Edgar Filing: DYCOM INDUSTRIES INC

form10q.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended April 30, 2011

[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from ________ to ________

Commission File Number 001-10613

DYCOM INDUSTRIES, INC.

( Exact name of registrant as specified in its charter )

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

11770 US Highway 1, Suite 101, Palm Beach Gardens, Florida		33408
( Address of principal executive offices )		( Zip Code )

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

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

Title of Each Class		Name of Each Exchange on Which Registered
Common Stock, par value $0.33 1/3 per share		New York Stock Exchange
Series A Preferred Stock Purchase Rights		New York Stock Exchange

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

None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ ] No [ ]

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

Large accelerated filer [ ]	Accelerated filer [X]	Non-accelerated filer [ ]	Smaller reporting company [ ]
(Do not check if a smaller reporting company)

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

There were 34,045,788 shares of common stock with a par value of $0.33 1/3 outstanding at May 27, 2011.

Dycom Industries, Inc.

Table of Contents


	PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements	3

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35

Item 4.	Controls and Procedures	35

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	35

Item 1A.	Risk Factors	36

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36

Item 6.	Exhibits	37

Signatures		38
EX-31.1
EX-31.2
EX-32.1
EX-32.2

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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.

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

	April 30,		July 31,
	2011		2010
	(Dollars in thousands)
ASSETS
CURRENT ASSETS:
Cash and equivalents	$	89,027	$	103,320
Accounts receivable, net		101,789		110,117
Costs and estimated earnings in excess of billings		73,899		66,559
Deferred tax assets, net		14,869		14,944
Income taxes receivable		6,836		3,626
Inventories		17,648		16,058
Other current assets		10,890		8,137
Total current assets		314,958		322,761

PROPERTY AND EQUIPMENT, NET		127,068		136,028
GOODWILL		173,364		157,851
INTANGIBLE ASSETS, NET		59,414		49,625
OTHER		14,222		13,291
TOTAL NON-CURRENT ASSETS		374,068		356,795
TOTAL	$	689,026	$	679,556

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	27,862	$	25,881
Current portion of debt		383		47
Billings in excess of costs and estimated earnings		877		376
Accrued insurance claims		26,289		28,086
Other accrued liabilities		44,427		42,813
Total current liabilities		99,838		97,203

LONG-TERM DEBT		187,603		135,350
ACCRUED INSURANCE CLAIMS		22,974		24,844
DEFERRED TAX LIABILITIES, NET NON-CURRENT		28,567		24,159
OTHER LIABILITIES		3,685		3,445
Total liabilities		342,667		285,001

COMMITMENTS AND CONTINGENCIES, Notes 10, 11, and 16

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: 34,045,742 and 38,656,190 issued and outstanding, respectively		11,348		12,885
Additional paid-in capital		120,281		170,209
Accumulated other comprehensive income		295		169
Retained earnings		214,435		211,292
Total stockholders' equity		346,359		394,555
TOTAL	$	689,026	$	679,556

See notes to the condensed consolidated financial statements.

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


	For the Three Months Ended
	April 30,			April 24,
	2011			2010
	(Dollars in thousands, except per share amounts)
REVENUES:
Contract revenues	$	252,363		$	231,636

EXPENSES:
Costs of earned revenues, excluding depreciation and amortization		207,045			191,333
General and administrative (including stock-based compensation expense of $1.3 million and $0.8 million, respectively)		23,678			24,297
Depreciation and amortization		15,491			15,852
Total		246,214			231,482

Interest income		27			27
Interest expense		(4,422	)		(3,386	)
Loss on debt extinguishment		(2,557	)		-
Other income, net		3,500			4,451

INCOME BEFORE INCOME TAXES		2,697			1,246

PROVISION (BENEFIT) FOR INCOME TAXES:

Current		(1,326	)		7
Deferred		2,534			(409	)

Total		1,208			(402	)

NET INCOME	$	1,489		$	1,648

EARNINGS PER COMMON SHARE:

Basic earnings per common share	$	0.04		$	0.04

Diluted earnings per common share	$	0.04		$	0.04

WEIGHTED-AVERAGE SHARES USED IN COMPUTING EARNINGS PER COMMON SHARE:
Basic		34,706,822			39,021,043
Diluted		35,323,667			39,054,443

See notes to the condensed consolidated financial statements.

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


	For the Nine Months Ended
	April 30,			April 24,
	2011			2010
	(Dollars in thousands, except per share amounts)
REVENUES:
Contract revenues	$	732,150		$	707,082

EXPENSES:
Costs of earned revenues, excluding depreciation and amortization		597,987			582,241
General and administrative (including stock-based compensation expense of $3.1 million and $2.5 million, respectively)		68,338			71,698
Depreciation and amortization		46,894			46,558
Total		713,219			700,497

Interest income		90			85
Interest expense		(11,903	)		(10,470	)
Loss on debt extinguishment		(8,296	)		-
Other income, net		7,464			6,459

INCOME BEFORE INCOME TAXES		6,286			2,659

PROVISION (BENEFIT) FOR INCOME TAXES:

Current		(1,350	)		(566	)
Deferred		4,494			2,019

Total		3,144			1,453

NET INCOME	$	3,142		$	1,206

EARNINGS PER COMMON SHARE:

Basic earnings per common share	$	0.09		$	0.03

Diluted earnings per common share	$	0.09		$	0.03

WEIGHTED-AVERAGE SHARES USED IN COMPUTING EARNINGS PER COMMON SHARE:
Basic		35,800,175			39,028,637
Diluted		36,130,585			39,102,612

See notes to the condensed consolidated financial statements.

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


	For the Nine Months Ended
	April 30,			April 24,
	2011			2010
	(Dollars in thousands)
OPERATING ACTIVITIES:
Net income	$	3,142		$	1,206
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		46,894			46,558
Bad debt expense, net		12			62
Gain on sale of fixed assets		(6,810	)		(6,143	)
Deferred income tax provision		4,494			2,019
Stock-based compensation		3,086			2,488
Amortization and write-off of debt issuance costs		3,312			791
Excess tax benefit from share-based awards		(251	)		(69	)
Change in operating assets and liabilities, net of acquisitions:
Accounts receivable, net		14,590			18,782
Costs and estimated earnings in excess of billings, net		(6,073	)		7,675
Other current assets and inventory		(3,361	)		(6,895	)
Other assets		807			(960	)
Income taxes receivable		(3,210	)		(1,380	)
Accounts payable		(1,144	)		(1,212	)
Accrued liabilities and insurance claims		(3,398	)		(14,240	)
Net cash provided by operating activities		52,090			48,682

INVESTING ACTIVITIES:
Capital expenditures		(32,255	)		(38,222	)
Proceeds from sale of assets		9,690			6,571
Cash paid for acquisitions		(36,500	)		-
Changes in restricted cash		216			-
Net cash used in investing activities		(58,849	)		(31,651	)

FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt		187,500			-
Principal payments on long-term debt		(135,667	)		(920	)
Debt issuance costs		(5,105	)		-
Repurchases of common stock		(55,491	)		(4,489	)
Exercise of stock options and other		1,174			30
Restricted stock tax withholdings		(196	)		(273	)
Excess tax benefit from share-based awards		251			69
Net cash used in financing activities		(7,534	)		(5,583	)

Net (decrease) increase in cash and equivalents		(14,293	)		11,448

CASH AND EQUIVALENTS AT BEGINNING OF PERIOD		103,320			104,707

CASH AND EQUIVALENTS AT END OF PERIOD	$	89,027		$	116,155

SUPPLEMENTAL DISCLOSURE OF OTHER CASH FLOW ACTIVITIES AND NON-CASH INVESTING AND FINANCING ACTIVITIES:

Cash paid during the period for:
Interest	$	10,327		$	12,570
Income taxes	$	2,786		$	5,788
Purchases of capital assets included in accounts payable or other accrued liabilities at period end	$	2,138		$	3,818

See notes to the condensed consolidated financial statements.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Accounting Policies

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

The condensed consolidated financial statements include the results of Dycom and its subsidiaries, all of which are wholly-owned. All intercompany accounts and transactions have been eliminated and the financial statements reflect all adjustments, consisting of only normal recurring accruals which are, in the opinion of management, necessary for a fair presentation of such statements. These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). However, the financial statements do not include all of the financial information and footnotes required by GAAP for complete financial statements. Additionally, the results of operations for the three and nine months ended April 30, 2011 are not necessarily indicative of the results that may be expected for the entire year. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements for the year ended July 31, 2010 included in the Company’s 2010 Annual Report on Form 10-K, filed with the SEC on September 3, 2010.

On November 19, 2010, the Company acquired certain assets and assumed certain liabilities of Communication Services, Inc. On December 23, 2010, the Company acquired the outstanding common stock of NeoCom Solutions, Inc. The operating results of the businesses acquired by the Company are included in the accompanying condensed consolidated financial statements from their respective acquisition dates.

Debt issuance and debt repurchases– On January 21, 2011, Dycom Investments, Inc., a subsidiary of the Company, issued $187.5 million aggregate principal amount of 7.125% senior subordinated notes due 2021 (the “2021 Notes”) in a private placement. A portion of the net proceeds was used (1) to fund the Company’s purchase in January 2011 of $86.96 million aggregate principal amount of its outstanding 8.125% senior subordinated notes due 2015 (the “2015 Notes”) at a price of 104.313% of the principal amount pursuant to a tender offer for any and all of its $135.35 million in aggregate principal amount of outstanding 2015 Notes, and (2) to fund the Company’s redemption in February 2011 of the remaining $48.39 million outstanding aggregate principal amount of 2015 Notes at a price of 104.063% of the principal amount. As a result, during the three and nine months ended April 30, 2011, the Company recognized debt extinguishment costs of $2.0 million and $6.0 million, respectively, comprised of tender premiums and legal and professional fees associated with the tender offer and redemption and $0.6 million and $2.3 million, respectively, for the write-off of deferred debt issuance costs related to the transaction (see Note 10).

Accounting Period – The Company uses a fiscal year ending on the last Saturday in July. Fiscal 2011 will consist of 52 weeks, while fiscal 2010 consisted of 53 weeks, with the fourth quarter having 14 weeks of operations.

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

Restricted Cash — As of April 30, 2011 and July 31, 2010, the Company had approximately $4.7 million and $4.9 million, respectively, in restricted cash which is held as collateral in support of the Company’s insurance obligations. Restricted cash is included in other current assets and other assets in the condensed consolidated balance sheets and changes in restricted cash are reported in cash flows used in investing activities in the condensed consolidated statements of cash flows.

Comprehensive Income – During the three and nine months ended April 30, 2011 and April 24, 2010, the Company did not have any material changes in its equity resulting from non-owner sources. Accordingly, comprehensive income approximated the net income amounts presented for the respective period’s operations.

Fair Value of Financial Instruments — Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures (“ASC Topic 820”), defines fair value, establishes a measurement framework and expands disclosure requirements. The Company adopted ASC Topic 820 for financial assets and liabilities on the first day of fiscal 2009 and adopted non-recurring measurements for non-financial assets and liabilities on the first day of fiscal 2010. The adoption of ASC Topic 820 did not have an impact on the Company’s condensed consolidated financial statements. ASC Topic 820 requires that assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories: (1) Level 1 - Quoted market prices in active markets for identical assets or liabilities; (2) Level 2 - Observable market based inputs or unobservable inputs that are corroborated by market data; and (3) Level 3 - Unobservable inputs not corroborated by market data which require the reporting entity’s own assumptions. The Company’s financial instruments consist primarily of cash and equivalents, restricted cash, accounts receivable, income taxes receivable and payable, accounts payable and accrued expenses, and long-term debt. The carrying amounts of these instruments approximate their fair value due to the short maturity of these items, except for the Company’s outstanding 2021 Notes. The Company determined that the fair value of the 2021 Notes at April 30, 2011 was $193.1 million based on quoted market prices, which reflect Level 1 inputs, as compared to a carrying value of $187.5 million.

Segment Information — The Company operates in one reportable segment as a specialty contractor, providing engineering, construction, maintenance and installation services to telecommunications providers, underground facility locating services to various utilities including telecommunications providers, and other construction and maintenance services to electric and gas utilities and others. All of the Company’s operating segments have been aggregated into one reporting segment due to their similar economic characteristics, nature of services and production processes, type of customers, and service distribution methods. The Company’s services are provided by its various subsidiaries throughout the United States and, on a limited basis, in Canada. One of the Company’s operating segments earned revenues from contracts in Canada of approximately $1.0 million and $4.2 million during the three and nine months ended April 30, 2011, respectively, and $1.5 million and $5.0 million during the three and nine months ended April 24, 2010, respectively. The Company had no material long-lived assets in the Canadian operations at April 30, 2011 or July 31, 2010.

Recently Issued Accounting Pronouncements – In December 2010, the FASB issued Accounting Standards Update No. 2010-29, Business Combinations (Topic 805) (“ASU 2010-29”). ASU 2010-29 is intended to address diversity in practice regarding pro-forma revenue and earnings disclosure requirements for business combinations. ASU 2010-29 specifies that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. The amendments also expand the supplemental pro-forma disclosures to include a description of the nature and amount of material, non-recurring pro-forma adjustments directly attributable to the business combination included in the reported pro-forma revenue and earnings. The amendments affect any public entity as defined by ASU 2010-29 that enters into business combinations that are material on an individual or aggregate basis. ASU 2010-29 is effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period after December 15, 2010. The adoption of this guidance is not expected to have a material effect on the Company’s condensed consolidated financial statements.

In December 2010, the FASB issued Accounting Standards Update No. 2010-28, Intangibles - Goodwill and Other (Topic 350): When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts (“ASU 2010-28”). ASU 2010-28 modifies Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determining whether it is more likely than not that a goodwill impairment exists, an entity should consider whether there are any adverse qualitative factors indicating that an impairment may exist. The amendments in ASU 2010-28 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2010. The adoption of this guidance is not expected to have a material effect on the Company’s condensed consolidated financial statements.

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2. Computation of Earnings Per Common Share

Basic earnings per common share is computed based on the weighted average number of shares outstanding during the period, excluding unvested restricted share units. Diluted earnings per common share includes the weighted average common shares outstanding for the period plus dilutive potential common shares, including unvested time vesting and certain performance vesting restricted share units. Performance vesting restricted share units are only included in diluted earnings per common share calculations for the period if all the necessary performance conditions are satisfied and their impact is not anti-dilutive. Common stock equivalents related to stock options are excluded from diluted earnings per common share calculations if their effect would be anti-dilutive. The following is a reconciliation of the numerator and denominator of the basic and diluted earnings per common share computation as required by FASB ASC Topic 260.

	For the Three Months Ended				For the Nine Months Ended
	April 30, 2011		April 24, 2010		April 30, 2011		April 24, 2010
	(Dollars in thousands, except per share amounts)

Net income available to common stockholders (numerator)	$	1,489	$	1,648	$	3,142	$	1,206

Weighted-average number of common shares (denominator)		34,706,822		39,021,043		35,800,175		39,028,637

Basic earnings per common share	$	0.04	$	0.04	$	0.09	$	0.03

Weighted-average number of common shares		34,706,822		39,021,043		35,800,175		39,028,637
Potential common stock arising from stock options, and unvested restricted share units		616,845		33,400		330,410		73,975
Total shares-diluted (denominator)		35,323,667		39,054,443		36,130,585		39,102,612

Diluted earnings per common share	$	0.04	$	0.04	$	0.09	$	0.03

Antidilutive weighted shares excluded from the calculation of earnings per share		2,051,652		3,618,970		2,054,837		2,547,418

3. Acquisitions

On November 19, 2010, the Company acquired certain assets and assumed certain liabilities of Communication Services, Inc. (“Communication Services”), a provider of outside plant construction services to telecommunications companies in the Southeastern and south central United States. The anticipated benefits of this acquisition include incremental growth opportunities with existing customers and geographic expansion. The purchase price for Communication Services was $9.0 million paid from cash on hand and the assumption of approximately $0.7 million in capital lease obligations. Approximately $0.9 million of the purchase price has been placed in escrow until November 19, 2012 and will be used to satisfy indemnification obligations of the sellers that may arise.

On December 23, 2010, the Company acquired NeoCom Solutions, Inc. (“NeoCom”), based in Woodstock, Georgia. NeoCom provides services to construct, install, optimize and maintain wireless communication facilities in the Southeastern United States. The anticipated benefits of this acquisition include incremental growth opportunities with new and existing customers, including wireless service providers. The purchase price for NeoCom was $27.5 million paid from cash on hand. Approximately $2.8 million of the purchase price has been placed in escrow until June 23, 2012 and will be used to satisfy indemnification obligations of the seller that may arise.

The Communication Services and NeoCom acquisitions were not material to the Company. Approximately $0.2 million of transaction costs directly related to the acquisitions were incurred and are included in general and administrative expenses in the Company’s fiscal 2011 condensed consolidated statement of operations for the nine months ended April 30, 2011.

4. Accounts Receivable

Accounts receivable consists of the following:

	April 30, 2011		July 31, 2010
	(Dollars in thousands)

Contract billings	$	100,402	$	109,537
Retainage		1,833		1,139
Total		102,235		110,676
Less: allowance for doubtful accounts		446		559
Accounts receivable, net	$	101,789	$	110,117

As of April 30, 2011, the Company expected to collect all retainage balances above within the next twelve months.

The allowance for doubtful accounts changed as follows:

	For the Three Months Ended						For the Nine Months Ended
	April 30, 2011			April 24, 2010			April 30, 2011			April 24, 2010
	(Dollars in thousands)

Allowance for doubtful accounts at beginning of period	$	546		$	605		$	560		$	808
Bad debt expense (recovery), net		(75	)		68			12			62
Amounts charged against the allowance		(25	)		(91	)		(126	)		(288	)
Allowance for doubtful accounts at end of period	$	446		$	582		$	446		$	582

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5. Costs and Estimated Earnings on Contracts in Excess of Billings

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

	April 30, 2011			July 31, 2010
	(Dollars in thousands)

Costs incurred on contracts in progress	$	60,018		$	52,601
Estimated to date earnings		13,881			13,958
Total costs and estimated earnings		73,899			66,559
Less: billings to date		877			376
	$	73,022		$	66,183

Included in the accompanying consolidated balance sheets under the captions:
Costs and estimated earnings in excess of billings	$	73,899		$	66,559
Billings in excess of costs and estimated earnings		(877	)		(376	)
	$	73,022		$	66,183

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

6. Property and Equipment

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

	April 30, 2011		July 31, 2010
	(Dollars in thousands)

Land	$	3,165	$	3,165
Buildings		11,684		11,630
Leasehold improvements		4,546		4,540
Vehicles		197,882		203,420
Computer hardware and software		55,106		52,506
Office furniture and equipment		5,432		5,397
Equipment and machinery		125,441		119,285
Total		403,256		399,943
Less: accumulated depreciation		276,188		263,915
Property and equipment, net	$	127,068	$	136,028

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

	For the Three Months Ended				For the Nine Months Ended
	April 30, 2011		April 24, 2010		April 30, 2011		April 24, 2010
	(Dollars in thousands)

Depreciation expense	$	13,672	$	14,286	$	41,823	$	41,812
Repairs and maintenance expense	$	3,907	$	3,375	$	11,156	$	10,743

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7. Goodwill and Intangible Assets

Changes in the carrying amount of goodwill for fiscal 2011 are as follows:

				Nine Months Ended
				April 30, 2011
	July 31, 2010			Additions		Impairment Losses		Other		April 30, 2011
	(Dollars in thousands)

Goodwill	$	353,618		$	15,513	$	-	$	-	$	369,131
Accumulated impairment losses		(195,767	)		-		-		-		(195,767	)
	$	157,851		$	15,513	$	-	$	-	$	173,364

The Company’s intangible assets consist of the following:

	Useful Life
	In Years		April 30, 2011		July 31, 2010
			(Dollars in thousands)
Intangible Assets:
Carrying amount:
Customer relationships		5-15	$	90,545	$	76,095
UtiliQuest tradename	Indefinite			4,700		4,700
Tradenames		4-15		2,860		2,600
Non-compete agreements		5		150		-
				98,255		83,395
Accumulated amortization:
Customer relationships				37,943		33,020
Tradenames				887		750
Non-compete agreements				11		-
Net Intangible Assets			$	59,414	$	49,625

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During the second quarter of fiscal 2011, the Company acquired Communication Services and NeoCom (see Note 3). The Company accounted for these acquisitions using the purchase method of accounting and the purchase price has been allocated on a preliminary basis to the tangible and intangible assets acquired and the liabilities assumed based on estimated fair values. Management determined the fair values of the identifiable intangible assets based primarily on historical data, estimated discounted future cash flows, and expected royalty rates for trademarks and tradenames. The purchase price allocations for the acquisitions are preliminary as the Company continues to assess the valuation of the acquired assets and liabilities. The purchase price paid for each of the acquired companies reflects expectations of anticipated future cash flows and exceeded the fair value of identifiable net assets. As a result, goodwill was recognized in the amount of the excess of the purchase price over the fair value of the identifiable net assets. The carrying value of goodwill and intangible assets increased by approximately $15.5 million and $14.9 million, respectively, as a result of these acquisitions. The full amount of goodwill related to the Communication Services and NeoCom acquisitions is expected to be deductible for tax purposes.

Amortization expense for finite-lived intangible assets for the three months ended April 30, 2011 and April 24, 2010 was $1.8 million and $1.6 million, respectively. Amortization expense for finite-lived intangible assets for the nine months ended April 30, 2011 and April 24, 2010 was $5.1 million and $4.7 million, respectively. The customer relationships of Communication Services and NeoCom have an estimated useful life of 15 years. Amortization of the Company’s customer relationships is recognized on an accelerated basis related to the expected economic benefit of the intangible asset, while amortization of other finite-lived intangibles is recognized on a straight-line basis over the estimated useful life.

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

As of April 30, 2011, the Company believes the carrying value of its goodwill and other indefinite-lived intangible asset is recoverable; however, there can be no assurances that they will not be impaired in future periods. Certain of the Company’s reporting units also have other intangible assets including customer relationship, tradenames, and non-compete intangibles. As of April 30, 2011, management believes that the carrying amounts of the intangible assets are recoverable. However, if adverse events were to occur or circumstances were to change indicating that the carrying amount of such assets may not be fully recoverable, the assets would be reviewed for impairment and the assets may become impaired.

8. Accrued Insurance Claims

The Company retains the risk of loss, up to certain limits, for claims relating to automobile liability, general liability (including locate damages), workers’ compensation, and employee group health. With regard to losses occurring in fiscal 2011, the Company has retained the risk of loss up to $1.0 million on a per occurrence basis for automobile liability, general liability and workers’ compensation. These retention amounts are applicable to all of the states in which the Company operates, except with respect to workers’ compensation insurance in three states in which the Company participates in a state sponsored insurance fund. Aggregate stop loss coverage for automobile liability, general liability and workers’ compensation claims is $37.3 million for fiscal 2011. For losses under the Company's employee health plan, the Company is party to a stop-loss agreement under which it retains the risk of loss, on an annual basis, of the first $250,000 of claims per participant.

Accrued insurance claims consist of the following:

	April 30, 2011		July 31, 2010
	(Dollars in thousands)
Amounts expected to be paid within one year:
Accrued auto, general liability and workers' compensation	$	15,443	$	15,596
Accrued employee group health		3,900		3,894
Accrued damage claims		6,946		8,596
		26,289		28,086
Amounts expected to be paid beyond one year:
Accrued auto, general liability and workers' compensation		19,914		21,174
Accrued damage claims		3,060		3,670
		22,974		24,844
Total accrued insurance claims	$	49,263	$	52,930

9. Other Accrued Liabilities

Other accrued liabilities consist of the following:

	April 30, 2011		July 31, 2010
	(Dollars in thousands)

Accrued payroll and related taxes	$	17,412	$	18,930
Accrued employee benefit and incentive plan costs		5,477		5,595
Accrued construction costs		9,517		7,892
Accrued interest and related bank fees		3,822		3,347
Other		8,199		7,049
Total other accrued liabilities	$	44,427	$	42,813

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10. Debt

The Company’s outstanding indebtedness consists of the following:

	April 30, 2011		July 31, 2010
	(Dollars in thousands)

7.125% senior subordinated notes, due January 2021	$	187,500	$	-
8.125% senior subordinated notes, repaid February 2011		-		135,350
Capital leases		486		47
		187,986		135,397
Less: current portion		383		47
Long-term debt	$	187,603	$	135,350

On January 6, 2011, Dycom Investments, Inc. (“Issuer”), a subsidiary of the Company, announced a tender offer to purchase, for cash, any and all of its $135.35 million in aggregate principal amount of outstanding 8.125% senior subordinated notes due 2015 (the “2015 Notes”). Concurrently with the tender offer, the Issuer also solicited consents to eliminate certain covenants in, and amend certain provisions of, the indenture governing the 2015 Notes. On January 21, 2011, the Issuer accepted tenders for $86.96 million in aggregate principal amount of outstanding 2015 Notes in connection with the early acceptance date of the tender offer, with the holders of the accepted 2015 Notes receiving total consideration of $1,043.13 per $1,000 principal amount of 2015 Notes tendered (which included a $20 consent payment per $1,000 principal amount of 2015 Notes tendered). The total cash payment to purchase the tendered 2015 Notes, including accrued and unpaid interest, was approximately $92.6 million, which the Issuer obtained from the net proceeds of the sale of the 7.125% senior subordinated notes due 2021 described below. The tender offer expired on February 3, 2011, and no additional 2015 Notes were tendered to the Issuer after January 20, 2011.

On January 21, 2011, the Issuer issued a notice of redemption for the outstanding 2015 Notes that were not tendered pursuant to the tender offer described above. On February 21, 2011, the Issuer redeemed the remaining $48.39 million outstanding aggregate principal amount of 2015 Notes at a redemption price of 104.063% of the principal amount of the 2015 Notes, plus accrued and unpaid interest. As a result, the Company recognized debt extinguishment costs of approximately $2.0 million and $6.0 million during the three and nine months ended April 30, 2011, respectively, comprised of tender premiums and legal and professional fees associated with the tender offer and redemption and $0.6 million and $2.3 million, respectively, for the write-off of deferred debt issuance costs.

Furthermore, on January 21, 2011, the Issuer issued $187.5 million aggregate principal amount of 7.125% senior subordinated notes due 2021 (the “2021 Notes”) in a private placement. A portion of the net proceeds was used to fund the Company’s purchase of the $86.96 million aggregate principal amount of 2015 Notes pursuant to the tender offer described above and to fund its redemption of the remaining $48.39 million outstanding aggregate principal amount of 2015 Notes in February 2011. The 2021 Notes are guaranteed by certain subsidiaries of the Company (see Note 18). In March 2011, the Issuer filed a registration statement on Form S-4 with the SEC, under which the Issuer intends to offer to exchange the 2021 Notes for registered notes with substantially similar terms. The registration statement has not yet become effective.

The indenture governing the 2021 Notes contains covenants that limit, among other things, the ability of the Company and its subsidiaries to incur additional debt and issue preferred stock, make certain restricted payments, consummate specified asset sales, enter into transactions with affiliates, incur liens, impose restrictions on the ability of the Company’s subsidiaries to pay dividends or make payments to the Company and its restricted subsidiaries, merge or consolidate with another person, and dispose of all or substantially all of its assets. As of April 30, 2011, the principal amount outstanding under the 2021 Notes was $187.5 million.

On June 4, 2010, the Company entered into a five-year $225.0 million senior secured revolving credit agreement (the “Credit Agreement”) with a syndicate of banks. The Credit Agreement has an expiration date of June 4, 2015 and provides for maximum borrowings of $225.0 million, including a sublimit of $100.0 million for the issuance of letters of credit. Subject to certain conditions, the Credit Agreement provides for the ability to enter into one or more incremental facilities, in an aggregate amount not to exceed $75.0 million, either by increasing the revolving commitments under the Credit Agreement and/or in the form of term loans. In connection with issuance of the 2021 Notes, the Company entered into an amendment (the “Amendment”) to the Credit Agreement. The Amendment modified the Credit Agreement to permit the issuance of the 2021 Notes in an aggregate principal amount of up to $175.0 million, so long as the net cash proceeds of the notes are used to refinance, prepay, repurchase, redeem, retire and/or defease the Company's 2015 Notes in their entirety within sixty days of issuance of the additional notes. Any remaining net cash proceeds may be used for general corporate purposes. The issuance of the portion of the 2021 Notes in excess of the $175.0 million reduced the amount of other indebtedness permitted by the Credit Agreement by $12.5 million.

In addition, the Amendment provides for the incremental repurchase of the Company's common stock in an aggregate amount not to exceed $30.0 million for the period beginning January 5, 2011 through the maturity date of the Credit Agreement, subject to certain conditions. This incremental amount is in addition to amounts otherwise available under the Credit Agreement to purchase the Company’s common stock.

Obligations under the Credit Agreement are guaranteed by certain subsidiaries and secured by a pledge of (i) 100% of the equity of the Company’s material domestic subsidiaries and (ii) 100% of the non-voting equity and 65% of the voting equity of first-tier material foreign subsidiaries, if any, in each case excluding certain unrestricted subsidiaries. The Credit Agreement replaces the Company’s prior credit facility which was due to expire in September 2011.

Borrowings under the Credit Agreement (other than swingline loans as defined in the Credit Agreement) bear interest at a rate equal to, at the Company’s option, either (a) the administrative agent’s base rate, described in the Credit Agreement as the highest of (i) the federal funds rate plus 0.50%; (ii) the administrative agent’s prime rate; and (iii) the eurodollar rate (defined in the Credit Agreement as the British Bankers Association LIBOR Rate, divided by one (1) minus a reserve percentage (as defined in the Credit Agreement) plus 1.00%, or (b) the eurodollar rate, plus, in each case, an applicable margin based on the Company’s consolidated leverage ratio. Swingline loans bear interest at a rate equal to the administrative agent’s base rate plus a margin based on the Company’s consolidated leverage ratio. Based on the Company’s current consolidated leverage ratio, revolving borrowings would be eligible for a margin of 1.50% for borrowings based on the administrative agent’s base rate and 2.50% for borrowings based on the eurodollar rate.

The Company incurs a facility fee, at rates that range from 0.500% to 0.625% of the unutilized commitments depending on its leverage ratio. The Credit Agreement also requires the payment of fees for outstanding letters of credit and unutilized commitments, in each case based on the Company’s consolidated leverage ratio. Based on the Company’s current consolidated leverage ratio, fees for outstanding letters of credit and fees for unutilized commitments would be 1.250% and 0.50% per annum, respectively.

The Credit Agreement contains certain affirmative and negative covenants, including limitations with respect to indebtedness, liens, investments, distributions, mergers and acquisitions, dispositions of assets, sale-leaseback transactions, transactions with affiliates and capital expenditures. The Credit Agreement contains financial covenants that require the Company to (i) maintain a consolidated leverage ratio of not greater than 3.00 to 1.00, as measured on a trailing four quarter basis at the end of each fiscal quarter and (ii) maintain a consolidated interest coverage ratio of not less than 2.75 to 1.00 for fiscal quarters ending July 31, 2010 through April 28, 2012 and not less than 3.00 to 1.00 for the fiscal quarter ending July 28, 2012 and each fiscal quarter thereafter, as measured on a trailing four quarter basis at the end of each fiscal quarter.

As of April 30, 2011 and July 31, 2010, the Company had no outstanding borrowings and $37.8 million and $44.1 million, respectively, of outstanding letters of credit issued under the Credit Agreement as part of the Company’s insurance program. These letters of credit provide financial assurance to the Company’s insurance carriers in connection with the settlement of potential claims. At April 30, 2011 and July 31, 2010, the Company had additional borrowing availability of $127.8 million and $124.1 million, respectively, as determined by the most restrictive covenants of the Credit Agreement.

The Company has $0.5 million in capital lease obligations it assumed in connection with the November 2010 acquisition of Communication Services as of April 30, 2011. The capital leases include obligations for certain vehicles and equipment and expire at various dates in fiscal years 2011 and 2012.

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11. Income Taxes

The Company accounts for income taxes under the asset and liability method. This approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. The Company’s effective income tax rate differs from the statutory rate for the tax jurisdictions where it operates primarily as the result of the impact of non-deductible and non-taxable items and tax credits recognized in relation to pre-tax results. In addition, prior to fiscal 2009, the Company incurred non-cash impairment charges on an investment for financial statement purposes and recorded a deferred tax asset reflecting the tax benefits of those impairment charges. During the first quarter of fiscal 2010, the investment became impaired for tax purposes and the Company determined that it was more likely than not that the associated tax benefit would not be realized prior to its eventual expiration. Accordingly, the Company recognized a non-cash income tax charge of $1.1 million for a valuation allowance of the associated deferred tax asset during the first quarter of fiscal 2010. Additionally, during the three months ended April 24, 2010 the provision for income taxes included the reversal of $1.0 million of certain income tax liabilities which were no longer required.

As of April 30, 2011, the Company has total unrecognized tax benefits of $2.1 million which would reduce the Company’s effective tax rate during future periods if it is subsequently determined that those liabilities are not required. The Company recognizes interest related to unrecognized tax benefits in interest expense and penalties in general and administrative expenses. Interest expense related to unrecognized tax benefits was immaterial for the three and nine months ended April 30, 2011 and April 24, 2010.

12. Other Income, Net

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

	For the Three Months Ended				For the Nine Months Ended
	April 30, 2011		April 24, 2010		April 30, 2011		April 24, 2010
	(Dollars in thousands)

Gain on sale of fixed assets	$	3,300	$	4,308	$	6,810	$	6,143
Miscellaneous income		200		143		654		316
Total other income, net	$	3,500	$	4,451	$	7,464	$	6,459

13. Capital Stock

On February 23, 2010, the Board of Directors authorized the repurchase of up to $20.0 million of the Company’s common stock in open market or private transactions though August 2011. On each of September 29, 2010 and November 22, 2010, the Board of Directors increased the amount authorized for repurchases by $20.0 million and extended the repurchase date for 18 months.

The Company has made the following repurchases under the share repurchase authorization set forth above:

Three Months Ending	Number of Shares Repurchased		Total Consideration (Dollars in thousands)		Average Price Per Share
April 24, 2010		475,602	$	4,489	$	9.44
October 30, 2010		3,239,900	$	31,036	$	9.58
January 29, 2011		291,500	$	3,203	$	10.99
April 30, 2011		1,278,100	$	21,252	$	16.63

All shares repurchased have been subsequently cancelled. On May 25, 2011, the Company announced that its Board of Directors had authorized an additional $20.0 million to repurchase shares of the Company’s outstanding common stock to be made over the next 18 months in open market or private transactions.

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14. Stock-Based Awards

Stock-based awards are granted by the Company under its 2003 Long-term Incentive Plan (“2003 Plan”) and the 2007 Non-Employee Directors Equity Plan (“2007 Directors Plan” and, together with the 2003 Plan, “the Plans”). The Company also has several other plans under which awards are outstanding but under which no further awards will be granted, including expired plans. The Company’s policy is to issue new shares to satisfy equity awards under the Plans. Under the terms of the Plans, stock options are granted at the closing price on the date of the grant and are exercisable over a period of up to ten years. The Plans also provide for the grants of time based restricted share units (“RSUs”), that currently vest ratably over a four year period from the date of grant. Additionally, the 2003 Plan provides for the grants of performance based restricted share units (“Performance RSUs”). Outstanding Performance RSUs vest over a three year period from the grant date if certain Company performance goals are achieved.

The following table summarizes the stock-based awards activity during the nine months ended April 30, 2011:

	Stock Options					RSUs					Performance RSUs
	Shares			Weighted Average Exercise Price		Share Units			Weighted Average Grant Price		Share Units			Weighted Average Grant Price
Outstanding as of July 31, 2010		3,519,383		$	18.53		190,101		$	10.95		300,090		$	19.29
Granted		930,150		$	13.90		104,954		$	13.60		69,720		$	10.60
Options Exercised/Share Units Vested		(133,933	)	$	8.76		(78,783	)	$	12.62		-		$	-
Forfeited or cancelled		(399,102	)	$	37.16		(683	)	$	24.71		(220,258	)	$	22.51
Outstanding as of April 30, 2011		3,916,498		$	15.87		215,589		$	11.58		149,552		$	10.49

Exercisable options as of April 30, 2011		1,878,419

The Performance RSUs in the above table represent the maximum number of awards which may vest under the outstanding grants assuming that all performance criteria are met. Approximately 220,000 Performance RSUs were cancelled during fiscal 2011 related to fiscal 2010 performance criteria not being met.

Compensation expense for stock-based awards is based on the fair value at the measurement date and is included in general and administrative expenses in the condensed consolidated statements of operations. The compensation expense and the related tax benefit recognized related to stock options and restricted share units for the three and nine months ended April 30, 2011 and April 24, 2010 are as follows:

	For the Three Months Ended						For the Nine Months Ended
	April 30, 2011			April 24, 2010			April 30, 2011			April 24, 2010
	(Dollars in thousands)

Stock-based compensation expense	$	1,314		$	812		$	3,086		$	2,488
Tax benefit recognized	$	(414	)	$	(166	)	$	(905	)	$	(652	)

The Company evaluates compensation expense quarterly and recognizes expense for performance based awards only if management determines it is probable that the performance criteria for the awards will be met. The total amount of expense ultimately recognized is based on the number of awards that actually vest. Accordingly, the amount of compensation expense recognized during current and prior periods may not be representative of future stock-based compensation expense.

Under the Plans, the maximum total unrecognized compensation expense and weighted-average period over which the expense would be recognized subsequent to April 30, 2011 is shown below. For performance based awards, the unrecognized compensation cost is based upon the maximum amount of restricted share units that can be earned under outstanding awards. If the performance goals are not met, no compensation expense will be recognized for these share units and compensation expense previously recognized will be reversed.

	Unrecognized Compensation Expense		Weighted-Average Period
	(In thousands)		(In years)

Stock options	$	11,294	3.1
Unvested RSUs	$	2,135	2.9
Unvested Performance RSUs	$	1,506	1.1

15. Related Party Transactions

The Company leases administrative offices from entities related to officers of the Company’s subsidiaries. The total expense under these arrangements was $0.4 million and $0.3 million for the three months ended April 30, 2011 and April 24, 2010, respectively, and $1.1 million and $0.9 million for the nine months ended April 30, 2011 and April 24, 2010, respectively.

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16. Commitments and Contingencies

In October 2010, Prince Telecom, LLC (“Prince”), a wholly-owned subsidiary of the Company, was named as a defendant in a lawsuit in the U.S. District Court for the District of Oregon. The plaintiffs, three former employees of Prince, alleged various wage and hour claims, including that employees were not paid for all hours worked and were subject to improper wage deductions. Plaintiffs sought to certify as a class current and former employees of the subsidiary who worked in the State of Oregon. In October 2010, the plaintiffs’ attorneys and Prince entered into a memorandum of understanding pursuant to which the parties agreed to the terms of a proposed settlement with respect to the lawsuit. As a result, the Company recorded approximately $0.5 million in other accrued liabilities with respect to the proposed settlement during the first quarter of fiscal 2011. On May 18, 2011, the Court entered an Order approving the settlement and dismissed the action with prejudice subject to final administration of the terms of the settlement. The Order may be appealed for 30 days from the date on which it was entered.

In May 2011, a proposed settlement was reached with respect to the Company’s other two outstanding wage and hour class action lawsuits described below. In connection with an agreement to settle the two lawsuits entered into by the Company, Prince, Cavo Broadband Communications, LLC, Broadband Express, LLC (“BBX”) and the plaintiffs’ attorneys, the Company recorded $0.6 million in other accrued liabilities during the third quarter of fiscal 2011. The first of the two lawsuits, which commenced in June 2010, was brought by a former employee of Prince against Prince, the Company and certain unnamed U.S. affiliates of Prince and the Company (the “Affiliates”) in the United States District Court for the Southern District of New York. The lawsuit alleged that Prince, the Company and the Affiliates violated the Fair Labor Standards Act by failing to comply with applicable overtime pay requirements. The plaintiff sought unspecified damages and other relief on behalf of himself and a putative class of similarly situated current and former employees of Prince, the Company and/or the Affiliates. The second of the lawsuits, which commenced in September 2010, was brought by two former employees of BBX against BBX in the United States District Court for the Southern District of Florida. The lawsuit alleged that BBX violated the Fair Labor Standards Act by failing to comply with applicable overtime pay requirements. The plaintiffs sought unspecified damages and other relief on behalf of themselves and a putative class of similarly situated current and former employees of BBX. The proposed settlement and the consolidation of the two lawsuits are subject to the approval of the United States District Court for the Southern District of New York.

In May 2009, the Company and Prince were named as defendants in a lawsuit in the U.S. District Court for the Western District of Washington. The plaintiffs, all former employees of the subsidiary, alleged various wage and hour claims, including those employees were not paid for all hours worked and were subject to improper wage deductions. Plaintiffs sought to certify as a class current and former employees of the subsidiary who worked in the State of Washington. The Company estimated the liability of the proposed settlement at $2.0 million and recorded a pre-tax charge for this amount during the quarter ended October 24, 2009. In November 2009, the plaintiffs’ attorneys, the Company and the subsidiary entered into a memorandum of understanding pursuant to which the parties agreed to the terms of a proposed settlement with respect to the lawsuit. In January 2010, the Court granted preliminary approval of the proposed settlement. Notice of the terms of the proposed settlement and claim forms were mailed to members of the plaintiffs’ class in February 2010. The Court held a hearing regarding the plaintiffs’ Motion for Final Approval of the Class Action Settlement in April 2010, at which time it entered an Order approving the settlement and dismissed the action with prejudice subject to final administration of the terms of the settlement. Excluding legal expenses of the Company, approximately $1.6 million was incurred pursuant to the settlement and was paid in June 2010.

From time to time, the Company and its subsidiaries are parties to various other claims and legal proceedings. Additionally, as part of the Company’s insurance program, it retains the risk of loss, up to certain limits, for claims related to automobile liability, general liability, workers’ compensation, employee group health, and locate damages. For these claims, the effect on the Company’s financial statements is generally limited to the amount needed to satisfy its insurance deductibles or retentions. It is the opinion of the Company’s management, based on information available at this time, that none of such other pending claims or proceedings will have a material effect on its condensed consolidated financial statements.

Performance Bonds and Guarantees

The Company has obligations under performance, bid and other surety contract bonds related to certain of its customer contracts. Performance bonds generally provide the Company’s customer with the right to obtain payment and/or performance from the issuer of the bond if the Company fails to perform its contractual obligations. Bid bonds are issued by a surety to protect owners if the Company fails to perform its obligations arising from a successful bid. As of April 30, 2011, the Company had $77.6 million of outstanding performance, bid and other surety contract bonds and no events have occurred in which the customers have exercised their rights under the bonds.

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

Letters of Credit

The Company has letters of credit issued under its Credit Agreement as part of its insurance program. These letters of credit provide financial assurance to our insurance carriers in connection with the settlement of potential claims. As of April 30, 2011, the Company had $37.8 million outstanding letters of credit issued under the Credit Agreement.

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17. Concentration of Credit Risk

The Company’s customer base is concentrated, with the top five customers for the nine month period ending April 30, 2011 accounting for approximately 62.3% and 64.6% of revenue for the nine month periods ended April 30, 2011 and April 24, 2010, respectively. AT&T Inc. (“AT&T”), Comcast Corporation (“Comcast”), CenturyLink, Inc. (“CenturyLink”), and Verizon Communications Inc. (“Verizon”) represent a significant portion of the Company’s customer base and were over 10% or more of total revenue for the three months or nine months ended April 30, 2011 or April 24, 2010 as follows:

	For the Three Months Ended		For the Nine Months Ended
	April 30, 2011	April 24, 2010	April 30, 2011	April 24, 2010
AT&T	21.1%	22.4%	22.2%	20.1%
Comcast	13.7%	14.0%	15.1%	14.4%
CenturyLink*	11.0%	11.8%	10.2%	11.6%
Verizon	8.7%	9.7%	8.0%	12.4%

*For comparison purposes, revenues from CenturyTel, Inc. and Qwest Communications International, Inc. have been combined for periods prior to their April 2011 merger.

The Company believes that none of its significant customers were experiencing financial difficulties that would impact the collectability of the Company’s trade accounts receivable and costs in excess of billings as of April 30, 2011. Customers representing 10% or more of combined amounts of trade accounts receivable and costs and estimated earnings in excess of billings as of April 30, 2011 or July 31, 2010 had the following outstanding balances and the related percentage of the Company’s total outstanding balances:

	April 30, 2011			July 31, 2010
	Amount		% of Total	Amount		% of Total
	(Dollars in millions)

CenturyLink*	$	31.7	18.0%	$	28.4	16.0%
AT&T	$	28.9	16.4%	$	30.9	17.4%
Comcast	$	18.0	10.2%	$	19.6	11.1%
Verizon	$	16.9	9.6%	$	22.4	12.7%

*For comparison purposes, amounts for CenturyTel, Inc. and Qwest Communications International, Inc. have been combined for periods prior to their April 2011 merger.

18. Supplemental Consolidating Financial Statements

As of April 30, 2011, the outstanding aggregate principal amount of the Company’s 2021 Notes was $187.5 million. The 2021 Notes were issued by the Issuer (Dycom Investments, Inc.) in fiscal 2011 (see Note 10). The following condensed consolidating financial statements present, in separate columns, financial information for (i) Dycom Industries, Inc. (“Parent”) on a parent only basis, (ii) the Issuer, (iii) the guarantor subsidiaries for the Notes on a combined basis, (iv) other non-guarantor subsidiaries on a combined basis, (v) the eliminations and reclassifications necessary to arrive at the information for the Company on a consolidated basis, and (vi) the Company on a consolidated basis. The condensed consolidating financial statements are presented in accordance with the equity method. Under this method, the investments in subsidiaries are recorded at cost and adjusted for the Company’s share of subsidiaries’ cumulative results of operations, capital contributions, distributions and other equity changes. Intercompany charges (income) between the Parent and subsidiaries are recognized in the condensed consolidating financial statements during the period incurred and the settlement of intercompany balances is reflected in the consolidating statement of cash flows based on the nature of the underlying transactions.

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

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DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
APRIL 30, 2011

	Parent		Issuer		Subsidiary Guarantors		Non-Guarantor Subsidiaries		Eliminations and Reclassifications			Dycom Consolidated
	(Dollars in thousands)
ASSETS

CURRENT ASSETS:
Cash and equivalents	$	-	$	-	$	88,479	$	548	$	-		$	89,027
Accounts receivable, net		-		-		100,753		1,036		-			101,789
Costs and estimated earnings in excess of billings		-		-		73,392		507		-			73,899
Deferred tax assets, net		1,056		-		13,854		97		(138	)		14,869
Income taxes receivable		6,836		-		-		-		-			6,836
Inventories		-		-		17,563		85		-			17,648
Other current assets		5,085		22		4,919		864		-			10,890
Total current assets		12,977		22		298,960		3,137		(138	)		314,958

PROPERTY AND EQUIPMENT, NET		9,439		-		98,509		19,695		(575	)		127,068
GOODWILL		-		-		173,364		-		-			173,364
INTANGIBLE ASSETS, NET		-		-		59,414		-		-			59,414
DEFERRED TAX ASSETS, NET		-		-		19,424		-		(19,424	)		-
INVESTMENT IN SUBSIDIARIES		682,108		1,326,905		-		-		(2,009,013	)		-
INTERCOMPANY RECEIVABLES		-		-		815,374		-		(815,374	)		-
OTHER		7,108		4,771		1,958		385		-			14,222
TOTAL NON-CURRENT ASSETS		698,655		1,331,676		1,168,043		20,080		(2,844,386	)		374,068
TOTAL	$	711,632	$	1,331,698	$	1,467,003	$	23,217	$	(2,844,524	)	$	689,026

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable	$	691	$	-	$	26,668	$	503	$	-		$	27,862
Current portion of debt		-		-		383		-		-			383
Billings in excess of costs and estimated earnings		-		-		877		-		-			877
Accrued insurance claims		619		-		25,590		80		-			26,289
Deferred tax liabilities		-		138		-		-		(138	)		-
Other accrued liabilities		3,486		4,265		35,601		1,075		-			44,427
Total current liabilities		4,796		4,403		89,119		1,658		(138	)		99,838

LONG-TERM DEBT		-		187,500		103		-		-			187,603
ACCRUED INSURANCE CLAIMS		723		-		22,198		53		-			22,974
DEFERRED TAX LIABILITIES, NET NON-CURRENT		1,059		332		45,228		1,373		(19,425	)		28,567
INTERCOMPANY PAYABLES		356,001		457,355		-		2,030		(815,386	)		-
OTHER LIABILITIES		2,694		-		985		6		-			3,685
Total liabilities		365,273		649,590		157,633		5,120		(834,949	)		342,667
Total stockholders' equity		346,359		682,108		1,309,370		18,097		(2,009,575	)		346,359
TOTAL	$	711,632	$	1,331,698	$	1,467,003	$	23,217	$	(2,844,524	)	$	689,026

Table of Contents

DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
JULY 31, 2010

	Parent		Issuer		Subsidiary Guarantors		Non-Guarantor Subsidiaries		Eliminations and Reclassifications			Dycom Consolidated
	(Dollars in thousands)
ASSETS

CURRENT ASSETS:
Cash and equivalents	$	-	$	-	$	102,858	$	462	$	-		$	103,320
Accounts receivable, net		-		-		109,141		976		-			110,117
Costs and estimated earnings in excess of billings		-		-		66,180		379		-			66,559
Deferred tax assets, net		1,056		-		13,959		67		(138	)		14,944
Income taxes receivable		3,626		-		-		-		-			3,626
Inventories		-		-		15,958		100		-			16,058
Other current assets		2,395		9		4,761		972		-			8,137
Total current assets		7,077		9		312,857		2,956		(138	)		322,761

PROPERTY AND EQUIPMENT, NET		10,379		-		106,069		20,165		(585	)		136,028
GOODWILL		-		-		157,851		-		-			157,851
INTANGIBLE ASSETS, NET		-		-		49,625		-		-			49,625
DEFERRED TAX ASSETS, NET NON-CURRENT		-		-		13,267		-		(13,267	)		-
INVESTMENT IN SUBSIDIARIES		678,966		1,256,518		-		-		(1,935,484	)		-
INTERCOMPANY RECEIVABLES		-		-		744,064		-		(744,064	)		-
OTHER		7,461		2,527		2,812		491		-			13,291
TOTAL NON-CURRENT ASSETS		696,806		1,259,045		1,073,688		20,656		(2,693,400	)		356,795
TOTAL	$	703,883	$	1,259,054	$	1,386,545	$	23,612	$	(2,693,538	)	$	679,556

LIABILITIES AND
STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable	$	137	$	-	$	25,548	$	196	$	-		$	25,881
Current portion of debt		-		-		47		-		-			47
Billings in excess of costs and estimated earnings		-		-		376		-		-			376
Accrued insurance claims		615		-		27,395		76		-			28,086
Deferred tax liabilities