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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 April 30, 2022

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 29,551,971 shares of common stock with a par value of $0.33 1/3 outstanding at May 24, 2022.



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)
 April 30, 2022January 29, 2022
ASSETS
Current assets:  
Cash and equivalents$185,568 $310,757 
Accounts receivable, net (Note 5)994,951 895,898 
Contract assets33,646 24,539 
Inventories94,067 81,291 
Income tax receivable14,537 12,729 
Other current assets47,182 30,876 
Total current assets1,369,951 1,356,090 
Property and equipment, net299,005 294,798 
Operating lease right-of-use assets62,127 61,101 
Goodwill272,485 272,485 
Intangible assets, net97,902 101,832 
Other assets30,642 31,918 
Total assets$2,132,112 $2,118,224 
LIABILITIES AND STOCKHOLDERS’ EQUITY  
Current liabilities:  
Accounts payable$176,447 $155,896 
Current portion of debt17,500 17,500 
Contract liabilities16,024 18,512 
Accrued insurance claims38,967 36,805 
Operating lease liabilities24,536 24,641 
Income taxes payable 233 
Other accrued liabilities122,207 128,209 
Total current liabilities395,681 381,796 
Long-term debt819,311 823,251 
Accrued insurance claims - non-current48,559 48,238 
Operating lease liabilities - non-current 37,486 36,519 
Deferred tax liabilities, net - non-current57,794 55,674 
Other liabilities14,943 14,202 
Total liabilities1,373,774 1,359,680 
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: 29,543,766 and 29,612,867 issued and outstanding, respectively
9,848 9,871 
Additional paid-in capital3,128 2,028 
Accumulated other comprehensive loss(1,769)(1,769)
Retained earnings747,131 748,414 
Total stockholders’ equity758,338 758,544 
Total liabilities and stockholders’ equity$2,132,112 $2,118,224 
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
 April 30, 2022May 1, 2021
Contract revenues$876,300 $727,497 
Costs of earned revenues, excluding depreciation and amortization745,730 620,011 
General and administrative69,380 67,011 
Depreciation and amortization36,637 39,079 
Total851,747 726,101 
Interest expense, net(9,118)(5,877)
Loss on debt extinguishment (62)
Other income, net4,795 2,717 
Income (loss) before income taxes20,230 (1,826)
 Provision for income taxes:
Provision (benefit) for income taxes694 (2,724)
Net income$19,536 $898 
Earnings per common share:
Basic earnings per common share$0.66 $0.03 
Diluted earnings per common share$0.65 $0.03 
Shares used in computing earnings per common share:
 Basic29,638,833 30,675,625 
 Diluted30,119,561 31,299,469 
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
April 30, 2022May 1, 2021
Net income$19,536 $898 
Foreign currency translation gains, net of tax 2 
Comprehensive income$19,536 $900 
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
April 30, 2022
Common StockAdditional
Paid-in Capital
Accumulated Other
Comprehensive
Loss
Retained
Earnings
Total
Equity
 SharesAmount
Balances as of January 29, 202229,612,867 $9,871 $2,028 $(1,769)$748,414 $758,544 
Stock options exercised15,363 5 1,197 — — 1,202 
Stock-based compensation573 — 3,128 — — 3,128 
Issuance of restricted stock, net of tax withholdings114,963 38 (3,224)— (2,346)(5,532)
Repurchase of common stock(200,000)(66) — (18,473)(18,539)
Net income— — —  19,536 19,536 
Balances as of April 30, 202229,543,766 $9,848 $3,128 $(1,769)$747,131 $758,338 
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 
See notes to the condensed consolidated financial statements.

7


DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
For the Three Months Ended
April 30, 2022May 1, 2021
Cash flows from operating activities:
Net income $19,536 $898 
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization36,637 39,079 
Non-cash lease expense7,878 7,866 
Deferred income tax provision2,119 3,799 
Stock-based compensation3,128 3,740 
Amortization of debt discount 663 
Provision for bad debt, net32 2,823 
Gain on sale of fixed assets(5,389)(2,852)
Loss on debt extinguishment 62 
Amortization of debt issuance costs and other745 636 
Change in operating assets and liabilities:
Accounts receivable, net(99,085)(12,246)
Contract assets, net(11,595)24,629 
Other current assets and inventories(28,901)(19,067)
Other assets818 2,222 
Income taxes receivable/payable(2,041)(7,306)
Accounts payable21,612 7,699 
Accrued liabilities, insurance claims, operating lease liabilities, and other liabilities(10,409)(11,134)
Net cash (used in) provided by operating activities(64,915)41,511 
Cash flows from investing activities:
Capital expenditures(38,405)(31,629)
Proceeds from sale of assets5,375 3,044 
Net cash used in investing activities(33,030)(28,585)
Cash flows from financing activities:
Proceeds from 2029 Notes 500,000 
Proceeds from borrowings on senior credit agreement, including term loan 95,000 
Principal payments on senior credit agreement, including term loan(4,375)(271,875)
Debt issuance costs (11,211)
Repurchase of common stock(18,539) 
Exercise of stock options1,202 366 
Restricted stock tax withholdings(5,532)(6,361)
Net cash (used in) provided by financing activities(27,244)305,919 
Net (decrease) increase in cash, cash equivalents and restricted cash(125,189)318,845 
Cash, cash equivalents and restricted cash at beginning of period (Note 7)312,561 13,574 
Cash, cash equivalents and restricted cash at end of period (Note 7)$187,372 $332,419 
8


Supplemental disclosure of other cash flow activities and non-cash investing and financing activities:
Cash paid for interest$13,640 $2,592 
Cash (refunded) paid for taxes, net$(26)$430 
Purchases of capital assets included in accounts payable or other accrued liabilities at period end$5,341 $9,149 
Debt financing costs included in other accrued liabilities at period end$ $427 
See notes to the condensed consolidated financial statements.

9


NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

Dycom Industries, Inc. (“Dycom”, the “Company”, “we”, “our”, or “us”) 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 2022 and fiscal 2023 each consist of 52 weeks of operations. The next 53 week fiscal period will occur in the fiscal year ending January 31, 2026.

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 2022, filed with the SEC on March 4, 2022. 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 continues to be severely impacted by a pandemic caused by a novel strain of coronavirus, including variants of the coronavirus, such as the Delta and Omicron variants (“COVID-19”) and the response to it. Measures mandated by governmental agencies have included vaccination and masking requirements, travel and large gathering restrictions, social distancing requirements, quarantines, and shelter in place orders. Even as efforts to contain the pandemic have made progress and some restrictions have been relaxed, new variants of COVID-19 have resulted in, and may continue to result in, additional outbreaks. As a result, certain business-related activities have been curtailed or modified. During the COVID-19 pandemic, our services have generally been considered essential in nature and have not been materially interrupted by governmental mandates. 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. We believe the full extent of the impact of the COVID-19 pandemic on the Company's operating results, cash flow and financial condition will be determined by factors which are uncertain, unpredictable and outside of our control, including the duration and severity of the pandemic, including any new variants, any worsening of the pandemic, the vaccination rates in the areas we operate and among our employees and subcontractors, the nature and duration of the containment and mitigation actions taken by federal, state and local governments and protocols and contractual requirements implemented by our customers, 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 2022.

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
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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.

3. Accounting Standards

Recently issued accounting pronouncements are disclosed in the Company’s Annual Report on Form 10-K for fiscal 2022. 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 2022. 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 condensed consolidated financial statements of the Company.

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 operations.


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
 April 30, 2022May 1, 2021
Net income available to common stockholders (numerator)$19,536 $898 
Weighted-average number of common shares (denominator)29,638,833 30,675,625 
Basic earnings per common share$0.66 $0.03 
Weighted-average number of common shares29,638,833 30,675,625 
Potential shares of common stock arising from stock options, and unvested restricted share units480,728 623,844 
Total shares-diluted (denominator)30,119,561 31,299,469 
Diluted earnings per common share$0.65 $0.03 
Anti-dilutive weighted shares excluded from the calculation of earnings per common share:
Stock-based awards115,823 66,264 
0.75% convertible senior notes due 2021(1) (2)
 601,349 
Warrants(1) (2)
 601,349 
Total 115,823 1,268,962 

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(1) The Company used the treasury stock method for calculating any potential dilutive impact on earnings per common share if our average stock price for the period exceeded the $96.89 per share conversion price. There was no dilutive impact on earnings per common share during any of the periods presented as our average stock price did not exceed the per share conversion price and the 2021 Convertible Notes (as defined in Note 13) matured on September 15, 2021. The warrants associated with our 2021 Convertible Notes would have had a dilutive impact on earnings per common share if our average stock price for the period had exceeded the $130.43 per share warrant strike price. As our average stock price did not exceed the strike price for the warrants for any periods presented, the underlying common shares were anti-dilutive as reflected in the table above. The warrants were scheduled to expire on a series of dates concluding on May 9, 2022. During the fourth quarter of fiscal 2022, we purchased the remaining warrants for $0.7 million and there are no additional warrants outstanding.

(2) 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 was not included for purposes of the calculation of earnings per common share as its effect would be anti-dilutive. Upon any conversion, the convertible note hedge was expected to offset the dilutive effect of the 2021 Convertible Notes when the average stock price for the period was above $96.89 per share. The 2021 Convertible Notes matured on September 15, 2021. The convertible note hedge transactions expired on September 13, 2021. See Note 13, Debt, for additional information related to our 2021 Convertible Notes, warrant transactions, and hedge transactions.




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):
April 30, 2022January 29, 2022
Trade accounts receivable$366,587 $330,811 
Unbilled accounts receivable607,960 545,493 
Retainage21,165 20,318 
Total995,712 896,622 
Less: allowance for doubtful accounts(761)(724)
Accounts receivable, net$994,951 $895,898 
 
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
April 30, 2022May 1, 2021
Allowance for doubtful accounts at beginning of period$724 $1,676 
Provision for bad debt32 2,823 
Amounts recovered (charged) against the allowance5 (262)
Allowance for doubtful accounts at end of period$761 $4,237 

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Contract Assets and Contract Liabilities

Net contract assets consisted of the following (dollars in thousands):
April 30, 2022January 29, 2022
Contract assets$33,646 $24,539 
Contract liabilities 16,024 18,512 
Contract assets, net$17,622 $6,027 

During the three months ended April 30, 2022, we performed services and recognized $7.7 million of contract revenues related to contract liabilities that existed at January 29, 2022. See Note 6, Other Current Assets and Other Assets, for information on our long-term contract assets.

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 April 30, 2022 or January 29, 2022 were as follows (dollars in millions):

April 30, 2022January 29, 2022
Amount% of TotalAmount% of Total
Lumen Technologies$193.0 19.1%$166.0 18.4%
Verizon Communications Inc.$148.2 14.7%$144.3 16.0%
AT&T Inc.$140.0 13.8%$106.0 11.7%
Comcast Corporation$125.7 12.4%$113.5 12.6%


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 April 30, 2022 or January 29, 2022.

6. Other Current Assets and Other Assets
 
Other current assets consisted of the following (dollars in thousands):
April 30, 2022January 29, 2022
Prepaid expenses$30,252 $14,640 
Deposits and other current assets15,352 14,083 
Insurance recoveries/receivables for accrued insurance claims 756 
Restricted cash1,372 1,372 
Receivables on equipment sales206 25 
Other current assets$47,182 $30,876 

Other assets consisted of the following (dollars in thousands):
April 30, 2022January 29, 2022
Long-term contract assets$12,524 $14,056 
Deferred financing costs4,524 4,834 
Restricted cash432 432 
Insurance recoveries/receivables for accrued insurance claims3,541 3,687 
Other non-current deposits and assets9,621 8,909 
Other assets$30,642 $31,918 

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.

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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):
April 30, 2022January 29, 2022
Cash and cash equivalents$185,568 $310,757 
Restricted cash included in:
Other current assets1,372 1,372 
Other assets (long-term)432 432 
Cash, cash equivalents and restricted cash$187,372 $312,561 

8. Property and Equipment
 
Property and equipment consisted of the following (dollars in thousands):

Estimated Useful Lives (Years)April 30, 2022January 29, 2022
Land$4,127 $4,127 
Buildings
10-35
10,695 10,649 
Leasehold improvements
1-10
17,906 17,706 
Vehicles
1-5
726,433 714,515 
Computer hardware and software
1-7
157,714 153,072 
Office furniture and equipment
1-10
12,758 12,939 
Equipment and machinery
1-10
332,964 329,145 
Total1,262,597 1,242,153 
Less: accumulated depreciation(963,592)(947,355)
Property and equipment, net$299,005 $294,798 

Depreciation expense was $32.7 million and $34.4 million for the three months ended April 30, 2022 and May 1, 2021, respectively.

9. Goodwill and Intangible Assets

Goodwill

There was no change in the carrying amount of goodwill during the three months ended April 30, 2022. The goodwill balance consisted of the following (dollars in thousands):
April 30, 2022January 29, 2022
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
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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.

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 2022 period assessment, the Company determined that the fair values of each of the reporting units and the indefinite-lived intangible asset were in excess of their carrying values and no impairment had occurred. As of April 30, 2022, 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):
April 30, 2022January 29, 2022
Weighted Average Remaining Useful Lives (Years)Gross Carrying AmountAccumulated AmortizationIntangible Assets, NetGross Carrying AmountAccumulated AmortizationIntangible Assets, Net
Customer relationships8.2$312,017 $219,697 $92,320 $312,017 $215,806 $96,211 
Trade names, finite8.39,250 8,368 882 9,250 8,329 921 
Trade name, indefinite4,700  4,700 4,700  4,700 
$325,967 $228,065 $97,902 $325,967 $224,135 $101,832 

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 $3.9 million and $4.7 million for the three months ended April 30, 2022 and May 1, 2021, respectively.

As of April 30, 2022, 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 2022, 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 for fiscal 2022, we retained the risk of loss up to $1.0 million on a per-occurrence basis for the first $5.0 million of insurance coverage. 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. In addition, we retained $10.0 million risk of loss on a per occurrence basis for losses above $30.0 million.

For fiscal 2023, with regard to workers’ compensation losses, our retention of risk remains the same as fiscal 2022. With regard to automobile liability and general liability losses our retention of risk remains the same as fiscal 2022, with the exception that we retained an additional $5.0 million risk of loss on a per occurrence basis for losses above $10.0 million, if any.

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We are party to a stop-loss agreement for losses under our employee group health plan. For the calendar year 2022, we retain the risk of loss on an annual basis, up to the first $600,000 of claims per participant.

Amounts for total accrued insurance claims and insurance recoveries/receivables are as follows (dollars in thousands):

April 30, 2022January 29, 2022
Accrued insurance claims - current$38,967 $36,805 
Accrued insurance claims - non-current48,559 48,238 
Accrued insurance claims$87,526 $85,043 
Insurance recoveries/receivables:
Current (included in Other current assets)$ $756 
Non-current (included in Other assets)3,541 3,687 
Insurance recoveries/receivables$3,541 $4,443 

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 April 30, 2022, total insurance recoveries/receivables decreased approximately $0.9 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 April 30, 2022 and May 1, 2021 (dollars in thousands):
For the Three Months Ended
April 30, 2022May 1, 2021
Lease cost under long-term operating leases$8,466 $8,630 
Lease cost under short-term operating leases6,255 5,191 
Variable lease cost under short-term and long-term operating leases(1)
1,021 1,245 
Total lease cost$15,742 $15,066 

(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 $62.0 million as of April 30, 2022 and $61.2 million as of January 29, 2022. Supplemental balance sheet information related to these liabilities is as follows:

April 30, 2022January 29, 2022
Weighted average remaining lease term3.1 years3.1 years
Weighted average discount rate3.6 %3.8 %
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Supplemental cash flow information related to our long-term operating lease liabilities as of April 30, 2022 and May 1, 2021 is as follows (dollars in thousands):
For the Three Months Ended
April 30, 2022May 1, 2021
Cash paid for amounts included in the measurement of lease liabilities $9,489 $10,650 
Operating lease right-of-use assets obtained in exchange for operating lease liabilities $8,901 $11,710 

As of April 30, 2022, 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 2023$20,757 
202420,864 
202513,354 
20266,642 
20273,427 
Thereafter1,632 
Total lease payments66,676 
Less: imputed interest(4,654)
Total$62,022 

As of April 30, 2022, the Company had additional operating leases with total leases costs of $1.0 million, which will commence during the second quarter of fiscal 2023.

12. Other Accrued Liabilities
 
Other accrued liabilities consisted of the following (dollars in thousands):
April 30, 2022January 29, 2022
Accrued payroll and related taxes$52,256 $47,303 
Accrued employee benefit and incentive plan costs13,535 26,942 
Accrued construction costs36,631 28,254 
Other current liabilities19,785 25,710 
Other accrued liabilities$122,207 $128,209 

13. Debt
 
Our outstanding indebtedness consisted of the following (dollars in thousands):
April 30, 2022January 29, 2022
Credit agreement - Revolving facility (matures April 2026)$ $ 
Credit agreement - Term loan facility, net (matures April 2026)343,233 347,438 
4.50% senior notes, net (mature April 2029)
493,578 493,313 
836,811 840,751 
Less: current portion(17,500)(17,500)
Long-term debt$819,311 $823,251 

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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”) to among other things, decrease the maximum revolver commitment to $650.0 million from $750.0 million and decrease the term loan facility 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. As part of the amendment, the maturity of the Credit Agreement was extended to April 1, 2026.

The following table summarizes the net carrying value of the term loan as of April 30, 2022 and January 29, 2022 (dollars in thousands):
April 30, 2022January 29, 2022
Principal amount of term loan$345,625 $350,000 
Less: Debt issuance costs(2,392)(2,562)
Net carrying amount of term loan$343,233 $347,438 

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% of 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, 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 $47.5 million and $46.3 million, issued as part of our insurance program, were outstanding under the Credit Agreement as of April 30, 2022 and January 29, 2022, respectively.

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The weighted average interest rates and fees for balances under our Credit Agreement as of April 30, 2022 and January 29, 2022 were as follows:
Weighted Average Rate End of Period
April 30, 2022January 29, 2022
Borrowings - Term loan facility2.30%1.86%
Borrowings - Revolving facility(1)
%%
Standby Letters of Credit1.75%1.63%
Unused Revolver Commitment0.35%0.30%

(1) There were no outstanding borrowings under our revolving facility as of April 30, 2022 and January 29, 2022.

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 April 30, 2022 and January 29, 2022, we were in compliance with the financial covenants of our Credit Agreement and had borrowing availability under the revolving facility of $284.3 million and $326.3 million, respectively, as determined by the most restrictive covenant. For calculation purposes, applicable cash on hand is netted against the funded debt amount as permitted in the Credit Agreement.

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 our Subsidiaries’ capital stock or make other payments restricted by the indenture, (iii) enter into agreements that place limitations on distributions made from certain of our 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 our Subsidiaries’ 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 April 30, 2022 and January 29, 2022 (dollars in thousands):
April 30, 2022January 29, 2022
Principal amount of 2029 Notes $500,000 $500,000 
Less: Debt issuance costs(6,422)(6,687)
Net carrying amount of 2029 Notes$493,578 $493,313 

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 $91.25 and $97.50 as of April 30, 2022 and January 29, 2022, respectively (dollars in thousands):

April 30, 2022January 29, 2022
Fair value of principal amount of 2029 Notes$456,250 $487,500 
Less: Debt issuance costs(6,422)(6,687)
Fair value of 2029 Notes$449,828 $480,813 

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0.75% Convertible Senior Notes Due 2021

On September 15, 2015, we issued 0.75% convertible senior notes 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, were unsecured obligations and did 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 bore interest at a rate of 0.75% per year, payable in cash semiannually in March and September, and matured on September 15, 2021. On the maturity date the outstanding balance of $58.3 million under the 2021 Convertible Notes was repaid in full and no 2021 Convertible Notes were converted prior to maturity.

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. We also entered into separately negotiated warrant transactions with the same counterparties whereby we sold warrants to purchase shares of our common stock at a price of $130.43 per share. The convertible note hedge transactions expired in September 2021. In addition, we unwound the remaining warrants during the fourth quarter of fiscal 2022 and, as a result, there are no additional warrants outstanding. For further information, see Note 13 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for fiscal 2022.



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 3.4% and 149.1% for the three months ended April 30, 2022 and May 1, 2021, respectively. The effective tax rate differs from the statutory rate primarily due to tax credits recognized, the impact of the vesting and exercise of share-based awards, and the difference in income tax rates from state to state where work was performed. During the three months ended April 30, 2022 and May 1, 2021, the Company realized approximately $2.5 million and $2.6 million of net excess tax benefits, respectively, related to the vesting and exercise of share-based awards. Additionally, the three months ended April 30, 2022 includes approximately $1.7 million of incremental tax benefit for tax credits related to a tax filing for a prior year. Other fluctuations in our effective income tax rate from the statutory rate each period are mainly attributable to changes in unrecognized tax benefits, tax law changes, and variances in non-deductible and non-taxable items.
During the first quarter of fiscal 2023, we were notified by the Internal Revenue Service that our federal income tax return for fiscal 2016 was selected for examination due to the net operating loss carryback claim filed in fiscal 2021. In addition, fiscal year 2020 was selected for examination in the second quarter of fiscal 2022. We believe our provision for income taxes is adequate; however, any assessment may affect our results of operations and cash flows.

15. Other Income, Net

The components of other income, net, were as follows (dollars in thousands):
For the Three Months Ended
April 30, 2022May 1, 2021
Gain on sale of fixed assets$5,389 $2,852 
Discount fee expense(1,101)(489)
Miscellaneous income, net507 354 
Other income, net$4,795 $2,717 

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
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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 2, 2022 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 2023 in open market or private transactions. The new authorization replaces the remaining $43.9 million that was available under the prior authorization. During the first quarter of fiscal 2023, we repurchased 200,000 shares of common stock, at an average price of $92.70, for $18.5 million. As of April 30, 2022, $131.5 million of the authorization was available for repurchases.

Restricted Stock Tax Withholdings. During the three months ended April 30, 2022 and May 1, 2021 the Company withheld 56,839 shares and 74,835 shares, respectively, totaling $5.5 million and $6.4 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 repurchased or 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 April 30, 2022, $20.8 million was charged to retained earnings related to shares canceled during the period.

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 April 30, 2022 and May 1, 2021 were as follows (dollars in thousands):
For the Three Months Ended
April 30, 2022May 1, 2021
Stock-based compensation$3,128 $3,740 
Income tax effect of stock-based compensation$775 $919 

During the three months ended April 30, 2022 and May 1, 2021 the Company realized approximately $2.5 million and $2.6 million of net excess tax benefits, respectively, related to the vesting and exercise of share-based awards.

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As of April 30, 2022, 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 $3.7 million, $21.5 million, and $9.2 million, respectively. This expense will be recognized over a weighted-average number of years of 3.2, 3.0, and 2.1, respectively, based on the average remaining service periods for the awards. We may recognize an additional $24.3 million in compensation expense in future periods after April 30, 2022 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 April 30, 2022:
Stock Options
SharesWeighted Average Exercise Price
Outstanding as of January 29, 2022332,121 $52.39 
Granted33,015 $97.49 
Options exercised(15,363)$78.22 
Outstanding as of April 30, 2022349,773 $55.51 
Exercisable options as of April 30, 2022252,983 $51.60 

RSUs and Performance RSUs

The following table summarizes RSU and Performance RSU award activity during the three months ended April 30, 2022:
Restricted Stock
RSUsPerformance RSUs
Share UnitsWeighted Average Grant Date Fair ValueShare UnitsWeighted Average Grant Date Fair Value
Outstanding as of January 29, 2022524,255 $38.49 455,800 $68.88 
Granted105,756 $97.42 202,212 $97.49 
Share units vested(165,892)$37.42 (6,483)$25.15 
Forfeited or canceled(11,220)$46.34 (260,501)$59.99 
Outstanding as of April 30, 2022452,899 $52.45 391,028 $90.32 

The total number of granted Performance RSUs presented above consists of 137,605 target shares and 64,607 supplemental shares. The total number of Performance RSUs outstanding as of April 30, 2022 consists of 264,674 target shares and 126,354 supplemental shares. With respect to the Company’s Performance Year ended January 29, 2022, the Company canceled 164,066 target shares and 85,576 supplemental shares during the three months ended April 30, 2022, as a result of the performance period criteria not being met.
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18. Customer Concentration and Revenue Information

Geographic Location

We provide services throughout the United States.

Significant Customers

Our customer base is highly concentrated, with our top five customers accounting for approximately 67.3% and 68.2% of total contract revenues during the three months ended April 30, 2022 and May 1, 2021, respectively. Customers whose contract revenues exceeded 10% of total contract revenues during the three months ended April 30, 2022 or May 1, 2021, as well as total contract revenues from all other customers combined, were as follows (dollars in millions):
For the Three Months Ended
April 30, 2022May 1, 2021
Amount% of TotalAmount% of Total
AT&T Inc.$237.4 27.1%$155.6 21.4%
Comcast Corporation111.3 12.7131.1 18.0
Lumen Technologies102.8