Filed by Bowne Pure Compliance

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2008


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)

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, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” 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 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 May 2, 2008, there were 33,157,612 shares of our Common Stock, par value $0.001 per share, outstanding.

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

PIKE ELECTRIC CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)


	March 31,			June 30,
	2008			2007
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	4,466		$	1,467
Accounts receivable from customers, net		47,708			59,603
Work completed not billed		42,360			44,527
Inventories		8,709			8,535
Prepaid expenses and other		6,646			6,219
Deferred income taxes		15,440			13,633

Total current assets		125,329			133,984
Property and equipment, net		235,627			267,740
Goodwill		94,402			94,402
Other intangibles, net		40,855			43,228
Deferred loan costs, net		2,983			4,482
Other assets		1,463			1,661

Total assets	$	500,659		$	545,497


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	8,624		$	8,503
Accrued compensation		20,568			20,597
Accrued expenses and other		4,147			4,447
Income taxes payable		1,112			6,146
Current portion of deferred compensation		4,717			3,544
Current portion of insurance and claim accruals		27,742			26,669

Total current liabilities		66,910			69,906
Long-term debt		140,500			191,500
Insurance and claim accruals, net of current portion		9,595			10,894
Deferred compensation, net of current portion		6,168			9,315
Deferred income taxes		62,265			67,259
Other liabilities		1,948			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; 33,147 and 32,916 shares issued and outstanding at March 31, 2008 and June 30, 2007, respectively		6,427			6,426
Additional paid-in capital		147,255			142,849
Accumulated other comprehensive income (loss), net of taxes		(1,849	)		(8	)
Retained earnings		61,440			46,794

Total stockholders’ equity		213,273			196,061

Total liabilities and stockholders’ equity	$	500,659		$	545,497

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

PIKE ELECTRIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per share amounts)


	Three Months Ended						Nine Months Ended
	March 31,						March 31,
	2008			2007			2008			2007

Revenues	$	131,362		$	154,272		$	414,213		$	452,496
Cost of operations		110,607			126,751			345,717			380,723

Gross profit		20,755			27,521			68,496			71,773
General and administrative expenses		10,377			12,428			31,253			34,706
Loss on sale and impairment of property and equipment		93			349			2,076			847

Income from operations		10,285			14,744			35,167			36,220
Other expense (income):
Interest expense		3,327			5,053			11,473			15,275
Other, net		(43	)		(83	)		(168	)		(199	)

Total other expense		3,284			4,970			11,305			15,076

Income before income taxes		7,001			9,774			23,862			21,144
Income tax expense		2,718			3,810			9,217			8,358

Net income	$	4,283		$	5,964		$	14,645		$	12,786


Earnings per share:
Basic	$	0.13		$	0.18		$	0.45		$	0.40

Diluted	$	0.13		$	0.18		$	0.44		$	0.38


Shares used in computing earnings per share:
Basic		32,844			32,505			32,791			32,359

Diluted		33,605			33,377			33,655			33,278

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

PIKE ELECTRIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)


	Nine Months Ended
	March 31,
	2008			2007
Cash flows from operating activities:
Net income	$	14,645		$	12,786
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		27,408			29,521
Non-compete litigation settlement		—			3,551
Non-cash interest expense		2,560			2,373
Deferred income taxes		(5,621	)		(881	)
Loss on sale and impairment of property and equipment		2,076			847
Equity compensation expense		2,085			1,700
Excess tax benefit from stock-based compensation		(977	)		(1,000	)
Changes in operating assets and liabilities:
Accounts receivable and work completed not billed		14,062			9,502
Inventories, prepaid expenses and other		770			1,039
Insurance and claim accruals		(226	)		7,468
Accounts payable and other		(5,840	)		(1,609	)
Deferred compensation		(3,034	)		(9,428	)

Net cash provided by operating activities		47,908			55,869

Cash flows from investing activities:
Purchases of property and equipment		(6,353	)		(29,981	)
Net proceeds from sale of property and equipment		10,182			6,884

Net cash provided by (used in) investing activities		3,829			(23,097	)

Cash flows from financing activities:
Principal payments on long-term debt		(51,000	)		(34,500	)
Repayments on revolving credit facility, net		—			(4,500	)
Net proceeds from sale of common stock		1,285			2,695
Equity compensation tax benefit		977			1,000
Deferred loan costs		—			(162	)

Net cash used in financing activities		(48,738	)		(35,467	)


Net increase (decrease) in cash and cash equivalents		2,999			(2,695	)
Cash and cash equivalents beginning of year		1,467			3,391

Cash and cash equivalents end of period	$	4,466		$	696

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 nine months ended March 31, 2008 and 2007

(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								Nine Months Ended
	March 31,								March 31,
	2008				2007				2008				2007
Core powerline services	$	120,305	91.6	%	$	135,051	87.5	%	$	378,705	91.4	%	$	406,929	89.9	%
Storm restoration services		11,057	8.4	%		19,221	12.5	%		35,508	8.6	%		45,567	10.1	%

Total	$	131,362	100.0	%	$	154,272	100.0	%	$	414,213	100.0	%	$	452,496	100.0	%

3. Stock-Based Compensation

Compensation expense related to stock-based compensation plans was $773 and $614 for the three months ended March 31, 2008 and March 31, 2007, respectively, and $2,085 and $1,700 for the nine months ended March 31, 2008 and March 31, 2007, respectively. Impacting the expense for the nine months ended March 31, 2007 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 $302 and $240 for the three months ended March 31, 2008 and March 31, 2007, respectively, and $815 and $664 for the nine months ended March 31, 2008 and March 31, 2007, respectively.

4. Earnings Per Share

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


	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2008		2007		2008		2007
Basic:
Net income	$	4,283	$	5,964	$	14,645	$	12,786

Weighted average common shares		32,844		32,505		32,791		32,359

Basic earnings per share	$	0.13	$	0.18	$	0.45	$	0.40

Diluted:
Net income	$	4,283	$	5,964	$	14,645	$	12,786

Weighted average common shares		32,844		32,505		32,791		32,359
Potential common stock arising from stock options and restricted stock		761		872		864		919

Weighted average common shares — diluted		33,605		33,377		33,655		33,278

Diluted earnings per share	$	0.13	$	0.18	$	0.44	$	0.38

Outstanding options and restricted stock awards equivalent to 1,243 and 405 shares of common stock were excluded from the calculation of diluted earnings per share for the three months ended March 31, 2008 and 2007, respectively, because their effect would have been anti-dilutive. Outstanding options and restricted stock awards equivalent to 427 and 1,107 shares of common stock were excluded from the calculation of diluted earnings per share for the nine months ended March 31, 2008 and 2007, 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 an $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 the nine months ended March 31, 2008. For purposes of measuring impairment, fair value was determined based on prices in the used equipment market. During the three months ended March 31, 2008 we sold approximately half of this equipment, primarily at used equipment auctions. At March 31, 2008 the carrying value of the remaining equipment to be sold was $3,404, and is included under “Prepaid expenses and other.” We expect to sell substantially all of this equipment in the next three to six months.

6. Income Taxes

Effective income tax rates of 38.8% and 39.0% for the three months ended March 31, 2008 and March 31, 2007, respectively, and 38.6% and 39.5% for the nine months ended March 31, 2008 and March 31, 2007, 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 March 31, 2008, 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 had two separate diesel fuel swap agreements outstanding to manage exposure to diesel fuel price volatility, both of which expired 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 income 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 interest rates. As interest rates decrease, the charge to earnings will increase. Conversely, as 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					Nine Months Ended
	March 31,					March 31,
	2008			2007		2008			2007
Net income	$	4,283		$	5,964	$	14,645		$	12,786
Diesel fuel hedge		(102	)		228		8			(72	)
Interest rate hedges		(1,487	)		—		(1,849	)		—

Comprehensive income	$	2,694		$	6,192	$	12,804		$	12,714

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 March 31, 2008, 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 $38,916.


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								Nine Months Ended
	March 31,								March 31,
	2008				2007				2008				2007
Core powerline services	$	120.3	91.6	%	$	135.1	87.5	%	$	378.7	91.4	%	$	406.9	89.9	%
Storm restoration services		11.1	8.4	%		19.2	12.5	%		35.5	8.6	%		45.6	10.1	%

Total	$	131.4	100.0	%	$	154.3	100.0	%	$	414.2	100.0	%	$	452.5	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 who can perform our work. When we experience increased demand in a particular market, labor costs tend to increase. We historically have been able to obtain price increases when we renegotiate rates with our customers to offset these cost increases.

	•		Fuel costs have risen and may 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 to lower our fuel costs. We have entered into diesel fuel swaps in the past and may enter into additional diesel fuel derivative instruments in the future, depending on market conditions.

Results of Operations

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


	Three Months Ended						Nine Months Ended
	March 31,						March 31,
	2008			2007			2008			2007
Revenues:
Core powerline services		91.6	%		87.5	%		91.4	%		89.9	%
Storm restoration services		8.4			12.5			8.6			10.1

Total		100.0	%		100.0	%		100.0	%		100.0	%
Cost of operations		84.2			82.2			83.5			84.1

Gross profit		15.8			17.8			16.5			15.9
General and administrative expenses		7.9			8.1			7.5			7.7
Loss on sale and impairment of property and equipment		0.1			0.2			0.5			0.2

Income from operations		7.8			9.5			8.5			8.0
Interest expense and other, net		2.5			3.2			2.7			3.3

Income before income taxes		5.3			6.3			5.8			4.7
Income tax expense		2.0			2.4			2.3			1.9

Net income		3.3	%		3.9	%		3.5	%		2.8	%

Three Months Ended March 31, 2008 Compared to Three Months Ended March 31, 2007

Revenues. Revenues decreased 14.9%, or $22.9 million, to $131.4 million for the three months ended March 31, 2008 from $154.3 million for the three months ended March 31, 2007. The decrease was attributable to a $14.8 million decrease in core powerline revenues and an $8.1 million decrease in storm restoration revenues compared to the prior fiscal year. Total billable hours decreased by 15.1% during the three months ended March 31, 2008 compared to the same period in the prior year. In addition, our average revenue-producing headcount decreased 14.0% during the three months ending March 31, 2008 compared to the same period in the prior year.

Our core powerline revenues decreased 10.9% to $120.3 million for the three months ended March 31, 2008 from $135.1 million for the same period in the prior year. Core powerline billable man-hours decreased 13.3% while revenue per man-hour increased 2.7%. Billable hours 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 $6.0 million of revenue during the three months ended March 31, 2007. In addition, the overall distribution maintenance spending of our utility customers has declined as they evaluate the impacts of the current economic and housing conditions in their markets.

Our storm restoration revenues decreased 42.5% to $11.1 million for the three months ended March 31, 2008 from $19.2 million for the same period in the prior year. Our storm restoration revenues are highly volatile and unpredictable.

Gross Profit. Gross profit decreased 24.6%, or $6.7 million, to $20.8 million for the three months ended March 31, 2008 from $27.5 million for the same period in the prior year. Gross profit as a percentage of revenues decreased to 15.8% for the three months ended March 31, 2008 from 17.8% for the three months ended March 31, 2007, primarily due to a lower contribution from higher margin storm restoration revenues, higher fuel prices, and the impact of lower revenue on direct overhead costs.

General and Administrative Expenses. General and administrative expenses decreased $2.0 million to $10.4 million for the three months ended March 31, 2008 from $12.4 million for the three months ended March 31, 2007. This decrease is primarily related to lower legal fees and a decrease in Sarbanes-Oxley compliance expenses. As a percentage of revenues, general and administrative expenses decreased to 7.9% from 8.1%.

Loss on Sale and Impairment of Property and Equipment. Loss on sale and impairment of property and equipment decreased $0.2 million to $0.1 million for the three months ended March 31, 2008 compared to $0.3 million for the three months ended March 31, 2007. This decrease is primarily due to the timing of the continued replenishment of aging or damaged fleet equipment in the normal course of business.

Interest Expense and Other, Net. Interest expense and other, net decreased $1.7 million to $3.3 million for the quarter ended March 31, 2008 from $5.0 million for the quarter ended March 31, 2007. This decrease was primarily due to lower average debt balances and lower interest rates.

Income Tax Expense. Income tax expense decreased $1.1 million to $2.7 million for the three months ended March 31, 2008 from $3.8 million for the three months ended March 31, 2007 primarily as a result of a decrease in income before income taxes. The effective tax rate was 38.8% and 39.0% for the three months ended March 31, 2008 and March 31, 2007, respectively.

Net Income. As a result of the factors discussed above, net income decreased $1.7 million to $4.3 million for the three months ended March 31, 2008 from $6.0 million for the three months ended March 31, 2007.

Nine Months Ended March 31, 2008 Compared to the Nine Months Ended March 31, 2007

Revenues. Revenues decreased 8.5%, or $38.3 million, to $414.2 million for the nine months ended March 31, 2008 from $452.5 million for the same period in the prior year. The decrease was attributable to a $28.2 million decrease in core powerline revenues and a $10.1 million decrease in storm restoration revenue. Total billable hours decreased 12.9% during the nine months ended March 31, 2008 compared to the same period in the prior fiscal year. In addition, our average revenue-producing headcount decreased 16.7% during the nine months ending March 31, 2008 from the same period in the prior year.

Our core powerline service revenues decreased 6.9% to $378.7 million in the nine months ended March 31, 2008 from $406.9 million in the nine months ended March 31, 2007. Core powerline billable man-hours decreased 12.8% while revenue per man-hour increased 6.7%. Billable hours 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 $23.0 million of revenue during the nine months ended March 31, 2007.

Our storm restoration revenues decreased 22.1% to $35.5 million for the nine months ended March 31, 2008 from $45.6 million for the nine months ended March 31, 2007. The reduction in total storm restoration revenue is due to the decrease in overall storms that have affected our service area. Our storm restoration revenues are highly volatile and unpredictable.

Gross Profit. Gross profit decreased $3.3 million to $68.5 million for the nine months ended March 31, 2008 from $71.8 million for the nine months ended March 31, 2007. Gross profit as a percentage of revenues increased to 16.5% from 15.9% during the nine months ended March 31, 2007. This increase was primarily due to positive impacts related to operational efficiency improvements and the successful elimination of certain lower-margin accounts and services during fiscal 2007, partially offset by a lower contribution from higher margin storm restoration revenues, higher fuel prices, and the impact of lower revenue on direct overhead costs.

General and Administrative Expenses. General and administrative expenses decreased $3.4 million to $31.3 million for the nine months ended March 31, 2008 from $34.7 million for the nine months ended March 31, 2007. This decrease is primarily due to a significant reduction in legal fees and Sarbanes-Oxley compliance expense, partially offset by an increase in costs related to information technology staffing and initiatives. As a percentage of revenues, general and administrative expenses decreased to 7.5% from 7.7%.

Loss on Sale and Impairment of Property and Equipment. Loss on sale and impairment of property and equipment increased $1.3 million to $2.1 million for the nine months ended March 31, 2008 compared to $0.8 million for the nine months ended March 31, 2007. This increase is primarily due to an impairment charge on idle equipment (See Note 5).

Interest Expense and Other, Net. Interest expense and other, net decreased $3.8 million to $11.3 million for the nine months ended March 31, 2008 from $15.1 million for the nine months ended March 31, 2007. This decrease was primarily due to a reduction in average debt balances and lower interest rates.

Income Tax Expense. Income tax expense increased $0.8 million to $9.2 million for the nine months ended March 31, 2008 from $8.4 million for the nine months ended March 31, 2007 primarily as a result of the increase in income before income taxes. The effective tax rate was 38.6% and 39.5% for the nine months ended March 31, 2008 and 2007, respectively.

Net Income. As a result of the factors discussed above, net income increased $1.8 million to $14.6 million for the nine months ended March 31, 2008 from $12.8 million for the nine months ended March 31, 2007.

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 nine months ended March 31, 2008 were cash provided by operations and, to a lesser extent, proceeds from the sale of property and equipment. Our primary source of cash for the nine months ended March 31, 2007 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:


	Nine Months Ended
	March 31,
	2008			2007
	(in millions)
Net cash provided by operating activities	$	47.9		$	55.9
Net cash provided by (used in) investing activities	$	3.8		$	(23.1	)
Net cash used in financing activities	$	(48.7	)	$	(35.5	)

Net cash provided by operating activities decreased $8.0 million to $47.9 million for the nine months ended March 31, 2008 from $55.9 million for the nine months ended March 31, 2007. The decrease in cash flows from operating activities was primarily due to a decrease in deferred income taxes and a non-compete litigation settlement that occurred during the first quarter of the prior year.

Net cash provided by investing activities was $3.8 million for the nine months ended March 31, 2008 compared to net cash used in investing activities of $23.1 million for the nine months ended March 31, 2007. 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 $13.2 million to $48.7 million for the nine months ended March 31, 2008 from $35.5 million for the nine months ended March 31, 2007. Net cash used in financing activities in both the nine months ended March 31, 2008 and 2007 primarily reflected net payments under our senior credit facility.

Senior Credit Facility

As of March 31, 2008, we had $140.5 million of term loan indebtedness outstanding under our senior credit facility. As of March 31, 2008, our borrowing availability under the $90.0 million revolving portion of our senior credit facility was $66.4 million (after giving effect to the outstanding balance of $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 $26.2 million and $51.0 million of term loans outstanding under our senior credit facility during the three and nine months ended March 31, 2008, respectively, primarily with cash provided by operations and, to a lesser extent, cash provided by the sale of property and equipment.

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 March 31, 2008, 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 $3,000 to $14.0 million. As of March 31, 2008, we had approximately $38.9 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 nine months of fiscal 2008 and 2007, inflation did not have a significant effect on our results.

Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statements of Financial Accounting Standards (“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 will adopt SFAS No. 157 on July 1, 2008, 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, but do not expect the standard to have a material effect 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. The fair value of the interest rate swaps at March 31, 2008 was reflected on the balance sheet in “Accrued expenses and other” for $1.7 million and “Other liabilities” for $1.3 million.

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. At March 31, 2008, we had no active diesel fuel derivatives, as our two diesel fuel swaps expired in February 2008. Depending on market conditions, we may enter into additional diesel fuel derivative instruments in the future.

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 March 31, 2008.

There has been no change in our internal control over financial reporting during the quarter ended March 31, 2008 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 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)


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 6. Exhibits			17

Signatures			18

Exhibit Index			19

Exhibit 31.1
Exhibit 31.2
Exhibit 32.1


	PIKE ELECTRIC CORPORATION (Registrant)
Date: May 9, 2008	By:	/s/ J. Eric Pike
		J. Eric Pike
		Chairman, Chief Executive Officer and President

Date: May 9, 2008	By:	/s/ Anthony K. Slater
		Anthony K. Slater
		Chief Financial Officer

	a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b)		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c)		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d)		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

	a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


	/s/ J. Eric Pike
Date: May 9, 2008	J. Eric Pike
	Chairman, Chief Executive Officer and President

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1.		I have reviewed this Quarterly Report on Form 10-Q of Pike Electric Corporation;

2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.		The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: