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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 
 COMMISSION FILE NUMBER 001-32582
 PIKE ELECTRIC CORPORATION
 (Exact name of registrant as specified in its charter)
 Delaware
    
    20-3112047(State of incorporation)
    
    (I.R.S. Employer Identification No.)
 100 Pike Way, PO Box 868, Mount Airy, NC 27030  (Address of principal executive office)   (336) 789-2171  (Registrants telephone number, including area code)
 þ o
  o þ o
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PIKE ELECTRIC CORPORATION
FORM 10-Q
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2007

INDEX
 Part I. FINANCIAL INFORMATIONItem 1.
    
    Financial Statements (unaudited):Condensed consolidated balance sheets
    
    
    1Condensed consolidated statements of operations
    
    
    2Condensed consolidated statements of cash flows
    
    
    3Notes to condensed consolidated financial statements
    
    
    4Item 2.
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    7Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    14Item 4.
    
    Controls and Procedures
    
    
    14Part II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    15Item 1A.
    
    Risk Factors
    
    
    15Item 6.
    
    Exhibits
    
    
    16Signatures
    
    
    
    
    17Exhibit 31.1Exhibit 31.2Exhibit 32.1




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PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 PIKE ELECTRIC CORPORATION
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (In thousands, except per share amounts)
 September
    
    
    June 30,30, 2007
    
    
    2007(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    56
    
    
    $
    1,467Accounts receivable from customers, net
    
    
    57,760
    
    
    
    59,603Work completed not billed
    
    
    47,634
    
    
    
    44,527Inventories
    
    
    8,772
    
    
    
    8,535Prepaid expenses and other
    
    
    4,885
    
    
    
    6,219Deferred income taxes
    
    
    14,129
    
    
    
    13,633Total current assets
    
    
    133,236
    
    
    
    133,984Property and equipment, net
    
    
    257,270
    
    
    
    267,740Goodwill
    
    
    94,402
    
    
    
    94,402Other intangibles, net
    
    
    42,438
    
    
    
    43,228Deferred loan costs, net
    
    
    3,948
    
    
    
    4,482Other assets
    
    
    1,661
    
    
    
    1,661Total assets
    
    $
    532,955
    
    
    $
    545,497LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    9,294
    
    
    $
    8,503Accrued compensation
    
    
    20,570
    
    
    
    20,597Accrued expenses and other
    
    
    4,460
    
    
    
    4,447Income taxes payable
    
    
    4,624
    
    
    
    6,146Current portion of deferred compensation
    
    
    4,553
    
    
    
    3,544Current portion of insurance and claim accruals
    
    
    26,503
    
    
    
    26,669Revolving credit facility
    
    
    2,000
    
    
    
    Total current liabilities
    
    
    72,004
    
    
    
    69,906Long-term debt, net of current portion
    
    
    173,700
    
    
    
    191,500Insurance and claim accruals, net of current portion
    
    
    10,766
    
    
    
    10,894Deferred compensation, net of current portion
    
    
    5,662
    
    
    
    9,315Deferred income taxes
    
    
    66,110
    
    
    
    67,259Other liabilities
    
    
    590
    
    
    
    562Commitments and contingenciesStockholders equity:Preferred stock, par value $0.001 per share;
100,000 shares authorized; no shares issued and
outstanding
    
    
    
    
    
    
    Common stock, par value $0.001 per share; 100,000
shares authorized; 33,105 and 32,916 shares
issued and outstanding at September 30, 2007 and
June 30, 2007, respectively
    
    
    6,426
    
    
    
    6,426Additional paid-in capital
    
    
    145,577
    
    
    
    142,849Accumulated other comprehensive income (loss)
    
    
    43
    
    
    
    (8
    )Retained earnings
    
    
    52,077
    
    
    
    46,794Total stockholders equity
    
    
    204,123
    
    
    
    196,061Total liabilities and stockholders equity
    
    $
    532,955
    
    
    $
    545,497
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PIKE ELECTRIC CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 (Unaudited)
 (In thousands, except per share amounts)
 Three Months EndedSeptember 30,2007
    
    
    2006Revenues
    
    $
    139,735
    
    
    $
    149,855Cost of operations
    
    
    116,457
    
    
    
    130,115Gross profit
    
    
    23,278
    
    
    
    19,740General and administrative expenses
    
    
    10,311
    
    
    
    11,556Loss on sale of property and equipment
    
    
    45
    
    
    
    367Income from operations
    
    
    12,922
    
    
    
    7,817Other expense (income):Interest expense
    
    
    4,372
    
    
    
    5,178Other, net
    
    
    (60
    )
    
    
    (58
    )Total other expense
    
    
    4,312
    
    
    
    5,120Income before income taxes
    
    
    8,610
    
    
    
    2,697Income tax expense
    
    
    3,327
    
    
    
    1,095Net income
    
    $
    5,283
    
    
    $
    1,602Earnings per share:Basic
    
    $
    0.16
    
    
    $
    0.05Diluted
    
    $
    0.16
    
    
    $
    0.05Shares used in computing earnings per share:Basic
    
    
    32,696
    
    
    
    32,221Diluted
    
    
    33,671
    
    
    
    33,221
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PIKE ELECTRIC CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 (In thousands)
 Three Months EndedSeptember 30,2007
    
    
    2006Cash flows from operating activities:Net income
    
    $
    5,283
    
    
    $
    1,602Adjustments to reconcile net income to net cash provided
by operating activities:Depreciation and amortization
    
    
    9,562
    
    
    
    8,954Non-compete litigation settlement
    
    
    
    
    
    
    3,551Non-cash interest expense
    
    
    924
    
    
    
    947Deferred income taxes
    
    
    (1,679
    )
    
    
    (633
    )Loss on sale of property and equipment
    
    
    45
    
    
    
    367Equity compensation expense
    
    
    605
    
    
    
    272Excess tax benefit from stock-based compensation
    
    
    (957
    )
    
    
    Changes in operating assets and liabilities:Accounts receivable and work completed not billed
    
    
    (1,264
    )
    
    
    8,083Inventories, prepaid expenses and other
    
    
    425
    
    
    
    (1,514
    )Insurance and claim accruals
    
    
    (296
    )
    
    
    8,554Accounts payable and other
    
    
    514
    
    
    
    2,254Deferred compensation
    
    
    (3,035
    )
    
    
    (9,331
    )Net cash provided by operating activities
    
    
    10,127
    
    
    
    23,106Cash flows from investing activities:Purchases of property and equipment
    
    
    (1,772
    )
    
    
    (14,457
    )Net proceeds from sale of property and equipment
    
    
    4,098
    
    
    
    2,397Net cash provided by (used in) investing activities
    
    
    2,326
    
    
    
    (12,060
    )Cash flows from financing activities:Principal payments on long-term debt
    
    
    (17,800
    )
    
    
    (5,000
    )Draws (repayments) on revolving credit facility, net
    
    
    2,000
    
    
    
    (4,500
    )Net proceeds from sale of common stock
    
    
    979
    
    
    
    823Equity compensation tax benefit
    
    
    957
    
    
    
    Net cash used in financing activities
    
    
    (13,864
    )
    
    
    (8,677
    )Net (decrease) increase in cash and cash equivalents
    
    
    (1,411
    )
    
    
    2,369Cash and cash equivalents beginning of year
    
    
    1,467
    
    
    
    3,391Cash and cash equivalents end of period
    
    $
    56
    
    
    $
    5,760
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PIKE ELECTRIC CORPORATION
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 For the three months ended September 30, 2007 and 2006
 (In thousands, except per share amounts)
 1. Basis of Presentation
  2. Business
    Three Months EndedSeptember 30,2007
    
    
    2006Core powerline services
    
    $
    134,873
    
    
    
    96.5
    %
    
    $
    137,568
    
    
    
    91.8
    %Storm restoration services
    
    
    4,862
    
    
    
    3.5
    %
    
    
    12,287
    
    
    
    8.2
    %Total
    
    $
    139,735
    
    
    
    100.0
    %
    
    $
    149,855
    
    
    
    100.0
    %
 3. Stock-Based Compensation
  .
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4. Earnings Per Share
  Three Months EndedSeptember 30,2007
    
    
    2006Basic:Net income
    
    $
    5,283
    
    
    $
    1,602Weighted average common shares
    
    
    32,696
    
    
    
    32,221Basic earnings per share
    
    $
    0.16
    
    
    $
    0.05Diluted:Net income
    
    $
    5,283
    
    
    $
    1,602Weighted average common shares
    
    
    32,696
    
    
    
    32,221Potential common stock arising from stock options and restricted stock
    
    
    975
    
    
    
    1,000Weighted average common shares  diluted
    
    
    33,671
    
    
    
    33,221Diluted earnings per share
    
    $
    0.16
    
    
    $
    0.05
  5. Income Taxes
  Accounting for Uncertainty in Income Taxes  an Interpretation of FASB
Statement No. 109
   6. Comprehensive Income
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Three Months EndedSeptember 30,2007
    
    
    2006Net income
    
    $
    5,283
    
    
    $
    1,602Diesel fuel hedge
    
    
    51
    
    
    
    Comprehensive income
    
    $
    5,334
    
    
    $
    1,602
 7. Commitments and Contingencies
 Litigation
  Performance Bonds
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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Introduction
    Three Months EndedSeptember 30,2007
    
    
    2006Core powerline services
    
    $
    134.9
    
    
    
    96.5
    %
    
    $
    137.6
    
    
    
    91.8
    %Storm restoration services
    
    
    4.8
    
    
    
    3.5
    %
    
    
    12.3
    
    
    
    8.2
    %Total
    
    $
    139.7
    
    
    
    100.0
    %
    
    $
    149.9
    
    
    
    100.0
    %
 Critical Accounting Policies
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Operational and Other Factors
  
    
    When we add new customers and arrangements, we generally experience an increase in
costs, including the costs of training and outfitting our crews and spending on equipment
and specialized tools and supplies. Once the crews and equipment are fully utilized, our
margins generally increase over the life of the arrangement
    
    Industry-wide insurance costs for workmens compensation, medical and general liability
could rise at a rate faster than our revenues. We have implemented several safety
initiatives designed to reduce incident rates and corresponding insurance costs.
    
    There are a limited number of skilled workers that can perform our work, and during
historic periods of increased demand, labor costs have tended to increase. We are
currently experiencing shortages of skilled personnel in certain markets. While shortages
have caused our labor costs to increase, we historically have been able to obtain increases
when we renegotiate rates with our customers to offset these cost increases.
    
    Fuel costs may rise at a rate faster than our revenues. We have a large fleet of
vehicles and equipment that primarily use diesel fuel. We have implemented bulk purchasing
in certain areas to lower our fuel costs. In addition, we have entered into two diesel
fuel swaps that cover, based on current volumes, approximately 30% of our diesel
requirements through February 2008.
 Results of Operations
  Three Months EndedSeptember 30,2007
    
    2006Revenues:Core powerline services
    
    
    96.5
    %
    
    
    91.8
    %Storm restoration services
    
    
    3.5
    
    
    
    8.2Total
    
    
    100.0
    %
    
    
    100.0
    %Cost of operations
    
    
    83.3
    
    
    
    86.8Gross profit
    
    
    16.7
    
    
    
    13.2General and administrative expenses
    
    
    7.4
    
    
    
    7.7Loss on sale of property and equipment
    
    
    
    
    
    
    0.3Income from operations
    
    
    9.3
    
    
    
    5.2Interest expense and other, net
    
    
    3.1
    
    
    
    3.4Income before income taxes
    
    
    6.2
    
    
    
    1.8Income tax expense
    
    
    2.4
    
    
    
    0.7Net income
    
    
    3.8
    %
    
    
    1.1
    %
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Three Months Ended September 30, 2007 Compared to Three Months Ended September 30, 2006
 Revenues.
   Gross Profit.
 General and Administrative Expenses.
 Interest Expense and Other, Net.
 Income Tax Expense.
 Net Income.
 Liquidity and Capital Resources
  9




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Changes in Cash Flows:
 Three Months EndedSeptember 30,2007
    
    2006(In millions)Net cash provided by operating activities
    
    $
    10.1
    
    
    $
    23.1Net cash provided by (used in) investing activities
    
    $
    2.3
    
    
    $
    (12.0
    )Net cash used in financing activities
    
    $
    (13.8
    )
    
    $
    (8.7
    )
    Senior Credit Facility
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Off-Balance Sheet Arrangements
    Seasonality; Fluctuations of Results
  Inflation
  Recent Accounting Pronouncements
 Accounting for Uncertainty in Income Taxes Accounting for Income Taxes.
 Fair Value Measurements
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The Fair Value Option for Financial Assets and
Financial Liabilities, including an amendment of FASB Statement No. 115
 Uncertainty of Forward-Looking Statements and Information
  
    
    our belief that the lawsuits, claims or other proceedings to which we are subject in the
ordinary course of business will not have a material adverse effect on the Companys
results of operation or financial position;
    
    our belief that our cash flow from operations, available cash and cash equivalents, and
borrowings available under our senior credit facility will be adequate to meet our ordinary
course liquidity needs for the foreseeable future.
  
    
    We derive a significant portion of our revenues from a small group of customers. The
loss of or a significant decrease in services to one or more of these customers could
negatively impact our business and results of operations.
    
    Our customers often have no obligation to assign work to us, and many of our
arrangements may be terminated on short notice.
    
    Our storm restoration services are highly volatile and unpredictable, which could result
in substantial variations in, and uncertainties regarding, the levels of our financial
results from period to period.
    
    Our business is subject to numerous hazards that could subject us to substantial
monetary and other liabilities. If accidents occur, they could materially and adversely
affect our business and results of operations.
    
    Our current insurance coverage may not be adequate, and we may not be able to obtain
insurance at acceptable rates, or at all.
    
    Record high fuel costs could materially and adversely affect our operating results.
    
    Demand for some of our services is cyclical and vulnerable to industry and economic
downturns, which could materially and adversely affect our business and results of
operations.
    
    The Energy Policy Act may fail to result in increased spending in the electric power
transmission infrastructure, which could slow our expected growth.
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
    
    Failure to maintain effective internal control over financial reporting could have a
material adverse effect on our business, operating results and stock price.
    
    To be successful, we need to attract and retain qualified personnel, and any inability
to do so would adversely affect our business.
    
    The slowdown in the housing market could negatively affect our revenues from
distribution work.
    
    We are dependent on our senior management and other key personnel, the loss of which
could have a material adverse effect on our business.
    
    Our industry is highly competitive and we may be unable to compete effectively, retain
our customers or win new customers, which could result in reduced profitability and loss of
market share.
    
    We may be unsuccessful at acquiring companies or at integrating companies that we may
acquire, and as a result, we may not achieve the expected benefits and our profitability
could materially suffer.
    
    We have incurred indebtedness under a senior credit facility, which may restrict our
business and operations, adversely affect our cash flow, and restrict our future access to
sufficient funding to finance desired growth.
    
    We are in the process of investigating a company-wide information technology (IT)
solution which could temporarily disrupt our day-to-day operations.
    
    During the ordinary course of our business, we may become subject to lawsuits or
indemnity claims, which could materially and adversely affect our business and results of
operations.
    
    Our failure to comply with or the imposition of liability under, environmental laws and
regulations could result in significant costs.
    
    Weather conditions can adversely affect our operations and, consequently, revenues. The
electric infrastructure servicing business is subject to seasonal variations, which may
cause our operating results to vary significantly from period to period and could cause the
market price of our stock to fall.
    
    Our results of operations could be adversely affected as a result of the impairment of
goodwill or other intangibles.
    
    The market price of our stock may be influenced by many factors, some of which are
beyond our control.
    
    Shares eligible for future sale may cause the market price of our common stock to drop
significantly, even if our business is doing well.
    
    The concentration of our capital stock among a relatively small group of stockholders
may limit other stockholders ability to influence corporate matters.
    
    Anti-takeover provisions of our charter and bylaws may reduce the likelihood of any
potential change of control or unsolicited acquisition proposal that stockholders might
consider favorable.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
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PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  15




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Item 6. Exhibits
 Exhibit
    
    Description31.1
    
    
    Certification of Periodic Report by Chief Executive Officer
pursuant to Rule 13a-14(a)/15d-14a and pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002 (filed herewith)31.2
    
    
    Certification of Periodic Report by Chief Financial Officer
pursuant to Rule 13a-14(a)/15d-14a and pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002 (filed herewith)32.1
    
    
    Certification of Periodic Report by Chief Executive Officer and
Chief Financial Officer pursuant to U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(filed herewith)
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SIGNATURES
  PIKE ELECTRIC CORPORATION
  (Registrant)Date: November 8, 2007
    By:
    /s/ J. Eric PikeJ. Eric PikeChairman, Chief Executive Officer and PresidentDate: November 8, 2007
    By:
    /s/ Anthony K. SlaterAnthony K. SlaterChief Financial Officer 17