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United States Securities and Exchange Commission
 Washington, D.C. 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE FISCAL YEAR ENDED JUNE 30, 2006
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 COMMISSION FILE NUMBER 001-32582
 PIKE ELECTRIC CORPORATION
 (Exact name of registrant as specified in its charter)
 Delaware(State of incorporation)
    
    20-3112047(I.R.S. Employer Identification No.)
 100 Pike Way, PO Box 868, Mount Airy, NC 27030
 (Address of principal executive office)
 (336) 789-2171
 (Registrants telephone number, including area code)
 Securities registered pursuant to Section 12(b) of the Act:
 Title of Each Class
    
    Name of Each Exchange on Which RegisteredCommon Stock, par value $0.001
    
    New York Stock Exchange
 Securities registered pursuant to Section 12(g) of the Act:
 o þ
 o þ
 þ o
 o
  o o þ
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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##### 



PIKE ELECTRIC CORPORATION
Annual Report on Form 10-K for the year ended June 30, 2006
 Index
 ItemsPart IItem 1.
    
    Business
    
    
    1Item 1A.
    
    Risk Factors
    
    
    12Item 1B.
    
    Unresolved Staff Comments
    
    
    20Item 2.
    
    Properties
    
    
    20Item 3.
    
    Legal Proceedings
    
    
    20Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    20Part IIItem 5.
    
    Market for Registrants Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity
Securities
    
    
    21Item 6.
    
    Selected Financial Data
    
    
    21Item 7.
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    24Item 7A.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    37Item 8.
    
    Financial Statements and Supplementary Data
    
    
    38Item 9.
    
    Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
    
    
    65Item 9A.
    
    Controls and Procedures
    
    
    65Item 9B.
    
    Other Information
    
    
    65Part IIIItem 10.
    
    Directors and Executive Officers of the Registrant
    
    
    65Item 11.
    
    Executive Compensation
    
    
    65Item 12.
    
    Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters
    
    
    65Item 13.
    
    Certain Relationships and Related Transactions
    
    
    65Item 14.
    
    Principal Accountant Fees and Services
    
    
    65Part IVItem 15.
    
    Exhibits and Financial Statement Schedules
    
    
    66Signatures
    
    
    
    
    67EX-21.1EX-23.1EX-31.1EX-31.2Ex-32.1




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PART I
 
 ITEM 1. BUSINESS
 Overview
    Reincorporation and Initial Public Offering
   Industry Overview
  1




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Industry Trends
  Growth in Demand for Electricity.
 Passage of the Energy Policy Act of 2005.
 Increased Outsourcing of Infrastructure Services.
 Inadequacy of Current Electric Infrastructure.
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History
   Competitive Strengths
  
    
    Leading Pure-Play Provider of Electric Distribution and Transmission Infrastructure
Services.We are one of the largest providers of services to electric utilities,
cooperatives and municipalities. Additionally, we are one of the few service providers of
scale in our industry that operates under a single, well-recognized brand over a contiguous
geographic area.
    
    Outsourced Services-Based Business Model.We provide vital services to electric
utilities, cooperatives and municipalities, which have increased their reliance on
outsourcing the maintenance and improvement of their distribution and transmission systems
to third-party service providers. Over 90% of our revenues are derived under master service
arrangements. We derive less than 5% of our revenues from fixed-price agreements relating
to large-scale capital improvement projects.
    
    Attractive, Contiguous End Markets.We operate in a contiguous geographic market that
includes the southeastern and south central United States. Our markets have exhibited
strong population growth and increases in electricity consumption, which have increased
demand for our services. Moreover, the contiguous nature of our service territory provides
us with significant benefits by increasing our operating efficiency and our flexibility to
respond to our customers needs.
    
    Recognized Leader in Storm Restoration Capabilities.Our 19-state market includes the
prime storm territories of the southeastern and south central United States. Throughout
our market, we are a leading provider of emergency services for storm restoration.
    
    Long-Standing Relationships Across a High-Quality Customer Base.We have a diverse,
well capitalized customer base that includes over 150 electric companies throughout our
service territory. We employ a
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customer-focused philosophy that has resulted in long-standing customer relationships. After
giving effect to the Red Simpson acquisition, our relationships with our top 15 customers
average approximately 33 years.
    
    Experienced Management Team with Demonstrated Operational Excellence.Our strong
management has led us to operational excellence, as demonstrated by our continuing success
in effectively growing our business, managing our costs, supervising our workforce and
deploying our fleet. Members of our senior management have been with us for an average of
approximately 22 years and most obtained significant operating experience prior to being
promoted to their current positions.
    
    Major Investments in Fleet and Safety.We have made significant investments in our
business to support our continued growth. In addition to investing in our fleet,
substantially all of which we own, we have invested in our employee safety and development
programs, establishing training and safety programs certified by the Department of Labor.
 Business Strategy
  
    
    Increased Penetration Within Our Existing Service Territory.We intend to continue to
increase our penetration and market share within our existing service territory by
expanding our existing customer relationships, attracting new customers and pursuing
selective acquisitions. We believe our quality service, modern fleet, regional presence,
storm restoration capabilities and strong safety record will enable us to develop our
business with both existing and prospective customers as they continue to further outsource
their servicing needs.
    
    Expand Our Service Territory.We intend to continue to grow our business by seeking new
opportunities from our existing customers that have operations outside our current service
territory, capturing new customers in other geographic markets and pursuing selective
acquisitions. In the last several years, we have successfully expanded our services into
Mississippi, Pennsylvania, Louisiana and Texas. In addition, our acquisition of Red Simpson
enabled us to add customer density in the south central market, primarily in Texas and
Louisiana, which had been a strategic objective. We also have been successful in acquiring
new customers after providing storm restoration services to them.
    
    Continued Focus on Distribution and Sub-500 kV Transmission.We will continue to focus
on the maintenance, upgrade and extension of electric distribution and sub-500 kV
transmission power lines. By focusing on the distribution and sub-500 kV transmission
sector of the industry and providing high-quality services to our customers, we believe
that we will be in a position to capture a significant share of the expected increased
amount of work in this market sector.
    
    Capitalize on Favorable Long-Term Industry Trends.We believe that we are well
positioned to benefit from expected long-term industry trends, which are described in more
detail above under the heading Industry Trends.
    
    Continued Focus on Operating Efficiency and Customer Service.We intend to use the
scale and scope of our capabilities to achieve higher levels of operating efficiency and
productivity while further enhancing our customer service. Additionally, we intend to use
our modern fleet, repair and maintenance capabilities and skilled workforce to increase our
cost competitiveness so that we may profitably win new business.
    
    Investment in Technology.We have recently completed the installation of four core
modules of a new accounting system. We are currently considering different alternatives for
a comprehensive Enterprise Resource Planning (ERP) system that would allow for a seamless interface between functions such
as accounting and finance, human resources, powerline operations, fleet management and
customer relationships. The ERP system is intended to improve and enhance our information
systems and to give us a technological advantage over competitors in our industry.
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Our Services
  Powerline Services.
   Storm Restoration Services.
   5




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Storm Revenue DataStorm
    
    Total
    
    Percentage ofYear
    
    
    Revenues
    
    Revenues
    
    Total Revenues(In millions)
    
    (In millions)2000
    
    
    $
    21.6
    
    
    $
    263.7
    
    
    
    8.2
    %2001
    
    
    
    25.3
    
    
    
    287.3
    
    
    
    8.8
    %2002
    
    
    
    7.0
    
    
    
    273.2
    
    
    
    2.6
    %2003
    
    
    
    46.6
    
    
    
    297.5
    
    
    
    15.7
    %2004
    
    
    
    43.0
    
    
    
    356.7
    
    
    
    12.1
    %2005
    
    
    
    149.2
    
    
    
    679.2
    
    
    
    22.0
    %2006
    
    
    
    185.3
    
    
    
    727.5
    
    
    
    25.5
    %
   Selected Storm MobilizationsApproximateNumber ofEmployees
    
    
    RestorationStorm
    
    Date
    
    
    Mobilized
    
    
    PeriodHurricanes or Tropical StormsHurricane Wilma (FL)
    
    October 2005
    
    
    1,600
    
    
    22 daysHurricane Rita (TX, LA)
    
    September 2005
    
    
    1,500
    
    
    18 daysHurricane Katrina (LA, MS, AL)
    
    September 2005
    
    
    3,100
    
    
    30 daysHurricane Dennis (FL)
    
    July 2005
    
    
    1,600
    
    
    6 daysHurricane Frances (FL, GA, NC, SC)
    
    September 2004
    
    
    1,800
    
    
    15 daysHurricane Ivan (AL, FL, GA, MS, SC, NC, VA)
    
    September 2004
    
    
    1,700
    
    
    9 daysHurricane Charley (FL, NC)
    
    August 2004
    
    
    2,000
    
    
    16 daysIce StormsIce Storm (NC, VA)
    
    February 2006
    
    
    275
    
    
    4 daysIce Storm (GA, NC, SC, VA)
    
    December 2005
    
    
    2,000
    
    
    7 daysIce Storm (OH)
    
    December 2004
    
    
    880
    
    
    11 daysIce Storm (IN)
    
    December 2004
    
    
    440
    
    
    9 days
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Customers
   Selected Long-Standing Customer Relationships
 Length ofCustomer
    
    Relationship(In years)Duke Energy
    
    
    60Cobb EMC
    
    
    49American Electric Power Company, Inc.
    
    
    48Snapping Shoals EMC
    
    
    44Greystone Power Corp.
    
    
    43Entergy Corporation
    
    
    41Dominion Virginia Power Co.
    
    
    33Progress Energy Carolinas (formerly Carolina Power
& Light Company)
    
    
    33TXU Corp.
    
    
    31Oglethorp Power Corp./ Georgia Transmission Corp.
    
    
    25
  Types of Service Arrangements
  7




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Seasonality
  Proprietary Rights
  Training, Quality Assurance and Safety
    Equipment
   8




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Employees
   Risk Management and Insurance
   Competition
   
    
    reputation and relationships with customers;
    
    history of service execution (for example, safety record, cost control, timing and experience);
    
    geographic presence and breadth of service offerings;
    
    investment in fleet and equipment;
    
    technological capabilities;
    
    storm restoration abilities and reputation;
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
    
    experience of management team;
    
    price; and
    
    the availability of qualified and/or licensed personnel.
  Government Regulation
  
    
    licensing requirements;
    
    building and electrical codes;
    
    permitting and inspection requirements applicable to construction projects;
    
    regulations relating to worker safety and health, including those in respect of OSHA; and
    
    regulations relating to environmental protection.
  Environmental Matters
  10




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Available Information
  FORWARD-LOOKING STATEMENTS
   
    
    our belief that future growth in demand for services generally will be driven by
increased demand for electricity due to growth in electricity consumption and population in
the southeastern and south central regions of the United States, increased outsourcing by
power suppliers and the need to correct the inadequacy of the current electric
infrastructure;
    
    our belief that our quality service, modern fleet, regional presence, storm restoration
capabilities and strong safety record will enable us to develop our business with both
existing and prospective customers as they continue to further outsource their servicing
needs;
    
    our belief that, by focusing on the distribution and sub-500 kV transmission sector of
the industry and providing high-quality services to our customers, we will be in a position
to capture a significant share of the expected increased amount of work in this market
sector;
    
    our belief that provisions of the Energy Policy Act of 2005 will lead to a more
efficient permitting process and could spur investment interest from non-utility entities
and that the repeal of PUHCA may lead to increased interest in outsourcing solutions, which
we believe will benefit our business due to the associated increases in maintenance,
extension and upgrade of distribution and sub-500 kV transmission lines;
    
    our belief that outsourcing by electric companies will continue in the future;
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
    
    our belief that the lawsuits, claims or other proceedings to which we are subject in the
ordinary course of business will not have a material adverse effect on the Companys
results of operation or financial position;
    
    our expectation that our general and administrative expenses will include additional
implementation costs relating to compliance with Section 404 of the Sarbanes-Oxley Act of
2002 and will range from $1.5 million to $2.5 million in fiscal 2007 compared to
approximately $0.7 million in fiscal 2006;
    
    our expectation that, as a result of the termination of employment of our former chief financial
officer on August 16, 2006, we expect to incur approximately $0.8 million in general and
administrative expenses in the first quarter of fiscal 2007 in accordance with the terms of
his employment arrangement;
    
    our belief that our cash flow from operations and borrowings available under our senior
credit facility will be adequate to meet our ordinary course liquidity needs for the
foreseeable future; and
    
    our expectation that our capital expenditures will range from $40 million to $60 million
for the year ended June 30, 2007 and our intention to fund those expenditures from
operating cash flow.
  
 ITEM 1A. RISK FACTORS
 Forward-Looking Statements.
 We derive a significant portion of our revenues from a small group of customers. The loss of
one or more of these customers could negatively impact our business and results of operations.
  Our customers often have no obligation to assign work to us, and many of our arrangements may
be terminated on short notice. As a result, we are at risk of losing significant business on short
notice. This risk may be accentuated for customers we obtained in the Red Simpson acquisition.
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Our storm restoration services are highly volatile and unpredictable, which could result in
substantial variations in, and uncertainties regarding, the levels of our financial results from
period to period.
 Storm Revenue DataPercentageStorm
    
    Total
    
    of TotalYear
    
    Revenues
    
    Revenues
    
    Revenues(In millions)
    
    (In millions)2000
    
    $
    21.6
    
    
    $
    263.7
    
    
    
    8.2
    %2001
    
    
    25.3
    
    
    
    287.3
    
    
    
    8.8
    %2002
    
    
    7.0
    
    
    
    273.2
    
    
    
    2.6
    %2003
    
    
    46.6
    
    
    
    297.5
    
    
    
    15.7
    %2004
    
    
    43.0
    
    
    
    356.7
    
    
    
    12.1
    %2005
    
    
    149.2
    
    
    
    679.2
    
    
    
    22.0
    %2006
    
    
    185.3
    
    
    
    727.5
    
    
    
    25.5
    %
  Our business is subject to numerous hazards that could subject us to substantial monetary and
other liabilities. If accidents occur, they could materially and adversely affect our business and
results of operations.
  Our current insurance coverage may not be adequate, and we may not be able to obtain insurance
at acceptable rates, or at all.
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Record high fuel costs could materially and adversely affect our operating results.
 Demand for some of our services is cyclical and vulnerable to industry and economic downturns,
which could materially and adversely affect our business and results of operations.
 The Energy Policy Act may fail to result in increased spending in the electric power
transmission infrastructure, which could slow our expected growth
 Failure to establish and maintain effective internal control over financial reporting could
have a material adverse effect on our business, operating results and stock price.
 To be successful, we need to attract and retain qualified personnel, and any inability to do
so would adversely affect our business.
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We are dependent on our senior management and other key personnel, the loss of which could
have a material adverse effect on our business.
 Our industry is highly competitive and we may be unable to compete effectively, retain our
customers or win new customers, which could result in reduced profitability and loss of market
share.
 We may be unsuccessful at acquiring companies or at integrating companies that we may acquire,
and as a result, we may not achieve the expected benefits and our profitability could materially
suffer.
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We have incurred a substantial amount of indebtedness under a senior credit facility, which
may restrict our business and operations, adversely affect our cash flow, and restrict our future
access to sufficient funding to finance desired growth.
    We are in the process of implementing certain financial and accounting applications and
investigating a company-wide ERP system which could temporarily
disrupt our day-to-day operations.
 During the ordinary course of our business, we may become subject to lawsuits or indemnity
claims, which could materially and adversely affect our business and results of operations.
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Our failure to comply with, or the imposition of liability under, environmental laws and
regulations could result in significant costs.
 The electric infrastructure servicing business is subject to seasonal variations, which may
cause our operating results to vary significantly from period to period and could cause the market
price of our stock to fall.
 Weather conditions can adversely affect our operations and revenues .
 We have incurred and will continue to incur increased costs as a result of being a public
company.
 Our results of operations could be adversely affected as a result of the impairment of
goodwill or other intangibles.
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Business Combinations
 Goodwill and Other Intangible Assets,
  The market price of our stock may be influenced by many factors, some of which are beyond our
control.
 
    
    the failure of securities analysts to continue to cover our common stock or changes in
financial estimates by analysts;
    
    announcements by us or our competitors of significant contracts, acquisitions or capital commitments;
    
    changes in market valuation or earnings of our competitors;
    
    variations in quarterly operating results;
    
    availability of capital;
    
    general economic conditions;
    
    terrorist acts;
    
    legislation;
    
    future sales of our common stock; and
    
    investor perception of us and the electric utility industry.
  18




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Shares eligible for future sale may cause the market price of our common stock to drop
significantly, even if our business is doing well.
    A significant stockholder controls the direction of our business. The concentrated ownership
of our common stock will prevent other stockholders from influencing significant corporate
decisions.
   Anti-takeover provisions of our charter and bylaws may reduce the likelihood of any potential
change of control or unsolicited acquisition proposal that stockholders might consider favorable.
 
    
    the authority of the board to issue preferred stock with terms as the board may determine;
    
    the absence of cumulative voting in the election of directors;
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
    
    limitations on who may call special meetings of stockholders; and
    
    advance notice requirements for stockholder proposals.
 
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 2. PROPERTIES
  
 ITEM 3. LEGAL PROCEEDINGS
    
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  20




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PART II
 
 ITEM 5.
    
    MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
 Market Information
  High
    
    LowFiscal 2006:First Quarter (beginning July 27, 2005)
    
    $
    20.40
    
    
    $
    13.60Second Quarter
    
    
    20.25
    
    
    
    15.50Third Quarter
    
    
    21.42
    
    
    
    16.12Fourth Quarter
    
    
    21.80
    
    
    
    15.95
  Dividend Policy
  Recent Sales of Unregistered Securities
  
 ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
   21




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Year Ended June 30,2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(in thousands, except per share amounts)Statement of Operations Data:Revenues
    
    $
    727,470
    
    
    $
    679,197
    
    
    $
    356,697
    
    
    $
    297,514
    
    
    $
    273,235Cost of operations(1)
    
    
    599,247
    
    
    
    585,354
    
    
    
    300,313
    
    
    
    247,204
    
    
    
    225,280Gross profit
    
    
    128,223
    
    
    
    93,843
    
    
    
    56,384
    
    
    
    50,310
    
    
    
    47,955General and administrative expenses(2)
    
    
    45,228
    
    
    
    47,867
    
    
    
    18,812
    
    
    
    16,783
    
    
    
    14,176Recapitalization expenses(3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    386
    
    
    
    10,893Loss (gain) on sale of property and
equipment
    
    
    2,250
    
    
    
    585
    
    
    
    265
    
    
    
    539
    
    
    
    (4
    )Income from operations
    
    
    80,745
    
    
    
    45,391
    
    
    
    37,307
    
    
    
    32,602
    
    
    
    22,890Other expense (income):Interest expense(4)
    
    
    24,272
    
    
    
    40,217
    
    
    
    9,192
    
    
    
    11,862
    
    
    
    2,802Other, net
    
    
    (220
    )
    
    
    (109
    )
    
    
    (19
    )
    
    
    (46
    )
    
    
    (267
    )Total other expense
    
    
    24,052
    
    
    
    40,108
    
    
    
    9,173
    
    
    
    11,816
    
    
    
    2,535Income before income taxes from
continuing operations
    
    
    56,693
    
    
    
    5,283
    
    
    
    28,134
    
    
    
    20,786
    
    
    
    20,355Income tax expense
    
    
    22,324
    
    
    
    8,469
    
    
    
    11,276
    
    
    
    8,335
    
    
    
    9,519Income (loss) from continuing operations
    
    
    34,369
    
    
    
    (3,186
    )
    
    
    16,858
    
    
    
    12,451
    
    
    
    10,836Loss from discontinued operations, net
of taxes(5)
    
    
    
    
    
    
    
    
    
    
    (330
    )
    
    
    (621
    )
    
    
    (324
    )Net income (loss)
    
    $
    34,369
    
    
    $
    (3,186
    )
    
    $
    16,528
    
    
    $
    11,830
    
    
    $
    10,512Decrease in redemption value of
mandatorily redeemable preferred
stock(6)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,071
    
    
    
    Net income (loss) available
(attributable) to common stockholders
    
    $
    34,369
    
    
    $
    (3,186
    )
    
    $
    16,528
    
    
    $
    23,901
    
    
    $
    10,512Basic earnings from continuing
operations per common share:Weighted average basic common shares
outstanding
    
    
    31,023
    
    
    
    27,709
    
    
    
    24,437
    
    
    
    24,437
    
    
    
    59,633Income (loss) from continuing
operations
    
    $
    1.11
    
    
    $
    (0.11
    )
    
    $
    0.69
    
    
    $
    0.51
    
    
    $
    0.18Diluted earnings from continuing
operations per common share:Weighted average diluted common shares
outstanding
    
    
    32,252
    
    
    
    27,709
    
    
    
    24,437
    
    
    
    24,437
    
    
    
    59,633Income (loss) from continuing
operations
    
    $
    1.07
    
    
    $
    (0.11
    )
    
    $
    0.69
    
    
    $
    0.51
    
    
    $
    0.18
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As of June 30,2006
    
    2005
    
    2004
    
    2003
    
    2002(in thousands)Balance Sheet Data:Cash and cash equivalents
    
    $
    3,391
    
    
    $
    3,106
    
    
    $
    4,937
    
    
    $
    3,637
    
    
    $
    99Working capital
    
    
    78,995
    
    
    
    69,421
    
    
    
    41,497
    
    
    
    41,372
    
    
    
    36,048Property and equipment, net
    
    
    284,452
    
    
    
    281,842
    
    
    
    190,600
    
    
    
    171,488
    
    
    
    174,500Total assets
    
    
    589,966
    
    
    
    592,455
    
    
    
    287,096
    
    
    
    245,248
    
    
    
    245,032Total current liabilities
    
    
    73,884
    
    
    
    82,307
    
    
    
    38,502
    
    
    
    20,810
    
    
    
    21,515Total long-term liabilities
    
    
    345,350
    
    
    
    509,665
    
    
    
    199,311
    
    
    
    192,103
    
    
    
    198,807Mandatorily redeemable preferred stock
    
    
    
    
    
    
    
    
    
    
    5,810
    
    
    
    5,429
    
    
    
    17,500Total stockholders equity(7)
    
    
    170,732
    
    
    
    483
    
    
    
    49,283
    
    
    
    32,335
    
    
    
    7,210Cash dividend per share of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 
 (1)
    
    Cost of operations for fiscal 2005 includes $21.1 million in deferred compensation charges
related to our acquisition of Red Simpson in July 2004.(2)
    
    General and administrative expenses for fiscal 2006 includes stock compensation expense of
approximately $2.3 million related to the adoption of SFAS 123R as of July 1, 2005. General
and administrative expenses for fiscal 2005 include: (i) $4.2 million of compensation expense
for common stock options repurchased from our management in connection with our December 2004
recapitalization, (ii) a $4.0 million charge for the termination of our management agreement
with Lindsay Goldberg & Bessemer, and (iii) $2.6 million related to the purchase by members of
Red Simpsons management of restricted shares of common stock in connection with the
acquisition of Red Simpson, due to the acceleration of deferred compensation benefits and the
subsequent repurchase of a portion of that restricted stock in the December 2004
recapitalization.(3)
    
    Recapitalization expenses represent costs incurred in connection with a recapitalization that
we effected in 2002.(4)
    
    Interest expense primarily includes interest expense related to outstanding debt as well as
(a) a $14.0 million charge in fiscal 2005 for the redemption of preferred stock and (b) the
write-off of unamortized deferred loan costs of $3.2 million and $6.7 million for fiscal 2006
and 2005, respectively, resulting from the prepayment of debt.(5)
    
    Loss from discontinued operations, net of taxes, represents losses from our industrial
division, which ceased operations during the year ended June 30, 2004.(6)
    
    The $12.1 million decrease in the redemption value of our Series A preferred stock during
fiscal 2003 occurred because we adjusted the carrying value of the Series A preferred stock to
$5.4 million from its original carrying value of $17.5 million at issuance in accordance with
the terms of the Series A preferred stock.(7)
    
    Total stockholders equity was effected in fiscal 2006 by our IPO, completed on August 1,
2005, of 10.0 million shares of common stock, in which we received approximately $122.0
million in net proceeds. Total stockholders equity was effected in fiscal 2005 by our sale of
common stock on July 1, 2004 for $71.0 million in connection with our acquisition of Red
Simpson, which was offset by our recapitalization in December 2004, pursuant to which we
acquired shares of our common stock for a total purchase price of $123.3 million. 23




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##### Table of Contents



ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our historical consolidated financial statements and
related notes thereto in Item 8 Financial Statements and Supplementary Data. The discussion below
contains forward-looking statements that are based upon our current expectations and are subject to
uncertainty and changes in circumstances. Actual results may differ materially from these
expectations due to inaccurate assumptions and known or unknown risks and uncertainties, including
those identified in Risk Factors.
 Overview
  Business Drivers and Measures
  Industry Trends.
 
    
    Growth in demand for electricity.Demand for
electricity is a direct driver of spending on electric distribution
and transmission infrastructure, which is driven by population
growth, economic expansion and the proliferation of electrical
devices. The southern census region of the United States, which forms
the majority of our market, has exhibited, and is forecasted to
continue to exhibit, more than double the population growth rate of
the midwest and northeast census regions, driving both increased
investment in the distribution and transmission infrastructure and
the related increase in maintenance requirements in our service
territory.
    
    Passage of the Energy Policy Act of 2005. On August 8, 2005, President Bush signed the
Energy Policy Act of 2005 into law. The Act includes provisions designed to improve
electric transmission capacity and reliability and incentives to encourage investment in
the transmission infrastructure. We believe that provisions in this Act will lead to a more
efficient permitting process, which should encourage investment in the transmission system.
Additionally, we believe that provisions of this Act could spur investment interest from
non-utility entities, which are likely to focus on reducing costs, while enabling utilities
to focus on their core competencies. Finally, we believe that this Act could lead to
increased interest in outsourcing solutions.
    
    Increased outsourcing of infrastructure services.There has been an increase in
outsourcing of electrical infrastructure maintenance and system improvements by electric
companies over the last decade as they have increasingly focused on their core
competencies. We believe outsourcing enables electric companies to manage their labor costs
more flexibly, improve the reliability of their systems and deploy their capital more
efficiently, and we expect the outsourcing trend to continue.
 24




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##### Table of Contents




    
    Inadequacy of current electric infrastructure.The current electric infrastructure is
increasingly viewed as inadequate, as more electricity is being transported over longer
distances utilizing a system that was designed for limited power sharing among neighboring utilities. We expect spending on
electrical transmission infrastructure to increase in order to cure historical
underinvestment, and we expect this increase to drive further work for us.
 Operational and Other Factors.
 
    
    When we add new customers and contracts, we generally experience an increase in costs,
including the costs of training and outfitting our crews and spending on equipment and
specialized tools and supplies. Once the crews and equipment are fully utilized, our
margins generally increase over the life of the contract.
    
    Industry-wide insurance costs for workmens compensation, medical and general liability
have risen in the past several years and are expected to continue to rise at a rate faster
than our revenues. We have implemented several safety initiatives designed to reduce
incident rates and corresponding insurance costs as well as introduced an employee safety
bonus in fiscal 2005 that has initially increased our costs.
    
    There are a limited number of skilled workers that can perform our work, and during
historic periods of increased demand, labor costs have tended to increase. We have been
experiencing an improved economic cycle, and we are currently experiencing shortages of
skilled personnel in certain markets. While shortages have caused our labor costs to
increase, we historically have been able to obtain increases when we renegotiate rates with
our customers to offset these cost increases.
    
    Our general and administrative expenses will include additional implementation costs
relating to compliance with Section 404 of the Sarbanes-Oxley Act of 2002 and will range
from $1.5 million to $2.5 million in fiscal 2007 compared to approximately $0.7 million in
fiscal 2006. In addition, as a result of the termination of employment of our former chief financial
officer on August 16, 2006, we expect to incur approximately $0.8 million in general and
administrative expenses in the first quarter of fiscal 2007 in accordance with the terms of
his employment arrangement.
    
    Fuel costs have risen significantly in the past year and are expected to continue to
rise at a rate faster than our revenues. We have a large fleet of vehicles and equipment
that primarily use diesel fuel. We have implemented bulk purchasing in certain areas to
hedge fuel costs. In addition, on May 5, 2006 we entered into swaps covering approximately
2.5 million gallons of our diesel requirements for the period from June 2006 through
February 2008.
 Services
    25




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##### Table of Contents



Storm Revenue DataPercentage
    
    Storm
    
    PercentagePowerline
    
    of Total
    
    Restoration
    
    of Total
    
    TotalYear
    
    Services
    
    Revenues
    
    Services
    
    Revenues
    
    Revenues(In millions)
    
    
    
    
    
    (In millions)
    
    
    
    
    
    (In millions)2000
    
    $
    242.1
    
    
    
    91.8
    %
    
    $
    21.6
    
    
    
    8.2
    %
    
    $
    263.72001
    
    
    262.0
    
    
    
    91.2
    %
    
    
    25.3
    
    
    
    8.8
    %
    
    
    287.32002
    
    
    266.2
    
    
    
    97.4
    %
    
    
    7.0
    
    
    
    2.6
    %
    
    
    273.22003
    
    
    250.9
    
    
    
    84.3
    %
    
    
    46.6
    
    
    
    15.7
    %
    
    
    297.52004
    
    
    313.7
    
    
    
    87.9
    %
    
    
    43.0
    
    
    
    12.1
    %
    
    
    356.72005
    
    
    530.0
    
    
    
    78.0
    %
    
    
    149.2
    
    
    
    22.0
    %
    
    
    679.22006
    
    
    542.2
    
    
    
    74.5
    %
    
    
    185.3
    
    
    
    25.5
    %
    
    
    727.5
 Seasonality; Fluctuations of Results
  Inflation
  Basis of Reporting
 Revenues.
  Cost of Operations.
 26




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##### Table of Contents



General and Administrative Expenses.
 Interest
Expense and Other, Net.
 Critical Accounting Policies
  Revenue Recognition.
  Allowance for Doubtful Accounts.
 Property, Plant and Equipment and Impairment of Long-Lived Assets.
 27




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##### Table of Contents



Accounting for the Impairment or Disposal of Long-Lived Assets.
 Valuation of Goodwill and Other Intangible Assets. Business
Combinations Recognition of Customer Relationship Intangible Assets Acquired in a Business
Combination.
 Goodwill and Other Intangible Assets
   Insurance and Claims Accruals.
 28




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##### Table of Contents



Stock-Based
Compensation. Share-Based Payment Accounting for Stock Based
Compensation Accounting for Stock Issued to Employees Statement of Cash
Flows,
    29




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##### Table of Contents



Results of Operations
  Pike Electric Corporation and Subsidiaries
Consolidated Statements of Operations
 Year Ended June 30,2006
    
    
    2005
    
    
    2004Revenues:Powerline services
    
    
    74.5
    %
    
    
    78.0
    %
    
    
    87.9
    %Storm restoration services
    
    
    25.5
    
    
    
    22.0
    
    
    
    12.1Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of operations
    
    
    82.4
    
    
    
    86.2
    
    
    
    84.2Gross profit
    
    
    17.6
    
    
    
    13.8
    
    
    
    15.8General and administrative expenses
    
    
    6.2
    
    
    
    7.0
    
    
    
    5.3Loss on sale of property and equipment
    
    
    0.3
    
    
    
    0.1
    
    
    
    Income from operations
    
    
    11.1
    %
    
    
    6.7
    %
    
    
    10.5
    %Other expense (income):Interest expense, net
    
    
    3.3
    
    
    
    5.9
    
    
    
    2.6Other, net
    
    
    
    
    
    
    
    
    
    
    Income before income tax from continuing operations
    
    
    7.8
    
    
    
    0.8
    
    
    
    7.9Income tax expense
    
    
    3.1
    
    
    
    1.3
    
    
    
    3.2Income (loss) from continuing operations
    
    
    4.7
    
    
    
    (0.5
    )
    
    
    4.7Loss from discontinued operations, net of taxes
    
    
    
    
    
    
    
    
    
    
    (0.1
    )Net income (loss)
    
    
    4.7
    %
    
    
    (0.5
    )%
    
    
    4.6
    %
 Year Ended June 30, 2006 Compared to Year Ended June 30, 2005
 Revenues.
   Gross Profit.
 30




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##### Table of Contents



General and Administrative Expenses.
 Loss on Sale of Property and Equipment .
 Interest Expense and Other, Net.
 Income Tax Expense.
 Net Income (Loss).
 Year Ended June 30, 2005 Compared to Year Ended June 30, 2004
 Revenues.
   31




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##### Table of Contents



Gross Profit.
 General and Administrative Expenses.
 Interest Expense and Other, Net.
 Income Tax Expense.
 Discontinued Operations.
 Net Income (Loss).
 Liquidity and Capital Resources
   32




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Changes in Cash Flows: 2006 Compared to 2005
 Year Ended June 30,2006
    
    2005(in millions)Net cash provided by operating activities
    
    $
    74.9
    
    
    $
    53.2Net cash used in investing activities
    
    $
    (40.9
    )
    
    $
    (241.5
    )Net cash (used in) provided by financing activities
    
    $
    (33.7
    )
    
    $
    186.5
    33




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##### Table of Contents



Changes in Cash Flows: 2005 Compared to 2004
 Year Ended June 30,2005
    
    2004(in millions)Net cash provided by operating activities from continuing operations
    
    $
    53.2
    
    
    $
    31.5Net cash used in investing activities from continuing operations
    
    $
    (241.5
    )
    
    $
    (41.8
    )Net cash provided by financing activities from continuing operations
    
    $
    186.5
    
    
    $
    10.0
    Capital Expenditures
  Senior Credit Facility
  34




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##### Table of Contents




    
    a minimum cash interest coverage ratio, based upon the ratio of consolidated EBITDA to
consolidated cash interest expense, of at least 3.50 to 1.00; and
    
    a maximum leverage ratio, based upon the ratio of consolidated funded debt to
consolidated EBITDA, of 4.50 to 1.00 through the quarter ending June 30, 2006, and
declining ratios thereafter.
  Preferred Stock
  Contractual Obligations and Other Commitments
  Payment Obligations by Fiscal Year Ended June 30,Total
    
    2007
    
    2008
    
    2009
    
    2010
    
    2011
    
    Thereafter(in
millions)Long-term debt obligations(1)
    
    $
    249.0
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    249.0Capital lease obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Revolving credit facility(2)
    
    
    4.5
    
    
    
    4.5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest payment obligations(3)
    
    
    107.5
    
    
    
    17.9
    
    
    
    17.9
    
    
    
    17.9
    
    
    
    17.9
    
    
    
    17.9
    
    
    
    18.0Operating lease obligations
    
    
    16.1
    
    
    
    2.4
    
    
    
    1.9
    
    
    
    1.8
    
    
    
    1.8
    
    
    
    1.7
    
    
    
    6.5Purchase obligations(4)
    
    
    12.3
    
    
    
    12.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Deferred compensation(5)
    
    
    22.5
    
    
    
    10.8
    
    
    
    6.3
    
    
    
    5.4
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    411.9
    
    
    $
    47.9
    
    
    $
    26.1
    
    
    $
    25.1
    
    
    $
    19.7
    
    
    $
    19.6
    
    
    $
    273.5
 
 (1)
    
    Includes only obligations to pay principal not interest expense.(2)
    
    Includes only obligation to pay principal not interest expense related to the revolving
portion of our senior credit facility. Although we are contractually required to pay this
amount by 2010, we expect to pay the balance in fiscal 2007.(3)
    
    Represents estimated interest payments to be made on our variable rate debt. All interest
payments assume that principal payments are made as originally scheduled. Interest rates
utilized to determine interest payments for variable rate debt are based upon our estimate of
future interest rates.(4)
    
    Consists of obligations to purchase vehicles and other machinery and equipment.(5)
    
    For a description of the deferred compensation obligation, see Note 14 of the Notes to
Consolidated Financial Statements. 35




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##### Table of Contents



Off-Balance Sheet Arrangements
    Recent Accounting Pronouncements
 Accounting Changes and Error Corrections, a
replacement of ABP Opinion No. 20, Accounting Changes, and FASB Statement No. 3, Reporting
Accounting Changes in Interim Financial Statements.
 Accounting for Conditional Asset Retirement
Obligations  an interpretation of FASB Statement No. 143, Accounting for Asset Retirement
Obligations conditional asset
retirement obligation,
 Accounting
for Uncertainty in Income Taxes Accounting for Income Taxes
 
 36




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##### Table of Contents



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    37




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##### Table of Contents



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 PageReport of Independent Registered Public Accounting Firm
    
    39Consolidated Balance Sheets
    
    40Consolidated Statements of Operations
    
    41Consolidated Statements of Stockholders Equity
    
    42Consolidated Statements of Cash Flows
    
    43Notes to Consolidated Financial Statements
    
    44
 38




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
      
 39




---



##### Table of Contents



PIKE ELECTRIC CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
(in thousands, except par value amount)
 June 30,2006
    
    
    2005ASSETSCurrent assets:Cash and cash equivalents
    
    $
    3,391
    
    
    $
    3,106Accounts receivable, net
    
    
    66,629
    
    
    
    60,690Work completed not billed, net
    
    
    56,430
    
    
    
    64,568Inventories
    
    
    8,041
    
    
    
    7,321Prepaid expenses and other
    
    
    5,928
    
    
    
    11,205Deferred income taxes
    
    
    12,460
    
    
    
    4,838Total current assets
    
    
    152,879
    
    
    
    151,728Property and equipment, net
    
    
    284,452
    
    
    
    281,842Goodwill
    
    
    94,402
    
    
    
    91,826Other intangibles, net
    
    
    49,978
    
    
    
    55,128Deferred loan costs, net
    
    
    6,265
    
    
    
    9,879Other assets
    
    
    1,990
    
    
    
    2,052Total assets
    
    $
    589,966
    
    
    $
    592,455LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    9,706
    
    
    $
    19,574Accrued compensation
    
    
    24,954
    
    
    
    24,586Accrued expenses and other
    
    
    5,243
    
    
    
    9,257Current portion of deferred compensation
    
    
    10,614
    
    
    
    12,202Current portion of insurance and claim accruals
    
    
    18,867
    
    
    
    4,938Current portion of long-term debt
    
    
    
    
    
    
    250Revolving credit facility
    
    
    4,500
    
    
    
    11,500Total current liabilities
    
    
    73,884
    
    
    
    82,307Long-term debt, net of current portion
    
    
    249,000
    
    
    
    407,750Insurance and claim accruals, net of current portion
    
    
    13,439
    
    
    
    13,484Deferred compensation, net of current portion
    
    
    10,378
    
    
    
    16,904Deferred income taxes
    
    
    72,333
    
    
    
    71,467Other liabilities
    
    
    200
    
    
    
    60Commitments and contingenciesStockholders equity:Common stock, par value $0.001 per share; 100,000
authorized shares; 32,577 and 21,484 shares issued
and outstanding at June 30, 2006 and 2005,
respectively
    
    
    6,426
    
    
    
    6,415Additional paid-in capital
    
    
    135,869
    
    
    
    105Unearned compensation
    
    
    
    
    
    
    (879
    )Retained earnings (accumulated deficit)
    
    
    28,437
    
    
    
    (5,158
    )Total stockholders equity
    
    
    170,732
    
    
    
    483Total liabilities and stockholders equity
    
    $
    589,966
    
    
    $
    592,455
  40




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##### Table of Contents



PIKE ELECTRIC CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
 Years Ended June 30,2006
    
    
    2005
    
    
    2004Revenues
    
    $
    727,470
    
    
    $
    679,197
    
    
    $
    356,697Cost of operations
    
    
    599,247
    
    
    
    585,354
    
    
    
    300,313Gross profit
    
    
    128,223
    
    
    
    93,843
    
    
    
    56,384General and administrative expenses
    
    
    45,228
    
    
    
    47,867
    
    
    
    18,812Loss on sale of property and equipment
    
    
    2,250
    
    
    
    585
    
    
    
    265Income from operations
    
    
    80,745
    
    
    
    45,391
    
    
    
    37,307Other expense (income):Interest expense
    
    
    24,272
    
    
    
    40,217
    
    
    
    9,192Other, net
    
    
    (220
    )
    
    
    (109
    )
    
    
    (19
    )Total other expense
    
    
    24,052
    
    
    
    40,108
    
    
    
    9,173Income before income taxes from continuing operations
    
    
    56,693
    
    
    
    5,283
    
    
    
    28,134Income tax expense
    
    
    22,324
    
    
    
    8,469
    
    
    
    11,276Income (loss) from continuing operations
    
    
    34,369
    
    
    
    (3,186
    )
    
    
    16,858Loss from discontinued operations, net of taxes
    
    
    
    
    
    
    
    
    
    
    (330
    )Net income (loss)
    
    $
    34,369
    
    
    $
    (3,186
    )
    
    $
    16,528Basic income (loss) per share:Income (loss) from continuing operations
    
    $
    1.11
    
    
    $
    (0.11
    )
    
    $
    0.69Loss from discontinued operations, net
    
    
    
    
    
    
    
    
    
    
    (0.01
    )Net income (loss)
    
    $
    1.11
    
    
    $
    (0.11
    )
    
    $
    0.68Weighted average basic common shares outstanding
    
    
    31,023
    
    
    
    27,709
    
    
    
    24,437Diluted income (loss) per share:Income (loss) from continuing operations
    
    $
    1.07
    
    
    $
    (0.11
    )
    
    $
    0.69Loss from discontinued operations, net
    
    
    
    
    
    
    
    
    
    
    (0.01
    )Net income (loss)
    
    $
    1.07
    
    
    $
    (0.11
    )
    
    $
    0.68Weighted average diluted common shares outstanding
    
    
    32,252
    
    
    
    27,709
    
    
    
    24,437
  41




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##### Table of Contents



PIKE ELECTRIC CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(in thousands)
 Common
    
    
    
    
    
    
    Additional
    
    
    UnearnedStock
    
    
    Common
    
    
    Paid-In
    
    
    Stock
    
    
    RetainedShares
    
    
    Stock
    
    
    Capital
    
    
    Compensation
    
    
    Earnings
    
    
    TotalBalance July 1, 2003
    
    
    24,437
    
    
    $
    1,656
    
    
    $
    508
    
    
    $
    
    
    
    $
    30,171
    
    
    $
    32,335Net income for year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,528
    
    
    
    16,528Equity compensation expense
    
    
    
    
    
    
    
    
    
    
    420
    
    
    
    
    
    
    
    
    
    
    
    420Balance June 30, 2004
    
    
    24,437
    
    
    $
    1,656
    
    
    $
    928
    
    
    $
    
    
    
    $
    46,699
    
    
    $
    49,283Net loss for year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,186
    )
    
    
    (3,186
    )Net proceeds from the sale of common stock
    
    
    11,498
    
    
    
    76,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    76,000Purchase of common stock
    
    
    (14,758
    )
    
    
    (73,241
    )
    
    
    (1,138
    )
    
    
    
    
    
    
    (48,905
    )
    
    
    (123,284
    )Employee stock compensation plans, net
    
    
    307
    
    
    
    2,000
    
    
    
    315
    
    
    
    (879
    )
    
    
    234
    
    
    
    1,670Balance June 30, 2005
    
    
    21,484
    
    
    $
    6,415
    
    
    $
    105
    
    
    $
    (879
    )
    
    $
    (5,158
    )
    
    $
    483Reclassification upon adoption of SFAS 123R
    
    
    
    
    
    
    
    
    
    
    (105
    )
    
    
    879
    
    
    
    (774
    )
    
    
    Net income for year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    34,369
    
    
    
    34,369Net proceeds from the sale of common stock
    
    
    10,000
    
    
    
    10
    
    
    
    124,930
    
    
    
    
    
    
    
    
    
    
    
    124,940Employee stock compensation plans, net
    
    
    1,093
    
    
    
    1
    
    
    
    10,939
    
    
    
    
    
    
    
    
    
    
    
    10,940Balance June 30, 2006
    
    
    32,577
    
    
    $
    6,426
    
    
    $
    135,869
    
    
    $
    
    
    
    $
    28,437
    
    
    $
    170,732
  42




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##### Table of Contents



PIKE ELECTRIC CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 Years Ended June 30,2006
    
    
    2005
    
    
    2004Cash flows from operating activities:Income (loss) from continuing operations
    
    $
    34,369
    
    
    $
    (3,186
    )
    
    $
    16,858Adjustments to reconcile income (loss) from continuing operations to
net cash provided by operating activities from continuing operations:Depreciation
    
    
    32,432
    
    
    
    32,604
    
    
    
    19,457Amortization
    
    
    5,150
    
    
    
    5,682
    
    
    
    Non-cash interest expense
    
    
    4,962
    
    
    
    21,787
    
    
    
    922Deferred income taxes
    
    
    (5,571
    )
    
    
    5,945
    
    
    
    5,570Unrealized (gain) loss on investments
    
    
    
    
    
    
    
    
    
    
    (465
    )Loss on sale of property and equipment
    
    
    2,250
    
    
    
    585
    
    
    
    265Equity compensation expense
    
    
    2,991
    
    
    
    1,670
    
    
    
    420Changes in assets and liabilities arising from continuing operations:Accounts receivable and work completed not billed
    
    
    1,592
    
    
    
    (18,091
    )
    
    
    (20,488
    )Inventories, prepaid expenses and other
    
    
    5,187
    
    
    
    (6,059
    )
    
    
    2,132Other assets
    
    
    49
    
    
    
    671
    
    
    
    313Insurance and claim accruals
    
    
    13,884
    
    
    
    (3,201
    )
    
    
    1,401Accounts payable and other
    
    
    (13,574
    )
    
    
    14,590
    
    
    
    5,075Deferred compensation
    
    
    (8,793
    )
    
    
    158
    
    
    
    Net cash provided by operating activities from continuing
operations
    
    
    74,928
    
    
    
    53,155
    
    
    
    31,460Cash flows from investing activities from continuing operations:Purchases of property and equipment
    
    
    (50,245
    )
    
    
    (49,988
    )
    
    
    (35,678
    )Business acquisitions, net of cash acquired
    
    
    
    
    
    
    (193,928
    )
    
    
    (6,994
    )Proceeds from sale of property and equipment
    
    
    9,369
    
    
    
    2,397
    
    
    
    901Net cash used in investing activities from continuing operations
    
    
    (40,876
    )
    
    
    (241,519
    )
    
    
    (41,771
    )Cash flows from financing activities from continuing operations:Principal payments on long-term debt
    
    
    (159,000
    )
    
    
    (179,000
    )
    
    
    (3,000
    )Proceeds from long-term debt
    
    
    
    
    
    
    450,000
    
    
    
    (Payments) borrowings on revolving credit facility, net
    
    
    (7,000
    )
    
    
    (1,500
    )
    
    
    13,000Redemption of mandatorily redeemable preferred stock
    
    
    
    
    
    
    (20,000
    )
    
    
    Repurchase of common stock
    
    
    
    
    
    
    (123,284
    )
    
    
    Net proceeds from sale of common stock
    
    
    128,865
    
    
    
    72,571
    
    
    
    Deferred loan costs
    
    
    (656
    )
    
    
    (12,254
    )
    
    
    Stock option tax benefit
    
    
    4,024
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    (15
    )Net cash (used in) provided by financing activities from continuing
operations
    
    
    (33,767
    )
    
    
    186,533
    
    
    
    9,985Net cash provided by discontinued operations
    
    
    
    
    
    
    
    
    
    
    1,626Net increase (decrease) in cash and cash equivalents
    
    
    285
    
    
    
    (1,831
    )
    
    
    1,300Cash and cash equivalents beginning of year
    
    
    3,106
    
    
    
    4,937
    
    
    
    3,637Cash and cash equivalents end of year
    
    $
    3,391
    
    
    $
    3,106
    
    
    $
    4,937
  43




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PIKE ELECTRIC CORPORATION AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For the years ended June 30, 2006, 2005 and 2004
(in thousands, except per share amounts)
 1. Organization and Business
 Organization
    Business
    For the Year Ended June 30,2006
    
    
    2005
    
    
    2004Powerline services
    
    $
    542,166
    
    
    
    74.5
    %
    
    $
    529,924
    
    
    
    78.0
    %
    
    $
    313,705
    
    
    
    87.9
    %Storm restoration services
    
    
    185,304
    
    
    
    25.5
    
    
    
    149,273
    
    
    
    22.0
    
    
    
    42,992
    
    
    
    12.1Total
    
    $
    727,470
    
    
    
    100.0
    %
    
    $
    679,197
    
    
    
    100.0
    %
    
    $
    356,697
    
    
    
    100.0
    %
 44




---



##### Table of Contents



2. Significant Accounting Policies
 Accounting Principles
  Principles of Consolidation
  Use of Estimates
  Cash and Cash Equivalents
  Revenue Recognition
   Allowance for Doubtful Accounts
  45




---



##### Table of Contents



Inventories
  Property and Equipment
  Accounting for the Impairment or Disposal of Long-Lived Assets.
 Accounting
for the Impairment or Disposal of Long-Lived Assets
 Valuation of Goodwill and Intangible Assets
 Business Combinations Recognition of Customer Relationship Intangible Assets Acquired in a Business Combination.
 Goodwill and Other Intangible Assets,
 46




---



##### Table of Contents



Insurance and Claim Accruals
   Stock-Based Compensation
 Share-Based Payment, Accounting for Stock Based Compensation Accounting for Stock
Issued to Employees Statement of Cash Flows
   47




---



##### Table of Contents



Years ended June 30,2006
    
    2005Dividend yield
    
    
    
    
    
    
    Risk-free interest rate
    
    
    4.06%  5.05
    %
    
    
    3.75
    %Volatility
    
    
    0.29
    
    
    
    0.45Expected life
    
    6.5 years
    
    
    6.0 years
  Years Ended June 30,2005
    
    
    2004Net (loss) income, as reported
    
    $
    (3,186
    )
    
    $
    16,528Add: Stock-based employee compensation expense
included in reported net (loss) income, net of
related income tax effects
    
    
    2,985
    
    
    
    420Less: Stock-based employee compensation expense
determined under fair value based method of all
awards, net of related income tax effects
    
    
    (1,880
    )
    
    
    (1,010
    )Pro forma net (loss) income
    
    $
    (2,081
    )
    
    $
    15,938Net (loss) income  basic and diluted, as reported
    
    $
    (0.11
    )
    
    $
    0.68Net (loss) income  basic and diluted, pro forma
    
    $
    (0.08
    )
    
    $
    0.65
 Earnings Per Share
  Deferred Loan Costs
  Income Taxes
 Accounting for Income Taxes.
 48




---



##### Table of Contents



Recent Accounting Pronouncements
 Accounting Changes and Error Corrections, a
replacement of ABP Opinion No. 20, Accounting Changes, and FASB Statement No. 3, Reporting
Accounting Changes in Interim Financial Statements.
 Accounting for Conditional Asset Retirement
Obligations  an interpretation of FASB Statement No. 143, Accounting for Asset Retirement
Obligations conditional asset
retirement obligation,
 Accounting
for Uncertainty in Income Taxes Accounting for Income Taxes
 3. Acquisitions
 Business Combinations.
 49




---



##### Table of Contents



Accounts receivable
    
    $
    35,042Work completed not billed
    
    
    7,027Other current assets
    
    
    18,569Property, plant & equipment
    
    
    76,048Goodwill
    
    
    91,399Identified intangible assets
    
    
    60,810Other non-current assets
    
    
    1,383Accounts payable and accrued expenses
    
    
    (18,368
    )Insurance payable
    
    
    (14,121
    )Deferred compensation
    
    
    (28,948
    )Deferred income taxes
    
    
    (34,913
    )Total net assets acquired
    
    $
    193,928
 Unaudited Pro Forma Financial Information
  Unaudited ProForma for theYear EndedJune 30, 2004Revenues
    
    $
    552,495Income from continuing operations
    
    
    22,067Weighted average basic and diluted common shares outstanding
    
    
    35,644Basic and diluted net income from continuing operations per share
    
    
    0.62
  4. Change in Capital Structure, Recapitalization and Initial Public Offering
  50




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##### Table of Contents



5. Property and Equipment
  EstimatedUsefulLives in
    
    June 30,Years
    
    2006
    
    
    2005Land
    
    
    
    $
    3,123
    
    
    $
    3,123Buildings
    
    15-39
    
    
    26,671
    
    
    
    26,143Vehicles
    
    5-12
    
    
    298,107
    
    
    
    291,967Machinery and equipment
    
    3-19
    
    
    104,160
    
    
    
    95,865Office equipment and furniture
    
    3-7
    
    
    6,736
    
    
    
    5,621Total
    
    
    
    
    438,797
    
    
    
    422,719Less: accumulated depreciation
    
    
    
    
    154,345
    
    
    
    140,877Property and equipment, net
    
    
    
    $
    284,452
    
    
    $
    281,842
   6. Goodwill and Intangible Assets
  June 30, 2006
    
    
    June 30, 2005Gross
    
    
    
    
    
    
    
    
    
    
    GrossCarrying
    
    
    Accumulated
    
    
    
    
    
    
    Carrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Net
    
    
    Amount
    
    
    Amortization
    
    
    NetGoodwill
    
    $
    94,402
    
    
    $
    
    
    
    $
    94,402
    
    
    $
    91,826
    
    
    $
    
    
    
    $
    91,826Intangible assets:Customer relationships
    
    
    43,220
    
    
    
    (1,617
    )
    
    
    41,603
    
    
    
    43,220
    
    
    
    (582
    )
    
    
    42,638Customer arrangements
    
    
    6,990
    
    
    
    (6,592
    )
    
    
    398
    
    
    
    6,990
    
    
    
    (3,922
    )
    
    
    3,068Non-compete agreements
    
    
    10,600
    
    
    
    (2,623
    )
    
    
    7,977
    
    
    
    10,600
    
    
    
    (1,178
    )
    
    
    9,422Intangible assets, net
    
    $
    60,810
    
    
    $
    (10,832
    )
    
    $
    49,978
    
    
    $
    60,810
    
    
    $
    (5,682
    )
    
    $
    55,128
 51




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##### Table of Contents



Year Ended June 30,
    
    Amount2007
    
    $
    3,9382008
    
    
    4,0522009
    
    
    4,0192010
    
    
    3,9322011
    
    
    4,259Thereafter
    
    
    29,778Total
    
    $
    49,978
  7. Debt
  June 30,2006
    
    
    2005Revolving credit facility
    
    $
    4,500
    
    
    $
    11,500Long-term debt:$300 million term loan
    
    $
    158,676
    
    
    $
    260,000$150 million term loan
    
    
    90,324
    
    
    
    148,000249,000
    
    
    
    408,000Less: current portion
    
    
    
    
    
    
    250Long-term debt
    
    $
    249,000
    
    
    $
    407,750
    52




---



##### Table of Contents



Amount2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    Thereafter
    
    $
    249,000Total
    
    $
    249,000
 Accounting for Derivatives and Hedging Activities
   8. Mandatorily Redeemable Preferred Stock
  53




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##### Table of Contents



Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity
  9. Income Taxes
  Years Ended June 30,2006
    
    
    2005
    
    
    2004Current
    
    $
    27,895
    
    
    $
    2,551
    
    
    $
    5,706Deferred
    
    
    (5,571
    )
    
    
    5,918
    
    
    
    5,570Total
    
    $
    22,324
    
    
    $
    8,469
    
    
    $
    11,276
  June 30,2006
    
    
    2005Deferred tax liabilities:Tax over book depreciation
    
    $
    (71,364
    )
    
    $
    (74,528
    )Tax over book amortization
    
    
    (13,411
    )
    
    
    (14,915
    )Other
    
    
    (524
    )
    
    
    (657
    )Total deferred tax liabilities
    
    
    (85,299
    )
    
    
    (90,100
    )Deferred tax assets:Deferred compensation
    
    
    8,332
    
    
    
    11,281Workers compensation
    
    
    10,619
    
    
    
    8,616Accrued vacation
    
    
    2,374
    
    
    
    2,238Recapitalization expenses
    
    
    252
    
    
    
    572Other
    
    
    3,849
    
    
    
    764Total deferred tax assets
    
    
    25,426
    
    
    
    23,471Net deferred tax liabilities
    
    $
    (59,873
    )
    
    $
    (66,629
    )
 54




---



##### Table of Contents



June 30,2006
    
    
    2005Current assets
    
    $
    12,460
    
    
    $
    4,838Non-current liabilities
    
    
    (72,333
    )
    
    
    (71,467
    )Net deferred tax liabilities
    
    $
    (59,873
    )
    
    $
    (66,629
    )
  Years Ended June 30,2006
    
    
    2005
    
    
    2004Computed tax at federal statutory rate
    
    $
    19,843
    
    
    
    35.0
    %
    
    $
    1,849
    
    
    
    35.0
    %
    
    $
    9,847
    
    
    
    35.0
    %State income taxes, net of federal benefit
    
    
    2,352
    
    
    
    4.2
    %
    
    
    875
    
    
    
    16.6
    %
    
    
    1,316
    
    
    
    4.7
    %Accretion of preferred stock
    
    
    
    
    
    
    
    
    
    
    4,967
    
    
    
    94.0
    %
    
    
    
    
    
    
    Allowance for income tax uncertainties
    
    
    300
    
    
    
    0.5
    %
    
    
    600
    
    
    
    11.4
    %
    
    
    
    
    
    
    Permanent differences
    
    
    (35
    )
    
    
    (0.1
    )%
    
    
    312
    
    
    
    5.9
    %
    
    
    96
    
    
    
    0.3
    %Credits and other
    
    
    (136
    )
    
    
    (0.2
    )%
    
    
    (134
    )
    
    
    (2.6
    )%
    
    
    17
    
    
    
    0.1
    %Net income tax expense
    
    $
    22,324
    
    
    
    39.4
    %
    
    $
    8,469
    
    
    
    160.3
    %
    
    $
    11,276
    
    
    
    40.1
    %
  10. Employee Benefit Plans
  11. Stock-Based Compensation
 Stock Option Plans
 Share-Based Payment Accounting for Stock Based Compensation Accounting for Stock
Issued to Employees Statement of Cash Flows
  55




---



##### Table of Contents



56




---



##### Table of Contents



Years ended June 30,2006
    
    2005Dividend yield
    
    
    
    
    
    
    Risk-free interest rate
    
    
    4.06%  5.05
    %
    
    
    3.75
    %Volatility
    
    
    0.29
    
    
    
    0.45Expected life
    
    6.5 years
    
    
    6.0 years
  WeightedAverageOptions
    
    
    Options
    
    
    Exercise
    
    
    ExerciseAvailable
    
    
    Outstanding
    
    
    Price
    
    
    PriceBalance at June 30, 2003
    
    
    127
    
    
    
    2,588
    
    
    $
    3.80
    
    
    $
    3.80Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance at June 30, 2004
    
    
    127
    
    
    
    2,588
    
    
    $
    3.80
    
    
    $
    3.80Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Authorized
    
    
    1,503
    
    
    
    
    
    
    
    
    
    
    
    Repurchased
    
    
    
    
    
    
    (1,186
    )
    
    
    3.80  6.51
    
    
    
    4.80Granted
    
    
    (1,503
    )
    
    
    1,503
    
    
    
    6.51
    
    
    
    6.51Balance at June 30, 2005
    
    
    127
    
    
    
    2,905
    
    
    $
    3.80  $6.51
    
    
    $
    4.80Exercised
    
    
    
    
    
    
    (879
    )
    
    
    3.80  14.00
    
    
    
    4.37Authorized
    
    
    1,750
    
    
    
    
    
    
    
    
    
    
    
    4.80Forfeited
    
    
    116
    
    
    
    (116
    )
    
    
    6.51  14.00
    
    
    
    10.02Granted
    
    
    (1,056
    )
    
    
    1,056
    
    
    
    14.00  19.64
    
    
    
    14.35Balance at June 30, 2006
    
    
    937
    
    
    
    2,966
    
    
    $
    3.80$19.64
    
    
    $
    8.12
  Options Outstanding
    
    
    Options ExercisableWeighted-AverageNumber of
    
    
    Weighted-
    
    
    Contractual Life
    
    
    Number of
    
    
    Weighted-Exercise

    
    Options
    
    
    Average Exercise
    
    
    Remaining
    
    
    Options
    
    
    Average Exerciseprice

    
    Outstanding
    
    
    Price
    
    
    (Years)
    
    
    Outstanding
    
    
    Price$
    3.80
    
    
    
    1,123
    
    
    $
    3.80
    
    
    
    5.8
    
    
    
    1,123
    
    
    $
    3.806.51
    
    
    
    850
    
    
    
    6.51
    
    
    
    8.3
    
    
    
    355
    
    
    
    6.5114.00
    
    
    
    907
    
    
    
    14.00
    
    
    
    9.1
    
    
    
    
    
    
    
    14.03
    
    
    
    9
    
    
    
    14.03
    
    
    
    9.1
    
    
    
    
    
    
    
    18.62
    
    
    
    64
    
    
    
    18.62
    
    
    
    9.3
    
    
    
    
    
    
    
    19.64
    
    
    
    13
    
    
    
    19.64
    
    
    
    9.9
    
    
    
    
    
    
    
    Total/Avg


    
    
    2,966
    
    
    $
    8.12
    
    
    
    7.6
    
    
    
    1,478
    
    
    $
    4.45
 57




---



##### Table of Contents



Year EndedNon-Qualified Stock Options:
    
    June 30, 2006Fair value of options granted during period expected to vest
    
    $
    5,197Aggregate intrinsic value of exercisable and nonvested options
expected to vest
    
    $
    30,967Number of nonvested options expected to vest
    
    
    1,265Weighted average price of nonvested options expected to vest
    
    $
    11.66Weighted average remaining life of nonvested options expected to vest
    
    
    9.0Intrinsic value of nonvested options expected to vest
    
    $
    9,654
    Non-Vested Restricted Stock
  Weighted AverageGrant-Date FairShares
    
    
    ValueNon-vested shares as of June 30, 2005
    
    
    180
    
    
    $
    6.81Granted
    
    
    199
    
    
    $
    14.69Vested
    
    
    (1
    )
    
    $
    14.00Forfeited
    
    
    (9
    )
    
    $
    14.00Non-vested shares as of June 30, 2006
    
    
    369
    
    
    $
    10.72
  Employee Stock Plans
   58




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##### Table of Contents



Fair Value of Equity Instruments
   12. Earnings Per Share
  Year Ended June 30,2006
    
    
    2005
    
    
    2004Income (loss) from
continuing
operations
    
    $
    34,369
    
    
    $
    (3,186
    )
    
    $
    16,858Loss from
discontinued
operations,
net
    
    
    
    
    
    
    
    
    
    
    (330
    )Net income (loss)
(numerator)
    
    $
    34,369
    
    
    $
    (3,186
    )
    
    $
    16,528Weighted-average
number of common
shares
(denominator)
    
    
    31,023
    
    
    
    27,709
    
    
    
    24,437Basic earnings
(loss) per common
share from
continuing
operations
    
    $
    1.11
    
    
    $
    (0.11
    )
    
    $
    0.69Loss per common
share from
discontinued
operations, net
    
    
    
    
    
    
    
    
    
    
    (0.01
    )Basic earnings
(loss) per common
share
    
    $
    1.11
    
    
    $
    (0.11
    )
    
    $
    0.68Weighted-average
number of common
shares
    
    
    31,023
    
    
    
    27,709
    
    
    
    24,437Potential common
stock arising from
stock options and
restricted
stock
    
    
    1,229
    
    
    
    
    
    
    
    Total
shares-diluted
(denominator)
    
    
    32,252
    
    
    
    27,709
    
    
    
    24,437Diluted earnings
(loss) per common
share from
continuing
operations
    
    $
    1.07
    
    
    $
    (0.11
    )
    
    $
    0.69Loss per diluted
share from
discontinued
operations, net
    
    
    
    
    
    
    
    
    
    
    (0.01
    )Diluted earnings
(loss) per common
share
    
    $
    1.07
    
    
    $
    (0.11
    )
    
    $
    0.68
 59




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##### Table of Contents



June 30,2006
    
    
    2005
    
    
    2004Common stock option Plan B
    
    
    
    
    
    
    1,227
    
    
    
    776Common stock option Plan A
    
    
    
    
    
    
    1,678
    
    
    
    1,812Common stock option 2005 Plan
    
    
    973
    
    
    
    
    
    
    
    973
    
    
    
    2,905
    
    
    
    2,588
 13. Leases
  2007
    
    $
    2,3572008
    
    
    1,8962009
    
    
    1,7822010
    
    
    1,7712011
    
    
    1,736Thereafter
    
    
    6,590$
    16,132
  14. Deferred Compensation Plan
   Using Cash
Flow Information and Present
 60




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##### Table of Contents



Values in Accounting Measurements.
    Base Deferred
    
    
    Bonus DeferredCompensation
    
    
    Compensation
    
    
    TotalAmounts payable in connection
with the acquisition of Red
Simpson
    
    $
    25,989
    
    
    $
    29,131
    
    
    $
    55,120Payments or other consideration
    
    
    (18,646
    )
    
    
    (4,419
    )
    
    
    (23,065
    )Forfeitures
    
    
    
    
    
    
    (752
    )
    
    
    (752
    )Face value at June 30, 2005
    
    $
    7,343
    
    
    $
    23,960
    
    
    $
    31,303Payments
    
    
    (7,343
    )
    
    
    (1,450
    )
    
    
    (8,793
    )Face value at June 30, 2006
    
    $
    
    
    
    $
    22,510
    
    
    $
    22,510
  2007
    
    
    10,7942008
    
    
    6,2922009
    
    
    5,424Total
    
    $
    22,510
  15. Discontinued Operations
   Year endedJune 30, 2004Revenue
    
    $
    1,933Operating loss
    
    
    (544
    )Income tax benefit
    
    
    214Loss from discontinued operations
    
    $
    (330
    )
 61




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##### Table of Contents



16. Financial Instruments
 Concentrations of Credit Risk
   Off-Balance Sheet Risk
  Fair Value of Financial Instruments
  Derivatives
 Accounting for
Derivatives and Hedging Activities
 17. Related Party Transactions and Agreements
 Stockholders Agreement
  Restrictions on Transfer of Shares.
 62




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##### Table of Contents



Corporate Governance.
 Registration Rights.
 Management Agreement
   18. Commitments and Contingencies
 Litigation
  Performance Bonds
  63




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##### Table of Contents



19.
Subsequent Event  Settlement of Litigation
  20. Quarterly DataUnaudited
  Quarter EndedSeptember 30,
    
    December 31,
    
    March 31,
    
    June 30,Fiscal 2006:Revenues
    
    $
    218,431
    
    
    $
    195,725
    
    
    $
    157,202
    
    
    $
    156,112Gross profit
    
    
    48,655
    
    
    
    39,434
    
    
    
    17,300
    
    
    
    22,834Net income
    
    
    17,515
    
    
    
    13,571
    
    
    
    288
    
    
    
    2,995Basic earnings per share
    
    $
    0.61
    
    
    $
    0.43
    
    
    $
    0.01
    
    
    $
    0.09Diluted earnings per share
    
    $
    0.58
    
    
    $
    0.41
    
    
    $
    0.01
    
    
    $
    0.09Fiscal 2005:Revenues
    
    $
    220,370
    
    
    $
    149,404
    
    
    $
    154,473
    
    
    $
    154,950Gross profit (loss)
    
    
    61,959
    
    
    
    16,356
    
    
    
    17,860
    
    
    
    (2,331
    )Net income (loss)
    
    
    24,199
    
    
    
    (1,470
    )
    
    
    (11,917
    )
    
    
    (13,998
    )Basic earnings (loss) per share
    
    $
    0.68
    
    
    $
    (0.04
    )
    
    $
    (0.56
    )
    
    $
    (0.65
    )Diluted earnings (loss) per share
    
    $
    0.67
    
    
    $
    (0.04
    )
    
    $
    (0.56
    )
    
    $
    (0.65
    )
  64




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##### Table of Contents



ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A. CONTROLS AND PROCEDURES
    
 ITEM 9B. OTHER INFORMATION
  
 Part III
 
 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
  
 ITEM 11. EXECUTIVE COMPENSATION
  
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
  
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
  
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  65




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##### Table of Contents



Part IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
  (1)
    
    Financial Statements: See Index to Consolidated
Financial Statements in Part II, Item 8 of this
Form 10-K.(2)
    
    Financial Statement Schedule: See Schedule II 
Valuation and Qualifying Accounts of this Form
10-K.(3)
    
    ExhibitsSee (b) below.
   66




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##### Table of Contents



SIGNATURES
  PIKE ELECTRIC CORPORATION 
(Registrant)Date: September 28, 2006
    By:
    /s/ J. Eric PikeJ. Eric PikeChairman, Chief Executive Officer and President  Signature
    
    Title
    
    Date/s/ J. Eric Pike

J. Eric Pike
    
    Chairman, Chief Executive Officer and President
    
    September 28, 2006/s/ Anthony K. Slater

Anthony K. Slater
    
    Chief Financial Officer and Secretary
    
    September 28, 2006/s/ James R. Helvey III

James R. Helvey III
    
    Director
    
    September 28, 2006/s/ Louis F. Terhar

Louis F. Terhar
    
    Director
    
    September 28, 2006/s/ Adam P. Godfrey

Adam P. Godfrey
    
    Director
    
    September 28, 2006/s/ Robert D. Lindsay

Robert D. Lindsay
    
    Director
    
    September 28, 2006/s/ Charles E. Bayless

Charles E. Bayless
    
    Director
    
    September 28, 2006Andrew J. Schindler
    
    Director
 67




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##### Table of Contents



EXHIBIT INDEX
 EXHIBITNO.
    
    DESCRIPTION3.1
    
    Certificate of Incorporation of Pike Electric Corporation
(Incorporated by reference to Exhibit 3.1 on our Registration
Statement on Form S-1/A filed July 11, 2005)3.2
    
    Bylaws of Pike Electric Corporation (Incorporated by reference to
Exhibit 3.2 on our Registration Statement on Form S-1/A filed July
11, 2005)4.1
    
    Specimen Stock Certificate (Incorporated by reference to Exhibit
4.1 on our Registration Statement on Form S-1/A filed July 22,
2005)10.1*
    
    2005 Employee Stock Purchase Plan (Incorporated by reference to
Exhibit 10.1 on our Registration Statement on Form S-1/A filed
June 3, 2005)10.2*
    
    2002 Stock Option Plan A (Incorporated by reference to Exhibit
10.2 on our Registration Statement on Form S-1/A filed June 3,
2005)10.3*
    
    2002 Stock Option Plan B (Incorporated by reference to Exhibit
10.3 on our Registration Statement on Form S-1/A filed June 3,
2005)10.4
    
    Amended and Restated Credit Agreement, dated as of July 1, 2004,
among Pike Holdings, Inc., Pike Electric, Inc. and the lenders
party thereto (Incorporated by reference to Exhibit 10.4 on our
Registration Statement on Form S-1/A filed June 3, 2005)10.5
    
    First Amendment to the Amended and Restated Credit Agreement,
dated as of December 10, 2004, among Pike Holdings, Inc., Pike
Electric, Inc. and the lenders party thereto (Incorporated by
reference to Exhibit 10.5 on our Registration Statement on Form
S-1/A filed June 3, 2005)10.6
    
    Stockholders Agreement, dated April 18, 2002, among Pike Holdings,
Inc., LGB Pike LLC, certain rollover holders and certain
management stockholders (Incorporated by reference to Exhibit 10.6
on our Registration Statement on Form S-1/A filed June 3, 2005)10.7
    
    Management Advisory Services Agreement, dated April 18, 2002,
between Pike Electric, Inc. and Goldberg Lindsay & Co. LLC
(Incorporated by reference to Exhibit 10.7 on our Registration
Statement on Form S-1/A filed June 3, 2005)10.8
    
    Amendment Agreement, dated as of July 1, 2004, to the Management
Advisory Services Agreement, dated April 18, 2002, between Pike
Electric, Inc. and Goldberg Lindsay & Co. LLC (Incorporated by
reference to Exhibit 10.8 on our Registration Statement on Form
S-1/A filed June 3, 2005)10.9*
    
    Amended and Restated Employment Agreement, dated as of July 20,
2005, between J. Eric Pike and Pike Electric Corporation
(Incorporated by reference to Exhibit 10.9 on our Registration
Statement on Form S-1/A filed July 22, 2005)10.10*
    
    Letter Agreement, dated as of March 15, 2002, between Joe B. Pike
and LGB Pike LLC (Incorporated by reference to Exhibit 10.10 on
our Registration Statement on Form S-1/A filed June 3, 2005)10.11
    
    Second Amendment to the Amended and Restated Credit Agreement,
dated as of June 27, 2005, among Pike Holdings, Inc., Pike
Electric, Inc. and the lenders party thereto (Incorporated by
reference to Exhibit 10.11 on our Registration Statement on Form
S-1/A filed July 11, 2005)10.12
    
    Termination Agreement, dated as of June 23, 2005, between Pike
Electric, Inc. and Goldberg Lindsay & Co. LLC (Incorporated by
reference to Exhibit 10.12 on our Registration Statement on Form
S-1/A filed July 11, 2005)10.13
    
    Addendum, dated June 13, 2005, to the Stockholders Agreement dated
April 18, 2002, among Pike Holdings, Inc., LGB Pike LLC, certain
rollover holders and certain management stockholders (Incorporated
by reference to Exhibit 10.13 on our Registration Statement on
Form S-1/A filed July 11, 2005)
 68




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##### Table of Contents



EXHIBITNO.
    
    DESCRIPTION10.14*
    
    2005 Omnibus Incentive Compensation Plan (Incorporated by
reference to Exhibit 10.15 on our Registration Statement on Form
S-1/A filed July 22, 2005)10.15*
    
    Amendment, dated July 21, 2005, to the Stockholders Agreement
dated April 18, 2002, among Pike Electric Corporation as successor
to Pike Holdings, Inc., LGB Pike II LLC as successor to LGB Pike
LLC, certain rollover holders and certain management stockholders
(Incorporated by reference to Exhibit 10.16 on our Registration
Statement on Form S-1/A filed July 22, 2005)10.16
    
    Third Amendment to the Amended and Restated Credit Agreement,
dated as of December 9, 2005, among Pike Holdings, Inc., Pike
Electric, Inc. and the lenders party thereto (Incorporated by
reference to Exhibit 10.1 on our Form 8-K filed December 13, 2005)10.17
    
    Revolving Commitment Increase Agreement, dated December 12, 2005,
by and between Pike Electric, Inc. and Bank of America, N.A.
(Incorporated by reference to Exhibit 10.2 on our Form 8-K filed
December 13, 2005)10.18
    
    Revolving Commitment Increase Agreement, dated December 12, 2005,
by and between Pike Electric, Inc. and First Tennessee Bank,
National Association (Incorporated by reference to Exhibit 10.3 on
our Form 8-K filed December 13, 2005)10.19
    
    Fourth Amendment to the Amended and Restated Credit Agreement,
dated February 28, 2006, among Pike Electric Corporation, Pike
Electric, Inc. and the lenders party thereto (Incorporated by
reference to Exhibit 10.1 on our Form 10-Q filed May 12, 2006)21.1
    
    List of subsidiaries of Pike Electric Corporation (filed herewith)23.1
    
    Consent of Ernst & Young LLP (filed herewith)31.1
    
    Certification of Periodic Report by Chief Executive Officer
pursuant to Rule 13a-14(a)/15d-14a and pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002 (filed herewith)31.2
    
    Certification of Periodic Report by Chief Financial Officer
pursuant to Rule 13a-14(a)/15d-14a and pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002 (filed herewith)32.1
    
    Certification of Periodic Report by Chief Executive Officer and
Chief Financial Officer pursuant to U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(filed herewith)
 
 *
    
    Indicates a management contract or compensatory plan or arrangement. 69




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##### Table of Contents



SCHEDULE II
 PIKE ELECTRIC CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED JUNE 30 2006, 2005 AND 2004
 Balance at
    
    Charged toBeginning of
    
    Revenue or
    
    
    
    
    
    Balance at EndDescription
    
    Period
    
    Expense
    
    Deductions
    
    of Period(in thousands)Year ended June 30, 2006:Allowance for doubtful accounts
    
    $
    236
    
    
    $
    4,133
    
    
    $
    (1,937
    )(1)
    
    $
    2,432Insurance claim reserve
    
    
    18,422
    
    
    
    41,407
    
    
    
    (27,523
    )(2)
    
    
    32,306Year ended June 30, 2005:Allowance for doubtful accounts
    
    $
    
    
    
    $
    2,816
    
    
    $
    (2,580
    )(1)
    
    $
    236Insurance claim reserve
    
    
    7,501
    
    
    
    47,124
    
    
    
    (36,203
    )(2)
    
    
    18,422Year ended June 30, 2004:Allowance for doubtful accounts
    
    $
    
    
    
    $
    660
    
    
    $
    (660
    )(1)
    
    $
    Insurance claim reserve
    
    
    6,100
    
    
    
    17,624
    
    
    
    (16,223
    )(2)
    
    
    7,501
 
 (1)
    
    Represents uncollectible accounts written off, net of recoveries.(2)
    
    Represents claim payments for self-insured claims. 70