##### 



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 1934For the quarterly period ended December 31, 2005oro
    
    TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from                      to                     .
 COMMISSION FILE NUMBER 001-32582
 PIKE ELECTRIC CORPORATION
  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
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
 o þ




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##### 



PIKE ELECTRIC CORPORATION
FORM 10-Q
FOR THE SIX MONTHS ENDED DECEMBER 31, 2005
INDEX
 PagePART I. FINANCIAL INFORMATIONITEM 1.
    
    Financial StatementsCondensed Consolidated Balance Sheets
    
    
    2Condensed Consolidated Statements of Operations
    
    
    3Condensed Consolidated Statements of Cash Flow
    
    
    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
    
    
    21PART II. OTHER INFORMATIONITEM 1.
    
    Legal Proceedings
    
    
    22ITEM 4.
    
    Submission of Matters to a Vote of Security HoldersITEM 6.
    
    Exhibits
    
    
    22Signature
    
    
    
    
    23
 
 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)
 December 31,
    
    
    June 30,2005
    
    
    2005(Unaudited)
    
    
    (Note 1)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    1,814
    
    
    $
    3,106Accounts receivable, net
    
    
    123,006
    
    
    
    60,690Work completed not billed
    
    
    52,215
    
    
    
    64,568Inventories
    
    
    8,699
    
    
    
    7,321Prepaid expenses and other
    
    
    3,924
    
    
    
    11,205Deferred income taxes
    
    
    5,162
    
    
    
    4,838Total current assets
    
    
    194,820
    
    
    
    151,728Property and equipment, net
    
    
    287,835
    
    
    
    281,842Goodwill
    
    
    94,400
    
    
    
    91,826Other intangibles, net
    
    
    52,580
    
    
    
    55,128Deferred loan costs, net
    
    
    7,563
    
    
    
    9,879Other assets
    
    
    2,375
    
    
    
    2,052Total assets
    
    $
    639,573
    
    
    $
    592,455LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    11,974
    
    
    $
    19,574Accrued expenses
    
    
    29,532
    
    
    
    33,843Income taxes payable
    
    
    11,711
    
    
    
    Current portion of deferred compensation
    
    
    10,185
    
    
    
    12,202Current portion of insurance and claim accruals
    
    
    10,912
    
    
    
    4,938Current portion of long-term debt
    
    
    
    
    
    
    250Revolving credit facility
    
    
    20,500
    
    
    
    11,500Total current liabilities
    
    
    94,814
    
    
    
    82,307Long-term debt, net of current portion
    
    
    286,050
    
    
    
    407,750Deferred compensation, net of current portion
    
    
    12,082
    
    
    
    16,904Insurance and claim accruals, net of current portion
    
    
    13,759
    
    
    
    13,484Deferred income taxes
    
    
    69,474
    
    
    
    71,467Other liabilities
    
    
    2,416
    
    
    
    60Commitments and contingenciesStockholders equity:Common stock, par value $0.001 per share; 100,000
authorized shares; 32,005 and 21,484 shares issued
and outstanding at December 31, 2005 and June 30,
2005, respectively
    
    
    6,425
    
    
    
    6,415Additional paid-in capital
    
    
    129,399
    
    
    
    105Unearned compensation
    
    
    
    
    
    
    (879
    )Retained earnings (accumulated deficit)
    
    
    25,154
    
    
    
    (5,158
    )Total stockholders equity
    
    
    160,978
    
    
    
    483Total liabilities and stockholders equity
    
    $
    639,573
    
    
    $
    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
    
    
    Six Months EndedDecember 31,
    
    
    December 31,2005
    
    
    2004
    
    
    2005
    
    
    2004Revenues
    
    $
    195,725
    
    
    $
    149,404
    
    
    $
    414,156
    
    
    $
    369,774Cost of operations
    
    
    156,291
    
    
    
    133,048
    
    
    
    326,067
    
    
    
    291,459Gross profit
    
    
    39,434
    
    
    
    16,356
    
    
    
    88,089
    
    
    
    78,315General and administrative expenses
    
    
    11,084
    
    
    
    13,130
    
    
    
    22,149
    
    
    
    25,322Loss on sale of property and equipment
    
    
    204
    
    
    
    33
    
    
    
    349
    
    
    
    46Income from operations
    
    
    28,146
    
    
    
    3,193
    
    
    
    65,591
    
    
    
    52,947Other expense (income):Interest expense
    
    
    5,705
    
    
    
    4,960
    
    
    
    13,853
    
    
    
    14,844Other, net
    
    
    (84
    )
    
    
    (22
    )
    
    
    (105
    )
    
    
    (79
    )Total other expense
    
    
    5,621
    
    
    
    4,938
    
    
    
    13,748
    
    
    
    14,765Income (loss) before income taxes
    
    
    22,525
    
    
    
    (1,745
    )
    
    
    51,843
    
    
    
    38,182Income tax expense (benefit)
    
    
    8,954
    
    
    
    (275
    )
    
    
    20,757
    
    
    
    15,453Net income (loss)
    
    $
    13,571
    
    
    $
    (1,470
    )
    
    $
    31,086
    
    
    $
    22,729Earnings (loss) per share:Basic earnings (loss) per share
    
    $
    0.43
    
    
    $
    (0.05
    )
    
    $
    1.03
    
    
    $
    0.67Diluted earnings per share
    
    $
    0.41
    
    
    $
    (0.05
    )
    
    $
    0.99
    
    
    $
    0.66Shares used in computing earnings
(loss) per share:Basic
    
    
    31,833
    
    
    
    32,275
    
    
    
    30,314
    
    
    
    33,898Diluted
    
    
    33,025
    
    
    
    32,275
    
    
    
    31,488
    
    
    
    34,355
  
 3




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##### 



PIKE ELECTRIC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited )
(In thousands)
 Six Months EndedDecember 31,2005
    
    
    2004Cash flows from operating activities:Net income
    
    $
    31,086
    
    
    $
    22,729Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization
    
    
    18,828
    
    
    
    18,658Non-cash interest expense
    
    
    3,211
    
    
    
    7,368Deferred income taxes
    
    
    (2,317
    )
    
    
    9,393Unrealized gains on investments
    
    
    
    
    
    
    (566
    )Loss on sale of property and equipment
    
    
    349
    
    
    
    46Equity compensation expense
    
    
    1,471
    
    
    
    444Changes in operating assets and liabilities:Accounts receivable and work completed not billed
    
    
    (49,963
    )
    
    
    (18,297
    )Inventories, prepaids and other
    
    
    5,844
    
    
    
    (8,404
    )Insurance and claim accruals
    
    
    6,249
    
    
    
    57Accounts payable and other
    
    
    373
    
    
    
    1,604Deferred compensation
    
    
    (7,343
    )
    
    
    (9,338
    )Net cash provided by operating activities
    
    
    7,788
    
    
    
    23,694Cash flows from investing activities:Purchases of property and equipment
    
    
    (24,935
    )
    
    
    (27,454
    )Business acquisitions, net of cash acquired
    
    
    
    
    
    
    (193,928
    )Proceeds from sale of property and equipment
    
    
    1,522
    
    
    
    1,032Net cash used in investing activities
    
    
    (23,413
    )
    
    
    (220,350
    )Cash flows from financing activities:Principal payments on long-term debt
    
    
    (121,950
    )
    
    
    (178,500
    )Proceeds from long-term debt
    
    
    
    
    
    
    450,000Proceeds from (payments on) revolving credit facility, net
    
    
    9,000
    
    
    
    (3,631
    )Equity compensation excess tax benefit
    
    
    1,198
    
    
    
    Repurchase of common stock
    
    
    
    
    
    
    (123,283
    )Net proceeds from sale of common stock
    
    
    126,740
    
    
    
    71,975Deferred loan costs
    
    
    (655
    )
    
    
    (12,254
    )Net cash provided by financing activities
    
    
    14,333
    
    
    
    204,307Net decrease (increase) in cash and cash equivalents
    
    
    (1,292
    )
    
    
    7,651Cash and cash equivalents beginning of period
    
    
    3,106
    
    
    
    4,937Cash and cash equivalents end of period
    
    $
    1,814
    
    
    $
    12,588
  
 4




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##### 



PIKE ELECTRIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005 (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
    
    
    Six Months EndedDecember 31,
    
    
    December 31,2005
    
    
    2004
    
    
    2005
    
    
    2004Powerline
    
    $
    124.3
    
    
    
    63.5
    %
    
    $
    129.4
    
    
    
    86.6
    %
    
    $
    248.1
    
    
    
    59.9
    %
    
    $
    237.6
    
    
    
    64.2
    %Storm
    
    
    71.4
    
    
    
    36.5
    %
    
    
    20.0
    
    
    
    13.4
    %
    
    
    166.1
    
    
    
    40.1
    %
    
    
    132.2
    
    
    
    35.8
    %Total
    
    $
    195.7
    
    
    
    100.0
    %
    
    $
    149.4
    
    
    
    100.0
    %
    
    $
    414.2
    
    
    
    100.0
    %
    
    $
    369.8
    
    
    
    100.0
    %
 4. Recent Accounting Pronouncements
 Exchanges of Nonmonetary Assets
 Accounting Changes and Error Corrections, a
replacement of ABP Opinion No. 20, Accounting Changes Reporting
Accounting Changes in Interim Financial Statements.
 conditional asset
retirement obligation,
 5. Stock-Based Compensation
  6




---



##### 



7




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##### 



Six Months Ended
    
    Six Months EndedDecember 31,
    
    December 31,2005
    
    2004Dividend 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
    
    
    Exercise
    
    
    ExerciseAvailable
    
    
    Outstanding
    
    
    Price ($)
    
    
    Price($)Balance at June 30, 2005
    
    
    127
    
    
    
    2,905
    
    
    $
    3.80-6.51
    
    
    $
    4.80Exercised
    
    
    
    
    
    
    (348
    )
    
    
    3.80-6.51
    
    
    
    4.41Authorized
    
    
    1,750
    
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    116
    
    
    
    (116
    )
    
    
    6.51  14.00
    
    
    
    10.02Granted
    
    
    (1,043
    )
    
    
    1,043
    
    
    
    14.00 - 18.62
    
    
    
    14.28Balance at December 31, 2005
    
    
    950
    
    
    
    3,484
    
    
    $
    3.80-18.62
    
    
    $
    7.50
  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
    
    
    1,568
    
    
    
    $  3.80
    
    
    
    6.3
    
    
    
    1,181
    
    
    $
    3.806.51
    
    
    928
    
    
    
    6.51
    
    
    
    8.8
    
    
    
    392
    
    
    
    6.5114.00
    
    
    915
    
    
    
    14.00
    
    
    
    9.6
    
    
    
    
    
    
    
    14.03
    
    
    9
    
    
    
    14.03
    
    
    
    9.6
    
    
    
    
    
    
    
    18.62
    
    
    64
    
    
    
    18.62
    
    
    
    9.8
    
    
    
    
    
    
    
    Total/Avg
    
    
    3,484
    
    
    $
    7.50
    
    
    
    7.9
    
    
    
    1,573
    
    
    $
    4.47
 8




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##### 



Six MonthsEndedDecember 31,2005Non-Qualified Stock Options:Fair value of options granted during period expected to vest
    
    $
    5,246Aggregate intrinsic value of exercisable and nonvested options expected to vest
    
    $
    28,184Number of nonvested options expected to vest
    
    
    1,680Weighted average price of nonvested options expected to vest
    
    $
    9.82Weighted average remaining life of nonvested options expected to vest
    
    
    9.2Intrinsic value of nonvested options expected to vest
    
    $
    10,892
     WeightedAverageGrant-DateNon-vested Restricted Stock
    
    
    Shares
    
    
    
    Fair ValueNon-vested shares as of June 30, 2005
    
    
    
    180
    
    
    
    $
    6.81Granted
    
    
    
    181
    
    
    
    $
    14.28Vested
    
    
    
    
    
    
    
    
    Forfeited
    
    
    
    (9
    )
    
    
    $
    14.00Non-vested shares as of December 31, 2005
    
    
    
    352
    
    
    
    $
    10.47
  Three Months
    
    
    Six MonthsEnded
    
    
    EndedDecember 31,
    
    
    December 31,2004
    
    
    2004Net (loss) income, as reported
    
    $
    (1,470
    )
    
    $
    22,729Add: Stock-based employee compensation expense
included in reported net income, net of related
income tax effects
    
    
    2,775
    
    
    
    2,880Less: Stock-based employee compensation expense
determined under fair value based method of all
awards, net of related income tax effects
    
    
    (589
    )
    
    
    (841
    )Pro forma net income
    
    $
    716
    
    
    $
    24,768(Loss) earnings per share  basic, as reported
    
    $
    (0.05
    )
    
    $
    0.67(Loss) earnings per share  diluted, as reported
    
    $
    (0.05
    )
    
    $
    0.66Earnings per share  basic, proforma
    
    $
    0.02
    
    
    $
    0.73Earnings per share  diluted, proforma
    
    $
    0.02
    
    
    $
    0.72
 9




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##### 



6. Acquisition
 Business Combinations.
  7. Earnings Per Share
  Three Months Ended
    
    
    
    Six Months EndedDecember 31,
    
    December 31,2005
    
    
    
    2004
    
    
    
    2005
    
    
    
    2004Net income (loss) (numerator)
    
    
    $
    13,571
    
    
    
    $
    (1,470
    )
    
    
    $
    31,086
    
    
    
    $
    22,729Weighted-average number of
common shares (denominator)
    
    
    
    31,833
    
    
    
    
    32,275
    
    
    
    
    30,314
    
    
    
    
    33,898Basic earnings (loss) per
common share
    
    
    $
    0.43
    
    
    
    $
    (0.05
    )
    
    
    $
    1.03
    
    
    
    $
    0.67Weighted-average number of
common shares
    
    
    
    31,833
    
    
    
    
    32,275
    
    
    
    
    30,314
    
    
    
    
    33,898Potential common stock
arising from stock options
    
    
    
    1,192
    
    
    
    
    
    
    
    
    
    1,174
    
    
    
    
    457Total shares-diluted
(denominator)
    
    
    
    33,025
    
    
    
    
    32,275
    
    
    
    
    31,488
    
    
    
    
    34,355Diluted earnings (loss) per
common share
    
    
    $
    0.41
    
    
    
    $
    (0.05
    )
    
    
    $
    0.99
    
    
    
    $
    0.66Anti-dilutive weighted shares
excluded from the calculation
of earnings per share
    
    
    
    966
    
    
    
    
    3,630
    
    
    
    
    831
    
    
    
    
    953
  8. Accounts Receivable
  10




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##### 



9. Debt
  December 31,
    
    
    June 30,2005
    
    
    2005Revolving credit facility
    
    $
    20,500
    
    
    $
    11,500Long-term debt:$300 million term loan
    
    $
    182,287
    
    
    $
    260,000$150 million term loan
    
    
    103,763
    
    
    
    148,000286,050
    
    
    
    408,000Less: current portion
    
    
    
    
    
    
    250Long term debt
    
    $
    286,050
    
    
    $
    407,750
     Accounting
for Derivatives and Hedging Activities
  11




---



##### 



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
    
    
    
    Six Months EndedDecember 31,
    
    December 31,2005
    
    
    
    2004
    
    
    
    2005
    
    
    
    2004Powerline
    
    
    $
    124.3
    
    
    
    
    63.5
    %
    
    
    $
    129.4
    
    
    
    
    86.6
    %
    
    
    $
    248.1
    
    
    
    
    59.9
    %
    
    
    $
    237.6
    
    
    
    
    64.2
    %Storm
    
    
    
    71.4
    
    
    
    
    36.5
    %
    
    
    
    20.0
    
    
    
    
    13.4
    %
    
    
    
    166.1
    
    
    
    
    40.1
    %
    
    
    
    132.2
    
    
    
    
    35.8
    %Total
    
    
    $
    195.7
    
    
    
    
    100.0
    %
    
    
    $
    149.4
    
    
    
    
    100.0
    %
    
    
    $
    414.2
    
    
    
    
    100.0
    %
    
    
    $
    369.8
    
    
    
    
    100.0
    %
 Critical Accounting Policies and Estimates
  13




---



##### 



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 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 costs
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 expenses 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




---



##### 



Results of Operations
  Three Months Ended
    
    
    Six Months EndedDecember 31,
    
    

December 31,2005
    
    
    2004
    
    
    2005
    
    
    2004Revenues:Powerline services
    
    
    63.5
    %
    
    
    86.6
    %
    
    
    59.9
    %
    
    
    64.2
    %Storm restoration services
    
    
    36.5
    
    
    
    13.4
    
    
    
    40.1
    
    
    
    35.8Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of operations
    
    
    79.9
    
    
    
    89.1
    
    
    
    78.7
    
    
    
    78.8Gross profit
    
    
    20.1
    
    
    
    10.9
    
    
    
    21.3
    
    
    
    21.2General and administrative expenses
    
    
    5.7
    
    
    
    8.8
    
    
    
    5.4
    
    
    
    6.9Other operating expense, net
    
    
    0.0
    
    
    
    0.0
    
    
    
    0.1
    
    
    
    0.0Income from operations
    
    
    14.4
    %
    
    
    2.1
    %
    
    
    15.8
    %
    
    
    14.3
    %Other expense:Interest expense, net
    
    
    2.9
    
    
    
    3.3
    
    
    
    3.3
    
    
    
    4.0Income tax expense (benefits)
    
    
    4.6
    
    
    
    (0.2
    )
    
    
    5.0
    
    
    
    4.2Net income (loss)
    
    
    6.9
    %
    
    
    (1.0
    )%
    
    
    7.5
    %
    
    
    6.1
    %
 Three Months Ended December 31, 2005 Compared to the Three Months Ended December 31, 2004
 Revenues.
   Gross Profit.
 General and Administrative Expenses.
 15




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##### 



Other Expense.
 Income Tax Expense.
 Net Income.
 Six Months Ended December 31, 2005 Compared to the Six Months Ended December 31, 2004
 Revenues.
   Gross Profit.
 General and Administrative Expenses.
 Other Expense.
 16




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##### 



Income Tax Expense.
 Net Income.
 Liquidity and Capital Resources
     Changes in Cash Flows
 Six Months EndedDecember 31,2005
    
    
    2004(in millions)Net cash provided by operating activities
    
    $
    7.8
    
    
    $
    23.7Net cash used in investing activities
    
    $
    (23.4
    )
    
    $
    (220.4
    )Net cash provided by financing activities
    
    $
    14.3
    
    
    $
    204.3
  17




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##### 



Senior Credit Facility
  Off-Balance Sheet Arrangements
    18




---



##### 



Seasonality
  Recent Accounting Pronouncements
 Exchanges of Nonmonetary Assets
 Accounting Changes and Error Corrections, a
replacement of ABP Opinion No. 20, Accounting Changes Reporting
Accounting Changes in Interim Financial Statements.
  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;
 19




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##### 




    
    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 expectations regarding our mix of revenues and gross margins returning to normalized
levels for the remaining six months of the fiscal year;
    
    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.
 
    
    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




---



##### 




    
    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.
 
    
    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
  Item 4. Controls and Procedures
   21




---



##### 



PART II  OTHER INFORMATION
 Item 1. Legal Proceedings
   Item 4. Submission of Matters to a Vote of Security Holders.
   Nominee
    
    For
    
    
    WithheldJ. Eric Pike
    
    
    25,377,306
    
    
    
    3,854,255Adam P. Godfrey
    
    
    24,685,824
    
    
    
    4,545,737Alan E. Goldberg
    
    
    24,710,089
    
    
    
    4,521,472James R. Helvey, III
    
    
    28,581,887
    
    
    
    649,674Stuart S. Janney, III
    
    
    24,964,400
    
    
    
    4,267,161Robert D. Lindsay
    
    
    24,966,350
    
    
    
    4,265,211J. Russell Triedman
    
    
    24,942,125
    
    
    
    4,289,436
   Item 6. Exhibits.
 ExhibitNo.
    
    
    
    Description31.1
    
    
    
    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)
 22




---



##### 



SIGNATURE
  Date: February 13, 2006
    
    By:
    
    /s/ J. Eric PikeChairman and Chief Executive OfficerDate: February 13, 2006
    
    By:
    
    /s/ Mark CastanedaChief Financial Officer
 23