##### 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 March 31, 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












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For the Quarter Ended March 31, 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 March 31, 2005                          |    |        | 3  | 
|                                                                                           |  | Condensed Consolidated Statements of Income
    for the three months ended March 31, 2004 and 2005         |    |        | 4  | 
|                                                                                           |  | Condensed Consolidated Statement of
    Shareholders Equity for the three months ended
    March 31, 2005 |    |        | 5  | 
|                                                                                           |  | Condensed Consolidated Statements of Cash
    Flows for the three months ended March 31, 2004 and 2005     |    |        | 6  | 
|                                                                                           |  | Notes to Condensed Consolidated Financial
    Statements                                                   |    |        | 7  | 
|Item 2.                                                                                    |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                  |    |        | 17 | 
|Item 3.                                                                                    |  | Quantitative and Qualitative Disclosures
    About Market Risk                                             |    |        | 26 | 
|Item 4.                                                                                    |  | Controls and Procedures                                                                                    |    |        | 27 | 
|                                                                                          
|PART II  OTHER
    INFORMATION                                                            |  |                                                                                                            | 27 |       
|Item 1.                                                                                    |  | Legal Proceedings                                                                                          |    |        | 27 | 
|Item 2.                                                                                    |  | Unregistered Sales of Equity Securities and
    Use of Proceeds                                            |    |        | 27 | 
|Item 3.                                                                                    |  | Defaults Upon Senior Securities                                                                            |    |        | 27 | 
|Item 4.                                                                                    |  | Submission of Matters to a Vote of Security
    Holders                                                    |    |        | 27 | 
|Item 5.                                                                                    |  | Other Information                                                                                          |    |        | 28 | 
|Item 6.                                                                                    |  | Exhibits                                                                                                   |    |        | 28 | 
|SIGNATURES                                                                                 |  |                                                                                                            | 29 |       
|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 OF TITLE 18 OF THE UNITED STATES CODE



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,               |         |         | March 31, |  
|                                                                                                |                                                                                                                                          | 2004                       |         |         | 2005      |  
|                                                                                                |                                                                                                                                          |                            |         |         |           |  
|                                                                                                |                                                                                                                                          | (Unaudited)                |        
|                                                                                                |                                                                                                                                          | (In thousands, except      |        
|                                                                                                |                                                                                                                                          | share data)                |        
|ASSETS                                                                                         
|Current assets:                                                                                 |                                                                                                                                          |                            |         |         |           |   |         |        
|                                                                                                | Cash and cash equivalents                                                                                                                |                            | $       | 21,781  |           |   | $       | 8,812   |        
|                                                                                                | Restricted cash                                                                                                                          |                            |         | 5,000   |           |   |         |        |        
|                                                                                                | Contract receivables (less allowances for doubtful accounts of
    $3,305 and $3,303, respectively)                                      |                            |         | 109,099 |           |   |         | 103,435 |        
|                                                                                                | Costs and estimated earnings in excess of billings                                                                                       |                            |         | 59,517  |           |   |         | 83,410  |        
|                                                                                                | Inventories                                                                                                                              |                            |         | 13,567  |           |   |         | 13,123  |        
|                                                                                                | Deferred income taxes                                                                                                                    |                            |         | 2,970   |           |   |         | 1,672   |        
|                                                                                                | Other current assets                                                                                                                     |                            |         | 9,037   |           |   |         | 10,102  |        
|                                                                                                | Current assets  discontinued operations                                                                                                 |                            |         | 2,019   |           |   |         | 2,081   |        
|                                                                                                |                                                                                                                                          |                            |         |         |           |  
|                                                                                                |                                                                                                                                          | Total current assets       |         |         | 222,990   |   |         |         | 222,635 | 
|                                                                                                |                                                                                                                                          |                            |         |         |           |  
|Property and equipment (less accumulated depreciation of $30,754
    and $36,560, respectively) |                                                                                                                                          |                            | 144,670 |         |           |   | 146,979 |        
|Goodwill                                                                                        |                                                                                                                                          |                            | 134,478 |         |           |   | 134,484 |        
|Intangible assets (less accumulated amortization of $14,950 and
    $15,661, respectively)      |                                                                                                                                          |                            | 6,795   |         |           |   | 5,183   |        
|Deferred charges and other assets, net                                                          |                                                                                                                                          |                            | 11,766  |         |           |   | 12,767  |        
|Deferred income taxes                                                                           |                                                                                                                                          |                            | 1,265   |         |           |   | 877     |        
|Noncurrent assets  discontinued operations                                                     |                                                                                                                                          |                            | 516     |         |           |   | 635     |        
|                                                                                                |                                                                                                                                          |                            |         |         |           |  
|Total assets                                                                                    |                                                                                                                                          | $                          | 522,480 |         |           | $ | 523,560 |        
|                                                                                                |                                                                                                                                          |                            |         |         |           |  
|Current liabilities:                                                                            |                                                                                                                                          |                            |         |         |           |   |         |        
|                                                                                                | Current portion of long-term debt and capital lease obligations                                                                          |                            | $       | 900     |           |   | $       | 889     |        
|                                                                                                | Revolving credit facility borrowings                                                                                                     |                            |         |        |           |   |         | 6,000   |        
|                                                                                                | Other liabilities  related parties                                                                                                      |                            |         | 3,904   |           |   |         | 13,103  |        
|                                                                                                | Accounts payable                                                                                                                         |                            |         | 35,292  |           |   |         | 31,952  |        
|                                                                                                | Accrued compensation and benefits                                                                                                        |                            |         | 17,525  |           |   |         | 15,039  |        
|                                                                                                | Other current and accrued liabilities                                                                                                    |                            |         | 19,549  |           |   |         | 17,998  |        
|                                                                                                | Accrued insurance reserves                                                                                                               |                            |         | 26,042  |           |   |         | 26,419  |        
|                                                                                                | Billings in excess of costs and estimated earnings                                                                                       |                            |         | 10,728  |           |   |         | 9,287   |        
|                                                                                                | Deferred revenues                                                                                                                        |                            |         | 8,710   |           |   |         | 8,091   |        
|                                                                                                | Current liabilities  discontinued operations                                                                                            |                            |         | 1,304   |           |   |         | 1,626   |        
|                                                                                                |                                                                                                                                          |                            |         |         |           |  
|                                                                                                |                                                                                                                                          | Total current liabilities  |         |         | 123,954   |   |         |         | 130,404 | 
|                                                                                                |                                                                                                                                          |                            |         |         |           |  
|Long-term debt, net of current portion                                                          |                                                                                                                                          |                            | 83,878  |         |           |   | 83,657  |        
|Long-term debt  related party                                                                  |                                                                                                                                          |                            | 1,000   |         |           |   | 1,000   |        
|Deferred revenues                                                                               |                                                                                                                                          |                            | 16,935  |         |           |   | 16,671  |        
|Other long-term liabilities  related parties                                                   |                                                                                                                                          |                            | 8,493   |         |           |   |        |        
|Other long-term liabilities                                                                     |                                                                                                                                          |                            | 4,226   |         |           |   | 4,392   |        
|Non-current liabilities  discontinued operations                                               |                                                                                                                                          |                            | 11      |         |           |   | 11      |        
|                                                                                                |                                                                                                                                          |                            |         |         |           |  
|                                                                                                |                                                                                                                                          | Total liabilities          |         |         | 238,497   |   |         |         | 236,135 | 
|                                                                                                |                                                                                                                                          |                            |         |         |           |  
|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 39,001,456, respectively) |                            |         | 39      |           |   |         | 39      |        
|                                                                                                | Additional paid-in capital                                                                                                               |                            |         | 272,954 |           |   |         | 273,396 |        
|                                                                                                | Deferred compensation                                                                                                                    |                            |         | (329    | )         |   |         | (302    | )      
|                                                                                                | Retained earnings                                                                                                                        |                            |         | 10,911  |           |   |         | 13,653  |        
|                                                                                                | Accumulated other comprehensive income                                                                                                   |                            |         | 408     |           |   |         | 639     |        
|                                                                                                |                                                                                                                                          |                            |         |         |           |  
|                                                                                                |                                                                                                                                          | Total shareholders equity |         |         | 283,983   |   |         |         | 287,425 | 
|                                                                                                |                                                                                                                                          |                            |         |         |           |  
|Total liabilities and shareholders equity                                                      |                                                                                                                                          | $                          | 522,480 |         |           | $ | 523,560 |        
|                                                                                                |                                                                                                                                          |                            |         |         |           |  



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INFRASOURCE SERVICES, INC. AND SUBSIDIARIES





Condensed Consolidated Statements of Income


|                                                   |                                                                                                                       |                       |         |        |                |   |         |        |  
|-------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------- | --------------------- | ------- | ------ | -------------- | - | ------- | ------ | -
|                                                   |                                                                                                                       | Three Months          |         |        | Three Months   |  
|                                                   |                                                                                                                       | Ended                 |         |        | Ended          |  
|                                                   |                                                                                                                       | March 31, 2004        |         |        | March 31, 2005 |  
|                                                   |                                                                                                                       |                       |         |        |                |  
|                                                   |                                                                                                                       | (Unaudited)           |        
|                                                   |                                                                                                                       | (In thousands, except |        
|                                                   |                                                                                                                       | per share data)       |        
|Contract revenues                                  |                                                                                                                       | $                     | 146,888 |        |                | $ | 182,917 |       
|Cost of revenues                                   |                                                                                                                       |                       | 121,883 |        |                |   | 161,273 |       
|                                                   |                                                                                                                       |                       |         |        |                |  
|                                                   | Gross profit                                                                                                          |                       |         | 25,005 |                |   |         | 21,644 |  
|                                                   |                                                                                                                       |                       |         |        |                |  
|Selling, general and administrative expenses       |                                                                                                                       |                       | 15,534  |        |                |   | 17,638  |       
|Merger related costs                               |                                                                                                                       |                       |        |        |                |   | 76      |       
|Provision (recoveries) of uncollectible accounts   |                                                                                                                       |                       | (7      | )      |                |   | 80      |       
|Amortization of intangible assets                  |                                                                                                                       |                       | 4,547   |        |                |   | 1,612   |       
|                                                   |                                                                                                                       |                       |         |        |                |  
|                                                   | Income from operations                                                                                                |                       |         | 4,931  |                |   |         | 2,238  |  
|Interest income                                    |                                                                                                                       |                       | 54      |        |                |   | 194     |       
|Interest expense and amortization of debt discount |                                                                                                                       |                       | (3,352  | )      |                |   | (1,456  | )     
|Other income (expense), net                        |                                                                                                                       |                       | 152     |        |                |   | 3,829   |       
|                                                   |                                                                                                                       |                       |         |        |                |  
|                                                   | Income before income taxes                                                                                            |                       |         | 1,785  |                |   |         | 4,805  |  
|Income tax expense                                 |                                                                                                                       |                       | 732     |        |                |   | 1,922   |       
|                                                   |                                                                                                                       |                       |         |        |                |  
|                                                   | Income from continuing operations                                                                                     |                       |         | 1,053  |                |   |         | 2,883  |  
|Discontinued operations:                           |                                                                                                                       |                       |         |        |                |   |         |       
|                                                   | Income (loss) from discontinued operations (net of income tax
    provision (benefit) of $12 and $(95), respectively) |                       |         | 19     |                |   |         | (141   | )
|                                                   |                                                                                                                       |                       |         |        |                |  
|Net income                                         |                                                                                                                       | $                     | 1,072   |        |                | $ | 2,742   |       
|                                                   |                                                                                                                       |                       |         |        |                |  
|Basic income per share:                            |                                                                                                                       |                       |         |        |                |   |         |       
|                                                   | Income from continuing operations                                                                                     |                       | $       | 0.04   |                |   | $       | 0.07   |  
|                                                   | Income (loss) from discontinued operations                                                                            |                       |         |       |                |   |         |       |  
|                                                   |                                                                                                                       |                       |         |        |                |  
|                                                   | Net income                                                                                                            |                       | $       | 0.04   |                |   | $       | 0.07   |  
|                                                   |                                                                                                                       |                       |         |        |                |  
|                                                   | Weighted average basic common shares outstanding                                                                      |                       |         | 28,057 |                |   |         | 38,981 |  
|                                                   |                                                                                                                       |                       |         |        |                |  
|Diluted income per share:                          |                                                                                                                       |                       |         |        |                |   |         |       
|                                                   | Income from continuing operations                                                                                     |                       | $       | 0.04   |                |   | $       | 0.07   |  
|                                                   | Income (loss) from discontinued operations                                                                            |                       |         |       |                |   |         |       |  
|                                                   |                                                                                                                       |                       |         |        |                |  
|                                                   | Net income                                                                                                            |                       | $       | 0.04   |                |   | $       | 0.07   |  
|                                                   |                                                                                                                       |                       |         |        |                |  
|                                                   | Weighted average diluted common shares outstanding                                                                    |                       |         | 29,142 |                |   |         | 39,794 |  
|                                                   |                                                                                                                       |                       |         |        |                |  



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INFRASOURCE SERVICES, INC. AND SUBSIDIARIES





Condensed Consolidated Statement of Shareholders
Equity


|                                          |  |                                      |            |  |            |   |    |             |  |       |               |  |  |          |      |   |          |   |     |       |  |   |        |  |  |   |         | 
|----------------------------------------- |  | ------------------------------------ | ---------- |  | ---------- | - | -- | ----------- |  | ----- | ------------- |  |  | -------- | ---- | - | -------- | - | --- | ----- |  | - | ------ |  |  | - | ------- | 
|                                          |  |                                      |            |  |            |   |    | Accumulated |  |       |               |  | 
|                                          |  | Common Stock                         |            |  | Additional |   |    |             |  | Other |               |  |  |          |     
|                                          |  |                                      |            |  | Paid-In    |   |    | Deferred    |  |       | Comprehensive |  |  | Retained |      |   |         
|                                          |  | 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 | 
|Amortization of unearned compensation     |  |                                      |           |  |            |   |   |             |  |       |              |  |  |          | 27   |   |          |   |    |       |  |   |       |  |  |   | 27      | 
|Stock options exercised                   |  |                                      | 58,728     |  |            |   |   |             |  |       | 270           |  |  |          |     |   |          |   |    |       |  |   |       |  |  |   | 270     | 
|Income tax benefit from options exercised |  |                                      |           |  |            |   |   |             |  |       | 172           |  |  |          |     |   |          |   |    |       |  |   |       |  |  |   | 172     | 
|Net income                                |  |                                      |           |  |            |   |   |             |  |       |              |  |  |          |     |   |          |   |    |       |  |   | 2,742  |  |  |   | 2,742   | 
|Other comprehensive income                |  |                                      |           |  |            |   |   |             |  |       |              |  |  |          |     |   |          |   | 231 |       |  |   |       |  |  |   | 231     | 
|                                          |  |                                      |            |  |            |   |    |             |  |       |               |  |  |          |      |   |          |   |     |       | 
|Balance as of March 31, 2005              |  |                                      | 39,001,456 |  |            | $ | 39 |             |  | $     | 273,396       |  |  | $        | (302 | ) |          | $ | 639 |       |  | $ | 13,653 |  |  | $ | 287,425 | 
|                                          |  |                                      |            |  |            |   |    |             |  |       |               |  |  |          |      |   |          |   |     |       | 



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INFRASOURCE SERVICES, INC. AND SUBSIDIARIES





Condensed Consolidated Statements of Cash Flows


|                                                                                                   |                                                                                                                    |                                                                                  |                                                         |                                                                                            |                |         |         |         |        |         |         |  
|-------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------ | -------------------------------------------------------------------------------- | ------------------------------------------------------- | ------------------------------------------------------------------------------------------ | -------------- | ------- | ------- | ------- | ------ | ------- | ------- | -
|                                                                                                   |                                                                                                                    | Three Months                                                                     |                                                         |                                                                                            | Three Months   |        
|                                                                                                   |                                                                                                                    | Ended                                                                            |                                                         |                                                                                            | Ended          |        
|                                                                                                   |                                                                                                                    | March 31, 2004                                                                   |                                                         |                                                                                            | March 31, 2005 |        
|                                                                                                   |                                                                                                                    |                                                                                  |                                                         |                                                                                            |                |        
|                                                                                                   |                                                                                                                    | (Unaudited)                                                                      |                                                        
|                                                                                                   |                                                                                                                    | (In thousands)                                                                   |                                                        
|Cash flows used in operating activities:                                                           |                                                                                                                    |                                                                                  |                                                         |                                                                                            |                |         |         |        
|                                                                                                   | Income from continuing operations                                                                                  |                                                                                  | $                                                       | 1,053                                                                                      |                |         | $       | 2,883   |       
|                                                                                                   | Adjustments to reconcile income from continuing operations to
    cash provided by (used in) operating activities: |                                                                                  |                                                         |                                                                                            |                |         |         |         |       
|                                                                                                   |                                                                                                                    | Depreciation                                                                     |                                                         |                                                                                            | 5,563          |         |         |         | 6,826  |        
|                                                                                                   |                                                                                                                    | Amortization of intangibles                                                      |                                                         |                                                                                            | 4,547          |         |         |         | 1,612  |        
|                                                                                                   |                                                                                                                    | Deferred income taxes                                                            |                                                         |                                                                                            | (9             | )       |         |         | 1,512  |        
|                                                                                                   |                                                                                                                    | Other                                                                            |                                                         |                                                                                            | 1,206          |         |         |         | (5,036 | )      
|                                                                                                   |                                                                                                                    | Changes in operating assets and liabilities, net of effects of
    acquisitions: |                                                         |                                                                                            |                |         |         |         |        |        
|                                                                                                   |                                                                                                                    |                                                                                  | Contract receivables, net                               |                                                                                            |                | (3,298  | )       |         |        | 5,584   |        
|                                                                                                   |                                                                                                                    |                                                                                  | Contract receivables due from related parties, net      |                                                                                            |                | 14,617  |         |         |        |        |        
|                                                                                                   |                                                                                                                    |                                                                                  | Costs and estimated earnings in excess of billings, net |                                                                                            |                | (18,915 | )       |         |        | (25,335 | )      
|                                                                                                   |                                                                                                                    |                                                                                  | Inventories                                             |                                                                                            |                | (883    | )       |         |        | 444     |        
|                                                                                                   |                                                                                                                    |                                                                                  | Other current assets                                    |                                                                                            |                | (1,711  | )       |         |        | 234     |        
|                                                                                                   |                                                                                                                    |                                                                                  | Deferred charges and other assets                       |                                                                                            |                | 550     |         |         |        | (1,151  | )      
|                                                                                                   |                                                                                                                    |                                                                                  | Accounts payable                                        |                                                                                            |                | 4,029   |         |         |        | (3,340  | )      
|                                                                                                   |                                                                                                                    |                                                                                  | Other liabilities  related parties                     |                                                                                            |                |        |         |         |        | 892     |        
|                                                                                                   |                                                                                                                    |                                                                                  | Other current and accrued liabilities                   |                                                                                            |                | (17,840 | )       |         |        | (780    | )      
|                                                                                                   |                                                                                                                    |                                                                                  | Accrued insurance reserves                              |                                                                                            |                | 596     |         |         |        | 377     |        
|                                                                                                   |                                                                                                                    |                                                                                  | Deferred revenue                                        |                                                                                            |                | 4,051   |         |         |        | (882    | )      
|                                                                                                   |                                                                                                                    |                                                                                  | Other liabilities                                       |                                                                                            |                | 99      |         |         |        | (30     | )      
|                                                                                                   |                                                                                                                    |                                                                                  |                                                         |                                                                                            |                |        
|                                                                                                   |                                                                                                                    |                                                                                  |                                                         | Net cash flows used in operating activities from continuing
    operations                 |                |         | (6,345  | )       |        |         | (16,190 | )
|                                                                                                   |                                                                                                                    |                                                                                  |                                                         | Net cash flows provided by operating activities from
    discontinued operations           |                |         | 317     |         |        |         | 118     |  
|                                                                                                   |                                                                                                                    |                                                                                  |                                                         |                                                                                            |                |        
|                                                                                                   |                                                                                                                    |                                                                                  |                                                         | Net cash flows used in operating activities                                                |                |         | (6,028  | )       |        |         | (16,072 | )
|                                                                                                   |                                                                                                                    |                                                                                  |                                                         |                                                                                            |                |        
|Cash flows used in investing activities:                                                           |                                                                                                                    |                                                                                  |                                                         |                                                                                            |                |         |         |        
|                                                                                                   | Acquisitions of businesses, net of cash acquired                                                                   |                                                                                  |                                                         | (20,101                                                                                    | )              |         |         | (38     | )     
|                                                                                                   | Proceeds from restricted cash                                                                                      |                                                                                  |                                                         |                                                                                           |                |         |         | 5,000   |       
|                                                                                                   | Proceeds from sales of equipment                                                                                   |                                                                                  |                                                         | 900                                                                                        |                |         |         | 1,345   |       
|                                                                                                   | Additions to property, plant and equipment                                                                         |                                                                                  |                                                         | (5,109                                                                                     | )              |         |         | (9,125  | )     
|                                                                                                   |                                                                                                                    |                                                                                  |                                                         |                                                                                            |                |        
|                                                                                                   |                                                                                                                    |                                                                                  |                                                         | Net cash flows used in investing activities from continuing
    operations                 |                |         | (24,310 | )       |        |         | (2,818  | )
|                                                                                                   |                                                                                                                    |                                                                                  |                                                         | Net cash flows used in investing activities from discontinued
    operations               |                |         | (115    | )       |        |         | (118    | )
|                                                                                                   |                                                                                                                    |                                                                                  |                                                         |                                                                                            |                |        
|                                                                                                   |                                                                                                                    |                                                                                  |                                                         | Net cash flows used in investing activities                                                |                |         | (24,425 | )       |        |         | (2,936  | )
|                                                                                                   |                                                                                                                    |                                                                                  |                                                         |                                                                                            |                |        
|Cash flows from financing activities:                                                              |                                                                                                                    |                                                                                  |                                                         |                                                                                            |                |         |         |        
|                                                                                                   | Increase in revolving credit facility borrowings                                                                   |                                                                                  |                                                         | 5,000                                                                                      |                |         |         | 6,000   |       
|                                                                                                   | Repayments of long-term debt and capital lease obligations                                                         |                                                                                  |                                                         | (399                                                                                       | )              |         |         | (231    | )     
|                                                                                                   | Proceeds from exercise of stock options                                                                            |                                                                                  |                                                         | 2,250                                                                                      |                |         |         | 270     |       
|                                                                                                   | Proceeds from sale of common stock                                                                                 |                                                                                  |                                                         | 27,523                                                                                     |                |         |         |        |       
|                                                                                                   |                                                                                                                    |                                                                                  |                                                         |                                                                                            |                |        
|                                                                                                   |                                                                                                                    |                                                                                  |                                                         | Net cash flows provided by financing activities from continuing
    operations             |                |         | 34,374  |         |        |         | 6,039   |  
|                                                                                                   |                                                                                                                    |                                                                                  |                                                         | Net cash flows provided by (used in) financing activities from
    discontinued operations |                |         |        |         |        |         |        |  
|                                                                                                   |                                                                                                                    |                                                                                  |                                                         |                                                                                            |                |        
|                                                                                                   |                                                                                                                    |                                                                                  |                                                         | Net cash flows provided by financing activities                                            |                |         | 34,374  |         |        |         | 6,039   |  
|                                                                                                   |                                                                                                                    |                                                                                  |                                                         |                                                                                            |                |        
|Cash and cash equivalents:                                                                         |                                                                                                                    |                                                                                  |                                                         |                                                                                            |                |         |         |        
|                                                                                                   | Net increase (decrease) in cash and cash equivalents                                                               |                                                                                  |                                                         | 3,921                                                                                      |                |         |         | (12,969 | )     
|                                                                                                   | Cash and cash equivalents transferred to discontinued operations                                                   |                                                                                  |                                                         | (203                                                                                       | )              |         |         |        |       
|                                                                                                   | Cash and cash equivalents  beginning of period                                                                    |                                                                                  |                                                         | 12,176                                                                                     |                |         |         | 21,781  |       
|                                                                                                   |                                                                                                                    |                                                                                  |                                                         |                                                                                            |                |        
|                                                                                                   | Cash and cash equivalents  end of period                                                                          |                                                                                  | $                                                       | 15,894                                                                                     |                |         | $       | 8,812   |       
|                                                                                                   |                                                                                                                    |                                                                                  |                                                         |                                                                                            |                |        
|Supplemental Disclosure of Non-Cash Investing and Financing
    Activities:                        |                                                                                                                    |                                                                                  |                                                         |                                                                                            |                |         |         |        
|Distribution of property and equipment owed to related party                                       |                                                                                                                    | $                                                                                | 7,218                                                   |                                                                                            |                | $       |        |        
|We acquired all of the voting interests of Maslonka for $77,476
    in January, 2004               |                                                                                                                    |                                                                                  |                                                         |                                                                                            |                |         |         |        
|In conjunction with this acquisition, assets acquired and
    liabilities assumed were as follows: |                                                                                                                    |                                                                                  |                                                         |                                                                                            |                |         |         |        
|Fair value of assets acquired                                                                      |                                                                                                                    |                                                                                  | 41,093                                                  |                                                                                            |                |         |        |        
|Goodwill                                                                                           |                                                                                                                    |                                                                                  | 59,549                                                  |                                                                                            |                |         |        |        
|Liability to sellers for taxes and cash holdback                                                   |                                                                                                                    |                                                                                  | (6,704                                                  | )                                                                                          |                |         |        |        
|Liabilities assumed                                                                                |                                                                                                                    |                                                                                  | (23,166                                                 | )                                                                                          |                |         |        |        
|Equity issued to sellers                                                                           |                                                                                                                    |                                                                                  | (50,671                                                 | )                                                                                          |                |         |        |        
|Cash paid for acquisition, net of cash acquired                                                    |                                                                                                                    |                                                                                  | (20,101                                                 | )                                                                                          |                |         |        |        



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##### Table of Contents



INFRASOURCE SERVICES, INC. AND SUBSIDARIES





Notes to Condensed Consolidated Financial Statements


(Unaudited)




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













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



7



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##### Table of Contents



INFRASOURCE SERVICES, INC. AND SUBSIDARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)










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



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





8



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##### Table of Contents



INFRASOURCE SERVICES, INC. AND SUBSIDARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)








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





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





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



|                                                   |  |                |         |  
|-------------------------------------------------- |  | -------------- | ------- | -
|                                                   |  | Three Months   |        
|                                                   |  | Ended          |        
|                                                   |  | March 31, 2004 |        
|                                                   |  |                |        
|Contract revenues                                  |  | $              | 172,915 |  
|Net loss                                           |  |                | (18,209 | )
|Earnings Per Share Data:                           |  |                |         |  
|Weighted average basic common shares outstanding   |  |                | 30,178  |  
|Weighted average diluted common shares outstanding |  |                | 30,178  |  
|Basic net loss per share                           |  | $              | (0.60   | )
|Diluted net loss per share                         |  |                | (0.60   | )

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INFRASOURCE SERVICES, INC. AND SUBSIDARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)








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











|                                       |                      |                |       |       |           |   |       |       | 
|-------------------------------------- | -------------------- | -------------- | ----- | ----- | --------- | - | ----- | ----- | 
|                                       |                      | December 31,   |       |       | March 31, |  
|                                       |                      | 2004           |       |       | 2005      |  
|                                       |                      |                |       |       |           |  
|                                       |                      | (In thousands) |      
|Contract receivables, net              |                      | $              | 1,894 |       |           | $ | 1,294 |      
|Other current assets                   |                      |                | 125   |       |           |   | 787   |      
|                                       |                      |                |       |       |           |  
|                                       | Total current assets |                |       | 2,019 |           |   |       | 2,081 | 
|Property and equipment, net            |                      |                | 488   |       |           |   | 607   |      
|Other long-term assets, net            |                      |                | 28    |       |           |   | 28    |      
|                                       |                      |                |       |       |           |  
|                                       | Total assets         |                |       | 2,535 |           |   |       | 2,716 | 
|                                       |                      |                |       |       |           |  
|Accounts payable and other liabilities |                      |                | 1,304 |       |           |   | 1,626 |      
|Long-term debt, net of current portion |                      |                |      |       |           |   |      |      
|Deferred income taxes  long term      |                      |                | 11    |       |           |   | 11    |      
|                                       |                      |                |       |       |           |  
|                                       | Total liabilities    |                |       | 1,315 |           |   |       | 1,637 | 
|                                       |                      |                |       |       |           |  
|Net assets                             |                      | $              | 1,220 |       |           | $ | 1,079 |      
|                                       |                      |                |       |       |           |  

10



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##### Table of Contents



INFRASOURCE SERVICES, INC. AND SUBSIDARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)




|                      |  |                |       |  |                |   |       |  
|--------------------- |  | -------------- | ----- |  | -------------- | - | ----- | -
|                      |  | Three Months   |       |  | Three Months   |  
|                      |  | Ended          |       |  | Ended          |  
|                      |  | March 31, 2004 |       |  | March 31, 2005 |  
|                      |  |                |       |  |                |  
|                      |  | (In thousands) |      
|Contract revenues     |  | $              | 1,733 |  |                | $ | 2,591 |  
|Pre-tax income (loss) |  |                | 31    |  |                |   | (236  | )



|   |                                                   
|-- | --------------------------------------------------
|5. | Costs and estimated earnings in excess of billings





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



|                               |                      |                |         |         |           |   |         |         |  
|------------------------------ | -------------------- | -------------- | ------- | ------- | --------- | - | ------- | ------- | -
|                               |                      | December 31,   |         |         | March 31, |  
|                               |                      | 2004           |         |         | 2005      |  
|                               |                      |                |         |         |           |  
|                               |                      | (In thousands) |        
|Goodwill                       |                      | $              | 134,478 |         |           | $ | 134,484 |        
|                               |                      |                |         |         |           |  
|Intangible assets:             |                      |                |         |         |           |   |         |        
|                               | Construction backlog |                | $       | 17,184  |           |   | $       | 16,283  |  
|                               | Volume agreements    |                |         | 4,561   |           |   |         | 4,561   |  
|                               |                      |                |         |         |           |  
|Total intangible assets        |                      |                | 21,745  |         |           |   | 20,844  |        
|                               |                      |                |         |         |           |  
|Accumulated amortization:      |                      |                |         |         |           |   |         |        
|                               | Construction backlog |                |         | (13,491 | )         |   |         | (13,787 | )
|                               | Volume agreements    |                |         | (1,459  | )         |   |         | (1,874  | )
|                               |                      |                |         |         |           |  
|Total accumulated amortization |                      |                | (14,950 | )       |           |   | (15,661 | )      
|                               |                      |                |         |         |           |  
|Intangible assets, net         |                      | $              | 6,795   |         |           | $ | 5,183   |        
|                               |                      |                |         |         |           |  





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##### Table of Contents



INFRASOURCE SERVICES, INC. AND SUBSIDARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)






|                                                                                           |  |                |       | 
|------------------------------------------------------------------------------------------ |  | -------------- | ----- | 
|                                                                                           |  | (In thousands) |      
|                                                                                           |  |                |      
|For the year ended December, 31, 2005 (excludes the three
    months ended March 31, 2005) |  | $              | 3,143 | 
|2006                                                                                       |  |                | 1,005 | 
|2007                                                                                       |  |                | 429   | 
|2008                                                                                       |  |                | 447   | 
|2009                                                                                       |  |                | 159   | 
|                                                                                           |  |                |      
|Total                                                                                      |  | $              | 5,183 | 
|                                                                                           |  |                |      



|   |                                  
|-- | ---------------------------------
|7. | Computation of Per Share Earnings



|                                                                                                            |  |                                     |        |  |                |   |        |  
|----------------------------------------------------------------------------------------------------------- |  | ----------------------------------- | ------ |  | -------------- | - | ------ | -
|                                                                                                            |  | Three Months                        |        |  | Three Months   |  
|                                                                                                            |  | Ended                               |        |  | Ended          |  
|                                                                                                            |  | March 31, 2004                      |        |  | March 31, 2005 |  
|                                                                                                            |  |                                     |        |  |                |  
|                                                                                                            |  | (In thousands, except for per share |       
|                                                                                                            |  | amounts)                            |       
|Income from continuing operations (numerator)                                                               |  | $                                   | 1,053  |  |                | $ | 2,883  |  
|Income (loss) from discontinued operations, net of tax expense
    (benefit) of $12 and $(95), respectively |  |                                     | 19     |  |                |   | (141   | )
|                                                                                                            |  |                                     |        |  |                |  
|Net income                                                                                                  |  | $                                   | 1,072  |  |                | $ | 2,742  |  
|                                                                                                            |  |                                     |        |  |                |  
|Weighted average basic common shares outstanding (denominator)                                              |  |                                     | 28,057 |  |                |   | 38,981 |  
|Potential common stock arising from stock options                                                           |  |                                     | 1,085  |  |                |   | 813    |  
|                                                                                                            |  |                                     |        |  |                |  
|Weighted average diluted common shares outstanding (denominator)                                            |  |                                     | 29,142 |  |                |   | 39,794 |  
|                                                                                                            |  |                                     |        |  |                |  
|Basic net income per share                                                                                  |  | $                                   | 0.04   |  |                | $ | 0.07   |  
|Diluted net income per share                                                                                |  |                                     | 0.04   |  |                |   | 0.07   |  





|   |                         
|-- | ------------------------
|8. | Stock-Based Compensation



12



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INFRASOURCE SERVICES, INC. AND SUBSIDARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)




|                                                                                                                                                    |  |                       |       |   |                |   |       |  
|--------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------- | ----- | - | -------------- | - | ----- | -
|                                                                                                                                                    |  | Three Months          |       |   | Three Months   |  
|                                                                                                                                                    |  | Ended                 |       |   | Ended          |  
|                                                                                                                                                    |  | March 31, 2004        |       |   | March 31, 2005 |  
|                                                                                                                                                    |  |                       |       |   |                |  
|                                                                                                                                                    |  | (In thousands, except |      
|                                                                                                                                                    |  | per share amounts)    |      
|Net income as reported                                                                                                                              |  | $                     | 1,072 |   |                | $ | 2,742 |  
|Deduct: Total stock-based employee compensation expense
    determined under fair value based method for all awards, net of
    related tax effects |  |                       | (209  | ) |                |   | (157  | )
|Add: Total stock-based employee compensation expense, net of
    related tax effects included in the determination of net income
    as reported    |  |                       | 166   |   |                |   | 16    |  
|                                                                                                                                                    |  |                       |       |   |                |  
|Pro forma net income                                                                                                                                |  | $                     | 1,029 |   |                | $ | 2,601 |  
|                                                                                                                                                    |  |                       |       |   |                |  
|Basic and diluted income per share:                                                                                                                 |  |                       |       |   |                |   |       |  
|Basic net income per share  as reported                                                                                                            |  | $                     | 0.04  |   |                | $ | 0.07  |  
|Basic net income per share  pro forma                                                                                                              |  |                       | 0.04  |   |                |   | 0.07  |  
|Diluted net income per share  as reported                                                                                                          |  |                       | 0.04  |   |                |   | 0.07  |  
|Diluted net income per share  pro forma                                                                                                            |  |                       | 0.04  |   |                |   | 0.07  |  



|   |                             
|-- | ----------------------------
|9. | Concentration of Credit Risk







|    |                            
|--- | ---------------------------
|10. | Other Income (Expense), Net





|    |                     
|--- | --------------------
|11. | Comprehensive Income



|                           |  |                |       |  |                |   |       | 
|-------------------------- |  | -------------- | ----- |  | -------------- | - | ----- | 
|                           |  | Three Months   |       |  | Three Months   |  
|                           |  | Ended          |       |  | Ended          |  
|                           |  | March 31, 2004 |       |  | March 31, 2005 |  
|                           |  |                |       |  |                |  
|                           |  | (In thousands) |      
|Net income                 |  | $              | 1,072 |  |                | $ | 2,742 | 
|Other comprehensive income |  |                | 408   |  |                |   | 231   | 
|                           |  |                |       |  |                |  
|Comprehensive income       |  | $              | 1,480 |  |                | $ | 2,973 | 
|                           |  |                |       |  |                |  

13



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##### Table of Contents



INFRASOURCE SERVICES, INC. AND SUBSIDARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)






|    |                    
|--- | -------------------
|12. | Segment Information







|                                                   |  |                |         |   |                   |   |        |               |  |   |        |   |  |   |         |  
|-------------------------------------------------- |  | -------------- | ------- | - | ----------------- | - | ------ | ------------- |  | - | ------ | - |  | - | ------- | -
|                                                   |  | Infrastructure |         |   |                   |   |        |               | 
|                                                   |  | Construction   |         |   | Telecommunication |   |        | Corporate and |  |   |       
|Three Months Ended March 31, 2004                  |  | Services       |         |   | Services          |   |        | Eliminations  |  |   | Total  |  
|                                                   |  |                |         |   |                   |   |        |               |  |   |        |  
|                                                   |  | (In thousands) |        
|Revenues                                           |  | $              | 140,561 |   |                   | $ | 6,347  |               |  | $ | (20    | ) |  | $ | 146,888 |  
|Income (loss) from operations as adjusted          |  |                | 11,255  |   |                   |   | 2,618  |               |  |   | (4,395 | ) |  |   | 9,478   |  
|Depreciation                                       |  |                | 4,826   |   |                   |   | 643    |               |  |   | 94     |   |  |   | 5,563   |  
|Amortization                                       |  |                | 4,547   |   |                   |   |       |               |  |   |       |   |  |   | 4,547   |  
|Total assets                                       |  |                | 366,575 |   |                   |   | 71,839 |               |  |   | 27,568 |   |  |   | 465,982 |  
|Capital expenditures                               |  |                | 2,298   |   |                   |   | 2,736  |               |  |   | 75     |   |  |   | 5,109   |  
|reconciliation:                                    |  |                |         |   |                   |   |        |               |  |   |        |   |  |   |         |  
|Income (loss) from operations as adjusted          |  | $              | 11,255  |   |                   | $ | 2,618  |               |  | $ | (4,395 | ) |  | $ | 9,478   |  
|Less: Amortization                                 |  |                | 4,547   |   |                   |   |       |               |  |   |       |   |  |   | 4,547   |  
|                                                   |  |                |         |   |                   |   |        |               |  |   |        |  
|Income (loss) from operations                      |  |                | 6,708   |   |                   |   | 2,618  |               |  |   | (4,395 | ) |  |   | 4,931   |  
|Interest income                                    |  |                | 32      |   |                   |   |       |               |  |   | 22     |   |  |   | 54      |  
|Interest expense and amortization of debt discount |  |                | (2,715  | ) |                   |   | (519   | )             |  |   | (118   | ) |  |   | (3,352  | )
|Other income (expense), net                        |  |                | 131     |   |                   |   | 18     |               |  |   | 3      |   |  |   | 152     |  
|                                                   |  |                |         |   |                   |   |        |               |  |   |        |  
|Income (loss) before income taxes                  |  | $              | 4,156   |   |                   | $ | 2,117  |               |  | $ | (4,488 | ) |  | $ | 1,785   |  
|                                                   |  |                |         |   |                   |   |        |               |  |   |        |  

14



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INFRASOURCE SERVICES, INC. AND SUBSIDARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)


|                                                   |  |                |         |   |                   |   |        |               |  |   |        |   |  |   |         |  
|-------------------------------------------------- |  | -------------- | ------- | - | ----------------- | - | ------ | ------------- |  | - | ------ | - |  | - | ------- | -
|                                                   |  | Infrastructure |         |   |                   |   |        |               | 
|                                                   |  | Construction   |         |   | Telecommunication |   |        | Corporate and |  |   |       
|Three Months Ended March 31, 2005                  |  | Services       |         |   | Services          |   |        | Eliminations  |  |   | Total  |  
|                                                   |  |                |         |   |                   |   |        |               |  |   |        |  
|                                                   |  | (In thousands) |        
|Revenues                                           |  | $              | 171,628 |   |                   | $ | 10,514 |               |  | $ | 775    |   |  | $ | 182,917 |  
|Income (loss) from operations as adjusted          |  |                | 3,545   |   |                   |   | 4,193  |               |  |   | (3,888 | ) |  |   | 3,850   |  
|Depreciation                                       |  |                | 5,944   |   |                   |   | 836    |               |  |   | 46     |   |  |   | 6,826   |  
|Amortization                                       |  |                | 1,612   |   |                   |   |       |               |  |   |       |   |  |   | 1,612   |  
|Total assets                                       |  |                | 376,237 |   |                   |   | 78,790 |               |  |   | 68,533 |   |  |   | 523,560 |  
|Capital expenditures                               |  |                | 4,359   |   |                   |   | 4,460  |               |  |   | 306    |   |  |   | 9,125   |  
|reconciliation:                                    |  |                |         |   |                   |   |        |               |  |   |        |   |  |   |         |  
|Income (loss) from operations as adjusted          |  | $              | 3,545   |   |                   | $ | 4,193  |               |  | $ | (3,888 | ) |  | $ | 3,850   |  
|Less: Amortization                                 |  |                | 1,612   |   |                   |   |       |               |  |   |       |   |  |   | 1,612   |  
|                                                   |  |                |         |   |                   |   |        |               |  |   |        |  
|Income (loss) from operations                      |  |                | 1,933   |   |                   |   | 4,193  |               |  |   | (3,888 | ) |  |   | 2,238   |  
|Interest income                                    |  |                | 87      |   |                   |   |       |               |  |   | 107    |   |  |   | 194     |  
|Interest expense and amortization of debt discount |  |                | (1,353  | ) |                   |   | (24    | )             |  |   | (79    | ) |  |   | (1,456  | )
|Other income (expense), net                        |  |                | 43      |   |                   |   | 1      |               |  |   | 3,785  |   |  |   | 3,829   |  
|                                                   |  |                |         |   |                   |   |        |               |  |   |        |  
|Income (loss) before income taxes                  |  | $              | 710     |   |                   | $ | 4,170  |               |  | $ | (75    | ) |  | $ | 4,805   |  
|                                                   |  |                |         |   |                   |   |        |               |  |   |        |  



|                   |  |                |         |  |                |   |         | 
|------------------ |  | -------------- | ------- |  | -------------- | - | ------- | 
|                   |  | Three Months   |         |  | Three Months   |  
|                   |  | Ended          |         |  | Ended          |  
|                   |  | March 31, 2004 |         |  | March 31, 2005 |  
|                   |  |                |         |  |                |  
|                   |  | (In thousands) |        
|Electric           |  | $              | 104,389 |  |                | $ | 116,188 | 
|Gas                |  |                | 30,052  |  |                |   | 43,141  | 
|Telecommunications |  |                | 9,092   |  |                |   | 19,381  | 
|Other              |  |                | 3,355   |  |                |   | 4,207   | 
|                   |  |                |         |  |                |  
|                   |  | $              | 146,888 |  |                | $ | 182,917 | 
|                   |  |                |         |  |                |  





|    |                           
|--- | --------------------------
|13. | Related Party Transactions







15



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INFRASOURCE SERVICES, INC. AND SUBSIDARIES


Notes to Condensed Consolidated Financial
Statements  (Continued)












|    |                              
|--- | -----------------------------
|14. | Commitments and Contingencies











16



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

Forward-Looking and Cautionary Statements






Introduction




General








17



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##### Table of Contents







Acquisitions and Discontinued Operations




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

Maslonka:


Utili-Trax:


EnStructure:


18



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##### Table of Contents





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







Results of Operations








Company Results


|                                                   |  |                |         |   |         |  |              |                |  |   |         |   |  |  |       |   
|-------------------------------------------------- |  | -------------- | ------- | - | ------- |  | ------------ | -------------- |  | - | ------- | - |  |  | ----- | --
|                                                   |  | Three Months   |         |   |         |  | Three Months |                |  |  
|                                                   |  | Ended          |         |   | % of    |  |              | Ended          |  |   | % of    |  
|                                                   |  | March 31, 2004 |         |   | Revenue |  |              | March 31, 2005 |  |   | Revenue |  
|                                                   |  |                |         |   |         |  |              |                |  |   |         |  
|                                                   |  | (In thousands) |        
|Contract Revenues                                  |  | $              | 146,888 |   |         |  | 100.0        | %              |  | $ | 182,917 |   |  |  | 100.0 | % 
|Gross profit                                       |  |                | 25,005  |   |         |  | 17.0         | %              |  |   | 21,644  |   |  |  | 11.8  | % 
|Selling, general and administrative expenses       |  |                | 15,534  |   |         |  | 10.6         | %              |  |   | 17,638  |   |  |  | 9.6   | % 
|Merger related costs                               |  |                |        |   |         |  | 0.0          | %              |  |   | 76      |   |  |  | 0.0   | % 
|Provision (recoveries) of uncollectible accounts   |  |                | (7      | ) |         |  | 0.0          | %              |  |   | 80      |   |  |  | 0.0   | % 
|Amortization of intangible assets                  |  |                | 4,547   |   |         |  | 3.1          | %              |  |   | 1,612   |   |  |  | 0.9   | % 
|                                                   |  |                |         |   |         |  |              |                |  |   |         |  
|Income from operations                             |  |                | 4,931   |   |         |  | 3.4          | %              |  |   | 2,238   |   |  |  | 1.2   | % 
|Interest income                                    |  |                | 54      |   |         |  | 0.0          | %              |  |   | 194     |   |  |  | 0.1   | % 
|Interest expense and amortization of debt discount |  |                | (3,352  | ) |         |  | (2.3         | )%             |  |   | (1,456  | ) |  |  | (0.8  | )%
|Other income (expense), net                        |  |                | 152     |   |         |  | 0.1          | %              |  |   | 3,829   |   |  |  | 2.1   | % 
|                                                   |  |                |         |   |         |  |              |                |  |   |         |  
|Income before income taxes                         |  |                | 1,785   |   |         |  | 1.2          | %              |  |   | 4,805   |   |  |  | 2.6   | % 
|Income tax expense                                 |  |                | 732     |   |         |  | 0.5          | %              |  |   | 1,922   |   |  |  | 1.1   | % 
|                                                   |  |                |         |   |         |  |              |                |  |   |         |  
|Income from continuing operations                  |  | $              | 1,053   |   |         |  | 0.7          | %              |  | $ | 2,883   |   |  |  | 1.6   | % 
|                                                   |  |                |         |   |         |  |              |                |  |   |         |  

19



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| |                                                                                        
| | ---------------------------------------------------------------------------------------
| | Three months ended March 31, 2005 compared to the
    three months ended March 31, 2004

Revenues:


Gross profit:


Selling, general and administrative expenses:


Merger related costs:


Amortization of intangible assets:


Interest expense and amortization of debt discount:


Other income (expense), net:


Provision for income taxes:


Income from continuing operations:


20



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Discontinued operations, net of tax:


Net income:


Segment Results








| |                                                                                        
| | ---------------------------------------------------------------------------------------
| | Three months ended March 31, 2005 compared to the
    three months ended March 31, 2004

|         |                            |                                      |   |         |         |  |   |         |         |  |   |        |        |  |  |         |      |  
|-------- | -------------------------- | ------------------------------------ | - | ------- | ------- |  | - | ------- | ------- |  | - | ------ | ------ |  |  | ------- | ---- | -
|         |                            | Quarter Ended                        |   |         |        
|         |                            | March 31,                            |   |         | Change  | 
|         |                            |                                      |   |         |         | 
|         |                            | 2004                                 |   |         | 2005    |  |   | $       |         |  | % |       
|         |                            |                                      |   |         |         |  |   |         |         |  |   |       
|         |                            | (In thousands)                       |  
|Revenue: |                            |                                      |   |         |         |  |   |         |         |  |   |        |        |  |  |        
|         |                            | Infrastructure Construction Services |   | $       | 140,561 |  |   | $       | 171,628 |  |   | $      | 31,067 |  |  |         | 22.1 | %
|         |                            | Telecommunication Services           |   |         | 6,347   |  |   |         | 10,514  |  |   |        | 4,167  |  |  |         | 65.7 | %
|         |                            |                                      |   |         |         |  |   |         |         |  |   |       
|         | Total segment revenues     |                                      |   | 146,908 |         |  |   | 182,142 |         |  |   | 35,234 |        |  |  | 24.0    | %   
|         | Corporate and eliminations |                                      |   | (20     | )       |  |   | 775     |         |  |   | 795    |        |  |  | (3975.0 | )%  
|         |                            |                                      |   |         |         |  |   |         |         |  |   |       
|         | Total revenue              |                                      | $ | 146,888 |         |  | $ | 182,917 |         |  | $ | 36,029 |        |  |  | 24.5    | %   
|         |                            |                                      |   |         |         |  |   |         |         |  |   |       

|                                    |                                                  |                                      |   |        |        |  |   |        |       |  |   |        |        |   |  |       |       |   
|----------------------------------- | ------------------------------------------------ | ------------------------------------ | - | ------ | ------ |  | - | ------ | ----- |  | - | ------ | ------ | - |  | ----- | ----- | --
|                                    |                                                  | Quarter Ended                        |   |        |       
|                                    |                                                  | March 31,                            |   |        | Change | 
|                                    |                                                  |                                      |   |        |        | 
|                                    |                                                  | 2004                                 |   |        | 2005   |  |   | $      |       |  | % |       
|                                    |                                                  |                                      |   |        |        |  |   |        |       |  |   |       
|                                    |                                                  | (In thousands)                       |  
|Income from operations as adjusted: |                                                  |                                      |   |        |        |  |   |        |       |  |   |        |        |   |  |      
|                                    |                                                  | Infrastructure Construction Services |   | $      | 11,255 |  |   | $      | 3,545 |  |   | $      | (7,710 | ) |  |       | (68.5 | )%
|                                    |                                                  | Telecommunication Services           |   |        | 2,618  |  |   |        | 4,193 |  |   |        | 1,575  |   |  |       | 60.2  | % 
|                                    |                                                  |                                      |   |        |        |  |   |        |       |  |   |       
|                                    | Total segment income from operations as adjusted |                                      |   | 13,873 |        |  |   | 7,738  |       |  |   | (6,135 | )      |   |  | (44.2 | )%   
|                                    | Corporate and eliminations                       |                                      |   | (4,395 | )      |  |   | (3,888 | )     |  |   | 507    |        |   |  | (11.5 | )%   
|                                    |                                                  |                                      |   |        |        |  |   |        |       |  |   |       
|                                    | Total income from operations as adjusted         |                                      | $ | 9,478  |        |  | $ | 3,850  |       |  | $ | (5,628 | )      |   |  | (59.4 | )%   
|                                    |                                                  |                                      |   |        |        |  |   |        |       |  |   |       

21



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ICS


Revenues:


Income (loss) from operations as adjusted:


TS


Revenues:


Income from operations as adjusted:


Corporate




Liquidity and Capital Resources




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





22



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##### Table of Contents







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







Cash from operating activities from continuing
operations.


Cash from investing activities from continuing
operations.


Cash from financing activities from continuing
operations.


23



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##### Table of Contents







Contractual Obligations and Other Commitments




|                                                 |  |                        |        |  |      |   |       |      |  |   |       |  |  |      |       |  |            |   |       |       |  |   |        |  |  |   |         | 
|------------------------------------------------ |  | ---------------------- | ------ |  | ---- | - | ----- | ---- |  | - | ----- |  |  | ---- | ----- |  | ---------- | - | ----- | ----- |  | - | ------ |  |  | - | ------- | 
|                                                 |  | Payments due by Period |       
|                                                 |  |                        |       
|Long-Term Debt and Interest Payments             |  | 2005                   |        |  | 2006 |   |       | 2007 |  |   | 2008  |  |  | 2009 |       |  | Thereafter |   |       | Total | 
|                                                 |  |                        |        |  |      |   |       |      |  |   |       |  |  |      |       |  |            |   |       |       | 
|Senior credit facility                           |  | $                      | 640    |  |      | $ | 853   |      |  | $ | 853   |  |  | $    | 853   |  |            | $ | 853   |       |  | $ | 80,398 |  |  | $ | 84,450  | 
|Revolving credit facility                        |  |                        | 6,000  |  |      |   |      |      |  |   |      |  |  |      |      |  |            |   |      |       |  |   |       |  |  |   | 6,000   | 
|Long-term debt  related party                   |  |                        |       |  |      |   | 1,000 |      |  |   |      |  |  |      |      |  |            |   |      |       |  |   |       |  |  |   | 1,000   | 
|Bank notes                                       |  |                        | 33     |  |      |   | 59    |      |  |   |      |  |  |      |      |  |            |   |      |       |  |   |       |  |  |   | 92      | 
|Capital lease obligations                        |  |                        | 4      |  |      |   |      |      |  |   |      |  |  |      |      |  |            |   |      |       |  |   |       |  |  |   | 4       | 
|Projected interest payments on long-term debt(1) |  |                        | 3,459  |  |      |   | 4,694 |      |  |   | 4,846 |  |  |      | 4,796 |  |            |   | 4,746 |       |  |   | 3,527  |  |  |   | 26,068  | 
|                                                 |  |                        |        |  |      |   |       |      |  |   |       |  |  |      |       |  |            |   |       |       | 
|Total                                            |  | $                      | 10,136 |  |      | $ | 6,606 |      |  | $ | 5,699 |  |  | $    | 5,649 |  |            | $ | 5,599 |       |  | $ | 83,925 |  |  | $ | 117,614 | 
|                                                 |  |                        |        |  |      |   |       |      |  |   |       |  |  |      |       |  |            |   |       |       | 

|                                 |                              |                        |       |     |      |   |        |       |  |   |      |    |  |      |    |    |            |   |    |       |  |   |     |     |  |   |        |       | 
|-------------------------------- | ---------------------------- | ---------------------- | ----- | --- | ---- | - | ------ | ----- |  | - | ---- | -- |  | ---- | -- | -- | ---------- | - | -- | ----- |  | - | --- | --- |  | - | ------ | ----- | 
|                                 |                              | Payments due by Period |      
|                                 |                              |                        |      
|Other Contractual Obligations(2) |                              | 2005                   |       |     | 2006 |   |        | 2007  |  |   | 2008 |    |  | 2009 |    |    | Thereafter |   |    | Total | 
|                                 |                              |                        |       |     |      |   |        |       |  |   |      |    |  |      |    |    |            |   |    |       | 
|Contingent earnouts(3)           |                              | $                      | 3,300 |     |      | $ | 8,493  |       |  | $ |     |    |  | $    |   |    |            | $ |   |       |  | $ |    |     |  | $ | 11,793 |      
|Other long-term liabilities:     |                              |                        |       |     |      |   |        |       |  |   |      |    |  |      |    |    |            |   |    |       |  |   |     |     |  |   |        |      
|                                 | Non-vested options exercised |                        |       | 520 |      |   |        | 400   |  |   |      | 68 |  |      |    |   |            |   |    |      |  |   |     | 549 |  |   |        | 1,537 | 
|                                 | Other                        |                        |       |    |      |   |        | 2,556 |  |   |      | 57 |  |      |    | 57 |            |   |    | 57    |  |   |     | 128 |  |   |        | 2,855 | 
|                                 |                              |                        |       |     |      |   |        |       |  |   |      |    |  |      |    |    |            |   |    |       | 
|Total                            |                              | $                      | 3,820 |     |      | $ | 11,449 |       |  | $ | 125  |    |  | $    | 57 |    |            | $ | 57 |       |  | $ | 677 |     |  | $ | 16,185 |      
|                                 |                              |                        |       |     |      |   |        |       |  |   |      |    |  |      |    |    |            |   |    |       | 






|    |                                                                                                                                                                                                                                                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The total projected interest payments on long-term debt are
    based upon borrowings and interest rates as of March 31,
    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 | 
|                             |  |                                            |       |  |      |   |       |      |  |   |       |  |  |      |       |  |            |   |     |       | 
|Operating leases             |  | $                                          | 9,769 |  |      | $ | 9,136 |      |  | $ | 6,988 |  |  | $    | 3,766 |  |            | $ | 915 |       |  | $ | 15 |  |  | $ | 30,589 | 
|                             |  |                                            |       |  |      |   |       |      |  |   |       |  |  |      |       |  |            |   |     |       | 

24



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##### Table of Contents





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







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

















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



25



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##### Table of Contents














|        |                                                               
|------- | --------------------------------------------------------------
|Item 3. | Quantitative and Qualitative Disclosures About Market
    Risk





Interest Rates.


26



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##### Table of Contents










|        |                        
|------- | -----------------------
|Item 4. | Controls and Procedures



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





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






PART II OTHER INFORMATION







|        |                  
|------- | -----------------
|Item 1. | Legal Proceedings












|        |                                                                 
|------- | ----------------------------------------------------------------
|Item 2. | Unregistered Sales of Equity Securities and Use of
    Proceeds.



27



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##### Table of Contents








|        |                                 
|------- | --------------------------------
|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)                                                                                                                                                                                                    
|
| | 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.*                                                                                                                                                                                                                                                                                                






|    |                                                                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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.                   



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

28



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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



29



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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.

30