Dycom Industries, Inc. Lowers Expectations For Second Quarter Fiscal 2018 Results And The First Quarter Of Fiscal 2019 And Provides Guidance For Fiscal 2019
PALM BEACH GARDENS, Fla., Feb. 12, 2018 /PRNewswire/ -- Dycom Industries, Inc. (NYSE: DY) announced today that for the quarter ended January 27, 2018 the Company expects revenue of approximately $655.0 million, below the midpoint of its previous guidance. Additionally, the Company expects Non-GAAP Adjusted Diluted Earnings per Common Share ranging from $0.09 - $0.12 for the quarter ended January 27, 2018, which is below previous guidance. On a GAAP basis, the Company expects Diluted Earnings per Common Share ranging from $1.20 - $1.23, including tax benefits from the Tax Cuts and Jobs Act of 2017 ("Tax Reform") and tax benefits from the vesting and exercise of share-based awards. See "Reconciliation of Non-GAAP Financial Measures to Comparable GAAP Financial Measures" included below.
Widespread adverse weather reduced the number of available workdays and negatively impacted productivity and margins during the quarter ended January 27, 2018. Margins were also impacted by costs incurred in conjunction with the initiation of large customer programs.
The Company plans to report full financial results for the second quarter period ended January 27, 2018 on Wednesday, February 28, 2018, before the open of trading on the New York Stock Exchange.
Outlook
As previously announced, the Company changed its fiscal year end from the last Saturday in July to the last Saturday in January. As a result, fiscal 2019 commenced on January 28, 2018.
The Company is providing financial guidance for the 2019 fiscal year ending January 26, 2019, as well as updating its outlook for the quarter ending April 28, 2018 (first quarter of fiscal 2019). This guidance reflects the anticipated timing of activity on large customer programs and the related impacts on margins as well as consideration of near-term weather conditions. The Company currently expects the following:
Fiscal 2019 Quarter Ending
April 28, 2018
(Q1-19)
------
Contract revenues $3.30 - $3.50 billion $720 - $750 million
Diluted Earnings per
Common Share -GAAP(1) $4.78 - $5.70 $0.52 - $0.67
Non-GAAP Adjusted
Diluted Earnings per
Common Share(1) $5.22 - $6.14 $0.63 - $0.78
Non-GAAP Adjusted EBITDA
% of revenue 13.6% - 14.1% 10.7% - 11.1%
((1) )Earnings per Common Share calculations based on effective tax rate of 27.3%. See Tax Reform below for further information.
See reconciliation of Non-GAAP Financial Measures to Comparable GAAP Financial Measures included below.
Tax Reform
The Company estimates that Tax Reform will result in a benefit to the Company's income taxes of approximately $31.0 million, or $0.98 per diluted common share, in the quarter ended January 27, 2018 (second quarter of fiscal 2018). It will not impact Non-GAAP Adjusted Diluted Earnings per Common Share. This benefit primarily resulted from the re-measurement of the Company's net deferred tax liabilities at a lower U.S. federal corporate income tax rate and represents a preliminary assessment of the effect of Tax Reform. The impact of Tax Reform may change from this preliminary estimate as the Company completes its assessment for purposes of finalizing its year-end provision for income taxes.
Based on a preliminary analysis of the impact of Tax Reform, the Company currently expects that the fiscal 2019 effective tax rate will be within a range of 27.0% to 27.5%.
Other Information
As of January 27, 2018, the Company reported cash and equivalents of approximately $84.0 million, no outstanding borrowings on its revolving line of credit and $358.1 million of term loans outstanding.
Use of Non-GAAP Financial Measures
The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). In quarterly results releases, trend schedules, conference calls, slide presentations, and webcasts, the Company may use or discuss Non-GAAP financial measures, as defined by Regulation G of the Securities and Exchange Commission. See Explanation of Non-GAAP Financial Measures directly following the press release tables.
About Dycom Industries, Inc.
Dycom is a leading provider of specialty contracting services throughout the United States and in Canada. These services include program management, engineering, construction, maintenance and installation services for telecommunications providers, underground facility locating services for various utilities, including telecommunications providers, and other construction and maintenance services for electric and gas utilities.
Forward Looking Information
This press release contains forward-looking statements as contemplated by the 1995 Private Securities Litigation Reform Act. These statements include those related to the expected results for the second quarter period ended January 27, 2018 which are preliminary and unaudited, the outlook for the quarter ending April 28, 2018 and fiscal 2019 and statements found under the "Reconciliation of Non-GAAP Financial Measures to Comparable GAAP Financial Measures" section of this release. Forward looking statements are based on management's current expectations, estimates and projections. These statements are subject to risks and uncertainties that may cause actual results for completed periods and periods in the future to differ materially from the results projected or implied in any forward-looking statements contained in this press release. The most significant of these risks and uncertainties are described in the Company's Form 10-K, Form 10-Q and Form 8-K reports (including all amendments to those reports) and include business and economic conditions and trends in the telecommunications industry affecting the Company's customers, the adequacy of the Company's insurance and other reserves and allowances for doubtful accounts, whether the carrying value of the Company's assets may be impaired, preliminary purchase price allocations of acquired businesses, expected benefits and synergies of acquisitions, the future impact of any acquisitions or dispositions, adjustments and cancellations related to the Company's backlog, weather conditions, the anticipated outcome of other contingent events, including litigation, liquidity and other financial needs, the availability of financing, the impact of the Tax Cuts and Jobs Act of 2017, and the other risks and uncertainties detailed from time to time in the Company's filings with the Securities and Exchange Commission. The Company does not undertake to update forward-looking statements.
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
TO COMPARABLE GAAP FINANCIAL MEASURES
UNAUDITED
GAAP and Non-GAAP Earnings per Share Guidance for the
Quarter Ended January 27, 2018 (Q2-18)
Quarter
Ended
January
27, 2018
--------
Diluted Earnings per Share:
---------------------------
Diluted Earnings per Common
Share -GAAP $1.20 - $1.23
---------
Adjustments
Addback of after-tax non-cash
amortization of debt discount
on Notes (a) 0.09
Tax impact of Tax Reform (b) (0.98)
Tax impact of share-based
vesting and exercises under ASU
2016-09 (c) (0.22)
Non-GAAP Adjusted Diluted
Earnings per Common Share $0.09 - $0.12
=========
Diluted Shares (in millions):
-----------------------------
Diluted Shares - GAAP 32.2
Adjustment for economic benefit
of note hedge related to Notes
(d) (0.4)
----
Non-GAAP Adjusted Diluted
Shares (d) 31.8
====
(a) The Company expects to recognize $4.6 million of
pre-tax interest expense for non-cash amortization of
the debt discount associated with the Company's 0.75%
convertible senior notes due September 2021 (the
"Notes").
(b) The Company estimates that Tax Reform will result in
a benefit to the Company's income taxes of
approximately $31.0 million. This benefit primarily
resulted from the re-measurement of the Company's net
deferred tax liabilities at a lower U.S. federal
corporate income tax rate and represents a preliminary
assessment of the effect of Tax Reform. The impact of
Tax Reform may change from this preliminary estimate as
the Company completes its assessment for purposes of
finalizing its year-end provision for income taxes.
(c) The Company expects to recognize an income tax
benefit of approximately $7.0 million for the tax
effects of certain share-based award activities in
accordance with ASU 2016-09, Improvements to Employee
Share-Based Payment Accounting ("ASU 2016-09"). See
Explanation of Non-GAAP Financial Measures below for
more information related to income tax benefits as a
result of the adoption of ASU 2016-09.
(d) Diluted shares used in computing expected GAAP
Diluted Earnings per Common Share includes
approximately 0.4 million common shares from the
dilutive effect of the Notes based on the average share
price during the quarter ended January 27, 2018. The
Company has a note hedge in effect to offset the
economic dilution of the Notes up to an average
quarterly share price of $130.43 per share. Non-GAAP
Adjusted Diluted Shares excludes the GAAP dilutive
effect of the Notes based on the expected effect of the
note hedge. See the Company's Form 8-K previously
filed with the Securities and Exchange Commission on
September 28, 2015 for further information regarding
the Notes and note hedge.
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
TO COMPARABLE GAAP FINANCIAL MEASURES (CONTINUED)
UNAUDITED
GAAP and Non-GAAP Adjusted Diluted Earnings per Common Share Guidance for Fiscal 2019 and Quarter Ending April 28, 2018 (Q1-19)
Quarter Ending
April 28, 2018
Fiscal 2019 (Q1-19)
----------- ------
Diluted Earnings per Share:
---------------------------
Diluted Earnings per Common Share - GAAP (a) $4.78 - $5.70 $0.52 - $0.67
------------- -------------
Adjustment
Addback of after-tax non-cash amortization of debt discount on Notes (b) 0.44 0.11
Non-GAAP Adjusted Diluted Earnings per Common Share $5.22 - $6.14 $0.63 - $0.78
============= =============
Diluted Shares (in millions) (c) 31.9 31.8
---- ----
(a) Based on a preliminary analysis of the impact of Tax Reform, the Company currently expects that the fiscal 2019 effective tax rate will be within a range of 27.0% to 27.5%.
(b) The Company expects to recognize approximately $19.1 million and $4.7 million in pre-tax interest expense during fiscal 2019 and the quarter ending April 28, 2018, respectively, for non-cash amortization of the debt discount
associated with the Notes.
(c) Actual diluted shares will include any applicable dilutive effect of the Notes based on the average share price during the respective period. The Company has a note hedge in effect to offset the economic dilution of the Notes
up to an average quarterly price of $130.43 per share. Accordingly, for Non-GAAP Adjusted Diluted Earnings per Common Share calculations, the Company expects to present results per share that exclude the dilutive effect of the
Notes, if applicable, based on the expected effect of the note hedge.
Reconciliation of Net Income to Non-GAAP Adjusted EBITDA based on the Midpoint of Earnings per Common Share ("EPS") Guidance for Fiscal 2019 and Quarter Ending April 28, 2018 (Q1-19) (Dollars in millions)
Quarter
Ending
April 28,
2018
Fiscal 2019 (Q1-19)
----------- ------
(at midpoint of EPS guidance)
Net Income $167.2 $19.0
Interest Expense, Net 41.5 10.1
Provision for income taxes 62.8 7.1
Depreciation and amortization 183.6 43.8
Earnings Before Interest, Taxes, Depreciation & Amortization ("EBITDA") 455.1 80.0
Gain on sale of fixed assets (11.0) (5.1)
Stock-based compensation expense 26.1 5.3
Non-GAAP Adjusted EBITDA $470.2 $80.3
====== =====
Contract Revenues (at midpoint of guidance) $3,400 $735
Non-GAAP Adjusted EBITDA % of Contract Revenues (at midpoint of guidance) 13.8% 10.9%
Amounts in tables above may not add due to rounding.
DYCOM INDUSTRIES, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
TO COMPARABLE GAAP FINANCIAL MEASURES (CONTINUED)
Explanation of Non-GAAP Financial Measures
The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). In the Company's quarterly results releases, trend schedules, conference calls, slide presentations, and webcasts, it may use or discuss Non-GAAP financial measures, as defined by Regulation G of the Securities and Exchange Commission. The Company believes that the presentation of certain Non-GAAP financial measures in these materials provides information that is useful to investors because it allows for a more direct comparison of the Company's performance for the period reported with the performance in prior periods. The Company cautions that Non-GAAP financial measures should be considered in addition to, but not as a substitute for, the Company's reported GAAP results. Management defines the Non-GAAP financial measures used in this release as follows:
-- Non-GAAP Adjusted EBITDA - net income before interest, taxes,
depreciation and amortization, gain on sale of fixed assets, stock-based
compensation expense, and certain non-recurring items. Management
believes Non-GAAP Adjusted EBITDA is a helpful measure for comparing the
Company's operating performance with prior periods as well as with the
performance of other companies with different capital structures or tax
rates.
-- Non-GAAP Adjusted Net Income - GAAP net income before non-cash
amortization of the debt discount and the related tax impact, certain
tax impacts resulting from vesting and exercise of share-based awards,
certain tax impacts of Tax Reform, and certain non-recurring items.
-- Non-GAAP Adjusted Diluted Earnings per Common Share and Non-GAAP
Adjusted Diluted Shares - Non-GAAP Adjusted Net Income divided by
Non-GAAP Adjusted Diluted Shares outstanding. The Company has a note
hedge in effect to offset the economic dilution of its Notes up to an
average quarterly share price of $130.43. The measure of Non-GAAP
Adjusted Diluted Shares used in computing Non-GAAP Adjusted Diluted
Earnings per Common Share excludes dilution from the Notes. Management
believes that the calculation of Non-GAAP Adjusted Diluted Shares to
reflect the note hedge is useful to investors because it provides
insight into the offsetting economic effect of the hedge against
potential conversion of the Notes.
Management excludes or adjusts each of the items identified below from Non-GAAP Adjusted Net Income and Non-GAAP Adjusted Diluted Earnings per Common Share:
-- Non-cash amortization of the debt discount - The Company's Notes were
allocated between debt and equity components. The difference between the
principal amount and the carrying amount of the liability component of
the Notes represents a debt discount. The debt discount is being
amortized over the term of the Notes but does not result in periodic
cash interest payments. The Company has excluded the non-cash
amortization of the debt discount from its Non-GAAP financial measures
because it believes it is useful to analyze the component of interest
expense for the Notes that will be paid in cash and provides management
with a consistent measure for assessing financial results.
-- Tax impact from Tax Reform - During the quarter ended January 27, 2018,
the Company expects to recognize an income tax benefit of approximately
$31.0 million resulting from Tax Reform, primarily due to a reduction of
net deferred tax liabilities. The Company has excluded this impact
because it is a significant change in the U.S. federal corporate tax
rate and because the Company believes it is not indicative of the
Company's underlying results or ongoing operations. The impact of Tax
Reform may change from this preliminary estimate as the Company
completes its assessment for purposes of finalizing its year-end
provision for income taxes.
-- Tax impact of excess tax benefits as a result of ASU 2016-09 - ASU
2016-09 became effective for the Company during the first quarter period
ended October 28, 2017 and changed the treatment of excess tax benefits
(or shortfalls) arising from the vesting and exercise of share-based
awards. Prior to ASU 2016-09, these amounts were recorded as an
adjustment to additional paid-in capital. With the adoption of ASU
2016-09, these amounts are now captured in the Company's provision for
income taxes. The Company excluded the impact of approximately $7.0
million of excess tax benefits during the quarter ended January 27, 2018
from its provision for income taxes in its Non-GAAP measures as this
amount may vary significantly from period to period and excluding this
amount from the Company's Non-GAAP financial measures provides
management with a more consistent measure for assessing financial
results.
-- Tax impact of adjusted results - The tax impact of the adjusted results
reflects the Company's effective tax rate used for financial planning
during the applicable period.
SOURCE Dycom Industries, Inc.
