-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, C6uTEhOXYxSu4mSeQI3GhGKxvyFcp4NjKF9AlJHstHP8ycJaElP5+va7p5mJk7sB ETUBe3A83iWx3YqVFKa8CA== 0000009263-96-000002.txt : 19960329 0000009263-96-000002.hdr.sgml : 19960329 ACCESSION NUMBER: 0000009263-96-000002 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960328 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: BAKER MICHAEL CORP CENTRAL INDEX KEY: 0000009263 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MANAGEMENT SERVICES [8741] IRS NUMBER: 250927646 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-06627 FILM NUMBER: 96539892 BUSINESS ADDRESS: STREET 1: 420 ROUSE ROAD STREET 2: AIRPORT OFFICE PARK BLDG 3 CITY: CORAOPOLIS STATE: PA ZIP: 15108 BUSINESS PHONE: 4122696300 MAIL ADDRESS: STREET 1: P O BOX 12259 CITY: PITTSBURGH STATE: PA ZIP: 15231-0259 FORMER COMPANY: FORMER CONFORMED NAME: EUTHENICS SYSTEMS CORP DATE OF NAME CHANGE: 19750527 FORMER COMPANY: FORMER CONFORMED NAME: BAKER MICHAEL JR INC DATE OF NAME CHANGE: 19720526 10-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 COMMISSION FILE NUMBER 1-6627 MICHAEL BAKER CORPORATION ------------------------- (Exact name of registrant as specified in its charter) PENNSYLVANIA 25-0927646 - ------------ ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) AIRPORT OFFICE PARK, BUILDING 3, 420 ROUSER ROAD, CORAOPOLIS, PA 15108 - ----------------------------------------------------------------- ----- (Address of principal executive offices) (Zip Code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (412) 269-6300 ------------- SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: Title of Class Name of each exchange on which registered -------------- ----------------------------------------- COMMON STOCK, PAR VALUE $1 PER SHARE AMERICAN STOCK EXCHANGE 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 X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ------------ The Registrant estimates that as of March 15, 1996, the aggregate market value of shares of the Registrant's Common Stock and Series B Common Stock held by non-affiliates (excluding for purposes of this calculation only, 2,307,520 shares of Common Stock and 1,234,384 shares of Series B Common Stock held of record or beneficially by the executive officers and directors of the Registrant as a group, and the Registrant's Employee Stock Ownership Plan) of the Registrant was $21,911,382 for the Common Stock and $542,471 for the Series B Common Stock (calculated for the Series B Common Stock on the basis of the shares of Common Stock into which Series B Common Stock is convertible). As of March 15, 1996, the Registrant had outstanding 7,045,116 shares of its Common Stock and 1,351,675 shares of its Series B Common Stock. DOCUMENTS INCORPORATED BY REFERENCE Parts of Form 10-K into which Document Document is incorporated - --------------------------------------------------------------------------- Financial Section of Annual Report to Shareholders for the year ended December 31, 1995 I, II Proxy Statement to be distributed in connection with the 1996 Annual Meeting of Shareholders III NOTE WITH RESPECT TO FORWARD-LOOKING STATEMENTS: This Annual Report on Form 10-K, and in particular the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of Exhibit 13.1 hereto, which is incorporated by reference into Item 7 of Part II, contains forward-looking statements concerning future operations and performance of the Registrant. Forward-looking statements are subject to market, operating and economic risks and uncertainties that may cause the Registrant's actual results in future periods to be materially different from any future performance suggested herein. Such statements are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. PART I Item 1. Business ----------- Michael Baker Corporation ("Baker" or "the Registrant") was founded in 1940 and organized as a Pennsylvania corporation in 1946. Today, through its operating subsidiaries and joint ventures, Baker provides engineering, construction, and operations and technical services worldwide. Effective January 1, 1995, the Registrant reorganized into five market-focused business units (segments)--Buildings, Civil, Energy, Environmental and Transportation-- from its former three operating groups (Engineering, Construction, and Operations & Maintenance). Information regarding the amounts of revenue, operating profit and identifiable assets attributable to the Registrant's newly restated industry segments is contained in Note 4 to the consolidated financial statements, which are included within Exhibit 13.1 to this Form 10-K. Such information is incorporated herein by reference. According to the annual listings published in 1995 by ENGINEERING NEWS RECORD magazine, Baker ranks 46th among U.S. design firms, 12th among transportation design firms, 81st among global design firms, 93rd among U.S. construction contractors, 190th among international construction contractors and 64th among U.S. construction management at-risk firms. In addition, according to an annual listing published in 1995 by GOVERNMENT EXECUTIVE magazine, Baker ranks 152nd among government contractors. The rankings were based on 1994 revenues, except for the government contractor ranking which was based on 1994 contract awards. Business Units ---------------- BUILDINGS. The Buildings unit consolidated the former Construction Group's general construction, construction management and design-build division with the former Engineering Group's facility planning and design unit to pursue the growing design-build market. The following are the principal services provided by the Buildings unit: o Architecture o Engineering o Planning o Construction management and consulting o Design-build o General construction CIVIL. The Civil unit combined the Registrant's civil engineering and water resources division with its military operations & maintenance service division, Baker Support Services, Inc. ("BSSI"). This unit has consolidated Baker's military infrastructure work in planning and operations & maintenance, to improve its ability to market to, and serve, the U.S. Department of Defense, a major Baker client. The following list comprises the primary services provided by the Civil unit: o Engineering, planning, design and program management o Geographic information systems o Photogrammetric mapping o Waste/wastewater systems development o Water resources management o Military facilities planning and program management o Military base operations support o Fiber-optic cable engineering o Design-build-operate ENERGY. The Energy unit comprises Baker/MO Services, Inc. ("Baker/MO") and Baker/OTS, Inc. ("Baker/OTS"). This unit focuses on providing operations & maintenance and technical services within the domestic and international energy industry. Baker/MO provides specialized services to the oil and gas, utility, and petrochemical industries, while Baker/OTS provides operations and technical services to major international oil and gas producers. The major services provided by the Energy unit are as follows: o Facility operations and maintenance o Operations analysis o Equipment maintenance and overhaul o Training programs o Pipeline development and design o Technical consulting and personnel o Engineering and construction management o Design-build-operate oil & gas facilities ENVIRONMENTAL. The Environmental unit continues to operate in its pre-1995 form, but became a separate business unit in 1995. The principal services provided by the Environmental unit include: o Site characterization o Remediation design and construction management o Air quality management o Process safety management o Human health/ecological risk assessment o Occupational health and safety compliance o Environmental regulation compliance, audits and permitting o Groundwater/wastewater treatment o Facility design-build-operate TRANSPORTATION. The Transportation unit merged the engineering capabilities in highways, bridges, transit, aviation and rail, with the heavy and highway construction capabilities of the former Construction Group. This merger has enhanced the Registrant's existing capabilities to serve transportation clients, created a strong construction management team, and positioned Baker to serve the evolving design-build and privatization markets. The major services provided by the Transportation unit are the following: o Planning o Design o Construction o Construction management and inspection o Program management for surface and air transportation o Design-build-operate Domestic and Foreign Operations ------------------------------- Approximately 95% of the Registrant's total contract revenues are derived from work performed within the United States. Of those domestic-based revenues, the majority comprises engineering and construction work performed in the Northeast region of the U.S. The Registrant's international-based revenues are derived primarily from Baker/OTS and relate to operations and technical services performed outside the U.S. Baker/OTS provides the majority of its services in the Middle East and Africa. Funded and Unfunded Backlog --------------------------- The Registrant's funded backlog, which comprises that portion of uncompleted work represented by signed contracts and for which the procuring agency has appropriated and allocated the funds to pay for the work, was $300 million at December 31, 1995 vs. $283 million at December 31, 1994. Total backlog, which incrementally includes that portion of contract value for which options are still to be exercised (unfunded backlog), was $508 million at December 31, 1995 vs. $468 million at December 31, 1994. There is not necessarily a correlation between the foregoing figures and the Registrant's annual total contract revenues. In the case of multi-year contracts, total contract revenues are spread over several years and correspond to the timing of the contract rather than the Registrant's fiscal year. Many multi-year contracts, particularly with agencies of the U.S. government, provide for optional renewals on the part of the customer. The Registrant's experience has been that these optional contract renewals have generally been exercised. Funded backlog generally is highest during the last quarter of each of the Registrant's fiscal years because that corresponds to the first quarter of the U.S. government's fiscal year, which is when many such government contract renewals occur. Customers --------- No individual contract accounted for more than 10% of the Registrant's total contract revenues in 1995, 1994 or 1993; however, several contracts with the State of Illinois provided 10.5% and 13.5% of the Registrant's total contract revenues in 1995 and 1994, respectively. Several contracts with the U.S. Department of Navy also provided 10.9%, 12.1% and 10.9% of the Registrant's 1995, 1994 and 1993 total contract revenues, respectively. Competitive Conditions ---------------------- The Registrant's business is highly competitive with respect to all principal services it offers. Baker competes with numerous firms which provide some or all of the services provided by the Registrant. The competitive conditions in the Registrant's businesses relate to the nature of the contracts being pursued. Public-sector contracts, consisting mostly of contracts with federal and state governmental entities, are generally awarded through a competitive bidding process, subject to the contractors' qualifications, licensure and demonstrated abilities. The Baker business units employ extensive cost estimating, scheduling and other computerized techniques for the preparation of these competitive bids. Private-sector contractors compete on the bases of qualifications and licensure, quality of performance, price of services and other related factors. Such private-sector contracts are generally awarded on a negotiated basis. The Registrant believes that the principal competitive factors (in various orders of importance) in the areas of services it offers are quality of service, reputation, experience, technical proficiency and cost of service. The Registrant believes that it is well positioned to compete effectively by emphasizing its full range of professional services. Seasonality ----------- Based upon the Registrant's experience, total contract revenues and net income during the first and fourth quarters from engineering and construction-related services tend to be lower than the remaining quarters due to winter weather conditions, particularly for projects in the Northeast and Midwest regions of the United States. Personnel ----------- At December 31, 1995, the Registrant employed approximately 3,100 persons, broken down by business unit as follows: Buildings unit--470 Environmental unit--210 Civil unit--1,210 Transportation unit--610 Energy unit--570 Corporate staff--30 None of the Registrant's engineering employees are represented by labor unions; however, its construction personnel are generally covered by collective bargaining agreements, as are certain BSSI employees in the Civil unit. Currently, the Registrant considers its relationships with labor unions to be good. Item 2. Properties ---------- The principal office of the Registrant is located at the Airport Office Park, 420 Rouser Road, Coraopolis, Pennsylvania 15108, at which approximately 122,000 square feet of office space is leased for use by the Registrant's Buildings, Environmental and Transportation units and, to a much lesser extent, by its corporate staff. The Registrant owns a 75,000 square foot office building located in Beaver County, Pennsylvania, which is situated on a 175 acre site and utilized as the principal office of the Registrant's Civil unit. The Registrant leases an aggregate of approximately 388,000 square feet of office-related floor space, including the principal office. The space leased by business unit is as follows: The Buildings unit leases approximately 66,000 square feet in: Orlando, Florida Coraopolis, Pennsylvania Chicago, Illinois Pittsburgh, Pennsylvania The Civil unit leases approximately 89,000 square feet in: Baltimore, Maryland Dallas, Texas Jackson, Mississippi Alexandria, Virginia Vestal, New York Virginia Beach, Virginia The Energy unit leases approximately 28,000 square feet in: Cypress, Texas Middlesex, United Kingdom Abu Dhabi, United Arab Emirates Environmental Unit leases approximately 49,000 square feet in: Merrillville, Indiana Coraopolis, Pennsylvania Princeton, New Jersey The Transportation unit leases approximately 132,000 square feet in: Anchorage, Alaska Coraopolis, Pennsylvania Phoenix, Arizona Gibsonia, Pennsylvania Fort Smith, Arkansas Harrisburg, Pennsylvania Tampa, Florida Pittsburgh, Pennsylvania Chicago, Illinois Richmond, Virginia Princeton, New Jersey Virginia Beach, Virginia Elmsford, New York Charleston, West Virginia The Corporate staff utilizes approximately 24,000 square feet of leased space in Coraopolis and New Brighton, Pennsylvania. Item 3. Legal Proceedings ----------------- The Registrant has been named as a defendant or co-defendant in legal proceedings wherein substantial damages are claimed. Such proceedings are not uncommon to the Registrant's business. After consultations with counsel, management believes that the Registrant has recognized adequate provisions for these proceedings and their ultimate resolutions will not have a material adverse effect on the consolidated financial position or annual results of operations of the Registrant. The most significant of these proceedings are discussed below. In 1987, a lawsuit was brought in the Supreme Court of the State of New York, Bronx County, by the Dormitory Authority of the State of New York against a number of parties, including the Registrant and one of its wholly-owned subsidiaries, that asserts breach of contract and alleges damages of $13 million. The Registrant, which was not a party to the contract underlying the lawsuit, contends that there is no jurisdiction with respect to the Registrant and that it cannot be held liable for any conduct of the subsidiary. Both the Registrant and the subsidiary are contesting liability issues and have filed cross-claims and third-party claims against the other entities involved in the project. In September 1991, the Registrant, through a newly formed subsidiary, Baker Mellon Stuart Construction, Inc. ("BMSCI", formerly Mellon Stuart Construction, Inc.), acquired certain assets and contracts from Federal Street Construction Co., Inc. ("FSC"), which thereafter continued to perform services under various contracts that were not acquired by BMSCI. On May 11, 1992, a public body that had contracted with FSC in 1989 to construct a $38 million project filed a lawsuit in state court in Illinois (County of Cook v. Mellon Stuart Company, et al., Circuit Court, Illinois) against FSC and its surety alleging various claims in connection with the contract. This contract was not acquired by BMSCI, but the plaintiff also named the Registrant, BMSCI and another subsidiary as defendants based upon a legal theory of successor liability by virtue of the sale of certain assets and contracts to BMSCI by FSC. On November 15, 1995, a motion was granted ordering that the settlement agreement between FSC and the public body was entered into in good faith, and the case against the Registrant and its subsidiaries was dismissed without prejudice. Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- No matters were submitted to a vote of the Registrant's security holders during the fourth quarter of 1995. Executive Officers of the Registrant - ------------------------------------ The following represents a listing of executive officers of the Registrant as of December 31, 1995. CHARLES I. HOMAN - Age 52; President, Chief Executive Officer and a Director of the Registrant since October 1994. Mr. Homan previously served as Executive Vice President of the Registrant from 1990 through September 1994, and as President of Michael Baker, Jr., Inc., a subsidiary of the Registrant, from 1983 through September 1994. He has been employed by the Registrant in various capacities since 1965. Mr. Homan has also served as a director of Century Financial Corporation since 1994. J. ROBERT WHITE - Age 53; Executive Vice President, Chief Financial Officer and Treasurer of the Registrant since July 1994, and a Director since August 1994. Prior to joining the Registrant, Mr. White served 21 years in various capacities with Westinghouse Electric Corp., most recently as Assistant Director of Investor Relations from 1989 through June 1994. DONALD J. NELSON - Age 51; Executive Vice President of the Registrant from 1991 until his resignation in January 1996. Mr. Nelson previously served as a Director from 1984 through April 1994, and as Chief Financial Officer of the Registrant from 1987 through April 1994. He had been employed by the Registrant in various capacities since 1965. DONALD P. FUSILLI, Jr. - Age 44; Executive Vice President of the Registrant since 1991 and President of Baker/MO Services, Inc., a subsidiary of the Registrant, since May 1995. Mr. Fusilli previously served as General Counsel and Secretary of the Registrant from 1986 through August 1994. He has been employed by the Registrant in various capacities since 1973. JOHN C. HAYWARD - Age 48; Executive Vice President of the Registrant since January 1995 and President of Michael Baker Jr., Inc. since October 1994. Mr. Hayward previously served as Senior Vice President of Michael Baker Jr., Inc. from 1989 through September 1994. He has been employed by the Registrant in various capacities since 1974. ANDREW P. PAJAK - Age 46; Executive Vice President of the Registrant since January 1995 and President of Baker Environmental, Inc., a subsidiary of the Registrant, since 1990. Mr. Pajak previously served as Senior Vice President of Baker Environmental, Inc. from 1988 through 1990. He has been employed by the Registrant in various capacities since 1981. EDWARD L. WILEY - Age 52; Executive Vice President of the Registrant since January 1995 and Executive Vice President of Michael Baker Jr., Inc. since October 1994. Mr. Wiley previously served as Senior Vice President of Michael Baker Jr., Inc. from 1989 through September 1994. He has been employed by the Registrant in various capacities since 1968. GLENN S. BURNS - Age 46; Executive Vice President of the Registrant and President of BMSCI since May 1995. Mr. Burns previously served as Vice President, General Counsel and Secretary of the Registrant from August 1994 to October 1995 and as Assistant General Counsel from 1991 through August 1994. Prior to 1991 and at the time of the acquisition of certain assets and contracts of FSC by BMSCI, Mr. Burns served as General Counsel for FSC. H. JAMES MCKNIGHT - Age 51; Vice President, General Counsel and Secretary of the Registrant since September 1995. Mr. McKnight previously served as counsel to International Technology Corporation from February 1995 through September 1995, and was a self-employed consultant from November 1992 through February 1995. Prior to being self-employed, Mr. McKnight was Vice President, General Counsel and Secretary for Vectura Group, Inc. Executive officers of the Registrant serve at the pleasure of the Board of Directors and are elected by the Board annually for a term of office extending through the election and qualification of their successors. PART II Item 5. Market for the Registrant's Common Stock and Related Security ------------------------------------------------------------ Holder Matters --------------- Information relating to the market for the Registrant's Common Stock and other matters related to the holders thereof is set forth in the "Supplemental Financial Information" section of Exhibit 13.1 to this Form 10-K. Such information is incorporated herein by reference. The Registrant's present policy is to retain any earnings to fund the operations and growth of the Registrant. The Registrant has not paid any cash dividends since 1983 and has no plans to do so for the foreseeable future. The declaration and payment of dividends is currently limited to $2 million through May 31, 1998, by the Registrant's secured credit agreement with Mellon Bank, N.A. At March 15, 1996, the Registrant had 1,595 Common Stock holders and 730 Series B Common Stock holders. Item 6. Selected Financial Data ----------------------- A summary of selected financial data for the Registrant, including each of the last five fiscal years in the period ended December 31, 1995, is set forth in the "Selected Financial Data" section of Exhibit 13.1 to this Form 10-K. Such summary is incorporated herein by reference. Item 7. Management's Discussion and Analysis of Financial Condition ----------------------------------------------------------- and Results of Operations ------------------------- A discussion of the Registrant's financial condition, cash flows and results of operations is set forth in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of Exhibit 13.1 to this Form 10-K. Such discussion is incorporated herein by reference. Item 8. Financial Statements and Supplementary Data ------------------------------------------- The consolidated financial statements, together with the report thereon of Price Waterhouse LLP, dated February 16, 1996, except as to Notes 6 and 12, which are as of March 22, 1996, are set forth within Exhibit 13.1 to this Form 10-K. Such financial statements and the "Supplemental Financial Information" section, which follows within the same exhibit, are incorporated herein by reference. The report of Arthur Andersen LLP on the consolidated financial statements for the year ended December 31, 1993, is dated February 14, 1994, and attached hereto as Exhibit 99.3. Item 9. Changes in and Disagreements With Accountants on ------------------------------------------------ Accounting and Financial Disclosure ----------------------------------- Not applicable. PART III Item 10. Directors and Executive Officers of the Registrant -------------------------------------------------- Information relating to the Directors of the Registrant appears beneath the caption "Election of Directors" in the Registrant's definitive Proxy Statement which will be distributed in connection with the 1996 Annual Meeting of Shareholders and which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A. Information relating to compliance with Section 16(a) of the Securities Exchange Act of 1934 appears beneath the caption "Directors and Officers" of such Proxy Statement. Such information is incorporated herein by reference. Information relating to the executive officers of the Registrant is set forth in Part I of this Report under the caption "Executive Officers of the Registrant." Such information is incorporated herein by reference. Item 11. Executive Compensation ---------------------- Information relating to executive compensation appears beneath the caption "Directors and Officers" in the Registrant's definitive Proxy Statement which will be distributed in connection with the 1996 Annual Meeting of Shareholders and which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A. Such information is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management -------------------------------------------------------------- Information relating to the ownership of equity securities by beneficial owners of 5% or more of the common stock of the Registrant and by management has been set forth under the caption "Stock Ownership of Certain Beneficial Owners and Management" in the Registrant's definitive Proxy Statement which will be distributed in connection with the 1996 Annual Meeting of Shareholders and which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A. Such information is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions ---------------------------------------------- Information concerning certain relationships and transactions between the Registrant and its directors and officers appears beneath the caption "Directors and Officers" in the Registrant's definitive Proxy Statement which will be distributed in connection with its 1996 Annual Meeting of Shareholders and which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A. Such information is incorporated herein by reference. PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K --------------------------------------------------------------- (a)(1) The following financial statements are incorporated in Item 8 of Part II of this Report by reference to the consolidated financial statements within Exhibit 13.1 to this Form 10-K: Consolidated Balance Sheet as of December 31, 1995 and 1994 Consolidated Statement of Income for the three years ended December 31, 1995 Consolidated Statement of Cash Flows for the three years ended December 31, 1995 Consolidated Statement of Shareholders' Investment for the three years ended December 31, 1995 Notes to Consolidated Financial Statements Report of Independent Accountants (Price Waterhouse LLP) The report of Arthur Andersen LLP on the consolidated financial statements for the year ended December 31, 1993, is attached hereto as Exhibit 99.3. (a)(2) Financial Statement Schedule for the three years ended December 31, 1995: Schedule II - Valuation and Qualifying Accounts Report of Independent Accountants on Financial Statement Schedule for the two years ended December 31, 1995 (included as Exhibit 99.2 to this Form 10-K) Report of Independent Public Accountants on Financial Statement Schedule for the year ended December 31, 1993 (included within Exhibit 99.3 to this Form 10-K) All other schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto. (a)(3) The following exhibits are included herewith as a part of this Report:
Exhibit No. Description - ----------- ----------- 10.1 Agreement for the sale and purchase of the whole of the issued share capital of certain companies among Messrs. Robert A. Rudin, John P. Prendergast, David S. Hall and Baker/OTS Inc., filed as Exhibit 1 to the Registrant's Report on Form 8-K dated March 17, 1993, and incorporated herein by reference. 10.2 1995 Incentive Compensation Plan of Michael Baker Corporation, filed herewith. 10.3 Asset Purchase Agreement by and among Mellon Stuart Company, Cameron Construction Company, Mellon Stuart Construction, Inc. and the Registrant, filed as Exhibit 1 to the Registrant's Report on Form 8-K dated September 3, 1991, and incorporated herein by reference. 10.4 Employment Agreement dated as of April 12, 1988, Supplemental Agreement No. 1 dated as of March 17, 1992, and Supplemental Agreement No. 2 dated as of October 1, 1994 by and between the Registrant and Richard L. Shaw, filed as Exhibit 10.6 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1994, and incorporated herein by reference. 10.5 Second Amended and Restated Credit Agreement by and among Michael Baker Corporation and Subsidiaries and Mellon Bank, N.A. dated as of April 13, 1995, filed as Exhibit 10.11 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1994, and incorporated herein by reference. 10.6 First Amendment to Second Amended and Restated Credit Agreement by and among Michael Baker Corporation and Subsidiaries and Mellon Bank, N.A. dated as of March 22, 1996, filed herewith. 10.7 Michael Baker Corporation 1995 Stock Incentive Plan, filed as Exhibit A to the Registrant's definitive Proxy Statement with respect to its 1995 Annual Meeting of Shareholders, and incorporated herein by reference. 13.1 Financial Section of Annual Report to Shareholders for the year ended December 31, 1995, including Selected Financial Data, Management's Discussion and Analysis of Financial Condition and Results of Operations, Consolidated Financial Statements as of December 31, 1995 and for the three years then ended, Report of Independent Accountants (Price Waterhouse LLP), and Supplemental Financial Information, filed herewith. 21.1 Subsidiaries of the Registrant, filed herewith. 23.1 Consent of Independent Accountants (Price Waterhouse LLP), filed herewith. 23.2 Consent of Independent Public Accountants (Arthur Andersen LLP), filed herewith. 99.1 Form 11-K for the Michael Baker Corporation Employee Stock Ownership Plan for the year ended December 31, 1995, filed herewith. 99.2 Report of Independent Accountants (Price Waterhouse LLP) on financial statement schedule for the two years ended December 31, 1995, filed herewith. 99.3 Report of Independent Public Accountants (Arthur Andersen LLP) on consolidated financial statements and on financial statement schedule for the year ended December 31, 1993, filed herewith.
(b) The Registrant filed no reports on Form 8-K during the fourth quarter of 1995. SIGNATURES ------------ Pursuant to the requirements of Section 13 or 15(d) 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. MICHAEL BAKER CORPORATION Dated: March 28, 1996 By /s/ Charles I. Homan -------------------- Charles I. Homan, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
Signature Title Date /s/ Richard L. Shaw Chairman of the Board March 28, 1996 - ------------------- Richard L. Shaw /s/ Charles I. Homan Director, President March 28, 1996 - --------------------- and Chief Executive Charles I. Homan Officer /s/ J. Robert White Director, Executive March 28, 1996 - ------------------- Vice President, J. Robert White Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) - ------------------- Director March 28, 1996 William J. Copeland /s/ Roy V. Gavert, Jr. Director March 28, 1996 - ---------------------- Roy V. Gavert, Jr. /s/ Jack B. Hoey Director March 28, 1996 - -------------------- Jack B. Hoey /s/ Thomas D. Larson Director March 28, 1996 - --------------------- Thomas D. Larson - ---------------------- Director March 28, 1996 Konrad M. Weis /s/ William A. Wulf Director March 28, 1996 - ----------------------- William A. Wulf
MICHAEL BAKER CORPORATION Schedule II - Valuation and Qualifying Accounts For the three years ended December 31, 1995 (In thousands) - -------------------------------------------------------------------------- Column A Column B Column C Column D Column E Additions ------------------------ Charge to Balance at Charge to other accts Deductions Balance at Description beg. of yr. expense describe describe* end of yr - --------------------------------------------------------------------------- FOR THE YEAR ENDED DECEMBER 31, 1995: Allowance for doubtful accts $667 $1,000 $0 ($310) $1,357 - --------------------------------------------------------------------------- FOR THE YEAR ENDED DECEMBER 31, 1994: Allowance for doubtful accts $2,305 $2,076 $0 ($3,714) $667 - ---------------------------------------------------------------------------- FOR THE YEAR ENDED DECEMBER 31, 1993: Allowance for doubtful accts $529 $1,904 $0 ($128) $2,305 - ---------------------------------------------------------------------------- * Accounts receivable written off during the year.
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1995 EXHIBITS
Exhibit No. Description - ----------- ----------- 10.1 Agreement for the sale and purchase of the whole of the issued share capital of certain companies among Messrs. Robert A. Rudin, John P. Prendergast, David S. Hall and Baker/OTS Inc., filed as Exhibit 1 to the Registrant's Report on Form 8-K dated March 17, 1993, and incorporated herein by reference. 10.2 1995 Incentive Compensation Plan of Michael Baker Corporation, filed herewith. 10.3 Asset Purchase Agreement by and among Mellon Stuart Company, Cameron Construction Company, Mellon Stuart Construction, Inc. and the Registrant, filed as Exhibit 1 to the Registrant's Report on Form 8-K dated September 3, 1991, and incorporated herein by reference. 10.4 Employment Agreement dated as of April 12, 1988, Supplemental Agreement No. 1 dated as of March 17, 1992, and Supplemental Agreement No. 2 dated as of October 1, 1994 by and between the Registrant and Richard L. Shaw, filed as Exhibit 10.6 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1994, and incorporated herein by reference. 10.5 Second Amended and Restated Credit Agreement by and among Michael Baker Corporation and Subsidiaries and Mellon Bank, N.A. dated as of April 13, 1995, filed as Exhibit 10.11 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1994, and incorporated herein by reference. 10.6 First Amendment to Second Amended and Restated Credit Agreement by and among Michael Baker Corporation and Subsidiaries and Mellon Bank, N.A. dated as of March 22, 1996, filed herewith. 10.7 Michael Baker Corporation 1995 Stock Incentive Plan, filed as Exhibit A to the Registrant's definitive Proxy Statement with respect to its 1995 Annual Meeting of Shareholders, and incorporated herein by reference. 13.1 Financial Section of Annual Report to Shareholders for the year ended December 31, 1995, including Selected Financial Data, Management's Discussion and Analysis of Financial Condition and Results of Operations, Consolidated Financial Statements as of December 31, 1995 and for the three years then ended, Report of Independent Accountants (Price Waterhouse LLP), and Supplemental Financial Information, filed herewith. 21.1 Subsidiaries of the Registrant, filed herewith. 23.1 Consent of Independent Accountants (Price Waterhouse LLP), filed herewith. 23.2 Consent of Independent Public Accountants (Arthur Andersen LLP), filed herewith. 99.1 Form 11-K for the Michael Baker Corporation Employee Stock Ownership Plan for the year ended December 31, 1995, filed herewith. 99.2 Report of Independent Accountants (Price Waterhouse LLP) on financial statement schedule for the two years ended December 31, 1995, filed herewith. 99.3 Report of Independent Public Accountants (Arthur Andersen LLP) on consolidated financial statements and on financial statement schedule for the year ended December 31, 1993, filed herewith.
EX-10 2 Exhibit 10.2 1995 INCENTIVE COMPENSATION PLAN MICHAEL BAKER CORPORATION INDEX ------
ARTICLE I - GENERAL Page 1.1 ESTABLISHMENT OF THE PLAN ...............................2 1.2 PURPOSE ................................................ 2 1.3 ADMINISTRATION ..........................................2 ARTICLE II - DEFINITIONS 2.1 DEFINITIONS .............................................2 2.2 GENDER AND NUMBER ...................................... 3 ARTICLE III - ELIGIBILITY AND PARTICIPATION 3.1 ELIGIBILITY .............................................3 3.2 PARTICIPATION ...........................................3 3.3 PARTIAL PLAN YEAR PARTICIPATION .........................4 ARTICLE IV - AWARDS 4.1 COMPONENTS OF PARTICIPATION AWARDS ......................4 4.2 CORPORATE PERFORMANCE MEASURES AND GOALS ................4 4.3 BUSINESS UNIT AND PROFIT CENTER PERFORMANCE .............5 4.4 INDIVIDUAL PERFORMANCE ..................................5 ARTICLE V - PAYMENT OF AWARDS 5.1 PAYMENT OF AWARDS ........... ...........................6 5.2 PLAN FUNDING ................. ..........................6 ARTICLE VI - CHANGE IN CONTROL 6.1 CHANGE IN CONTROL .......................................7 6.2 DEFINITION OF CHANGE IN CONTROL .........................7 ARTICLE VII - MISCELLANEOUS PROVISIONS 7.1 NON-TRANSFERABILITY .....................................8 7.2 TAX WITHHOLDING .........................................8 7.3 AMENDMENTS ..............................................8 7.4 INDEMNIFICATION .........................................9 7.5 BENEFICIARY DESIGNATION .................................9 7.6 RIGHTS OF PARTICIPANTS ..................................9 7.7 GOVERNING LAW ..........................................10 7.8 EFFECTIVE DATE .........................................10 1995 INCENTIVE COMPENSATION PLAN - ATTACHMENT 1 ELIGIBILITY OPPORTUNITY PERFORMANCE MEASUREMENT POTENTIAL PAYOUT (PERCENTAGE OF ANNUAL SALARY) FREQUENCY OF PAYOUT
1 1995 INCENTIVE COMPENSATION PLAN MICHAEL BAKER CORPORATION ARTICLE I GENERAL - ------- 1.1 ESTABLISHMENT OF PLAN Michael Baker Corporation, a Pennsylvania corporation (the "Company"), hereby adopts this Plan, which shall be known as the MICHAEL BAKER CORPORATION 1995 INCENTIVE COMPENSATION PLAN (the "Plan"). 1.2 PURPOSE: The purpose of the Plan is to focus attention on shareholder value, drive performance in support of this goal and other business goals, and reward individual performance. 1.3 ADMINISTRATION (a) The Plan shall be administered by the Incentive Compensation Committee (the "Committee"), of the Company with the concurrence of the Compensation Committee of the Board of Directors of the Company. The members of the Committee shall be appointed by the Chief Executive Officer (the "CEO"), and any vacancy on the Committee shall be filled by an appointee of the CEO. (b) Subject to the limitations of the Plan, the Committee shall, subject to approval by the CEO and Compensation Committee of the Board of Directors: (i) select from the regular, full-time exempt Employees of the Company, those who shall participate in the Plan (a "Participant" or "Participants"), (ii) make awards in such forms and amounts as the Committee shall determine, (iii) impose such limitations, restrictions, and conditions upon such awards as the Committee shall deem appropriate, (iv) interpret the Plan and adopt, amend, and rescind administrative guidelines and other rules and regulations relating to the Plan, (v) correct any defect or omission or reconcile any inconsistency in this Plan or in any award granted hereunder, and (vi) make all necessary determinations and take all other actions necessary or advisable for the implementation and administration of the Plan. The Committee's determinations on matters within its authority shall be conclusive and binding upon the Company and all other Persons. ARTICLE II DEFINITIONS - ----------- 2.1 DEFINITIONS Whenever used herein, the following terms shall have the meaning set forth below, unless otherwise expressly provided. 2 (a) "Base Salary" shall mean the regular salary actually paid during a Plan Year to a participant while participating in the Plan. Regular salary shall include any salary reduction contributions made to the Company's Internal Revenue Code Section 401(k) Plan or other deferred compensation plans, but exclusive of any awards under this Plan and of any other bonuses, incentive pay, or special awards. (b) "Board" shall mean the Board of Directors of Michael Baker Corporation. (c) "Committee" shall mean the Incentive Compensation Committee of the Company, which shall consist of at least three employees of the Company. (d) "Company" shall mean Michael Baker Corporation and its Subsidiaries. (e) "Corporate" shall mean relating to Michael Baker Corporation. (f) "Employee" shall mean a regular, full-time, exempt Employee of the Company who is in a position meeting the defined eligibility criteria for participation in the Plan, as stated in Section 3.1. (g) "Participant" shall mean an Employee who is approved by the Committee for participation in the Plan for a specified Plan Year. (h) "Performance Management Process" shall mean the Company's three-step performance cycle. The cycle begins with setting individual performance goals, followed by performance coaching, and ending with formal performance review at the end of the performance period. (i) "Plan Year" shall mean the Company's fiscal year. 2.2 GENDER AND NUMBER Except when otherwise indicted by the context, words in the masculine gender, when used in the Plan, shall include the feminine gender, the singular shall include the plural, and the plural shall include the singular. ARTICLE III ELIGIBILITY AND PARTICIPATION - ----------------------------- 3.1 ELIGIBILITY: Eligibility for participation in the Plan shall be limited to regular, full-time exempt Employees of the Company. 3.2 PARTICIPATION: Participation in the Plan shall be determined by the executive management of the Company. The CEO shall determine Corporate participants and the Business Unit Heads shall determine Business Unit participants, in all cases with the concurrence of the Michael Baker Corporation CEO and the Compensation Committee of the Board of Directors of the Company. The number of 3 participants in the Plan shall be influenced by the Business Unit's ability to financially support the accrual for the projected payout opportunity. (See Plan Funding 5.2 on page 6) Participants are to include executive management, business unit managers, and selected managers who are accountable for significant contributions to Corporate, as determined by the CEO, and to the Business Unit, as determined by the Business Unit head. 3.3 PARTIAL PLAN YEAR PARTICIPATION: An Employee who becomes eligible after the beginning of a Plan Year may participate in the Plan for that Plan Year. Such situations may include, but are not limited to (i) new hires, (ii) when an Employee is promoted from a position which did not meet the eligibility criteria, (iii) when an Employee is transferred from an affiliate which does not participate in the Plan, or (iv) when job responsibilities become consistent with other Plan participants. The CEO retains the right to prohibit or allow participation in the initial Plan Year of eligibility for any of the aforementioned Employees. Any so added participant will be eligible to receive a pro-rated share based upon a 2,080 work-hour year. Any Employee who leaves the employment of the company prior to July 1 of the Plan Year is not eligible to receive any payout from the Plan for that year. Subject to the conditions of the following sentence, any employee who leaves the employment of the Company after June 30 of the Plan Year is eligible to receive a pro-rata payout from the Plan for that year based upon the percent of the fiscal year employed. Employees who are terminated for cause or voluntarily resign their positions from the company at any time during the Plan year are not eligible to receive any payout from the Plan that year. ARTICLE IV AWARDS - ------ 4.1 COMPONENTS OF PARTICIPANT AWARDS: Each award may be based on (i) Corporate performance, (ii) Business Unit performance, (iii) Profit Center performance, and (iv) individual performance. 4.2 CORPORATE PERFORMANCE MEASURES AND GOALS: For each Plan Year, the Committee shall recommend, and the CEO shall approve, a range of performance goals for Corporate results. Each performance range shall include a level of performance at which awards shall be earned. Measures of performance may include, but are not limited to, one or more financial ratios such as earnings per share, profitability, return on equity and return on assets. Performance measures need not be the same within the Company. For 1995, corporate results shall be dependent upon audited corporate earnings per share (after all incentives have been paid). 4 For 1995, performance level goals for earnings per share are:
Corporate Performance Goal Setting Level (Earnings Per Share) ------ -------------------- Level 1 On Plan $.40 Level 2 Commendable $.50 Level 3 Outstanding $.60
New goal setting amounts for corporate profitability will be suggested to the CEO by the Compensation Committee of the Board each year of the Plan. 4.3 BUSINESS UNIT AND PROFIT CENTER PERFORMANCE: Business Unit and Profit Center performance shall be reflected in the final award based on the Business Units' and/or Profit Centers' Contribution to Corporate Overhead and Profit. Guidelines of performance goals and percentage weights for Business Unit and Profit Center managers are specific to each Business Unit and are included in the Attachments to the Plan. 4.4 INDIVIDUAL PERFORMANCE: Individual performance shall be reflected in the final award based on the performance rating assigned to an Employee as part of the Performance Management Process and is based upon a number of factors established by the participant's manager(s) at the beginning of the Plan Year. Guidelines of performance goals and percentage weights for Business Unit and Profit Center managers are recommended to be:
Performance Goal Percentage Weight ---------------- ------------------ Contribution to Corporate Overhead 35% and Profit New Work Added To The Company 20% Accounts Receivable 15% Strategic Goal 10% TQM Goal 10% Human Resources Development 10% --- 100%
Individual performance measures for incentive compensation participants who are not Business Unit or Profit Center managers are to be developed jointly with the employee's immediate supervisor, be consistent with the participant's respective job responsibilities, and be included on the participant's performance plan. The performance plans are to be submitted to the CEO by the Business Unit head during February of the Plan year. For individuals who become eligible for participation in the Plan during the course of the year, a completed performance plan is to be submitted within four weeks of the individual becoming eligible for participation. 5 Performance Plans of incentive compensation participants are to be submitted to the CEO based upon timetables to be established in the respective Plan Year. At the end of the Plan Year, incentive compensation participants' managers will determine the level of performance accomplished by the participant. Participant performance which does not meet or exceed the Competent-On Plan Performance-3 level will result in no incentive payout for the individual's specific performance goals. Once performance has exceeded the Competent-On Plan Performance-3 level, any performance beyond the 3 level will result in a pro-rated calculation of the incremental incentive compensation earned by the participant, until the maximum level 5 performance is achieved. Payout for participants meeting individual performance goals will occur when Business Unit or Profit Center (as applicable) operating profit accomplishes threshold performance indicated in each Business Unit's or Profit Center's Performance Plan (after all individual incentives have been paid). Individual performance goals are developed by each participant's manager and payout is based on the applicable Business Unit or Profit Center performance plan. The specific accomplishments associated with these goals are to be recorded on each participant's annual Performance Plan at the end of the Plan Year. In addition to individual performance incentives, a discretionary pool may be created to selectively award those individuals who have exceeded expected performance. Guidelines for discretionary awards are indicated within each Business Unit's and Profit Center's Incentive Compensation Plan Summary in the attachments. Discretionary awards are to be selected by the Executive Vice President of the Business Unit with the concurrence of the Incentive Compensation Committee. ARTICLE V PAYMENT OF AWARDS - ----------------- 5.1 PAYMENT OF AWARDS At the end of each Plan Year, the CEO shall report the overall Corporate and individual performance levels to the Compensation Committee of the Board of Directors, who shall then approve the payment of awards. The incentive compensation earned as a result of the Company achieving corporate profitability goals and through the achievement of Business Unit, Profit Center and individual goals, will be paid in cash no later than the end of the first quarter of the year after which it was earned. 5.2 PLAN FUNDING: Accrual for the Incentive Compensation Plan will be established annually by the Committee, subject to the approval of the CEO. The approved accrual for the Incentive Compensation Plan shall pre-fund the amounts available to be earned for incentive compensation distributions. 6 Any forfeitures associated with the termination of those in the incentive compensation plan prior to year-end will be allocated toward the funding of the incentive pool for the following year. In addition, if the incentive pool is not paid out in full because of participants' failure to achieve individual goals established under the Performance Management Process, the unearned portion would be allocated toward the funding of the incentive pool for the following year. Any excess pre-funding accrual based upon corporate goals which are not met and, therefore, not earned by Incentive Compensation Plan participants, will be removed from expense. ARTICLE VI CHANGE IN CONTROL - ----------------- 6.1 CHANGE IN CONTROL In the event of a Change in Control of the Company, as defined below, a Participant shall be entitled to, for the Plan Year in which the Change of Control occurs, the award determined using: (i) The Participant's actual Base Salary rate in effect on the date of the Change in Control, (ii) Actual Corporate performance results to the date of Change in Control, and (iii) Participant's Individual Performance results. The Committee as constituted immediately prior to the Change in Control shall determine how actual Corporate performance should be measured for purposes of the award calculation in 6.1. The Committee's determination shall be conclusive and final. Awards and any previously accrued awards shall be paid in cash to the Participant promptly following any discontinuance of the Plan on or after a Change of Control. 6.2 DEFINITION OF CHANGE IN CONTROL A "Change in Control" will be deemed to have occurred on the first to occur of the following: (a) Any Person becomes the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, the "Exchange Act"), directly or indirectly, of 30% or more of the combined voting power of the Company's Voting Securities; or (b) Individuals who constitute the Board on the date the Plan is approved by the Board of Directors (the "Incumbent Board") cease for any reason to constitute at least a majority thereof, provided that any Person 7 becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least three-quarters of the directors comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which such Person is named as a nominee for director, without objection to such nominations) shall be, for purposes of this clause (b), considered as though such Person were a member of the Incumbent Board; or (c) The stockholders of the Company approve a dissolution of the Company or a definitive agreement (i) to merge or consolidate the Company with or into another entity on which the Company is not the continuing or surviving corporation or pursuant to which any shares of Common Stock would be converted into cash, securities, or other property of another entity, other than a merger of the Company in which holders of Common Stock immediately prior to the merger have the same proportionate ownership of common stock (or equivalent securities) of the surviving entity immediately after the merger as immediately before, or (ii) to sell or otherwise dispose of substantially all the assets of the Company. "Voting Securities" means securities ordinarily having the right to vote at election of directors. The term "person" shall mean and include any individual, corporation, partnership, company, association or other "person," as such term is used in Section 14(d) of the Exchange Act, other than the Company or any employee benefit plans sponsored by the Company. ARTICLE VII MISCELLANEOUS PROVISIONS - ------------------------ 7.1 NON-TRANSFERABILITY: No right of interest of any Participant in this Plan shall be assignable or transferable, or subject to any lien, directly, by operation of law or otherwise, including execution, levy, garnishment, attachment, pledge, and bankruptcy. 7.2 TAX WITHHOLDING: The Company shall have the right to deduct from all payments under this Plan any foreign, Federal, state, or local taxes required by law to be withheld with respect to such payments. 7.3 AMENDMENTS: The Company, in its absolute discretion, without notice, at any time and from time to time, may modify or amend, in whole or in part, any or all other provisions of this Plan, or suspend or terminate it entirely; provided, that no such modification, amendment, suspension, or termination may reduce the right of a Participant (or his beneficiary as the case may be) to a payment or 8 distribution in accordance with the provisions contained in this Plan or change to the detriment of a Participant of any potential rights in that Plan Year pursuant to Section 6.1 of this Plan. 7.4 INDEMNIFICATION: Each person who is or shall have been a member of the Committee or the Board or who is or shall have been an Employee of the Company shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense, including, without limitation, fees and expenses of legal counsel, that may have been imposed upon or reasonably incurred by him in connection with or resulting from any claim, action, suit, or proceeding to which he may be a party or in which he may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him in settlement thereof, with the Company's approval, or paid by him in satisfaction of any judgment in any such action, suit, or proceeding against him provided he shall give the Company an opportunity, at its own expense, to handle and defend the same before he undertakes to handle and defend it on his own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such person may be entitled under the Company's Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless. 7.5 BENEFICIARY DESIGNATION: Each Participant under the Plan may name, from time to time, beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under the Plan is to be paid in case of his death before he receives any or all of such benefit. Each designation will revoke all prior designations by the same Participant, shall be in a form prescribed by the Company, and will be effective only when filed by the Participant in writing with the Company during his lifetime. In the absence of any such designation, or if the designated beneficiary is no longer living, benefits shall be paid to the surviving member(s) of the following classes of beneficiaries, with preference for classes in the order listed below: (a) Participant's spouse (unless the parties were divorced or legally separated by court decree); (b) Participant's children (including children by adoption);or (c) Participant's executor or administrator. Payment of benefits shall be made exclusively to the member(s) of the first class, in the order listed above, which has surviving member(s). If that class have more than one member, benefit payment shall be made in equal shares among members of that class. 7.6 RIGHTS OF PARTICIPANTS: Nothing in this Plan shall interfere with or limit in any way the right of the Company to terminate or change a Participant's employment at any time, nor 9 confer upon any Participant, any right to continue in the employment of the Company for any period of time or to continue his present or any other rate of compensation. No Participant in a previous Plan Year, or other Employee at any time, shall have a right to be selected for participation in a current or future Plan Year. 7.7 GOVERNING LAW: The Plan shall be construed in accordance with and governed by the laws of the State of Pennsylvania. 7.8 EFFECTIVE DATE: The Plan shall be deemed effective as of January 1, 1995. 10 1995 Michael Baker Corporation Incentive Compensation Plan- Summary Attachment 1
Eligibility for Incentive Compensation Plan - -------------------------------------------------------------------------- Number of Participants Tier 1: approximately 45 Tier 2: approximately 40 Tier 3: Discretionary
- --------------------------------------------------------------------------
Participants Tier 1 Corporate Executive Management, Officers and Directors Business Units Business Unit Head Selected Staff who support the functions of the entire Business Unit (Designated by Business Unit Head) Business Units-Engineering Profit Center Managers with greater than and Design $ 2.5 Million revenue responsibility (Designated by Business Unit Head) Business Units-Construction Profit Center Managers with greater than and Heavy/Highway and Baker $ 25 Million revenue responsibility Support Services, Inc. (Designated by Business Unit Head) Tier 2 Corporate Business Unit Controllers/Selected Functional Unit Managers Business Units Selected Staff who support the functions of the entire Business Unit (Designated by Business Unit Head) Business Units-Engineering and Selected Managers, Other Profit Center Design Managers, and selected Senior Project Managers Business Units -Construction and (Designated by Business Unit Head) Heavy/Highway Baker Support Services, Inc. Tier 3 Discretionary
- --------------------------------------------------------------------------- Participant Recommendation Corporate participants and Business Unit Heads (CEO) Within Business Units (Head of Business Unit) - ---------------------------------------------------------------------------- Participant Approval President and Chief Executive Officer 1 - ---------------------------------------------------------------------------- Participants Added During Year? Yes, Pro-rata - ---------------------------------------------------------------------------- Ineligible Employees Termination for Cause/Voluntary Resignation
- ----------------------------------------------------------------------------
Incentive Compensation Opportunity Tier 1 Tier 2 Tier 3 Total % of Annual Salary 0 - 25% 0-15% Discretionary First Level (total maximum) 8.334% 5% (Accumulative 15 % of Total Second Level (total maximum) 16.668% 10% Business Unit Incentive Third Level (total maximum) 25.000% 15% Payout)
- ----------------------------------------------------------------------------
Performance Measurement Corporate Participants, Heads of Business Units & Staff and all Environmental Business Unit Participants Corporate Profitability Goals 50 % of Potential Award Business Unit Performance Goals 50 % of Potential Award (Departmental Goals for Corporate Participants)
- ----------------------------------------------------------------------------
Business Unit-Segments and Profit Center Managers Corporate Profitability Goals 25 % of Potential Award Business Unit Performance Goals 25 % of Potential Award Profit Center/Individual Performance Goals 50 % of Potential Award
- ---------------------------------------------------------------------------
Performance Goals Corporate Profitability Goals - ----------------------------- Audited Corporate Earnings Per Share % of Payout Based Earnings (After All Incentives Have Been Paid) Upon Corporate Plan Per Share ------------------- --------- 1st Level (On-Plan Performance) 33% $.40 2nd Level (Commendable) 33% $.50 3rd Level (Outstanding) 34% $.60
2 - -----------------------------------------------------------------------------
Performance Goals % of Business Unit, Business Units, Segments, Profit Centers, Profit Center/Individual and Individual Performance Goals Performance Plans ------------------ Contribution to Corporate Overhead and Profit 35% New Work Added to the Company 20% Accounts Receivables 15% Strategic Goal 10% TQM Goals 10% Human Resources Development 10%
- --------------------------------------------------------------------------
Potential Payout Corporate Business Unit Profitability Performance (% of Annual Salary) Goals Goals ----- ----- Tier 1 Corporate and Business Unit Heads and Staff 1st Level (On-Plan Performance) 4.167% 4.167% 2nd Level (Commendable) 8.334% 8.334% 3rd Level (Outstanding) 12.500% 12.500%
Segment, Profit Business Center, Corporate Unit Individual Profitability Performance Performance Goals Goals Goals ------ ------ ------ Tier 1 Business Unit-Segments 1st Level (On-Plan Performance) 2.084% 2.084% 4.167% 2nd Level (Commendable) 4.167% 4.167% 8.334% 3rd Level (Outstanding) 6.250% 6.250% 12.500%
- -------------------------------------------------------------------------- 3
Corporate Business Unit (% of Annual Salary) Profitability Performance Goals Goals ------ ------ Tier 2 Corporate and Business Unit Head and Staff 1st Level (On-Plan Performance) 2.50% 2.50% 2nd Level (Commendable) 5.00% 5.00% 3rd Level (Outstanding) 7.50% 7.50%
- ------------------------------------------------------------------------
Segment Business Profit Center, Corporate Unit Individual Profitability Performance Performance Goals Goals Goals ------ ------ ------ Tier 2 Business Unit-Segments 1st Level (On-Plan Performance) 1.250% 1.250% 2.500% 2nd Level (Commendable) 2.500% 2.500% 5.000% 3rd Level (Outstanding) 3.750% 3.750% 7.500%
- -------------------------------------------------------------------------- Threshold Corporate Minimum earnings per share for any Potential Payout $0.40 on Corporate Component (after all incentives have been paid) Business Units, Business Unit-Segments and Profit Centers Minimum Contribution to Overhead and Profit (After Accrual for Incentive Compensation Payments and Internal Interest Charges)
Contribution ------------ Civil Business Unit $4,082,314 Civil-Engineering $4,521,169 Baker Support Services, Inc. $1,142,473 General Buildings Business Unit $2,004,096 General Buildings-Design $1,303,415 General Buildings-Construction $2,168,431 Transportation Business Unit $3,405,057 Transportation-Engineering $5,677,856 Transportation-Heavy/Highway ($47,692) Environmental Business Unit $2,178,113 Energy Business Unit $2,132,436 Energy Profit Centers $888,151
4 - --------------------------------------------------------------------------- Type of Payout Cash - --------------------------------------------------------------------------- Frequency of Payout Annually, with payment by the end of the following year's first quarter - --------------------------------------------------------------------------- Funding Pre-funding accrual in the year earned - ----------------------------------------------------------------------------- Forfeitures Allocated toward next year's funding
- ---------------------------------------------------------------------------- 5 EX-10 3 Exhibit 10.6 FIRST AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT This First Amendment to Second Amended and Restated Credit Agreement, dated as of March 22, 1996 (this "Amendment"), is made by and between Michael Baker Corporation (the "Company"), Michael Baker Jr., Inc., Baker Engineering NY, Inc., Baker Engineering, Inc., Baker Environmental, Inc., Baker/MO Services, Inc., Baker Support Services, Inc., Baker/Mellon Stuart Construction, Inc., Baker Heavy & Highway, Inc., Mellon Stuart Building Services, Inc., Mellon Stuart Construction International, Inc., Baker/OTS, Inc., Baker Construction, Inc. (a/k/a Michael Baker Construction, Inc.) and Vermont General Insurance Company (collectively, the "Borrowers"), and Mellon Bank, N.A. (the "Bank"). Capitalized terms used in this Amendment and not otherwise defined have the meanings assigned to such terms in the Credit Agreement (as defined below). PRELIMINARY STATEMENTS: ----------------------- 1. The Borrowers and the Bank are parties to the Second Amended and Restated Credit Agreement dated as of April 13, 1995 (as amended, modified, restated or supplemented from time to time, the "Credit Agreement"), under which the Bank provided the Company with a $17,500,000 revolving credit facility. 2. The Bank has extended credit under the Credit Agreement evidenced by the Revolving Credit Note dated as of April 13, 1995 (the "Existing Note") made by the Borrowers in favor of the Bank in the original principal amount of $17,500,000. 3. The Borrowers and the Bank desire to amend and restate the Existing Note to, among other things, (i) increase the maximum commitment to $25,000,000 and (ii) extend the maturity date to May 31, 1998. 4. The Borrowers and the Bank desire to amend the Credit Agreement to, among other things, (i) reflect the amendments to the Existing Note, (ii) increase the maximum facility to $25,000,000, (iii) modify the interest rates and fees applicable under the Credit Agreement, (iv) continue to provide Michael Baker Jr., Inc. with a corporate credit card line and (v) modify certain financial covenants, on the terms and subject to the conditions of this Amendment. AGREEMENT: ---------- The Borrowers and the Bank agree that the following terms and conditions apply to this Amendment: 1. AMENDMENTS TO CREDIT AGREEMENT ------------------------------ On the date this Amendment becomes effective, after satisfaction by the Company of each of the conditions set forth in Section 4 of this Amendment (the "Closing Date"), the Credit Agreement is amended as follows: 1.1 Section 1.01 of the Credit Agreement is amended by adding the definitions of "Credit Card Line" and "Credit Card Line Amount" after the definition of "Corresponding Source of Funds" as follows: "Credit Card Line" shall have the meaning assigned to such term in Section 2.01 of this Agreement. "Credit Card Line Amount" shall have the meaning assigned to such term in Section 2.01 of this Agreement. 1.2 Section 1.01 of the Credit Agreement is amended by deleting the definition of "Maturity Date" and replacing it as follows: "Maturity Date" shall mean May 31, 1998. 1.3 Section 1.01 of the Credit Agreement is amended by adding the definition of "Sale/Lease-Back Arrangements" after the definition of "Rollover Loan" as follows: "Sale/Lease-Back Arrangements" shall mean those certain sale and lease-back arrangements with respect to certain of the Borrowers' computer and related equipment purchased throughout any fiscal year and sold to a financial institution to create an operating lease. 1.4 Section 2.01 of the Credit Agreement is amended by deleting the first paragraph of such section and replacing it as follows: The Bank hereby establishes a credit (the "Commitment") in favor of the Borrowers equal to a Commitment of $25,000,000. Subject to the terms and conditions hereof, the Bank agrees to make loans (the "Revolving Credit Loans") to the Borrowers on any Business Day, at any time or from time to time prior to the Maturity Date in an aggregate principal amount not exceeding the Commitment; provided, however, that the sum of all Loans outstanding at any one time, including any reimbursement obligations arising from draws on Letters of Credit, plus the aggregate undrawn amount of all outstanding Letters of Credit at such time, plus the Credit Card Line Amount shall not exceed the Commitment at such time. If, at any time, an excess shall for any reason exist, the Borrowers shall forthwith repay to the Bank, in funds immediately available, the amount of such excess, together with all interest accrued on the amount so repaid. 1.5 Section 2.01 of the Credit Agreement is further amended by adding the following paragraph to the end of such section as follows: Subject to the terms and conditions of this Agreement, the Bank agrees to make available for the account of Michael Baker Jr., Inc. a corporate credit card line (the "Credit Card Line"), up to a maximum outstanding amount of $4,000 (as the same may be reduced as described below, the "Credit Card Line Amount"); provided, however, that on any date on which Michael Baker Jr., Inc. utilizes the Credit Card Line, and after giving effect to such extension of credit by the Bank, the sum of all Loans outstanding at any such time (including any reimbursement obligations arising from draws on Letters of Credit, plus the aggregate undrawn amount of all outstanding Letters of Credit at such time), plus the Credit Card Line Amount shall not exceed the Commitment at such time. If, at any time, an excess shall for any reason exist, the Borrowers shall forthwith repay to the Bank, in funds immediately available, the amount of such excess, together with all interest accrued on the amount so repaid. The Credit Card Line shall be governed by, and shall be subject to the terms and conditions of, the Bank's Master Card and Business Card Agreement, a copy of which has been provided by the Bank to Michael Baker Jr., Inc. At the written request of Michael Baker Jr., Inc., the Credit Card Line Amount shall be permanently reduced in increments of $1,000; provided, however, that in no event shall the Credit Card Line Amount be reduced to an amount less than the outstanding principal balance of the Credit Card Line at such time. 1.6 Section 2.02(a) of the Credit Agreement is amended by deleting the first sentence of such section and replacing it as follows: At the request of any Borrower (which shall be made at least five (5) Business Days prior to the date, which shall be a Business Day, on which such Letter of Credit is proposed to be issued), and pursuant to an Application duly executed by the applicable Borrower, one or more Standby Letters of Credit will be issued by the Bank for the account of the Borrowers in an aggregate face amount not exceeding an amount equal to the Bank's Commitment at such time minus the aggregate principal amount of all then outstanding Loans (including any reimbursement obligations arising from draws on the Letters of Credit plus the aggregate amount of all outstanding Letters of Credit, as the same may be changed from time to time by amendment or otherwise pursuant to the terms thereof) and minus the Credit Card Line Amount (the "Standby Letter of Credit Limit"). The aggregate undrawn amount of all outstanding Standby Letters of Credit, as the same may be changed from time to time by amendment or otherwise pursuant to the terms thereof, shall be charged against the Standby Letter of Credit Limit and against the Bank's Commitment. 1.7 Section 2.02(b) of the Credit Agreement is amended by deleting the third sentence of such section and replacing it as follows: The Borrowers agree that upon the issuance of a Standby Letter of Credit, the Bank shall be paid a fee equal to 1.00% per annum based upon the amount of the Standby Letter of Credit issued; provided, however, that the Borrowers shall pay an annual minimum fee of $250 per annum if the fee of 1.00% per annum would result in an annual fee of less than $250. 1.8 Section 2.05(a)(i) of the Credit Agreement is amended by deleting the first paragraph of such section and replacing it as follows: Interest shall accrue on Prime Rate Loans at a rate per annum for each day equal to the Prime Rate plus 0.25%. 1.9 Section 2.05(a)(ii) of the Credit Agreement is amended by deleting the first paragraph of such section and replacing it as follows: Interest shall accrue on CD Rate Loans at a rate per annum (based on a year of 360 days and actual days elapsed) for each day equal to the CD Rate plus 2.50%. 1.10 Section 2.05(a)(iii) of the Credit Agreement is amended by deleting the first paragraph of such section and replacing it as follows: Interest shall accrue on Euro-Rate Loans at a rate per annum (based on a year of 360 days and actual days elapsed) for each day at a rate equal to the Euro-Rate plus 2.50%. 1.11 Section 2.05(a)(iv) of the Credit Agreement is amended by deleting the first paragraph of such section and replacing it as follows: Interest shall accrue on As-Offered Rate Loans at a rate per annum for each day equal to the As-Offered Rate plus 2.50%. 1.12 Section 5.02(a) of the Credit Agreement is amended by deleting subsection (2) of such section in its entirety and replacing it as follows: (2) Liens arising as a result of the Sale/Lease-Back Arrangements. 1.13 Section 5.02(d) of the Credit Agreement is amended by adding the following subsection (v) of such section as follows: and (v) sales of assets under the Sale/Lease-Back Arrangements. 1.14 Section 5.02(e) of the Credit Agreement is amended by adding the following subsection (7) of such section as follows: (7) Investments with a cash purchase price of not more than $2,000,000 and a total purchase price (cash plus stock) of not more than $4,000,000 during the period from March 22, 1996 through May 31, 1998. 1.15 Section 5.02(f) of the Credit Agreement is amended by adding the following subsection (i)(C) of such section as follows: and (C) may make aggregate dividends, distributions, or stock purchase of not more than $2,000,000 during the period from March 22, 1996 through May 31, 1998, 1.16 Section 5.02(j) of the Credit Agreement is amended by deleting such section in its entirety and replacing it as follows: (j) Maintenance of Minimum Consolidated Cash Flow Coverage Ratio. Permit as of the last day of any fiscal quarter of the Borrowers the Consolidated Cash Flow Coverage Ratio for the immediately preceding four fiscal quarters to be less than 1.2:1. 1.17 Section 5.02(k) of the Credit Agreement is amended by deleting such section in its entirety and replacing it as follows: (k) Maintenance of Minimum Ratio of Consolidated Income From Operations to Consolidated Interest Expense. Permit as of the last day of any fiscal quarter of the Borrowers the ratio of Consolidated Income from Operations to Consolidated Interest Expense for the immediately preceding four fiscal quarters to be less than 5:1. 1.18 Section 5.02(l) of the Credit Agreement is amended by deleting such section in its entirety and replacing it as follows: (l) Maintenance of Maximum Ratio of Consolidated Total Liabilities to Consolidated Tangible Net Worth. Permit the ratio of Consolidated Total Liabilities to Consolidated Tangible Net Worth to exceed 2.1:1 at any time. 1.19 Section 5.02(m) of the Credit Agreement is amended by deleting such section in its entirety and replacing it as follows: (m) Consolidated Capital Expenditures. Permit Consolidated Capital Expenditures to exceed $4,500,000 in any fiscal year. 1.20 Section 5.02(o) of the Credit Agreement is amended by deleting subsection (3) of such section in its entirety and replacing it as follows: (3) purchase money Indebtedness not in excess of $500,000 in the aggregate during the term of this Agreement incurred in connection with the purchase of property other than inventory, recourse for which is limited solely to the assets financed thereby; 1.21 Section 5.02(o) of the Credit Agreement is further amended by adding the following subsection (6) to such section: (6) Indebtedness arising from the Sale/Lease-Back Arrangements. 1.22 Section 5.02 of the Credit Agreement is amended by adding the following Section 5.02(p) to such section: (p) Minimum Consolidated Tangible Net Worth. Permit Consolidated Tangible Net Worth to be less than $38,000,000 at any time during the period from December 31, 1995 through December 30, 1996, and to be less than $40,000,000 at any time thereafter. 1.23 Section 5.03(a) of the Credit Agreement is amended by deleting subsection (ii) of such section in its entirety and replacing it as follows: (ii) Additional Reports. The Borrowers shall also furnish: (1) within 90 days after the end of each fiscal year, consolidating financial statements prepared on a legal entity basis, including balance sheets, income statements and cash flow statements for the Company and each Subsidiary for such year; (2) within 30 days after the end of each month, unaudited consolidated and consolidating financial statements prepared on an operating unit basis, including balance sheets, income statements and cash flow statements for the Company and each operating unit, for such month; (3) within 20 days after the end of each month, a report containing an aged accounts receivable analysis and an aged accounts payable analysis for such months for each legal entity as of the end of such month; and (4) within 30 days after the end of each month, a project status report and a backlog report for such month for the Company and each of its Subsidiaries as of the end of such month. 2. AMENDMENTS TO EXHIBITS AND OTHER LOAN DOCUMENTS ----------------------------------------------- 2.1 Amendments to Revolving Credit Note. On the Closing Date, the Existing Note is amended, restated and replaced in its entirety by the First Amended and Restated Revolving Credit Note dated as of the Closing Date (the "Amended Note") made by the Borrowers in favor of the Bank substantially in the form of Exhibit A to this Amendment, and Exhibit A to the Credit Agreement is replaced by Exhibit A to this Amendment. 2.2 Amendments to Mortgages. On the Closing Date, each Open-End Mortgage and Security Agreement dated as of April 13, 1995 (collectively, the "Existing Mortgages"), made by the Company or Baker/Mellon Stuart Construction, Inc., as applicable, in favor of the Bank and relating to the Real Property is amended by a First Amendment to Open-End Mortgage and Security Agreement dated as of the Closing Date (each, a "Mortgage Amendment") made between the Company or Baker/Mellon Stuart Construction, Inc., as applicable, and the Bank substantially in the form of Exhibit B to this Amendment. 3. REPRESENTATIONS AND WARRANTIES ------------------------------ To induce the Bank to enter into this Amendment and to extend future credit under the Credit Agreement, as amended by this Amendment, each Borrower represents and warrants to the Bank that: 3.1 Due Authorization; No Conflicts; Valid and Binding. The execution, delivery and performance of this Amendment, the Amended Note and the Mortgage Amendments, as applicable, are within its corporate powers, have been duly authorized by all necessary corporate action, have received all necessary governmental, regulatory or other approvals (if any are required), and do not and will not contravene or conflict with any provision of (i) any law, (ii) any judgment, decree or order, or (iii) its certificate of incorporation or by-laws, and do not and will not contravene or conflict with, or cause any lien to arise under any provision of any agreement or instrument binding upon the Company or upon any of its property. This Amendment, the Amended Note, the Mortgage Amendments, as applicable, and the Credit Agreement, as amended by this Amendment, are the legal, valid and binding obligations of each Borrower, enforceable against such Borrower in accordance with their respective terms. 3.2 No Default; Representations and Warranties. As of the Closing Date, (i) no Event of Default or Potential Event of Default under the Credit Agreement, as amended by this Amendment, has occurred and is continuing or will result from the amendments set forth in this Amendment and (ii) the representations and warranties contained in the Credit Agreement are true and correct. 3.3 Litigation. As of the Closing Date, except as previously disclosed to the Bank in writing, there is no litigation or governmental proceeding by or against any of the Borrowers or any Subsidiary that is pending or, to the knowledge of any of the Borrowers, threatened which, in the opinion of any of the Borrowers, involves any substantial risk of any material adverse effect on the financial condition or business of the total enterprise represented by the Borrowers or any Subsidiary on a consolidated basis. In addition, there are no inquiries, formal or informal, which might give rise to such actions, proceedings or investigations. 4. CONDITIONS TO EFFECTIVENESS --------------------------- The obligation of the Bank to make the amendments contemplated by this Amendment, and the effectiveness of such amendments, are subject to the following: 4.1 Representations and Warranties. The representations and warranties contained in this Amendment are true and correct as of the Closing Date. 4.2 Documents. The Bank must have received all of the following, each duly executed and dated as of the Closing Date (or such other date as is satisfactory to the Bank) in form and substance satisfactory to the Bank: (A) Amendment to Credit Agreement. This Amendment. (B) Amended Note. The Amended Note, substantially in the form of Exhibit A to this Amendment. (C) Mortgage Amendments. The Mortgage Amendments, each substantially in the form of Exhibit B to this Amendment. (D) Title Company Documents. Date-down endorsements from the Title Company with respect to the Real Property covered by the Existing Mortgages, each adding the Amended Note to the Title Policy with only those exceptions permitted by the Bank. (E) Opinion of Counsel. An opinion of the Borrowers' legal counsel covering such matters as are satisfactory to the Bank and its counsel. (F) Secretary's Certificates. A certificate from the Secretary of each Borrower regarding (i) the incumbency of officers, (ii) resolutions authorizing this Amendment, the Amended Note and the Mortgage Amendments, as applicable, and (iii) no change in such Borrower's certificate of incorporation or by-laws since April 13, 1995. (G) Consents, Etc. Certified copies of all documents evidencing any necessary corporate action, consents and governmental approvals, if any, with respect to this Amendment, the Amended Note, the Mortgage Amendments or any other document provided for under this Amendment. (H) Other. Such other documents as the Bank may reasonably request. 4.3 Facility Fee. The Bank must have received a one-time facility fee of $31,250 from the Borrowers on the Closing Date. 5. MISCELLANEOUS ------------- 5.1 Captions. The preliminary statements to this Amendment (except for definitions) and the section captions used in this Amendment are for convenience only, and do not affect the construction of this Amendment. 5.2 Governing Law; Severability. THIS AMENDMENT IS A CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES. Wherever possible, each provision of this Amendment must be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Amendment is prohibited by or invalid under such law, such provision is ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Amendment. 5.3 Counterparts. This Amendment may be executed in any number of counterparts and by the different parties on separate counterparts, and each such counterpart is deemed to be an original, but all such counterparts together constitute but one and the same Amendment. 5.4 Successors and Assigns. This Amendment is binding upon each Borrower and the Bank and their respective successors and assigns, and inures to the sole benefit of each Borrower and the Bank and their successors and assigns. No Borrower has the right to assign its rights or delegate its duties under this Amendment. 5.5 References. From and after the Closing Date, each reference in the Credit Agreement, the Existing Note or the Existing Mortgages to "this Agreement," "this Note," "this Mortgage," "hereunder," "hereof," "herein," or words of like import, and each reference in any other Loan Document to the Credit Agreement, the Existing Note, the Existing Mortgages or to any term, condition or provision contained "thereunder," "thereof," "therein," or words of like import, mean, and are a reference to, the Credit Agreement, the Existing Note or the Existing Mortgages (or such term, condition or provision, as applicable) as amended, supplemented or otherwise modified by this Amendment, the Amended Note or the Mortgage Amendments, as applicable. 5.6 Continued Effectiveness. Notwithstanding anything contained in this Amendment, the terms of this Amendment, the Amended Note or the Mortgage Amendments are not intended to, and do not serve to, effect a novation as to the Credit Agreement, the Existing Note or the Existing Mortgages. Each Borrower and the Bank expressly do not intend to extinguish the Credit Agreement, the Existing Note or the Existing Mortgages. Instead, it is the express intention of each Borrower and the Bank to reaffirm the indebtedness created under the Credit Agreement, which is evidenced by the Existing Note and secured in part by the Existing Mortgages. The Credit Agreement, as amended by this Amendment, the Existing Note, as amended and restated by the Amended Note, and the Existing Mortgages, each as amended by the Mortgage Amendments, remain in full force and effect, and their terms and provisions are ratified and confirmed by the Borrowers. 5.7 Costs, Expenses and Taxes. Each Borrower affirms and acknowledges that Section 7.02 of the Credit Agreement applies to this Amendment and the transactions, agreements and documents contemplated under this Amendment. * * * Delivered at Pittsburgh, Pennsylvania, as of the day and year first above written.
ATTEST MICHAEL BAKER CORPORATION /s/ H. James McKnight /s/ J. Robert White - -------------------------- By: --------------------------- Title: Secretary Title: Chief Financial Officer - -------------------------- -------------------------------- MICHAEL BAKER JR., INC. By: /s/ J. Robert White ------------------------------- Title: Chief Financial Officer -------------------------------- BAKER ENGINEERING NY, INC. By: /s/ J. Robert White ------------------------------- Title: Chief Financial Officer ------------------------------- BAKER ENGINEERING, INC. By: /s/ J. Robert White ------------------------------ Title: Chief Financial Officer ------------------------------- BAKER ENVIRONMENTAL, INC. By: /s/ J. Robert White ------------------------------- Title: Chief Financial Officer -------------------------------- BAKER/MO SERVICES, INC. By: /s/ J. Robert White -------------------------------- Title: Chief Financial Officer -------------------------------- BAKER SUPPORT SERVICES, INC. By: /s/ J. Robert White ------------------------------ Title: Chief Financial Officer ------------------------------- BAKER/MELLON STUART CONSTRUCTION, INC. By: /s/ J. Robert White -------------------------------- Title: Chief Financial Officer -------------------------------- BAKER HEAVY & HIGHWAY, INC. By: /s/ J. Robert White ------------------------------- Title: Chief Financial Officer ------------------------------- MELLON STUART BUILDING SERVICES, INC. By: /s/ J. Robert White ------------------------------- Title: Chief Financial Officer ------------------------------- MELLON STUART CONSTRUCTION INTERNATIONAL, INC. By: /s/ J. Robert White ------------------------------- Title: Chief Financial Officer ------------------------------- BAKER/OTS, INC. By: /s/ J. Robert White ------------------------------- Title: Chief Financial Officer ------------------------------- BAKER CONSTRUCTION, INC. By: /s/ J. Robert White ------------------------------- Title: Chief Financial Officer ------------------------------- VERMONT GENERAL INSURANCE COMPANY By: /s/ J. Robert White ------------------------------- Title: Chief Financial Officer ------------------------------- MELLON BANK, N.A. By: /s/ Gary A. Saul ------------------------------ Title: Vice President -----------------------------
EX-13 4 Exhibit 13.1
SELECTED FINANCIAL DATA - ------------------------------------------------------------------------- 1995 1994 1993 1992 1991 - ------------------------------------------------------------------------- (Amounts in thousands, except per share information) RESULTS OF OPERATIONS Total contract revenues $354,728 $437,193 $434,791 $355,820 $204,197 Operating income/(loss) 5,104 (9,097) (21,805) 8,543 6,899 Net income/(loss) 2,900 (7,945) (15,128) 4,403 3,537 Net income/(loss) per share $0.35 $(0.95) $(1.82) $0.67 $0.61 Return on average equity 6.28% (16.31)% (25.59)% 8.67% 10.47% FINANCIAL CONDITION Total assets $117,376 $134,794 $145,805 $130,917 $90,731 Working capital 25,185 22,391 33,042 42,981 15,325 Long-term debt -- 3,960 7,670 2,625 4,811 Shareholders' investment 47,631 44,731 52,676 65,536 36,065 Book value per share 5.70 5.35 6.30 8.03 6.09 Year-end closing share price $5.00 $3.75 $11.00 $14.75 $13.00 Current ratio 1.36 1.26 1.39 1.75 1.31 CASH FLOW Cash provided by/(used in) operating activities $15,539 $5,415 $4,758 $(11,324) $564 Cash used in investing activities (2,294) (5,436) (11,232) (4,876) (3,812) Cash (used in)/provided by financing activities (2,547) (1,477) 5,105 22,158 1,399 Net increase/(decrease) in cash and cash equivalents $10,698 $(1,498) $(1,369) $5,958 $(1,849) BACKLOG Funded $299,900 $283,300 $357,600 $296,800 $313,800 Total $507,800 $468,300 $587,600 $469,600 $473,200 SHARE INFORMATION Year-end shares 8,364 8,364 8,364 8,161 5,926 Average shares outstanding 8,368 8,364 8,304 6,561 5,846
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- RESULTS OF OPERATIONS - --------------------------------------------------------------------------- The Company returned to profitability for the year ended December 31, 1995, after two years of net losses. The overriding reasons for this improvement stemmed from the Company's contract-related writedowns in 1993 and 1994 and its significant reduction of general and administrative expenses during 1995. For the years ended December 31, 1994 and 1993, pre-tax charges related to contractual difficulties and overhead reductions were recorded in the amounts of $10 million and $28 million, respectively. Total Contract Revenues - --------------------------------------------------------------------------- Total contract revenues decreased to $355 million in 1995 from $437 million in 1994. The most significant component, totaling $70 million, of this overall decrease occurred in the Buildings unit primarily due to greater bidding selectivity in its construction division, as well as from the substantial completion of Baker Support Services' military housing renovation business during 1994. While the Buildings unit added the same volume of new construction work in 1995 and 1994, most of its new work added in 1995 was contracted during the second half of the year and did not significantly enhance its 1995 revenues. Another $7 million decrease resulted in the Energy unit from Baker/MO having terminated certain lower margin and loss contracts during the year. For 1994, total contract revenues increased from $435 million in 1993. Inherent in this slight overall rise are increases of $23 million in the Buildings unit and $6 million in the Civil unit, and a decrease of $27 million in the Energy unit. A few new general construction contracts awarded during 1994 accounted for the increase in the Buildings unit, while the Civil unit benefitted from increases resulting from new work in both of its divisions. Within the Energy unit, revenues for Baker/MO decreased by $30 million due to an $11 million reduction related to a single contract in Abu Dhabi, United Arab Emirates that was completed in 1994, as well as the effect of having lost two of its major customers. Gross Profit - --------------------------------------------------------------------------- The Company's gross profit increased to $39.6 million in 1995 from $32.8 million in 1994. Gross profit expressed as a percentage of total contract revenues climbed from 7.5% in 1994 to 11.2% in 1995. With the exception of the Civil unit, each of the Company's business units reported improvements in its gross profits as a percentage of total contract revenues for the year. Despite lower 1995 volumes in the Buildings and Energy units, these units provided the most significant percentage improvements. Specifically, the 1995 improvement of $5.5 million in the Energy unit resulted primarily from a combination of 1994 contract-related charges totaling $4.1 million at Baker/MO and improved 1995 margins related to the aforementioned termination of certain Baker/MO contracts during the year. In the Buildings unit, the $2.9 million improvement was effected by the combination of a favorable 1995 contract settlement, and 1994 writedowns on certain construction contracts. The percentage decline in the Civil unit resulted primarily from 1995 charges taken on a significant operations and maintenance contract. The 1994 gross profit represented an improvement from $22.7 million in 1993. Expressed as a percentage of total contract revenues, gross profit for 1994 increased from 5.2% in 1993. This overall increase resulted primarily from an increase of $15.5 million in the Buildings unit, despite a decrease of $5.4 million in the Energy unit. The improvement in the Buildings unit resulted principally from 1993 charges totaling $18.1 million related to the completion of several military housing renovation projects. Refinements of contract estimates related to these projects were made in 1994, thereby improving this unit's 1994 gross profit by $1.6 million. Also within the Buildings unit, the remaining decrease in gross profit for its construction division was the result of an inability to attract profitable new work and the 1994 contract writedowns mentioned above. The decrease in the Energy unit resulted from a combination of the 1994 Baker/MO contract-related charges totaling $4.1 million, depressed conditions in Baker/MO's markets during 1994, and the loss of two of its major customers. General and Administrative Expenses - --------------------------------------------------------------------------- General and administrative ("G&A") expenses decreased to $34.5 million in 1995 from $41.9 million in 1994. While the 1994 amount included restructuring charges totaling $1.1 million, the remainder of the overall decrease is attributable to the cost reduction programs at Baker/MO and in the construction divisions of the Company's Buildings and Transportation business units. These cost reductions were effected during 1994 and early 1995 to better align each of the divisions with its expected revenues, and resulted in cost reductions totaling approximately $5.6 million in 1995. G&A expenses decreased in 1994 from $44.5 million in 1993. Significant items included in the 1993 amount were costs associated with discontinuing certain operations and writing down certain noncurrent assets totaling $4.5 million. After excluding these significant items and the previously mentioned $1.1 million for 1994, G&A expenses increased on an overall basis by $800,000 due to higher costs associated with executive management changes effected in late 1993 and 1994, and the first full year's effect of having added an internal audit department in late 1993. Other Income and Expense - --------------------------------------------------------------------------- Despite higher interest rates on borrowings during 1995, interest expense decreased by $396,000 to $336,000 for the year as a result of the Company's repayment of all working capital borrowings under its revolving credit agreement in September 1995. Interest income increased by $141,000 to $221,000 in 1995, again due to the Company's repayment of its borrowings and its subsequent investment of cash generated from operations. Interest expense rose by $368,000 to $732,000 during 1994 as a result of increased working capital borrowings under the Company's revolving credit agreement and interest rate increases over the course of the year. Other income increased by $608,000 to $204,000 in 1994 due partly to 1994 income generated from a real estate investment and because the 1993 expense amount included a charge of $300,000 related to the writedown of certain property to its fair market value. Income Taxes - ---------------------------------------------------------------------------- The provision for/(benefit from)income taxes resulted in an effective tax rate of 43% in 1995, (17)% in 1994, and (32)% in 1993. The difference between these percentages and the 34% statutory U.S. federal rate is attributable primarily to state and foreign income taxes and the nondeductibility of certain normal business expenses. The 1995 provision rate was impacted both by the Company returning to profitability for the year, and by the realization of a $600,000 tax benefit from a Baker Support joint venture. The 1994 benefit rate decreased from 1993 due to a reduction of foreign tax benefits. Another difference in the rates relates to certain states having established limitations on the amount of net operating losses that may be carried forward to benefit future years. Furthermore, certain states do not allow taxable losses generated by subsidiaries to be offset by taxable income generated by other subsidiaries within the Company's consolidated group. The Company has recorded a net deferred tax asset of $4.0 million at December 31, 1995. As discussed further in Note 9 to the consolidated financial statements, management believes that the Company will have sufficient future taxable income to make it more likely than not that the net deferred tax asset will be realized. New Accounting Pronouncement - --------------------------------------------------------------------------- In October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS 123). Under this standard, the Company may either continue to account for stock options granted as it currently does under the intrinsic value based method prescribed by APB Opinion No. 25, "Accounting for Stock Issued to Employees," or it may use the fair value based method prescribed by SFAS 123. The Company plans to continue using the intrinsic value method, but will adopt the disclosure requirements of SFAS 123 effective January 1, 1996. - ------------------------------------------------------------------------- CONTRACT BACKLOG - ------------------------------------------------------------------------- The Company's funded backlog, which consists of that portion of work represented by signed contracts and for which the procuring agency has appropriated and allocated the funds to pay for the work, was $300 million at December 31, 1995, an increase from $283 million at the end of 1994. The overall 1995 increase resulted primarily from an increase in the Company's Buildings business unit of $27 million, despite relatively minor decreases in certain other units. Significant new contracts added to the Company's funded backlog in 1995, all of which relate to the Buildings unit, were a contract totaling $55 million to construct an airport terminal in Buffalo, New York, and a $26 million contract to provide construction management services for a convention center in Orlando, Florida. Total backlog, which incrementally includes that portion of contract value for which options are still to be exercised (unfunded backlog), was $508 million at the end of 1995 versus $468 million at the end of 1994. The overall increase in unfunded backlog resulted from increases in the Civil unit of $63 million, despite a $29 million decrease in the Buildings unit. The increase in the Civil unit is predominantly the result of a five-year, $50 million contract extension to continue providing engineering services for the Federal Emergency Management Agency (FEMA) and a ten-year, $36 million contract to provide operation and maintenance services at a military base. The decrease in the Buildings unit is the consequence of transfers from unfunded to funded backlog for engineering projects during the year. - ---------------------------------------------------------------------------- LIQUIDITY AND CAPITAL RESOURCES - ---------------------------------------------------------------------------- Net cash provided by operating activities improved significantly to $15.5 million in 1995, compared to $5.4 million in 1994 and $4.8 million in 1993. The 1995 improvement resulted primarily from the Company achieving net income totaling $2.9 million for 1995 versus 1994's net loss of $7.9 million. The primary sources of the 1994 cash generated by operating activities were a decrease of $8.4 million in contract-related assets and a reduction in the net loss from 1993. Net cash used in investing activities was $2.3 million in 1995, compared to $5.4 million in 1994 and $11.2 million in 1993. The purchase of Baker/OTS accounted for $5.5 million of the 1993 uses, while purchases of property, plant and equipment made up the remainder for 1993 and represented all of the 1994 and 1995 uses. During 1994, non-recurring capital expenditures totaling $1.0 million related to the completion of renovations to the Company's office building in Beaver, Pennsylvania, were incurred. The remainder of the 1995 reduction reflects management's concerted effort to more closely monitor capital expenditures and the effect of the Company having entered into a leasing arrangement for the majority of computer equipment during 1995. Net cash used in financing activities was $2.5 million in 1995, compared to $1.5 million in 1994 and cash provided of $5.1 million in 1993. During 1995, the Company totally repaid its borrowings under its revolving credit facility and subsequently remained invested at year end. All 1994 and 1995 cash uses resulted from repayments of long-term debt and borrowings on the revolving credit facility, while the Company was a net borrower on its revolving credit facility in 1993. During 1993, the Company also benefitted from having sold its remaining treasury stock to the ESOP. Working capital increased to $25.2 million at December 31, 1995 from $22.4 million at December 31, 1994. Current ratios were 1.36:1 at the end of 1995 and 1.26:1 at the end of 1994. These increases are principally due to the Company having short-term investments of $12.9 million at December 31, 1995, versus being $2.0 million borrowed at December 31, 1994. In March 1996, the Company entered into an amended secured credit agreement with Mellon Bank, N.A. Under its terms, the agreement provides for a commitment of $25.0 million, which covers loans and letters of credit, through May 31, 1998. As of December 31, 1995, no borrowings were outstanding; however, letters of credit totaling $6.7 million were outstanding under the agreement. Management believes that the credit agreement will be adequate to meet its borrowing and letter of credit requirements through May 31, 1998. The Company is required to provide bid and performance bonding on certain construction contracts, and has a $350 million bonding line available through Aetna Casualty and Surety Company of America. Management believes that its bonding line will be sufficient to meet its bid and performance needs for the foreseeable future. A significant portion of the Company's cash flow is dependent upon appropriations of public funds and financial terms under long-term contracts. The Company's short and long-term liquidity will be affected by the improved but still narrow margins on construction work in backlog, and its ability to sustain profitable operations and to control costs during periods of lower volumes. Additional external factors such as price fluctuations in the energy industry and the effects of interest rates on private construction projects could affect the Company. At this time, management believes that its funds generated from operations, its existing credit facility and its longer-term borrowing capabilities will be sufficient to meet its operating requirements for the foreseeable future.
CONSOLIDATED BALANCE SHEET - -------------------------------------------------------------------------- As of December 31, 1995 1994 ASSETS - -------------------------------------------------------------------------- (In thousands) CURRENT ASSETS Cash $14,303 $ 3,605 Trade receivables 53,708 69,618 Cost of contracts in progress, plus estimated earnings recorded, less billings thereon 19,104 24,246 Prepaid expenses and other 7,816 10,670 - -------------------------------------------------------------------------- Total current assets 94,931 108,139 - -------------------------------------------------------------------------- PROPERTY, PLANT AND EQUIPMENT, NET 12,558 14,970 - -------------------------------------------------------------------------- OTHER ASSETS Goodwill, net of accumulated amortization of $1,649,000 and $1,359,000 in 1995 and 1994, respectively 4,667 4,958 Other intangible assets, net of accumulated amortization of $1,625,000 and $3,100,000 in 1995 and 1994, respectively 2,467 3,013 Other assets 2,753 3,714 - -------------------------------------------------------------------------- Total other assets 9,887 11,685 - -------------------------------------------------------------------------- TOTAL ASSETS $117,376 $134,794 - --------------------------------------------------------------------------
The accompanying notes are an integral part of this statement.
CONSOLIDATED BALANCE SHEET - ------------------------------------------------------------------------- As of December 31, 1995 1994 LIABILITIES AND SHAREHOLDERS' INVESTMENT - -------------------------------------------------------------------------- (In thousands) CURRENT LIABILITIES Current portion of long-term debt $ 1,204 $ 2,539 Accounts payable 30,879 42,876 Accrued employee compensation 5,703 4,224 Accrued insurance 6,204 8,167 Other accrued expenses 15,261 19,304 Excess of billings on contracts in progress over cost and estimated earnings recorded thereon 10,494 8,638 - ------------------------------------------------------------------------- Total current liabilities 69,745 85,748 - ------------------------------------------------------------------------- OTHER LIABILITIES Long-term debt -- 3,960 Other -- 355 - ------------------------------------------------------------------------- Total liabilities 69,745 90,063 - ------------------------------------------------------------------------- SHAREHOLDERS' INVESTMENT Common Stock, par value $1, authorized 44,000,000 shares, issued 7,011,302 and 7,001,435 shares, in 1995 and 1994, respectively 7,012 7,002 Series B Common Stock, par value $1, authorized 6,000,000 shares issued 1,352,250 and 1,362,117 shares in 1995 and 1994, respectively 1,352 1,362 Paid-in surplus 36,534 36,534 Retained earnings/(accumulated deficit) 2,733 (167) - -------------------------------------------------------------------------- Total shareholders' investment 47,631 44,731 - -------------------------------------------------------------------------- TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT $117,376 $134,794 - --------------------------------------------------------------------------
The accompanying notes are an integral part of this statement.
CONSOLIDATED STATEMENT OF INCOME - ----------------------------------------------------------------------------- For the years ended December 31, 1995 1994 1993 - ----------------------------------------------------------------------------- (In thousands, except per share amounts) Total contract revenues $354,728 $437,193 $434,791 Cost of work performed 315,155 404,439 412,090 - ---------------------------------------------------------------------------- Gross profit 39,573 32,754 22,701 General and administrative expenses 34,469 41,851 44,506 - ---------------------------------------------------------------------------- Income/(loss)from operations 5,104 (9,097) (21,805) Other income (expense): Interest expense (336) (732) (364) Interest income 221 80 100 Other, net 91 204 (404) - ---------------------------------------------------------------------------- Income/(loss) before income taxes 5,080 (9,545) (22,473) - ---------------------------------------------------------------------------- Prov. for/(bene. from)income taxes 2,180 (1,600) (7,191) - --------------------------------------------------------------------------- Income/(loss) before cumulative effect of change in accounting principle 2,900 (7,945) (15,282) Cumulative effect on prior years of change in accounting for income taxes --- --- 154 - --------------------------------------------------------------------------- Net income/(loss) $2,900 $(7,945) $(15,128) - --------------------------------------------------------------------------- Net income/(loss) per share $0.35 $(0.95) $(1.82) - ---------------------------------------------------------------------------
The accompanying notes are an integral part of this statement.
CONSOLIDATED STATEMENT OF CASH FLOWS - -------------------------------------------------------------------------- For the years ended December 31, 1995 1994 1993 - -------------------------------------------------------------------------- (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES Net income/(loss) $2,900 $(7,945) $(15,128) Adjustments to reconcile net income/(loss) to net cash provided by operating activities: Depreciation and amortization 5,049 5,279 5,491 Deferred income taxes 460 (1,765) (7,027) Writedown of noncurrent assets --- --- 1,511 Changes in assets and liabilities: Decrease/(increase) in receivables, contracts in progress and adv. billings 22,909 8,406 (12,430) Decr./(incr.) in other net assets 3,847 (1,007) 7,225 (Decrease)/increase in accounts payable and accrued expenses (19,626) 2,447 25,116 ----------------------------------------------------------------------- Total adjustments 12,639 13,360 19,886 ------------------------------------------------------------------------- Net cash provided by operating activities 15,539 5,415 4,758 ------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Add. to property, plant and equip. (2,294) (5,436) (5,685) Pymnts for acquisitionss, net of cash acquired --- --- (5,547) ------------------------------------------------------------------------- Net cash used in investing activities (2,294) (5,436) (11,232) ------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES (Repayments of)/proceeds from revolving credit loans (2,035) (965) 3,000 Repayments of other long-term debt (512) (512) (477) Proceeds from sale of stock to ESOP --- --- 2,582 ------------------------------------------------------------------------- Net cash (used in)/provided by financing activities (2,547) (1,477) 5,105 ------------------------------------------------------------------------- Net increase/(decrease) in cash 10,698 (1,498) (1,369) Cash at beginning of year 3,605 5,103 6,472 ------------------------------------------------------------------------- CASH AT END OF YEAR $14,303 $3,605 $5,103 ------------------------------------------------------------------------- Supplemental Disclosure of Cash Flow Data Interest paid $537 $690 $467 Income taxes paid $1,671 $3,184 $643 -------------------------------------------------------------------------- SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES-ACQUISITION OF BUSINESSES Fair value of assets acquired $--- $--- $10,470 Cash paid --- --- (7,810) Liabilities assumed --- --- 2,660 ------------------------------------------------------------------------- The accompanying notes are an integral part of this statement.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' INVESTMENT - ---------------------------------------------------------------------------- Series B Common Common Stock Stock Par Value Par Value $1 $1 (1 vote) (10 votes) Treasury Paid-in Retained (In thousands) per share per share Shs Amt Surplus Earnings - ---------------------------------------------------------------------------- Balance, Jan. 3, 1993 $6,988 $1,376 203 $295 $34,561 $22,906 Net loss --- --- --- --- --- (15,128) Series B Common Stock conversions to regular Common Stock 5 (5) --- --- --- --- Series B Common Stock sold to ESOP --- --- (203) (295) 1,973 --- - ---------------------------------------------------------------------------- Balance, Dec. 31, 1993 6,993 1,371 --- --- 36,534 7,778 Net loss --- --- --- --- --- (7,945) Series B Common Stock conversions to regular Common Stock 9 (9) --- --- --- --- - ----------------------------------------------------------------------------- Balance, Dec. 31, 1994 7,002 1,362 --- --- 36,534 (167) Net income --- --- --- --- --- 2,900 Series B Common Stock conversions to regular Common Stock 10 (10) --- --- --- --- - ----------------------------------------------------------------------------- Balance, Dec. 31, 1995 $7,012 $1,352 --- $--- $36,534 $2,733 =============================================================================
The accompanying notes are an integral part of this statement. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - ---------------------------------------------------------------------------- Principles of Consolidation - ---------------------------------------------------------------------------- The consolidated financial statements include the accounts of the Company and its subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation. Accounting for Contracts - --------------------------------------------------------------- Total contract revenues have been recorded on the percentage-of-completion method of accounting for the engineering and construction contracts in the Buildings, Civil, Environmental and Transportation Units. Contract revenues attributable to claims are recognized when realization is probable and the amounts can be reliably estimated. Earnings on fixed-price contracts are determined by multiplying the total estimated gross profit for the contracts by the percentage of physical completion to date (which approximates costs incurred to date in relation to total estimated costs), less earnings recognized in prior periods. Earnings under cost reimbursement contracts are recorded as costs are incurred and include estimated fees in the proportion that costs incurred to date compare to total estimated costs. As work is performed under long-term contracts, estimates of the costs are reviewed and, when necessary, revised on a current basis. Contract costs include costs of subcontracts, direct labor, supplies and overhead. Estimated losses on contracts in progress, if significant, are recorded as they are identified. Total contract revenues for the operations and maintenance contracts within the Civil and Energy Units are primarily recognized as costs are incurred and related services are provided. The Civil Unit's government contracts are typically binding on the Company for a multi-year period and are renewable at the option of the respective government agency. Modifications to contract terms that result in retroactive adjustments to contract revenues are recognized when realization is probable. Accounting for Joint Ventures - --------------------------------------------------------------- The Company records its interest in all majority-owned joint ventures based on the equity method of accounting for investments, in the accompanying Consolidated Balance Sheet. The Company's proportionate share of majority- owned joint venture revenue and cost of contracts is included in the accompanying Consolidated Statement of Income. The Company's investment in joint ventures for which the related projects are expected to be completed within one year is shown as other current assets in the accompanying Consolidated Balance Sheet. Use of Estimates - -------------------------------------------------------------- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses for the reporting period. Actual results could differ from those which result from using the estimates. The use of estimates is an integral part of applying percentage-of-completion accounting for contracts. Income Taxes - --------------------------------------------------------------- In the first quarter in 1993, the Company adopted Statement of Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes." The adoption of SFAS 109 changed the Company's method of accounting for income taxes from the deferred method (prescribed by Accounting Principles Board Opinion No. 11) to an asset and liability approach. The asset and liability approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of other assets and liabilities. As a result of adopting SFAS 109, the Company recognized a cumulative benefit from the change in accounting principle of $154,000 in the first quarter of 1993, or $0.02 per share for the year ended December 31, 1993. Depreciation and Amortization - --------------------------------------------------------------- Depreciation on property, plant and equipment is recorded using straight-line and accelerated methods over the estimated useful lives of the assets which range from three to 31 years. Amortization of intangible assets is provided primarily on a straight-line basis over the estimated useful lives of the assets, which range from five to 10 years. Upon disposal of property items, the asset and related accumulated depreciation accounts are relieved of the amounts recorded therein for such items and any resulting gain or loss is reflected in income. Goodwill - --------------------------------------------------------------- Goodwill, which represents the excess of cost over net assets of acquired companies, is being amortized on the straight-line basis over periods ranging from 15 to 40 years. Earnings Per Common Share - --------------------------------------------------------------- Per share computations are based upon a weighted average of 8,368,206, 8,363,552, and 8,303,668 shares in 1995, 1994, and 1993, respectively. Stock options are included as share equivalents in the computation of weighted average shares outstanding using the treasury stock method. The Company's 1995 Stock Incentive Plan, which was approved at the annual meeting of shareholders on May 24, 1995, had no significant impact on earnings per share for the year ended December 31, 1995. - --------------------------------------------------------------- 2. CONTRACTS - --------------------------------------------------------------- The total cost of contracts in progress (used to determine cost of work performed) plus accumulated gross profit recorded was $624,971,000 and $885,827,000 at December 31, 1995 and 1994, respectively. Billings to date on contracts in progress at December 31, 1995 and 1994 were $616,361,000 and $870,219,000, respectively. Trade accounts receivable totaling $7,384,000 and $16,120,000 at December 31, 1995 and 1994, respectively, relate to retainage provisions under long-term contracts which will be due upon completion of the contracts. Based on management's estimates, the majority of the retention balance at December 31, 1995 is expected to be collected in 1996. As of December 31, 1995 and 1994, the Company had an allowance for doubtful accounts of $1,357,000 and $667,000, respectively. As of December 31, 1995 and 1994, accounts payable included amounts due to subcontractors of $4,553,000 and $10,533,000, respectively, which have been retained under contractual terms pending the completion and acceptance of the work performed by the subcontractors. Certain subsidiaries of the Company participate in joint ventures that are typically formed to accomplish a specific project and then dissolved upon completion of the project. The number of joint ventures in which the Company participates and the size, scope and duration of the projects vary between periods. The Company's equity investment in these joint ventures was $1,891,000 and $1,397,000 at December 31, 1995 and 1994, respectively. Consistent with industry practice, within each of the Company's operating units, credit is granted to customers for the payment of services rendered. Although the Company has a diversified client base, a substantial portion of its receivables and net underbillings reflected in the accompanying Consolidated Balance Sheet is dependent upon federal and state government appropriations. - --------------------------------------------------------------- 3. ACQUISITION - --------------------------------------------------------------- On March 3, 1993, the Company, through a newly formed Delaware subsidiary, Baker/OTS Inc., acquired all of the outstanding shares of capital stock of the Overseas Technical Services companies ("OTS") from their shareholders. The purchase price for the shares of OTS was $5,270,000. The Company also paid $2,000,000 as consideration to the sellers for entering into certain noncompetition covenants and paid $1,000,000 in 1995 as a result of OTS attaining a specified performance level. The acquisition of OTS has been accounted for as a purchase. Accordingly, the operating results for OTS have been included in the Consolidated Statement of Income since March 3, 1993. As required under the purchase method of accounting, the acquisition costs have been allocated to the net assets acquired based upon the fair market value to the Company as of the date of acquisition. The excess of acquisition costs over fair market value is being amortized over 15 years. The principal components of net noncurrent assets acquired and their approximate values were intangible assets of $4,072,000, and property, plant and equipment of $169,000. The operating results on a pro forma basis for fiscal 1993 are not presented as they are not materially different from the Company's actual results. - --------------------------------------------------------------- 4. BUSINESS SEGMENT INFORMATION - --------------------------------------------------------------- Effective January 1, 1995, the Company reorganized from its former three operating groups into the following five market-focused business units: Buildings, Civil, Energy, Environmental and Transportation. The following tables reflect the revenues and income/(loss) from operations for the five business units (in millions):
1995 1994 1993 - --------------------------------------------------------------- Total contract revenues from: Buildings Unit $116.3 $186.2 $162.7 Civil Unit 73.9 78.2 72.0 Energy Unit 37.0 45.5 72.3 Environmental Unit 27.7 30.2 34.4 Transportation Unit 99.8 97.1 93.4 - --------------------------------------------------------------- Total $354.7 $437.2 $434.8 ===============================================================
1995 1994 1993 - --------------------------------------------------------------- Income/(loss)from operations from: Buildings Unit $1.8 $(5.4) $(22.0) Civil Unit (0.6) 4.8 4.5 Energy Unit 0.8 (7.7) (3.4) Environmental Unit 1.9 1.0 0.0 Transportation Unit 1.2 (1.8) (0.9) - --------------------------------------------------------------- Total $5.1 $(9.1) $(21.8) ===============================================================
The following represents identifiable assets (both tangible and intangible) that are associated with the operations of each business unit (in millions):
1995 1994 - --------------------------------------------------------------- Identifiable assets from: Buildings Unit $33.1 $42.8 Civil Unit 22.5 29.4 Energy Unit 14.2 16.6 Environmental Unit 6.1 9.0 Transportation Unit 27.1 32.9 Corporate 14.4 4.1 - --------------------------------------------------------------- Total $117.4 $134.8 ===============================================================
Based on total contract revenues, the principal markets for the Company's services are as follows:
1995 1994 1993 - --------------------------------------------------------------- United States government 32.5% 24.7% 23.3% Various state governmental and quasi-governmental agencies 44.4% 35.6% 36.6% Commercial, industrial and private clients 23.1% 39.7% 40.1% ===============================================================
The Company's business is substantially conducted in the domestic marketplace. No individual contract accounted for more than 10% of the Company's total contract revenues in 1995, 1994, or 1993; however, several contracts with the State of Illinois provided 10.5% and 13.5% of the Company's total contract revenues in 1995 and 1994, respectively. Several contracts with the U.S. Department of Navy provided 10.9%, 12.1%, and 10.9% of the Company's 1995, 1994 and 1993 total contract revenues, respectively. - --------------------------------------------------------------- 5. PROPERTY, PLANT AND EQUIPMENT - --------------------------------------------------------------- Property, plant and equipment consists of the following (in thousands):
1995 1994 ------- ------- Land $ 693 $ 693 Buildings and improvements 5,952 5,790 Equipment and vehicles 28,202 27,619 - ---------------------------------------------------- Total, at cost 34,847 34,102 Less-Accumulated depreciation 22,289 19,132 - ---------------------------------------------------- Net property, plant and equipment $12,558 $14,970 ====================================================
- --------------------------------------------------------------- 6. LONG-TERM DEBT AND BORROWING ARRANGEMENTS - --------------------------------------------------------------- In March 1996, the Company entered into an amended secured credit agreement (the "Agreement") with Mellon Bank, N.A. (the "Bank"). Under its terms, the Agreement provides for a commitment of $25 million through May 31, 1998. Under the Agreement, the commitment includes the sum of the principal amount of revolving credit loans outstanding and the aggregate face value of outstanding letters of credit. As of December 31, 1995, no borrowings were outstanding; however, letters of credit totaling $6,669,000 were outstanding under the Agreement. The Agreement provides for the Company to borrow at 1/4% over the Bank's prime interest rate or at other indexed rates that may be lower, and for the Company to meet certain cash flow, leverage, interest coverage and tangible net worth requirements. The Agreement also limits the Company's capital expenditures and the declaration or payment of dividends to the Company's shareholders, and is secured by substantially all of the Company's assets, excluding the accounts receivable for certain bonded construction projects. For 1995, the Company paid the Bank commitment fees of 1/2% per year based on the unused portion of the commitment; this fee arrangement remains in effect under the Agreement. The maximum amount of borrowings outstanding under the Agreement during 1995 was $9,932,000. For 1995, the average daily balance outstanding when the Company was in a net borrowing position was $4,249,000 at a weighted average rate of 9.1%. For the period during 1994 in which the Company was in a net borrowing position, the average daily balance outstanding was $9,293,000 at a weighted average rate of 6.5%. The proceeds of the loans under the Agreement were used for various working capital requirements. Amounts included in the current portion of long-term debt in the accompanying Consolidated Balance Sheet represent amounts due to former owners of acquired assets and subsidiaries. - --------------------------------------------------------------- 7. CAPITAL STOCK - --------------------------------------------------------------- During 1993, the Company sold 202,601 treasury shares of Series B Common Stock to the Michael Baker Corporation Employee Stock Ownership Plan at market prices ranging from $9.29 to $14.20 per share. Total proceeds to the Company for these sales were $2,252,000. The Company's Articles of Incorporation authorize the issuance of 300,000 shares of Cumulative Preferred Stock, par value $1 per share. At December 31, 1995, there were no shares of such Preferred Stock outstanding. - --------------------------------------------------------------- 8. LEASE COMMITMENTS - --------------------------------------------------------------- Rent expense under noncancelable leases was $8,388,000 in 1995, $8,111,000 in 1994 and $8,651,000 in 1993. Minimum annual rentals payable under noncancelable leases in each of the five years after December 31, 1995 are $8,441,000, $7,050,000, $5,048,000, $4,131,000 and $3,873,000, respectively. These noncancelable leases relate to office space, computer equipment, office equipment and vehicles with lease terms ranging from one to 10 years. - --------------------------------------------------------------- 9. INCOME TAXES - --------------------------------------------------------------- The provision for/(benefit from) income taxes consisted of the following (in thousands):
1995 1994 1993 - --------------------------------------------------------------- Current income taxes: Federal $ -- $(808) $(1,431) State 837 80 466 Foreign 883 893 801 - --------------------------------------------------------------- Total current income taxes 1,720 165 (164) - --------------------------------------------------------------- Deferred income taxes: Federal 994 (2,190) (7,027) State (534) 425 -- - --------------------------------------------------------------- Total deferred income taxes 460 (1,765) (7,027) - --------------------------------------------------------------- Total provision for/(benefit from)income taxes $2,180 $(1,600) $(7,191) ===============================================================
The following is a reconciliation of income taxes at the federal statutory rate to income taxes recorded by the Company (in thousands):
1995 1994 1993 - --------------------------------------------------------------- Computed income taxes at U.S. federal statutory rate $1,727 $(3,245) $(7,641) Loss of foreign tax credits -- 629 -- Foreign taxes, net of federal income tax benefit 583 377 -- State income taxes, net of federal income tax benefit 153 333 466 Nondeductible charges 246 179 (91) Realization of tax benefit (600) -- -- Other, net 71 127 75 - --------------------------------------------------------------- Total provision for/(benefit from) income taxes $2,180 $(1,600) $(7,191) ===============================================================
The domestic and foreign components of income/(loss) before income taxes are as follows (in thousands):
1995 1994 1993 - --------------------------------------------------------------- Domestic $2,816 $(12,120) $(26,228) Foreign 2,264 2,575 3,755 - --------------------------------------------------------------- Total $5,080 $(9,545) $(22,473) ===============================================================
The components of the Company's deferred income tax assets and liabilities at December 31, 1995 and 1994 are as follows (in thousands):
1995 1994 - --------------------------------------------------------------- Deferred income tax assets: Deductible temporary differences Provision for expenses and losses $ 4,540 $ 6,485 Contract overbillings 1,326 1,661 Federal tax operating loss carryforward 1,476 1,363 Accrued vacation pay 1,134 970 Fixed and intangible assets 517 602 Other 1,721 1,331 - --------------------------------------------------------------- Total deferred income tax assets 10,714 12,412 - --------------------------------------------------------------- Deferred income tax liabilities: Contract underbillings (6,689) (7,647) State income tax, net -- (280) - --------------------------------------------------------------- Total deferred income tax liabilities (6,689) (7,927) - --------------------------------------------------------------- Net deferred tax asset $ 4,025 $ 4,485 ===============================================================
The Company believes that it will have sufficient future taxable income to make it more likely than not that the net deferred tax asset at December 31, 1995 will be realized. In making this assessment, management has considered the Company's historic operating performance and taxable income generated by its core engineering business, and further believes that its taxable losses generated in 1993 and 1994 were abnormal. As of December 31, 1995, the Company had a U.S. net operating loss carryforward of $4,341,000. This carryforward expires in the year 2010. The Company's U.S. income tax returns have been examined by the Internal Revenue Service through 1991. Management believes that adequate provisions have been made for income taxes at December 31, 1995. - --------------------------------------------------------------- 10. CONTINGENCIES - --------------------------------------------------------------- The Company is self-insured for its primary layer of professional liability insurance through a wholly-owned captive insurance subsidiary. The secondary layer of the professional liability insurance continues to be provided, consistent with industry practice, under a "claims-made" insurance policy placed with an independent insurance company. (Under claims-made policies, coverage must be in effect when a claim is made.) This insurance is subject to standard exclusions. The Company is self-insured up to certain limits with respect to its workers' compensation and general liability exposures. Provisions for losses expected for these exposures are recorded based upon the Company's estimates of the aggregate liability for claims incurred. Such estimates utilize certain actuarial assumptions followed in the insurance industry. Insurance coverage is obtained for catastrophic exposures as well as those risks required to be insured by law or contract. The Company has been named as a defendant or co-defendant in legal proceedings wherein substantial damages are claimed. Such proceedings are not uncommon to the Company's business. After consultations with counsel, management believes that the Company has recognized adequate provisions for these proceedings and their ultimate resolutions will not have a material adverse effect on the consolidated financial position or annual results of operations of the Company. The only significant proceeding relates to a lawsuit brought in 1987 in the Supreme Court of the State of New York, Bronx County, by the Dormitory Authority of the State of New York against a number of parties, including the Company and one of its wholly-owned subsidiaries, that asserts breach of contract and alleges damages of $13,000,000. The Company, which was not a party to the contract underlying the lawsuit, contends that there is no jurisdiction with respect to the Company and that it cannot be held liable for any conduct of the subsidiary. Both the Company and the subsidiary are contesting liability issues and have filed cross-claims and third-party claims against other entities involved in the project. At December 31, 1995, certain subcontractors performing work on uncompleted Company and joint venture construction contracts and certain contractors on construction management projects had not been required to furnish performance bonds. In the opinion of management, provision has been made for all costs that will be incurred as a result of such contractors not performing in accordance with their agreements. - --------------------------------------------------------------- 11. EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST - --------------------------------------------------------------- The Company maintains a defined contribution retirement program through an Employee Stock Ownership Plan ("ESOP"), in which substantially all employees are eligible to participate. In addition to providing a vehicle for investment in Company stock, the ESOP offers participants several other investment options. Contributions to the ESOP are derived from a 401(k) Salary Redirection Program with a Company matching contribution, and a discretionary contribution as determined by the Company's Board of Directors. Under the 401(k) Salary Redirection Program, the Company matches 100% of the first 5% of salary contributed by an employee. The Company's matching contributions are invested in Michael Baker Corporation Common Stock. Such contributions under this program amounted to $2,912,000, $2,925,000, and $2,862,000 in 1995, 1994, and 1993, respectively. As of December 31, 1995, the market value of all ESOP investments was approximately $40,679,000, of which 43% represented the market value of the ESOP's investment in Michael Baker Corporation Common Stock. The Company's ESOP held 41% of the shares and 71% of the voting power for the outstanding Common Stock and Series B Common Stock of the Company at the end of 1995. - --------------------------------------------------------------- 12. STOCK OPTION PLANS - --------------------------------------------------------------- Effective January 1, 1995, the Michael Baker Corporation 1995 Stock Incentive Plan (the "Plan") was formed to motivate and reward key employees who make significant contributions toward enhancing the Company's success. Under the Plan, options are granted to participants annually, provided that the Company has attained certain minimum prior year performance goals set at the beginning of the prior year. On the date of grant, one-fourth of the options granted become vested, and the remaining three-fourths vest in annual one-fourth increments. Vested options remain exercisable for a period of ten years from the grant date. The Company's Board of Directors has authorized 500,000 shares of Common Stock for issuance upon the exercise of options granted under the Plan. The following table summarizes the options outstanding during 1995, all of which have an exercise price of $5.00 per share: - --------------------------------------------------------------- Granted on and outstanding at January 1 176,894 Forfeited (25,106) Exercised or expired 0 - --------------------------------------------------------------- Outstanding at December 31 151,788 - --------------------------------------------------------------- Exercisable at December 31 44,224 ===============================================================
On February 27, 1996, the Company's Board of Directors approved the 1996 Nonemployee Directors Stock Incentive Plan (the "Directors Plan"). The Directors Plan will become effective upon its approval by the Company's shareholders at the 1996 Annual Meeting, which is scheduled to be held on May 13, 1996. The Board of Directors has reserved 150,000 shares for issuance upon the exercise of options to be granted under the Directors Plan. If approved, a total of 7,000 nonstatutory stock options will be granted and 3,500 restricted shares will be awarded to nonemployee board members effective May 14, 1996. - --------------------------------------------------------------- 13. EMPLOYEE BENEFITS - --------------------------------------------------------------- The Company contributes to multiemployer, union-administered, construction- related pension funds based on rates per hour worked by member employees. Related contribution costs included in the cost of work performed was approximately $863,000, $1,060,000, and $820,000 for the years ended December 31, 1995, 1994, and 1993, respectively. - --------------------------------------------------------------- 14. QUARTERLY RESULTS OF OPERATION (UNAUDITED) - --------------------------------------------------------------- The following is a summary of the unaudited quarterly results of operations for the two years ended December 31, 1995. The results for the fourth quarter of 1995 were adversely affected by provisions for certain litigation, contract claims and rework, and by charges taken on a significant base operating support services contract. These provisions were offset by favorable adjustments for medical and casualty insurance costs and a reduction in the Company's tax provision rate. The insurance adjustments, which totaled approximately $3.9 million, were based on changes in estimates of the Company's insurance exposures relative to its reserves and also reflects the more favorable levels of insurance experience over the last several years. The tax provision adjustment resulted from the realization of a tax benefit from a Baker Support Services joint venture, which reduced the Company's tax provision by $600,000 during the fourth quarter. Each of these fourth quarter adjustments either arose from decisions reached or events occurring during the fourth quarter of 1995, or from changes in accounting estimates based on information which became available during that period.
1995 - Three Months Ended Mar 31 Jun 30 Sept 30 Dec 31 - --------------------------------------------------------------- Total contract revenues $86,543 $88,946 $90,620 $88,619 Gross profit 9,980 10,788 10,462 8,343 Income before income taxes 829 1,852 2,049 350 Net income 431 915 1,029 525 Net income per common share $0.05 $0.11 $0.12 $0.07 ===============================================================
1994 - Three Months Ended Mar 31 Jun 30 Sept 30 Dec 31 - --------------------------------------------------------------- Total contract revenues $93,883 $109,995 $119,473 $113,842 Gross profit 10,133 10,799 10,242 1,580 Income/(loss) before income taxes (453) 605 352 (10,049) Net income/(loss) (241) 322 187 (8,213) Net income/(loss) per common share $(0.03) $0.04 $0.02 $(0.98) ===============================================================
- --------------------------------------------------------------- REPORT OF INDEPENDENT ACCOUNTANTS - --------------------------------------------------------------- To the Shareholders and Board of Directors of Michael Baker Corporation: In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of income, of shareholders' investment and of cash flows present fairly, in all material respects, the financial position of Michael Baker Corporation and its subsidiaries at December 31, 1995 and 1994, and the results of their operations and their cash flows for the years then ended, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. The consolidated financial statements of Michael Baker Corporation for the year ended December 31, 1993, were audited by other independent public accountants whose report, which was based on their audit and the report of other auditors and dated February 14, 1994, expressed an unqualified opinion on those statements. As discussed in Note 9 to the consolidated financial statements, effective January 4, 1993, the Company changed its method of accounting for income taxes. /s/ Price Waterhouse LLP - ------------------------ Price Waterhouse LLP Pittsburgh, Pennsylvania February 16, 1996, except as to Note 6 and 12, which are as of March 22, 1996 - --------------------------------------------------------------- SUPPLEMENTAL FINANCIAL INFORMATION - --------------------------------------------------------------- Market Information Common Shares - --------------------------------------------------------------- The principal market on which the Michael Baker Corporation Common Stock is traded is the American Stock Exchange. High and low closing prices of the Common Stock for each quarter during 1995 and 1994 were as follows:
1995 - --------------------------------------------------------------- First Second Third Fourth High 4 3/8 5 5/8 6 1/4 6 1/4 Low 3 3/4 3 15/16 4 3/4 4 1/4 ===============================================================
1994 - --------------------------------------------------------------- First Second Third Fourth High 10 7/8 9 1/4 6 3/4 4 9/16 Low 8 1/2 6 1/2 3 7/8 3 1/8 ===============================================================
EX-21 5 EXHIBIT 21.1 SUBSIDIARIES OF THE REGISTRANT ------------------------------ The following entities, unless otherwise indicated, are wholly-owned direct or indirect subsidiaries of the Registrant as of December 31, 1995:
State or Country Name of Organization ----- ----------------- 1. Aerial Map Service Company Pennsylvania 2. Baker Environmental, Inc. Pennsylvania 3. Baker Heavy & Highway, Inc. Pennsylvania 4. Baker Mellon Stuart Construction, Inc. Pennsylvania 5. Mellon Stuart Building Services, Inc. Pennsylvania 6. Mellon Stuart Construction International, Inc. Pennsylvania 7. Michael Baker Development Corporation Pennsylvania 8. Michael Baker Jr., Inc. Pennsylvania 9. Tinney Drilling Company, Inc. Pennsylvania 10. Touhill, Shuckrow & Associates, Inc. Pennsylvania 11. Michael Baker Alaska, Inc. Alaska 12. Baker Construction, Inc. Delaware 13. Baker Holding Corporation Delaware 14. Baker/OTS, Inc. Delaware 15. Michael Baker International, Inc. Delaware 16. MO Services, L.P.* Delaware 17. Baker Engineering, Inc. Illinois 18. Michael Baker Jr. Company Nevada 19. Michael Baker Architects/Engineers, P.C. New Jersey 20. Baker Engineering NY, Inc. New York 21. Baker/MO Services, Inc. Texas 22. Baker Support Services, Inc. Texas 23. Vermont General Insurance Company Vermont 24. Michael Baker Barbados Ltd. Barbados 25. Baker O&M International, Ltd. Cayman Islands 26. Baker/OTS International, Inc. Cayman Islands 27. Overseas Technical Service (Middle East) Ltd. Cayman Islands 28. Michael Baker de Mexico S.A. de C.V. Mexico 29. OTS International Training Services Ltd. United Kingdom 30. Overseas Technical Service (Harrow) Ltd. United Kingdom 31. Baker/OTS Ltd. United Kingdom 32. SD Forty-Five Ltd. United Kingdom 33. Hanseatic Oilfield Services Ltd. Vanuatu 34. Oilfield Personnel Recruitment and Management Ltd. Vanuatu 35. OTS Finance and Management Ltd. Vanuatu 36. OTS International Training Services Ltd. Vanuatu 37. Overseas Technical Services International Ltd. Vanuatu
- ------------------- * A Delaware limited partnership in which Baker Support Services, Inc. and Baker/MO Services, Inc. are the partners. 1 EX-23 6 Exhibit 23.1 Consent of Independent Accountants We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 33-14058) of our report dated February 16, 1996 (except as to Notes 6 and 12, which are as of March 22, 1996), appearing within Exhibit 13.1 which has been incorporated by reference into various items of Michael Baker Corporation's Annual Report on Form 10-K for the year ended December 31, 1995. We also consent to the incorporation by reference of our report on the Financial Statement Schedules, which appears as Exhibit 99.2 of this Form 10-K. /s/ Price Waterhouse LLP - ------------------------- Price Waterhouse LLP Pittsburgh, Pennsylvania March 28, 1996 EX-23 7 Exhibit 23.2 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS ------------------------------------------ As independent public accountants, we hereby consent to the use in this Form 10-K of our report dated February 14, 1994, appearing as Exhibit 99.3 to this Annual Report on Form 10-K for the year ended December 31, 1995. We also consent to the incorporation of our report included in this Form 10-K into the Company's previously filed registration statement on Form S-8 (No. 33-14058), including the prospectus therein, pertaining to the Michael Baker Corporation Employee Stock Ownership Plan. It should be noted that we have not audited any financial statements of the Company subsequent to December 31, 1993 or performed any audit procedures subsequent to the date of our report. /s/ Arthur Andersen LLP ------------------------- ARTHUR ANDERSEN LLP Pittsburgh, Pennsylvania March 28, 1996 EX-99 8 Exhibit 99.1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 11-K Annual Report Pursuant to Section 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 1995 Commission file number 33-14058 A. Full title of the plan and the address of the plan, if different from that of the issuer named below: Michael Baker Corporation Employee Stock Ownership Plan B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: Michael Baker Corporation Airport Office Park, Building 3 420 Rouser Road Coraopolis, PA 15108 Michael Baker Corporation Employee Stock Ownership Plan Financial Statements Periods Ended December 31, 1995 and 1994 and January 2, 1994 Index - -------------------------------------------------------- Report of Independent Accountants Financial Statements: Statements of Financial Condition With Fund Information - December 31, 1995 and 1994 Statements of Income and Changes in Participants' Equity With Fund Information - For the Periods Ended December 31, 1995 and 1994 and January 2, 1994 Notes to Financial Statements Additional Information:* Schedule of Assets Held for Investment Purposes - December 31, 1995 * Other schedules required by Section 2520.103-1 of the Department of Labor Rules and Regulations for Reporting and Disclosure under ERISA have been omitted because they are not applicable. The Schedule of reportable transactions (transactions in excess of 5 percent of the current value of plan assets at the beginning of the year) has not been provided since such information has not been provided by the Trustee. Report of Independent Accountants March 15, 1996 To the Participants and Administrator of the Michael Baker Employee Stock Ownership Plan In our opinion, the accompanying statements of financial condition and the related statements of income and changes in participants' equity present fairly, in all material respects, the financial position of the Michael Baker Employee Stock Ownership Plan (the ESOP) at December 31, 1995 and 1994, and the results of operations and the changes in participants' equity for the years then ended, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the ESOP's Administrator; our responsibility is to express an opinion on these statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. The financial statement of the ESOP for the period ended January 2, 1994, was audited by other independent public accountants whose report dated February 15, 1994, expressed an unqualified opinion on that statement. Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules of assets held for investment purposes and of reportable transactions are presented for purposes of additional analysis and are not a required part of the basic financial statements but are additional information required by the Employee Retirement Income Security Act of 1974 (ERISA). The fund information in the statement of financial condition and the statement of income and changes in participants' equity is presented for purposes of additional analysis rather than to present the financial condition and income and changes in participants' equity of each fund. The supplemental schedules and fund information have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. The plan has not presented the schedule of reportable transactions (transactions in excess of 5 percent of the current value of plan assets at the beginning of the year). Disclosure of this information is required by the Department of Labor Rules and Regulations for Reporting and Disclosure under ERISA. Michael Baker Corporation Employee Stock Ownership Plan Statement of Financial Condition With Fund Information December 31, 1995
December 31, 1995 -------------------------------- Dreyfus/ Laurel Prime Premier Money Market Balanced Fund Fund Assets Investments, at quoted market value: Investments in common stock of Michael Baker Corporation: Common stock $ - $ - Series B common stock - - Investments in trust funds managed by Mellon Bank N.A.: Dreyfus/Laurel Prime Money Market Fund (market value approximates cost) 3,433,306 - Premier Balanced Fund (703,452 shares with a cost of $7,227,448) - 8,610,252 Dreyfus Disciplined Stock Fund (453,587 shares with a cost of $8,554,746) - - Dreyfus Bond Market Index Fund (41,414 shares with a cost of $398,830) - - Participants' notes receivable (market value approximates cost) - - ---------- ---------- Total investments 3,433,306 8,610,252 Contributions receivable from Michael Baker Corporation - - Temporary investments 43,980 160,505 ---------- ---------- Participants' equity $3,477,286 $8,770,757 =========== ==========
The accompanying notes are an integral part of these financial statements. Michael Baker Corporation Employee Stock Ownership Plan Statement of Financial Condition With Fund Information (Continued) December 31, 1995
December 31, 1995 ----------------------------------------- Dreyfus Dreyfus Disciplined Bond Market Stock Index Fund Fund Assets Investments, at quoted market value: Investments in common stock of Michael Baker Corporation: Common stock $ - $ - Series B common stock - - Investments in trust funds managed by Mellon Bank N.A.: Dreyfus/Laurel Prime Money Market Fund (market value approximates cost) - - Premier Balanced Fund (703,452 shares with a cost of $7,227,448) - - Dreyfus Disciplined Stock Fund (453,587 shares with a cost of $8,554,746) 10,332,704 - Dreyfus Bond Market Index Fund (41,414 shares with a cost of $398,830) - 420,352 Participants' notes receivable (market value approximates cost) - - ----------- ---------- Total investments 10,332,704 420,352 Contributions receivable from Michael Baker Corporation - - Temporary investment 446,230 34,213 ----------- ---------- Participants' equity $10,778,934 $ 454,565 =========== ==========
The accompanying notes are an integral part of these financial statements. Michael Baker Corporation Employee Stock Ownership Plan Statement of Financial Condition With Fund Information (Continued) December 31, 1995
December 31, 1995 ----------------------------------------- Michael Baker Participant Common Loan Stock Fund Fund Combined Assets Investments, at quoted market value: Investments in common stock of Michael Baker Corporation: Common stock $11,055,430 $ - $11,055,430 Series B common stock 6,129,240 - 6,129,240 Investments in trust funds managed by Mellon Bank N.A.: Dreyfus/Laurel Prime Money Market Fund (market value approximates cost) - - 3,433,306 Premier Balanced Fund (703,452 shares with a cost of $7,227,448) - - 8,610,252 Dreyfus Disciplined Stock Fund (453,587 shares with a cost of $8,554,746) - - 10,332,704 Dreyfus Bond Market Index Fund (41,414 shares with a cost of $398,830) - - 420,352 Participants' notes receivable (market value approximates cost) - 48,440 48,440 ----------- -------- ---------- Total investments 17,184,670 48,440 40,029,724 Contributions receivable from Michael Baker Corporation 233,654 - 233,654 Temporary investments 276,391 - 961,319 ---------- --------- ---------- Participants' equity $17,694,715 $48,440 $41,224,697 =========== ======== ============
The accompanying notes are an integral part of these financial statements. Michael Baker Corporation Employee Stock Ownership Plan Statement of Financial Condition With Fund Information December 31, 1994
December 31, 1994 -------------------------------- Dreyfus/ Laurel Prime Premier Money Market Balanced Fund Fund Assets Investments, at quoted market value: Investments in common stock of Michael Baker Corporation: Common stock $ - $ - Series B common stock - - Investments in trust funds managed by Mellon Bank N.A.: Dreyfus/Laurel Prime Money Market Fund (market value approximates cost) 3,202,063 - Premier Balanced Fund (651,295 shares with a cost of $6,573,414) - 6,369,667 Dreyfus Disciplined Stock Fund (382,116 shares with a cost of $7,027,651) - - Dreyfus Bond Market Index Fund (22,443 shares with a cost of $214,360) - - Participants' notes receivable (market value approximates cost) - - --------- -------- Total investments 3,202,063 6,369,667 Contributions receivable from Michael Baker Corporation - - Temporary investments 56,995 78,360 --------- ---------- Participants' equity $3,259,058 $6,448,027 ========== ==========
The accompanying notes are an integral part of these financial statements. Michael Baker Corporation Employee Stock Ownership Plan Statement of Financial Condition With Fund Information (Continued) December 31, 1994
December 31, 1994 -------------------------------- Dreyfus Dreyfus Disciplined Bond Market Stock Index Fund Fund Assets Investments, at quoted market value: Investments in common stock of Michael Baker Corporation: Common stock $ - $ - Series B common stock - - Investments in trust funds managed by Mellon Bank N.A.: Dreyfus/Laurel Prime Money Market Fund (market value approximates cost) - - Premier Balanced Fund (651,295 shares with a cost of $6,573,414) - - Dreyfus Disciplined Stock Fund (382,116 shares with a cost of $7,027,651) 6,614,436 - Dreyfus Bond Market Index Fund (22,443 shares with a cost of $214,360) - 204,234 Participants' notes receivalbe (market value approximates cost) - - ---------- ---------- Total investments 6,614,436 204,234 Contributions receivable from Michael Baker Corporation - - Temporary investments 270,497 2,746 ---------- ---------- Participants' equity $6,884,933 $206,980 ========== =========
The accompanying notes are an integral part of these financial statements. Michael Baker Corporation Employee Stock Ownership Plan Statement of Financial Condition With Fund Information (Continued) December 31, 1994
December 31, 1994 ----------------------------------------- Michael Baker Participant Common Loan Stock Fund Fund Combined Assets Investments, at quoted market value: Investments in common stock of Michael Baker Corporation: Common stock $5,850,919 $ - $5,850,919 Series B common stock 4,592,728 - 4,592,728 Investments in trust funds managed by Mellon Bank N.A.: Dreyfus/Laurel Prime Money Market Fund (market value approximates cost) - - 3,202,063 Premier Balanced Fund (651,295 shares with a cost of $6,573,414) - - 6,369,667 Dreyfus Disciplined Stock Fund (382,116 shares with a cost of $7,027,651) - - 6,614,436 Dreyfus Bond Market Index Fund (22,443 shares with a cost of $214,360) - - 204,234 Participants' notes receivable (market value approximates cost) - 22,605 22,605 -------- -------- --------- Total investments 10,443,647 22,605 26,856,652 Contributions receivable from Michael Baker Corporation 223,054 - 223,054 Temporary investments 650,294 - 1,058,892 ---------- -------- ------------ Participants' equity $11,316,995 $ 22,605 $28,138,598 =========== ========= ============
The accompanying notes are an integral part of these financial statements. Michael Baker Corporation Employee Stock Ownership Plan Statement of Income and Changes in Participants' Equity With Fund Information Period Ended December 31, 1995 - -------------------------------------------------------------------
Changes in Participants' Equity Period Ended December 31, 1995 ------------------------------- Dreyfus/ Laurel Prime Premier Money Market Balanced Fund Fund Contributions: Participants' $ 546,251 $1,167,216 Employer's - - Interest income 199,747 342,998 Net appreciation in market value of investments - 1,649,624 Interfund transfers - net (27,937) (131,436) ----------- ---------- Total additions 718,063 3,028,402 Distributions to participants (499,835) (705,672) ----------- ---------- Total deductions (499,835) (705,672) ----------- ---------- Net increase in participants' equity during the period 218,228 2,322,730 Participants' equity at beginning of period 3,259,058 6,448,027 ----------- ---------- Participants' equity at end of period $3,477,286 $8,770,757 ============ ==========
The accompanying notes are an integral part of these financial statements. Michael Baker Corporation Employee Stock Ownership Plan Statement of Income and Changes in Participants' Equity With Fund Information (Continued) Period Ended December 31, 1995 - -------------------------------------------------------------------
Changes in Participants' Equity Period Ended December 31, 1995 ------------------------------- Dreyfus Dreyfus Disciplined Market Stock Index Fund Fund Contributions: Participants' $ 1,598,206 $ 181,499 Employer's - - Interest income 353,018 18,956 Net appreciation in market value of investments 2,589,252 30,232 Interfund transfers - net 123,123 50,592 ----------- ---------- Total additions 4,663,599 281,279 ----------- ---------- Distributions to participants (769,598) (33,694) ----------- ---------- Total deductions (769,598) (33,694) ------------ ---------- Net increase in participants' equity during the period 3,894,001 247,585 Participants' equity at beginning of period 6,884,933 206,980 ----------- ---------- Participants' equity at end of period $10,778,934 $ 454,565 ============ ==========
The accompanying notes are an integral part of these financial statements. Michael Baker Corporation Employee Stock Ownership Plan Statement of Income and Changes in Participants' Equity With Fund Information (Continued) Period Ended December 31, 1995 - -------------------------------------------------------------------
Changes in Participants' Equity Period Ended December 31, 1995 ------------------------------- Michael Baker Participants Common Stock Loan Fund Fund Total Contributions: Participants' $1,088,589 $ - $4,581,761 Employer's 2,918,272 - 2,918,272 Interest income 23,442 - 938,163 Net appreciation in market value of investments 3,244,162 - 7,513,270 Interfund transfers - net (40,177) 25,835 - ---------- --------- ---------- Total additions 7,234,288 25,835 15,951,466 ---------- --------- ---------- Distributions to participants (856,568) - (2,865,367) ----------- --------- ---------- Total deductions (856,568) - (2,865,367) ----------- ---------- --------- Net increase in participants' equity during the period 6,377,720 25,835 13,086,099 Participants' equity at beginning of period 11,316,995 22,605 28,138,598 ----------- ----------- ---------- Participants' equity at end of period $17,694,715 $ 48,440 $41,224,697 =========== ======== ==========
The accompanying notes are an integral part of these financial statements. Michael Baker Corporation Employee Stock Ownership Plan Statement of Income and Changes in Participants' Equity With Fund Information Period Ended December 31, 1994 - -------------------------------------------------------------------
Changes in Participants' Equity Period Ended December 31, 1994 ------------------------------- Dreyfus/ Laurel Prime Premier Money Market Balanced Fund Fund Contributions: Participants' $561,630 $1,337,985 Employer's - - Interest income 140,732 65,471 Interfund transfers - net (263,699) (222,595) ----------- ---------- Total additions 438,663 1,180,861 ----------- ---------- Distributions to participants (261,534) (572,205) Net depreciation in market value of investments - (75,296) ----------- ----------- Total deductions (261,534) (647,501) ------------ ----------- Net increase (decrease) in participants' equity during the period 177,129 533,360 Participants' equity at beginning of period 3,081,929 5,914,667 ----------- ----------- Participants' equity at end of period $3,259,058 $6,448,027 =========== ===========
The accompanying notes are an integral part of these financial statements. Michael Baker Corporation Employee Stock Ownership Plan Statement of Income and Changes in Participants' Equity With Fund Information (Continued) Period Ended December 31, 1994 - -----------------------------------------------------------------
Changes in Participants' Equity Period Ended December 31, 1994 ------------------------------- Dreyfus Dreyfus Disciplined Bond Market Stock Index Fund Fund Contributions: Participants' $1,440,191 $ 112,085 Employer's - - Interest income 65,905 1,374 Interfund transfers - net 59,745 162,424 ----------- ---------- Total additions 1,565,841 275,883 ----------- ---------- Distributions to participants (424,582) (61,615) Net depreciation in market value of investments (62,203) (7,288) ----------- ---------- Total deductions (486,785) (68,903) ------------ ---------- Net increase (decrease) in participants' equity during the period 1,079,056 206,980 Participants' equity at beginning 5,805,877 - of period ----------- ----------- Participants' equity at end of period $6,884,933 $ 206,980 ============ ============
The accompanying notes are an integral part of these financial statements. Michael Baker Corporation Employee Stock Ownership Plan Statement of Income and Changes in Participants' Equity With Fund Information (Continued) Period Ended December 31, 1994 - -------------------------------------------------------------------
Changes in Participants' Equity Period Ended December 31, 1994 ------------------------------- Michael Baker Participants Common Stock Loan Fund Fund Total Contributions: Participants' $1,208,942 $ - $4,660,833 Employer's 3,163,405 - 3,163,405 Interest income 14,307 - 287,789 Interfund transfers - net 241,520 22,605 - ------------ --------- --------- Total additions 4,628,174 22,605 8,112,027 ------------ -------- --------- Distributions to participants (1,249,644) - (2,569,580) Net depreciation in market value of investments (17,279,596) - (17,424,383) ----------- ---------- --------- Total deductions (18,529,240) - (19,993,963) ------------ ---------- --------- Net increase (decrease) in participants' equity during the period (13,901,066) 22,605 (11,881,936) Participants' equity at beginning of period 25,218,061 - 40,020,534 ----------- ---------- ----------- Participants' equity at end of period $11,316,995 $ 22,605 $28,138,598 =========== ========== ===========
The accompanying notes are an integral part of these financial statements. Michael Baker Corporation Employee Stock Ownership Plan Statement of Income and Changes in Participant's Equity With Fund Information Period Ended January 2, 1994
- --------------------------------------------------------------------------- Changes in Participants' Equity Period Ended January 2, 1994 --------------------------------- Laurel Prime Laurel Laurel Money Market I Balanced Stock Fund Fund Fund Participants' equity at beginning of period $2,849,974 (a) $4,371,375 (b) $4,158,952 (c) Contributions: Participants' 612,357 1,097,400 1,195,727 Employer's -- -- -- Investment Income 90,047 200,538 119,096 Interfund transfers-net (266,439) 113,057 31,027 Unrealized appreciation in market value of investments -- 474,774 575,540 ----------- ---------- ------------ Total additions and interest income 435,965 1,885,769 1,921,390 ----------- ---------- ------------ Distributions to participants (258,054) (270,343) (218,250) Unrealized depreciation in market value of investments -- -- -- ---------- ----------- ----------- Total deductions (258,054) (270,343) (218,250) ---------- ------------ ----------- Net increase (decrease) in participants' equity 177,911 1,615,426 1,703,140 ---------- ------------ ----------- Participants' equity transferred to the Laurel Funds 3,027,885 5,986,801 5,862,092 ---------- ------------ ---------- Contributions - Participants 53,313 97,000 98,346 Interest income 731 -- -- ---------- ------------ ---------- Total additions and interest income 54,044 97,000 98,346 ---------- ----------- ---------- Distributions to participants -- (59,322) (11,022) Realized gain (loss) and increase (decrease) in unrealized depreciation in market value of investments -- (109,812) (143,539) ----------- ----------- ------------ Total deductions -- (169,134) (154,561) Net increase (decrease) in participants' equity 54,044 (72,134) (56,215) ----------- ---------- ----------- Participants' equity at end of period $3,081,929 (d) $5,914,667 (e) $5,805,877 (f) =========== =========== ==========
(a) Invested in Short-Term Fixed Income Fund (b) Invested in Managed Growth and Income Fund (c) Invested in Stock Market Growth Fund (d) Invested in Laurel Prime Money Market I (e) Invested in Laurel Balanced Portfolio (f) Invested in Laurel Stock Portfolio See Note 1 describing change in fund names. The accompanying notes are an integral part of these financial statements. Michael Baker Corporation Employee Stock Ownership Plan Statement of Income and Changes in Participants' Equity With Fund Information Period Ended January 2, 1994 (Continued)
- ---------------------------------------------------------------------------- Changes in Participants' Equity Period Ended January 2, 1994 ----------------------------------- Michael Baker Common Stock Fund Total Participants' equity at beginning $29,285,513 $40,665,814 of period Contributions: Participants' 1,442,665 4,348,149 Employer's 2,965,578 2,965,578 Investment Income 18,187 427,868 Interfund transfers - net 122,355 -- Unrealized appreciation in market value of investments -- 1,050,314 ----------- ------------ Total additions and interest income 4,548,785 8,791,909 ------------ ------------ Distributions to participants (884,914) (1,631,561) Unrealized depreciation in market value of investments (7,731,323) (7,731,323) ----------- ----------- Total deductions (8,616,237) (9,362,884) ------------ ----------- Net increase (decrease) in participants' equity (4,067,452) (570,975) ----------- ----------- Participants' equity transferred to the Laurel Funds 25,218,061 40,094,839 ------------ ----------- Contributions - Participants -- 248,659 Interest income -- 731 ------------ ----------- Total additions and interest income -- 249,390 ------------ ---------- Distributions to participants -- (70,344) Realized gain (loss) and increase (decrease) in unrealized depreciation in market value of investments -- (253,351) ----------- ----------- Total deductions -- (323,695) Net increase (decrease) in participants' equity -- (74,305) ----------- ----------- Participants' equity at end of period $25,218,061 $40,020,534 ============= ==============
See Note 1 describing change in fund names. The accompanying notes are an integral part of these financial statements. Michael Baker Corporation Employee Stock Ownership Plan Periods Ended December 31, 1995 and 1994 and January 2, 1994 Notes to Financial Statements - ------------------------------------------------------------ 1. DESCRIPTION OF THE PLAN GENERAL The following description of the Michael Baker Employee Stock Ownership Plan (the ESOP, or the Plan) provides only general information. Participants should refer to the Plan agreement for a more complete description of the Plan's provision. The ESOP is an individual account stock bonus plan under which a participant's distributions are based on the amount contributed to that participant's account, including any transferred amounts from the prior retirement plan and any gains or losses and income and expense that may be allocated to the participant's account. The Plan is subject to provisions of the Employee Retirement Income Security Act of 1974, as amended (ERISA). On March 11, 1994, the Internal Revenue Service (IRS) approved the change in the Plan's fiscal year from a 52/53-week period to a calendar year. The change was effective for the Plan's 1993 year ending January 2, 1994. Since the approval from the IRS was received subsequent to issuance of the Plan's fiscal 1993 financial statements and since January 1 and January 2, 1994, were nonbusiness days, the Plan's 1993 financial statements were not revised. Dates when used herein: 1995, 1994 and 1993 refer to the periods ended December 31, 1995 and 1994 and January 2, 1994, respectively. COMMON STOCK The primary purpose of the ESOP is to enable participating employees to acquire an equity interest in Michael Baker Corporation (the Company). Consistent with this purpose, contributions to the ESOP can be invested in the Company's common stock (Common Stock and Series B Common Stock, on a pro rata basis as available). Investments into the Michael Baker Common Stock Fund cannot be specifically directed to either Regular Common or Series B Common Stock. At times, common stock may not be available at a price acceptable to the ESOP Committee (see Note 3), or it may be appropriate to retain some of the ESOP's funds in a more liquid form so that the funds may be available for the payment of benefits. In such cases, a portion of the ESOP's assets may be invested in temporary investments, such as short-term corporate obligations or short-term obligations of the U.S. government. The ESOP's investment in the Company's common stock comprises 2,211,086 (cost of $11,966,196) and 1,560,245 (cost of $8,891,947) shares of Common Stock and 1,225,848 (cost of $7,440,333) and 1,224,727 (cost of $7,618,605) shares of Series B Common Stock at December 31, 1995 and 1994, respectively. CONTRIBUTIONS Participants contribute to the ESOP through a Section 401(k) Employee Salary Redirection Election, whereby the participants may choose to have a percentage of their salaries (including commissions, effective July 1, 1993) withheld and contributed to the ESOP. The percentage may not exceed 15 percent of the participant's salary. The ESOP also allows participants to roll over funds from a previous employer's qualified 401(k) plan. Michael Baker Corporation Employee Stock Ownership Plan Periods Ended December 31, 1995 and 1994 and January 2, 1994 Notes to the Financial Statements - --------------------------------------------------------------------------- INVESTMENT OPTIONS Each participant may direct Mellon Bank N.A. (the Trustee) to invest certain portions of his or her account in investment funds managed by the Trustee. Prior to December 1993, investment fund options available to employees prior to December 1993 included the Michael Baker Common Stock Fund (invested exclusively in common stock of the Company), the Short-Term Fixed Income Fund (invested in short-term fixed income securities), the Managed Growth and Income Fund (invested in diversified corporate stocks and bonds) and the Stock Market Growth Fund (invested in diversified corporate stocks). Effective December 1993, the investment fund options available to employees included the Michael Baker Common Stock Fund (invested exclusively in common stock of the Company), managed by the Trustee; the Laurel Prime Money Market I Portfolio (invested in short-term, income-producing securities); the Laurel Balanced Portfolio (invested in common stocks and bonds in proportions consistent with their expected returns and risks as determined by the portfolio's adviser); and the Laurel Stock Portfolio (invested in diversified corporate stocks). All amounts previously invested in the Short-Term Fixed Income Fund, the Managed Growth and Income Fund and Stock Market Growth Fund were transferred into the respective investment funds based on each employee's fund account balances at the transfer date. Mellon Bank N.A. serves as the Adviser, Custodian, Fund Accountant and Transfer Agent for the aforementioned Laurel investment funds. Effective January 3, 1994, the Laurel Bond Market Index Portfolio (investing in U.S. government and Securities and Exchange Commission (SEC)-registered obligations of domestic corporations, foreign governments and supranational organizations) was added to the available election options. Effective October 17, 1994, the Laurel Prime Money Market I Portfolio, Laurel Balanced Portfolio, Laurel Stock Portfolio and the Laurel Bond Market Index Portfolio were changed to the Dreyfus/Laurel Prime Money Market Fund, Premier Balanced Fund, Dreyfus Disciplined Stock Fund and Dreyfus Bond market Index Fund, respectively. The funds were renamed to reflect the merger of Mellon Bank and the Dreyfus Family of Funds. The funds were renamed but operations continue substantially unchanged. Effective April 1, 1996, the Plan agreement will be amended as a result of a change in trustees from Mellon Bank N.A. to Putnam Investments, Inc., (Putnam). As a result of this change, investment funds available to participants are the Michael Baker Common Stock Fund (invested exclusively in common stock of the Company), the Putnam New Opportunities Fund (invested in long-term growth stocks within emerging industries), Putnam Overseas Growth Fund (invested in diversified corporate stocks outside of North America), Putnam Voyager Fund (invested in diversified corporate stocks), Putnam Fund for Growth and Income (invested in long-term growth stocks), George Putnam Fund of Boston (invested in diversified capital growth and current income stocks and bonds), Putnam Income Fund (invested in corporate bonds) and the Putnam Money Market Fund (invested in corporate bonds) and the Putnam Money Market Fund (invested in short-term money market securities). Michael Baker Corporation Employee Stock Ownership Plan Periods Ended December 31, 1995 and 1994 and January 2, 1994 Notes to Financial Statements - ----------------------------------------------------------- COMPANY MATCHING CONTRIBUTIONS AND VESTING OF BENEFITS Under the provisions of the Plan, the Company will make a matching contribution to the participants' accounts in an amount not less than 50 percent of the first 5 percent of the salary contributed by each participant. Salary amounts over the 5 percent limit will not be matched by the Company. All matching contributions can be invested only in the Michael Baker Common Stock Fund. During 1995, 1994 and 1993, the Company matched participants' contributions on a dollar-for-dollar basis for the first 5 percent of participants' salaries. The Board of Directors of the Company is authorized to make additional discretionary contributions to the ESOP from time to time. However, no discretionary contributions were made in 1995, 1994 and 1993. All amounts in the participants' ESOP accounts that are attributable to the transfer of funds from a terminated prior retirement plan, the rollover from a previous employer's qualified 401(k) plan, participant contributions under Salary Redirection Election and PAYSOP contributions are 100 percent vested and nonforfeitable at all times. All Company matching contributions to the participants' Salary Redirection Election and discretionary contributions on behalf of the participants will become 100 percent vested upon attainment of 3 years of service with the Company or, if earlier, upon attainment of normal retirement date, disability or death. If a participant leaves employment with the Company before attaining a vested interest in his or her Company matching contribution, the contributions are forfeited and reduce future Company matching contributions. DISTRIBUTIONS The Plan provides for distribution of benefits upon retirement, total and permanent disability, death, or termination of employment for any other reason. The amount of distribution the participant or his or her beneficiary is entitled to, based on the vesting requirements, is discussed above. A participant may retire at age 65, or at age 55 if he or she has completed at least 3 years of service. All distributions will be made in the form of a single lump-sum distribution or in substantially equal installments over a period not exceeding the life expectancy of the participant, or the joint life expectancy of the participant and beneficiary, as the participant or his or her beneficiary may elect. Distributions may be made in cash or shares of common stock, at the discretion of the ESOP Committee. PARTICIPANT LOANS Effective January 3, 1994, a participant may borrow money from the portion of his or her account attributable to his or her own 401(k) plan contributions. Participant loans may be obtained in the sole event of immediate and heavy financial need, where the participant lacks other available resources. Loan amounts are limited to the lower of $50,000 or 50 percent of the employee's deferred amount. All loans will be drawn against the participant's account among the respective investment options as directed, and are secured by the assets within the participant's accounts. Interest rates on outstanding notes receivable range from 12.62 percent to 13.5 percent. Michael Baker Corporation Employee Stock Ownership Plan Period Ended December 31, 1995 and 1994 and January 2, 1994 Notes to Financial Statements - --------------------------------------------------------------- PLAN TERMINATION Although it has not expressed any intention to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions set forth in the Employee Retirement Income Security Act of 1974 (ERISA). 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF ACCOUNTING The Trustee performs the recordkeeping function for the ESOP and the records are maintained on a cash basis. The financial statements included herein include all material adjustments to place the financial statements on the accrual basis of accounting in accordance with generally accepted accounting principles. The investment in common stock of the Company is stated at publicly-traded market values as of December 31, 1995 and 1994. The ESOP owns approximately 41 percent of the outstanding shares of the Company's common stock; therefore, such valuation might be subject to significant fluctuation in the event of a substantial liquidation of such holdings by the ESOP. INVESTMENTS The difference between the cost and current market value of investment purchases since the beginning of the period and the increase or decrease in such stated market value of investments held at the beginning of the period reported is included in the increase (decrease) in unrealized appreciation in market value of investments in the statements of changes in Plan equity. A significant portion of the investments of the ESOP is publicly-traded shares of the Company's Common Stock and, therefore, have a published market price. The accompanying financial statements should be read in conjunction with the consolidated financial statements appearing within Exhibit 13.1, which has been incorporated by reference into various items of Michael Baker Corporation's Annual Report on Form 10-K. DISTRIBUTIONS Distributions to participants are recorded when paid. 3. PLAN ADMINISTRATOR AND TRUSTEE The ESOP is administered by a committee consisting of nine employees who are ESOP participants and the Chief Executive Officer and the Chief Financial Officer of the Company, who serve as nonvoting members. The Committee is responsible for the general day-to-day administration of the ESOP, such as determining eligibility, participant allocation procedures and distribution of benefits. Under the trust agreement, the Trustee will invest the contributions to the ESOP and make distributions of ESOP assets as directed by the ESOP Committee. The Company provides certain administrative and accounting services to the ESOP at no cost. In addition, the Company pays the cost of services provided to the ESOP by the ESOP's Trustee, legal counsel and independent accountants. Michael Baker Corporation Employee Stock Ownership Plan Periods Ended December 31, 1995 and 1994 and January 2, 1994 Notes to the Financial Statements - ------------------------------------------------------------------------- 4. QUALIFICATIONS OF THE PLAN By determination letter from the IRS dated December 30, 1994, the Company was notified that the Plan and related trust are designed in accordance with applicable sections of the Internal Revenue Code. Therefore, no provision for income taxes has been included in the Plan's financial statements. This determination letter is applicable for amendments adopted through October 27, 1993. The Plan has been amended since receiving the determination letter; however, the Plan Administrator and the Plan's counsel believe that the Plan is currently designed and being operated in compliance with applicable requirements of the Code. Therefore, they believe the Plan was qualified and the related trust was tax-exempt as of the financial statement date. 5. DISTRIBUTIONS TO PARTICIPANTS At December 31, 1995 and 1994, the Plan had distributions to employees that had been authorized but not paid of $314,453 and $550,118, respectively. The following table is a reconciliation of participant's equity at December 31, 1995 and 1994 per the financial statements to the Plan's Form 5500, respectively.
December 31 1995 1994 Participants' equity per the financial statements $41,224,697 $28,138,598 ----------- ----------- Amounts allocated to withdrawing participants: Michael Baker Common Stock Fund (110,060) (134,969) Dreyfus/Laurel Prime Money Market Fund (115,740) (119,042) Dreyfus Premier Balanced Fund (52,745) (177,955) Dreyfus Disciplined Stock Fund (31,039) (101,912) Dreyfus Bond Market Index Fund (4,869) (16,240) ----------- ----------- (314,453) (550,118) ----------- ----------- Participants' equity per Form 5500 $40,910,244 $27,588,480 =========== ===========
Michael Baker Corporation Employee Stock Ownership Plan Periods Ended December 31, 1995 and 1994 and January 2, 1994 Notes to the Financial Statements - ------------------------------------------------------------------- The following is a reconciliation of distributions to employees per the financial statements to the Plan's Form 5500 for the period ended December 31, 1995:
December 31, 1995 Distributions to employees per the financial statements $2,865,367 Distributions to employees authorized but not paid as of December 31, 1995 314,453 ---------- Distributions to employees per Form 5500 $3,179,820 ===========
Michael Baker Corporation Employee Stock Ownership Plan Schedule of Assets Held for Investment Purposes - Form 5500, Item 27a December 31, 1995 Additional Information - Schedule I - ---------------------------------------------------------------------
Cost of Current Shares Description asset value *Michael Baker Corporation 2,211,086 Common Stock - Regular $11,966,196 $11,055,430 *Michael Baker Corporation 1,225,848 Common Stock - Series B 7,440,333 6,129,240 *Dreyfus/Laurel Prime Money 3,433,306 Market Fund 3,433,306 3,433,306 703,452 *Premier Balanced Fund 7,227,448 8,610,252 453,587 *Dreyfus Disciplined Stock Fund 8,554,746 10,332,704 41,414 *Dreyfus Bond Market Index Fund 398,830 420,352 Participant notes receivable; 12.62% to 13.50%, due January 31, 1997, to September 30, 1999 48,440 48,440 ---------- --------- $39,069,299 $40,029,724 ============ =========== * Party-in-interest.
SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Chairman of the Plan Administrative Committee appointed by the Board of Directors of Michael Baker Corporation has duly caused this annual report to be signed by the undersigned thereunto duly authorized. MICHAEL BAKER CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN Date: March 28, 1996 By:/s/ Susan E. Rezek -------------------------- Susan E. Rezek Chairman of the Plan Administrative Committee REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Michael Baker Corporation Employee Stock Ownership Plan Committee: We have audited the accompanying statement of income and changes in participants' equity of the Michael Baker Corporation Employee Stock Ownership Plan for the year ended January 2, 1994. This financial statement is the responsibility of the plan administrator. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above presents fairly, in all material respects, the income and changes in participants' equity of the Michael Baker Corporation Employee Stock Ownership Plan for the year ended January 2, 1994, in conformity with generally accepted accounting principles. /s/ Arthur Andersen LLP ------------------------ ARTHUR ANDERSEN LLP Pittsburgh, Pennsylvania February 15, 1994 Consent of Independent Accountants We hereby consent to the use of this Form 11-K of our report dated March 15, 1996, appearing on page 1 of the Annual Report of the Michael Baker Corporation Employee Stock Ownership Plan as an exhibit to the registrant's Form 10-K for the year ended December 31, 1995. We also consent to the incorporation by reference of our report in this Form 11-K into the registrant's Registration Statement on Form S-8 (no. 33-14058). /s/ Price Waterhouse LLP ------------------------ Price Waterhouse LLP Pittsburgh, Pennsylvania March 28, 1996 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS ------------------------------------------ As independent public accountants, we hereby consent to the use in this Form 11-K of our report dated February 15, 1994 on the statement of income and changes in participants' equity of the Michael Baker Corporation Employee Stock Ownership Plan (the "Plan") for the year ended January 2, 1994 as an exhibit to the registrant's Form 10-K for the year ended December 31, 1995. We also consent to the incorporation of our report included in this Form 11-K into the registrant's previously filed registration statement on Form S-8 (Registration No. 33-14058), including the prospectus therein, pertaining to the Michael Baker Corporation Employee Stock Ownership Plan. It should be noted that we have not audited any financial statements of the Plan subsequent to January 2, 1994 or performed any audit procedures subsequent to the date of our report. /s/ Arthur Andersen LLP ----------------------- ARTHUR ANDERSEN LLP Pittsburgh, Pennsylvania March 28, 1996 EX-99 9 Exhibit 99.2 Report of Independent Accountants on Financial Statement Schedules To the Board of Directors of Michael Baker Corporation Our audits of the consolidated financial statements referred to in our report dated February 16, 1996 (except as to Notes 6 and 12, which are as of March 22, 1996), appearing within the Exhibit 13.1 which has been incorporated by reference into various items of Michael Baker Corporation's Annual Report on Form 10-K, also included an audit of the Financial Statements Schedules as of and for the years ended December 31, 1995 and 1994, listed in Item 14(a)(2) of this Form 10-K. In our opinion, these Financial Statement Schedules present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. /s/ Price Waterhouse LLP - ----------------------- Price Waterhouse LLP Pittsburgh, Pennsylvania February 16, 1996 EX-99 10 Exhibit 99.3 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Shareholders and Board of Directors of Michael Baker Corporation: We have audited the accompanying consolidated statements of income, shareholders' investment and cash flows of Michael Baker Corporation (a Pennsylvania corporation) and subsidiaries for the year ended December 31, 1993. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We did not audit the financial statements of Mellon Stuart Construction, Inc. for the year ended December 31, 1993. Those statements reflect total revenues which are 39% of the consolidated total for the year ended December 31, 1993. Those statements were audited by another major international accounting firm whose report has been furnished to us and our opinion insofar as it relates to the amounts included for Mellon Stuart Construction, Inc., is based solely on the report of the other auditors. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit and the report of other auditors provide a reasonable basis for our opinion. In our opinion, based upon our audit and the report of other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of Michael Baker Corporation and its subsidiaries for the year ended December 31, 1993, in conformity with generally accepted accounting principles. As discussed in Note 9 to the consolidated financial statements, effective January 4, 1993, the Company changed its method of accounting for income taxes. Our audit was made for the purpose of forming an opinion on the basic statements taken as a whole. The schedule listed in Item 14(a)(2) is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. /s/ Arthur Andersen LLP ------------------------ ARTHUR ANDERSEN LLP Pittsburgh, Pennsylvania February 14, 1994 EX-27 11
5 1000 YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 14,303 0 53,708 0 19,104 94,931 34,847 22,289 117,376 69,745 0 0 0 8,364 39,267 117,376 354,728 354,728 315,155 315,155 0 0 336 5,080 2,180 2,900 0 0 0 2,900 .35 .35
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