##### 



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 March 31, 2006
 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 001-32582
 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 o þ
 o þ




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##### 



PIKE ELECTRIC CORPORATION
FORM 10-Q
FOR THE NINE MONTHS ENDED MARCH 31, 2006
INDEX
 PagePART I. FINANCIAL INFORMATIONITEM 1.
    
    Financial StatementsCondensed Consolidated Balance Sheets
    
    
    2Condensed Consolidated Statements of Operations
    
    
    3Condensed Consolidated Statements of Cash Flows
    
    
    4Notes to Condensed Consolidated Financial Statements
    
    
    5ITEM 2.
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    13ITEM 3
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    21ITEM 4.
    
    Controls and Procedures
    
    
    22PART II. OTHER INFORMATIONITEM 1.
    
    Legal Proceedings
    
    
    23ITEM 1A.
    
    Risk Factors
    
    
    23ITEM 6.
    
    Exhibits
    
    
    23Signature
    
    
    24
 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)
 March 31,
    
    
    June 30,2006
    
    
    2005(Unaudited)
    
    
    (Note 1)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    3,031
    
    
    $
    3,106Accounts receivable, net
    
    
    68,007
    
    
    
    60,690Work completed not billed
    
    
    58,824
    
    
    
    64,568Inventories
    
    
    8,159
    
    
    
    7,321Prepaid expenses and other
    
    
    5,365
    
    
    
    11,205Deferred income taxes
    
    
    5,162
    
    
    
    4,838Total current assets
    
    
    148,548
    
    
    
    151,728Property and equipment, net
    
    
    287,446
    
    
    
    281,842Goodwill
    
    
    94,400
    
    
    
    91,826Other intangibles, net
    
    
    51,279
    
    
    
    55,128Deferred loan costs, net
    
    
    6,797
    
    
    
    9,879Other assets
    
    
    2,237
    
    
    
    2,052Total assets
    
    $
    590,707
    
    
    $
    592,455LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    14,480
    
    
    $
    19,574Accrued expenses
    
    
    26,529
    
    
    
    33,843Income taxes payable
    
    
    4,632
    
    
    
    Current portion of deferred compensation
    
    
    9,075
    
    
    
    12,202Current portion of insurance and claim accruals
    
    
    13,898
    
    
    
    4,938Current portion of long-term debt
    
    
    
    
    
    
    250Revolving credit facility
    
    
    
    
    
    
    11,500Total current liabilities
    
    
    68,614
    
    
    
    82,307Long-term debt, net of current portion
    
    
    261,000
    
    
    
    407,750Deferred compensation, net of current portion
    
    
    11,997
    
    
    
    16,904Insurance and claim accruals, net of current portion
    
    
    13,148
    
    
    
    13,484Deferred income taxes
    
    
    66,891
    
    
    
    71,467Other liabilities
    
    
    2,412
    
    
    
    60Commitments and contingenciesStockholders equity:Common stock, par value $0.001 per share; 100,000
authorized shares; 32,448 and 21,484 shares issued
and outstanding at March 31, 2006 and June 30,
2005, respectively
    
    
    6,426
    
    
    
    6,415Additional paid-in capital
    
    
    134,777
    
    
    
    105Unearned compensation
    
    
    
    
    
    
    (879
    )Retained earnings (accumulated deficit)
    
    
    25,442
    
    
    
    (5,158
    )Total stockholders equity
    
    
    166,645
    
    
    
    483Total liabilities and stockholders equity
    
    $
    590,707
    
    
    $
    592,455
  2




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##### 



PIKE ELECTRIC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
 Three Months Ended
    
    
    Nine Months EndedMarch 31,
    
    
    March 31,2006
    
    
    2005
    
    
    2006
    
    
    2005Revenues
    
    $
    157,202
    
    
    $
    154,473
    
    
    $
    571,358
    
    
    $
    524,247Cost of operations
    
    
    139,902
    
    
    
    136,613
    
    
    
    465,969
    
    
    
    428,072Gross profit
    
    
    17,300
    
    
    
    17,860
    
    
    
    105,389
    
    
    
    96,175General and administrative expenses
    
    
    9,836
    
    
    
    8,185
    
    
    
    31,985
    
    
    
    33,507Loss on sale of property and equipment
    
    
    1,556
    
    
    
    210
    
    
    
    1,905
    
    
    
    256Income from operations
    
    
    5,908
    
    
    
    9,465
    
    
    
    71,499
    
    
    
    62,412Other expense (income):Interest expense
    
    
    5,484
    
    
    
    19,421
    
    
    
    19,337
    
    
    
    34,265Other, net
    
    
    (58
    )
    
    
    (15
    )
    
    
    (163
    )
    
    
    (94
    )Total other expense
    
    
    5,426
    
    
    
    19,406
    
    
    
    19,174
    
    
    
    34,171Income (loss) before income taxes
    
    
    482
    
    
    
    (9,941
    )
    
    
    52,325
    
    
    
    28,241Income tax expense
    
    
    194
    
    
    
    1,976
    
    
    
    20,951
    
    
    
    17,429Net income (loss)
    
    $
    288
    
    
    $
    (11,917
    )
    
    $
    31,374
    
    
    $
    10,812Earnings (loss) per share:Basic earnings (loss) per share
    
    $
    0.01
    
    
    $
    (0.56
    )
    
    $
    1.02
    
    
    $
    0.36Diluted earnings (loss) per share
    
    $
    0.01
    
    
    $
    (0.56
    )
    
    $
    0.98
    
    
    $
    0.36Shares used in computing earnings
(loss) per share:Basic
    
    
    31,932
    
    
    
    21,278
    
    
    
    30,846
    
    
    
    29,753Diluted
    
    
    33,092
    
    
    
    21,278
    
    
    
    32,016
    
    
    
    30,196
  3




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##### 



PIKE ELECTRIC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
 Nine MonthsEndedMarch 31,2006
    
    
    2005Cash flows from operating activities:Net income
    
    $
    31,374
    
    
    $
    10,812Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    28,352
    
    
    
    28,200Non-cash interest expense
    
    
    4,170
    
    
    
    21,618Deferred income taxes
    
    
    (4,901
    )
    
    
    10,411Unrealized gains on investments
    
    
    
    
    
    
    (566
    )Loss on sale of property and equipment
    
    
    1,905
    
    
    
    256Equity compensation expense
    
    
    2,518
    
    
    
    1,597Changes in operating assets and liabilities:Accounts receivable and work completed not billed
    
    
    (1,573
    )
    
    
    (7,939
    )Inventories, prepaids and other
    
    
    5,142
    
    
    
    (1,670
    )Insurance and claim accruals
    
    
    8,624
    
    
    
    (1,530
    )Accounts payable and other
    
    
    (7,403
    )
    
    
    1,651Deferred compensation
    
    
    (8,793
    )
    
    
    (12,123
    )Net cash provided by operating activities
    
    
    59,415
    
    
    
    50,717Cash flows from investing activities:Purchases of property and equipment
    
    
    (39,855
    )
    
    
    (40,769
    )Business acquisitions, net of cash acquired
    
    
    
    
    
    
    (194,222
    )Proceeds from sale of property and equipment
    
    
    7,052
    
    
    
    1,598Net cash used in investing activities
    
    
    (32,803
    )
    
    
    (233,393
    )Cash flows from financing activities:Principal payments on long-term debt
    
    
    (147,000
    )
    
    
    (179,000
    )Proceeds from long-term debt
    
    
    
    
    
    
    450,000Payments on revolving credit facility, net
    
    
    (11,500
    )
    
    
    (13,000
    )Equity compensation excess tax benefit
    
    
    3,673
    
    
    
    Repurchase of stock
    
    
    
    
    
    
    (123,283
    )Redemption of mandatorily redeemable preferred stock
    
    
    
    
    
    
    (20,000
    )Net proceeds from sale of common stock
    
    
    128,796
    
    
    
    75,349Deferred loan costs
    
    
    (656
    )
    
    
    (12,254
    )Net cash (used in) provided by financing activities
    
    
    (26,687
    )
    
    
    177,812Net decrease in cash and cash equivalents
    
    
    (75
    )
    
    
    (4,864
    )Cash and cash equivalents beginning of period
    
    
    3,106
    
    
    
    4,937Cash and cash equivalents end of period
    
    $
    3,031
    
    
    $
    73
  4




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##### 



PIKE ELECTRIC CORPORATION
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2006 (Unaudited )
(In thousands, except per share amounts)
 1. Basis of Presentation
  2. Change in Capital Structure
   3. Business
   5




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##### 



Three Months Ended
    
    
    Nine Months EndedMarch 31,
    
    
    
    
    
    
    
    
    
    
    March 31,2006
    
    
    2005
    
    
    2006
    
    
    2005Powerline
    
    $
    148.0
    
    
    
    94.2
    %
    
    $
    139.7
    
    
    
    90.4
    %
    
    $
    396.1
    
    
    
    69.3
    %
    
    $
    377.2
    
    
    
    72.0
    %Storm
    
    
    9.2
    
    
    
    5.8
    %
    
    
    14.8
    
    
    
    9.6
    %
    
    
    175.3
    
    
    
    30.7
    %
    
    
    147.0
    
    
    
    28.0
    %Total
    
    $
    157.2
    
    
    
    100.0
    %
    
    $
    154.5
    
    
    
    100.0
    %
    
    $
    571.4
    
    
    
    100.0
    %
    
    $
    524.2
    
    
    
    100.0
    %
 4. Recent Accounting Pronouncements
 Exchanges of Nonmonetary Assets
 Accounting Changes and Error Corrections, a
replacement of ABP Opinion No. 20, Accounting Changes, and FASB Statement No. 3, Reporting
Accounting Changes in Interim Financial Statements.
 conditional asset
retirement obligation,
 5. Stock-Based Compensation
  6




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##### 



7




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##### 



Nine Months
    
    Nine MonthsEnded
    
    EndedMarch 31,
    
    March 31,2006
    
    2005Dividend yield
    
    
    
    
    
    
    Risk-free interest rate
    
    
    4.06%  4.48
    %
    
    
    3.75
    %Volatility
    
    
    0.29
    
    
    
    0.45Expected life
    
    6.5 years
    
    
    6.0 years
  WeightedAverageOptions
    
    
    Options
    
    
    
    
    
    
    ExerciseAvailable
    
    
    Outstanding
    
    
    Exercise Price ($)
    
    
    Price($)Balance at June 30, 2005
    
    
    127
    
    
    
    2,905
    
    
    $
    $3.806.51
    
    
    $
    $4.80Exercised
    
    
    
    
    
    
    (774
    )
    
    
    3.8014.00
    
    
    
    4.42Authorized
    
    
    1,750
    
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    116
    
    
    
    (116
    )
    
    
    6.5114.00
    
    
    
    10.02Granted
    
    
    (1,043
    )
    
    
    1,043
    
    
    
    14.0018.62
    
    
    
    14.28Balance at March 31, 2006
    
    
    950
    
    
    
    3,058
    
    
    $
    3.80-18.62
    
    
    $
    7.93
  Options Outstanding
    
    
    Options ExercisableWeighted AverageNumber of
    
    
    Weighted
    
    
    Contractual Life
    
    
    Number of
    
    
    WeightedOptions
    
    
    Average
    
    
    Remaining
    
    
    Options
    
    
    AverageExercise price
    
    Outstanding
    
    
    Exercise Price
    
    
    (Years)
    
    
    Exercisable
    
    
    Exercise Price$   3.80
    
    
    1,221
    
    
    $
    3.80
    
    
    
    6.1
    
    
    
    891
    
    
    $
    3.806.51
    
    
    857
    
    
    
    6.51
    
    
    
    8.6
    
    
    
    362
    
    
    
    6.5114.00
    
    
    907
    
    
    
    14.00
    
    
    
    9.3
    
    
    
    
    
    
    
    14.03
    
    
    9
    
    
    
    14.03
    
    
    
    9.4
    
    
    
    
    
    
    
    18.62
    
    
    64
    
    
    
    18.62
    
    
    
    9.6
    
    
    
    
    
    
    
    Total/Avg
    
    
    3,058
    
    
    $
    7.93
    
    
    
    7.8
    
    
    
    1,253
    
    
    $
    4.57
 8




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##### 



Nine Months EndedMarch, 31. 2006Non-Qualified Stock Options:Fair value of options granted during period expected to vest
    
    $
    5,124Aggregate intrinsic value of exercisable and nonvested options expected to vest
    
    $
    36,367Number of nonvested options expected to vest
    
    
    1,577Weighted average price of nonvested options expected to vest
    
    $
    10.06Weighted average remaining life of nonvested options expected to vest
    
    
    9.0Intrinsic value of nonvested options expected to vest
    
    $
    17,263
    Weighted AverageGrant-Date FairNon Vested Restricted Stock
    
    Shares
    
    
    ValueNon-vested shares as of June 30, 2005
    
    
    180
    
    
    $
    6.51Granted
    
    
    187
    
    
    $
    14.36Vested
    
    
    (1
    )
    
    $
    14.00Forfeited
    
    
    (9
    )
    
    $
    14.00Non-vested shares as of March 31, 2006
    
    
    357
    
    
    $
    10.41
    Three Months Ended
    
    
    Nine Months EndedMarch 31, 2005
    
    
    March 31, 2005Net (loss) income, as reported
    
    $
    (11,917
    )
    
    $
    10,812Add: Stock-based employee compensation expense included
in reported net income, net of related income tax effects
    
    
    105
    
    
    
    2,985Less: Stock-based employee compensation expense
determined under fair value based method of all awards,
net of related income tax effects
    
    
    (805
    )
    
    
    (1,646
    )Pro forma net income
    
    $
    (12,617
    )
    
    $
    12,151(Loss) earnings per share  basic and diluted, as reported
    
    $
    (0.56
    )
    
    $
    0.36(Loss) earnings per share  basic and diluted, proforma
    
    $
    (0.59
    )
    
    $
    0.40
 9




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##### 



6. Acquisition
 Business Combinations.
  7. Earnings Per Share
  Three Months Ended
    
    
    Nine Months EndedMarch 31,
    
    
    March 31,2006
    
    
    2005
    
    
    2006
    
    
    2005Net income (loss) (numerator)
    
    $
    288
    
    
    $
    (11,917
    )
    
    $
    31,374
    
    
    $
    10,812Weighted-average number of
common shares (denominator)
    
    
    31,932
    
    
    
    21,278
    
    
    
    30,846
    
    
    
    29,753Basic earnings (loss) per
common share
    
    $
    0.01
    
    
    $
    (0.56
    )
    
    $
    1.02
    
    
    $
    0.36Weighted-average number of
common shares
    
    
    31,932
    
    
    
    21,278
    
    
    
    30,846
    
    
    
    29,753Potential common stock
arising from stock options
and restricted stock
    
    
    1,160
    
    
    
    
    
    
    
    1,170
    
    
    
    443Total shares-diluted
(denominator)
    
    
    33,092
    
    
    
    21,278
    
    
    
    32,016
    
    
    
    30,196Diluted earnings (loss) per
common share
    
    $
    0.01
    
    
    $
    (0.56
    )
    
    $
    0.98
    
    
    $
    0.36Anti-dilutive weighted shares
excluded from the calculation
of earnings per share
    
    
    983
    
    
    
    2,906
    
    
    
    882
    
    
    
    1,228
 8. Accounts Receivable
  10




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##### 



9. Debt
  March 31,
    
    
    June 30,2006
    
    
    2005Revolving credit facility
    
    $
    
    
    
    $
    11,500Long-term debt:$300 million term loan
    
    $
    166,324
    
    
    $
    260,000$150 million term loan
    
    
    94,676
    
    
    
    148,000261,000
    
    
    
    408,000Less: current portion
    
    
    
    
    
    
    250Long term debt
    
    $
    261,000
    
    
    $
    407,750
     Accounting for Derivatives and Hedging
Activities,
  11




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##### 



10. Income Taxes
  11. Commitments and contingencies
 Litigation
  Performance Bonds
  12




---



##### 



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Introduction
     Three Months Ended
    
    Nine Months EndedMarch 31,
    
    March 31,2006
    

    2005

    
    2006
    
    2005Powerline
    
    $
    148.0
    
    
    
    94.2
    %
    
    $
    139.7
    
    
    
    90.4
    %
    
    $
    396.1
    
    
    
    69.3
    %
    
    $
    377.2
    
    
    
    72.0
    %Storm
    
    
    9.2
    
    
    
    5.8
    %
    
    
    14.8
    
    
    
    9.6
    %
    
    
    175.3
    
    
    
    30.7
    %
    
    
    147.0
    
    
    
    28.0
    %Total
    
    $
    157.2
    
    
    
    100.0
    %
    
    $
    154.5
    
    
    
    100.0
    %
    
    $
    571.4
    
    
    
    100.0
    %
    
    $
    524.2
    
    
    
    100.0
    %
 Critical Accounting Policies and Estimates
  13




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##### 



Operational Factors
  Operational Factors.
 
    
    When we add new customers and contracts, we generally experience an
increase in costs, including the costs of training and outfitting our
crews and spending on equipment. Once the crews and equipment are
fully utilized, our margins generally increase over the life of the
contract.
 
    
    Industry-wide insurance costs for workmens compensation, medical and
general liability insurance have risen in the past several years and
are expected to continue to rise at a rate faster than our revenues.
We have implemented several safety initiatives designed to reduce
incident rates and corresponding insurance costs as well as introduced
an employee safety bonus in 2005 that has initially increased our
costs.
 
    
    There are a limited number of skilled workers that can perform our
work, and during historic periods of increased demand, labor rates
have tended to increase. We have been experiencing an improved
economic cycle, and we are currently experiencing shortages of skilled
personnel in certain markets. While shortages have caused our labor
costs to increase, we historically have been able to obtain increases
when we renegotiate rates with our customers to offset these cost
increases.
 
    
    We expect an increase in our general and administrative expenses
related to the cost of operating as a public company of $2.0 million
to $3.0 million per year and additional implementation costs in fiscal
2006 and 2007 relating to compliance with Section 404 of the
Sarbanes-Oxley Act of 2002 of approximately $1.0 million.
 
    
    Fuel costs have risen in the past year, with significant increases
recently, and are expected to continue to rise at a rate faster than
our revenues. We have a large fleet of vehicles and equipment that
primarily use diesel fuel. We have implemented bulk purchasing in
certain areas and may seek other alternatives to hedge fuel costs.
 Other Factors.
 
    
    In connection with our acquisition of Red Simpson, we allocated a
portion of the purchase price to definite-lived intangible assets that
will be amortized over their estimated lives of 3 to 30 years, which
will result in an annual amortization charge of $5.2 million in fiscal
2006.
 
    
    In connection with our adoption of Statement of Financial Accounting
Standards (SFAS) No. 123R, Share-Based Payment, as of July 1, 2005,
we are required to account for share-based payments, including grants
of employee stock options, based on fair values, which means that we
will begin to recognize compensation expense in connection with
employee stock options. We currently estimate the annual expense for
share-based payments to be approximately $3.0 million for fiscal 2006.
 14




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##### 



Results of Operations
  Three Months Ended
    
    
    Nine Months EndedMarch 31,
    
    
    December 31,2006
    
    
    2005
    
    
    2006
    
    
    2005Revenues:Powerline services
    
    
    94.2
    %
    
    
    90.4
    %
    
    
    69.3
    %
    
    
    72.0
    %Storm restoration services
    
    
    5.8
    
    
    
    9.6
    
    
    
    30.7
    
    
    
    28.0Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of operations
    
    
    89.0
    
    
    
    88.4
    
    
    
    81.6
    
    
    
    81.7Gross profit
    
    
    11.0
    
    
    
    11.6
    
    
    
    18.4
    
    
    
    18.3General and administrative expenses
    
    
    6.2
    
    
    
    5.4
    
    
    
    5.6
    
    
    
    6.4Loss on sale of property and equipment
    
    
    1.0
    
    
    
    0.1
    
    
    
    0.3
    
    
    
    0.0Income from operations
    
    
    3.8
    %
    
    
    6.1
    %
    
    
    12.5
    %
    
    
    11.9
    %Other expense:Interest expense, net
    
    
    3.5
    
    
    
    12.5
    
    
    
    3.3
    
    
    
    6.5Income tax expense
    
    
    0.1
    
    
    
    1.3
    
    
    
    3.7
    
    
    
    3.3Net income (loss)
    
    
    0.2
    %
    
    
    (7.7
    )%
    
    
    5.5
    %
    
    
    2.1
    %
 Three Months Ended March 31, 2006 Compared to the Three Months Ended March 31, 2005
 Revenues.
   Gross Profit.
 General and Administrative Expenses.
 Loss on Sale of Property and Equipment.
 Other Expense.
 15




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##### 



Income Tax Expense.
 Net Income.
 Nine Months Ended March 31, 2006 Compared to the Nine Months Ended March 31, 2005
 Revenues.
   Gross Profit.
 General and Administrative Expenses.
 Loss on Sale of Property and Equipment.
 Other Expense.
 16




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##### 



Income Tax Expense.
 Net Income.
 Liquidity and Capital Resources
     Changes in Cash Flows
 Nine Months EndedMarch 31,2006
    
    
    2005(in millions)Net cash provided by operating activities
    
    $
    59.4
    
    
    $
    50.7Net cash used in investing activities
    
    $
    (32.8
    )
    
    $
    (233.4
    )Net cash (used in) provided by financing activities
    
    $
    (26.7
    )
    
    $
    177.8
   17




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##### 



Senior Credit Facility
  Off-Balance Sheet Arrangements
    18




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##### 



Seasonality
  Recent Accounting Pronouncements
 Exchanges of Nonmonetary Assets
 Accounting Changes and Error Corrections, a
replacement of ABP Opinion No. 20, Accounting Changes, and FASB Statement No. 3, Reporting
Accounting Changes in Interim Financial Statements.
  Uncertainty of Forward-Looking Statements and Information
  19




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##### 




    
    our belief that the lawsuits, claims or other proceedings to which we are subject in the
ordinary course of business will not have a material adverse effect on the Companys results
of operation or financial position;
    
    our expectation regarding an increase in our general and administrative expenses related
to the cost of operating as a public company of $2.0 million to $3.0 million per year and
additional implementation costs in fiscal 2006 and 2007 related to compliance with Section
404 of the Sarbanes-Oxley Act of 2002 of approximately $1.0 million;
    
    our estimate that the annual expense related to share-based payments will be approximately
$3.0 million for fiscal 2006;
    
    our belief that our cash flow from operations and borrowings available under our senior
credit facility will be adequate to meet our future liquidity needs through the fiscal year
ended June 30, 2006;
    
    our expectations that our capital expenditures will range from $40 million to $60 million
in each of the years ended June 30, 2006 and 2007 and our intention to fund those
expenditures from operating cash flow.
  
    
    We derive a significant portion of our revenues from a small group of customers. The
loss of one or more of these customers could negatively impact our business and
results of operations.
 
    
    Our customers often have no obligation to assign work to us, and many of our
arrangements may be terminated on short notice.
 
    
    We may not be able to realize the anticipated benefits of the Red Simpson acquisition.
 
    
    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.
 
    
    Failure to establish and maintain effective internal control over financial reporting
could have a material adverse effect on our business, operating results and stock
price.
 
    
    To be successful, we need to attract and retain qualified personnel, and any
inability to do so would adversely affect our business.
 
    
    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.
 20




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##### 




    
    We have a substantial amount of indebtedness incurred 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.
 
    
    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.
 
    
    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.
 
    
    As a public company, we are incurring significant legal, accounting and other expenses
that we did not incur as a private company.
 
    
    Our results of operations could be adversely affected as a result of goodwill impairments.
 
    
    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.
 
    
    A significant stockholder controls the direction of our business. The concentrated
ownership of our common stock will prevent you and other stockholders from influencing
significant corporate decisions.
 
    
    Anti-takeover provisions of our charter and bylaws may reduce the likelihood of any
potential change of control or unsolicited acquisition proposal that stockholders might
consider favorable.
   Item 3. Quantitative and Qualitative Disclosures About Market Risk
 
    
    Fuel Price Volatility: The Company has exposure related to fuel price fluctuations. The
Company utilizes, on a limited basis, fuel charge escalation clauses in customer contracts.
A hypothetical change in fuel prices of 10% would have changed cost of operations by
approximately $2.4 million for the nine months ended March 31, 2006.
 21




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##### 



Item 4. Controls and Procedures
    22




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##### 



PART II  OTHER INFORMATION
 Item 1. Legal Proceedings
  Item 1A. Risk Factors
  Item 6. Exhibits.
 ExhibitNo
    
    
    
    Description10.1
    
    
    
    Fourth Amendment to the Amended and Restated
Credit Agreement dated February 28, 2006,
among Pike Electric Corporation, Pike
Electric, Inc. and the lenders party thereto.31.1
    
    
    
    Certification of Periodic Report by Chief
Executive Officer pursuant to Rule 13a-14(a)
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)
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 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (furnished herewith)
 23




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##### 



SIGNATURE
  Date: May 12, 2006
    
    By:
    
    /s/ J. Eric PikeChairman and Chief Executive OfficerDate: May 12, 2006
    
    By:
    
    /s/ Mark CastanedaChief Financial Officer
 24