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Pike Electric ends fiscal year on positive note

September 11th, 2007 · No Comments

Mount Airy-based Pike Electric Corp. (NYSE: PEC) reported lower revenue in the fiscal fourth quarter and fiscal year that ended June 30, 2007, compared with the same periods in fiscal 2006, but gross profit and net income increased in the fourth quarter and Chairman and CEO J. Eric Pike said he is pleased with the company’s progress as the fiscal year ended.

“We not only reported solid improvement in gross margins year over year,” he said, “we continued to maintain margins on a sequential basis in the fourth quarter, despite a significantly lower contribution from storm restoration revenues.”

In 2006, Pike Electric continued to play a large role in the restoration of electrical services following the devastation caused in 2005 by hurricanes Dennis, Katrina, Rita and Wilma.

“As part of our previously communicated strategy, we continued to enhance our profitability by renegotiating or exiting certain lower-margin contracts as well as improving utilization and efficiency,” Pike continued. “This improvement was somewhat offset by unfavorable wet weather conditions in some of our key markets.

“I am confident that our focus on improving utilization, contract profitability, enhanced IT systems and debt reduction initiatives, positions us well to capitalize on strong industry fundamentals and consistently grow our core business over the long-term.”

Total revenues for the fourth quarter of fiscal 2007 were $144.3 million, compared to $156.1 million in the fourth quarter of fiscal 2006. Core powerline revenues for the fourth quarter of fiscal 2007 were $136.6 million, as compared to $145.8 million for the fourth quarter of fiscal 2006, but core powerline revenue per billable hour increased approximately 6 percent year over year, reflecting more favorable pricing from contract renegotiations and elimination of certain unprofitable accounts. Core powerline billable hours decreased approximately 13 percent year over year in the quarter due primarily to reduced headcount from recent efforts to exit certain contracts and the negative impact of wet weather in parts of the South.

Gross profit for the fourth quarter of fiscal 2007 was $25.6 million, or 17.8% of revenue, as compared to $22.8 million, or 14.6% revenue, for the fourth quarter of fiscal 2006. The improvement in gross margin of approximately 320 basis points year over year was primarily due to the successful elimination of certain low margin accounts, the negotiation of more favorable pricing on contracts and an improved self-insurance claim experience.

General and administrative expenses for the fourth quarter of fiscal 2007 were $11.8 million, or 8.2 percent of revenue, an 11.0 percent decrease from $13.2 million, or 8.5 percent of revenue, for the fourth quarter of fiscal 2006. This decrease in general and administrative expenses reflects a reduction in legal expenses, partially offset by higher consulting fees related to recent investments in IT infrastructure. Interest expense decreased 8.4 percent to $4.5 million compared to the fourth quarter of 2006 primarily due to lower debt balances.

Net income for the fourth quarter of fiscal 2007 totaled $5.6 million, or $0.17 per diluted share, compared to net income of approximately $3.0 million, or $0.09 per diluted share, for the fourth quarter of fiscal 2006.

Total revenues for the fiscal year that ended June 30, 2007 were $596.8 million, as compared to $727.5 million for fiscal year 2006. Core powerline revenues for fiscal 2007 were $543.6 million, as compared to $542.2 million for fiscal 2006, as an approximate 4 percent increase in core powerline revenue per billable hour more than offset the approximate 3 percent decline in core powerline billable hours. Storm restoration revenues totaled $53.2 million for fiscal 2007, a decrease of 71 percent from $185.3 million in fiscal 2006, because prior year revenues benefited from repair and maintenance work following hurricanes Dennis, Katrina, Rita and Wilma. Net income for the fiscal year ended June 30, 2007 totaled $18.4 million, or $0.55 per diluted share, compared to net income of $34.4 million, or $1.07 per diluted share, for fiscal 2006.

Based on current customer contracts and business conditions, Pike Electric expects core powerline revenues to range from $550 million to $560 million in fiscal 2008. The company expects total gross profit margins to be in the range of 16-17 percent and general and administrative expenses to be in a range of 7-8 percent of revenues. This guidance assumes storm restoration revenues of approximately $50 million to $70 million for fiscal 2008. Any significant variations in storm restoration revenues may result in year-to- year fluctuations in core powerline revenue growth, Pike said.

Pike Electric is one of the largest providers of outsourced electric distribution and transmission services in the United States. Its core activities consist of the maintenance, upgrade and extension of electric distribution and sub-500 kilovolt transmission powerlines for more than 150 electric utilities, cooperatives and municipalities. Pike Electric services a contiguous 19-state region that stretches from Pennsylvania in the north to Florida in the southeast and Texas in the southwest and is a recognized leader in storm restoration services.

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