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Pike Electric Corporation (PIKE)

F2Q10 (Qtr End 12/31/09) Earnings Call Transcript

February 8, 2009 5:00 pm ET


Frank Milano – IR, ICR Inc.

Eric Pike – Chairman, CEO & President

Anthony Slater – EVP & CFO


Rich Wesolowski – Sidoti & Company

Adam Thalhimer – BB&T Capital Markets

Scott Levine – JP Morgan

Andrea Wirth – Robert W. Baird

Liam Burke – Janney Montgomery Scott

Matt Tucker [ph] – KeyBanc Capital Markets

Min Cho – FBR Capital Markets



Good day, everyone, and welcome to the Pike Electric Corporate fiscal second quarter 2010 earnings conference call. As a reminder, today’s call is being recorded. Now for opening remarks and introductions, I would like to turn the call over to Mr. Frank Milano, Pike Electric’s Investor Relations contact. Please go ahead, sir.

Frank Milano

Thank you, Elizabeth. Good afternoon, and welcome to Pike Electric’s earnings conference call to review our fiscal 2010 second quarter results. Joining us this afternoon are Eric Pike, our Chairman and Chief Executive Officer, and Anthony Slater, our Executive Vice President and Chief Financial Officer.

Before I turn this call over to Eric and Anthony, I will review the necessary disclosures. During this call, we will make forward-looking statements. These are statements that are either not historical facts or represent statements regarding our intents, beliefs, or expectations with respect to trends affecting the company’s operations, financial, general economic and market conditions, and growth and operating strategies. Financial expectations and estimates, for example, are forward-looking statements.

We filed our earnings release on Form 8-K and our quarterly Form 10-Q earlier today. The risk factors and management discussion and analysis section of our annual reports on Form 10-K and other SEC filings describe the factors that may affect future results of our operations. Any forward-looking statements made today, contained in Pike’s public statements, or made by management should be considered in light of these factors. We undertake no obligation to revise these forward-looking statements to reflect events or circumstances after today’s call.

A replay of today’s call will be available this evening in the Investor Center section of our website at Investor Relations questions can be directed to us at 336-719-4622 and financial news alerts are available via email.

I will now turn the call over to Eric Pike, Chairman and Chief Executive Officer. Eric?

Eric Pike

Thanks, Frank. Good afternoon, everyone, and welcome to Pike Electric’s second quarter earnings conference call. I will begin the call with a short overview of the past quarter’s performance and update on our restructuring efforts and a perspective on the present economic conditions affecting our industry. After these comments, Anthony Slater, our Chief Financial Officer, will provide a more detailed review of our financial results. After that, we will open the call to your questions.

Revenues for the fiscal second quarter of 2010 were $135.2 million compared to $144.6 million in the second quarter last year. Storm revenues were $18 million for the quarter as compared to $10.9 million for the same quarter a year ago. Our diluted EPS for the quarter was a negative $0.14 or a net loss of $4.7 million.

By comparison, we reported net income of $2.6 million or $0.08 per diluted share a year ago. Our net loss for the quarter was materially impacted by an $8.9 million charge related to our restructuring actions this quarter to right-size our fleet and reduce overhead and administrative costs in the distribution portion of our business. On an after-tax basis, this charge impacted net income by approximately $5.4 million or $0.16 per diluted share.

The actions we took regarding our distribution business will reduce annual expenses by over $16 million. As a result, we expect to see operating profit improvements in future quarters, as we continue to grow our other lines of business and we see our distribution business stabilize at current levels. While we believe this quarter marks the possible bottom for the distribution business deferrable, it is still too soon to suggest in overall industry has bottomed out.

As we indicated last quarter, the government stimulus programs have in many cases actually slowed distribution spending. Many utilities concerned with the administration of the federal government stimulus and bailout programs have elected to forego applying for stimulus money in favor of seeking public service rate increases. However, recent rate case petitions have had generally poor results.

While a small number of our customers have seen some success in the rate case request, most have received little to no increase at all. Without the catalyst from additional federal stimulus moneys and recognizing that utility rate increases have generally been ineffective, the near-term outlook for increased distribution spending is not particularly encouraging.

Given the lingering economic issues facing the country and our customers, the competitive environment remains intense. Longer-term, however, as the overall economy does improve, we do expect end-user demand growth, both from consumers and from businesses, which will drive increased distribution maintenance spending.

This economic slowdown created the first real decline in electricity demand since the mid-1970s. This temporary reduction in demand has allowed a longer deferral of distribution maintenance than we have experienced in the past. However, over time, we remain confident that reliability issues and demand growth will drive incremental spending for new transmission and distribution infrastructure as well as increased maintenance spending on existing infrastructure.

Looking ahead, our focus will be to continue to successfully diversify the company’s revenue base with the goal of enhancing our full platform of energy solutions and driving growth in all business lines. Given the year-over-year revenue growth from our engineering, substation and transmission businesses, it is evident that the two acquisitions we made last year will ultimately begin to drive consolidated top-line revenue as distribution revenues stabilize.

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