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, 2007

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ  No o

     Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o                Accelerated filer þ                Non-accelerated filer o                Smaller reporting company o

(Do not check if a smaller reporting company)

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o  No þ

     As of February 1, 2008, there were 33,136,473 shares of our Common Stock, par value $0.001 per share, outstanding.

 

 

PIKE ELECTRIC CORPORATION
FORM 10-Q
FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2007
INDEX

Part I. FINANCIAL INFORMATION
Item 1.		Financial Statements (unaudited):
		Condensed consolidated balance sheets			1
		Condensed consolidated statements of income			2
		Condensed consolidated statements of cash flows			3
		Notes to condensed consolidated financial statements			4
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			7
Item 3.		Quantitative and Qualitative Disclosures about Market Risk			15
Item 4.		Controls and Procedures			16
Part II. OTHER INFORMATION
Item 1.		Legal Proceedings			17
Item 1A.		Risk Factors			17
Item 4.		Submission of Matters to a Vote of Security Holders			17
Item 6.		Exhibits			18
Signatures					19
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

PIKE ELECTRIC CORPORATION

		December 31,				June 30,
		2007				2007
		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	60			$	1,467
Accounts receivable from customers, net			71,772				59,603
Work completed not billed			37,342				44,527
Inventories			8,784				8,535
Prepaid expenses and other			4,916				6,219
Deferred income taxes			15,056				13,633
Total current assets			137,930				133,984
Property and equipment, net			247,963				267,740
Goodwill			94,402				94,402
Other intangibles, net			41,647				43,228
Deferred loan costs, net			3,612				4,482
Other assets			1,661				1,661
Total assets		$	527,215			$	545,497
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	9,127			$	8,503
Accrued compensation			20,314				20,597
Accrued expenses and other			3,207				4,447
Income taxes payable			2,214				6,146
Current portion of deferred compensation			4,641				3,544
Current portion of insurance and claim accruals			28,399				26,669
Revolving credit facility			800				—
Total current liabilities			68,702				69,906
Long-term debt, net of current portion			166,700				191,500
Insurance and claim accruals, net of current portion			11,170				10,894
Deferred compensation, net of current portion			5,935				9,315
Deferred income taxes			64,119				67,259
Other liabilities			916				562
Commitments and contingencies
Stockholders’ 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 shares authorized; 33,131 and 32,916 shares issued and outstanding at December 31, 2007 and June 30, 2007, respectively			6,427				6,426
Additional paid-in capital			146,349				142,849
Accumulated other comprehensive income (loss)			(260	)			(8	)
Retained earnings			57,157				46,794
Total stockholders’ equity			209,673				196,061
Total liabilities and stockholders’ equity		$	527,215			$	545,497

The accompanying notes are an integral part of these condensed consolidated financial statements

PIKE ELECTRIC CORPORATION

		Three Months Ended								Six Months Ended
		December 31,								December 31,
		2007				2006				2007				2006
Revenues		$	143,116			$	148,369			$	282,852			$	298,224
Cost of operations			118,653				123,857				235,110				253,972
Gross profit			24,463				24,512				47,742				44,252
General and administrative expenses			10,564				10,722				20,876				22,278
Loss on sale and impairment of property and equipment			1,939				131				1,984				498
Income from operations			11,960				13,659				24,882				21,476
Other expense (income):
Interest expense			3,774				5,045				8,146				10,223
Other, net			(64	)			(58	)			(125	)			(116	)
Total other expense			3,710				4,987				8,021				10,107
Income before income taxes			8,250				8,672				16,861				11,369
Income tax expense			3,171				3,452				6,498				4,547
Net income		$	5,079			$	5,220			$	10,363			$	6,822
Earnings per share:
Basic		$	0.15			$	0.16			$	0.32			$	0.21
Diluted		$	0.15			$	0.16			$	0.31			$	0.21
Shares used in computing earnings per share:
Basic			32,833				32,353				32,764				32,288
Diluted			33,668				33,242				33,677				33,233

The accompanying notes are an integral part of these condensed consolidated financial statements

PIKE ELECTRIC CORPORATION

		Six Months Ended
		December 31,
		2007				2006
Cash flows from operating activities:
Net income		$	10,363			$	6,822
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			18,712				19,485
Non-compete litigation settlement			—				3,551
Non-cash interest expense			1,620				1,465
Deferred income taxes			(4,402	)			(536	)
Loss on sale and impairment of property and equipment			1,984				498
Equity compensation expense			1,312				1,085
Excess tax benefit from stock-based compensation			(957	)			(939	)
Changes in operating assets and liabilities:
Accounts receivable and work completed not billed			(4,984	)			13,170
Inventories, prepaid expenses and other			(747	)			(327	)
Insurance and claim accruals			2,005				5,615
Accounts payable and other			(3,975	)			(3,179	)
Deferred compensation			(3,034	)			(9,428	)
Net cash provided by operating activities			17,897				37,282
Cash flows from investing activities:
Purchases of property and equipment			(3,584	)			(25,997	)
Net proceeds from sale of property and equipment			6,215				3,949
Net cash provided by (used in) investing activities			2,631				(22,048	)
Cash flows from financing activities:
Principal payments on long-term debt			(24,800	)			(12,500	)
Draws (repayments) on revolving credit facility, net			800				(4,500	)
Net proceeds from sale of common stock			1,108				2,350
Equity compensation tax benefit			957				939
Deferred loan costs			—				(162	)
Net cash used in financing activities			(21,935	)			(13,873	)
Net (decrease) increase in cash and cash equivalents			(1,407	)			1,361
Cash and cash equivalents beginning of year			1,467				3,391
Cash and cash equivalents end of period		$	60			$	4,752

The accompanying notes are an integral part of these condensed consolidated financial statements

PIKE ELECTRIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three and six months ended December 31, 2007 and 2006
(In thousands, except per share amounts)
(Unaudited)

1. Basis of Presentation

     The accompanying condensed consolidated financial statements of Pike Electric Corporation and its wholly-owned subsidiaries (“Pike,” “Pike Electric,” “we,” “us,” and “our”) are unaudited and have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management these financial statements include all adjustments (consisting of normal recurring adjustments) that are considered necessary for a fair presentation of financial position, results of operations and cash flows for the interim periods presented. The operating results for interim periods are not necessarily indicative of results to be expected for a full year or future interim periods. The balance sheet at June 30, 2007 has been derived from our audited financial statements but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. Certain amounts reported previously have been reclassified to conform to the current year presentation. These financial statements should be read in conjunction with our financial statements and related notes included our report on Form 10-K for the year ended June 30, 2007.

2. Business

     Pike Electric is headquartered in Mount Airy, North Carolina and operates in one reportable segment as a provider of outsourced electric distribution and transmission services. Pike’s customers include more than 150 electric utilities, cooperatives and municipalities across a contiguous 19-state region that stretches from Pennsylvania in the north to Florida in the southeast and to Texas in the southwest. Pike’s core services consist of the maintenance, upgrade and extension of electric distribution and sub-500 kilovolt (“kV”) transmission power lines. Additionally, Pike provides storm restoration services. Pike Electric does not have operations or assets outside the United States.

     We monitor revenue by two categories of services: core powerline and storm restoration. We use this breakdown because core powerline services represent ongoing service revenues, most of which are generated by our customers’ recurring maintenance needs. Storm restoration revenues represent additional revenue opportunities that depend on weather conditions.

     The following table sets forth our revenue by category of service for the periods indicated:

		Three Months Ended																Six Months Ended
		December 31,																December 31,
		2007								2006								2007								2006
Core powerline services		$	123,527				86.3	%		$	134,310				90.5	%		$	258,401				91.4	%		$	271,878				91.2	%
Storm restoration services			19,589				13.7	%			14,059				9.5	%			24,451				8.6	%			26,346				8.8	%
Total		$	143,116				100.0	%		$	148,369				100.0	%		$	282,852				100.0	%		$	298,224				100.0	%

3. Stock-Based Compensation

     Compensation expense related to stock-based compensation plans was $706 and $813 for the three months ended December 31, 2007 and December 31, 2006, respectively, and $1,312 and $1,085 for the six months ended December 31, 2007 and December 31, 2006, respectively. Impacting the expense for the six months ended December 31, 2006 was the reversal of $293 of previously recognized stock compensation expense related to the settlement of litigation.

     The income tax benefit recognized for stock-based compensation arrangements was $276 and $318 for the three months ended December 31, 2007 and December 31, 2006, respectively, and $513 and $424 for the six months ended December 31, 2007 and December 31, 2006, respectively.

4. Earnings Per Share

     The following table sets forth the calculations of basic and diluted earnings per share:

		Three Months Ended								Six Months Ended
		December 31,								December 31,
		2007				2006				2007				2006
Basic:
Net income		$	5,079			$	5,220			$	10,363			$	6,822
Weighted average common shares			32,833				32,353				32,764				32,288
Basic earnings per share		$	0.15			$	0.16			$	0.32			$	0.21
Diluted:
Net income		$	5,079			$	5,220			$	10,363			$	6,822
Weighted average common shares			32,833				32,353				32,764				32,288
Potential common stock arising from stock options and restricted stock			835				889				913				945
Weighted average common shares — diluted			33,668				33,242				33,677				33,233
Diluted earnings per share		$	0.15			$	0.16			$	0.31			$	0.21

     Outstanding options and restricted stock awards equivalent to 432 and 1,129 shares of common stock were excluded from the calculation of diluted earnings per share for the three months ended December 31, 2007 and 2006, respectively, because their effect would have been anti-dilutive. Outstanding options and restricted stock awards equivalent to 374 and 1,068 shares of common stock were excluded from the calculation of diluted earnings per share for the six months ended December 31, 2007 and 2006, respectively, because their effect would have been anti-dilutive.

5. Property and Equipment

     During the three months ended December 31, 2007, we determined that it was highly likely that certain idle equipment would be sold in the near future, and not placed back into service. Accordingly, we recorded a $1,893 ($1,154 net of tax or $0.03 per diluted share) impairment charge, which is reported under “Loss on sale and impairment of property and equipment.” For purposes of measuring impairment, fair value was determined based on prices in the used equipment market.

6. Income Taxes

     Effective income tax rates of 38.4% and 39.8% for the three months ended December 31, 2007 and December 31, 2006, respectively, and 38.5% and 40.0% for the six months ended December 31, 2007 and December 31, 2006, respectively, varied from the statutory federal income tax rate of 35% primarily as a result of the effect of state income taxes.

     Effective July 1, 2007, we adopted the provisions of Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109 (“FIN 48”). The adoption of FIN 48 did not have any impact on the total liabilities or stockholders’ equity of Pike. At the date of adoption, Pike had approximately $600 in liabilities associated with uncertain tax positions, substantially all of which would impact our effective tax rate if recognized.

     Our policy is to recognize interest and penalties related to income tax matters in the income tax provision. As of December 31, 2007, there were no significant amounts accrued for interest or penalties related to uncertain income tax positions.

     The Internal Revenue Service has completed its examinations of Pike’s income tax returns through the year ended June 30, 2004 and no significant adjustments have been proposed. The Internal Revenue Service is currently examining the returns for the years ended June 30, 2005 and 2006. Various years remain subject to examination by state taxing authorities.

7. Comprehensive Income

     We have two separate diesel fuel swap agreements outstanding to manage exposure to diesel fuel price volatility. We did not elect to apply hedge accounting for the first swap, entered into in May 2006. This swap is marked to market and included on the balance sheet at fair value. Realized and unrealized gains and losses are recognized in cost of operations. This swap expires in February 2008.

     The second diesel fuel swap, entered into in October 2006, qualified for hedge accounting and was designated as a cash flow hedge. This swap is marked to market and included on the balance sheet at fair value. The effective portions of changes in the fair value of the swap are recorded in other comprehensive income (“OCI”) and are recognized in the statement of income when the hedged item affects earnings. Ineffective portions of changes in the fair value of cash flow hedges are recognized in cost of operations. This swap expires in February 2008.

     Effective December 2007, we entered into two interest rate swap agreements to help manage a portion of our floating-rate debt interest risk. The interest rate swaps qualified for hedge accounting and were designated as cash flow hedges. The interest rate swaps are marked to market and included on the balance sheet at fair value. Changes in the fair values of the swaps are recorded in OCI and are recognized in the statement of operations when the hedged items affect earnings. The interest rate swaps expire in December 2009.

     The net derivative income recorded in OCI will be reclassified into earnings over the term of the underlying cash flow hedge. The amount that will be reclassified into earnings will vary depending upon the movement of the underlying diesel fuel prices and interest rates. As diesel fuel prices and interest rates decrease, the charge to earnings will increase. Conversely, as diesel fuel prices and interest rates increase, the charge to earnings will decrease.

     The components of comprehensive income, net of tax, were as follows for the periods presented below:

		Three Months Ended								Six Months Ended
		December 31,								December 31,
		2007				2006				2007				2006
Net income		$	5,079			$	5,220			$	10,363			$	6,822
Diesel fuel hedge			59				(300	)			110				(300	)
Interest rate hedges			(362	)			—				(362	)			—
Comprehensive income		$	4,776			$	4,920			$	10,111			$	6,522

8. Commitments and Contingencies

     Litigation

     We are, from time to time, a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. These actions typically seek, among other things, compensation for alleged personal injury, workers’ compensation, employment discrimination, breach of contract, property damage, punitive damages, civil penalties or other losses, or injunctive or declaratory relief. With respect to all such lawsuits, claims and proceedings, we accrue reserves when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. We do not believe that any of these proceedings, individually or in the aggregate, would be expected to have a material adverse effect on our results of operations or financial position.

     Performance Bonds

     In certain circumstances we are required to provide performance bonds in connection with our contractual commitments. We have indemnified the surety for any expenses that may be paid out under these performance bonds. At December 31, 2007, we had an outstanding letter of credit of $4,000 to provide collateral to the surety, and the total amount of outstanding performance bonds was $29,301.

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 unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with our Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission (“SEC”) on August 31, 2007 and is available on the SEC’s website at www.sec.gov. 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.”

Introduction

     We are one of the largest third-party providers of outsourced electric distribution and transmission services in the United States. Our core activities consist of the maintenance, upgrade and extension of electric distribution and sub-500 kV transmission power lines. Our customers include more than 150 electric utilities, cooperatives and municipalities across a contiguous 19-state region that stretches from Pennsylvania in the north to Florida in the southeast and to Texas in the southwest.

     We monitor our revenues by the two categories of services we provide: core powerline and storm restoration. We use this breakdown because core powerline services represent our ongoing service revenues, most of which are generated by our customers’ recurring maintenance needs and new construction projects. Storm restoration revenues represent additional revenue opportunities that depend on weather conditions. Although storm restoration services can generate significant revenues, their unpredictability is demonstrated by comparing our revenues from those services in the last six fiscal years which have ranged from 2.6% to 25.5% of total revenues.

     The following table sets forth our revenues by category of service for the periods indicated (dollars in millions):

		Three Months Ended																Six Months Ended
		December 31,																December 31,
		2007								2006								2007								2006
Core powerline services		$	123.5				86.3	%		$	134.3				90.5	%		$	258.4				91.4	%		$	271.9				91.2	%
Storm restoration services			19.6				13.7	%			14.1				9.5	%			24.5				8.6	%			26.3				8.8	%
Total		$	143.1				100.0	%		$	148.4				100.0	%		$	282.9				100.0	%		$	298.2				100.0	%

Critical Accounting Policies

     The discussion and analysis of our financial condition and results of operations are based on our condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires management to make certain estimates and assumptions for interim financial information that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, we evaluate these estimates and assumptions, including those related to revenue recognition for work in progress, allowance for doubtful accounts, self-insured claims liability, valuation of goodwill and other intangible assets, asset lives and values used in computing depreciation, amortization and impairment, and accounting for income taxes, contingencies, litigation and stock-based compensation. Application of these estimates and assumptions requires the exercise of judgment as to future uncertainties and, as a result, actual results could differ from these estimates. Please refer to “Management’s Discussion and Analysis of Financial Condition and Results of

Operations-Critical Accounting Policies” included in our Annual Report on Form 10-K for the year ended June 30, 2007 for further information regarding our critical accounting policies and estimates.

Operational and Other Factors

     We are subject to various operational and other factors that can affect our business and results of operations. To mitigate the effects of these factors, we focus on elements of our business we can control, including excellent customer service, safety and employee development and cost control. The statements in this section are based on our current expectations. See “Uncertainty of Forward-Looking Statements and Information.” Certain of these operational and other factors that affect our business include the following:

	•		General economic conditions may impact utility maintenance expenditures, and certain of our customers’ powerline maintenance projects may be temporarily deferred. We continue to work closely with all customers to provide a skilled, flexible work force.
	•		When we add new customers and arrangements, we generally experience an increase in costs, including the costs of training and outfitting our crews and spending on equipment and specialized tools and supplies. Once the crews and equipment are fully utilized, our margins generally increase over the life of the arrangement.
	•		Industry-wide insurance costs for workmens’ compensation, medical and general liability could rise at a rate faster than our revenues. We have implemented several safety initiatives designed to reduce incident rates and corresponding insurance costs.
	•		There are a limited number of skilled workers that can perform our work, and during historic periods of increased demand, labor costs have tended to increase. We are currently experiencing shortages of skilled personnel in certain markets. While shortages have caused our labor costs to increase, we historically have been able to obtain increases when we renegotiate rates with our customers to offset these cost increases.
	•		Fuel costs may rise at a rate faster than our revenues. We have a large fleet of vehicles and equipment that primarily use diesel fuel. We have implemented bulk purchasing in certain areas to lower our fuel costs. In addition, we have entered into two diesel fuel swaps that cover, based on current volumes, approximately 30% of our diesel requirements through February 2008.

Results of Operations

     The following table sets forth selected statement of income data as percentages of revenues for the periods indicated:

		Three Months Ended								Six Months Ended
		December 31,								December 31,
		2007				2006				2007				2006
Revenues:
Core powerline services			86.3	%			90.5	%			91.4	%			91.2	%
Storm restoration services			13.7				9.5				8.6				8.8
Total			100.0	%			100.0	%			100.0	%			100.0	%
Cost of operations			82.9				83.5				83.1				85.2
Gross profit			17.1				16.5				16.9				14.8
General and administrative expenses			7.4				7.2				7.4				7.5
Loss on sale and impairment of property and equipment			1.3				0.1				0.7				0.1
Income from operations			8.4				9.2				8.8				7.2
Interest expense and other, net			2.6				3.4				2.8				3.4
Income before income taxes			5.8				5.8				6.0				3.8
Income tax expense			2.3				2.3				2.3				1.5
Net income			3.5	%			3.5	%			3.7	%			2.3	%

   Three Months Ended December 31, 2007 Compared to Three Months Ended December 31, 2006

     Revenues. Revenues decreased 3.5%, or $5.3 million, to $143.1 million for the three months ended December 31, 2007 from $148.4 million for the three months ended December 31, 2006. The decrease was attributable to a $10.8 million decrease in core powerline revenues partially offset by a $5.5 million increase in storm restoration revenues compared to the prior fiscal year. Total billable hours decreased by 9.7% during the three months ended December 31, 2007 compared to the same period in the prior year. In addition, our average revenue-producing headcount decreased 11.9% during the three months ending December 31, 2007 compared to the same period in the prior year. Billable hours and headcount decreased primarily due to our terminating certain services during our 2007 fiscal year that did not meet strategic goals, including right-of-way maintenance, and our exiting certain accounts that did not meet long-term profitability goals. These exited accounts represented approximately $8.0 million of revenue during the second quarter of the prior year.

     Our core powerline revenues decreased 8.0% to $123.5 million for the three months ended December 31, 2007 from $134.3 million for the same period in the prior year. Core powerline billable man-hours decreased 14.1% while revenue per man-hour increased 7.1%. The decrease in core powerline revenues was due to the exiting of certain accounts and the increase in storm restoration work, which diverted some of our man-hours from core powerline work.

     Our storm restoration revenues increased 39.3% to $19.6 million for the three months ended December 31, 2007 from $14.1 million for the same period in the prior year. There was significant storm restoration work in the three months ended December 31, 2007 due to damage caused by winter storms primarily in the Midwest and Mid-Atlantic regions. Our storm restoration revenues are highly volatile and unpredictable.

     Gross Profit. Gross profit was virtually unchanged at $24.5 million for both the three months ended December 31, 2007 and 2006. Gross profit as a percentage of revenues increased to 17.1% for the three months ended December 31, 2007 from 16.5% for the three months ended December 31, 2006, primarily due to an increase in higher-margin storm revenue, operational efficiency improvements and the successful elimination of certain lower-margin accounts and services, partially offset by a $0.5 million investment into new fire retardant uniform shirts.

     General and Administrative Expenses. General and administrative expenses were $10.6 million for the three months ended December 31, 2007 compared to $10.7 million for the three months ended December 31, 2006. Lower legal and accounting fees for the three months ended December 31, 2007 were partially offset by an increase in cost related to information technology staffing and initiatives. As a percentage of revenues, general and administrative expenses increased to 7.4% from 7.2%.

     Loss on Sale and Impairment of Property and Equipment. Loss on sale and impairment of property and equipment increased $1.8 million to $1.9 million for the three months ended December 31, 2007 compared to $0.1 million for the three months ended December 31, 2006. This increase is due to an impairment charge on excess equipment (see Note 5).

     Interest Expense and Other, Net. Interest expense and other, net decreased $1.3 million to $3.7 million for the quarter ended December 31, 2007 from $5.0 million for the quarter ended December 31, 2006. This decrease was primarily due to lower average debt balances.

     Income Tax Expense. Income tax expense decreased $0.3 million to $3.2 million for the three months ended December 31, 2007 from $3.5 million for the three months ended December 31, 2006 primarily as a result of a decrease in income before income taxes. The effective tax rate was 38.4% and 39.8% for the three months ended December 31, 2007 and December 31, 2006, respectively.

     Net Income. As a result of the factors discussed above, net income decreased $0.1 million to $5.1 million for the three months ended December 31, 2007 from $5.2 million for the three months ended December 31, 2006.

   Six Months Ended December 31, 2007 Compared to the Six Months Ended December 31, 2006

     Revenues. Revenues decreased 5.2%, or $15.3 million, to $282.9 million for the six months ended December 31, 2007 from $298.2 million for the same period in the prior year. The decrease was attributable to a $13.5 million decrease in core powerline revenues and a $1.8 million decrease in storm restoration revenue. Total billable hours decreased 11.8% during the six months ended December 31, 2007 compared to the same period in the prior fiscal year. In addition, our average revenue-producing headcount decreased 11.9% during the six months ending December 31, 2007 from the same period in the prior year. Billable hours and headcount decreased primarily due to our terminating certain services during our 2007 fiscal year that did not meet strategic goals, including right-of-way maintenance, and our exiting certain accounts that did not meet long-term profitability goals. These exited accounts represented approximately $17.0 million of revenue during the six months ended December 31, 2006.

     Our core powerline service revenues decreased 5.0% to $258.4 million in the six months ended December 31, 2007 from $271.9 million in the six months ended December 31, 2006. Core powerline billable man-hours decreased 12.5% while revenue per man-hour increased 8.6%.

     Our storm restoration revenues decreased 7.2% to $24.5 million for the six months ended December 31, 2007 from $26.3 million for the six months ended December 31, 2006. The reduction in total storm restoration revenue is due to the decrease in hurricane storm restoration work, partially offset by an increase in winter storm restoration work.

     Gross Profit. Gross profit increased $3.4 million to $47.7 million for the six months ended December 31, 2007 from $44.3 million for the six months ended December 31, 2006. Gross profit as a percentage of revenues increased to 16.9% from 14.8% during the six months ended December 31, 2006 primarily due to operational efficiency improvements and the successful elimination of certain lower-margin accounts and services. These positive impacts were partially offset by a decrease in higher-margin storm restoration revenues and a $1.1 million investment into new fire retardant uniform shirts.

     General and Administrative Expenses. General and administrative expenses decreased $1.4 million to $20.9 million for the six months ended December 31, 2007 from $22.3 million for the six months ended December 31, 2006. This decrease is primarily due to a significant reduction in legal fees and Sarbanes-Oxley compliance

expense, partially offset by an increase in cost related to information technology staffing and initiatives. As a percentage of revenues, general and administrative expenses decreased to 7.4% from 7.5%.

     Loss on Sale and Impairment of Property and Equipment. Loss on sale and impairment of property and equipment increased $1.5 million to $2.0 million for the six months ended December 31, 2007 compared to $0.5 million for the six months ended December 31, 2006. This increase is due to an impairment charge on idle equipment (see Note 5).

     Interest Expense and Other, Net. Interest expense and other, net decreased $2.1 million to $8.0 million for the six months ended December 31, 2007 from $10.1 million for the six months ended December 31, 2006. This decrease was primarily due to a reduction in average debt balances.

     Income Tax Expense. Income tax expense increased $2.0 million to $6.5 million for the six months ended December 31, 2007 from $4.5 million for the six months ended December 31, 2006 primarily as a result of the increase in income before income taxes. The effective tax rate was 38.5% and 40.0% for the six months ended December 31, 2007 and 2006, respectively.

     Net Income. As a result of the factors discussed above, net income increased $3.6 million to $10.4 million for the six months ended December 31, 2007 from $6.8 million for the six months ended December 31, 2006.

Liquidity and Capital Resources

     Our primary cash needs have been for capital expenditures, working capital and payments under our senior credit facility. Our primary sources of cash for the six months ended December 31, 2007 was cash provided by operations and, to a lesser extent, proceeds from the sale of property and equipment. Our primary source of cash for the six months ended December 31, 2006 was cash provided by operations.

     We need working capital to support seasonal variations in our business, primarily due to the impact of weather conditions on the electric infrastructure and the corresponding spending by our customers on electric service and repairs. We may experience working capital needs in connection with our storm restoration services. The increased service activity causes an excess of customer billings over customer collections, leading to increased accounts receivable during those periods. In the past, we have utilized borrowings under the revolving portion of our senior credit facility to satisfy normal operating costs during these periods.

     We believe 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. However, our ability to satisfy our obligations or to fund planned capital expenditures will depend on our future performance, which to a certain extent is subject to general economic, financial, competitive, legislative, regulatory and other factors beyond our control.

   Changes in Cash Flows:

		Six Months Ended
		December 31,
		2007				2006
		(in millions)
Net cash provided by operating activities		$	17.9			$	37.3
Net cash provided by (used in) investing activities		$	2.6			$	(22.0	)
Net cash used in financing activities		$	(21.9	)		$	(13.9	)

     Net cash provided by operating activities decreased $19.4 million to $17.9 million for the six months ended December 31, 2007 from $37.3 million for the six months ended December 31, 2006. The decrease in cash flows from operating activities was primarily due to the increase in accounts receivable caused by storm restoration work that occurred late in the quarter, partially offset by the increase in net income.

     Net cash provided by investing activities was $2.6 million for the six months ended December 31, 2007 compared to net cash used in investing activities of $22.0 million for the six months ended December 31, 2006. The change in cash provided by investing activities was primarily due to the decrease in purchases of property and equipment.

     Net cash used in financing activities increased $8.0 million to $21.9 million for the six months ended December 31, 2007 from $13.9 million for the six months ended December 31, 2006. Net cash used in financing activities in the six months ended December 31, 2007 and 2006 primarily reflected net payments under our senior credit facility.

   Senior Credit Facility

     As of December 31, 2007, we had $166.7 million of term loan and $0.8 million of revolver indebtedness outstanding under our senior credit facility. As of December 31, 2007, our borrowing availability under the $90.0 million revolving portion of our senior credit facility was $65.6 million (after giving effect to the outstanding balance of $0.8 million and $23.6 million of outstanding standby letters of credit). The obligations under our senior credit facility are unconditionally guaranteed by us and each of our existing and subsequently acquired or organized subsidiaries (other than Pike Electric, Inc., which is the borrower under the facility) and secured on a first-priority basis by security interests (subject to permitted liens) in substantially all assets owned by us, Pike Electric, Inc. and each of our other domestic subsidiaries, subject to limited exceptions.

     We repaid $7.0 million and $24.8 million of term loans outstanding under our senior credit facility during the three and six months ended December 31, 2007, respectively, primarily with cash provided by operations and, to a lesser extent, cash provided by the sale of property and equipment. Our $0.8 million balance of revolver loans at December 31, 2007 was due to the timing of working capital needs.

     Our credit agreement contains a number of affirmative and restrictive covenants including limitations on mergers, consolidations and dissolutions, sales of assets, investments and acquisitions, indebtedness and liens, and other restricted payments.

Off-Balance Sheet Arrangements

     Other than letters of credit issued under the $90.0 million revolving portion of our senior credit facility and our obligations under the surety and performance bonds described below, we have no obligations or relationships that could be considered material off-balance sheet arrangements.

     As of December 31, 2007, we had $23.6 million of standby letters of credit issued under our senior credit facility primarily for insurance and bonding purposes.

     In the ordinary course of business, we occasionally are required by our customers to post surety or performance bonds in connection with services that we provide to them. These bonds have face amounts ranging from $25,000 to $14.0 million. As of December 31, 2007, we had approximately $29.3 million in surety bonds outstanding. In addition, we have provided collateral in the form of a letter of credit to sureties in the amount of $4.0 million, which is included in the total letters of credit outstanding above.

Seasonality; Fluctuations of Results

     Because our services are performed outdoors, our results of operations can be subject to seasonal variations due to weather conditions. These seasonal variations affect both our core powerline and storm restoration services. Extended periods of rain affect the deployment of our core powerline crews, particularly with respect to underground work. During the winter months, demand for core powerline work is generally lower due to inclement weather. In addition, demand for core powerline work generally increases during the spring months due to improved weather conditions and is typically the highest during the summer due to better weather conditions. Demand for electrical repairs is generally higher during the late summer and fall months due to damage caused by weather conditions, such as hurricanes. In addition, our results of operations are subject to significant variations related to storm restoration services. Due to the unpredictable nature of storms, the level of our storm restoration revenues fluctuates from period to period.

Inflation

     Due to relatively low levels of inflation experienced during the first six months of fiscal 2008 and 2007, inflation did not have a significant effect on our results.

Recent Accounting Pronouncements

     In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”), which is an interpretation of SFAS 109, Accounting for Income Taxes. This interpretation prescribes a minimum recognition threshold that an income tax position is required to meet before being recognized in the financial statements. FIN 48 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. We adopted FIN 48 effective July 1, 2007. The adoption had no impact on our total liabilities or stockholders’ equity.

     In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS No. 157 defines fair value, establishes a measurement framework and expands disclosure requirements. SFAS No. 157 does not require any new fair value measurements but does apply to assets and liabilities that are required to be recorded at fair value pursuant to other accounting standards. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. We are evaluating the impact of SFAS No. 157, but do not expect the standard to have a material effect on our consolidated financial statements.

     In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement No. 115. SFAS No. 159 permits entities to choose to measure at fair value many financial instruments and certain other items at fair value that are not currently required to be measured. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS No. 159 does not affect any existing accounting literature that requires certain assets and liabilities to be carried at fair value. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. We will adopt SFAS No. 159 on July 1, 2008, and we are currently evaluating the impact of adoption on our consolidated financial statements.

     In December 2007, the FASB issued SFAS No. 141(R), Business Combinations. SFAS No. 141(R) will significantly change the accounting for business combinations in a number of areas including the treatment of contingent consideration, contingencies, acquisition costs, and restructuring costs. In addition, under SFAS 141R, changes in deferred tax asset valuation allowances and acquired income tax uncertainties in a business combination after the measurement period will impact income tax expense. SFAS No. 141(R) is effective for fiscal years beginning after December 15, 2008 and early adoption is not permitted. SFAS No. 141(R) will impact our consolidated financial statements if we are party to a business combination that closes after the pronouncement has been adopted.

     In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51. SFAS No. 160 will change the accounting and reporting for minority interests, which will be recharacterized as noncontrolling interests (NCI) and classified as a component of equity. This new consolidation method will significantly change the accounting for transactions with minority interest holders. SFAS No. 160 is effective for fiscal years beginning after December 15, 2008. We are currently evaluating the effects of No. 160, but do not expect the standard to have a material effect on our consolidated financial statements.

     Uncertainty of Forward-Looking Statements and Information

     This Quarterly Report on Form 10-Q includes statements reflecting assumptions, expectations, projections, intentions or beliefs about future events that are intended to be “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. You can identify these statements by the fact that they do not relate strictly to historical or current facts. Words such as “may,” “will,” “should,” “expect,” “anticipate,” “intend,” “plan,” “predict,” “potential,” “continue,” “believe,” “seek,” “estimate,” variations of such words and similar

expressions are intended to identify such forward-looking statements. In particular, these include, but are not limited to, statements relating to the following:

	•		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 our results of operation or financial position;
	•		our belief that our cash flow from operations, available cash and cash equivalents, and borrowings available under our senior credit facility will be adequate to meet our ordinary course liquidity needs for the foreseeable future.

     Any or all of our forward-looking statements may turn out to be incorrect. They can be affected by inaccurate assumptions and by known or unknown risks and uncertainties, including the following, which are described in more detail in our Annual Report on Form 10-K for the fiscal year ended June 30, 2007:

	•		We derive a significant portion of our revenues from a small group of customers. The loss of or a significant decrease in services to one or more of these customers could negatively impact our business and results of operations.
	•		Our customers often have no obligation to assign work to us, and many of our arrangements may be terminated on short notice.
	•		Our storm restoration services are highly volatile and unpredictable, which could result in substantial variations in, and uncertainties regarding, the levels of our financial results from period to period.
	•		Our business is subject to numerous hazards that could subject us to substantial monetary and other liabilities. If accidents occur, they could materially and adversely affect our business and results of operations.
	•		Our current insurance coverage may not be adequate, and we may not be able to obtain insurance at acceptable rates, or at all.
	•		Record high fuel costs could materially and adversely affect our operating results.
	•		Demand for some of our services is cyclical and vulnerable to industry and economic downturns, which could materially and adversely affect our business and results of operations.
	•		The Energy Policy Act may fail to result in increased spending in the electric power transmission infrastructure, which could slow our expected growth.
	•		Failure to maintain effective internal control over financial reporting could have a material adverse effect on our business, operating results and stock price.
	•		To be successful, we need to attract and retain qualified personnel, and any inability to do so would adversely affect our business.
	•		The slowdown in the housing market could negatively affect our revenues from distribution work.
	•		We are dependent on our senior management and other key personnel, the loss of which could have a material adverse effect on our business.
	•		Our industry is highly competitive and we may be unable to compete effectively, retain our customers or win new customers, which could result in reduced profitability and loss of market share.
	•		We may be unsuccessful at acquiring companies or at integrating companies that we may acquire, and as a result, we may not achieve the expected benefits and our profitability could materially suffer.

	•		We have incurred indebtedness under a senior credit facility, which may restrict our business and operations, adversely affect our cash flow, and restrict our future access to sufficient funding to finance desired growth.
	•		We are in the process of investigating a company-wide information technology (“IT”) solution which could temporarily disrupt our day-to-day operations.
	•		During the ordinary course of our business, we may become subject to lawsuits or indemnity claims, which could materially and adversely affect our business and results of operations.
	•		Our failure to comply with or the imposition of liability under, environmental laws and regulations could result in significant costs.
	•		Weather conditions can adversely affect our operations and, consequently, revenues. The electric infrastructure servicing business is subject to seasonal variations, which may cause our operating results to vary significantly from period to period and could cause the market price of our stock to fall.
	•		Our results of operations could be adversely affected as a result of the impairment of goodwill or other intangibles.
	•		The market price of our stock may be influenced by many factors, some of which are beyond our control.
	•		Shares eligible for future sale may cause the market price of our common stock to drop significantly, even if our business is doing well.
	•		The concentration of our capital stock among a relatively small group of stockholders may limit other stockholders’ ability to influence corporate matters.
	•		Anti-takeover provisions of our charter and bylaws may reduce the likelihood of any potential change of control or unsolicited acquisition proposal that stockholders might consider favorable.

     Many of these factors will be important in determining our actual future results. Consequently, no forward-looking statement can be guaranteed. Our actual future results may vary materially from those expressed or implied in any forward-looking statements.

     All of our forward-looking statements, whether written or oral, are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements. In addition, except as required under the federal securities laws and the rules and regulations of the SEC, we do not have any intention to update any forward-looking statements to reflect events or circumstances after the date of this report.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     We are exposed to market risk related to changes in interest rates on borrowings under our senior credit facility, which bears interest based on LIBOR, plus an applicable margin dependent upon a total leverage ratio. We use derivative financial instruments to manage exposure to fluctuations in interest rates on our senior credit facility. These derivative financial instruments, which are all swap agreements, are not entered into for trading or speculative purposes. A swap agreement is a contract to exchange a floating rate for a fixed rate without the exchange of the underlying notional amount. Effective December 2007, we entered into two separate interest rate swap agreements. The first agreement had a notional amount of $60.0 million, an effective date of December 13, 2007 and an expiration date of December 13, 2009. The second agreement had a notional amount of $40.0 million, an effective date of December 19, 2007 and an expiration date of December 19, 2009. Under both swap agreements, we pay a fixed rate of 3.99% and receive a rate equivalent to the thirty-day LIBOR, adjusted monthly. Based on our current leverage ratio, these swap agreements effectively fix the interest rate at 5.49% for $100.0 million of our term debt.

     We have a large fleet of vehicles and equipment that primarily use diesel fuel and, as a result, have market risk for changes in the prices of diesel fuel. If diesel prices rise, our gross profit and operating income would be negatively affected due to additional costs that may not be fully recovered through increases in prices to customers. We have two swap agreements outstanding that cover, based on current volumes, approximately 30% of our diesel requirements through February 2008.

Item 4. Controls and Procedures

     An evaluation was performed under the supervision and with the participation of our management, including the chief executive officer (“CEO”) and chief financial officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, our management, including the CEO and CFO, concluded that our disclosure controls and procedures were effective as of December 31, 2007.

     There has been no change in our internal control over financial reporting during the quarter ended December 31, 2007 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

     We are from time to time a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. These actions typically seek, among other things, compensation for alleged personal injury, breach of contract and/or property damages, punitive damages, civil penalties or other losses, or injunctive or declaratory relief. With respect to all such lawsuits, claims and proceedings, we record reserves when it is probable a liability has been incurred and the amount of loss can be reasonably estimated. We do not believe that any of these proceedings, individually or in the aggregate, would be expected to have a material adverse effect on our results of operations, cash flow or financial position.

Item 1A. Risk Factors

     There have been no material changes to these matters, disclosed in Part I, Item 1 in our Annual Report on Form 10-K for the fiscal year ended June 30, 2007.

Item 4. Submission of Matters to a Vote of Security Holders

     We held our annual meeting of stockholders in Bermuda Run, North Carolina on December 5, 2007. The following matters were submitted to a vote of the shareholders with the results shown below:

(a)

Seven members were elected to the board of directors, each to serve until our next annual meeting of stockholders and until their respective successors have been elected and qualified.

Nominee		Votes For				Votes Withheld
J. Eric Pike			29,963,009				196,427
Charles W. Bayless			30,009,451				149,985
Adam B. Godfrey			29,946,342				213,094
James R. Helvey, III			30,007,801				151,635
Robert D. Lindsay			29,947,842				211,594
Daniel J. Sullivan			30,007,451				151,985
Louis F. Terhar			30,006,194				153,242

(b)

The stockholders approved the adoption of the 2008 Omnibus Incentive Compensation Plan.

Votes For		Votes Against				Abstained				Broker Non-Votes
19,460,927			5,293,655				15,344			5,389,510

(c)

The stockholders ratified the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending June 30, 2008.

Votes For

Votes Against

Abstained

Broker Non-Votes

30,097,566

59,110

2,759

None

Item 6. Exhibits

Exhibit		Description
31.1		Certification of Periodic Report by Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14a and pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
31.2		Certification of Periodic Report by Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14a and pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
32.1		Certification of Periodic Report by Chief Executive Officer and Chief Financial Officer pursuant to U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.