##### Table of Contents



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 DECEMBER 31, 2010
 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 o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if smaller reporting company)
 o þ




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##### 



PIKE ELECTRIC CORPORATION
FORM 10-Q
FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2010
 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
    
    
    14Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    25Item 4. Controls and Procedures
    
    
    25Part II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    26Item 1A. Risk Factors
    
    
    26Item 6. Exhibits
    
    
    26Signatures
    
    
    27Exhibit 31.1Exhibit 31.2Exhibit 32.1




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1.
    
    Financial Statements
 PIKE ELECTRIC CORPORATION
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (In thousands, except per share amounts)
 December 31,
    
    
    June 30,2010
    
    
    2010(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    12,993
    
    
    $
    11,133Accounts receivable from customers, net
    
    
    73,818
    
    
    
    64,672Costs and estimated earnings in excess of billings on uncompleted contracts
    
    
    42,634
    
    
    
    50,215Inventories
    
    
    7,100
    
    
    
    6,401Prepaid expenses and other
    
    
    12,290
    
    
    
    9,115Deferred income taxes
    
    
    9,331
    
    
    
    10,526Total current assets
    
    
    158,166
    
    
    
    152,062Property and equipment, net
    
    
    181,338
    
    
    
    194,885Goodwill
    
    
    110,893
    
    
    
    114,778Other intangibles, net
    
    
    40,616
    
    
    
    38,527Deferred loan costs, net
    
    
    2,962
    
    
    
    3,021Other assets
    
    
    1,945
    
    
    
    2,105Total assets
    
    $
    495,920
    
    
    $
    505,378LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    23,941
    
    
    $
    17,484Accrued compensation
    
    
    18,437
    
    
    
    22,589Billings in excess of costs and estimated earnings on uncompleted contracts
    
    
    13,241
    
    
    
    8,925Accrued expenses and other
    
    
    10,609
    
    
    
    6,112Current portion of insurance and claim accruals
    
    
    21,701
    
    
    
    23,422Total current liabilities
    
    
    87,929
    
    
    
    78,532Long-term debt
    
    
    99,000
    
    
    
    114,500Insurance and claim accruals, net of current portion
    
    
    6,010
    
    
    
    6,005Deferred compensation, net of current portion
    
    
    5,992
    
    
    
    5,844Deferred income taxes
    
    
    45,360
    
    
    
    48,170Other liabilities
    
    
    2,358
    
    
    
    2,859Commitments and contingenciesStockholders equity:Preferred stock, par value $0.001 per share; 100,000 authorized shares; no
shares issued and outstanding
    
    
    
    
    
    
    Common stock, par value $0.001 per share; 100,000 authorized shares; 33,600
and 33,544 shares issued and outstanding at December 31, 2010 and
June 30, 2010, respectively
    
    
    6,427
    
    
    
    6,427Additional paid-in capital
    
    
    159,177
    
    
    
    158,030Accumulated other comprehensive loss, net of taxes
    
    
    (216
    )
    
    
    (142
    )Retained earnings
    
    
    83,883
    
    
    
    85,153Total stockholders equity
    
    
    249,271
    
    
    
    249,468Total liabilities and stockholders equity
    
    $
    495,920
    
    
    $
    505,378
   1




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PIKE ELECTRIC CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)
 (In thousands, except per share amounts)
 Three Months Ended
    
    
    Six Months EndedDecember 31,
    
    
    December 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Revenues
    
    $
    148,563
    
    
    $
    135,198
    
    
    $
    277,321
    
    
    $
    262,418Cost of operations
    
    
    131,925
    
    
    
    118,262
    
    
    
    248,961
    
    
    
    233,787Gross profit
    
    
    16,638
    
    
    
    16,936
    
    
    
    28,360
    
    
    
    28,631General and administrative expenses
    
    
    12,748
    
    
    
    13,131
    
    
    
    26,304
    
    
    
    26,254Loss on sale and impairment of property
and equipment
    
    
    382
    
    
    
    301
    
    
    
    549
    
    
    
    962Restructuring expenses
    
    
    
    
    
    
    8,924
    
    
    
    
    
    
    
    8,924Income (loss) from operations
    
    
    3,508
    
    
    
    (5,420
    )
    
    
    1,507
    
    
    
    (7,509
    )Other expense (income):Interest expense
    
    
    1,813
    
    
    
    2,273
    
    
    
    3,473
    
    
    
    4,644Other, net
    
    
    (5
    )
    
    
    (78
    )
    
    
    (14
    )
    
    
    (179
    )Total other expense
    
    
    1,808
    
    
    
    2,195
    
    
    
    3,459
    
    
    
    4,465Income (loss) before income taxes
    
    
    1,700
    
    
    
    (7,615
    )
    
    
    (1,952
    )
    
    
    (11,974
    )Income tax expense (benefit)
    
    
    679
    
    
    
    (2,912
    )
    
    
    (682
    )
    
    
    (4,566
    )Net income (loss)
    
    $
    1,021
    
    
    $
    (4,703
    )
    
    $
    (1,270
    )
    
    $
    (7,408
    )Earnings (loss) per share:Basic
    
    $
    0.03
    
    
    $
    (0.14
    )
    
    $
    (0.04
    )
    
    $
    (0.22
    )Diluted
    
    $
    0.03
    
    
    $
    (0.14
    )
    
    $
    (0.04
    )
    
    $
    (0.22
    )Shares used in computing earnings (loss)
per share:Basic
    
    
    33,386
    
    
    
    33,134
    
    
    
    33,329
    
    
    
    33,106Diluted
    
    
    33,902
    
    
    
    33,134
    
    
    
    33,329
    
    
    
    33,106
   2




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PIKE ELECTRIC CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 (In thousands)
 Six Months EndedDecember 31,2010
    
    
    2009Cash flows from operating activities:Net loss
    
    $
    (1,270
    )
    
    $
    (7,408
    )Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:Depreciation and amortization
    
    
    19,307
    
    
    
    18,298Non-cash interest expense
    
    
    1,198
    
    
    
    961Deferred income taxes
    
    
    (2,793
    )
    
    
    (4,896
    )Loss on sale and impairment of property and equipment
    
    
    549
    
    
    
    962Restructuring expenses, non-cash
    
    
    
    
    
    
    7,899Equity compensation expense
    
    
    2,017
    
    
    
    2,306Excess tax expense from stock-based compensation
    
    
    
    
    
    
    43Changes in operating assets and liabilities:Accounts receivable and costs and estimated earnings in excess
of billings on uncompleted contracts
    
    
    (1,565
    )
    
    
    (13,409
    )Inventories, prepaid expenses and other
    
    
    (2,783
    )
    
    
    610Insurance and claim accruals
    
    
    (1,716
    )
    
    
    (1,215
    )Accounts payable and other
    
    
    9,999
    
    
    
    (3,722
    )Deferred compensation
    
    
    
    
    
    
    (1,402
    )Net cash provided by (used in) operating activities
    
    
    22,943
    
    
    
    (973
    )Cash flows from investing activities:Purchases of property and equipment
    
    
    (4,873
    )
    
    
    (9,337
    )Net proceeds from sale of property and equipment
    
    
    745
    
    
    
    2,235Net cash used in investing activities
    
    
    (4,128
    )
    
    
    (7,102
    )Cash flows from financing activities:Principal payment on long-term debt
    
    
    (15,500
    )
    
    
    Stock option and employee stock purchase activity, net
    
    
    (464
    )
    
    
    (44
    )Excess tax expense from stock-based compensation
    
    
    
    
    
    
    (43
    )Deferred loan costs
    
    
    (991
    )
    
    
    (2,792
    )Net cash used in financing activities
    
    
    (16,955
    )
    
    
    (2,879
    )Net increase in (decrease in) cash and cash equivalents
    
    
    1,860
    
    
    
    (10,954
    )Cash and cash equivalents beginning of year
    
    
    11,133
    
    
    
    43,820Cash and cash equivalents end of period
    
    $
    12,993
    
    
    $
    32,866
   3




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PIKE ELECTRIC CORPORATION
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 For the three and six months ended December 31, 2010 and 2009
 (In thousands, except per share amounts)
 1. Basis of Presentation
  2. Business
     4




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Three Months Ended
    
    
    Six Months EndedDecember 31,
    
    
    December 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Core services
    
    $
    145,835
    
    
    
    98.2
    %
    
    $
    117,230
    
    
    
    86.7
    %
    
    $
    269,612
    
    
    
    97.2
    %
    
    $
    241,944
    
    
    
    92.2
    %Storm restoration
services
    
    
    2,728
    
    
    
    1.8
    %
    
    
    17,968
    
    
    
    13.3
    %
    
    
    7,709
    
    
    
    2.8
    %
    
    
    20,474
    
    
    
    7.8
    %Total
    
    $
    148,563
    
    
    
    100.0
    %
    
    $
    135,198
    
    
    
    100.0
    %
    
    $
    277,321
    
    
    
    100.0
    %
    
    $
    262,418
    
    
    
    100.0
    %
 3. Acquisition of Klondyke
    Three months ended
    
    
    Six months endedDecember 31, 2009
    
    
    December 31, 2009Revenues
    
    $
    143,723
    
    
    $
    282,290Net loss
    
    $
    (3,919
    )
    
    $
    (6,247
    )Basic loss per common share
    
    $
    (0.12
    )
    
    $
    (0.19
    )Diluted loss per common share
    
    $
    (0.12
    )
    
    $
    (0.19
    )
 4. Property and Equipment
   5




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5. Debt
  6. Derivative Instruments and Hedging Activities
   Interest Rate Risk
       6




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##### Table of Contents



Diesel Fuel Risk
   Balance Sheet and Statement of Operations Information
  Asset Derivatives
    
    
    Liability DerivativesFair Value
    
    
    Fair Value
    
    
    Fair Value
    
    
    Fair Valueat Dec. 31,
    
    
    at June 30,
    
    
    at Dec. 31,
    
    
    at June 30,Balance Sheet Location
    
    2010
    
    
    2010
    
    
    2010
    
    
    2010Derivatives designated as hedging
instruments under U.S. GAAP:Interest rate swaps
    
    Accrued expenses and other
    
    $
    
    
    
    $
    
    
    
    $
    355
    
    
    $
    245Total derivatives designated as
hedging instruments under U.S. GAAP
    
    
    
    $
    
    
    
    $
    
    
    
    $
    355
    
    
    $
    245Derivatives not designated as hedging
instruments under U.S. GAAP:Diesel fuel swaps (gross) (1)
    
    Prepaid expenses and other
    
    $
    808
    
    
    $
    169
    
    
    $
    
    
    
    $
    Diesel fuel swaps (gross) (1)
    
    Accrued expenses and other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    166Total derivatives not designated as
hedging instruments under U.S. GAAP
    
    
    
    $
    808
    
    
    $
    169
    
    
    $
    
    
    
    $
    166Total derivatives
    
    
    
    $
    808
    
    
    $
    169
    
    
    $
    
    
    
    $
    411
 (1)
    
    The fair values of asset and liability derivatives with the same counterparty are
netted on the balance sheet.  7




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Derivatives designated as cash flow hedging instruments under U.S. GAAP:
 Amount of LossAmount of Gain (Loss)
    
    
    Location of Loss
    
    Reclassified fromRecognized in OCI
    
    
    Reclassified from
    
    Accumulated OCI into(Effective Portion)
    
    
    Accumulated OCI into
    
    EarningsFor the Three Months Ended December 31,
    
    2010
    
    
    2009
    
    
    Earnings
    
    2010
    
    
    2009Interest rate swaps
    
    $
    56
    *
    
    $
    576
    *
    
    Interest expense
    
    $
    (53
    )*
    
    $
    (494
    )*Totals
    
    $
    56
    *
    
    $
    576
    *
    
    
    
    $
    (53
    )*
    
    $
    (494
    )*For the Six Months Ended December 31,
    
    2010
    
    
    2009
    
    
    
    
    2010
    
    
    2009Interest rate swaps
    
    $
    (67
    )*
    
    $
    1,109
    *
    
    Interest expense
    
    $
    (101
    )*
    
    $
    (1,068
    )*Totals
    
    $
    (67
    )*
    
    $
    1,109
    *
    
    
    
    $
    (101
    )*
    
    $
    (1,068
    )*
 *
    
    Net of tax Derivatives not designated as cash flow hedging instruments under U.S. GAAP:
 Location of Gain
    
    
    Amount of Gain Recognized inRecognized in
    
    
    EarningsFor the Three Months Ended December 31,
    
    Earnings
    
    
    2010
    
    
    2009Diesel fuel swaps
    
    Cost of operations
    
    $
    373
    
    
    $
    327Total
    
    
    
    
    
    $
    373
    
    
    $
    327For the Six Months Ended December 31,
    
    
    
    
    
    2010
    
    
    2009Diesel fuel swaps
    
    Cost of operations
    
    $
    805
    
    
    $
    695Total
    
    
    
    
    
    $
    805
    
    
    $
    695
 Accumulated OCI
  For the Three Months
    
    
    For the Six MonthsEnded December 31,
    
    
    Ended December 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Net accumulated derivative loss deferred at beginning of period
    
    $
    (272
    )
    
    $
    (576
    )
    
    $
    (142
    )
    
    $
    (1,109
    )Changes in fair value
    
    
    3
    
    
    
    82
    
    
    
    (175
    )
    
    
    41Reclassification to net income (loss)
    
    
    53
    
    
    
    494
    
    
    
    101
    
    
    
    1,068Net accumulated derivative loss deferred at end of period
    
    $
    (216
    )
    
    $
    
    
    
    $
    (216
    )
    
    $
    
  8




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7. Comprehensive Income (Loss)
  For the Three Months EndedDecember 31,2010
    
    
    2009Net income (loss)
    
    $
    1,021
    
    
    $
    (4,703
    )Change in fair value net of income taxes of $36 and $369, respectively
    
    
    56
    
    
    
    576Comprehensive income (loss)
    
    $
    1,077
    
    
    $
    (4,127
    )
 For the Six Months EndedDecember 31,2010
    
    
    2009Net loss
    
    $
    (1,270
    )
    
    $
    (7,408
    )Change in fair value net of income taxes of ($43) and $711, respectively
    
    
    (74
    )
    
    
    1,109Comprehensive loss
    
    $
    (1,344
    )
    
    $
    (6,299
    )
 8. Fair Value
   
    
    Level 1  Valuations based on quoted
prices in active markets for identical
instruments that we are able to access.
Since valuations are based on quoted prices
that are readily and regularly available in
an active market, valuation of these
products does not entail a significant
degree of judgment.
    
    Level 2  Valuations based on quoted
prices in active markets for instruments
that are similar, or quoted prices in
markets that are not active for identical
or similar instruments, and model-derived
valuations in which all significant inputs
and significant value drivers are
observable in active markets.
    
    Level 3  Valuations based on inputs
that are unobservable and significant to
the overall fair value measurement.
   9




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December 31,Description
    
    2010
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Asset:Diesel fuel swap agreements
    
    $
    808
    
    
    $
    
    
    
    $
    808
    
    
    $
    Liability:Interest rate swap agreements
    
    
    (355
    )
    
    
    
    
    
    
    (355
    )
    
    
    Total
    
    $
    453
    
    
    $
    
    
    
    $
    453
    
    
    $
    
 June 30,Description
    
    2010
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Asset:Diesel fuel swap agreements
    
    $
    3
    
    
    $
    
    
    
    $
    3
    
    
    $
    Liability:Interest rate swap agreements
    
    
    (245
    )
    
    
    
    
    
    
    (245
    )
    
    
    Total
    
    $
    (242
    )
    
    $
    
    
    
    $
    (242
    )
    
    $
    
    10




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##### Table of Contents



9. Stock-Based Compensation
  10. Income Taxes
    11. Earnings (Loss) Per Share
  Three Months Ended
    
    
    Six Months EndedDecember 31,
    
    
    December 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Basic:Net income (loss)
    
    $
    1,021
    
    
    $
    (4,703
    )
    
    $
    (1,270
    )
    
    $
    (7,408
    )Weighted average common shares
    
    
    33,386
    
    
    
    33,134
    
    
    
    33,329
    
    
    
    33,106Basic earnings (loss) per share
    
    $
    0.03
    
    
    $
    (0.14
    )
    
    $
    (0.04
    )
    
    $
    (0.22
    )Diluted:Net income (loss)
    
    $
    1,021
    
    
    $
    (4,703
    )
    
    $
    (1,270
    )
    
    $
    (7,408
    )Weighted average common shares
    
    
    33,386
    
    
    
    33,134
    
    
    
    33,329
    
    
    
    33,106Potential common stock arising from stock
options and restricted stock
    
    
    516
    
    
    
    
    
    
    
    
    
    
    
    Weighted average common shares  diluted
    
    
    33,902
    
    
    
    33,134
    
    
    
    33,329
    
    
    
    33,106Diluted earnings (loss) per share
    
    $
    0.03
    
    
    $
    (0.14
    )
    
    $
    (0.04
    )
    
    $
    (0.22
    )
  11




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12. Recent Accounting Pronouncements
   13. Commitments and Contingencies
 Legal Proceedings
  Performance Bonds and Parent Guarantees
   12




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Collective Bargaining Agreements
  Indemnities
   13




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Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our historical consolidated financial statements and
related notes thereto in this Quarterly Report on Form 10-Q and with our Annual Report on Form 10-K
for this fiscal year ended June 30, 2010. The discussion below contains forward-looking statements
that are based upon our current expectations and are subject to uncertainty and changes in
circumstances. Actual results may differ materially from these expectations due to inaccurate
assumptions and known or unknown risks and uncertainties, including those identified in
Uncertainty of Forward-Looking Statements and Information below in this Item 2 and in Risk
Factors in Item 1A of Part I of our Annual Report on Form 10-K for the fiscal year ended June 30,
2010.
 Overview
   Critical Accounting Policies
   14




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Results of Operations
  Three Months Ended
    
    
    Six Months EndedDecember 31,
    
    
    December 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Revenues:Core services
    
    
    98.2
    %
    
    
    86.7
    %
    
    
    97.2
    %
    
    
    92.2
    %Storm restoration services
    
    
    1.8
    %
    
    
    13.3
    %
    
    
    2.8
    %
    
    
    7.8
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of operations
    
    
    88.8
    %
    
    
    87.5
    %
    
    
    89.8
    %
    
    
    89.1
    %Gross profit
    
    
    11.2
    %
    
    
    12.5
    %
    
    
    10.2
    %
    
    
    10.9
    %General and administrative expenses
    
    
    8.6
    %
    
    
    9.7
    %
    
    
    9.5
    %
    
    
    10.0
    %Loss on sale of property and equipment
    
    
    0.3
    %
    
    
    0.2
    %
    
    
    0.2
    %
    
    
    0.4
    %Restructuring expense
    
    
    0.0
    %
    
    
    6.6
    %
    
    
    0.0
    %
    
    
    3.4
    %Income (loss) from operations
    
    
    2.3
    %
    
    
    -4.0
    %
    
    
    0.5
    %
    
    
    -2.9
    %Interest expense and other, net
    
    
    1.2
    %
    
    
    1.6
    %
    
    
    1.2
    %
    
    
    1.7
    %Income (loss) before income taxes
    
    
    1.1
    %
    
    
    -5.6
    %
    
    
    -0.7
    %
    
    
    -4.6
    %Income tax expense (benefit)
    
    
    0.4
    %
    
    
    -2.1
    %
    
    
    -0.2
    %
    
    
    -1.8
    %Net income (loss)
    
    
    0.7
    %
    
    
    -3.5
    %
    
    
    -0.5
    %
    
    
    -2.8
    %
 Three Months Ended December 31, 2010 Compared to Three Months Ended December 31, 2009
 Revenues.
   Three Months EndedDecember 31,Category of Core Revenue
    
    2010
    
    
    2009
    
    
    % ChangeOverhead distribution and other
    
    $
    72.8
    
    
    $
    63.1
    
    
    
    15.3
    %Underground distribution
    
    
    16.1
    
    
    
    15.3
    
    
    
    5.4
    %Transmission
    
    
    25.5
    
    
    
    17.3
    
    
    
    47.2
    %Engineering and substation
    
    
    31.5
    
    
    
    21.5
    
    
    
    46.3
    %Total
    
    $
    145.9
    
    
    $
    117.2
    
    
    
    24.4
    %
 
    
    Distribution Revenues. Our combined revenues for overhead and underground distribution
services increased 13.4% from the prior year, primarily due to significantly less storm
restoration revenues compared to the same period in the prior year, as storm restoration
work generally diverts man-hours from core work, which had decreased core revenues in the
prior year. Distribution revenues were also positively impacted by a general increase in
demand for overhead distribution maintenance during the quarter coupled
with the addition of Klondyke. Underground maintenance experienced a smaller level of
quarter-over-quarter growth and demand for underground distribution remains depressed due to
the weak market for new residential housing.
  15




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##### Table of Contents




    
    Transmission Revenues. Transmission revenues increased 47.2% from the prior year,
primarily due to the timing of certain projects that have started in the southeast United
States, increased material procurement revenues and the addition of Klondyke. We expect
our transmission revenues to continue to increase year over year, but revenues may vary
period to period due to the timing of work on significant projects.
 
    
    Engineering and Substation Revenues. Engineering and substation revenues increased
46.3% from the prior year, primarily due to material procurement services, including the VC
Summer project, along with the addition of Klondyke. Our engineering and substation
services continue to produce increased revenues and we expect that trend to continue in the
foreseeable future. However, engineering and substation revenues may fluctuate, especially
on a quarterly basis, due to the timing of material procurement revenues.
   Gross Profit. .
   General and Administrative Expenses.
  16




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Loss on Sale and Impairment of Property and Equipment .
 Restructuring Expenses.
  Interest Expense and Other, Net.
 Income Tax Expense or Benefit.
 Six Months Ended December 31, 2010 Compared to Six Months Ended December 31, 2009
 Revenues.
   Six Months EndedDecember 31,Category of Core Revenue
    
    2010
    
    
    2009
    
    

% ChangeOverhead distribution and other
    
    $
    141.2
    
    
    $
    133.9
    
    
    
    5.5
    %Underground distribution
    
    
    33.3
    
    
    
    32.3
    
    
    
    3.0
    %Transmission
    
    
    43.3
    
    
    
    35.4
    
    
    
    22.4
    %Engineering and substation
    
    
    51.8
    
    
    
    40.4
    
    
    
    28.3
    %Total
    
    $
    269.6
    
    
    $
    241.9
    
    
    
    11.4
    %
  17




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##### Table of Contents




    
    Distribution Revenues. Our combined revenues for overhead and underground distribution
services increased 5.0% from the prior year, primarily due to significantly less storm
restoration revenues compared to the same period in the prior year, as storm restoration
work generally diverts man-hours from core work,
which had decreased core revenues in the prior year. Distribution revenues were also
positively impacted as a result of a general increase in demand for overhead distribution
maintenance during the quarter coupled with the addition of Klondyke. Underground
maintenance experienced a smaller level of period-over-period growth and demand for
underground distribution remains depressed due to the weak market for new residential
housing.
 
    
    Transmission Revenues. Transmission revenues increased 22.4% from the prior year,
primarily due to the timing of certain projects that have started in the southeast United
States (primarily in the second quarter), increased material procurement revenues and the
addition of Klondyke. We expect our transmission revenues to continue to increase year
over year, but revenues may vary period to period due to the timing of work on significant
projects.
 
    
    Engineering and Substation Revenues. Engineering and substation revenues increased
28.3% increase from the prior year, primarily due to material procurement services,
including the VC Summer project, along with the addition of Klondyke. Our engineering and
substation services continue to produce increased revenues and we expect that trend to
continue in the foreseeable future. However, engineering and substation revenues may
fluctuate, especially on a quarterly basis, due to the timing of material procurement
revenues.
  Gross Profit.
 
    
    A significantly lower mix of storm revenue.Our storm restoration services typically
generate a higher profit margin than core services. During a storm response, our
storm-assigned crews and equipment are fully utilized. In addition, the overtime typically
worked on storm events lowers the ratio of fixed costs to revenue. Storm gross profit
margins can vary greatly depending on the geographic area, customer and amount of overtime
worked.
 
    
    Lower gross profit margin material procurement services. Material procurement services
offered primarily in the engineering, substation and transmission businesses generate lower
gross profit margins compared to other core services. In the current environment, the
gross profit percentages on these services generally range from 0% to 5%. We recognized
approximately $24.8 million in material procurement revenues ($20.4 million for engineering
and substation, $3.8 million for transmission and $0.6 million for combined distribution)
for the six months ended December 31, 2010 compared to approximately $13.6 million ($11.5
million for engineering and substation, $0.6 million for transmission and $1.5 million for
combined distribution) for the same period in the prior year. The material revenues above
are approximations, as certain material procurements services are provided as a portion of
larger fixed-price projects, in which we recognize project revenues using the
percentage-of-completion method.
 
    
    Crew start-up costs.Our gross margin was negatively impacted by a $1.5 million
increase in crew start-up costs, primarily in the first quarter of the current fiscal year,
that was caused by additions to our overhead distribution and transmission headcount, which
caused us to absorb costs related to the release of certain tools and supplies from
inventory and the acquisition of certain new tools. While we attempt to use excess fleet
equipment to start new crews, some of this equipment required significant repairs and
maintenance before being put back into service.
 
    
    Costs and estimated earnings in excess of billings adjustment. Our gross margin was
negatively impacted by our recording a $2.0 million reduction of costs and estimated
earnings in excess of billings on uncompleted contracts during the quarter ended September
30, 2010 that relates to prior periods (see Note 1 in our Notes to Condensed Consolidated
Financial Statements).
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General and Administrative Expenses.
 Loss on Sale and Impairment of Property and Equipment .
 Restructuring Expenses.
  Interest Expense and Other, Net.
 Income Tax Benefit.
 Liquidity and Capital Resources
     19




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Changes in Cash Flows:
 Six Months EndedDecember 31,2010
    
    
    2009(In millions)Net cash provided by (used in) operating
activities
    
    $
    22.9
    
    
    $
    (1.0
    )Net cash used in investing activities
    
    $
    (4.1
    )
    
    $
    (7.1
    )Net cash used in financing activities
    
    $
    (17.0
    )
    
    $
    (2.9
    )
     20




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##### Table of Contents



EBITDA U.S. GAAP Reconciliation
  Three months ended
    
    
    Six months endedDecember 31,
    
    
    December 31,2010
    
    
    2009
    
    
    2010
    
    
    2009(In millions)
    
    
    (In millions)Net income (loss)
    
    $
    1.0
    
    
    $
    (4.7
    )
    
    $
    (1.2
    )
    
    $
    (7.4
    )Adjustments:Interest expense
    
    
    1.8
    
    
    
    2.3
    
    
    
    3.5
    
    
    
    4.7Income tax expense (benefit)
    
    
    0.7
    
    
    
    (2.9
    )
    
    
    (0.8
    )
    
    
    (4.6
    )Depreciation and amortization
    
    
    9.5
    
    
    
    9.0
    
    
    
    19.3
    
    
    
    18.3EBITDA
    
    $
    13.0
    
    
    $
    3.7
    
    
    $
    20.8
    
    
    $
    11.0
  Senior Credit Facility
   21




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Concentration of Credit Risk
  Legal Proceedings
   22




---



##### Table of Contents



Off-Balance Sheet Arrangements
  Letters of Credit
  Performance Bonds and Parent Guarantees
   Seasonality; Fluctuations of Results
  Recent Accounting Pronouncements
   23




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##### Table of Contents



Uncertainty of Forward-Looking Statements and Information
  
    
    our expectation that the Tanzanian powerline projects will utilize our engineering,
procurement and construction capabilities and that the project will begin during the third
quarter of fiscal 2011 and continue through the second quarter of fiscal 2013;
 
    
    our expectation the goodwill recognized in our acquisition of Klondyke will be
amortizable for tax purposes;
 
    
    our expectation that substantially all the assets held for sale at December 31, 2010
will be sold during the next twelve months;
 
    
    our belief that the lawsuits, claims or other proceedings to which we are subject in the
ordinary course of business, individually or in the aggregate, will not have a material
adverse effect on our results of operations, financial position or cash flows;
 
    
    our expectation that our new diversified engineering and substation services will
continue to produce increased revenues in the future;
 
    
    our expectation that our transmission revenues will continue to increase year over year;
 
    
    our expectation that current volatility in the capital markets will not have a material
impact on the principal amounts of our cash investments;
 
    
    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;
 
    
    our expectation that our ability to satisfy our obligations or to fund planned capital
expenditures will depend on our future performance and our belief that this is subject to a
certain extent on general economic, financial, competitive, legislative, regulatory and
other factors beyond our control;
 
    
    the possibility that if we fail to comply with the covenants contained in our senior
credit facility, we may be unable to access the revolving portion of our senior credit
facility upon which we depend for letters of credit and other short-term borrowings and
that this would have a negative impact on our liquidity and could require us to obtain
alternative short-term financing;
 
    
    our belief that if we pursue any material acquisitions in the foreseeable future we may
need to finance this activity through additional equity or debt financing;
 
    
    our belief that it is unlikely that any material claims will be made under a letter of
credit in the foreseeable future;
 
    
    our belief that it is unlikely that we will have to fund significant claims under our
surety arrangements in the foreseeable future;
  24




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##### Table of Contents




    
    our expectation that our gross profit and operating income (loss) would be negatively
affected if diesel prices rise due to additional costs that we may not fully recover
through increases in prices to customers;
 
    
    our expectation that the net amount of the existing losses in OCI at December 31, 2010
reclassified into net income (loss) over the next twelve months will be approximately
$150,000;
 
    
    our belief that any potential underfunded liability related to one or more
multi-employer pension plans in which Klondyke is a participant would not have a material
adverse effect on our results of operations, financial position or cash flows;
 
    
    our belief that we will be in compliance with the financial covenants of our senior
credit facility for the remainder of the term of such facility; and
 
    
    our anticipation that we will refinance our senior credit facility during late fiscal
2011 or early fiscal 2012.
   
 Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4.
    
    Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
    25




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Internal Control over Financial Reporting
  Design and Operation of Control Systems
  
 PART II  OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings
  
 Item 1A.
    
    Risk Factors
  
 Item 6.
    
    Exhibits
 Exhibit
    
    Description3.1
    
    
    Certificate of Incorporation of Pike Electric Corporation
(Incorporated by reference to Exhibit 3.1 on our Registration
Statement on Form S-1/A filed July 11, 2005)3.2
    
    
    Amended and Restated Bylaws of Pike Electric Corporation, as of
April 30, 2009 (Incorporated by reference to Exhibit 3.1 on our
Form 8-K filed May 5, 2009)31.1
    
    
    Certification of Periodic Report by Chief Executive Officer
pursuant to Rule 13a-14(a)/15d-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)/15d-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 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(filed herewith)
  26




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SIGNATURES
  PIKE ELECTRIC CORPORATION
(Registrant)Date: February 8, 2011
    By:
    /s/ J. Eric PikeJ. Eric PikeChairman, Chief Executive Officer and PresidentDate: February 8, 2011
    By:
    /s/ Anthony K. SlaterAnthony K. SlaterExecutive Vice President and Chief Financial Officer  27