UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 25, 2009

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

DYCOM INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

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

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

Registrant’s telephone number, including area code (561) 627-7171
Securities registered pursuant to Section 12(b) of the Act:

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 þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o No o

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

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common stock		Outstanding shares May 20, 2009
Common stock, par value of $0.33 1/3		38,998,348

 

 

Dycom Industries, Inc.

Table of Contents

PART I – FINANCIAL INFORMATION
Item 1. Financial Statements			3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			36
Item 3. Quantitative and Qualitative Disclosures About Market Risk			56
Item 4. Controls and Procedures			57
PART II – OTHER INFORMATION
Item 1. Legal Proceedings			57
Item 1A. Risk Factors			58
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			60
Item 6. Exhibits			61
Signatures			62
EX-31.1
EX-31.2
EX-32.1
EX-32.2

Part 1 — FINANCIAL INFORMATION

Item 1. Financial Statements

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

		April 25,				July 26,
		2009				2008
		(Dollars in thousands)
ASSETS
CURRENT ASSETS:
Cash and equivalents		$	78,762			$	22,068
Accounts receivable, net			108,239				146,420
Costs and estimated earnings in excess of billings			63,853				94,270
Deferred tax assets, net			15,695				19,347
Income taxes receivable			11,557				6,014
Inventories			9,153				8,994
Other current assets			10,018				7,301
Current assets of discontinued operations			164				667
Total current assets			297,441				305,081
Property and equipment, net			148,186				170,479
Goodwill			157,851				252,374
Intangible assets, net			57,695				62,860
Other			10,711				10,478
Total non-current assets			374,443				496,191
TOTAL		$	671,884			$	801,272
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable		$	24,542			$	29,835
Current portion of debt			1,394				2,306
Billings in excess of costs and estimated earnings			512				483
Accrued insurance claims			28,743				29,834
Other accrued liabilities			41,360				66,275
Current liabilities of discontinued operations			537				2,731
Total current liabilities			97,088				131,464
LONG-TERM DEBT			135,487				151,049
ACCRUED INSURANCE CLAIMS			30,463				37,175
DEFERRED TAX LIABILITIES, net non-current			21,595				31,750
OTHER LIABILITIES			4,106				5,314
NON-CURRENT LIABILITIES OF DISCONTINUED OPERATIONS			388				427
Total liabilities			289,127				357,179
COMMITMENTS AND CONTINGENCIES, Notes 10, 11, and 16
STOCKHOLDERS’ EQUITY:
Preferred stock, par value $1.00 per share:
1,000,000 shares authorized: no shares issued and outstanding			—				—
Common stock, par value $0.33 1/3 per share:
150,000,000 shares authorized: 38,995,854 and 39,352,020 issued and outstanding, respectively			12,998				13,117
Additional paid-in capital			170,991				172,167
Accumulated other comprehensive (loss) income			(48	)			186
Retained earnings			198,816				258,623
Total stockholders’ equity			382,757				444,093
TOTAL		$	671,884			$	801,272

See notes to the condensed consolidated financial statements.

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

		For the Three Months Ended
		April 25, 2009				April 26, 2008
		(Dollars in thousands, except per share amounts)
REVENUES:
Contract revenues		$	257,719			$	293,440
EXPENSES:
Costs of earned revenues, excluding depreciation and amortization			206,733				239,598
General and administrative (including stock-based compensation expense of $0.9 million and $1.4 million, respectively)			24,276				24,969
Depreciation and amortization			16,163				17,301
Total			247,172				281,868
Interest income			60				238
Interest expense			(3,162	)			(3,110	)
Other income, net			3,566				2,670
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES			11,011				11,370
PROVISION (BENEFIT) FOR INCOME TAXES:
Current			(2,132	)			(442	)
Deferred			5,574				4,119
Total			3,442				3,677
INCOME FROM CONTINUING OPERATIONS			7,569				7,693
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAX			28				(807	)
NET INCOME		$	7,597			$	6,886
EARNINGS PER COMMON SHARE — BASIC:
Income from continuing operations		$	0.19			$	0.19
Income (loss) from discontinued operations			—				(0.02	)
Net income		$	0.19			$	0.17
EARNINGS PER COMMON SHARE — DILUTED:
Income from continuing operations		$	0.19			$	0.19
Income (loss) from discontinued operations			—				(0.02	)
Net income		$	0.19			$	0.17
SHARES USED IN COMPUTING EARNINGS (LOSS) PER COMMON SHARE:
Basic			39,330,308				40,436,212
Diluted			39,346,102				40,486,765

See notes to the condensed consolidated financial statements.

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

		For the Nine Months Ended
		April 25, 2009				April 26, 2008
		(Dollars in thousands, except per share amounts)
REVENUES:
Contract revenues		$	837,209			$	907,869
EXPENSES:
Costs of earned revenues, excluding depreciation and amortization			681,239				748,816
General and administrative (including stock-based compensation expense of $2.8 million and $4.6 million, respectively)			73,350				72,892
Depreciation and amortization			49,592				50,258
Goodwill impairment charge			94,429				—
Total			898,610				871,966
Interest income			234				619
Interest expense			(11,313	)			(10,231	)
Other income, net			5,799				5,040
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES			(66,681	)			31,331
PROVISION (BENEFIT) FOR INCOME TAXES:
Current			(379	)			12,370
Deferred			(6,503	)			(855	)
Total			(6,882	)			11,515
INCOME (LOSS) FROM CONTINUING OPERATIONS			(59,799	)			19,816
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX			(9	)			(1,228	)
NET INCOME (LOSS)		$	(59,808	)		$	18,588
EARNINGS (LOSS) PER COMMON SHARE — BASIC:
Income (loss) from continuing operations		$	(1.52	)		$	0.49
Loss from discontinued operations			—				(0.03	)
Net income (loss)		$	(1.52	)		$	0.46
EARNINGS (LOSS) PER COMMON SHARE — DILUTED:
Income (loss) from continuing operations		$	(1.52	)		$	0.48
Loss from discontinued operations			—				(0.03	)
Net income (loss)		$	(1.52	)		$	0.45
SHARES USED IN COMPUTING EARNINGS (LOSS) PER COMMON SHARE:
Basic			39,343,834				40,651,236
Diluted			39,343,834				40,865,349

See notes to the condensed consolidated financial statements.

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

		For the Nine Months Ended
		April 25, 2009				April 26, 2008
		(Dollars in thousands)
OPERATING ACTIVITIES:
Net income (loss)		$	(59,808	)		$	18,588
Adjustments to reconcile net cash inflow from operating activities:
Depreciation and amortization			49,592				50,258
Bad debts expense (recovery), net			200				(412	)
Gain on sale of fixed assets			(3,306	)			(4,786	)
Gain on extinguishment of debt, net			(3,027	)			—
Write-off of deferred financing costs			551				—
Deferred income tax benefit			(5,972	)			(844	)
Stock-based compensation expense			2,775				4,584
Amortization of debt issuance costs			727				608
Goodwill impairment charge			94,429				—
Excess tax benefit from share-based awards			—				(479	)
Change in operating assets and liabilities:
(Increase) decrease in operating assets:
Accounts receivable, net			37,978				19,514
Costs and estimated earnings in excess of billings, net			30,445				10,529
Other current assets and inventory			(3,049	)			(2,941	)
Other assets			826				973
Income taxes receivable			(6,468	)			—
Increase (decrease) in operating liabilities:
Accounts payable			(5,465	)			(533	)
Accrued insurance claims and other liabilities			(34,300	)			(2,037	)
Income taxes payable			—				(6,184	)
Net cash provided by operating activities			96,128				86,838
INVESTING ACTIVITIES:
Changes in restricted cash			(61	)			(299	)
Capital expenditures			(25,625	)			(59,992	)
Proceeds from sale of assets			4,349				6,296
Proceeds from acquisition indemnification claims			—				522
Net cash used in investing activities			(21,337	)			(53,473	)
FINANCING ACTIVITIES:
Proceeds from long-term debt			30,000				15,000
Principal payments on long-term debt			(31,824	)			(27,762	)
Purchase of senior subordinated notes			(11,292	)			—
Debt issuance costs			(1,837	)			—
Repurchases of common stock			(2,915	)			(14,073	)
Excess tax benefit from share-based awards			—				479
Restricted stock tax withholdings			(246	)			(2,145	)
Exercise of stock options and other			17				1,314
Net cash used in financing activities			(18,097	)			(27,187	)
Net increase in cash and equivalents			56,694				6,178
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD			22,068				18,862
CASH AND EQUIVALENTS AT END OF PERIOD		$	78,762			$	25,040
SUPPLEMENTAL DISCLOSURE OF OTHER CASH FLOW ACTIVITIES AND NON-CASH INVESTING AND FINANCING ACTIVITIES:
Cash paid during the period for:
Interest		$	14,021			$	12,515
Income taxes		$	6,885			$	18,346
Purchases of capital assets included in accounts payable or other accrued liabilities at period end		$	272			$	3,953

See notes to the condensed consolidated financial statements.

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. These services are provided throughout the United States and include engineering, construction, maintenance and installation services to telecommunications providers, underground facility locating services to various utilities including telecommunications providers, and other construction and maintenance services to electric utilities and others. Additionally, Dycom provides services on a limited basis in Canada.

     The condensed consolidated financial statements include the results of Dycom and its subsidiaries, all of which are wholly-owned. All intercompany accounts and transactions have been eliminated. The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The condensed consolidated financial statements do not include all of the financial information and footnotes required by GAAP for complete financial statements. The condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring accruals which are, in the opinion of management, necessary for a fair presentation of such statements. The results of operations for the three and nine months ended April 25, 2009 are not necessarily indicative of the results that may be expected for the entire year. For a fuller understanding of the Company and its financial statements, the Company recommends reading these condensed consolidated financial statements in conjunction with the Company’s audited financial statements for the year ended July 26, 2008 included in the Company’s 2008 Annual Report on Form 10-K, filed with the SEC on September 4, 2008.

     The Company has determined that goodwill and non-current deferred tax liabilities, net from certain prior acquisitions were understated by $12.2 million on the July 26, 2008 consolidated balance sheet. These amounts have been corrected on the July 26, 2008 consolidated balance sheet and in the related footnote disclosures. The Company has determined the impact of the above was immaterial to its consolidated balance sheet for all prior periods effected. The correction had no effect on the Company’s net income or cash flows included within previously issued financial statements. The Company’s fiscal 2009 Form 10-K will be adjusted to reflect the corrected goodwill and non-current deferred tax liabilities, net balances as of July 26, 2008.

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

     Restricted Cash — As of April 25, 2009 and July 26, 2008, the Company had approximately $4.9 million and $4.8 million, respectively, in restricted cash which is held as collateral in support of the Company’s insurance obligations. Restricted cash is

included in other current assets and other assets in the condensed consolidated balance sheets and changes in restricted cash are reported in cash flows used in investing activities in the condensed consolidated statements of cash flows.

     Goodwill and Intangible Assets — The Company accounts for goodwill in accordance with Statements of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”). The Company’s reporting units and related indefinite-lived intangible assets are tested annually during the fourth fiscal quarter of each year in accordance with SFAS No. 142 in order to determine whether their carrying value exceeds their fair value. Should this be the case, the value of a reporting unit’s goodwill or indefinite-lived intangible assets may be impaired and written down. Goodwill and indefinite-lived intangible assets are also tested for impairment on an interim basis if an event occurs or circumstances change between annual tests that would more likely than not reduce their fair value below carrying value. If the Company determines the fair value of goodwill or other indefinite-lived intangible assets is less than their carrying value, an impairment loss is recognized in an amount equal to the difference. Impairment losses, if any, are reflected in operating income or loss in the condensed consolidated statements of operations.

     In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS No. 144”), the Company reviews finite-lived intangible assets for impairment whenever an event occurs or circumstances change which indicates that the carrying amount of such assets may not be fully recoverable. Recoverability is determined based on an estimate of undiscounted future cash flows resulting from the use of an asset and its eventual disposition. An impairment loss is measured by comparing the fair value of the asset to its carrying value. If the Company determines the fair value of an asset is less than the carrying value, an impairment loss is incurred in an amount equal to the difference. Impairment losses, if any, are reflected in operating income or loss in the condensed consolidated statements of operations.

     The Company uses judgment in assessing if goodwill and intangible assets are impaired. Estimates of fair value are based on the Company’s projection of revenues, operating costs, and cash flows considering historical and anticipated future results, general economic and market conditions, as well as the impact of planned business or operational strategies. To measure fair value, the Company employs a combination of present value techniques which reflect market factors. Changes in the Company’s judgments and projections could result in significantly different estimates of fair value resulting in additional impairments of goodwill and other intangible assets. See Note 7 for further discussion regarding the Company’s goodwill and intangible assets.

     Income Taxes.— The Company accounts for income taxes under the asset and liability method. This approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. See Note 11 for further discussion regarding the Company’s income taxes.

     Comprehensive Income (Loss) — During the three and nine months ended April 25, 2009 and April 26, 2008, the Company did not have any material changes in its equity resulting from non-owner sources. Accordingly, comprehensive income (loss) approximated the net income (loss) amounts presented for the respective periods in the accompanying condensed consolidated statements of operations.

     Multiemployer Defined Benefit Pension Plan — A wholly-owned subsidiary of the Company participates in a multiemployer defined benefit pension plan that covers certain of its employees. This subsidiary makes periodic contributions to the plan to meet its

benefit obligations. During the three months ended April 25, 2009 and April 26, 2008, this subsidiary contributed approximately $1.2 million and $1.1 million to the plan, respectively. During the nine months ended April 25, 2009 and April 26, 2008, this subsidiary contributed approximately $4.2 million and $2.9 million to the plan, respectively.

     Recently Issued Accounting Standards — The Company adopted SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”) on July 27, 2008, the first day of fiscal 2009. SFAS No. 157 defines fair value, establishes a measurement framework and expands disclosure requirements. It does not require any new fair value measurements. SFAS No. 157 applies to existing accounting pronouncements that require or permit fair value measurement as the relevant measurement attribute. The adoption of SFAS No. 157 for financial assets and liabilities did not have an impact on the Company’s condensed consolidated financial statements. The effective date of the provisions of SFAS No. 157 for non-financial assets and liabilities, except for items recognized at fair value on a recurring basis, was deferred by FASB Staff Position FAS 157-2, “Effective Date of FASB Statement No. 157” and is effective for the Company beginning fiscal 2010. The Company is currently evaluating the impact of SFAS No. 157 for non-financial assets and liabilities measured at fair value on a nonrecurring basis.

     The Company also adopted SFAS No. 159 “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS No. 159”), on July 27, 2008, the first day of fiscal 2009. SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value. As of April 25, 2009, the Company has not elected to apply fair value measurements for any of its financial instruments or other assets and liabilities.

     In June 2008, the FASB issued FASB Staff Position No. EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” (“EITF 03-6-1”). EITF 03-6-1 addresses whether unvested share-based payment awards with rights to receive dividends or dividend equivalents should be considered as participating securities for the purposes of applying the two-class method of calculating earnings per share (“EPS”) under SFAS No. 128, “Earnings per Share.” The FASB staff concluded that unvested share-based payment awards that contain rights to receive non-forfeitable dividends or dividend equivalents are participating securities, and thus, should be included in the two-class method of computing EPS. EITF 03-6-1 is effective for the Company beginning in fiscal 2010 and also requires that all prior-period EPS data presented be adjusted retrospectively. The Company is currently evaluating the impact of EITF 03-6-1.

     In April 2008, the FASB issued FASB Staff Position 142-3, “Determination of the Useful Life of Intangible Assets” (“FSP 142-3”), which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142. FSP 142-3 will be effective for the Company in fiscal 2010. The Company is currently evaluating its impact.

     In December 2007, the FASB issued SFAS No. 141 (Revised 2007), “Business Combinations” (“SFAS No. 141(R)”). SFAS No. 141(R) retains the fundamental acquisition method of accounting established in SFAS No. 141; however, among other things, SFAS No. 141(R) requires fair value measurement of consideration and contingent consideration, expense recognition for transaction costs and certain integration costs, and adjustments to income tax expense for changes in an acquirer’s existing valuation allowances or uncertain tax positions that result from the business combination. In April 2009, the FASB issued Financial Staff Position No. 141(R)-1, “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination that Arise from Contingencies” (“FSP 141(R)-1”). FSP 141(R)-1 amends and clarifies SFAS No. 141(R) for the initial recognition and measurement, subsequent measurement and accounting, and disclosures for assets and liabilities arising from contingencies in business

combinations. SFAS No. 141(R) and FSP 141(R)-1 will be effective for the Company for any acquisition completed subsequent to July 25, 2009.

2. Discontinued Operations

     During fiscal 2007, a wholly-owned subsidiary of the Company, Apex Digital, LLC (“Apex”) notified its primary customer of its intention to cease performing installation services in accordance with its contractual rights. Effective December 2006, this customer, a satellite broadcast provider, transitioned its installation service requirements to others and Apex ceased providing these services. As a result, the Company has discontinued the operations of Apex and presented its results separately in the accompanying condensed consolidated financial statements for all periods presented.

     The summary comparative financial results of the discontinued operations were as follows:

		For the Three Months Ended								For the Nine Months Ended
		April 25, 2009				April 26, 2008				April 25, 2009				April 26, 2008
						(Dollars in thousands)
Contract revenues of discontinued operations		$	—			$	—			$	—			$	—
Income (loss) of discontinued operations before income taxes		$	47			$	(1,247	)		$	(14	)		$	(1,942	)
Income (loss) of discontinued operations, net of tax		$	28			$	(807	)		$	(9	)		$	(1,228	)

     In December 2006, two former employees of Apex commenced a lawsuit against the subsidiary in Illinois State Court on behalf of themselves and purporting to represent other similarly situated employees in Illinois. The lawsuit alleged that Apex violated certain minimum wage laws under the Fair Labor Standards Act and related state laws by failing to comply with applicable minimum wage and overtime pay requirements. In June 2008, the subsidiary reached an agreement to settle these claims through a structured mediation process and incurred a charge of approximately $1.2 million for the settlement. While the subsidiary denied the allegations underlying the dispute, it agreed to the mediated settlement to avoid additional legal fees, the uncertainty of a jury trial and the management time that would have been devoted to litigation. In January 2009, the Company paid the outstanding liability related to the settlement.

     The following table represents the assets and the liabilities of the discontinued operations:

		April 25, 2009				July 26, 2008
		(Dollars in thousands)
Deferred tax assets, net and other current assets		$	164			$	667
Current assets of discontinued operations		$	164			$	667
Accounts payable		$	9			$	129
Accrued liabilities			528				2,602
Total current liabilities of discontinued operations		$	537			$	2,731
Other accrued liabilities and deferred taxes		$	388			$	427
Non-current liabilities of discontinued operations		$	388			$	427

3. Computation of Earnings (Loss) Per Common Share

     The following is a reconciliation of the numerator and denominator of the basic and diluted earnings (loss) per common share computation as required by SFAS No. 128. Basic earnings (loss) per common share is computed based on the weighted average number of shares outstanding during the period, excluding unvested restricted shares and restricted share units. Diluted earnings (loss) per common share includes the weighted average common shares outstanding for the period plus dilutive potential common shares, including unvested time vesting and certain performance vesting restricted shares and restricted share units. Performance vesting restricted shares and restricted share units are only included in diluted earnings (loss) per common share calculations for the period if all the necessary performance conditions are satisfied and their impact is not anti-dilutive. Common stock equivalents related to stock options are excluded from diluted earnings (loss) per common share calculations if their effect would be anti-dilutive. For the nine months ended April 25, 2009, all common stock equivalents related to stock options and unvested restricted shares and restricted share units were excluded from the diluted loss per share calculation as their effect would be anti-dilutive due to the Company’s net loss for the period.

						For the Three Months Ended								For the Nine Months Ended
						April 25, 2009				April 26, 2008				April 25, 2009				April 26, 2008
						(Dollars in thousands, except per share amounts)
Numerator:
Income (loss) from continuing operations						$	7,569			$	7,693			$	(59,799	)		$	19,816
Income (loss) from discontinued operations, net of tax							28				(807	)			(9	)			(1,228	)
Net income (loss)						$	7,597			$	6,886			$	(59,808	)		$	18,588
Denominator:
Basic
Weighted-average number of common shares — Basic							39,330,308				40,436,212				39,343,834				40,651,236
Diluted
Weighted-average number of common shares — Basic							39,330,308				40,436,212				39,343,834				40,651,236
Potential common stock arising from stock options, unvested restricted shares and unvested restricted share units							15,794				50,553				—				214,113
Weighted-average number of common shares — Diluted							39,346,102				40,486,765				39,343,834				40,865,349
Anti-dilutive weighted shares excluded from the calculation of earnings (loss) per share							2,989,302				2,064,633				3,115,085				2,056,955
EARNINGS (LOSS) PER COMMON SHARE — BASIC:
Income (loss) from continuing operations						$	0.19			$	0.19			$	(1.52	)		$	0.49
Income (loss) from discontinued operations							—				(0.02	)			—				(0.03	)
Net income (loss)						$	0.19			$	0.17			$	(1.52	)		$	0.46
EARNINGS (LOSS) PER COMMON SHARE — DILUTED:
Income (loss) from continuing operations						$	0.19			$	0.19			$	(1.52	)		$	0.48
Income (loss) from discontinued operations							—				(0.02	)			—				(0.03	)
Net income (loss)						$	0.19			$	0.17			$	(1.52	)		$	0.45

4. Accounts Receivable

     Accounts receivable consists of the following:

		April 25, 2009				July 26, 2008
		(Dollars in thousands)
Contract billings		$	106,336			$	145,346
Retainage			1,839				972
Other receivables			844				871
Total			109,019				147,189
Less: allowance for doubtful accounts			780				769
Accounts receivable, net		$	108,239			$	146,420

     The allowance for doubtful accounts changed as follows:

		For the Three Months Ended								For the Nine Months Ended
		April 25, 2009				April 26, 2008				April 25, 2009				April 26, 2008
		(Dollars in thousands)
Allowance for doubtful accounts at beginning of period		$	601			$	860			$	769			$	986
Bad debt expense (recovery), net			177				(293	)			200				(412	)
Amounts (charged against) credited to the allowance			2				(44	)			(189	)			(51	)
Allowance for doubtful accounts at end of period		$	780			$	523			$	780			$	523

     As of April 25, 2009, the Company expected to collect all retainage balances within the next twelve months.

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

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

		April 25, 2009				July 26, 2008
		(Dollars in thousands)
Costs incurred on contracts in progress		$	52,823			$	75,978
Estimated to date earnings			11,030				18,292
Total costs and estimated earnings			63,853				94,270
Less: billings to date			512				483
		$	63,341			$	93,787
Included in the accompanying condensed consolidated balance sheets under the captions:
Costs and estimated earnings in excess of billings		$	63,853			$	94,270
Billings in excess of costs and estimated earnings			(512	)			(483	)
		$	63,341			$	93,787

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

6. Property and Equipment

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

		April 25, 2009				July 26, 2008
		(Dollars in thousands)
Land		$	2,974			$	2,953
Buildings			9,867				9,751
Leasehold improvements			4,365				3,959
Vehicles			200,435				204,814
Furniture, fixtures, computer equipment and software			48,131				40,339
Equipment and machinery			125,545				133,138
Total			391,317				394,954
Less: accumulated depreciation			243,131				224,475
Property and equipment, net		$	148,186			$	170,479

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

		For the Three Months Ended								For the Nine Months Ended
		April 25, 2009				April 26, 2008				April 25, 2009				April 26, 2008
		(Dollars in thousands)
Depreciation expense		$	14,523			$	15,473			$	44,427			$	44,803
Repairs and maintenance expense		$	3,828			$	4,722			$	12,143			$	15,431

7. Goodwill and Intangible Assets

     The Company’s goodwill and intangible assets consists of the following:

		Useful Life
		In Years		April 25, 2009				July 26, 2008
				(Dollars in thousands)
Goodwill		N/A		$	157,851			$	252,374
Intangible Assets:
Carrying amount
Covenants not to compete		5-7		$	—			$	800
UtiliQuest tradename		Indefinite			4,700				4,700
Tradenames		4-15			2,925				2,925
Customer relationships		5-15			77,555				77,555
					85,180				85,980
Accumulated amortization:
Covenants not to compete					—				747
Tradenames					854				714
Customer relationships					26,631				21,659
					27,485				23,120
Net Intangible Assets				$	57,695			$	62,860

     During the three months ended April 25, 2009, goodwill was reduced by approximately $0.1 million for the reversal of income tax liabilities that were no longer required. Amortization expense of finite-lived intangible assets was $1.6 million and $5.2 million for the three and nine months ended April 25, 2009, respectively, as compared to $1.8 million and $5.5 million for the three and nine months ended April 26, 2008, respectively. Amortization of the Company’s customer relationships is recognized on an accelerated basis related to the expected economic benefit of the intangible asset, while amortization of other finite-lived intangibles is recognized on a straight-line basis over the estimated useful life.

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

     The Company tested its reporting units goodwill for impairment in the fourth quarter of fiscal 2008, determined that its Stevens Communications (“Stevens”) and Nichols Communications (“Nichols”) reporting units were impaired and as a consequence recognized goodwill impairment charges of approximately $5.9 million and $3.8 million, respectively. The Company’s estimate of the fair value of these reporting units was based on projections of revenues, operating costs, and cash flows considering historical and anticipated future results, general economic and market conditions, as well as the impact of planned business and operational strategies. The key assumptions used to determine the fair value of the Company’s reporting units during the fiscal 2008 annual impairment analysis were: (a) expected cash flow for a period of seven years; (b) terminal value based upon terminal growth rates of between 2% and 4%; and (c) a discount rate of 12% which was based on the Company’s best estimate during the period of the weighted average cost of capital adjusted for risks associated with the reporting units. The Company believes the assumptions used in the fiscal 2008 annual impairment analysis were consistent with the risk inherent in the business models of the reporting units and within the Company’s industry at the time the analysis was performed.

     SFAS No. 142 requires that goodwill and indefinite-lived intangible assets be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce their fair value below carrying value. From October 2008 through the present, the Company’s market capitalization has been significantly impacted by the extreme volatility in the U.S. equity and credit markets. Additionally, the Company’s market capitalization has been below the book value of shareholders’ equity. As a result, the Company evaluated whether the decrease in its market capitalization reflected factors that would more likely than not reduce the fair value of the reporting units below their carrying value. Based on a combination of factors, including the current economic environment, the sustained period of decline in market capitalization, and the implied valuation and discount rate assumptions in the Company’s industry, the Company concluded there were sufficient indicators to perform an interim impairment test as of January 24, 2009.

     The fiscal 2009 interim impairment analyses and the Company’s fiscal 2008 annual analyses utilized the same valuation techniques. The key assumptions impacting the fair value of the Company’s reporting units during the fiscal 2009 interim impairment

analysis were: (a) expected cash flow for a period of seven years; (b) terminal value based upon terminal growth rates of between 2% and 4%; and (c) a discount rate of 18% which was based on the Company’s best estimate of the weighted average cost of capital adjusted for risks associated with the reporting units. The discount rate used in the fiscal 2009 analysis, increased compared to the fiscal 2008 analysis due to economic conditions and lower industry valuation comparisons. This increase in the discount rate caused a substantial decline in the calculated estimate of fair value of the reporting units. The Company believes the assumptions used in the fiscal 2009 interim impairment analysis were consistent with the risk inherent in the business models of the reporting units and within the Company’s industry.

     As a result of its impairment analysis, the Company determined that the estimated fair value of the Broadband Installation Services (formerly Cable Express), C-2 Utility Contractors (“C-2”), Ervin Cable Construction (“Ervin”), Nichols, Stevens, and UtiliQuest reporting units were less than their respective carrying values. Accordingly, the Company performed a further analysis to determine the implied fair value of each reporting unit’s goodwill. This analysis included a hypothetical valuation of all of the tangible and intangible assets of the reporting units, as if they had been acquired in separate business combinations. The Company recognized a preliminary goodwill impairment charge of $94.4 million during the second quarter of fiscal 2009. The Company’s interim impairment analysis was finalized during the third quarter of fiscal 2009 and no further charges were incurred. The charge included impairments at Broadband Installation Services for $14.8 million, C-2 for $9.2 million, Ervin for $15.7 million, Nichols for $2.0 million, Stevens for $2.4 million and UtiliQuest for $50.5 million. After the impairment charges, the C-2, Nichols, and Stevens reporting units have no remaining goodwill. The goodwill impairment charge did not affect the Company’s compliance with any covenants under its revolving credit agreement or senior subordinated notes.

     Based on the results of the interim testing, the Company concluded the fair value of the Company’s remaining reporting units exceeded their carrying value at January 24, 2009. Accordingly, there was no impairment of the remaining reporting units. The Company also determined there was no impairment of the $4.7 million indefinite-lived tradename at its UtiliQuest reporting unit as of January 24, 2009. Furthermore, an interim impairment test of the Company’s finite-lived intangible assets was performed under the guidance of SFAS No. 144. In accordance with SFAS No. 144, recoverability is determined based on an estimate of undiscounted future cash flows resulting from the use of an asset and its eventual disposition. The Company determined there was no impairment of any of the Company’s finite-lived intangible assets as of January 24, 2009.

     Based on the Company’s fiscal 2009 interim impairment test, the estimated fair value of the Globe Communications (“Globe”), Prince Telecom (“Prince”), and TCS Communications (“TCS”) reporting units exceeded their carrying value by a margin of approximately 25% or less. Additionally, there was no excess margin of fair value over carrying value for the Broadband Installation Services, Ervin, and UtiliQuest reporting units, as their carrying value was written down to their estimated fair value during fiscal 2009. As a result, the goodwill balances of these reporting units may have an increased likelihood of impairment if adverse events were to occur or circumstances were to change, and the long-term outlook for their cash flows were adversely impacted. Broadband Installation Services, Ervin, Globe, Prince, TCS, and UtiliQuest have remaining goodwill balances of $19.7 million, $7.4 million, $1.4 million, $39.7 million, $4.6 million, and $35.6 million, respectively, as of April 25, 2009.

     Except for the goodwill impairment charges, none of the Company’s reporting units have incurred significant losses in fiscal 2009. The estimates and assumptions used in assessing the fair value of the reporting units and the valuation of the underlying assets and liabilities are inherently subject to significant uncertainties. Changes in the Company’s judgments and estimates could result in a significantly different estimate of the fair value of the reporting units and could result in impairments of goodwill or intangible assets

at additional reporting units. A change in the estimated discount rate used would impact the amount of the goodwill impairment charges recorded during the quarter ended January 24, 2009. Additionally, continued adverse conditions in the economy and future volatility in the equity and credit markets could further impact the Company’s valuation of its reporting units. The Company can provide no assurances that, if such conditions continue, they will not trigger additional reporting units with impairments of goodwill and other intangible assets in future periods.

8. Accrued Insurance Claims

     The Company retains the risk of loss, up to certain limits, for claims relating to automobile liability, general liability, workers’ compensation, employee group health, and locate damages. With regard to losses occurring in fiscal year 2009, the Company has retained the risk of loss to $1.0 million on a per occurrence basis for automobile liability, general liability and workers’ compensation. These annual retention amounts are applicable to all of the states in which the Company operates, except with respect to workers’ compensation insurance in three states in which the Company participates in a state sponsored insurance fund. Aggregate stop loss coverage for automobile liability, general liability and workers’ compensation claims is $50.0 million for fiscal 2009. For losses under the Company’s employee health plan occurring during fiscal 2009, the Company has retained the risk of loss, on an annual basis, of $250,000 per participant.

     Accrued insurance claims consist of the following:

		April 25, 2009				July 26, 2008
		(Dollars in thousands)
Amounts expected to be paid within one year:
Accrued auto, general liability and workers’ compensation		$	17,225			$	16,599
Accrued employee group health			3,941				4,506
Accrued damage claims			7,577				8,729
			28,743				29,834
Amounts expected to be paid beyond one year:
Accrued auto, general liability and workers’ compensation			23,992				30,156
Accrued damage claims			6,471				7,019
			30,463				37,175
Total accrued insurance claims		$	59,206			$	67,009

9. Other Accrued Liabilities

     Other accrued liabilities consist of the following:

		April 25, 2009				July 26, 2008
		(Dollars in thousands)
Accrued payroll and related taxes		$	20,437			$	25,935
Accrued employee benefit and incentive plan costs			4,852				7,017
Accrued construction costs			7,428				10,434
Accrued interest and related bank fees			509				3,621
Other			8,134				19,268
Total other accrued liabilities		$	41,360			$	66,275

     Included in other accrued liabilities as of July 26, 2008 was $8.6 million in accrued costs related to a wage and hour class action settlement (see Note 16). This amount was paid during fiscal 2009.

10. Debt

     The Company’s outstanding indebtedness consists of the following:

		April 25, 2009				July 26, 2008
		(Dollars in thousands)
Senior subordinated notes		$	135,350			$	150,000
Capital leases			1,531				3,355
			136,881				153,355
Less: current portion			1,394				2,306
Long-term debt		$	135,487			$	151,049

     On September 12, 2008, the Company entered into a new three-year $195.0 million revolving Credit Agreement (“Credit Agreement”) with a syndicate of banks. The Credit Agreement has an expiration date of September 12, 2011 and includes a sublimit of $100.0 million for the issuance of letters of credit. Subject to certain conditions, the Credit Agreement provides for two one-year extensions and also provided the ability to borrow an incremental $100.0 million (the “Incremental Revolving Facility”). The Credit Agreement replaced the Company’s existing credit facility which was due to expire in December 2009. Letters of credit issued from the prior agreement were transferred to the Credit Agreement.

     During the third quarter of fiscal 2009, the Company entered into an amendment (the “Amendment”) to the Credit Agreement which added a new bank to the syndicate of banks and increased the maximum borrowing available under the Credit Agreement from $195.0 million to $210.0 million. After giving effect to the Amendment, the Incremental Revolving Facility was reduced by $15.0 million, permitting incremental borrowings of up to $85.0 million.

     Borrowings under the Credit Agreement bear interest, at the Company’s option, at either (a) the administrative agent’s base rate, described in the Credit Agreement as the higher of the administrative agent’s prime rate or the federal funds rate plus 0.50%, or (b) LIBOR (a publicly published rate) plus, in either instance, a spread determined by the Company’s consolidated leverage ratio. During fiscal 2009, interest on borrowings under the Credit Agreement was incurred at either the administrative agent’s base rate and a spread of 1.00% or LIBOR and a spread of 2.0%. Based on the Company’s consolidated leverage ratio, the Credit Agreement also includes fees for outstanding letters of credit and unutilized commitments. During fiscal 2009, fees for outstanding letters of credit and unutilized commitments on the Credit Agreement were based on rates of 2.125% per annum and 0.75% per annum, respectively, on the applicable balances. The payments under the Credit Agreement are guaranteed by certain subsidiaries and secured by a pledge of (i) 100% of the equity of the Company’s material domestic subsidiaries, and (ii) 100% of the non-voting equity and 65% of the voting equity of first tier material foreign subsidiaries, if any, in each case excluding certain unrestricted subsidiaries.

     The Credit Agreement contains certain affirmative and negative covenants, including limitations with respect to indebtedness, liens, investments, distributions, mergers and acquisitions, disposition of assets, sale-leaseback transactions and transactions with affiliates. It also contains defined financial covenants which require the Company to (i) maintain a leverage ratio of not greater than 3.00 to 1.00, as measured at the end of each fiscal quarter, (ii) maintain an interest coverage ratio of not less than 2.75 to 1.00, as measured at the end of each fiscal quarter and (iii) maintain consolidated total tangible net worth, as measured at the end of each fiscal quarter, of not less than $50.0 million plus (A) 50% of consolidated net income (if positive) from September 12, 2008 to the date of computation plus (B) 75% of equity issuances made from September 12, 2008 to the date of computation.

     As of April 25, 2009, the Company had no outstanding borrowings and $51.8 million of outstanding letters of credit issued under the Credit Agreement. The outstanding letters of credit are issued as part of the Company’s insurance program. At April 25, 2009, the Company had additional borrowing availability of $158.2 million as determined by the most restrictive covenants of the Credit Agreement and was in compliance with all of the financial covenants.

     In October 2005, Dycom Investments, Inc., a wholly-owned subsidiary of the Company, issued $150.0 million in aggregate principal amount of 8.125% senior subordinated notes due October 2015 (“Notes”). Interest is due on April 15th and October 15th of each year. The Company purchased $4.65 million principal amount of the Notes for $3.2 million during the second quarter of fiscal 2009 and $10.0 million principal amount of the Notes for $8.1 million during the third quarter of fiscal 2009. After the write-off of associated debt issuance costs, the net gain reported as other income was $1.7 million and $3.0 million for the three and nine months ended April 25, 2009, respectively. The indenture governing the Notes contains covenants that restrict the Company’s ability to:

•    make certain payments, including the payment of dividends
•    redeem or repurchase capital stock
•    incur additional indebtedness and issue preferred stock
•    make investments or create liens

•    enter into sale and leaseback transactions
•    merge or consolidate with another entity
•    sell assets
•    enter into transactions with affiliates

for certain vehicles and computer equipment and expire at various dates through fiscal year 2011.

11. Income Taxes

     The Company’s effective income tax rate was 31.3% and 10.3% for the three and nine months ended April 25, 2009, respectively, and 32.3% and 36.8% for the three and nine months ended April 26, 2008, respectively. The Company’s effective income tax rates for fiscal 2009 and 2008 differ from the statutory rates primarily due to the impact of certain items. Specifically, during the three months ended April 25, 2009 and April 26, 2008, the provision for income taxes included the reversal of certain income tax liabilities for unrecognized tax benefits of $1.4 million and $0.9 million, respectively, which were no longer required. In addition, only a portion of the fiscal 2009 goodwill impairment charge was deductible for income tax purposes during the nine months ended April 25, 2009. Other variations in the Company’s tax rate are attributable to the impact of non-deductible and non-taxable items in relation to the Company’s pre-tax income during the period and its expectations of total annual results of operations.

     As of April 25, 2009, the total amount of unrecognized tax benefits was $2.9 million. If it is subsequently determined that those liabilities are not required, approximately $2.6 million would affect the Company’s effective tax rate and $0.3 million would reduce goodwill during the periods recognized. The Company recognizes interest related to unrecognized tax benefits in interest expense and penalties in general and administrative expenses. During the three and nine months ended April 25, 2009, the Company recognized approximately $0.4 million and $0.2 million of interest benefit in the accompanying condensed consolidated statements of operations, respectively, as compared to $0.2 million of interest benefit and $0.1 million of interest expense during the three and nine months ended April 26, 2008, respectively, related to unrecognized tax benefits.

12. Other Income, net

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

		For the Three Months Ended								For the Nine Months Ended
		April 25, 2009				April 26, 2008				April 25, 2009				April 26, 2008
						(Dollars in thousands)
Gain on sale of fixed assets		$	1,786			$	2,582			$	3,306			$	4,786
Miscellaneous income			53				88				17				254
Gain on extinguishment of debt, net (See Note 10)			1,727				—				3,027				—
Write-off of deferred financing costs			—				—				(551	)			—
Total other income, net		$	3,566			$	2,670			$	5,799			$	5,040

13. Capital Stock

     On each of August 28, 2007 and May 20, 2008, the Company’s Board of Directors authorized the repurchase of up to $15 million of its common stock in open market or private transactions (for an aggregate authorization of $30 million). The Board of Directors further increased its authorization to repurchase shares of its common stock by $15 million, from $30 million to $45 million on August 26, 2008. The stock repurchases are authorized to be made through February 2010. The Company repurchased and

cancelled 450,000 shares during the third quarter of fiscal 2009 at an average price per share of $6.48. As of April 25, 2009, approximately $16.9 million of the authorized amount remains for the repurchase of common stock.

14. Stock-Based Awards

The Company’s stock-based award plans are comprised of the following (collectively, “the Plans”):

	•		the 1991 Incentive Stock Option Plan (“1991 Plan”)
	•		the Arguss Communications, Inc. 1991 Stock Option Plan (“1991 Arguss Plan”)
	•		the 1998 Incentive Stock Option Plan (“1998 Plan”)
	•		the 2001 Directors Stock Option Plan (“2001 Directors Plan”)
	•		the 2002 Directors Restricted Stock Plan (“2002 Directors Plan”)
	•		the 2003 Long-term Incentive Plan (“2003 Plan”)
	•		the 2007 Non-Employee Directors Equity Plan (“2007 Directors Plan”)

     The outstanding options under the 1991 Plan, the 1991 Arguss Plan, and the 1998 Plan are fully vested. The outstanding options under the 2003 Plan, the 2001 Directors Plan and 2007 Directors Plan, vest ratably over a four-year period, beginning on the date of the grant. Time vesting restricted shares and units vest ratably over a four year period. Performance vesting restricted shares and units that are outstanding vest over a three year period from the grant date, if certain annual and three year Company performance goals are achieved. The Company’s policy is to issue new shares to satisfy equity awards under the Plans. Under the terms of the Plans, stock options are granted at the closing price on the date of the grant and are exercisable over a period of up to ten years.

     The 2007 Directors Plan provides for equity grants to non-employee directors upon their initial election or appointment to the Board of Directors and for annual equity grants to continuing non-employee directors. Additionally, to the extent that a non-employee director does not beneficially own 7,500 shares of Company common stock, the plan requires a portion of the annual retainer paid to the director to be paid in the form of restricted shares or restricted share units.

     The following table lists the number of shares available and outstanding under each plan as of April 25, 2009, including restricted performance shares and units that will be issued under outstanding awards if certain performance goals are met:

								Unvested
								Restricted
								Shares and				Shares
		Plan		Outstanding				Units				Available for
		Expiration		Stock Options				Outstanding				Grant
1991 Plan		Expired			45,000				—				—
1991 Arguss Plan (a)		N/A			44,319				—				—
2001 Directors Plan (a)		2011			54,501				—				—
2002 Directors Plan (a)		2012			—				3,212				—
1998 Plan (a)		2008			1,145,465				—				—
2003 Plan		2013			1,509,379				826,247				2,046,791
2007 Directors Plan		2017			87,604				33,733				162,307
					2,886,268				863,192				2,209,098

The following tables summarize the stock-based awards outstanding at April 25, 2009:

						Weighted				Weighted Average
		Shares Subject to				Average Exercise				Remaining				Aggregate
		Options				Price				Contractual Life				Intrinsic Value
														(In thousands)
Options outstanding			2,886,268			$	13.49				5.4			$	658
Options exercisable*			2,036,854			$	17.36				3.7			$	—

						Weighted				Weighted Average
		Restricted				Average Grant				Remaining				Aggregate
		Shares/Units				Price				Vesting Period				Intrinsic Value
														(In thousands)
Unvested time vesting shares/units			177,670			$	13.80				2.3			$	1,340
Unvested performance vesting shares/units			685,522			$	21.37				1.1			$	5,169

     The aggregate intrinsic value for stock options and restricted shares and units in the preceding tables are based on the Company’s closing stock price of $7.54 on April 25, 2009. These amounts represent the total intrinsic value that would have been received by the holders of the stock-based awards had the awards been exercised and sold as of that date, before any applicable taxes.

     The following table summarizes the stock-based award activity during the nine months ended April 25, 2009:

										Time Vesting Restricted								Performance Vesting Restricted
		Stock Options								Shares/Units								Shares/Units
						Weighted
						Average								Weighted Average								Weighted Average
		Shares				Exercise Price				Shares/Units				Grant Price				Shares/Units				Grant Price
Outstanding as of July 26, 2008			2,375,557			$	29.45				134,872			$	24.32				643,450			$	24.95
Granted			788,248			$	6.70				102,812			$	6.35				157,286			$	8.42
Options Exercised/ Shares and Units Vested			(1,200	)		$	13.84				(54,467	)		$	24.66				(86,387	)		$	24.10
Forfeited or cancelled			(276,337	)		$	27.82				(5,547	)		$	24.93				(28,827	)		$	25.26
Outstanding as of April 25, 2009			2,886,268			$	13.49				177,670			$	13.80				685,522			$	21.37

     The performance vesting restricted shares and units in the above table represent the maximum number of awards which may vest under the outstanding grants assuming that all performance criteria are met.

     Compensation expense for stock-based awards is based on the fair value at the measurement date and is included in general and administrative expenses in the condensed consolidated statements of operations. The compensation expense and the related tax benefit recognized related to stock options, restricted share and restricted share units for the three and nine months ended April 25, 2009 and April 26, 2008 is as follows:

		For the Three Months Ended								For the Nine Months Ended
		April 25, 2009				April 26, 2008				April 25, 2009				April 26, 2008
		(Dollars in thousands)
Stock-based compensation expense		$	898			$	1,419			$	2,775			$	4,584
Tax benefit recognized			(282	)			(546	)			(967	)			(1,765	)

     The Company evaluates stock-based compensation expense quarterly and only recognizes compensation expense for performance based awards if management determines it is probable that the performance criteria for the awards will be met. Accordingly, the amount of stock-based compensation expense recognized during the three and nine month periods ended April 25, 2009 may not be representative of future stock-based compensation expense. The total amount of stock-based compensation expense ultimately recognized is based on the number of awards that actually vest. During fiscal 2009, management determined that it was not probable that the performance criteria of certain of the performance-based stock awards would be achieved for the fiscal 2009 performance period and stock-based compensation expense was reduced for these awards.

     Under the Plans, the maximum total unrecognized stock-based compensation expense and weighted-average period over which the expense would be recognized subsequent to April 25, 2009 is shown below. For performance based awards, the unrecognized stock-based compensation expense is based upon the maximum amount of restricted stock and units that can be earned under outstanding awards. If the performance goals are not met, no stock-based compensation expense will be recognized for these unvested shares/units and compensation expense previously recognized for the unvested shares/units will be reversed.

		Unrecognized
		Compensation				Weighted-
		Expense				Average Period
		(In thousands)				(In years)
Stock options		$	3,169				3.5
Unvested time vesting shares/units		$	1,976				2.3
Unvested performance vesting shares/units		$	13,855				1.1

     During the nine months ended April 25, 2009 and April 26, 2008, the Company received cash of less than $0.1 million and $1.3 million, respectively, from the exercise of stock options and realized a tax benefit from share-based awards of approximately $0.4 million and $2.9 million, respectively.

15. Related Party Transactions

     The Company leases administrative offices from entities related to officers of the Company’s subsidiaries. The total expense under these arrangements was $0.4 million and $0.3 million for the three month periods ended April 25, 2009 and April 26, 2008, respectively. The total expense under these arrangements was $1.0 million for each of the nine month periods ended April 25, 2009 and April 26, 2008. Additionally, the Company paid $0.2 million and $0.5 million for the three and nine months ended April 26, 2008, respectively, in subcontracting services to entities related to officers of certain of its subsidiaries. There was a minimal amount paid in subcontracting services to entities related to officers of certain of its subsidiaries for the three and nine month periods ended April 25, 2009.

16. Commitments and Contingencies

Legal Proceedings.

     In May 2009, the Company and one of its subsidiaries were named as defendants in a lawsuit in the U.S. District Court for the Western District of Washington. The plaintiffs, former employees of the subsidiary, allege various wage and hour claims, including that employees were not paid for all hours worked. They seek to certify as a class current and former employees of the subsidiary who worked in the State of Washington. It is too early to evaluate the likelihood of an outcome to this matter or estimate the amount or range of potential loss, if any. The Company intends to vigorously defend itself against this lawsuit.

     During fiscal 2007, the Company was contacted by counsel representing current and former employees alleging violations of the Fair Labor Standards Act and state wage and hour laws at the Company’s UtiliQuest, LLC, S.T.S., LLC and Locating, Inc. subsidiaries. The claims included periods dating primarily from September 2003 through January 31, 2007 and covered a number of states where these subsidiaries conducted business. During the second quarter of fiscal 2008, these subsidiaries reached an agreement to settle these claims through a structured mediation process. While the subsidiaries denied the allegations underlying the dispute, they agreed to the mediated settlement to avoid additional legal fees, the uncertainty of a jury trial and the management time that would have been devoted to litigation. Excluding legal expenses of the Company, approximately $8.6 million was incurred pursuant to the settlement and was included in accrued liabilities at July 26, 2008. This amount was paid in October 2008.

     From time to time, the Company and its subsidiaries are parties to various other claims and legal proceedings. Additionally, as part of the Company’s insurance program, the Company retains the risk of loss, up to certain limits, for claims related to automobile liability, general liability, workers’ compensation, employee group health, and locate damages. For these claims, the effect on the

Company’s financial statements is generally limited to the amount needed to satisfy the Company’s insurance deductibles or retentions. It is the opinion of the Company’s management, based on information available at this time, that none of such other pending claims or proceedings will have a material effect on its condensed consolidated financial statements.

Performance Bonds and Guarantees.

     The Company has obligations under performance bonds related to certain of its customer contracts. Performance bonds generally provide the Company’s customer with the right to obtain payment and/or performance from the issuer of the bond if the Company fails to perform its contractual obligations. As of April 25, 2009, the Company had $43.5 million of outstanding performance bonds and no events have occurred in which customers have exercised their rights under the performance bonds.

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

17. Concentration of Credit Risk

     The Company is subject to concentrations of credit risk relating primarily to its cash and equivalents, trade accounts receivable and costs and estimated earnings in excess of billings. Cash and equivalents primarily include balances on deposit in banks. The Company maintains substantially all of its cash and equivalents at financial institutions believed by the Company to be of high credit quality. Furthermore, a substantial portion of the balances held as cash in operating accounts with these financial institutions is generally within the current insurance levels of the Federal Deposit Insurance Corporation (“FDIC”). To date the Company has not experienced any loss or lack of access to cash in its operating accounts. However, the Company can provide no assurances that access to its cash and equivalents will not be impacted by adverse conditions in the financial markets.

     The Company grants credit under normal payment terms, generally without collateral, to its customers. These customers primarily consist of telephone companies, cable television multiple system operators, electric utilities and others. With respect to a portion of the services provided to these customers, the Company has certain statutory lien rights which may in certain circumstances enhance the Company’s collection efforts. Adverse changes in overall business and economic factors may impact the Company’s customers and increase potential credit risks. These risks may be heightened as a result of the current economic developments and market volatility. In the past, some of the Company’s customers have experienced significant financial difficulties and likewise, some may experience financial difficulties in the future. These difficulties expose the Company to increased risks related to the collectability of amounts due for services performed. The Company believes that none of its significant customers were experiencing financial difficulties that would impact the collectability of the Company’s trade accounts receivable and costs in excess of billings as of April 25, 2009.

     AT&T, Inc. (“AT&T”), Comcast Cable Corporation (“Comcast”), and Verizon Communications, Inc. (“Verizon”), represent a significant portion of the Company’s revenue. For the three and nine month periods ended April 25, 2009 and April 26, 2008, revenues from AT&T, Comcast, and Verizon represented the following percentages of total revenue from continuing operations:

		For the Three Months Ended								For the Nine Months Ended
		April 25, 2009				April 26, 2008				April 25, 2009				April 26, 2008
AT&T Inc			19.7	%			20.0	%			18.1	%			19.5	%
Verizon Communications Inc			13.9	%			18.1	%			16.3	%			17.6	%
Comcast Corporation			13.4	%			11.6	%			15.1	%			11.9	%

     As of April 25, 2009, the outstanding balances for trade accounts receivable and costs and estimated earnings in excess of billings from AT&T, Verizon, and Comcast, totaled approximately $33.4 million or 19.4%, $40.3 million or 23.4%,and $19.8 million or 11.5%, respectively, of the outstanding balances. As of July 26, 2008, the outstanding balances for these amounts from AT&T, Verizon, and Comcast totaled approximately $35.0 million or 14.5%, $66.0 million or 27.4%, and $25.0 million or 10.4%, respectively, of the outstanding balances.

     During the third quarter of fiscal 2009, one of the Company’s customers proposed a financial restructuring effected through a Chapter 11 filing. As part of its financial restructuring, this customer has received authorization from the United States Bankruptcy Court for the Southern District of New York to continue to pay its trade creditors in full, including the Company. This customer represented 5.1% and 4.9% of the Company’s contract revenues during the three and nine months ended April 25, 2009, respectively. As of April 25, 2009, the Company had a total of $5.7 million, or 3.3% of the combined total of trade accounts receivable and costs and estimated earnings in excess of billings. As of April 25, 2009, it is the Company’s belief that these balances are collectible. However, there can be no assurances this customer will continue to implement its financial restructuring as currently approved.

18. Segment Information

     The Company operates in one reportable segment as a specialty contractor, providing engineering, construction, maintenance and installation services to telecommunications providers, underground facility locating services to various utilities including telecommunications providers, and other construction and maintenance services to electric utilities and others. These services are provided by the Company’s various subsidiaries throughout the United States and, on a limited basis, in Canada. All of the Company’s subsidiaries have been aggregated into one reporting segment due to their similar economic characteristics, products and production methods, and distribution methods. The following table presents information regarding revenues by type of customer:

		For the Three Months Ended								For the Nine Months Ended
		April 25, 2009				April 26, 2008				April 25, 2009				April 26, 2008
		(Dollars in thousands)
Telecommunications		$	200,151			$	226,170			$	654,655			$	687,384
Underground facility locating			44,354				53,883				135,530				161,155
Electric utilities and other construction and maintenance			13,214				13,387				47,024				59,330
Total contract revenues		$	257,719			$	293,440			$	837,209			$	907,869

     One of the Company’s subsidiaries earned revenues from contracts in Canada of approximately $0.7 million and $2.6 million during the three and nine months ended April 25, 2009, respectively, and $0.6 million and $2.7 million during the three and nine months ended April 26, 2008, respectively. The Company had no material long-lived assets in the Canadian operations at April 25, 2009 or July 26, 2008.

19. Supplemental Condensed Consolidating Financial Statements

     As of April 25, 2009, the outstanding balance of the Company’s Notes was $135.35 million. The Notes were issued in fiscal 2006 by Dycom Investments, Inc. (“Issuer”), a wholly-owned subsidiary of the Company. The following condensed consolidating financial statements present, in separate columns, financial information for (i) Dycom Industries, Inc. (“Parent”) on a parent only basis, (ii) the Issuer, (iii) the guarantor subsidiaries for the Notes on a combined basis, (iv) other non-guarantor subsidiaries on a combined basis, (v) the eliminations and reclassifications necessary to arrive at the information for the Company on a consolidated basis, and (vi) the Company on a consolidated basis. The consolidating condensed financial statements are presented in accordance with the equity method. Under this method, the investments in subsidiaries are recorded at cost and adjusted for the Company’s share of subsidiaries’ cumulative results of operations, capital contributions, distributions and other equity changes.

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

     The condensed consolidating balance sheet as of July 26, 2008 has been corrected for the amounts of Investment in subsidiaries, Intercompany receivables/payables, and Stockholders’ equity for the Parent, Issuer, and guarantor subsidiaries. Certain intercompany transactions had previously been incorrectly reflected as shareholders’ equity. There was no impact on the condensed consolidated financial statements for any period.

DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET (UNAUDITED)
APRIL 25, 2009

														Non-
										Subsidiary				Guarantor				Eliminations and				Dycom
		Parent				Issuer				Guarantors				Subsidiaries				Reclassifications				Consolidated
		(Dollars in thousands)
ASSETS
CURRENT ASSETS:
Cash and equivalents		$	—			$	—			$	78,555			$	207			$	—			$	78,762
Accounts receivable, net			3				—				107,379				857				—				108,239
Costs and estimated earnings in excess of billings			—				—				63,657				196				—				63,853
Deferred tax assets, net			1,164				—				14,579				40				(88	)			15,695
Income taxes receivable			11,557				—				—				—				—				11,557
Inventories			—				—				9,042				111				—				9,153
Other current assets			4,646				20				3,853				1,499				—				10,018
Current assets of discontinued operations			—				—				164				—				—				164
Total current assets			17,370				20				277,229				2,910				(88	)			297,441
Property and equipment, net			13,123				—				115,390				20,313				(640	)			148,186
Goodwill			—				—				157,851				—				—				157,851
Intangible assets, net			—				—				57,695				—				—				57,695
Investment in subsidiaries			665,398				1,187,464				—				—				(1,852,862	)			—
Intercompany receivables			—				—				707,974				—				(707,974	)			—
Other			4,906				2,993				2,146				666				—				10,711
Total non-current assets			683,427				1,190,457				1,041,056				20,979				(2,561,476	)			374,443
TOTAL		$	700,797			$	1,190,477			$	1,318,285			$	23,889			$	(2,561,564	)		$	671,884
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable		$	237			$	—			$	24,170			$	135			$	—			$	24,542
Current portion of debt			—				—				1,394				—				—				1,394
Billings in excess of costs and estimated earnings			—				—				512				—				—				512
Accrued insurance claims			693				—				28,010				40				—				28,743
Deferred tax liabilities			—				88				—				—				(88	)			—
Other accrued liabilities			3,462				332				36,497				1,103				(34	)			41,360
Current liabilities of discontinued operations			—				—				537				—				—				537
Total current liabilities			4,392				420				91,120				1,278				(122	)			97,088
LONG-TERM DEBT			—				135,350				137				—				—				135,487
ACCRUED INSURANCE CLAIMS			939				—				29,227				297				—				30,463
DEFERRED TAX LIABILITIES, net non-current			337				345				17,423				3,490				—				21,595
INTERCOMPANY PAYABLES			308,565				388,964				65				10,380				(707,974	)			—
OTHER LIABILITIES			3,807				—				299				—				—				4,106
NON-CURRENT LIABILITIES OF DISCONTINUED OPERATIONS			—				—				388				—				—				388
Total liabilities			318,040				525,079				138,659				15,445				(708,096	)			289,127
Total stockholders’ equity			382,757				665,398				1,179,626				8,444				(1,853,468	)			382,757
TOTAL		$	700,797			$	1,190,477			$	1,318,285			$	23,889			$	(2,561,564	)		$	671,884