##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


Form 10-Q


|   |  |                                                                                             
|-- |  | --------------------------------------------------------------------------------------------
|þ  |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934 
|  
|   |  | For the quarterly period ended September 30, 2005                                           
|  
|OR
|  
|o  |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
|  
|   |  | For the transition period
    from           to                                             

Commission file number 001-32164


INFRASOURCE SERVICES, INC.


(Exact name of registrant as specified in its charter)


|                                                                   |  |                                         
|------------------------------------------------------------------ |  | ----------------------------------------
|Delaware                                                           |  | 03-0523754                              
|(State or other jurisdiction of
    incorporation or organization) |  | (I.R.S. Employer
    Identification No.)

100 West Sixth Street, Suite 300, Media, PA


(Address of principal executive offices)


19063


(Zip Code)


(610) 480-8000


(Registrants telephone number, including area code)


þ o


o þ


o þ












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For the Quarter Ended September 30, 2005


FORM 10-Q


INFRASOURCE SERVICES, INC. AND SUBSIDIARIES


Table of Contents


|                                                                       |  |                                                                                                                         |    |        |    | 
|---------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------- | -- | ------ | -- | 
|                                                                       |  |                                                                                                                         |    | Page # |   
|                                                                       |  |                                                                                                                         |    |        |   
|Part I  FINANCIAL
    INFORMATION                                     |  |                                                                                                                         | 3  |       
|Item 1.                                                                |  | Financial Statements (Unaudited)                                                                                        |    |        | 3  | 
|                                                                       |  | Condensed Consolidated Balance Sheets at
    December 31, 2004 and September 30, 2005                                   |    |        | 3  | 
|                                                                       |  | Condensed Consolidated Statements of
    Operations for the three and nine months ended
    September 30, 2004 and 2005 |    |        | 4  | 
|                                                                       |  | Condensed Consolidated Statement of
    Shareholders Equity for the nine months ended
    September 30, 2005           |    |        | 5  | 
|                                                                       |  | Condensed Consolidated Statements of Cash
    Flows for the nine months ended September 30, 2004 and
    2005           |    |        | 6  | 
|                                                                       |  | Notes to Condensed Consolidated Financial
    Statements                                                                |    |        | 8  | 
|Item 2.                                                                |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                               |    |        | 21 | 
|Item 3.                                                                |  | Quantitative and Qualitative Disclosures
    About Market Risk                                                          |    |        | 35 | 
|Item 4.                                                                |  | Controls and Procedures                                                                                                 |    |        | 35 | 
|PART II  OTHER
    INFORMATION                                        |  |                                                                                                                         | 36 |       
|Item 1.                                                                |  | Legal Proceedings                                                                                                       |    |        | 36 | 
|Item 2.                                                                |  | Unregistered Sales of Equity Securities and
    Use of Proceeds                                                         |    |        | 36 | 
|Item 3.                                                                |  | Defaults Upon Senior Securities                                                                                         |    |        | 36 | 
|Item 4.                                                                |  | Submission of Matters to a Vote of Security
    Holders                                                                 |    |        | 36 | 
|Item 5.                                                                |  | Other Information                                                                                                       |    |        | 36 | 
|Item 6.                                                                |  | Exhibits                                                                                                                |    |        | 36 | 
|SIGNATURES                                                             |  |                                                                                                                         | 38 |       
|Rule 13a-14(a)/Rule 15d-14(a) Certification of Chief Executive Officer
|Rule 13a-14(a)/Rule 15d-14(a) Certification of Chief Financial Officer
|Certification pursuant to Section 1350 of Chapter 63                  



2



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##### Table of Contents






PART I  FINANCIAL INFORMATION







|        |                     
|------- | --------------------
|ITEM 1. | FINANCIAL STATEMENTS

INFRASOURCE SERVICES, INC. AND SUBSIDIARIES





Condensed Consolidated Balance Sheets


|                                                                                                |                                                                                                                                          |                            |         |         |               |   |         |         |         | 
|----------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------- | ------- | ------------- | - | ------- | ------- | ------- | 
|                                                                                                |                                                                                                                                          | December 31,               |         |         | September 30, |  
|                                                                                                |                                                                                                                                          | 2004                       |         |         | 2005          |  
|                                                                                                |                                                                                                                                          |                            |         |         |               |  
|                                                                                                |                                                                                                                                          | (Unaudited)                |        
|                                                                                                |                                                                                                                                          | (In thousands, except      |        
|                                                                                                |                                                                                                                                          | share data)                |        
|Current assets:                                                                                 |                                                                                                                                          |                            |         |         |               |   |         |        
|                                                                                                | Cash and cash equivalents                                                                                                                |                            | $       | 21,222  |               |   | $       | 2,520   |        
|                                                                                                | Restricted cash                                                                                                                          |                            |         | 5,000   |               |   |         |        |        
|                                                                                                | Contract receivables (less allowances for doubtful accounts of
    $3,305 and $2,868, respectively)                                      |                            |         | 104,840 |               |   |         | 138,731 |        
|                                                                                                | Costs and estimated earnings in excess of billings                                                                                       |                            |         | 59,640  |               |   |         | 105,933 |        
|                                                                                                | Inventories                                                                                                                              |                            |         | 9,864   |               |   |         | 10,504  |        
|                                                                                                | Deferred income taxes                                                                                                                    |                            |         | 2,886   |               |   |         | 2,125   |        
|                                                                                                | Other current assets                                                                                                                     |                            |         | 10,781  |               |   |         | 11,083  |        
|                                                                                                | Current assets  discontinued operations                                                                                                 |                            |         | 10,699  |               |   |         |        |        
|                                                                                                |                                                                                                                                          |                            |         |         |               |  
|                                                                                                |                                                                                                                                          | Total current assets       |         |         | 224,932       |   |         |         | 270,896 | 
|                                                                                                |                                                                                                                                          |                            |         |         |               |  
|Property and equipment (less accumulated depreciation of $30,636
    and $49,511, respectively) |                                                                                                                                          |                            | 143,532 |         |               |   | 144,070 |        
|Goodwill                                                                                        |                                                                                                                                          |                            | 134,478 |         |               |   | 134,750 |        
|Intangible assets (less accumulated amortization of $14,950 and
    $18,342, respectively)      |                                                                                                                                          |                            | 6,795   |         |               |   | 2,484   |        
|Deferred charges and other assets, net                                                          |                                                                                                                                          |                            | 11,766  |         |               |   | 11,851  |        
|Deferred income taxes                                                                           |                                                                                                                                          |                            | 1,187   |         |               |   |        |        
|Noncurrent assets  discontinued operations                                                     |                                                                                                                                          |                            | 1,732   |         |               |   |        |        
|                                                                                                |                                                                                                                                          |                            |         |         |               |  
|Total assets                                                                                    |                                                                                                                                          | $                          | 524,422 |         |               | $ | 564,051 |        
|                                                                                                |                                                                                                                                          |                            |         |         |               |  
|Current liabilities:                                                                            |                                                                                                                                          |                            |         |         |               |   |         |        
|                                                                                                | Current portion of long-term debt and capital lease obligations                                                                          |                            | $       | 900     |               |   | $       | 881     |        
|                                                                                                | Note payable  related party                                                                                                             |                            |         |        |               |   |         | 1,000   |        
|                                                                                                | Revolving credit facility borrowings                                                                                                     |                            |         |        |               |   |         | 27,000  |        
|                                                                                                | Other liabilities  related parties                                                                                                      |                            |         | 3,904   |               |   |         | 9,400   |        
|                                                                                                | Accounts payable                                                                                                                         |                            |         | 33,342  |               |   |         | 32,690  |        
|                                                                                                | Accrued compensation and benefits                                                                                                        |                            |         | 17,525  |               |   |         | 22,608  |        
|                                                                                                | Other current and accrued liabilities                                                                                                    |                            |         | 19,570  |               |   |         | 22,048  |        
|                                                                                                | Accrued insurance reserves                                                                                                               |                            |         | 26,042  |               |   |         | 28,229  |        
|                                                                                                | Billings in excess of costs and estimated earnings                                                                                       |                            |         | 10,728  |               |   |         | 11,685  |        
|                                                                                                | Deferred revenues                                                                                                                        |                            |         | 5,359   |               |   |         | 6,467   |        
|                                                                                                | Current liabilities  discontinued operations                                                                                            |                            |         | 8,526   |               |   |         |        |        
|                                                                                                |                                                                                                                                          |                            |         |         |               |  
|                                                                                                |                                                                                                                                          | Total current liabilities  |         |         | 125,896       |   |         |         | 162,008 | 
|                                                                                                |                                                                                                                                          |                            |         |         |               |  
|Long-term debt, net of current portion                                                          |                                                                                                                                          |                            | 83,878  |         |               |   | 83,219  |        
|Long-term debt  related party                                                                  |                                                                                                                                          |                            | 1,000   |         |               |   |        |        
|Deferred revenues                                                                               |                                                                                                                                          |                            | 16,935  |         |               |   | 16,629  |        
|Other long-term liabilities  related parties                                                   |                                                                                                                                          |                            | 8,493   |         |               |   |        |        
|Deferred income taxes                                                                           |                                                                                                                                          |                            |        |         |               |   | 3,322   |        
|Other long-term liabilities                                                                     |                                                                                                                                          |                            | 4,226   |         |               |   | 4,304   |        
|Non-current liabilities  discontinued operations                                               |                                                                                                                                          |                            | 11      |         |               |   |        |        
|                                                                                                |                                                                                                                                          |                            |         |         |               |  
|                                                                                                |                                                                                                                                          | Total liabilities          |         |         | 240,439       |   |         |         | 269,482 | 
|                                                                                                |                                                                                                                                          |                            |         |         |               |  
|Commitments and contingencies                                                                   |                                                                                                                                          |                            |         |         |               |   |         |        
|Shareholders equity:                                                                           |                                                                                                                                          |                            |         |         |               |   |         |        
|                                                                                                | Preferred stock, $.001 par value (authorized 
    12,000,000 shares; 0 shares issued and outstanding)                                   |                            |         |        |               |   |         |        |        
|                                                                                                | Common stock $.001 par value (authorized 
    120,000,000 shares; issued and outstanding 
    38,942,728 and 39,283,591, respectively) |                            |         | 39      |               |   |         | 39      |        
|                                                                                                | Treasury stock at cost (0 and 29,870 respectively)                                                                                       |                            |         |        |               |   |         | (137    | )      
|                                                                                                | Additional paid-in capital                                                                                                               |                            |         | 272,954 |               |   |         | 277,460 |        
|                                                                                                | Deferred compensation                                                                                                                    |                            |         | (329    | )             |   |         | (2,115  | )      
|                                                                                                | Retained earnings                                                                                                                        |                            |         | 10,911  |               |   |         | 18,809  |        
|                                                                                                | Accumulated other comprehensive income                                                                                                   |                            |         | 408     |               |   |         | 513     |        
|                                                                                                |                                                                                                                                          |                            |         |         |               |  
|                                                                                                |                                                                                                                                          | Total shareholders equity |         |         | 283,983       |   |         |         | 294,569 | 
|                                                                                                |                                                                                                                                          |                            |         |         |               |  
|Total liabilities and shareholders equity                                                      |                                                                                                                                          | $                          | 524,422 |         |               | $ | 564,051 |        
|                                                                                                |                                                                                                                                          |                            |         |         |               |  



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##### Table of Contents



INFRASOURCE SERVICES, INC. AND SUBSIDIARIES





Condensed Consolidated Statements of Operations


|                                                   |                                                                                                                                           |                                       |         |        |                    |   |         |                    |   |   |                    |        |  |   |         |        |  
|-------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------- | ------- | ------ | ------------------ | - | ------- | ------------------ | - | - | ------------------ | ------ |  | - | ------- | ------ | -
|                                                   |                                                                                                                                           | Three Months                          |         |        | Three Months       |   |         | Nine Months        |   |   | Nine Months        |       
|                                                   |                                                                                                                                           | Ended                                 |         |        | Ended              |   |         | Ended              |   |   | Ended              |       
|                                                   |                                                                                                                                           | September 30, 2004                    |         |        | September 30, 2005 |   |         | September 30, 2004 |   |   | September 30, 2005 |       
|                                                   |                                                                                                                                           |                                       |         |        |                    |   |         |                    |   |   |                    |       
|                                                   |                                                                                                                                           | (Unaudited)                           |        
|                                                   |                                                                                                                                           | (In thousands, except per share data) |        
|Contract revenues                                  |                                                                                                                                           | $                                     | 161,876 |        |                    | $ | 229,880 |                    |   | $ | 450,220            |        |  | $ | 642,180 |       
|Cost of revenues                                   |                                                                                                                                           |                                       | 136,194 |        |                    |   | 197,769 |                    |   |   | 377,205            |        |  |   | 570,622 |       
|                                                   |                                                                                                                                           |                                       |         |        |                    |   |         |                    |   |   |                    |       
|                                                   | Gross profit                                                                                                                              |                                       |         | 25,682 |                    |   |         | 32,111             |   |   |                    | 73,015 |  |   |         | 71,558 |  
|                                                   |                                                                                                                                           |                                       |         |        |                    |   |         |                    |   |   |                    |       
|Selling, general and administrative expenses       |                                                                                                                                           |                                       | 16,405  |        |                    |   | 20,354  |                    |   |   | 46,548             |        |  |   | 54,854  |       
|Merger related costs                               |                                                                                                                                           |                                       | (334    | )      |                    |   | 66      |                    |   |   | (334               | )      |  |   | 218     |       
|Provision (recoveries) of uncollectible accounts   |                                                                                                                                           |                                       | 104     |        |                    |   | 61      |                    |   |   | (367               | )      |  |   | 145     |       
|Amortization of intangible assets                  |                                                                                                                                           |                                       | 2,420   |        |                    |   | 1,001   |                    |   |   | 10,989             |        |  |   | 4,311   |       
|                                                   |                                                                                                                                           |                                       |         |        |                    |   |         |                    |   |   |                    |       
|                                                   | Income from operations                                                                                                                    |                                       |         | 7,087  |                    |   |         | 10,629             |   |   |                    | 16,179 |  |   |         | 12,030 |  
|Interest income                                    |                                                                                                                                           |                                       | 228     |        |                    |   | 132     |                    |   |   | 350                |        |  |   | 354     |       
|Interest expense and amortization of debt discount |                                                                                                                                           |                                       | (1,969  | )      |                    |   | (2,170  | )                  |   |   | (8,161             | )      |  |   | (5,872  | )     
|Loss on early extinguishment of debt               |                                                                                                                                           |                                       |        |        |                    |   |        |                    |   |   | (5,549             | )      |  |   |        |       
|Other income, net                                  |                                                                                                                                           |                                       | 1,390   |        |                    |   | 735     |                    |   |   | 2,253              |        |  |   | 5,749   |       
|                                                   |                                                                                                                                           |                                       |         |        |                    |   |         |                    |   |   |                    |       
|                                                   | Income before income taxes                                                                                                                |                                       |         | 6,736  |                    |   |         | 9,326              |   |   |                    | 5,072  |  |   |         | 12,261 |  
|Income tax expense                                 |                                                                                                                                           |                                       | 2,760   |        |                    |   | 4,021   |                    |   |   | 2,029              |        |  |   | 5,255   |       
|                                                   |                                                                                                                                           |                                       |         |        |                    |   |         |                    |   |   |                    |       
|                                                   | Income from continuing operations                                                                                                         |                                       |         | 3,976  |                    |   |         | 5,305              |   |   |                    | 3,043  |  |   |         | 7,006  |  
|Discontinued operations:                           |                                                                                                                                           |                                       |         |        |                    |   |         |                    |   |   |                    |        |  |   |         |       
|                                                   | Income (loss) from discontinued operations (net of income tax
    provision (benefit) of $282, $(359), $289 and $(625),
    respectively) |                                       |         | 483    |                    |   |         | (529               | ) |   |                    | 461    |  |   |         | (898   | )
|                                                   | Gain on disposition of discontinued operations (net of income
    tax provision of $413, $1,432, $413 and $1,432, respectively)           |                                       |         | 593    |                    |   |         | 1,790              |   |   |                    | 593    |  |   |         | 1,790  |  
|                                                   |                                                                                                                                           |                                       |         |        |                    |   |         |                    |   |   |                    |       
|Net income                                         |                                                                                                                                           | $                                     | 5,052   |        |                    | $ | 6,566   |                    |   | $ | 4,097              |        |  | $ | 7,898   |       
|                                                   |                                                                                                                                           |                                       |         |        |                    |   |         |                    |   |   |                    |       
|Basic income per share:                            |                                                                                                                                           |                                       |         |        |                    |   |         |                    |   |   |                    |        |  |   |         |       
|                                                   | Income from continuing operations                                                                                                         |                                       | $       | 0.10   |                    |   | $       | 0.14               |   |   | $                  | 0.09   |  |   | $       | 0.18   |  
|                                                   | Income (loss) from discontinued operations                                                                                                |                                       |         | 0.01   |                    |   |         | (0.01              | ) |   |                    | 0.01   |  |   |         | (0.02  | )
|                                                   | Gain on disposition of discontinued operations                                                                                            |                                       |         | 0.02   |                    |   |         | 0.04               |   |   |                    | 0.02   |  |   |         | 0.04   |  
|                                                   |                                                                                                                                           |                                       |         |        |                    |   |         |                    |   |   |                    |       
|                                                   | Net income                                                                                                                                |                                       | $       | 0.13   |                    |   | $       | 0.17               |   |   | $                  | 0.12   |  |   | $       | 0.20   |  
|                                                   |                                                                                                                                           |                                       |         |        |                    |   |         |                    |   |   |                    |       
|                                                   | Weighted average basic common shares outstanding                                                                                          |                                       |         | 38,690 |                    |   |         | 39,139             |   |   |                    | 33,924 |  |   |         | 39,059 |  
|                                                   |                                                                                                                                           |                                       |         |        |                    |   |         |                    |   |   |                    |       
|Diluted income per share:                          |                                                                                                                                           |                                       |         |        |                    |   |         |                    |   |   |                    |        |  |   |         |       
|                                                   | Income from continuing operations                                                                                                         |                                       | $       | 0.10   |                    |   | $       | 0.13               |   |   | $                  | 0.09   |  |   | $       | 0.18   |  
|                                                   | Income (loss) from discontinued operations                                                                                                |                                       |         | 0.01   |                    |   |         | (0.01              | ) |   |                    | 0.01   |  |   |         | (0.02  | )
|                                                   | Gain on disposition of discontinued operations                                                                                            |                                       |         | 0.02   |                    |   |         | 0.04               |   |   |                    | 0.02   |  |   |         | 0.04   |  
|                                                   |                                                                                                                                           |                                       |         |        |                    |   |         |                    |   |   |                    |       
|                                                   | Net income                                                                                                                                |                                       | $       | 0.13   |                    |   | $       | 0.16               |   |   | $                  | 0.12   |  |   | $       | 0.20   |  
|                                                   |                                                                                                                                           |                                       |         |        |                    |   |         |                    |   |   |                    |       
|                                                   | Weighted average diluted common shares outstanding                                                                                        |                                       |         | 39,653 |                    |   |         | 40,090             |   |   |                    | 34,918 |  |   |         | 40,008 |  
|                                                   |                                                                                                                                           |                                       |         |        |                    |   |         |                    |   |   |                    |       



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##### Table of Contents



INFRASOURCE SERVICES, INC. AND SUBSIDIARIES





Condensed Consolidated Statement of Shareholders
Equity


|                                                      |  |                                      |            |  |                |   |    |            |  |             |          |   |       |               |      |   |              |   |         |        |  |   |          |   |  |       |     |  |  |   |        |  |  |   |         | 
|----------------------------------------------------- |  | ------------------------------------ | ---------- |  | -------------- | - | -- | ---------- |  | ----------- | -------- | - | ----- | ------------- | ---- | - | ------------ | - | ------- | ------ |  | - | -------- | - |  | ----- | --- |  |  | - | ------ |  |  | - | ------- | 
|                                                      |  |                                      |            |  |                |   |    |            |  | Accumulated |          |   |       |               |     
|                                                      |  | Common Stock                         |            |  | Treasury Stock |   |    | Additional |  |             |          |   | Other |               |      |   |              |  
|                                                      |  |                                      |            |  |                |   |    | Paid-In    |  |             | Deferred |   |       | Comprehensive |      |   | Retained     |   |         |       
|                                                      |  | Shares                               |            |  | Amount         |   |    | Shares     |  |             | Amount   |   |       | Capital       |      |   | Compensation |   |         | Income |  |   | Earnings |   |  | Total |    
|                                                      |  |                                      |            |  |                |   |    |            |  |             |          |   |       |               |      |   |              |   |         |        |  |   |          |   |  |       |    
|                                                      |  | (Unaudited)                          |           
|                                                      |  | (In thousands, except share amounts) |           
|Balance as of December 31, 2004                       |  |                                      | 38,942,728 |  |                | $ | 39 |            |  |             |         |   |       | $             |     |   |              | $ | 272,954 |        |  | $ | (329     | ) |  | $     | 408 |  |  | $ | 10,911 |  |  | $ | 283,983 | 
|Vesting of early exercised options                    |  |                                      | 98,285     |  |                |   |   |            |  |             |         |   |       |               |     |   |              |   | 452     |        |  |   |         |   |  |       |    |  |  |   |       |  |  |   | 452     | 
|Treasury stock                                        |  |                                      | 29,870     |  |                |   |   |            |  |             | (29,870  | ) |       |               | (137 | ) |              |   | 137     |        |  |   |         |   |  |       |    |  |  |   |       |  |  |   |        | 
|Unearned compensation                                 |  |                                      |           |  |                |   |   |            |  |             |         |   |       |               |     |   |              |   | 2,092   |        |  |   | (2,092   | ) |  |       |    |  |  |   |       |  |  |   |        | 
|Amortization of unearned compensation                 |  |                                      |           |  |                |   |   |            |  |             |         |   |       |               |     |   |              |   |        |        |  |   | 306      |   |  |       |    |  |  |   |       |  |  |   | 306     | 
|Stock options exercised                               |  |                                      | 135,704    |  |                |   |   |            |  |             |         |   |       |               |     |   |              |   | 686     |        |  |   |         |   |  |       |    |  |  |   |       |  |  |   | 686     | 
|Income tax benefit from options exercised             |  |                                      |           |  |                |   |   |            |  |             |         |   |       |               |     |   |              |   | 457     |        |  |   |         |   |  |       |    |  |  |   |       |  |  |   | 457     | 
|Issuance of shares under employee stock purchase plan |  |                                      | 77,004     |  |                |   |   |            |  |             |         |   |       |               |     |   |              |   | 682     |        |  |   |         |   |  |       |    |  |  |   |       |  |  |   | 682     | 
|Net income                                            |  |                                      |           |  |                |   |   |            |  |             |         |   |       |               |     |   |              |   |        |        |  |   |         |   |  |       |    |  |  |   | 7,898  |  |  |   | 7,898   | 
|Other comprehensive income                            |  |                                      |           |  |                |   |   |            |  |             |         |   |       |               |     |   |              |   |        |        |  |   |         |   |  |       | 105 |  |  |   |       |  |  |   | 105     | 
|                                                      |  |                                      |            |  |                |   |    |            |  |             |          |   |       |               |      |   |              |   |         |        |  |   |          |   |  |       |    
|Balance as of September 30, 2005                      |  |                                      | 39,283,591 |  |                | $ | 39 |            |  |             | (29,870  | ) |       | $             | (137 | ) |              | $ | 277,460 |        |  | $ | (2,115   | ) |  | $     | 513 |  |  | $ | 18,809 |  |  | $ | 294,569 | 
|                                                      |  |                                      |            |  |                |   |    |            |  |             |          |   |       |               |      |   |              |   |         |        |  |   |          |   |  |       |    



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##### Table of Contents



INFRASOURCE SERVICES, INC. AND SUBSIDIARIES





Condensed Consolidated Statements of Cash Flows


|                                                                                                      |                                                                                                      |                                                                                  |                                                         |                                                                                            |                    |         |         |         |        |         |         |  
|----------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------- | ------------------------------------------------------- | ------------------------------------------------------------------------------------------ | ------------------ | ------- | ------- | ------- | ------ | ------- | ------- | -
|                                                                                                      |                                                                                                      | Nine Months                                                                      |                                                         |                                                                                            | Nine Months        |        
|                                                                                                      |                                                                                                      | Ended                                                                            |                                                         |                                                                                            | Ended              |        
|                                                                                                      |                                                                                                      | September 30, 2004                                                               |                                                         |                                                                                            | September 30, 2005 |        
|                                                                                                      |                                                                                                      |                                                                                  |                                                         |                                                                                            |                    |        
|                                                                                                      |                                                                                                      | (Unaudited)                                                                      |                                                        
|                                                                                                      |                                                                                                      | (In thousands)                                                                   |                                                        
|Cash flows used in operating activities:                                                              |                                                                                                      |                                                                                  |                                                         |                                                                                            |                    |         |         |        
|                                                                                                      | Income from continuing operations                                                                    |                                                                                  | $                                                       | 3,043                                                                                      |                    |         | $       | 7,006   |       
|                                                                                                      | Adjustments to reconcile income from continuing operations to
    cash used in operating activities: |                                                                                  |                                                         |                                                                                            |                    |         |         |         |       
|                                                                                                      |                                                                                                      | Depreciation                                                                     |                                                         |                                                                                            | 17,577             |         |         |         | 20,714 |        
|                                                                                                      |                                                                                                      | Amortization of intangibles                                                      |                                                         |                                                                                            | 10,989             |         |         |         | 4,311  |        
|                                                                                                      |                                                                                                      | Deferred income taxes                                                            |                                                         |                                                                                            | (7,827             | )       |         |         | 5,121  |        
|                                                                                                      |                                                                                                      | Gain on sale of fixed assets                                                     |                                                         |                                                                                            | (1,247             | )       |         |         | (1,837 | )      
|                                                                                                      |                                                                                                      | Loss on early extinguishment of debt                                             |                                                         |                                                                                            | 5,549              |         |         |         |       |        
|                                                                                                      |                                                                                                      | Reversal of litigation judgment                                                  |                                                         |                                                                                            |                   |         |         |         | (4,279 | )      
|                                                                                                      |                                                                                                      | Other                                                                            |                                                         |                                                                                            | (1,179             | )       |         |         | (243   | )      
|                                                                                                      |                                                                                                      | Changes in operating assets and liabilities, net of effects of
    acquisitions: |                                                         |                                                                                            |                    |         |         |         |        |        
|                                                                                                      |                                                                                                      |                                                                                  | Contract receivables, net                               |                                                                                            |                    | (13,892 | )       |         |        | (34,035 | )      
|                                                                                                      |                                                                                                      |                                                                                  | Contract receivables due from related parties, net      |                                                                                            |                    | 14,617  |         |         |        |        |        
|                                                                                                      |                                                                                                      |                                                                                  | Costs and estimated earnings in excess of billings, net |                                                                                            |                    | (34,598 | )       |         |        | (45,336 | )      
|                                                                                                      |                                                                                                      |                                                                                  | Inventories                                             |                                                                                            |                    | (2,112  | )       |         |        | (639    | )      
|                                                                                                      |                                                                                                      |                                                                                  | Other current assets                                    |                                                                                            |                    | 3,514   |         |         |        | 3,755   |        
|                                                                                                      |                                                                                                      |                                                                                  | Deferred charges and other assets                       |                                                                                            |                    | 2,660   |         |         |        | 311     |        
|                                                                                                      |                                                                                                      |                                                                                  | Accounts payable                                        |                                                                                            |                    | 3,024   |         |         |        | (652    | )      
|                                                                                                      |                                                                                                      |                                                                                  | Other liabilities  related parties                     |                                                                                            |                    |        |         |         |        | (2,988  | )      
|                                                                                                      |                                                                                                      |                                                                                  | Other current and accrued liabilities                   |                                                                                            |                    | (9,772  | )       |         |        | 8,309   |        
|                                                                                                      |                                                                                                      |                                                                                  | Accrued insurance reserves                              |                                                                                            |                    | 3,873   |         |         |        | 2,187   |        
|                                                                                                      |                                                                                                      |                                                                                  | Deferred revenue                                        |                                                                                            |                    | 6,013   |         |         |        | 802     |        
|                                                                                                      |                                                                                                      |                                                                                  | Other liabilities                                       |                                                                                            |                    | (674    | )       |         |        | (165    | )      
|                                                                                                      |                                                                                                      |                                                                                  |                                                         |                                                                                            |                    |        
|                                                                                                      |                                                                                                      |                                                                                  |                                                         | Net cash flows used in operating activities from continuing
    operations                 |                    |         | (442    | )       |        |         | (37,658 | )
|                                                                                                      |                                                                                                      | Gain on sale of discontinued operations                                          |                                                         |                                                                                            | (1,006             | )       |         |         | (3,222 | )      
|                                                                                                      |                                                                                                      |                                                                                  |                                                         | Net cash flows provided by (used in) operating activities from
    discontinued operations |                    |         | 2,141   |         |        |         | (362    | )
|                                                                                                      |                                                                                                      |                                                                                  |                                                         |                                                                                            |                    |        
|                                                                                                      |                                                                                                      |                                                                                  |                                                         | Net cash flows provided by (used in) operating activities                                  |                    |         | 693     |         |        |         | (41,242 | )
|                                                                                                      |                                                                                                      |                                                                                  |                                                         |                                                                                            |                    |        
|Cash flows used in investing activities:                                                              |                                                                                                      |                                                                                  |                                                         |                                                                                            |                    |         |         |        
|                                                                                                      | Acquisitions of businesses, net of cash acquired                                                     |                                                                                  |                                                         | (49,571                                                                                    | )                  |         |         | (38     | )     
|                                                                                                      | Proceeds from restricted cash                                                                        |                                                                                  |                                                         |                                                                                           |                    |         |         | 5,000   |       
|                                                                                                      | Proceeds from sale of discontinued operations                                                        |                                                                                  |                                                         | 8,616                                                                                      |                    |         |         | 7,117   |       
|                                                                                                      | Proceeds from sales of equipment                                                                     |                                                                                  |                                                         | 3,299                                                                                      |                    |         |         | 4,091   |       
|                                                                                                      | Additions to property and equipment                                                                  |                                                                                  |                                                         | (17,283                                                                                    | )                  |         |         | (21,681 | )     
|                                                                                                      |                                                                                                      |                                                                                  |                                                         |                                                                                            |                    |        
|                                                                                                      |                                                                                                      |                                                                                  |                                                         | Net cash flows used in investing activities from continuing
    operations                 |                    |         | (54,939 | )       |        |         | (5,511  | )
|                                                                                                      |                                                                                                      |                                                                                  |                                                         | Net cash flows used in investing activities from discontinued
    operations               |                    |         | (653    | )       |        |         | (197    | )
|                                                                                                      |                                                                                                      |                                                                                  |                                                         |                                                                                            |                    |        
|                                                                                                      |                                                                                                      |                                                                                  |                                                         | Net cash flows used in investing activities                                                |                    |         | (55,592 | )       |        |         | (5,708  | )
|                                                                                                      |                                                                                                      |                                                                                  |                                                         |                                                                                            |                    |        
|Cash flows from financing activities:                                                                 |                                                                                                      |                                                                                  |                                                         |                                                                                            |                    |         |         |        
|                                                                                                      | Increase in revolving credit facility borrowings                                                     |                                                                                  |                                                         | 4,000                                                                                      |                    |         |         | 27,000  |       
|                                                                                                      | Repayments of long-term debt and capital lease obligations                                           |                                                                                  |                                                         | (83,766                                                                                    | )                  |         |         | (679    | )     
|                                                                                                      | Proceeds from exercise of stock options and employee stock
    purchase plan                         |                                                                                  |                                                         | 2,250                                                                                      |                    |         |         | 1,368   |       
|                                                                                                      | Proceeds from sale of common stock                                                                   |                                                                                  |                                                         | 128,093                                                                                    |                    |         |         |        |       
|                                                                                                      |                                                                                                      |                                                                                  |                                                         |                                                                                            |                    |        
|                                                                                                      |                                                                                                      |                                                                                  |                                                         | Net cash flows provided by financing activities from continuing
    operations             |                    |         | 50,577  |         |        |         | 27,689  |  
|                                                                                                      |                                                                                                      |                                                                                  |                                                         | Net cash flows used in financing activities from discontinued
    operations               |                    |         | (1,000  | )       |        |         |        |  
|                                                                                                      |                                                                                                      |                                                                                  |                                                         |                                                                                            |                    |        
|                                                                                                      |                                                                                                      |                                                                                  |                                                         | Net cash flows provided by financing activities                                            |                    |         | 49,577  |         |        |         | 27,689  |  
|                                                                                                      |                                                                                                      |                                                                                  |                                                         |                                                                                            |                    |        
|Cash and cash equivalents:                                                                            |                                                                                                      |                                                                                  |                                                         |                                                                                            |                    |         |         |        
|                                                                                                      | Net decrease in cash and cash equivalents                                                            |                                                                                  |                                                         | (5,322                                                                                     | )                  |         |         | (19,261 | )     
|                                                                                                      | Cash and cash equivalents transferred (to) from
    discontinued operations                          |                                                                                  |                                                         | (488                                                                                       | )                  |         |         | 559     |       
|                                                                                                      | Cash and cash equivalents  beginning of period                                                      |                                                                                  |                                                         | 12,013                                                                                     |                    |         |         | 21,222  |       
|                                                                                                      |                                                                                                      |                                                                                  |                                                         |                                                                                            |                    |        
|                                                                                                      | Cash and cash equivalents  end of period                                                            |                                                                                  | $                                                       | 6,203                                                                                      |                    |         | $       | 2,520   |       
|                                                                                                      |                                                                                                      |                                                                                  |                                                         |                                                                                            |                    |        
|The accompanying notes are an integral part of these condensed
    consolidated financial statements.

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##### Table of Contents



|                                                                                                                   |  |                    |         |   |                    |   |     |  
|------------------------------------------------------------------------------------------------------------------ |  | ------------------ | ------- | - | ------------------ | - | --- | -
|                                                                                                                   |  | Nine Months        |         |   | Nine Months        |  
|                                                                                                                   |  | Ended              |         |   | Ended              |  
|                                                                                                                   |  | September 30, 2004 |         |   | September 30, 2005 |  
|                                                                                                                   |  |                    |         |   |                    |  
|                                                                                                                   |  | (Unaudited)        |        
|                                                                                                                   |  | (In thousands)     |        
|Supplemental Disclosure of Non-Cash Investing and Financing
    Activities:                                        |  |                    |         |   |                    |   |     |  
|Distribution of property and equipment owed to related party                                                       |  | $                  | 7,218   |   |                    | $ |    |  
|Loss on early extinguishment of the note payable to Exelon                                                         |  |                    | 5,549   |   |                    |   |    |  
|Acquisition of all the voting interests of Maslonka for $77,571
    in
    January, 2004                           |  |                    |         |   |                    |   |     |  
|Assets acquired and liabilities assumed were as follows:                                                           |  |                    |         |   |                    |   |     |  
|Fair value of assets acquired                                                                                      |  |                    | 41,093  |   |                    |   |    |  
|Goodwill                                                                                                           |  |                    | 59,644  |   |                    |   |    |  
|Liability to sellers for taxes and cash holdback                                                                   |  |                    | (1,704  | ) |                    |   |    |  
|Liabilities assumed                                                                                                |  |                    | (23,166 | ) |                    |   |    |  
|Equity issued to sellers                                                                                           |  |                    | (50,671 | ) |                    |   |    |  
|Cash paid for acquisition, net of cash acquired                                                                    |  |                    | (25,196 | ) |                    |   |    |  
|Acquisition of substantially all of the assets of Utilitrax for
    $5,168 in
    August, 2004                     |  |                    |         |   |                    |   |     |  
|Assets acquired and liabilities assumed were as follows:                                                           |  |                    |         |   |                    |   |     |  
|Fair value of assets acquired                                                                                      |  | $                  | 3,073   |   |                    | $ |    |  
|Goodwill                                                                                                           |  |                    | 2,319   |   |                    |   |    |  
|Receivable from seller for management agreements                                                                   |  |                    | 290     |   |                    |   |    |  
|Liabilities assumed                                                                                                |  |                    | (224    | ) |                    |   |    |  
|Cash paid for acquisition, net of cash acquired                                                                    |  |                    | (5,458  | ) |                    |   |    |  
|Acquisition of substantially all of the assets of certain
    EnStructure companies for $21,208 in September, 2004 |  |                    |         |   |                    |   |     |  
|In conjunction with this acquisition, assets acquired and
    liabilities assumed were as follows:                 |  |                    |         |   |                    |   |     |  
|Fair value of assets acquired                                                                                      |  | $                  | 22,431  |   |                    | $ | 38  |  
|Receivable from seller for management agreements                                                                   |  |                    | 535     |   |                    |   |    |  
|Liability to sellers for cash holdback                                                                             |  |                    | (2,000  | ) |                    |   |    |  
|Liabilities assumed                                                                                                |  |                    | (1,223  | ) |                    |   |    |  
|Cash paid for acquisition, net of cash acquired                                                                    |  |                    | (19,743 | ) |                    |   | (38 | )



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INFRASOURCE SERVICES, INC. AND SUBSIDIARIES





Notes to Condensed Consolidated Financial Statements


(Unaudited)




|   |                                       
|-- | --------------------------------------
|1. | Organization and Basis of Presentation











|   |                                          
|-- | -----------------------------------------
|2. | Recently Issued Accounting Pronouncements



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INFRASOURCE SERVICES, INC. AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)












|   |             
|-- | ------------
|3. | Acquisitions



| |         
| | --------
| | Maslonka



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INFRASOURCE SERVICES, INC. AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)










| |           
| | ----------
| | Utili-Trax





| |            
| | -----------
| | EnStructure



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INFRASOURCE SERVICES, INC. AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)




| |                                
| | -------------------------------
| | Pro Forma Financial Information



|                                                   |  |               |         |  |               |   |         |  
|-------------------------------------------------- |  | ------------- | ------- |  | ------------- | - | ------- | -
|                                                   |  | Three Months  |         |  | Nine Months   |  
|                                                   |  | Ended         |         |  | Ended         |  
|                                                   |  | September 30, |         |  | September 30, |  
|                                                   |  | 2004          |         |  | 2004          |  
|                                                   |  |               |         |  |               |  
|Contract revenues                                  |  | $             | 176,470 |  |               | $ | 509,453 |  
|Net income (loss)                                  |  |               | 3,058   |  |               |   | (18,244 | )
|Earnings Per Share Data:                           |  |               |         |  |               |   |         |  
|Weighted average basic common shares outstanding   |  |               | 38,690  |  |               |   | 34,974  |  
|Weighted average diluted common shares outstanding |  |               | 39,653  |  |               |   | 34,974  |  
|Basic net income (loss) per share                  |  | $             | 0.08    |  |               | $ | (0.52   | )
|Diluted net income (loss) per share                |  |               | 0.08    |  |               |   | (0.52   | )







|   |                        
|-- | -----------------------
|4. | Discontinued Operations





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INFRASOURCE SERVICES, INC. AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)






|                                       |                      |                |       |        |               |   |   |   | 
|-------------------------------------- | -------------------- | -------------- | ----- | ------ | ------------- | - | - | - | 
|                                       |                      | December 31,   |       |        | September 30,
|                                       |                      | 2004           |       |        | 2005         
|                                       |                      |                |       |        |              
|                                       |                      | (In thousands)
|Cash and cash equivalents              |                      | $              | 559   |        |               | $ |  |  
|Contract receivables, net              |                      |                | 6,153 |        |               |   |  |  
|Other current assets                   |                      |                | 3,987 |        |               |   |  |  
|                                       |                      |                |       |        |               |  
|                                       | Total current assets |                |       | 10,699 |               |   |   |  | 
|Property and equipment, net            |                      |                | 1,626 |        |               |   |  |  
|Other long-term assets, net            |                      |                | 106   |        |               |   |  |  
|                                       |                      |                |       |        |               |  
|                                       | Total assets         |                |       | 12,431 |               |   |   |  | 
|                                       |                      |                |       |        |               |  
|Accounts payable and other liabilities |                      |                | 8,526 |        |               |   |  |  
|Deferred income taxes  long term      |                      |                | 11    |        |               |   |  |  
|                                       |                      |                |       |        |               |  
|                                       | Total liabilities    |                |       | 8,537  |               |   |   |  | 
|                                       |                      |                |       |        |               |  
|Net assets                             |                      | $              | 3,894 |        |               | $ |  |  
|                                       |                      |                |       |        |               |  



|                      |  |                |        |  |               |   |       |               |  |   |               |  |  |   |        |  
|--------------------- |  | -------------- | ------ |  | ------------- | - | ----- | ------------- |  | - | ------------- |  |  | - | ------ | -
|                      |  | Three Months   |        |  | Three Months  |   |       | Nine Months   |  |   | Nine Months   | 
|                      |  | Ended          |        |  | Ended         |   |       | Ended         |  |   | Ended         | 
|                      |  | September 30,  |        |  | September 30, |   |       | September 30, |  |   | September 30, | 
|                      |  | 2004           |        |  | 2005          |   |       | 2004          |  |   | 2005          | 
|                      |  |                |        |  |               |   |       |               |  |   |               | 
|                      |  | (In thousands) |       
|Contract revenues     |  | $              | 14,450 |  |               | $ | 1,436 |               |  | $ | 35,283        |  |  | $ | 12,769 |  
|Pre-tax income (loss) |  |                | 765    |  |               |   | (888  | )             |  |   | 750           |  |  |   | (1,523 | )



|   |                                                                           
|-- | --------------------------------------------------------------------------
|5. | Costs And Estimated Earnings In Excess Of Billings and
    Contract Losses





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INFRASOURCE SERVICES, INC. AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)




|   |                               
|-- | ------------------------------
|6. | Goodwill and Intangible Assets



|                               |                      |                |         |         |               |   |         |         |  
|------------------------------ | -------------------- | -------------- | ------- | ------- | ------------- | - | ------- | ------- | -
|                               |                      | December 31,   |         |         | September 30, |  
|                               |                      | 2004           |         |         | 2005          |  
|                               |                      |                |         |         |               |  
|                               |                      | (In thousands) |        
|Goodwill                       |                      | $              | 134,478 |         |               | $ | 134,750 |        
|                               |                      |                |         |         |               |  
|Intangible assets:             |                      |                |         |         |               |   |         |        
|                               | Construction backlog |                | $       | 17,184  |               |   | $       | 16,265  |  
|                               | Volume agreements    |                |         | 4,561   |               |   |         | 4,561   |  
|                               |                      |                |         |         |               |  
|Total intangible assets        |                      |                | 21,745  |         |               |   | 20,826  |        
|                               |                      |                |         |         |               |  
|Accumulated amortization:      |                      |                |         |         |               |   |         |        
|                               | Construction backlog |                |         | (13,491 | )             |   |         | (15,426 | )
|                               | Volume agreements    |                |         | (1,459  | )             |   |         | (2,916  | )
|                               |                      |                |         |         |               |  
|Total accumulated amortization |                      |                | (14,950 | )       |               |   | (18,342 | )      
|                               |                      |                |         |         |               |  
|Intangible assets, net         |                      | $              | 6,795   |         |               | $ | 2,484   |        
|                               |                      |                |         |         |               |  









|                                                                                             |  |                |       | 
|-------------------------------------------------------------------------------------------- |  | -------------- | ----- | 
|                                                                                             |  | (In thousands) |      
|                                                                                             |  |                |      
|For the year ended December 31, 2005 (excludes the nine
    months ended September 30, 2005) |  | $              | 562   | 
|2006                                                                                         |  |                | 1,078 | 
|2007                                                                                         |  |                | 458   | 
|2008                                                                                         |  |                | 227   | 
|2009                                                                                         |  |                | 159   | 
|                                                                                             |  |                |      
|Total                                                                                        |  | $              | 2,484 | 
|                                                                                             |  |                |      

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INFRASOURCE SERVICES, INC. AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)




|   |     
|-- | ----
|7. | Debt





|   |                                  
|-- | ---------------------------------
|8. | Computation of Per Share Earnings



|                                                                                                                            |  |                                          |        |  |               |   |        |               |  |   |               |  |  |   |        |  
|--------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------- | ------ |  | ------------- | - | ------ | ------------- |  | - | ------------- |  |  | - | ------ | -
|                                                                                                                            |  | Three Months                             |        |  | Three Months  |   |        | Nine Months   |  |   | Nine Months   | 
|                                                                                                                            |  | Ended                                    |        |  | Ended         |   |        | Ended         |  |   | Ended         | 
|                                                                                                                            |  | September 30,                            |        |  | September 30, |   |        | September 30, |  |   | September 30, | 
|                                                                                                                            |  | 2004                                     |        |  | 2005          |   |        | 2004          |  |   | 2005          | 
|                                                                                                                            |  |                                          |        |  |               |   |        |               |  |   |               | 
|                                                                                                                            |  | (In thousands, except per share amounts) |       
|Income from continuing operations (numerator)                                                                               |  | $                                        | 3,976  |  |               | $ | 5,305  |               |  | $ | 3,043         |  |  | $ | 7,006  |  
|Income (loss) from discontinued operations, net of tax expense
    (benefit) of $282, $(359), $289 and $(625), respectively |  |                                          | 483    |  |               |   | (529   | )             |  |   | 461           |  |  |   | (898   | )
|Gain on disposition of discontinued operations, net of tax of
    $413, $1,432, $413 and $1,432, respectively               |  |                                          | 593    |  |               |   | 1,790  |               |  |   | 593           |  |  |   | 1,790  |  
|                                                                                                                            |  |                                          |        |  |               |   |        |               |  |   |               | 
|Net income                                                                                                                  |  | $                                        | 5,052  |  |               | $ | 6,566  |               |  | $ | 4,097         |  |  | $ | 7,898  |  
|                                                                                                                            |  |                                          |        |  |               |   |        |               |  |   |               | 
|Weighted average basic common shares outstanding (denominator)                                                              |  |                                          | 38,690 |  |               |   | 39,139 |               |  |   | 33,924        |  |  |   | 39,059 |  
|Potential common stock arising from stock options                                                                           |  |                                          | 963    |  |               |   | 951    |               |  |   | 994           |  |  |   | 949    |  
|                                                                                                                            |  |                                          |        |  |               |   |        |               |  |   |               | 
|Weighted average diluted common shares outstanding (denominator)                                                            |  |                                          | 39,653 |  |               |   | 40,090 |               |  |   | 34,918        |  |  |   | 40,008 |  
|                                                                                                                            |  |                                          |        |  |               |   |        |               |  |   |               | 
|Basic net income per share                                                                                                  |  | $                                        | 0.13   |  |               | $ | 0.17   |               |  | $ | 0.12          |  |  | $ | 0.20   |  
|Diluted net income per share                                                                                                |  |                                          | 0.13   |  |               |   | 0.16   |               |  |   | 0.12          |  |  |   | 0.20   |  





|   |                         
|-- | ------------------------
|9. | Stock-Based Compensation



14



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INFRASOURCE SERVICES, INC. AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)




|                                                                                                                                                     |  |                                          |       |   |               |   |       |               |  |   |               |   |  |   |       |  
|---------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------- | ----- | - | ------------- | - | ----- | ------------- |  | - | ------------- | - |  | - | ----- | -
|                                                                                                                                                     |  | Three Months                             |       |   | Three Months  |   |       | Nine Months   |  |   | Nine Months   |  
|                                                                                                                                                     |  | Ended                                    |       |   | Ended         |   |       | Ended         |  |   | Ended         |  
|                                                                                                                                                     |  | September 30,                            |       |   | September 30, |   |       | September 30, |  |   | September 30, |  
|                                                                                                                                                     |  | 2004                                     |       |   | 2005          |   |       | 2004          |  |   | 2005          |  
|                                                                                                                                                     |  |                                          |       |   |               |   |       |               |  |   |               |  
|                                                                                                                                                     |  | (In thousands, except per share amounts) |      
|Net income as reported                                                                                                                               |  | $                                        | 5,052 |   |               | $ | 6,566 |               |  | $ | 4,097         |   |  | $ | 7,898 |  
|Deduct: Total stock-based employee compensation expense
    determined under fair value based method for all awards, net of
    relative tax effects |  |                                          | (226  | ) |               |   | (328  | )             |  |   | (635          | ) |  |   | (478  | )
|Add: Total stock-based employee compensation expense, net of
    related tax effects included in the determination of net income
    as reported     |  |                                          | 20    |   |               |   | 155   |               |  |   | 208           |   |  |   | 175   |  
|                                                                                                                                                     |  |                                          |       |   |               |   |       |               |  |   |               |  
|Pro forma net income                                                                                                                                 |  | $                                        | 4,846 |   |               | $ | 6,393 |               |  | $ | 3,670         |   |  | $ | 7,595 |  
|                                                                                                                                                     |  |                                          |       |   |               |   |       |               |  |   |               |  
|Basic and diluted income per share:                                                                                                                  |  |                                          |       |   |               |   |       |               |  |   |               |   |  |   |       |  
|Basic net income per share  as reported                                                                                                             |  | $                                        | 0.13  |   |               | $ | 0.17  |               |  | $ | 0.12          |   |  | $ | 0.20  |  
|Basic net income per share  pro forma                                                                                                               |  |                                          | 0.13  |   |               |   | 0.16  |               |  |   | 0.11          |   |  |   | 0.19  |  
|Diluted net income per share  as reported                                                                                                           |  |                                          | 0.13  |   |               |   | 0.16  |               |  |   | 0.12          |   |  |   | 0.20  |  
|Diluted net income per share  pro forma                                                                                                             |  |                                          | 0.12  |   |               |   | 0.16  |               |  |   | 0.11          |   |  |   | 0.19  |  



|    |                             
|--- | ----------------------------
|10. | Concentration of Credit Risk





11.     Other Income, Net




15



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INFRASOURCE SERVICES, INC. AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)




|    |                            
|--- | ---------------------------
|12. | Comprehensive Income (Loss)



|                                  |  |                |       |   |               |   |       |               |  |   |               |  |  |   |       | 
|--------------------------------- |  | -------------- | ----- | - | ------------- | - | ----- | ------------- |  | - | ------------- |  |  | - | ----- | 
|                                  |  | Three Months   |       |   | Three Months  |   |       | Nine Months   |  |   | Nine Months   | 
|                                  |  | Ended          |       |   | Ended         |   |       | Ended         |  |   | Ended         | 
|                                  |  | September 30,  |       |   | September 30, |   |       | September 30, |  |   | September 30, | 
|                                  |  | 2004           |       |   | 2005          |   |       | 2004          |  |   | 2005          | 
|                                  |  |                |       |   |               |   |       |               |  |   |               | 
|                                  |  | (In thousands) |      
|Net income                        |  | $              | 5,052 |   |               | $ | 6,566 |               |  | $ | 4,097         |  |  | $ | 7,898 | 
|Other comprehensive income (loss) |  |                | (204  | ) |               |   | 18    |               |  |   | 195           |  |  |   | 105   | 
|                                  |  |                |       |   |               |   |       |               |  |   |               | 
|Comprehensive income              |  | $              | 4,848 |   |               | $ | 6,584 |               |  | $ | 4,292         |  |  | $ | 8,003 | 
|                                  |  |                |       |   |               |   |       |               |  |   |               | 





|    |                    
|--- | -------------------
|13. | Segment Information





16



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INFRASOURCE SERVICES, INC. AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)




|                                                   |  |                |         |   |                   |   |        |               |  |   |        |   |  |   |         |  
|-------------------------------------------------- |  | -------------- | ------- | - | ----------------- | - | ------ | ------------- |  | - | ------ | - |  | - | ------- | -
|                                                   |  | Infrastructure |         |   |                   |   |        |               | 
|                                                   |  | Construction   |         |   | Telecommunication |   |        | Corporate and |  |   |       
|Three Months Ended September 30, 2004              |  | Services       |         |   | Services          |   |        | Eliminations  |  |   | Total  |  
|                                                   |  |                |         |   |                   |   |        |               |  |   |        |  
|                                                   |  | (In thousands) |        
|Revenues                                           |  | $              | 154,280 |   |                   | $ | 7,643  |               |  | $ | (47    | ) |  | $ | 161,876 |  
|Income (loss) from operations as adjusted          |  |                | 7,610   |   |                   |   | 3,632  |               |  |   | (1,735 | ) |  |   | 9,507   |  
|Depreciation                                       |  |                | 5,405   |   |                   |   | 749    |               |  |   | 109    |   |  |   | 6,263   |  
|Amortization                                       |  |                | 2,420   |   |                   |   |       |               |  |   |       |   |  |   | 2,420   |  
|Total assets                                       |  |                | 343,079 |   |                   |   | 70,387 |               |  |   | 89,086 |   |  |   | 502,552 |  
|Capital expenditures                               |  |                | 3,063   |   |                   |   | 2,473  |               |  |   | 113    |   |  |   | 5,649   |  
|                                                  
|reconciliation:                                    |  |                |         |   |                   |   |        |               |  |   |        |   |  |   |         |  
|Income (loss) from operations as adjusted          |  | $              | 7,610   |   |                   | $ | 3,632  |               |  | $ | (1,735 | ) |  | $ | 9,507   |  
|Less: Amortization                                 |  |                | 2,420   |   |                   |   |       |               |  |   |       |   |  |   | 2,420   |  
|                                                   |  |                |         |   |                   |   |        |               |  |   |        |  
|Income (loss) from operations                      |  |                | 5,190   |   |                   |   | 3,632  |               |  |   | (1,735 | ) |  |   | 7,087   |  
|Interest income                                    |  |                | 27      |   |                   |   |       |               |  |   | 201    |   |  |   | 228     |  
|Interest expense and amortization of debt discount |  |                | (1,475  | ) |                   |   | (173   | )             |  |   | (321   | ) |  |   | (1,969  | )
|Other income (expense), net                        |  |                | 1,426   |   |                   |   | 2      |               |  |   | (38    | ) |  |   | 1,390   |  
|                                                   |  |                |         |   |                   |   |        |               |  |   |        |  
|Income (loss) before income taxes                  |  | $              | 5,168   |   |                   | $ | 3,461  |               |  | $ | (1,893 | ) |  | $ | 6,736   |  
|                                                   |  |                |         |   |                   |   |        |               |  |   |        |  

|                                                   |  |                |         |   |                   |   |        |               |  |   |        |   |  |   |         |  
|-------------------------------------------------- |  | -------------- | ------- | - | ----------------- | - | ------ | ------------- |  | - | ------ | - |  | - | ------- | -
|                                                   |  | Infrastructure |         |   |                   |   |        |               | 
|                                                   |  | Construction   |         |   | Telecommunication |   |        | Corporate and |  |   |       
|Three Months Ended September 30, 2005              |  | Services       |         |   | Services          |   |        | Eliminations  |  |   | Total  |  
|                                                   |  |                |         |   |                   |   |        |               |  |   |        |  
|                                                   |  | (In thousands) |        
|Revenues                                           |  | $              | 219,461 |   |                   | $ | 9,884  |               |  | $ | 535    |   |  | $ | 229,880 |  
|Income (loss) from operations as adjusted          |  |                | 10,326  |   |                   |   | 4,065  |               |  |   | (2,761 | ) |  |   | 11,630  |  
|Depreciation                                       |  |                | 6,173   |   |                   |   | 892    |               |  |   | 52     |   |  |   | 7,117   |  
|Amortization                                       |  |                | 1,001   |   |                   |   |       |               |  |   |       |   |  |   | 1,001   |  
|Total assets                                       |  |                | 382,772 |   |                   |   | 82,162 |               |  |   | 99,117 |   |  |   | 564,051 |  
|Capital expenditures                               |  |                | 2,400   |   |                   |   | 3,839  |               |  |   | 38     |   |  |   | 6,277   |  
|                                                  
|reconciliation:                                    |  |                |         |   |                   |   |        |               |  |   |        |   |  |   |         |  
|Income (loss) from operations as adjusted          |  | $              | 10,326  |   |                   | $ | 4,065  |               |  | $ | (2,761 | ) |  | $ | 11,630  |  
|Less: Amortization                                 |  |                | 1,001   |   |                   |   |       |               |  |   |       |   |  |   | 1,001   |  
|                                                   |  |                |         |   |                   |   |        |               |  |   |        |  
|Income (loss) from operations                      |  |                | 9,325   |   |                   |   | 4,065  |               |  |   | (2,761 | ) |  |   | 10,629  |  
|Interest income                                    |  |                | 88      |   |                   |   |       |               |  |   | 44     |   |  |   | 132     |  
|Interest expense and amortization of debt discount |  |                | (1,844  | ) |                   |   | (69    | )             |  |   | (257   | ) |  |   | (2,170  | )
|Other income (expense), net                        |  |                | 678     |   |                   |   | (8     | )             |  |   | 65     |   |  |   | 735     |  
|                                                   |  |                |         |   |                   |   |        |               |  |   |        |  
|Income (loss) before income taxes                  |  | $              | 8,247   |   |                   | $ | 3,988  |               |  | $ | (2,909 | ) |  | $ | 9,326   |  
|                                                   |  |                |         |   |                   |   |        |               |  |   |        |  

17



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INFRASOURCE SERVICES, INC. AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)


|                                                   |  |                |         |   |                   |   |        |               |  |   |         |   |  |   |         |  
|-------------------------------------------------- |  | -------------- | ------- | - | ----------------- | - | ------ | ------------- |  | - | ------- | - |  | - | ------- | -
|                                                   |  | Infrastructure |         |   |                   |   |        |               | 
|                                                   |  | Construction   |         |   | Telecommunication |   |        | Corporate and |  |   |        
|Nine Months Ended September 30, 2004               |  | Services       |         |   | Services          |   |        | Eliminations  |  |   | Total   |  
|                                                   |  |                |         |   |                   |   |        |               |  |   |         |  
|                                                   |  | (In thousands) |        
|Revenues                                           |  | $              | 429,810 |   |                   | $ | 20,699 |               |  | $ | (289    | ) |  | $ | 450,220 |  
|Income (loss) from operations as adjusted          |  |                | 27,976  |   |                   |   | 9,090  |               |  |   | (9,898  | ) |  |   | 27,168  |  
|Depreciation                                       |  |                | 15,180  |   |                   |   | 2,099  |               |  |   | 298     |   |  |   | 17,577  |  
|Amortization                                       |  |                | 10,989  |   |                   |   |       |               |  |   |        |   |  |   | 10,989  |  
|Total assets                                       |  |                | 343,079 |   |                   |   | 70,387 |               |  |   | 89,086  |   |  |   | 502,552 |  
|Capital expenditures                               |  |                | 9,609   |   |                   |   | 7,332  |               |  |   | 342     |   |  |   | 17,283  |  
|                                                  
|reconciliation:                                    |  |                |         |   |                   |   |        |               |  |   |         |   |  |   |         |  
|Income (loss) from operations as adjusted          |  | $              | 27,976  |   |                   | $ | 9,090  |               |  | $ | (9,898  | ) |  | $ | 27,168  |  
|Less: Amortization                                 |  |                | 10,989  |   |                   |   |       |               |  |   |        |   |  |   | 10,989  |  
|                                                   |  |                |         |   |                   |   |        |               |  |   |         |  
|Income (loss) from operations                      |  |                | 16,987  |   |                   |   | 9,090  |               |  |   | (9,898  | ) |  |   | 16,179  |  
|Interest income                                    |  |                | 99      |   |                   |   |       |               |  |   | 251     |   |  |   | 350     |  
|Interest expense and amortization of debt discount |  |                | (6,222  | ) |                   |   | (1,032 | )             |  |   | (907    | ) |  |   | (8,161  | )
|Loss on early extinguishment of debt               |  |                | (4,586  | ) |                   |   | (878   | )             |  |   | (85     | ) |  |   | (5,549  | )
|Other income (expense), net                        |  |                | 2,247   |   |                   |   | 29     |               |  |   | (23     | ) |  |   | 2,253   |  
|                                                   |  |                |         |   |                   |   |        |               |  |   |         |  
|Income (loss) before income taxes                  |  | $              | 8,525   |   |                   | $ | 7,209  |               |  | $ | (10,662 | ) |  | $ | 5,072   |  
|                                                   |  |                |         |   |                   |   |        |               |  |   |         |  

|                                                   |  |                |         |   |                   |   |        |               |  |   |        |   |  |   |         |  
|-------------------------------------------------- |  | -------------- | ------- | - | ----------------- | - | ------ | ------------- |  | - | ------ | - |  | - | ------- | -
|                                                   |  | Infrastructure |         |   |                   |   |        |               | 
|                                                   |  | Construction   |         |   | Telecommunication |   |        | Corporate and |  |   |       
|Nine Months Ended September 30, 2005               |  | Services       |         |   | Services          |   |        | Eliminations  |  |   | Total  |  
|                                                   |  |                |         |   |                   |   |        |               |  |   |        |  
|                                                   |  | (In thousands) |        
|Revenues                                           |  | $              | 609,994 |   |                   | $ | 29,968 |               |  | $ | 2,218  |   |  | $ | 642,180 |  
|Income (loss) from operations as adjusted          |  |                | 14,203  |   |                   |   | 12,117 |               |  |   | (9,979 | ) |  |   | 16,341  |  
|Depreciation                                       |  |                | 17,994  |   |                   |   | 2,573  |               |  |   | 147    |   |  |   | 20,714  |  
|Amortization                                       |  |                | 4,311   |   |                   |   |       |               |  |   |       |   |  |   | 4,311   |  
|Total assets                                       |  |                | 382,772 |   |                   |   | 82,162 |               |  |   | 99,117 |   |  |   | 564,051 |  
|Capital expenditures                               |  |                | 9,482   |   |                   |   | 11,799 |               |  |   | 400    |   |  |   | 21,681  |  
|                                                  
|reconciliation:                                    |  |                |         |   |                   |   |        |               |  |   |        |   |  |   |         |  
|Income (loss) from operations as adjusted          |  | $              | 14,203  |   |                   | $ | 12,117 |               |  | $ | (9,979 | ) |  | $ | 16,341  |  
|Less: Amortization                                 |  |                | 4,311   |   |                   |   |       |               |  |   |       |   |  |   | 4,311   |  
|                                                   |  |                |         |   |                   |   |        |               |  |   |        |  
|Income (loss) from operations                      |  |                | 9,892   |   |                   |   | 12,117 |               |  |   | (9,979 | ) |  |   | 12,030  |  
|Interest income                                    |  |                | 184     |   |                   |   |       |               |  |   | 170    |   |  |   | 354     |  
|Interest expense and amortization of debt discount |  |                | (5,048  | ) |                   |   | (181   | )             |  |   | (643   | ) |  |   | (5,872  | )
|Other income (expense), net                        |  |                | 1,911   |   |                   |   | (11    | )             |  |   | 3,849  |   |  |   | 5,749   |  
|                                                   |  |                |         |   |                   |   |        |               |  |   |        |  
|Income (loss) before income taxes                  |  | $              | 6,939   |   |                   | $ | 11,925 |               |  | $ | (6,603 | ) |  | $ | 12,261  |  
|                                                   |  |                |         |   |                   |   |        |               |  |   |        |  

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INFRASOURCE SERVICES, INC. AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)




|                   |  |               |         |  |               |   |         |               |  |   |               |  |  |   |         | 
|------------------ |  | ------------- | ------- |  | ------------- | - | ------- | ------------- |  | - | ------------- |  |  | - | ------- | 
|                   |  | Three Months  |         |  | Three Months  |   |         | Nine Months   |  |   | Nine Months   | 
|                   |  | Ended         |         |  | Ended         |   |         | Ended         |  |   | Ended         | 
|                   |  | September 30, |         |  | September 30, |   |         | September 30, |  |   | September 30, | 
|                   |  | 2004          |         |  | 2005          |   |         | 2004          |  |   | 2005          | 
|                   |  |               |         |  |               |   |         |               |  |   |               | 
|Electric           |  | $             | 75,074  |  |               | $ | 110,622 |               |  | $ | 259,022       |  |  | $ | 346,127 | 
|Gas                |  |               | 66,153  |  |               |   | 83,310  |               |  |   | 139,362       |  |  |   | 202,315 | 
|Telecommunications |  |               | 14,284  |  |               |   | 27,476  |               |  |   | 36,264        |  |  |   | 72,265  | 
|Other              |  |               | 6,365   |  |               |   | 8,472   |               |  |   | 15,572        |  |  |   | 21,473  | 
|                   |  |               |         |  |               |   |         |               |  |   |               | 
|                   |  | $             | 161,876 |  |               | $ | 229,880 |               |  | $ | 450,220       |  |  | $ | 642,180 | 
|                   |  |               |         |  |               |   |         |               |  |   |               | 





|    |                           
|--- | --------------------------
|14. | Related Party Transactions













19



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INFRASOURCE SERVICES, INC. AND SUBSIDIARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)








|    |                              
|--- | -----------------------------
|15. | Commitments and Contingencies













20



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##### Table of Contents








|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
    CONDITION AND RESULTS OF OPERATIONS

Forward-Looking and Cautionary Statements







Introduction




Overview








| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We experienced significant revenue growth as compared to the
    third quarter of 2004 due to increased demand for electric
    transmission and distribution services, our mid-third quarter
    2004 acquisitions of EnStructure Corporations
    (EnStructure) operating companies and Utili-Trax
    Contracting Partnerships, LLC (Utili-Trax), and
    additional amounts of telecom fiber to the premises
    (FTTP) construction services.
|
| |  | Our gross profit increased $6.4 million, as compared to the
    third quarter of 2004, due to the $68.0 million increase in
    revenues, a $1.9 million credit to insurance expense as a
    result of actuarial                                                                                                                                                                                                                                        

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##### Table of Contents



| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | estimates reflecting favorable loss development in our self
    insurance retentions, and an increase in the volume of higher
    margin telecommunication services. These increases were offset,
    in part, by a proportionately smaller increase in the volume of
    higher margin aerial electric transmission work, proportionately
    higher increases in the volume of lower margin underground
    electric transmission and other electric work, and the overall
    effect of rising fuel costs.









| |                  
| | -----------------
| | 2004 Acquisitions

Maslonka:


22



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##### Table of Contents





Utili-Trax:


EnStructure:




| |                        
| | -----------------------
| | Discontinued Operations









Results of Operations




| |                            
| | ---------------------------
| | Seasonality and Cyclicality



23



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##### Table of Contents









Company Results




| |                                                                                                
| | -----------------------------------------------------------------------------------------------
| | Three months ended September 30, 2005 compared to the
    three months ended September 30, 2004

|                                                   |  |                        |         |   |         |  |              |               |  |   |         |   |  |  |     |   
|-------------------------------------------------- |  | ---------------------- | ------- | - | ------- |  | ------------ | ------------- |  | - | ------- | - |  |  | --- | --
|                                                   |  | Three Months           |         |   |         |  | Three Months |               |  |  
|                                                   |  | Ended                  |         |   |         |  | Ended        |               |  |  
|                                                   |  | September 30,          |         |   | % of    |  |              | September 30, |  |   | % of    |  
|                                                   |  | 2004                   |         |   | Revenue |  |              | 2005          |  |   | Revenue |  
|                                                   |  |                        |         |   |         |  |              |               |  |   |         |  
|                                                   |  | (Thousands of dollars) |        
|Contract Revenues                                  |  | $                      | 161,876 |   |         |  | 100          | %             |  | $ | 229,880 |   |  |  | 100 | % 
|Gross profit                                       |  |                        | 25,682  |   |         |  | 16           | %             |  |   | 32,111  |   |  |  | 14  | % 
|Selling, general and administrative expenses       |  |                        | 16,405  |   |         |  | 10           | %             |  |   | 20,354  |   |  |  | 9   | % 
|Merger related costs                               |  |                        | (334    | ) |         |  | 0            | %             |  |   | 66      |   |  |  | 0   | % 
|Provision for uncollectible accounts               |  |                        | 104     |   |         |  | 0            | %             |  |   | 61      |   |  |  | 0   | % 
|Amortization of intangible assets                  |  |                        | 2,420   |   |         |  | 2            | %             |  |   | 1,001   |   |  |  | 0   | % 
|                                                   |  |                        |         |   |         |  |              |               |  |   |         |  
|Income from operations                             |  |                        | 7,087   |   |         |  | 4            | %             |  |   | 10,629  |   |  |  | 5   | % 
|Interest income                                    |  |                        | 228     |   |         |  | 0            | %             |  |   | 132     |   |  |  | 0   | % 
|Interest expense and amortization of debt discount |  |                        | (1,969  | ) |         |  | (1           | )%            |  |   | (2,170  | ) |  |  | (1  | )%
|Other income, net                                  |  |                        | 1,390   |   |         |  | 1            | %             |  |   | 735     |   |  |  | 0   | % 
|                                                   |  |                        |         |   |         |  |              |               |  |   |         |  
|Loss before income taxes                           |  |                        | 6,736   |   |         |  | 4            | %             |  |   | 9,326   |   |  |  | 4   | % 
|Income tax benefit                                 |  |                        | 2,760   |   |         |  | 2            | %             |  |   | 4,021   |   |  |  | 2   | % 
|                                                   |  |                        |         |   |         |  |              |               |  |   |         |  
|Income from continuing operations                  |  | $                      | 3,976   |   |         |  | 2            | %             |  | $ | 5,305   |   |  |  | 2   | % 
|                                                   |  |                        |         |   |         |  |              |               |  |   |         |  

Revenues:


Gross profit:


24



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##### Table of Contents





Selling, general and administrative expenses:


Merger related costs:


Amortization of intangible assets:


Interest income:


Interest expense and amortization of debt discount:


Other income, net:


Provision for income taxes:


Discontinued operations, net of tax:


25



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| |                                                                                              
| | ---------------------------------------------------------------------------------------------
| | Nine months ended September 30, 2005 compared to the
    nine months ended September 30, 2004

|                                                   |  |                |         |   |         |  |             |               |  |   |         |   |  |  |     |   
|-------------------------------------------------- |  | -------------- | ------- | - | ------- |  | ----------- | ------------- |  | - | ------- | - |  |  | --- | --
|                                                   |  | Nine Months    |         |   |         |  | Nine Months |               |  |  
|                                                   |  | Ended          |         |   |         |  | Ended       |               |  |  
|                                                   |  | September 30,  |         |   | % of    |  |             | September 30, |  |   | % of    |  
|                                                   |  | 2004           |         |   | Revenue |  |             | 2005          |  |   | Revenue |  
|                                                   |  |                |         |   |         |  |             |               |  |   |         |  
|                                                   |  | (In thousands) |        
|Contract Revenues                                  |  | $              | 450,220 |   |         |  | 100         | %             |  | $ | 642,180 |   |  |  | 100 | % 
|Gross profit                                       |  |                | 73,015  |   |         |  | 16          | %             |  |   | 71,558  |   |  |  | 11  | % 
|Selling, general and administrative expenses       |  |                | 46,548  |   |         |  | 10          | %             |  |   | 54,854  |   |  |  | 8   | % 
|Merger related costs                               |  |                | (334    | ) |         |  | 0           | %             |  |   | 218     |   |  |  | 0   | % 
|Provision (recoveries) of uncollectible accounts   |  |                | (367    | ) |         |  | 0           | %             |  |   | 145     |   |  |  | 0   | % 
|Amortization of intangible assets                  |  |                | 10,989  |   |         |  | 3           | %             |  |   | 4,311   |   |  |  | 1   | % 
|                                                   |  |                |         |   |         |  |             |               |  |   |         |  
|Income from operations                             |  |                | 16,179  |   |         |  | 3           | %             |  |   | 12,030  |   |  |  | 2   | % 
|Interest income                                    |  |                | 350     |   |         |  | 0           | %             |  |   | 354     |   |  |  | 0   | % 
|Interest expense and amortization of debt discount |  |                | (8,161  | ) |         |  | (2          | )%            |  |   | (5,872  | ) |  |  | (1  | )%
|Loss on early extinguishment of debt               |  |                | (5,549  | ) |         |  | (1          | )%            |  |   |        |   |  |  | 0   | % 
|Other income, net                                  |  |                | 2,253   |   |         |  | 1           | %             |  |   | 5,749   |   |  |  | 1   | % 
|                                                   |  |                |         |   |         |  |             |               |  |   |         |  
|Income before income taxes                         |  |                | 5,072   |   |         |  | 1           | %             |  |   | 12,261  |   |  |  | 2   | % 
|Income tax expense                                 |  |                | 2,029   |   |         |  | 0           | %             |  |   | 5,255   |   |  |  | 1   | % 
|                                                   |  |                |         |   |         |  |             |               |  |   |         |  
|Income from continuing operations                  |  | $              | 3,043   |   |         |  | 1           | %             |  | $ | 7,006   |   |  |  | 1   | % 
|                                                   |  |                |         |   |         |  |             |               |  |   |         |  

Revenues:


Gross profit:


Selling, general and administrative expenses:


26



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##### Table of Contents



Merger related costs:


Provision (recoveries) of uncollectible accounts:


Amortization of intangible assets:


Interest expense and amortization of debt discount:


Loss on early extinguishment of debt:


Other income, net:


Provision for income taxes:


Discontinued operations, net of tax:


Segment Results




27



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| |                                                                                                
| | -----------------------------------------------------------------------------------------------
| | Three months ended September 30, 2005 compared to the
    three months ended September 30, 2004

|         |                            |                                      |   |         |         |  |   |         |         |  |   |        |        |  |  |       |    |  
|-------- | -------------------------- | ------------------------------------ | - | ------- | ------- |  | - | ------- | ------- |  | - | ------ | ------ |  |  | ----- | -- | -
|         |                            | Three Months Ended                   |   |         |        
|         |                            | September 30,                        |   |         | Change  | 
|         |                            |                                      |   |         |         | 
|         |                            | 2004                                 |   |         | 2005    |  |   | $       |         |  | % |       
|         |                            |                                      |   |         |         |  |   |         |         |  |   |       
|         |                            | (In thousands)                       |  
|Revenue: |                            |                                      |   |         |         |  |   |         |         |  |   |        |        |  |  |      
|         |                            | Infrastructure Construction Services |   | $       | 154,280 |  |   | $       | 219,461 |  |   | $      | 65,181 |  |  |       | 42 | %
|         |                            | Telecommunication Services           |   |         | 7,643   |  |   |         | 9,884   |  |   |        | 2,241  |  |  |       | 29 | %
|         |                            |                                      |   |         |         |  |   |         |         |  |   |       
|         | Total segment revenues     |                                      |   | 161,923 |         |  |   | 229,345 |         |  |   | 67,422 |        |  |  | 42    | % 
|         | Corporate and eliminations |                                      |   | (47     | )       |  |   | 535     |         |  |   | 582    |        |  |  | 1,238 | % 
|         |                            |                                      |   |         |         |  |   |         |         |  |   |       
|         | Total revenue              |                                      | $ | 161,876 |         |  | $ | 229,880 |         |  | $ | 68,004 |        |  |  | 42    | % 
|         |                            |                                      |   |         |         |  |   |         |         |  |   |       

|                                    |                                                  |                                      |   |        |        |  |   |        |        |  |   |        |       |  |  |     |    |  
|----------------------------------- | ------------------------------------------------ | ------------------------------------ | - | ------ | ------ |  | - | ------ | ------ |  | - | ------ | ----- |  |  | --- | -- | -
|                                    |                                                  | Three Months Ended                   |   |        |       
|                                    |                                                  | September 30,                        |   |        | Change | 
|                                    |                                                  |                                      |   |        |        | 
|                                    |                                                  | 2004                                 |   |        | 2005   |  |   | $      |        |  | % |       
|                                    |                                                  |                                      |   |        |        |  |   |        |        |  |   |       
|                                    |                                                  | (In thousands)                       |  
|Income from operations as adjusted: |                                                  |                                      |   |        |        |  |   |        |        |  |   |        |       |  |  |    
|                                    |                                                  | Infrastructure Construction Services |   | $      | 7,610  |  |   | $      | 10,326 |  |   | $      | 2,716 |  |  |     | 36 | %
|                                    |                                                  | Telecommunication Services           |   |        | 3,632  |  |   |        | 4,065  |  |   |        | 433   |  |  |     | 12 | %
|                                    |                                                  |                                      |   |        |        |  |   |        |        |  |   |       
|                                    | Total segment income from operations as adjusted |                                      |   | 11,242 |        |  |   | 14,391 |        |  |   | 3,149  |       |  |  | 28  | % 
|                                    | Corporate and eliminations                       |                                      |   | (1,735 | )      |  |   | (2,761 | )      |  |   | (1,026 | )     |  |  | (59 | )%
|                                    |                                                  |                                      |   |        |        |  |   |        |        |  |   |       
|                                    | Total income from operations as adjusted         |                                      | $ | 9,507  |        |  | $ | 11,630 |        |  | $ | 2,123  |       |  |  | 22  | % 
|                                    |                                                  |                                      |   |        |        |  |   |        |        |  |   |       

ICS


Revenues:


Income from operations as adjusted:


TS


Revenues:


28



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Income from operations as adjusted:


Corporate






| |                                                                                              
| | ---------------------------------------------------------------------------------------------
| | Nine months ended September 30, 2005 compared to the
    nine months ended September 30, 2004

|         |                            |                                      |   |         |         |  |   |         |         |  |   |         |         |  |  |     |    |  
|-------- | -------------------------- | ------------------------------------ | - | ------- | ------- |  | - | ------- | ------- |  | - | ------- | ------- |  |  | --- | -- | -
|         |                            | Nine Months Ended                    |   |         |        
|         |                            | September 30,                        |   |         | Change  | 
|         |                            |                                      |   |         |         | 
|         |                            | 2004                                 |   |         | 2005    |  |   | $       |         |  | % |        
|         |                            |                                      |   |         |         |  |   |         |         |  |   |        
|         |                            | (In thousands)                       |  
|Revenue: |                            |                                      |   |         |         |  |   |         |         |  |   |         |         |  |  |    
|         |                            | Infrastructure Construction Services |   | $       | 429,810 |  |   | $       | 609,994 |  |   | $       | 180,184 |  |  |     | 42 | %
|         |                            | Telecommunication Services           |   |         | 20,699  |  |   |         | 29,968  |  |   |         | 9,269   |  |  |     | 45 | %
|         |                            |                                      |   |         |         |  |   |         |         |  |   |        
|         | Total segment revenues     |                                      |   | 450,509 |         |  |   | 639,962 |         |  |   | 189,453 |         |  |  | 42  | % 
|         | Corporate and eliminations |                                      |   | (289    | )       |  |   | 2,218   |         |  |   | 2,507   |         |  |  | 867 | % 
|         |                            |                                      |   |         |         |  |   |         |         |  |   |        
|         | Total revenue              |                                      | $ | 450,220 |         |  | $ | 642,180 |         |  | $ | 191,960 |         |  |  | 43  | % 
|         |                            |                                      |   |         |         |  |   |         |         |  |   |        

|                                    |                                                  |                                      |   |        |        |  |   |        |        |  |   |         |         |   |  |     |     |   
|----------------------------------- | ------------------------------------------------ | ------------------------------------ | - | ------ | ------ |  | - | ------ | ------ |  | - | ------- | ------- | - |  | --- | --- | --
|                                    |                                                  | Nine Months Ended                    |   |        |       
|                                    |                                                  | September 30,                        |   |        | Change | 
|                                    |                                                  |                                      |   |        |        | 
|                                    |                                                  | 2004                                 |   |        | 2005   |  |   | $      |        |  | % |        
|                                    |                                                  |                                      |   |        |        |  |   |        |        |  |   |        
|                                    |                                                  | (In thousands)                       |  
|Income from operations as adjusted: |                                                  |                                      |   |        |        |  |   |        |        |  |   |         |         |   |  |    
|                                    |                                                  | Infrastructure Construction Services |   | $      | 27,976 |  |   | $      | 14,203 |  |   | $       | (13,773 | ) |  |     | (49 | )%
|                                    |                                                  | Telecommunication Services           |   |        | 9,090  |  |   |        | 12,117 |  |   |         | 3,027   |   |  |     | 33  | % 
|                                    |                                                  |                                      |   |        |        |  |   |        |        |  |   |        
|                                    | Total segment income from operations as adjusted |                                      |   | 37,066 |        |  |   | 26,320 |        |  |   | (10,746 | )       |   |  | (29 | )% 
|                                    | Corporate and eliminations                       |                                      |   | (9,898 | )      |  |   | (9,979 | )      |  |   | (81     | )       |   |  | (1  | )% 
|                                    |                                                  |                                      |   |        |        |  |   |        |        |  |   |        
|                                    | Total income from operations as adjusted         |                                      | $ | 27,168 |        |  | $ | 16,341 |        |  | $ | (10,827 | )       |   |  | (40 | )% 
|                                    |                                                  |                                      |   |        |        |  |   |        |        |  |   |        

ICS


Revenues:


Income from operations as adjusted:


29



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TS


Revenues:


Income from operations as adjusted:


Corporate




Liquidity and Capital Resources




| |                                      
| | -------------------------------------
| | Cash and Working Capital Requirements







| |                         
| | ------------------------
| | Sources and Uses of Cash



30



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Cash from operating activities from continuing
operations.


Cash from investing activities from continuing
operations.


31



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Cash from financing activities from continuing
operations.




Contractual Obligations and Other Commitments




|                                                 |  |                        |       |  |      |   |       |      |  |   |       |  |  |      |       |  |            |   |       |       |  |   |        |  |  |   |         | 
|------------------------------------------------ |  | ---------------------- | ----- |  | ---- | - | ----- | ---- |  | - | ----- |  |  | ---- | ----- |  | ---------- | - | ----- | ----- |  | - | ------ |  |  | - | ------- | 
|                                                 |  | Payments due by Period |      
|                                                 |  |                        |      
|Long-Term Debt and Interest Payments             |  | 2005                   |       |  | 2006 |   |       | 2007 |  |   | 2008  |  |  | 2009 |       |  | Thereafter |   |       | Total | 
|                                                 |  |                        |       |  |      |   |       |      |  |   |       |  |  |      |       |  |            |   |       |       | 
|                                                 |  | (In thousands)         |      
|Senior credit facility                           |  | $                      | 214   |  |      | $ | 853   |      |  | $ | 853   |  |  | $    | 853   |  |            | $ | 853   |       |  | $ | 80,405 |  |  | $ | 84,031  | 
|Bank notes                                       |  |                        | 28    |  |      |   | 41    |      |  |   |      |  |  |      |      |  |            |   |      |       |  |   |       |  |  |   | 69      | 
|Projected interest payments on long-term debt(1) |  |                        | 1,138 |  |      |   | 4,956 |      |  |   | 5,603 |  |  |      | 5,545 |  |            |   | 5,488 |       |  |   | 4,078  |  |  |   | 26,808  | 
|                                                 |  |                        |       |  |      |   |       |      |  |   |       |  |  |      |       |  |            |   |       |       | 
|Total                                            |  | $                      | 1,380 |  |      | $ | 5,850 |      |  | $ | 6,456 |  |  | $    | 6,398 |  |            | $ | 6,341 |       |  | $ | 84,483 |  |  | $ | 110,908 | 
|                                                 |  |                        |       |  |      |   |       |      |  |   |       |  |  |      |       |  |            |   |       |       | 

|                                 |                              |                        |    |    |      |   |        |       |  |   |      |    |  |      |    |    |            |   |    |       |  |   |     |     |  |   |        |       | 
|-------------------------------- | ---------------------------- | ---------------------- | -- | -- | ---- | - | ------ | ----- |  | - | ---- | -- |  | ---- | -- | -- | ---------- | - | -- | ----- |  | - | --- | --- |  | - | ------ | ----- | 
|                                 |                              | Payments due by Period |   
|                                 |                              |                        |   
|Other Contractual Obligations(2) |                              | 2005                   |    |    | 2006 |   |        | 2007  |  |   | 2008 |    |  | 2009 |    |    | Thereafter |   |    | Total | 
|                                 |                              |                        |    |    |      |   |        |       |  |   |      |    |  |      |    |    |            |   |    |       | 
|Contingent earnout(3)            |                              | $                      |   |    |      | $ | 8,493  |       |  | $ |     |    |  | $    |   |    |            | $ |   |       |  | $ |    |     |  | $ | 8,493  |      
|Other long-term liabilities:     |                              |                        |    |    |      |   |        |       |  |   |      |    |  |      |    |    |            |   |    |       |  |   |     |     |  |   |        |      
|                                 | Non-vested options exercised |                        |    | 23 |      |   |        | 355   |  |   |      | 21 |  |      |    |   |            |   |    |      |  |   |     | 549 |  |   |        | 948   | 
|                                 | Other                        |                        |    |   |      |   |        | 3,051 |  |   |      | 54 |  |      |    | 54 |            |   |    | 54    |  |   |     | 143 |  |   |        | 3,356 | 
|                                 |                              |                        |    |    |      |   |        |       |  |   |      |    |  |      |    |    |            |   |    |       | 
|Total                            |                              | $                      | 23 |    |      | $ | 11,899 |       |  | $ | 75   |    |  | $    | 54 |    |            | $ | 54 |       |  | $ | 692 |     |  | $ | 12,797 |      
|                                 |                              |                        |    |    |      |   |        |       |  |   |      |    |  |      |    |    |            |   |    |       | 






|    |                                                                                                                                                                                                                                                                                                                                         
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The total projected interest payments on long-term debt are
    based upon borrowings and interest rates as of
    September 30, 2005. The interest rates on variable rate
    debt are subject to changes beyond our control and may result in
    actual interest expense and payments differing from the amounts
    projected above.
|   
|(2) | Trade accounts payable are not included in Contractual
    Obligations.                                                                                                                                                                                                                                                                 
|   
|(3) | See discussion below in Contingent Earnout Payments.                                                                                                                                                                                                                                                                                  

|                             |  |                                            |       |  |      |   |        |      |  |   |        |  |  |      |       |  |            |   |       |       |  |   |     |  |  |   |        | 
|---------------------------- |  | ------------------------------------------ | ----- |  | ---- | - | ------ | ---- |  | - | ------ |  |  | ---- | ----- |  | ---------- | - | ----- | ----- |  | - | --- |  |  | - | ------ | 
|                             |  | Amount of Commitment Expiration per Period |      
|                             |  |                                            |      
|Other Commercial Commitments |  | 2005                                       |       |  | 2006 |   |        | 2007 |  |   | 2008   |  |  | 2009 |       |  | Thereafter |   |       | Total | 
|                             |  |                                            |       |  |      |   |        |      |  |   |        |  |  |      |       |  |            |   |       |       | 
|                             |  | (In thousands)                             |      
|Operating leases             |  | $                                          | 4,804 |  |      | $ | 13,518 |      |  | $ | 11,247 |  |  | $    | 7,133 |  |            | $ | 2,968 |       |  | $ | 709 |  |  | $ | 40,379 | 
|                             |  |                                            |       |  |      |   |        |      |  |   |        |  |  |      |       |  |            |   |       |       | 

32



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##### Table of Contents





| |                            
| | ---------------------------
| | Contingent Earnout Payments







| |                           
| | --------------------------
| | Related Party Transactions













33



---



##### Table of Contents









| |                              
| | -----------------------------
| | New Accounting Pronouncements









34



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##### Table of Contents










|        |                                                               
|------- | --------------------------------------------------------------
|Item 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
    RISK



Interest Rates.






Gasoline and Diesel Fuel.







|        |                        
|------- | -----------------------
|Item 4. | CONTROLS AND PROCEDURES



| |                                   
| | ----------------------------------
| | Disclosure Controls and Procedures



35



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##### Table of Contents





| |                                          
| | -----------------------------------------
| | Internal Control Over Financial Reporting






PART II  OTHER INFORMATION







|        |                   
|------- | ------------------
|Item 1. | LEGAL PROCEEDINGS.














|        |                                                                 
|------- | ----------------------------------------------------------------
|Item 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
    PROCEEDS.








|        |                                 
|------- | --------------------------------
|Item 3. | DEFAULTS UPON SENIOR SECURITIES.








|        |                                                         
|------- | --------------------------------------------------------
|Item 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY
    HOLDERS.








|        |                   
|------- | ------------------
|Item 5. | OTHER INFORMATION.








|        |         
|------- | --------
|Item 6. | EXHIBITS

| |   |      |  |                                                                                                                                                                                             
| | - | ---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 3 | .1   |  | Form of Restated Certificate of Incorporation of InfraSource
    Services, Inc.(1)                                                                                                          
| | 3 | .1.1 |  | Form of Certificate of Amendment to the Restated Certificate of
    Incorporation of InfraSource Services, Inc.(1)                                                                          
| | 3 | .2   |  | Form of Amended and Restated Bylaws of InfraSource Services,
    Inc.(1)                                                                                                                    
| | 3 | .3   |  | Specimen of stock certificate.(1)                                                                                                                                                           
| | 4 | .1   |  | Stockholders Agreement, dated as of September 24, 2003, by
    and among InfraSource Services, Inc. (f/k/a the Dearborn
    Holdings Corporation) and its Security Holders party thereto.(2)

36



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##### Table of Contents



| |    |    |  |                                                                                                                                                                                                                                                                                                                                                                                                  
| | -- | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 4  | .2 |  | Registration Rights Agreement, dated as of April 20, 2004,
    by and among InfraSource Services, Inc. OCM Principal
    Opportunities Fund II, L.P., OCM/ GFI Power Opportunities
    Funds, L.P., Martin Maslonka, Thomas B. Tilford, Mark C.
    Maslonka, Justin Campbell, Joseph Gabbard, Sidney Strauss, Jon
    Maslonka, David R. Helwig, Terence R. Montgomery and Paul M.
    Daily.(1)
| | 31 | .1 |  | Rule 13a-14(a)/ Rule 15d-14(a) Certification of Chief
    Executive Officer.*                                                                                                                                                                                                                                                                                                                    
| | 31 | .2 |  | Rule 13a-14(a)/ Rule 15d-14(a) Certification of Chief
    Financial Officer.*                                                                                                                                                                                                                                                                                                                    
| | 32 | .1 |  | Certification pursuant to Section 1350 of Chapter 63
    of Title 18 of the United States Code.*                                                                                                                                                                                                                                                                                                 






| |   |               
| | - | --------------
| | * | Filed herewith



|    |                                                                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Filed as an exhibit to the Registrants Registration
    Statement on Form S-1, Amendment No. 3 (Registration
    No. 333-112375) filed with the Commission on April 29,
    2004.
|   
|(2) | Filed as an exhibit to the Registrants Registration
    Statement on Form S-1 (Registration No. 333-112375)
    filed with the Commission on January 30, 2004.                   

37



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##### Table of Contents






SIGNATURES






| |                           
| | --------------------------
| | INFRASOURCE SERVICES, INC.
| | (Registrant)              



| |     |                          
| | --- | -------------------------
| | By: | /s/ TERENCE R. MONTGOMERY

| |                                                  
| | -------------------------------------------------
| |                                                  
| | Terence R. Montgomery                            
| | Chief Financial Officer and Senior Vice President



38



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##### Table of Contents



EXHIBIT INDEX


| |    |    |  |                                                                                                
| | -- | -- |  | -----------------------------------------------------------------------------------------------
| | 31 | .1 |  | Rule 13a-14(a)/ Rule 15d-14(a) Certification of Chief
    Executive Officer.                   
| | 31 | .2 |  | Rule 13a-14(a)/ Rule 15d-14(a) Certification of Chief
    Financial Officer.                   
| | 32 | .1 |  | Certification pursuant to Section 1350 of Chapter 63
    of Title 18 of the United States Code.

39