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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 1, 2021

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)

Florida59-1277135
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
11780 US Highway 1, Suite 600
Palm Beach Gardens, FL33408
(Address of principal executive offices, including 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 ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Common stock, par value $0.33 1/3 per shareDYNew York Stock Exchange

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 every Interactive Data File required to be submitted 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 such files). Yes x No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting company
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

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

There were 30,778,691 shares of common stock with a par value of $0.33 1/3 outstanding at May 24, 2021.



Dycom Industries, Inc.
Table of Contents
PART I - FINANCIAL INFORMATION
PART II - OTHER INFORMATION
SIGNATURES

2

Table of Contents
PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.
3

Table of Contents

DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share amounts)
(Unaudited)
 May 1, 2021January 30, 2021
ASSETS
Current assets:  
Cash and equivalents$330,615 $11,770 
Accounts receivable, net (Note 5)867,545 858,123 
Contract assets177,212 197,110 
Inventories71,059 70,849 
Income tax receivable3,607 1,706 
Other current assets48,012 29,072 
Total current assets1,498,050 1,168,630 
Property and equipment, net273,503 273,960 
Operating lease right-of-use assets67,045 63,179 
Goodwill272,485 272,485 
Intangible assets, net114,647 119,322 
Other assets37,287 46,589 
Total assets$2,263,017 $1,944,165 
LIABILITIES AND STOCKHOLDERS’ EQUITY  
Current liabilities:  
Accounts payable$171,013 $158,966 
Current portion of debt61,522 81,722 
Contract liabilities18,833 14,101 
Accrued insurance claims43,444 41,736 
Operating lease liabilities24,967 24,769 
Income taxes payable982 6,387 
Other accrued liabilities115,318 120,809 
Total current liabilities436,079 448,490 
Long-term debt835,178 501,562 
Accrued insurance claims - non-current62,361 70,224 
Operating lease liabilities - non-current 41,034 38,359 
Deferred tax liabilities, net - non-current51,448 47,650 
Other liabilities26,964 26,572 
Total liabilities1,453,064 1,132,857 
COMMITMENTS AND CONTINGENCIES (Note 19)
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: 30,778,154 and 30,615,167 issued and outstanding, respectively
10,259 10,205 
Additional paid-in capital3,807 2,284 
Accumulated other comprehensive loss(1,767)(1,769)
Retained earnings797,654 800,588 
Total stockholders’ equity809,953 811,308 
Total liabilities and stockholders’ equity$2,263,017 $1,944,165 
See notes to the condensed consolidated financial statements.

4

Table of Contents
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share amounts)
(Unaudited)
For the Three Months Ended
 May 1, 2021April 25, 2020
Contract revenues$727,497 $814,322 
Costs of earned revenues, excluding depreciation and amortization620,011 680,206 
General and administrative67,011 65,887 
Depreciation and amortization39,079 45,871 
Goodwill impairment charge 53,264 
Total726,101 845,228 
Interest expense, net(5,877)(12,457)
(Loss) gain on debt extinguishment(62)12,504 
Other income, net2,717 1,118 
Loss before income taxes(1,826)(29,741)
(Benefit) provision for income taxes(2,724)2,677 
Net income (loss)$898 $(32,418)
Earnings (loss) per common share:
Basic earnings (loss) per common share$0.03 $(1.03)
Diluted earnings (loss) per common share$0.03 $(1.03)
 Shares used in computing earnings (loss) per common share:
 Basic30,675,625 31,603,498 
 Diluted31,299,469 31,603,498 
See notes to the condensed consolidated financial statements.

5

Table of Contents
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)
(Unaudited)
For the Three Months Ended
May 1, 2021April 25, 2020
Net Income (loss)$898 $(32,418)
Foreign currency translation gains (losses), net of tax2 (31)
Comprehensive income (loss)$900 $(32,449)
See notes to the condensed consolidated financial statements.

6

Table of Contents
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(Dollars in thousands, except share amounts)
(Unaudited)
For the Three Months Ended
May 1, 2021
Common StockAdditional
Paid-in Capital
Accumulated Other
Comprehensive
Loss
Retained
Earnings
Total
Equity
 SharesAmount
Balances as of January 30, 202130,615,167 $10,205 $2,284 $(1,769)$800,588 $811,308 
Stock options exercised11,169 4 362 — — 366 
Stock-based compensation704  3,740 — — 3,740 
Issuance of restricted stock, net of tax withholdings151,114 50 (2,579)— (3,832)(6,361)
Other comprehensive income— — — 2 — 2 
Net income— — —  898 898 
Balances as of May 1, 202130,778,154 $10,259 $3,807 $(1,767)$797,654 $809,953 
For the Three Months Ended
April 25, 2020
Common StockAdditional
Paid-in Capital
Accumulated Other
Comprehensive
Loss
Retained
Earnings
Total
Equity
SharesAmount
Balances as of January 25, 202031,583,938 $10,528 $30,158 $(1,781)$829,699 $868,604 
Cumulative effect from implementation of ASU 2016-13— — — — (471)(471)
Stock options exercised15,425 5 237 — — 242 
Stock-based compensation1,428 1 2,321 — — 2,322 
Issuance of restricted stock, net of tax withholdings31,870 10 (336)— — (326)
Equity component of the settlement of 0.75% convertible senior notes due 2021, net of taxes— — (3,971)— — (3,971)
Purchase of warrants— — (398)— — (398)
Settlement of convertible note hedges related to extinguishment of convertible debt— — 341 — — 341 
Other comprehensive loss— — — (31)— (31)
Net (loss) income— — — — (32,418)(32,418)
Balances as of April 25, 202031,632,661 $10,544 $28,352 $(1,812)$796,810 $833,894 
See notes to the condensed consolidated financial statements.

7

Table of Contents
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
For the Three Months Ended
May 1, 2021April 25, 2020
Cash flows from operating activities:
Net income (loss)$898 $(32,418)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization39,079 45,871 
Non-cash lease expense7,866 7,921 
Deferred income tax provision (benefit)3,799 (8,710)
Stock-based compensation3,740 2,322 
Amortization of debt discount663 4,341 
Provision for bad debt, net2,823 118 
Gain on sale of fixed assets(2,852)(1,788)
Loss (gain) on debt extinguishment62 (12,504)
Amortization of debt issuance costs and other636 951 
Goodwill impairment charge 53,264 
Change in operating assets and liabilities, net of acquisitions:
Accounts receivable, net(12,246)(54,134)
Contract assets, net24,629 (13,763)
Other current assets and inventories(19,067)(11,337)
Other assets2,222 2,019 
Income taxes receivable/payable(7,306)11,518 
Accounts payable7,699 80,319 
Accrued liabilities, insurance claims, operating lease liabilities, and other liabilities(11,134)11,171 
Net cash provided by operating activities41,511 85,161 
Cash flows from investing activities:
Capital expenditures(31,629)(20,701)
Proceeds from sale of assets3,044 2,400 
Net cash used in investing activities(28,585)(18,301)
Cash flows from financing activities:
   Proceeds from 4.50% Senior Notes
500,000  
Proceeds from borrowings on senior credit agreement, including term loans95,000 675,000 
Principal payments on senior credit agreement, including term loans(271,875)(5,625)
Debt issuance costs(11,211) 
Extinguishment of 0.75% senior notes
 (167,003)
Redemption discount on convertible debt, net of costs 20,040 
Settlement of convertible note hedges related to extinguished convertible debt 341 
Purchase of warrants (397)
Exercise of stock options366 242 
Restricted stock tax withholdings(6,361)(326)
Net cash provided by financing activities305,919 522,272 
Net increase in cash, cash equivalents and restricted cash318,845 589,132 
Cash, cash equivalents and restricted cash at beginning of period13,574 59,869 
Cash, cash equivalents and restricted cash at end of period$332,419 $649,001 
8

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Supplemental disclosure of other cash flow activities and non-cash investing and financing activities:
Cash paid for interest$2,592 $8,510 
Cash paid for taxes, net$430 $52 
Purchases of capital assets included in accounts payable or other accrued liabilities at period end$9,149 $2,933 
Debt financing costs included in other accrued liabilities at period end$427 $ 
See notes to the condensed consolidated financial statements.

9

Table of Contents
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

Dycom Industries, Inc. (“Dycom” or the “Company”) is a leading provider of specialty contracting services throughout the United States. These services include program management; planning; engineering and design; aerial, underground, and wireless construction; maintenance; and fulfillment services for telecommunications providers. Additionally, Dycom provides underground facility locating services for various utilities, including telecommunications providers, and other construction and maintenance services for electric and gas utilities. Dycom supplies the labor, tools, and equipment necessary to provide these services to its customers.

The Company uses a 52/53 week fiscal year ending on the last Saturday in January. Fiscal 2021 consisted of 53 weeks of operations and fiscal year ending January 29, 2022 consists of 52 weeks of operation.

The accompanying unaudited condensed consolidated financial statements of the Company and its subsidiaries, all of which are wholly-owned, have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and notes required by GAAP for annual financial statements and should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in this report and the Company’s audited financial statements included in the Company’s Annual Report on Form 10-K for fiscal 2021, filed with the SEC on March 5, 2021. In the opinion of management, all adjustments considered necessary for a fair statement of the results for the interim periods presented have been included. This includes all normal and recurring adjustments and elimination of intercompany accounts and transactions. Operating results for the interim period are not necessarily indicative of the results expected for any subsequent interim or annual period.

Segment Information. The Company operates in one reportable segment. Its services are provided by its operating segments on a decentralized basis. Each operating segment consists of a subsidiary (or in certain instances, the combination of two or more subsidiaries), the results of which are regularly reviewed by the Company’s Chief Executive Officer, the chief operating decision maker. All of the Company’s operating segments have been aggregated into one reportable segment based on their similar economic characteristics, nature of services and production processes, type of customers, and service distribution methods.

The economy of the United States has been severely impacted by the nation’s response to a pandemic caused by a novel strain of coronavirus (“COVID-19”). Measures taken include travel restrictions, social distancing requirements, quarantines, and shelter in place orders. As a result, businesses have been closed and certain business activities curtailed for varying periods of time and in varying geographic regions. During the COVID-19 pandemic, our services have generally been considered essential in nature and have not been materially interrupted. As the situation continues to evolve, we are closely monitoring the impact of the COVID-19 pandemic on all aspects of our business, including how it impacts our customers, subcontractors, suppliers, vendors and employees, in addition to how the COVID-19 pandemic impacts our ability to provide services to our customers. The full extent of the impact of the COVID-19 pandemic on the Company's operational and financial performance will be determined by factors which are uncertain, unpredictable and outside of our control, including the duration of the pandemic, any worsening of the pandemic, the containment and mitigation actions taken by federal, state and local governments, and the resulting impact on the demand for our services from our customers. The situation surrounding COVID-19 remains fluid, and if disruptions do arise, they could materially adversely impact our business.

2. Significant Accounting Policies and Estimates

There have been no material changes to the Company’s significant accounting policies and critical accounting estimates described in the Company’s Annual Report on Form 10-K for fiscal 2021.

Use of Estimates. The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the amounts reported in these condensed consolidated financial statements and accompanying notes. These estimates are based on our historical experience and management’s understanding of current facts and circumstances. At the time they are made, we believe that such estimates are fair when considered in conjunction with the Company’s consolidated financial position and results of operations taken as a whole. However, actual results could differ materially from those estimates.

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3. Accounting Standards

Recently issued accounting pronouncements are disclosed in the Company’s Annual Report on Form 10-K for fiscal 2021. As of the date of this Quarterly Report on Form 10-Q, there have been no changes in the expected dates of adoption or estimated effects on the Company’s condensed consolidated financial statements of recently issued accounting pronouncements from those disclosed in the Company’s Annual Report on Form 10-K for fiscal 2021. Further, there have been no additional accounting standards issued as of the date of this Quarterly Report on Form 10-Q that are applicable to the consolidated financial statements of the Company. Accounting standards adopted during the three months ended May 1, 2021 are disclosed in this Quarterly Report on Form 10-Q.

Recently Adopted Accounting Standards

Codification Improvement. In October 2020, the FASB issued ASU No. 2020-10, Codification Improvements (“ASU 2020-10”). The amendments in this ASU represent changes to clarify the Accounting Standards Codification (“ASC”), correct unintended application of guidance, or make minor improvements to the ASC that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. ASU 2020-10 is effective for annual periods beginning after December 15, 2020 and interim periods within those annual periods, with early adoption permitted. The amendments in this ASU should be applied retrospectively. We adopted the provisions of this ASU in the first quarter of fiscal 2022 and there was no material effect on our consolidated financial statements.

Income Taxes. In December 2019, the FASB issued ASU No. 2019-12, Income Taxes - Simplifying the Accounting for Income Taxes (Topic 740) (“ASU 2019-12”). ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principals in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. We adopted the provisions of this ASU in the first quarter of fiscal 2022 and there was no material effect on our consolidated financial statements.


Accounting Standards Not Yet Adopted

All other new accounting pronouncements that have been issued but not yet effective are currently being evaluated and at this time are not expected to have a material impact on our financial position or results of operation.


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4. Computation of Earnings per Common Share

The following table sets forth the computation of basic and diluted earnings per common share (dollars in thousands, except per share amounts):
 For the Three Months Ended
 May 1, 2021April 25, 2020
Net income (loss) available to common stockholders (numerator)$898 $(32,418)
Weighted-average number of common shares (denominator)30,675,625 31,603,498 
Basic earnings (loss) per common share$0.03 $(1.03)
Weighted-average number of common shares30,675,625 31,603,498 
Potential shares of common stock arising from stock options, and unvested restricted share units623,844  
Total shares-diluted (denominator)31,299,469 31,603,498 
Diluted earnings (loss) per common share$0.03 $(1.03)
Anti-dilutive weighted shares excluded from the calculation of earnings (loss) per common share:
Stock-based awards(1)
66,264 608,279 
0.75% convertible senior notes due 2021(2) (3)
601,349 3,024,082 
Warrants(1) (2)
601,349 3,024,082 
Total 1,268,962 6,656,443 

(1) For the three months ended April 25, 2020, all common stock equivalents related to stock options and unvested restricted share units were excluded from the diluted loss per share calculation as their effect would be anti-dilutive due to our net less for the period.

(2) Under the treasury stock method, the convertible senior notes will have a dilutive impact on earnings per common share if our average stock price for the period exceeds the $96.89 per share conversion price. Our average stock price did not exceed the per share conversion price during the three months ended May 1, 2021 and April 25, 2020; therefore, there was no dilutive impact on earnings per common share for these periods. The warrants associated with our 2021 convertible senior notes will have a dilutive impact on earnings per common share if our average stock price for the period exceeds the $130.43 per share warrant strike price. As our average stock price did not exceed the strike price for the warrants for any of the periods presented, the underlying common shares were anti-dilutive as reflected in the table above.

(3) In connection with the purchase of $401.7 million of the 2021 Convertible Notes in fiscal 2021 and $25.0 million in fiscal 2020, we unwound convertible note hedge transactions and warrants proportionately to the number of 2021 Convertible Notes, resulting in a decrease in the number of excluded weighted shares.

In connection with the offering of the 2021 Convertible Notes, we entered into convertible note hedge transactions with counterparties for the purpose of reducing the potential dilution to common stockholders from the conversion of the 2021 Convertible Notes and offsetting any potential cash payments in excess of the principal amount of the 2021 Convertible Notes. Prior to conversion, the convertible note hedge is not included for purposes of the calculation of earnings per common share as its effect would be anti-dilutive. Upon conversion, the convertible note hedge is expected to offset the dilutive effect of the 2021 Convertible Notes when the average stock price for the period is above $96.89 per share. See Note 13, Debt, for additional information related to our 2021 Convertible Notes, warrant transactions, and hedge transactions.

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5. Accounts Receivable, Contract Assets, and Contract Liabilities

The following provides further details on the balance sheet accounts of accounts receivable, net; contract assets; and contract liabilities.

Accounts Receivable
 
Accounts receivable, net, classified as current, consisted of the following (dollars in thousands):
May 1, 2021January 30, 2021
Trade accounts receivable$326,582 $352,501 
Unbilled accounts receivable529,150 492,324 
Retainage16,050 14,974 
Total871,782 859,799 
Less: allowance for doubtful accounts(4,237)(1,676)
Accounts receivable, net$867,545 $858,123 
 
We maintain an allowance for doubtful accounts for estimated losses on uncollected balances. The allowance for doubtful accounts changed as follows (dollars in thousands):
For the Three Months Ended
May 1, 2021April 25, 2020
Cumulative effect from implementation of ASU 2016-13$ $471 
Allowance for doubtful accounts at beginning of period1,676 4,582 
Provision for bad debt2,823 118 
Amounts charged against the allowance(262)(5)
Allowance for doubtful accounts at end of period$4,237 $5,166 

Contract Assets and Contract Liabilities

Net contract assets consisted of the following (dollars in thousands):
May 1, 2021January 30, 2021
Contract assets$177,212 $197,110 
Contract liabilities 18,833 14,101 
Contract assets, net$158,379 $183,009 

Net contract assets were $158.4 million and $183.0 million as of May 1, 2021 and January 30, 2021, respectively. The decrease primarily resulted from reduced services performed and increased billings under contracts consisting of multiple tasks. During the three months ended May 1, 2021, we performed services and recognized $5.9 million of contract revenues related to contract liabilities that existed at January 30, 2021. See Note 6, Other Current Assets and Other Assets, for information on our long-term contract assets.

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Customer Credit Concentration

Customers whose combined amounts of accounts receivable and contract assets, net, exceeded 10% of total combined accounts receivable and contract assets, net, as of May 1, 2021 or January 30, 2021 were as follows (dollars in millions):
May 1, 2021January 30, 2021
Amount% of TotalAmount% of Total
Verizon Communications Inc.$361.5 35.1%$389.9 37.4%
Lumen Technologies(1)
$153.5 14.9%$173.5 16.6%
Comcast Corporation$134.8 13.1%$131.7 12.6%
(1) Formerly known as CenturyLink, Inc.

We believe that none of the customers above were experiencing financial difficulties that would materially impact the collectability of the Company’s total accounts receivable and contract assets, net, as of May 1, 2021 or January 30, 2021.

6. Other Current Assets and Other Assets
 
Other current assets consisted of the following (dollars in thousands):
May 1, 2021January 30, 2021
Prepaid expenses$31,520 $14,849 
Deposits and other current assets15,004 12,817 
Restricted cash1,372 1,372 
Receivables on equipment sales116 34 
Other current assets$48,012 $29,072 

Other assets consisted of the following (dollars in thousands):
May 1, 2021January 30, 2021
Long-term contract assets$16,202 $17,574 
Deferred financing costs5,631 5,205 
Restricted cash432 432 
Insurance recoveries/receivables for accrued insurance claims8,615 15,837 
Other non-current deposits and assets6,407 7,541 
Other assets$37,287 $46,589 

Long-term contract assets represent payments made to customers pursuant to long-term agreements and are recognized as a reduction of contract revenues over the period for which the related services are provided to the customers.

See Note 10, Accrued Insurance Claims, for information on our Insurance recoveries/receivables.

7. Cash, Cash Equivalents and Restricted Cash
 
Amounts of cash, cash equivalents and restricted cash reported in the condensed consolidated statement of cash flows consisted of the following (dollars in thousands):
May 1, 2021January 30, 2021
Cash and cash equivalents$330,615 $11,770 
Restricted cash included in:
Other current assets1,372 1,372 
Other assets (long-term)432 432 
Cash, cash equivalents and restricted cash$332,419 $13,574 

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8. Property and Equipment
 
Property and equipment consisted of the following (dollars in thousands):
Estimated Useful Lives (Years)May 1, 2021January 30, 2021
Land$4,421 $3,796 
Buildings
10-35
10,274 11,169 
Leasehold improvements
1-10
17,298 17,030 
Vehicles
1-5
641,371 626,809 
Computer hardware and software
1-7
148,987 144,989 
Office furniture and equipment
1-10
13,156 13,293 
Equipment and machinery
1-10
305,587 300,143 
Total1,141,094 1,117,229 
Less: accumulated depreciation(867,591)(843,269)
Property and equipment, net$273,503 $273,960 

Depreciation expense was $34.4 million and $40.6 million for the three months ended May 1, 2021 and April 25, 2020, respectively.

9. Goodwill and Intangible Assets

Goodwill

There was no change in the carrying amount of goodwill during the three months ended May 1, 2021. The goodwill balance consisted of the following (dollars in thousands):
May 1, 2021January 30, 2021
Goodwill, gross$521,516 $521,516 
Accumulated impairment losses(249,031)(249,031)
Total$272,485 $272,485 

The Company’s goodwill resides in multiple reporting units and primarily consists of expected synergies, together with the expansion of the Company’s geographic presence and strengthening of its customer base from acquisitions. Goodwill and other indefinite-lived intangible assets are assessed annually for impairment, or more frequently if events occur that would indicate a potential reduction in the fair value of a reporting unit below its carrying value. The profitability of individual reporting units may suffer periodically due to downturns in customer demand, increased costs of providing services, and the level of overall economic activity. The Company’s customers may reduce capital expenditures and defer or cancel pending projects due to changes in technology, a slowing or uncertain economy, merger or acquisition activity, a decision to allocate resources to other areas of their business, or other reasons. The profitability of reporting units may also suffer if actual costs of providing services exceed the costs anticipated when the Company enters into contracts. Additionally, adverse conditions in the economy and future volatility in the equity and credit markets could impact the valuation of the Company’s reporting units. The cyclical nature of the Company’s business, the high level of competition existing within its industry, and the concentration of its revenues from a limited number of customers may also cause results to vary. These factors may affect individual reporting units disproportionately, relative to the Company as a whole. As a result, the performance of one or more of the reporting units could decline, resulting in an impairment of goodwill or intangible assets.

During fiscal 2021 the economy of the United States was severely impacted by the nation’s response to the COVID-19 pandemic. Measures taken include travel restrictions, social distancing requirements, quarantines, and shelter in place orders. As a result, businesses have been closed and certain business activities curtailed for varying periods of time and in varying geographic regions. During the COVID-19 pandemic, our services have generally been considered essential in nature and have not been materially interrupted. However, certain customers of one of the Company’s reporting units (“Broadband”) have decided to restrict our technicians from entering third party premises. Furthermore, customers have modified their protocols to increase the self-installation of customer premise equipment by their subscribers. The events following the onset of COVID-19 were expected to result in a prolonged downturn in customer demand for installation services and to have a direct, adverse impact on its revenue, operating results and cash flows. As a result, during the quarter ended April 25, 2020 the Company
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recognized an impairment charge of $53.3 million which is the amount by which the carrying amount exceeded the reporting unit’s fair value.

The Company performs its annual impairment assessment as of the first day of the fourth fiscal quarter of each fiscal year. As a result of the Company’s fiscal 2021 period assessment, the Company concluded that no impairment of goodwill or the indefinite-lived intangible asset was indicated at any reporting unit for any of the periods other than the first quarter of fiscal 2021. As of May 1, 2021, the Company continues to believe the remaining goodwill and the indefinite-lived intangible asset are recoverable for all of its reporting units.

Intangible Assets

Our intangible assets consisted of the following (dollars in thousands):
May 1, 2021January 30, 2021
Weighted Average Remaining Useful Lives (Years)Gross Carrying AmountAccumulated AmortizationIntangible Assets, NetGross Carrying AmountAccumulated AmortizationIntangible Assets, Net
Customer relationships9.1$312,017 $203,199 $108,818 $312,017 $198,604 $113,413 
Trade names, finite8.210,350 9,221 1,129 10,350 9,141 1,209 
Trade name, indefinite4,700  4,700 4,700  4,700 
$327,067 $212,420 $114,647 $327,067 $207,745 $119,322 

Amortization of our customer relationship intangibles is recognized on an accelerated basis as a function of the expected economic benefit. Amortization of our other finite-lived intangibles is recognized on a straight-line basis over the estimated useful life. Amortization expense for finite-lived intangible assets was $4.7 million and $5.2 million for the three months ended May 1, 2021 and April 25, 2020, respectively.

As of May 1, 2021, we believe that the carrying amounts of our 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.

10. Accrued Insurance Claims
 
For claims within our insurance program, we retain the risk of loss, up to certain annual stop-loss limits, for matters related to automobile liability, general liability (including damages associated with underground facility locating services), workers’ compensation, and employee group health. Losses for claims beyond our retained risk of loss are covered by insurance up to our coverage limits.

For fiscal 2021, with regard to workers’ compensation losses, we retained the risk of loss up to $1.0 million on a per occurrence basis. This retention amount is applicable to all of the states in which we operate, except with respect to workers’ compensation insurance in two states in which we participate in state-sponsored insurance funds. With regard to automobile liability and general liability losses, we retained the risk of loss up $1.0 million on a per occurrence basis for the first $5.0 million of insurance coverage. In addition, we also retained the risk of loss for automobile and general liability for the next $5.0 million on a per-occurrence basis with aggregate loss limits of $11.5 million within this layer of retention.

For fiscal 2022, with regard to workers’ compensation losses, our retention of risk remains the same as fiscal 2021. With regard to automobile liability and general liability losses, our retention of primary risk remains the same as fiscal 2021. In addition, we reduced our coverage limit and retained $10.0 million risk of loss on a per occurrence basis for losses above $30.0 million.

We are party to a stop-loss agreement for losses under our employee group health plan. For the calendar year 2020, we retained the risk of loss, on an annual basis, up to the first $450,000 of claims per participant, as well as an annual aggregate amount for all participants of $475,000. For the calendar year 2021, we retain the risk of loss on an annual basis, up to the first $600,000 of claims per participant.

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Amounts for total accrued insurance claims and insurance recoveries/receivables are as follows (dollars in thousands):
May 1, 2021January 30, 2021
Accrued insurance claims - current$43,444 $41,736 
Accrued insurance claims - non-current62,361 70,224 
Accrued insurance claims$105,805 $111,960 
Insurance recoveries/receivables:
Non-current (included in Other assets)$8,615 $15,837 
Insurance recoveries/receivables$8,615 $15,837 

Insurance recoveries/receivables represent the amount of accrued insurance claims that are covered by insurance as the amounts exceed the Company’s loss retention. During the three months ended May 1, 2021, total insurance recoveries/receivables decreased approximately $7.2 million primarily due to the settlement of claims that exceeded our loss retention. Accrued insurance claims decreased by a corresponding amount.

11. Leases

We lease the majority of our office facilities as well as certain equipment, all of which are accounted for as operating leases. These leases have remaining terms ranging from less than 1 year to approximately 9 years. Some leases include options to extend the lease for up to 5 years and others include options to terminate.

The following table summarizes the components of lease cost recognized in the condensed consolidated statements of operations for the three months ended May 1, 2021 and April 25, 2020 (dollars in thousands):
For the Three Months Ended
May 1, 2021April 25, 2020
Lease cost under long-term operating leases$8,630 $8,813 
Lease cost under short-term operating leases5,191 8,833 
Variable lease cost under short-term and long-term operating leases(1)
1,245 1,132 
Total lease cost$15,066 $18,778 

(1) Variable lease cost primarily includes insurance, maintenance, and other operating expenses related to our leased office facilities.

Our operating lease liabilities related to long-term operating leases were $66.0 million as of May 1, 2021 and $63.1 million as of January 30, 2021. Supplemental balance sheet information related to these liabilities is as follows:
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May 1, 2021January 30, 2021
Weighted average remaining lease term3.3 years3.2 years
Weighted average discount rate4.3 %4.6 %

Supplemental cash flow information related to our long-term operating lease liabilities as of May 1, 2021 and April 25, 2020 is as follows (dollars in thousands):
For the Three Months Ended
May 1, 2021April 25, 2020
Cash paid for amounts included in the measurement of lease liabilities $10,650 $8,589 
Operating lease right-of-use assets obtained in exchange for operating lease liabilities $11,710 $11,240 

As of May 1, 2021, maturities of our lease liabilities under our long-term operating leases for the next five fiscal years and thereafter are as follows (dollars in thousands):
Fiscal YearAmount
Remainder of 2022$21,125 
202322,497 
202413,706 
20258,260 
20263,643 
Thereafter2,304 
Total lease payments71,535 
Less: imputed interest(5,534)
Total$66,001 

12. Other Accrued Liabilities
 
Other accrued liabilities consisted of the following (dollars in thousands):
May 1, 2021January 30, 2021
Accrued payroll and related taxes$47,944 $43,593 
Accrued employee benefit and incentive plan costs10,564 32,988 
Accrued construction costs28,988 22,972 
Other current liabilities27,822 21,256 
Other accrued liabilities$115,318 $120,809 

13. Debt
 
Our outstanding indebtedness consisted of the following (dollars in thousands):
May 1, 2021January 30, 2021
Credit agreement - Revolving facility (matures April 2026)$ $105,000 
Credit agreement - Term loan facility, net (matures April 2026)346,928 421,874 
4.50% senior notes, net (mature April 2029)
492,625  
0.75% convertible senior notes, net (mature September 2021)
57,147 56,410 
896,700 583,284 
Less: current portion(61,522)(81,722)
Long-term debt$835,178 $501,562 

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Senior Credit Agreement

On April 1, 2021, the Company and certain of its subsidiaries amended its credit agreement, dated as of October 19, 2018, with the various lenders party thereto and Bank of America, N.A., as administrative agent (the “Credit Agreement”). The maturity date of the Credit Agreement was extended to April 1, 2026 and, among other things, the maximum revolver commitment was decreased to $650.0 million from $750.0 million and the term loan facility was decreased to $350.0 million from $416.3 million. The Credit Agreement includes a $200.0 million sublimit for the issuance of letters of credit and a $50.0 million sublimit for swingline loans.

The following table summarizes the net carrying value of the term loan as of May 1, 2021 (dollars in thousands):

May 1, 2021
Principal amount of term loan$350,000 
Less: Debt issuance costs(3,072)
Net carrying amount of term loan$346,928 


Subject to certain conditions, the Credit Agreement provides us with the ability to enter into one or more incremental facilities either by increasing the revolving commitments under the Credit Agreement and/or by establishing one or more additional term loans, up to the sum of (i) $350.0 million and (ii) an aggregate amount such that, after giving effect to such incremental facilities on a pro forma basis (assuming that the amount of the incremental commitments are fully drawn and funded), the consolidated senior secured net leverage ratio does not exceed 2.25 to 1.00. The consolidated senior secured net leverage ratio is the ratio of our consolidated senior secured indebtedness reduced by unrestricted cash and equivalents in excess of $25.0 million to our trailing twelve-month consolidated earnings before interest, taxes, depreciation, and amortization, as defined by the Credit Agreement (“EBITDA”). Borrowings under the Credit Agreement are guaranteed by substantially all of our domestic subsidiaries and secured by 100% the equity interests of our direct and indirect domestic subsidiaries and 65% of the voting equity interests and 100% of the non-voting interests of our first-tier foreign subsidiaries (subject to customary exceptions).

Under the Credit Agreement, borrowings bear interest at the rates described below based upon our consolidated net leverage ratio, which is the ratio of our consolidated total funded debt reduced by unrestricted cash and equivalents in excess of $25.0 million to our trailing twelve-month consolidated EBITDA, as defined by the Credit Agreement. In addition, we incur certain fees for unused balances and letters of credit at the rates described below, also based upon our consolidated net leverage ratio.
Borrowings - Eurodollar Rate Loans
1.25% - 2.00% plus LIBOR(1)
Borrowings - Base Rate Loans
0.25% - 1.00% plus Base rate(2)
Unused Revolver Commitment
0.20% - 0.40%
Standby Letters of Credit
1.25% - 2.00%
Commercial Letters of Credit
0.625% -1.000%
(1) To address the transition in financial markets away from LIBOR by the end of 2021, the Credit Agreement includes provisions related to the replacement of LIBOR with a LIBOR Successor Rate (as defined in the Credit Agreement), which may be a rate based on the secured overnight financing rate published by the Federal Reserve Bank of New York.
(2) Base rate is described in our 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 plus 1.00% and, if such rate is less than zero, such rate shall be deemed zero.

Standby letters of credit of approximately $46.3 million and $52.2 million, issued as part of our insurance program, were outstanding under the Credit Agreement as of May 1, 2021 and January 30, 2021, respectively.

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The weighted average interest rates and fees for balances under our Credit Agreement as of May 1, 2021 and January 30, 2021 were as follows:
Weighted Average Rate End of Period
May 1, 2021January 30, 2021
Borrowings - Term loan facilities1.74%1.63%
Borrowings - Revolving facility%2.14%
Standby Letters of Credit1.63%1.50%
Unused Revolver Commitment0.30%0.25%

The Credit Agreement contains a financial covenant that requires us to maintain a consolidated net leverage ratio of not greater than 3.50 to 1.00, as measured at the end of each fiscal quarter, and provides for certain increases to this ratio in connection with permitted acquisitions. The agreement also contains a financial covenant that requires us to maintain a consolidated interest coverage ratio, which is the ratio of our trailing twelve-month consolidated EBITDA to our consolidated interest expense, each as defined by the Credit Agreement, of not less than 3.00 to 1.00, as measured at the end of each fiscal quarter. At May 1, 2021 and January 30, 2021, we were in compliance with the financial covenants of our Credit Agreement and had borrowing availability under the revolving facility of $452.1 million and $558.7 million, respectively, as determined by the most restrictive covenant.

4.50% Senior Notes Due 2029

On April 1, 2021, we issued $500.0 million aggregate principal amount of 4.50% senior notes due 2029 (the “2029 Notes”). The 2029 Notes are guaranteed on a senior unsecured basis, jointly and severally, by all of our domestic subsidiaries that guarantee the Credit Agreement.

The indenture governing the 2029 Notes contains certain covenants that limit, among other things, our ability and the ability of certain of our subsidiaries to (i) incur additional debt and issue certain preferred stock, (ii) pay certain dividends on, repurchase, or make distributions in respect of, our and their capital stock or make other restricted payments, (iii) enter into agreements that place limitations on distributions from restricted subsidiaries, (iv) guarantee certain debt, (v) make certain investments, (vi) sell or exchange certain assets, (vii) enter into transactions with affiliates, (viii) create certain liens, and (ix) consolidate, merge or transfer all or substantially all of our or their assets. These covenants are subject to a number of exceptions, limitations and qualifications as set forth in the indenture governing the 2029 Notes.

The following table summarizes the net carrying value of the 2029 Notes as of May 1, 2021 (dollars in thousands):

May 1, 2021
Principal amount of 4.50% senior notes due April 2029
$500,000 
Less: Debt issuance costs(7,375)
Net carrying amount of 2029 Notes$492,625 

The following table summarizes the fair value of the 2029 Notes, net of debt issuance costs. The fair value of the 2029 Notes is based on the closing trading price per $100 of the 2029 Notes as of the last day of trading (Level 2), which was $101.50 as of May 1, 2021 (dollars in thousands):

May 1, 2021
Fair value of principal amount of 2029 Notes$507,500 
Less: Debt issuance costs(7,375)
Fair value of 2029 Notes$500,125 

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0.75% Convertible Senior Notes Due 2021

On September 15, 2015, we issued 0.75% convertible senior notes due September 2021 in a private placement in the principal amount of $485.0 million (the “2021 Convertible Notes”). The 2021 Convertible Notes, governed by the terms of an indenture between the Company and a bank trustee, are unsecured obligations and do not contain any financial covenants or restrictions on the payments of dividends, the incurrence of indebtedness, or the issuance or repurchase of securities by the Company. The 2021 Convertible Notes bear interest at a rate of 0.75% per year, payable in cash semiannually in March and September, and will mature on September 15, 2021, unless earlier purchased by the Company or converted. In the event we fail to perform certain obligations under the indenture, the 2021 Convertible Notes will accrue additional interest. Certain events are considered “events of default” under the 2021 Convertible Notes, which may result in the acceleration of the maturity of the 2021 Convertible Notes, as described in the indenture. During the fourth quarter of fiscal 2020, we purchased, through open-market transactions, $25.0 million aggregate principal amount of the 2021 Convertible Notes for $24.3 million, leaving the principal amount of $460.0 million outstanding. After the write-off of associated debt issuance costs, the net loss on extinguishment was $0.1 million for fiscal 2020. In fiscal 2021, we purchased $401.7 million aggregate principal amount of the 2021 Convertible Notes for $371.4 million, including interest and fees, leaving the principal amount of $58.3 million outstanding. These 2021 Convertible Notes were purchased through privately-negotiated transactions and a tender offer. After the write-off of associated debt issuance costs, the net gain on extinguishment was $12.0 million for fiscal 2021.

Each $1,000 of principal of the 2021 Convertible Notes is convertible into 10.3211 shares of the Company’s common stock, which is equivalent to an initial conversion price of approximately $96.89 per share. The conversion rate is subject to adjustment in certain circumstances, including in connection with specified fundamental changes (as defined in the indenture). In addition, holders of the 2021 Convertible Notes have the right to require the Company to repurchase all or a portion of their notes on the occurrence of a fundamental change at a price of 100% of their principal amount plus accrued and unpaid interest.

Prior to June 15, 2021, the 2021 Convertible Notes are convertible by the 2021 Convertible Note holders under the following circumstances: (1) during any fiscal quarter commencing after October 24, 2015 (and only during such fiscal quarter) if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days period ending on the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the applicable conversion price on such trading day ($125.96 assuming an applicable conversion price of $96.89); (2) during the five consecutive business day period after any five consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of 2021 Convertible Notes for each trading day of such measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the applicable conversion rate on each such trading day; or (3) upon the occurrence of specified corporate events. On or after June 15, 2021 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or a portion of their 2021 Convertible Notes at any time regardless of the foregoing circumstances. Upon conversion, the 2021 Convertible Notes will be settled, at the Company’s election, in cash, shares of the Company’s common stock, or a combination of cash and shares of the Company’s common stock. The Company intends to settle the principal amount of the 2021 Convertible Notes with cash.

During the three months ended May 1, 2021, the closing price of the Company’s common stock did not meet or exceed 130% of the applicable conversion price of the 2021 Convertible Notes for at least 20 of the last 30 consecutive trading dates of the quarter. Additionally, no other conditions allowing holders of the 2021 Convertible Notes to convert have been met as of May 1, 2021. As a result, the 2021 Convertible Notes were not convertible during the three months ended May 1, 2021 and are classified as debt.
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Convertible debt instruments that may be settled in cash upon conversion are required to be accounted for as separate liability and equity components. As of the date of issuance, the carrying amount of the liability component is calculated by measuring the fair value of a similar instrument that does not have an associated convertible feature using an indicative market interest rate (“Comparable Yield”). The difference between the principal amount of the notes and the carrying amount represents a debt discount. The debt discount is amortized to interest expense using the Comparable Yield (5.5% with respect to the 2021 Convertible Notes) using the effective interest rate method over the term of the 2021 Convertible Notes. During the three months ended May 1, 2021 and April 25, 2020, we incurred $0.7 million and $4.3 million, respectively, of interest expense for the non-cash amortization of the debt discount. The liability component of the 2021 Convertible Notes consisted of the following (dollars in thousands):

May 1, 2021January 30, 2021
Liability component
Principal amount of 0.75% convertible senior notes due September 2021
$58,264 $58,264 
Less: Debt discount(1,003)(1,665)
Less: Debt issuance costs(114)(189)
Net carrying amount of 2021 Convertible Notes$57,147 $56,410 

The equity component of the 2021 Convertible Notes was recognized at issuance and represents the difference between the principal amount of the 2021 Convertible Notes and the fair value of the liability component of the 2021 Convertible Notes at issuance. The equity component approximated $112.6 million at the time of issuance and its fair value is not remeasured as long as it continues to meet the conditions for equity classification.

The following table summarizes the fair value of the 2021 Convertible Notes, net of the debt discount and debt issuance costs. The fair value of the 2021 Convertible Notes is based on the closing trading price per $100 of the 2021 Convertible Notes as of the last day of trading for the respective periods (Level 2), which was $108.75 and $104.50 as of May 1, 2021 and January 30, 2021, respectively (dollars in thousands):

May 1, 2021January 30, 2021
Fair value of principal amount of 2021 Convertible Notes$63,362 $60,886 
Less: Debt discount and debt issuance costs(1,117)(1,854)
Fair value of 2021 Convertible Notes$62,245 $59,032 

Convertible Note Hedge and Warrant Transactions

In connection with the offering of the 2021 Convertible Notes, we entered into convertible note hedge transactions with counterparties for the purpose of reducing the potential dilution to common stockholders from the conversion of the 2021 Convertible Notes and offsetting any potential cash payments in excess of the principal amount of the 2021 Convertible Notes. In the event that shares or cash are deliverable to holders of the 2021 Convertible Notes upon conversion at limits defined in the indenture governing the 2021 Convertible Notes, counterparties to the convertible note hedge will be required to deliver to us shares of our common stock or pay cash to us in a similar amount as the value that we deliver to the holders of the 2021 Convertible Notes based on a conversion price of $96.89 per share. At inception of the convertible note hedge transactions, up to 5.006 million of our shares could be deliverable to us upon conversion. After the Company settled a portion of the note hedge transactions during fiscal 2020 and fiscal 2021 in connection with the purchase of $25.0 million and $401.7 million, respectively, of the 2021 Convertible Notes, the number of shares that could be deliverable to us upon conversion was reduced to up to 0.601 million of our shares.

We also entered into separately negotiated warrant transactions with the same counterparties as the convertible note hedge transactions whereby we sold warrants to purchase, subject to certain anti-dilution adjustments, up to 5.006 million shares of our common stock at a price of $130.43 per share. After the Company purchased a portion of the warrants during fiscal 2020 and fiscal 2021 in connection with the purchase of $25.0 million and $401.7 million, respectively, of the 2021 Convertible Notes, the remaining warrant transactions provide for up to 0.601 million shares. The warrants will not have a dilutive effect on our earnings per share unless our quarterly average share price exceeds the warrant strike price of $130.43 per share. In this event, we expect to settle the warrant transactions on a net share basis whereby we will issue shares of our common stock.

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Upon settlement of the conversion premium of the 2021 Convertible Notes, convertible note hedge, and warrants, the resulting dilutive impact of these transactions, if any, would be the number of shares necessary to settle the value of the warrant transactions above $130.43 per share. The net amounts incurred in connection with the convertible note hedge and warrant transactions were recorded as a reduction to additional paid-in capital on the consolidated balance sheets during fiscal 2016 and are not expected to be remeasured in subsequent reporting periods.

14. Income Taxes

Our interim income tax provisions are based on the effective income tax rate expected to be applicable for the full fiscal year, adjusted for specific items that are required to be recognized in the period in which they occur. Deferred tax assets and liabilities are based on the enacted tax rate that will apply in future periods when such assets and liabilities are expected to be settled or realized.
Our effective income tax rate was 149.1% and (9.0)% for the three months ended May 1, 2021 and April 25, 2020, respectively. The effective tax rate differs from the statutory rate each period primarily due to the difference in income tax rates from state to state where work was performed, changes in unrecognized tax benefits, tax law changes, tax credits recognized, variances in non-deductible and non-taxable items, and the impact of the vesting and exercise of share-based awards during the periods. Additionally, during the three months ended April 25, 2020, our effective tax rate was impacted by a $53.3 million goodwill impairment charge which was mostly non-deductible for income tax purposes, and the benefit from a $2.6 million tax loss carryback technical correction under the CARES Act.


15. Other Income, Net

The components of other income, net, were as follows (dollars in thousands):
For the Three Months Ended
May 1, 2021April 25, 2020
Gain on sale of fixed assets$2,852 $1,788 
Discount fee expense(489)(792)
Miscellaneous income, net354 122 
Other income, net$2,717 $1,118 

We participate in a vendor payment program sponsored by one of our customers. Eligible accounts receivable from this customer are included in the program and payment is received pursuant to a non-recourse sale to a bank partner. This program effectively reduces the time to collect these receivables as compared to that customer’s standard payment terms. We incur a discount fee to the bank on the payments received that is reflected as discount fee expense in the table above and is included as an expense component in other income, net, in the condensed consolidated statements of operations.

16. Capital Stock

Repurchases of Common Stock. On March 3, 2021 the Company announced that its Board of Directors had authorized a new $150 million program to repurchase shares of the Company’s outstanding common stock through August 2022 in open market or private transactions. As of May 1, 2021, the full $150 million of the new authorization was available for repurchases.

Restricted Stock Tax Withholdings. During the three months ended May 1, 2021 and April 25, 2020, the Company withheld 74,835 shares and 12,808 shares, respectively, totaling $6.4 million and $0.3 million , respectively, to meet payroll tax withholdings obligations arising from the vesting of restricted share units. All shares withheld have been canceled. Shares of common stock withheld for tax withholdings do not reduce the Company’s total share repurchase authority.

Upon cancellation of shares withheld for tax withholdings, the excess over par value is recorded as a reduction of additional paid-in capital until the balance is reduced to zero, with any additional excess recorded as a reduction of retained earnings. During the three months ended May 1, 2021, $3.8 million was charged to retained earnings related to shares canceled during the period.

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17. Stock-Based Awards

We have certain stock-based compensation plans under which we grant stock-based awards, including common stock, stock options, time-based restricted share units (“RSUs”), and performance-based restricted share units (“Performance RSUs”) to attract, retain, and reward talented employees, officers, and directors, and to align stockholder and employee interests.

Compensation expense for stock-based awards is based on fair value at the measurement date. This expense fluctuates over time as a function of the duration of vesting periods of the stock-based awards and the Company’s performance, as measured by criteria set forth in performance-based awards. Stock-based compensation expense is included in general and administrative expenses in the condensed consolidated statements of operations and the amount of expense ultimately recognized depends on the quantity of awards that actually vest. Accordingly, stock-based compensation expense may vary from period to period.

The performance criteria for the Company’s performance-based equity awards utilize the Company’s operating earnings (adjusted for certain amounts) as a percentage of contract revenues for the applicable four-quarter period (a “Performance Year”) and its Performance Year operating cash flow level (adjusted for certain amounts). Additionally, certain awards include three-year performance measures that, if met, result in supplemental shares awarded. For Performance RSUs, the Company evaluates compensation expense quarterly and recognizes expense for performance-based awards only if it determines it is probable that performance criteria for the awards will be met.

Stock-based compensation expense and the related tax benefit recognized during the three months ended May 1, 2021 and April 25, 2020 were as follows (dollars in thousands):
For the Three Months Ended
May 1, 2021April 25, 2020
Stock-based compensation$3,740 $2,322 
Income tax effect of stock-based compensation$919 $573 
In addition, during the three months ended May 1, 2021 and April 25, 2020 the Company realized $2.6 million of net excess tax benefits and $0.5 million of net tax deficiencies, respectively, related to the vesting and exercise of share-based awards.

As of May 1, 2021, we had unrecognized compensation expense related to stock options, RSUs, and target Performance RSUs (based on the Company’s expected achievement of performance measures) of $2.9 million, $18.4 million, and $8.6 million, respectively. This expense will be recognized over a weighted-average number of years of 3.1, 2.9, and 2.5, respectively, based on the average remaining service periods for the awards. As of May 1, 2021, we may recognize an additional $21.6 million in compensation expense in future periods if the maximum number of Performance RSUs is earned based on certain performance measures being met.

Stock Options

The following table summarizes stock option award activity during the three months ended May 1, 2021:
Stock Options
SharesWeighted Average Exercise Price
Outstanding as of January 30, 2021344,963 $49.66 
Granted29,738 $85.02 
Options exercised(11,169)$32.77 
Canceled  
Outstanding as of May 1, 2021363,532 $53.07 
Exercisable options as of May 1, 2021254,745