety
of items. Such forward-looking statements are based upon current
expectations and involve risks and uncertainties. Actual results may
differ materially from those stated in any forward-looking statement based
on a number of important factors and risks, which are more specifically
identified in the companies' most recent SEC filings. Although the
companies may indicate and believe that the assumptions underlying the
forward-looking statements are reasonable, any of the assumptions could
prove inaccurate or incorrect and, therefore, there can be no assurance
that the results contemplated in the forward-looking statements will be
realized.
THE
INFORMATION CONTAINED IN EVENT TRANSCRIPTS IS A TEXTUAL REPRESENTATION OF
THE APPLICABLE COMPANY'S CONFERENCE CALL AND WHILE EFFORTS ARE MADE TO
PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS,
OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE
CONFERENCE CALLS. IN NO WAY DOES THOMSON REUTERS OR THE APPLICABLE COMPANY
OR THE APPLICABLE COMPANY ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR
OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON
THIS WEB SITE OR IN ANY EVENT TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE
APPLICABLE COMPANY'S CONFERENCE CALL ITSELF AND THE APPLICABLE COMPANY'S
SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.
©
2010 Thomson Reuters. All Rights Reserved.
|
14