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Dycom Industries Inc.$52.36($2.04)(3.75%)

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 Dycom Industries, Inc. Announces Results For The Second Quarter And Six Month Period Ended January 27, 2018 And Affirms Guidance For Fiscal 2019
   Wednesday, February 28, 2018 6:00:00 AM ET

Dycom Industries, Inc. (DY ) announced today its results for the second quarter and six month period ended January 27, 2018. The Company also affirmed its financial guidance for the 2019 fiscal year ending January 26, 2019 and outlook for the quarter ending April 28, 2018 that was previously provided by the Company on February 12, 2018.

Second Quarter Results Summary

-- Contract revenues of $655.1 million for the quarter ended January 27, 2018, compared to $701.1 million for the quarter ended January 28, 2017. Contract revenues for the quarter ended January 27, 2018 decreased 10.6% on an organic basis after excluding $19.6 million of contract revenues from storm restoration services in the current period and $8.4 million of contract revenues from an acquired business that was not owned during the prior year quarter.

-- Non-GAAP Adjusted EBITDA of $59.6 million, or 9.1% of contract revenues, for the quarter ended January 27, 2018, compared to $86.2 million, or 12.3% of contract revenues, for the quarter ended January 28, 2017.

-- On a GAAP basis, net income was $40.1 million, or $1.24 per common share diluted, for the quarter ended January 27, 2018, compared to net income of $23.7 million, or $0.74 per common share diluted, for the quarter ended January 28, 2017. Non-GAAP Adjusted Net Income was $3.8 million, or $0.12 per Non-GAAP Adjusted Diluted Share, for the quarter ended January 27, 2018, compared to Non-GAAP Adjusted Net Income of $26.4 million, or $0.82 per common share diluted, for the quarter ended January 28, 2017.

Non-GAAP Adjusted Net Income for the quarter ended January 27, 2018 excludes approximately $32.2 million of income tax benefit resulting from the Tax Cuts and Jobs Act of 2017 ("Tax Reform"), primarily due to the re-measurement of the Company’s net deferred tax liabilities at a lower U.S. federal corporate income tax rate. Non-GAAP Adjusted Net Income for the quarter ended January 27, 2018 also excludes approximately $6.9 million of income tax benefit for the tax effects of the vesting and exercise of share-based awards. In addition, Non-GAAP Adjusted Net Income for the quarters ended January 27, 2018 and January 28, 2017 excludes $4.6 million and $4.4 million, respectively, of pre-tax interest expense incurred for non-cash amortization of the debt discount associated with the Company’s 0.75% convertible senior notes due September 2021 (the "Notes"). Shares used in computing Non-GAAP Adjusted Diluted Earnings per Common Share for the quarter ended January 27, 2018 exclude the GAAP dilutive effect of approximately 0.4 million weighted shares from the Notes, as the Company has a note hedge in effect to offset the economic dilution of additional shares up to an average quarterly share price of $130.43 per share.

Six Month Results Summary

-- Contract revenues of $1.411 billion for the six months ended January 27, 2018, compared to $1.500 billion for the six months ended January 28, 2017. Contract revenues for the six months ended January 27, 2018 decreased 9.4% on an organic basis after excluding $35.1 million of contract revenues from storm restoration services in the current period and $17.0 million of contract revenues from an acquired business that was not owned during the prior year period.

-- Non-GAAP Adjusted EBITDA of $157.2 million, or 11.1% of contract revenues, for the six months ended January 27, 2018, compared to $215.4 million, or 14.4% of contract revenues, for the six months ended January 28, 2017.

-- On a GAAP basis, net income was $68.8 million, or $2.15 per common share diluted, for the six months ended January 27, 2018, compared to net income of $74.7 million, or $2.32 per common share diluted, for the six months ended January 28, 2017. Non-GAAP Adjusted Net Income was $35.4 million, or $1.11 per Non-GAAP Adjusted Diluted Share, for the six months ended January 27, 2018, compared to Non-GAAP Adjusted Net Income of $80.2 million or $2.49 per common share diluted, for the six months ended January 28, 2017.

Non-GAAP Adjusted Net Income for the six months ended January 27, 2018 excludes approximately $32.2 million of income tax benefit resulting from Tax Reform, primarily due to the re-measurement of the Company’s net deferred tax liabilities at a lower U.S. federal corporate income tax rate. Non-GAAP Adjusted Net Income for the six months ended January 27, 2018 also excludes approximately $6.9 million of income tax benefit for the tax effects of the vesting and exercise of share-based awards. In addition, Non-GAAP Adjusted Net Income for the six months ended January 27, 2018 and January 28, 2017 excludes $9.2 million and $8.7 million, respectively, of pre-tax interest expense incurred for non-cash amortization of the debt discount associated with the Notes. Shares used in computing Non-GAAP Adjusted Diluted Earnings per Common Share for the six months ended January 27, 2018 exclude the GAAP dilutive effect of approximately 0.2 million weighted shares from the Notes, as the Company has a note hedge in effect to offset the economic dilution of additional shares up to an average quarterly share price of $130.43 per share.

Fiscal Year Change

As previously announced, the Company changed its fiscal year end from the last Saturday in July to the last Saturday in January. As a result, fiscal 2019 commenced on January 28, 2018.

Outlook

For the 2019 fiscal year ending January 26, 2019 and for the quarter ending April 28, 2018 (first quarter of fiscal 2019), the Company currently expects the following:

                                                        Fiscal 2019            Quarter Ending
                                                                               April 28, 2018
                                                                               (Q1-19)
Contract revenues                                       $3.30 - $3.50 billion  $720 - $750 million
Diluted Earnings per Common Share - GAAP(a)             $4.78 - $5.70          $0.52 - $0.67
Non-GAAP Adjusted Diluted Earnings per Common Share(a)  $5.22 - $6.14          $0.63 - $0.78
Non-GAAP Adjusted EBITDA % of revenue                   13.6% - 14.1%          10.7% - 11.1%

(a) Based on a preliminary analysis of the impact of Tax Reform, the Company currently expects that the fiscal 2019 effective tax rate will be within a range of 27.0% to 27.5% before the tax effects of the settlement of share-based awards. Earnings per Common Share outlook calculations are based on effective tax rate of 27.3%.

Use of Non-GAAP Financial Measures

The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). In quarterly results releases, trend schedules, conference calls, slide presentations, and webcasts, the Company may use or discuss Non-GAAP financial measures, as defined by Regulation G of the Securities and Exchange Commission. See Reconciliation of Non-GAAP Financial Measures to Comparable GAAP Financial Measures directly following the press release tables.

Conference Call Information and Other Selected Data

A conference call to review the Company’s results will be hosted at 8:00 a.m. (ET), Wednesday, February 28, 2018; call (800) 230-1092 (United States) or (612) 332-0430 (International) ten minutes before the conference call begins and ask for the "Dycom Results" conference call. A live webcast of the conference call and related materials will be available at www.dycomind.com. If you are unable to attend the conference call at the scheduled time, a replay of the live webcast and related materials will be available shortly after the call at www.dycomind.com until Friday, March 30, 2018.

About Dycom Industries, Inc.

Dycom is a leading provider of specialty contracting services throughout the United States and in Canada. These services include program management, engineering, construction, maintenance and installation services for telecommunications providers, underground facility locating services for various utilities, including telecommunications providers, and other construction and maintenance services for electric and gas utilities.

Forward Looking Information

This press release contains forward-looking statements as contemplated by the 1995 Private Securities Litigation Reform Act. These statements include those related to the results for the quarter ended January 27, 2018 which are preliminary and unaudited, the outlook for the quarter ending April 28, 2018 and fiscal 2019 and statements found under the "Reconciliation of Non-GAAP Financial Measures to Comparable GAAP Financial Measures" section of this release. Forward looking statements are based on management’s current expectations, estimates and projections. These statements are subject to risks and uncertainties that may cause actual results for completed periods and periods in the future to differ materially from the results projected or implied in any forward-looking statements contained in this press release. The most significant of these risks and uncertainties are described in the Company’s Form 10-K, Form 10-Q and Form 8-K reports (including all amendments to those reports) and include business and economic conditions and trends in the telecommunications industry affecting the Company’s customers, customer capital budgets and spending priorities, the adequacy of the Company’s insurance and other reserves and allowances for doubtful accounts, whether the carrying value of the Company’s assets may be impaired, preliminary purchase price allocations of acquired businesses, expected benefits and synergies of acquisitions, the future impact of any acquisitions or dispositions, adjustments and cancellations related to the Company’s backlog, weather conditions, the anticipated outcome of other contingent events, including litigation, liquidity and other financial needs, the availability of financing, the impact of the Tax Cuts and Jobs Act of 2017, and the other risks and uncertainties detailed from time to time in the Company’s filings with the Securities and Exchange Commission. The Company does not undertake to update forward-looking statements.

Tables Follow---

DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
Unaudited
                                                                         January 27, 2018                                                                    July 29, 2017
ASSETS
Current assets:
Cash and equivalents                                                     $                                                                        84,029     $             38,608
Accounts receivable, net                                                 318,684                                                                             369,800
Costs and estimated earnings in excess of billings                       369,472                                                                             389,286
Inventories                                                              79,039                                                                              83,204
Deferred tax assets, net (a)                                             --                                                                                  26,524
Income tax receivable                                                    13,852                                                                              7,493
Other current assets                                                     39,710                                                                              23,603
Total current assets                                                     904,786                                                                             938,518
Property and equipment, net                                              414,768                                                                             422,107
Goodwill and other intangible assets, net                                493,212                                                                             505,309
Other                                                                    28,190                                                                              33,373
Total non-current assets                                                 936,170                                                                             960,789
Total assets                                                             $                                                                        1,840,956  $             1,899,307
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable                                                         $                                                                        92,361     $             132,974
Current portion of debt                                                  26,469                                                                              21,656
Billings in excess of costs and estimated earnings                       6,480                                                                               9,284
Accrued insurance claims                                                 53,890                                                                              39,909
Income taxes payable                                                     755                                                                                 1,112
Other accrued liabilities                                                79,657                                                                              113,603
Total current liabilities                                                259,612                                                                             318,538
Long-term debt                                                           733,843                                                                             738,265
Accrued insurance claims                                                 59,385                                                                              62,007
Deferred tax liabilities, net non-current (a)                            57,428                                                                              103,626
Other liabilities                                                        5,692                                                                               5,288
Total liabilities                                                        1,115,960                                                                           1,227,724
Total stockholders’ equity                                               724,996                                                                             671,583
Total liabilities and stockholders’ equity                               $                                                                        1,840,956  $             1,899,307
(a) The Company adopted Accounting Standards Update No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, on a prospective basis effective July 30, 2017, the first day of the six month period ended January 27, 2018. As a result of this adoption, Deferred tax liabilities, net non-current is presented net of deferred tax assets within the condensed consolidated balance sheets as of January 27, 2018.
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share amounts)
Unaudited
                                                     Quarter                                                Quarter                                                Six Months                                               Six Months
                                                     Ended                                                  Ended                                                  Ended                                                    Ended
                                                     January 27,                                            January 28,                                            January 27,                                              January 28,
                                                     2018                                                   2017                                                   2018                                                     2017
Contract revenues                                    $                                             655,133  $                                             701,131  $                                             1,411,348  $                                             1,500,355
Costs of earned revenues, excluding depreciation and 540,633                                                561,371                                                1,141,480                                                1,176,361
amortization
General and administrative expenses (a)              60,370                                                 58,191                                                 124,930                                                  118,395
Depreciation and amortization                        42,401                                                 35,705                                                 85,053                                                   70,252
Total                                                643,404                                                655,267                                                1,351,463                                                1,365,008
Interest expense, net (b)                            (9,853)                                                (9,181)                                                (19,560)                                                 (18,248)
Other income, net                                    295                                                    1,006                                                  6,225                                                    1,946
Income before income taxes                           2,171                                                  37,689                                                 46,550                                                   119,045
(Benefit) provision for income taxes (c)             (37,888)                                               14,026                                                 (22,285)                                                 44,332
Net income                                           $                                             40,059   $                                             23,663   $                                             68,835     $                                             74,713
Earnings per common share:
Basic earnings per common share                      $                                             1.29     $                                             0.75     $                                             2.22       $                                             2.37
Diluted earnings per common share                    $                                             1.24     $                                             0.74     $                                             2.15       $                                             2.32
Shares used in computing earnings per common share:
Basic                                                31,056,840                                             31,531,834                                             31,059,140                                               31,480,660
Diluted (d)                                          32,218,324                                             32,161,566                                             32,054,945                                               32,180,923
(a) Includes stock-based compensation expense of $5.9 million and $5.3 million for the quarter ended January 27, 2018 and January 28, 2017, respectively, and $13.3 million and $11.0 million for the six months ended January 27, 2018 and January 28, 2017, respectively.
(b) Includes pre-tax interest expense for non-cash amortization of the debt discount associated with the Notes of approximately $4.6 million and $4.4 million for the quarter ended January 27, 2018 and January 28, 2017, respectively, and $9.2 million and $8.7 million for the six months ended January 27, 2018 and January 28, 2017, respectively.
(c) During the quarter and six months ended January 27, 2018, the (benefit) provision for income taxes includes approximately $32.2 million of income tax benefit resulting from Tax Reform, primarily due to the re-measurement of the Company’s net deferred tax liabilities at a lower U.S. federal corporate income tax rate. It also included approximately $6.9 million and $7.8 million for the quarter and six months ended January 27, 2018, respectively, of income tax benefit for the tax effects of the vesting and exercise of share-based awards.
(d) During the quarter ended January 27, 2018, the Company’s average stock price exceeded the conversion price of its Notes of $96.89. As a result, diluted shares used in computing diluted earnings per common share for the quarter and six months ended January 27, 2018 includes approximately 0.4 million and 0.2 million weighted shares, respectively, of potential dilution from the embedded conversion feature in the Notes.
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
TO COMPARABLE GAAP FINANCIAL MEASURES
(Dollars in thousands)
Unaudited
CONTRACT REVENUES, NON-GAAP ORGANIC CONTRACT REVENUES, AND DECLINE %’s
                                  Contract               Revenues               Revenues               Non-GAAP               GAAP        Non-
                                  Revenues -             from                   from storm             - Organic              - Decline   GAAP -
                                  GAAP                   acquired               restoration            Contract               %           Organic
                                                         business (a)           services               Revenues                           Decline
                                                                                                                                          %
Quarter Ended January 27, 2018    $          655,133     $          (8,424)     $          (19,573)    $          627,136     (6.6)%      (10.6)%
Quarter Ended January 28, 2017    $          701,131     $          --          $          --          $          701,131
Six Months Ended January 27, 2018 $          1,411,348   $          (17,005)    $          (35,058)    $          1,359,285   (5.9)%      (9.4)%
Six Months Ended January 28, 2017 $          1,500,355   $          --          $          --          $          1,500,355
(a) Amounts for the quarter and six months ended January 27, 2018 represent contract revenues from an acquired business that was not owned in the prior year periods.
NON-GAAP ADJUSTED EBITDA
                                                  Quarter        Quarter        Six Months       Six Months
                                                  Ended          Ended          Ended            Ended
                                                  January 27,    January 28,    January 27,      January 28,
                                                  2018           2017           2018             2017
Reconciliation of net income to Non-GAAP Adjusted
EBITDA:
Net income                                        $     40,059   $     23,663   $     68,835     $     74,713
Interest expense, net                             9,853          9,181          19,560           18,248
(Benefit) provision for income taxes              (37,888)       14,026         (22,285)         44,332
Depreciation and amortization expense             42,401         35,705         85,053           70,252
Earnings Before Interest, Taxes, Depreciation &   54,425         82,575         151,163          207,545
Amortization ("EBITDA")
Gain on sale of fixed assets                      (722)          (1,729)        (7,217)          (3,172)
Stock-based compensation expense                  5,897          5,309          13,277           11,015
Non-GAAP Adjusted EBITDA                          $     59,600   $     86,155   $     157,223    $     215,388
Contract revenues                                 $     655,133  $     701,131  $     1,411,348  $     1,500,355
Non-GAAP Adjusted EBITDA % of Contract Revenues   9.1%           12.3%          11.1%            14.4%
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
TO COMPARABLE GAAP FINANCIAL MEASURES (CONTINUED)
(Dollars in thousands, except share amounts)
Unaudited
NET INCOME, NON-GAAP ADJUSTED NET INCOME, NET INCOME PER COMMON SHARE, NON-GAAP ADJUSTED DILUTED EARNINGS PER COMMON SHARE, AND NON-GAAP ADJUSTED DILUTED SHARES
                                                      Quarter                                            Quarter                                            Six Months                                         Six Months
                                                      Ended                                              Ended                                              Ended                                              Ended
                                                      January 27,                                        January 28,                                        January 27,                                        January 28,
                                                      2018                                               2017                                               2018                                               2017
Reconciliation of Non-GAAP Adjusted Net Income:
Net income                                            $                        40,059                    $                        23,663                    $                        68,835                    $                        74,713
Pre-Tax Adjustments:
Non-cash amortization of debt discount on Notes       4,623                                              4,379                                              9,170                                              8,686
Tax Adjustments:
Tax impact of Tax Reform (a)                          (32,249)                                           --                                                 (32,249)                                           --
Tax impact of share-based vesting and exercises (b)   (6,912)                                            --                                                 (6,912)                                            --
Tax impact of non-cash amortization of debt discount  (1,757)                                            (1,631)                                            (3,485)                                            (3,242)
on Notes
Total adjustments, net of tax                         (36,295)                                           2,748                                              (33,476)                                           5,444
Non-GAAP Adjusted Net Income                          $                        3,764                     $                        26,411                    $                        35,359                    $                        80,157
Reconciliation of Non-GAAP Adjusted Diluted
Earnings per Common Share:
Net income per common share                           $                        1.24                      $                        0.74                      $                        2.15                      $                        2.32
Total adjustments, net of tax                         (1.12)                                             0.09                                               (1.04)                                             0.17
Non-GAAP Adjusted Diluted Earnings per Common         $                        0.12                      $                        0.82                      $                        1.11                      $                        2.49
Share
Shares used in computing Non-GAAP Adjusted Diluted
Earnings per Common Share:
Diluted shares - GAAP                                 32,218,324                                         32,161,566                                         32,054,945                                         32,180,923
Adjustment for economic benefit of note hedge related (434,788)                                          --                                                 (217,394)                                          --
to Notes (c)
Non-GAAP Adjusted Diluted Shares (c)                  31,783,536                                         32,161,566                                         31,837,551                                         32,180,923
(a) During the quarter and six months ended January 27, 2018, the Company recognized an income tax benefit of approximately $32.2 million resulting from Tax Reform, primarily due to the re-measurement of the Company’s net deferred tax liabilities at a lower U.S. federal corporate income tax rate.
(b) During the quarter and six months ended January 27, 2018, the Company excluded an income tax benefit of approximately $6.9 million for the tax effects of the vesting and exercise of share-based awards from its Non-GAAP Adjusted Net Income and Non-GAAP Adjusted Diluted Earnings per Common Share.
(c) The Company has a note hedge in effect to offset the economic dilution of additional shares from the Notes up to an average quarterly share price of $130.43 per share. Non-GAAP Adjusted Diluted Shares excludes the GAAP dilutive effect of the Notes.
Amounts in table above may not add due to rounding.
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
TO COMPARABLE GAAP FINANCIAL MEASURES (CONTINUED)
(Dollars in thousands, except share amounts)
Unaudited
OUTLOOK - DILUTED EARNINGS PER COMMON SHARE AND NON-GAAP ADJUSTED DILUTED EARNINGS PER COMMON SHARE
                                                                                                 Quarter Ending
                                                                                                 April 28, 2018
                                                                                 Fiscal 2019     (Q1-19)
Diluted Earnings per Share:
Diluted earnings per common share - GAAP (a)                                     $4.78 - $5.70   $0.52 - $0.67
Adjustment
Addback of after-tax non-cash amortization of debt discount on Notes (b)         $0.44           $0.11
Non-GAAP Adjusted Diluted Earnings per Common Share                              $5.22 - $6.14   $0.63 - $0.78
Diluted shares - in millions (c)                                                 31.9            31.8
(a) Based on a preliminary analysis of the impact of Tax Reform, the Company currently expects that the fiscal 2019 effective tax rate will be within a range of 27.0% to 27.5% before the tax effects of the settlement of share-based awards.
(b) The Company expects to recognize approximately $19.1 million and $4.7 million in pre-tax interest expense during fiscal 2019 and the quarter ending April 28, 2018, respectively, for non-cash amortization of the debt discount associated with the Notes.
(c) Actual GAAP diluted shares will include any applicable dilutive effect of the Notes based on the average share price during the respective period. The Company has a note hedge in effect to offset the economic dilution of additional shares from the Notes up to an average quarterly price of $130.43 per share. Accordingly, for Non-GAAP Adjusted Diluted Earnings per Common Share calculations, the Company expects to present results per share that exclude the dilutive effect of the Notes, if applicable, based on the expected effect of the note hedge.
Amounts in table above may not add due to rounding.
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
TO COMPARABLE GAAP FINANCIAL MEASURES (CONTINUED)
(Dollars in millions, except share amounts)
Unaudited
RECONCILIATION OF NET INCOME TO NON-GAAP ADJUSTED EBITDA BASED ON THE MIDPOINT OF EARNINGS PER COMMON SHARE ("EPS") GUIDANCE FOR FISCAL 2019 AND QUARTER ENDING APRIL 28, 2018 (Q1-19)
                                                                                                             Quarter Ending
                                                                                                             April 28, 2018
                                                                           Fiscal 2019                       (Q1-19)
                                                                           (at midpoint of EPS guidance)
Net income                                                                 $                          167    $                          19.0
Interest expense, net                                                      41                                10.1
Provision for income taxes                                                 63                                7.1
Depreciation and amortization                                              184                               43.8
Earnings Before Interest, Taxes, Depreciation & Amortization ("EBITDA")    455                               80.0
Gain on sale of fixed assets                                               (11)                              (5.1)
Stock-based compensation expense                                           26                                5.3
Non-GAAP Adjusted EBITDA                                                   $                          470    $                          80.3
Contract revenues (at midpoint of guidance)                                $                          3,400  $                          735
Non-GAAP Adjusted EBITDA % of Contract Revenues (at midpoint of guidance)  13.8%                             10.9%
Amounts in table above may not add due to rounding.

DYCOM INDUSTRIES, INC. AND SUBSIDIARIESRECONCILIATION OF NON-GAAP FINANCIAL MEASURESTO COMPARABLE GAAP FINANCIAL MEASURES (CONTINUED)

Explanation of Non-GAAP Financial Measures

The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). In the Company’s quarterly results releases, trend schedules, conference calls, slide presentations, and webcasts, it may use or discuss Non-GAAP financial measures, as defined by Regulation G of the Securities and Exchange Commission. The Company believes that the presentation of certain Non-GAAP financial measures in these materials provides information that is useful to investors because it allows for a more direct comparison of the Company’s performance for the period reported with the Company’s performance in prior periods. The Company cautions that Non-GAAP financial measures should be considered in addition to, but not as a substitute for, the Company’s reported GAAP results. Management defines the Non-GAAP financial measures used in this release as follows:

-- Non-GAAP Organic Contract Revenues - contract revenues from businesses that are included for the entire period in both the current and prior year periods, excluding contract revenues from storm restoration services. Non-GAAP Organic Contract Revenue growth (decline) is calculated as the percentage change in Non-GAAP Organic Contract Revenues over those of the comparable prior year period. Management believes organic growth (decline) is a helpful measure for comparing the Company’s revenue performance with prior periods.

-- Non-GAAP Adjusted EBITDA - net income before interest, taxes, depreciation and amortization, gain on sale of fixed assets, stock-based compensation expense, and certain non-recurring items. Management believes Non-GAAP Adjusted EBITDA is a helpful measure for comparing the Company’s operating performance with prior periods as well as with the performance of other companies with different capital structures or tax rates.

-- Non-GAAP Adjusted Net Income - GAAP net income before non-cash amortization of the debt discount and the related tax impact, certain tax impacts resulting from vesting and exercise of share-based awards, certain tax impacts of Tax Reform, and certain non-recurring items.

-- Non-GAAP Adjusted Diluted Earnings per Common Share and Non-GAAP Adjusted Diluted Shares - Non-GAAP Adjusted Net Income divided by Non-GAAP Adjusted Diluted Shares outstanding. The Company has a note hedge in effect to offset the economic dilution of additional shares from the Notes up to an average quarterly share price of $130.43. The measure of Non-GAAP Adjusted Diluted shares used in computing Non-GAAP Adjusted Diluted Earnings per Common Share excludes dilution from the Notes. Management believes that the calculation of Non-GAAP Adjusted Diluted shares to reflect the note hedge will be useful to investors because it provides insight into the offsetting economic effect of the hedge against potential conversion of the Notes.

Management excludes or adjusts each of the items identified below from Non-GAAP Adjusted Net Income and Non-GAAP Adjusted Diluted Earnings per Common Share:

-- Non-cash amortization of the debt discount - The Company’s Notes were allocated between debt and equity components. The difference between the principal amount and the carrying amount of the liability component of the Notes represents a debt discount. The debt discount is being amortized over the term of the Notes but does not result in periodic cash interest payments. The Company has excluded the non-cash amortization of the debt discount from its Non-GAAP financial measures because it believes it is useful to analyze the component of interest expense for the Notes that will be paid in cash. The exclusion of the non-cash amortization from the Company’s Non-GAAP financial measures provides management with a consistent measure for assessing financial results.

-- Tax impact from Tax Reform - During the quarter and six months ended January 27, 2018, the Company recognized an income tax benefit of approximately $32.2 million resulting from Tax Reform, primarily due to a reduction of net deferred tax liabilities. The Company has excluded this impact because it is a significant change in the U.S. federal corporate tax rate and because the Company believes it is not indicative of the Company’s underlying results or ongoing operations.

-- Tax impact of excess tax benefits as a result of ASU 2016-09 - ASU 2016-09, Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09") became effective for the Company July 30, 2017, the first day of the 2018 transition period, and changed the treatment of windfalls (or shortfalls) arising from the vesting and exercise of share-based awards. Prior to ASU 2016-09, these amounts were recorded as an adjustment to additional paid-in capital. With the adoption of ASU 2016-09, these amounts are now captured in the Company’s provision for income taxes. The Company excluded the impact of approximately $6.9 million of excess tax benefits during the quarter and six months ended January 27, 2018 from its provision for income taxes in its Non-GAAP measures as this amount may vary significantly from period to period and excluding this amount from the Company’s Non-GAAP financial measures provides management with a more consistent measure for assessing financial results.

-- Tax impact of adjusted results - The tax impact of adjusted results reflects the Company’s effective tax rate used for financial planning for the applicable period.

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SOURCE Dycom Industries, Inc.

https://rt.prnewswire.com/rt.gif?NewsItemId=FL24431&Transmission_Id=201802280600PR_NEWS_USPR_____FL24431&DateId=20180228



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