-----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, AmHc/M4D+rpy1qUyWH+8Pw2m3t9p/8ScXAJRuh2W9+Rspt00dlHJho/XMrzwKnZL zJCfclrJH7H/AypFQFjsOQ== 0000009263-97-000004.txt : 19970329 0000009263-97-000004.hdr.sgml : 19970329 ACCESSION NUMBER: 0000009263-97-000004 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970328 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: 97567544 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, 1996 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 February 28, 1997, 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, 2,645,520 shares of Common Stock and 1,226,767 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 $31,000,577 for the Common Stock and $893,120 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 February 28, 1997, the Registrant had outstanding 6,848,988 shares of its Common Stock and 1,347,868 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, 1996 I, II Proxy Statement to be distributed in connection with the 1997 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 thereto, 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. The Registrant is organized into the following five market-focused business unit segments: Buildings, Civil, Energy, Environmental and Transportation. Information regarding the amounts of revenue, operating profit and identifiable assets attributable to the Registrant's industry segments is contained in Note 3 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 1996 by ENGINEERING NEWS RECORD magazine, Baker ranks 45th among U.S. design firms, 12th among transportation design firms, 76th among international design firms, 89th among environmental firms and 165th among U.S. construction contractors. These rankings were based on 1995 revenues. Business Units ---------------- BUILDINGS. The Buildings unit comprises a general construction, construction management and design-build division and a facility planning and design division, that together 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 comprises the Registrant's civil engineering and water resources division and its military operations & maintenance service division, Baker Support Services, Inc. ("BSSI"). This unit has combined 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, an important Baker client. The following are 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, principally outside the United States. 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 comprises only one operating division. 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 combines engineering capabilities in highways, bridges, transit, aviation and rail, with heavy and highway construction capabilities in its two divisions. The services provided by this unit have 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 market. 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 88% and 92% of the Registrant's total contract revenues were derived from work performed within the United States for the years ended December 31, 1996 and 1995, respectively. 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 $333 million at December 31, 1996 and $300 million at December 31, 1995. Total backlog, which incrementally includes that portion of contract value for which options are still to be exercised (unfunded backlog), was $544 million at December 31, 1996 and $508 million at December 31, 1995. 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 1996, 1995 or 1994; 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% and 12.1% of the Registrant's 1996 and 1995 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 and experience. 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, 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, 1996, the Registrant employed approximately 3,720 persons, broken down by business unit as follows: Buildings unit--330 Environmental unit--170 Civil unit--1,360 Transportation unit--870 Energy unit--950 Corporate staff--40 The Registrant's employees are not represented by labor unions, with the exception of its construction personnel, which 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 Civil, 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 404,000 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 42,000 square feet in: Orlando, Florida Coraopolis, Pennsylvania Chicago, Illinois Alexandria, Virginia The Civil unit leases approximately 106,000 square feet in: Phoenix, Arizona Dallas, Texas Baltimore, Maryland Salt Lake City, Utah Jackson, Mississippi Alexandria, Virginia Elmsford, New York Virginia Beach, Virginia Vestal, New York Mexico City, Mexico Coraopolis, Pennsylvania The Energy unit leases approximately 21,000 square feet in: Lafayette, Louisiana Abu Dhabi, United Arab Emirates Houston, Texas Middlesex, United Kingdom The Environmental Unit leases approximately 43,000 square feet: Merrillville, Indiana Coraopolis, Pennsylvania Princeton, New Jersey The Transportation unit leases approximately 151,000 square feet in: Anchorage, Alaska Coraopolis, Pennsylvania Phoenix, Arizona Gibsonia, Pennsylvania Fort Smith, Arkansas Harrisburg, Pennsylvania Tampa, Florida Pittsburgh, Pennsylvania Atlanta, Georgia Alexandria, Virginia Chicago, Illinois Richmond, Virginia Princeton, New Jersey Virginia Beach, Virginia Elmsford, New York Charleston, West Virginia The Corporate staff utilizes approximately 41,000 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 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 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. 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 1996. Executive Officers of the Registrant - ------------------------------------ The following represents a listing of executive officers of the Registrant as of December 31, 1996. CHARLES I. HOMAN - Age 53; President, Chief Executive Officer and a Director of the Registrant since 1994. Mr. Homan previously served as Executive Vice President of the Registrant from 1990 through 1994, and as President of Michael Baker, Jr., Inc., a subsidiary of the Registrant, from 1983 through 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 54; Executive Vice President, Chief Financial Officer, Treasurer and a Director of the Registrant since 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 1994. H. JAMES MCKNIGHT - Age 52; Vice President, General Counsel and Secretary of the Registrant since 1995. Mr. McKnight previously served as counsel to International Technology Corporation from February 1995 through September 1995, and was a self-employed consultant from 1992 through February 1995. Prior to being self-employed, Mr. McKnight was Vice President, General Counsel and Secretary for Vectura Group, Inc. GLENN S. BURNS - Age 47; Executive Vice President of the Registrant and President of BMSCI since 1995. Mr. Burns previously served as Vice President, General Counsel and Secretary of the Registrant from 1994 to 1995 and as Assistant General Counsel from 1991 through 1994. DONALD P. FUSILLI, Jr. - Age 45; Executive Vice President of the Registrant since 1991 and President of Baker/MO Services, Inc., a subsidiary of the Registrant, since 1995. Mr. Fusilli previously served as General Counsel and Secretary of the Registrant from 1986 through 1994. He has been employed by the Registrant in various capacities since 1973. JOHN C. HAYWARD - Age 49; Executive Vice President of the Registrant since 1995 and President of Michael Baker Jr., Inc. since 1994. Mr. Hayward previously served as Senior Vice President of Michael Baker Jr., Inc. from 1989 through 1994. He has been employed by the Registrant in various capacities since 1974. PHILIP A. SHUCET - Age 46; Executive Vice President of the Registrant and President of Baker Environmental, Inc., a subsidiary of the Registrant, since October 1996. Mr. Shucet previously served as Vice President of Michael Baker Jr., Inc. from 1995 through October 1996. Mr. Shucet has been employed by the Registrant in various capacities since 1989. EDWARD L. WILEY - Age 53; Executive Vice President of the Registrant since 1995 and Executive Vice President of Michael Baker Jr., Inc. since 1994. Mr. Wiley previously served as Senior Vice President of Michael Baker Jr., Inc. from 1989 through 1994. He has been employed by the Registrant in various capacities since 1968. Executive officers of the Registrant serve at the pleasure of the Board of Directors and are elected by the Board or appointed annually for a term of office extending through the election or appointment 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. This limitation is expected to be eased in connection with a formal revision of the credit agreement that is currently pending. At February 28, 1997, the Registrant had 1,566 beneficial holders of its Common Stock and 706 beneficial holders of its Series B Common Stock. Item 6. Selected Financial Data ----------------------- A summary of selected financial data for the Registrant, including each of the last five fiscal years for the period ended December 31, 1996, 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 6, 1997, are set forth within Exhibit 13.1 to this Form 10-K. Such financial statements and supplementary financial information are incorporated herein by reference. 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 1997 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 1997 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 1997 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 1997 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, 1996 and 1995 Consolidated Statement of Income for the three years ended December 31, 1996 Consolidated Statement of Cash Flows for the three years ended December 31, 1996 Consolidated Statement of Shareholders' Investment for the three years ended December 31, 1996 Notes to Consolidated Financial Statements Report of Independent Accountants (a)(2) Financial Statement Schedule for the three years ended December 31, 1996: Schedule II - Valuation and Qualifying Accounts Report of Independent Accountants on Financial Statement Schedule for the three years ended December 31, 1996 (included as Exhibit 99.2 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 - ----------- ----------- 3.1 Articles of Incorporation of the Registrant, as amended, filed as Exhibit 3.1 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, and incorporated herein by reference. 3.2 By-laws of the Registrant, as amended, filed as Exhibit 3.2 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, and incorporated herein by reference. 10.1 1996 Incentive Compensation Plan of Michael Baker Corporation, filed herewith. 10.2 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. 10.3 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. 10.4 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. 10.5 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 as Exhibit 10.6 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995, and incorporated herein by reference. 10.6 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. 10.7 Michael Baker Corporation 1996 Nonemployee Directors' Stock Incentive Plan, filed as Exhibit A to the Registrant's definitive Proxy Statement with respect to its 1996 Annual Meeting of Shareholders, and incorporated herein by reference. 13.1 Financial Section of Annual Report to Shareholders for the year ended December 31, 1996, including Selected Financial Data, Management's Discussion and Analysis of Financial Condition and Results of Operations, Consolidated Financial Statements as of December 31, 1996 and for the three years then ended, Report of Independent Accountants, and Supplemental Financial Information, filed herewith. 21.1 Subsidiaries of the Registrant, filed herewith. 23.1 Consent of Independent Accountants, filed herewith. 99.1 Form 11-K for the Michael Baker Corporation Employee Stock Ownership Plan for the year ended December 31, 1996, filed herewith. 99.2 Report of Independent Accountants on financial statement schedule for the three years ended December 31, 1996, filed herewith.
(b) The Registrant filed no reports on Form 8-K during the fourth quarter of 1996. 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, 1997 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, 1997 - ------------------- Richard L. Shaw /s/ Charles I. Homan Director, President March 28, 1997 - --------------------- and Chief Executive Charles I. Homan Officer /s/ J. Robert White Director, Executive March 28, 1997 - ------------------- Vice President, J. Robert White Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) - ------------------- Director March 28, 1997 William J. Copeland /s/ Roy V. Gavert, Jr. Director March 28, 1997 - ---------------------- Roy V. Gavert, Jr. /s/ Jack B. Hoey Director March 28, 1997 - -------------------- Jack B. Hoey /s/ Thomas D. Larson Director March 28, 1997 - --------------------- Thomas D. Larson /s/ Konrad M. Weis - -------------------- Director March 28, 1997 Konrad M. Weis Director March 28, 1997 - ----------------------- William A. Wulf
MICHAEL BAKER CORPORATION Schedule II - Valuation and Qualifying Accounts For the three years ended December 31, 1996 (In thousands) - -------------------------------------------------------------------- Column A Column B Column C Column D Column E Additions ----------------------- Charged Balance at Charged to other Balance at begin. to accounts- Deductions- at end Description of year expense describe describe* of year - ------------------------------------------------------------------------ For the year ended December 31, 1996: Allowance for doubtful accounts $1,357 $ 411 $0 ($1,383) $ 385 - ------------------------------------------------------------------------ For the year ended December 31, 1995: Allowance for doubtful accounts $ 667 $1,000 $0 ($ 310) $1,357 - ------------------------------------------------------------------------ For the year ended December 31, 1994: Allowance for doubtful accounts $2,305 $2,076 $0 ($3,714) $ 667 - ------------------------------------------------------------------------ * For the year ended December 31, 1996, the deduction amount reflects adjustments in the allowance account to match estimated receivable exposures as of year end. For the years ended December 31, 1995 and 1994, the amounts reflect accounts receivable balances written off during the year.
EX-27 2
5 1000 YEAR DEC-31-1996 JAN-01-1996 DEC-31-1996 10,480 0 69,621 0 16,276 102,747 0 0 126,082 75,330 0 0 0 7,145 36,694 126,082 418,388 418,388 371,766 371,766 0 0 76 8,039 3,859 4,180 0 0 0 4,180 .50 .50
EX-10.1 3 Exhibit 10.1 1996 INCENTIVE COMPENSATION PLAN MICHAEL BAKER CORPORATION INDEX ------
ARTICLE I - GENERAL 1.1 ESTABLISHMENT OF THE PLAN 1.2 PURPOSE 1.3 ADMINISTRATION ARTICLE II - DEFINITIONS 2.1 DEFINITIONS 2.2 GENDER AND NUMBER ARTICLE III - ELIGIBILITY AND PARTICIPATION 3.1 ELIGIBILITY 3.2 PARTICIPATION 3.3 PARTIAL PLAN YEAR PARTICIPATION ARTICLE IV - AWARDS 4.1 COMPONENTS OF PARTICIPATION AWARDS 4.2 CORPORATE PERFORMANCE MEASURES AND GOALS 4.3 BUSINESS UNIT AND PROFIT CENTER PERFORMANCE 4.4 INDIVIDUAL PERFORMANCE ARTICLE V - PAYMENT OF AWARDS 5.1 PAYMENT OF AWARDS 5.2 PLAN FUNDING ARTICLE VI - CHANGE IN CONTROL 6.1 CHANGE IN CONTROL 6.2 DEFINITION OF CHANGE IN CONTROL ARTICLE VII - MISCELLANEOUS PROVISIONS 7.1 NON-TRANSFERABILITY 7.2 TAX WITHHOLDING 7.3 AMENDMENTS 7.4 INDEMNIFICATION 7.5 BENEFICIARY DESIGNATION 7.6 RIGHTS OF PARTICIPANTS 7.7 GOVERNING LAW 7.8 EFFECTIVE DATE 1996 INCENTIVE COMPENSATION PLAN - ATTACHMENT 1 ELIGIBILITY OPPORTUNITY PERFORMANCE MEASUREMENT POTENTIAL PAYOUT (PERCENTAGE OF ANNUAL SALARY) FREQUENCY OF PAYOUT
1996 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 1996 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. (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 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) 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 1996, corporate results shall be dependent upon audited corporate earnings per share (after all incentives have been paid). For 1996, performance level goals for earnings per share are:
Corporate Performance Goal Setting Level (Earnings Per Share) ------ -------------------- Level 1 On Plan $.45 Level 2 Commendable $.50 Level 3 Outstanding $.55
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. Any units or segments with an objective of a positive contribution performance (net income before tax plus corporate overhead) which results in a year-end negative contribution, will not be eligible for the portion of incentive compensation dependent on overall corporate earnings per share performance. Any units or segments with an objective of a negative contribution which results in a year- end more favorable performance, will be eligible for the portion of incentive compensation dependent on overall corporate performance. 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 managers are recommended to be:
% of Business Unit Performance Plans ------------------ Contribution to Corporate Overhead 35% and Profit New Work Added To The Company 45% TQM Goals 10% Human Resources Development 10%
Guidelines of performance goals and percentage weights for Profit Center managers are recommended to be:
% of Profit Center and Individual Performance Plans ------------------ Contribution to Corporate Overhead 35% and Profit New Work Added To The Company 20% Implementation of New Growth Strategies 15% Accounts Receivable 10% TQM Goals 10% Human Resources Development 10%
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. 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. 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) The Company acquires actual knowledge that any Person other than the Company, a Subsidiary, the Company's Stock Ownership Plan and Trust or any employee benefit plan(s) sponsored by the Company has acquired the Beneficial Ownership, directly or indirectly, of securities of the Company entitling such Person to 20% or more of the Voting Power of the Company; (b) A Tender Offer is made to acquire securities of the Company entitling the holders thereof to 20% or more of the Voting Power of the Company; or (c) A solicitation subject to Rule 14a-11 under the 1934 Act (or any successor Rule) relating to the election or removal of 50% or more of the members of any class of the Board shall be made by any person other than the Company or less than 51% of the members of the Board shall be Continuing Directors; or (d) The shareholders of the Company shall approve a merger, consolidation, share exchange, division or sale or other disposition of assets of the Company as a result of which the shareholders of the Company immediately prior to such transaction shall not hold, directly or indirectly, immediately following such transaction a majority of the Voting Power of (i) in the case of a merger or consolidation, the surviving or resulting corporation; (ii) in the case of a share exchange, the acquiring corporation or (iii) in the case of a division or a sale or other disposition of assets, each surviving, resulting or acquiring corporation which, immediately following the transaction, holds more than 10% of the consolidated assets of the Company immediately prior to the transaction. 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. "Continuing Directors" shall mean a director of the Company who either (a) was a director of the Company on the effective date of the Plan or (b) is an individual whose election, or nomination for election, as a director of the Company was approved by a vote of at least two-thirds of the directors then still in office who were Continuing Directors (other than an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of directors of the Company which would be subject to Rule 14a-11 under the 1934 Act, or any successor Rule). 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 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 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, 1996. 1996 Michael Baker Corporation Incentive Compensation Plan - Summary Attachment 1 March 20, 1996
Eligibility for Incentive Compensation Plan - -------------------------------------------------------------------------- Number of Participants Tier 1: approximately 50 Tier 2: approximately 50 Tier 3: Discretionary
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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 net revenue responsibility (Designated by Business Unit Head) Business Units-Construction Profit Center Managers with greater than and Heavy/Highway and Baker $ 60 Million gross revenue responsibility Support Services, Inc. (Designated by Business Unit Head) Tier 2 Corporate 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 - ---------------------------------------------------------------------------- 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) 8.333% 5% (Accumulative 15 % of Total Second Level (total maximum) 16.667% 10% 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)
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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% $.45 2nd Level (Commendable) 33% $.50 3rd Level (Outstanding) 34% $.55
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Performance Goals Business Units, Segments, Profit Centers, and Individual Performance Goals Guidelines (Number of goals and % for each specific goal is to be customized for each participant based upon Operating Objective, Marketing driven % of Business Unit orientation and level of accountability. Profit Center/Individual % is not to be less than 10% for any goal) Performance Plans --- ------------------------ Contribution to Corporate Overhead and Profit 35% New Work Added to the Company 20% Strategic Initiatives 15% Accounts Receivable 10% TQM Goals 10% Human Resources Development 10%
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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%
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Corporate Business Unit (% of Annual Salary) Profitability Performance Goals Goals ------ ------ Tier 2 Corporate and Business Unit Staff 1st Level (On-Plan Performance) 2.50% 2.50% 2nd Level (Commendable) 5.00% 5.00% 3rd Level (Outstanding) 7.50% 7.50%
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Potential Payout (continued) Segment Business Profit Center, Corporate Unit Individual Profitability Performance Performance Goals Goals Goals ------ ------ ------ Tier 2 Business Unit-Segments 1st Level (On-Plan Performance) 1.25% 1.25% 2.50% 2nd Level (Commendable) 2.50% 2.50% 5.00% 3rd Level (Outstanding) 3.75% 3.75% 7.50%
- -------------------------------------------------------------------------- Threshold Corporate Minimum earnings per share for any Potential Payout $0.45 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 $3,812,625 Civil-Engineering $5,436,079 Baker Support Services, Inc. $ (161,528) Buildings Business Unit $2,039,454 Buildings-Design $ 924,777 Buildings-Construction $2,163,477 Transportation Business Unit $4,534,144 Transportation-Engineering $6,068,072 Transportation-Heavy/Highway $ 629,918 Environmental Business Unit $1,760,394 Energy Business Unit $2,720,261 Energy/Baker MO $1,155,213
- --------------------------------------------------------------------------- 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
- ---------------------------------------------------------------------------- EX-13.1 4 Exhibit 13.1
Selected Financial Data - ------------------------------------------------------------------------------ 1996 1995 1994 1993 1992 - ------------------------------------------------------------------------------ (In thousands, except per share information) RESULTS OF OPERATIONS Total contract revenues $418,388 $354,728 $437,193 $434,791 $355,820 Operating income/(loss) 7,460 5,104 (9,097) (21,805) 8,543 Net income/(loss) 4,180 2,900 (7,945) (15,128) 4,403 Net income/(loss) per share $ 0.50 $ 0.35 $ (0.95) $ (1.82) $ 0.67 Return on average equity 8.50% 6.28% (16.31)% (25.59)% 8.67% FINANCIAL CONDITION Total assets $126,082 $117,376 $134,794 $145,805 $130,917 Working capital $ 27,417 $ 25,186 $ 22,391 $ 33,042 $ 42,981 Current ratio 1.36 1.36 1.26 1.39 1.75 Long-term debt $ -- $ -- $ 3,960 $ 7,670 $ 2,625 Shareholders' investment 50,752 47,631 44,731 52,676 65,536 Book value per share 6.19 5.70 5.35 6.30 8.03 Year-end closing share price $ 6.38 $ 5.00 $ 3.75 $ 11.00 $ 14.75 CASH FLOW Cash provided by/(used in) operating activities $ 1,188 $ 15,539 $ 5,415 $ 4,758 $(11,324) Cash used in investing activities (3,739) (2,294) (5,436) (11,232) (4,876) Cash (used in)/provided by financing activities (1,272) (2,547) (1,477) 5,105 22,158 ----------------------------------------------------- (Decrease)/increase in cash and cash equivalents $ (3,823) $ 10,698 $ (1,498) $(1,369) $ 5,958 BACKLOG Funded $332,800 $299,900 $283,300 $357,600 $296,800 Total $543,700 $507,800 $468,300 $587,600 $469,600 SHARE INFORMATION Year-end shares outstanding 8,197 8,364 8,364 8,364 8,161 Average shares outstanding during year 8,383 8,368 8,364 8,304 6,561 - ------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - ------------------------------------------------------------------------------ RESULTS OF OPERATIONS - ------------------------------------------------------------------------------ The year 1996 was marked by a return to revenue growth, the maintenance of overall gross profit margins, and a sizable improvement in net income. Although public spending on infrastructure projects remained relatively flat, or even decreased in some areas, the Company achieved growth through entering new markets for its engineering services, achieving additional penetration in its energy niches, and gaining some modest increases in its commercial sector businesses. The improved performance helped to fund increased investments in technology development and in the opening of new offices, including one in Mexico. This performance improvement translated to earnings of $0.50 per share in 1996, compared to $0.35 per share in 1995. TOTAL CONTRACT REVENUES Total contract revenues grew to $418 million in 1996 from $355 million in 1995. While total contract revenues climbed in each of the Company's business units for 1996, the Civil unit had the largest increase due primarily to a new engineering project in Mexico which generated revenues of $24 million. The Buildings and Transportation units were also significant contributors to the overall increase with improvements of $12 million and $11 million, respectively. Revenue growth in the construction divisions of each of these two units caused their respective improvements. For 1995, total contract revenues decreased 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 both 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 1995 decrease resulted in the Energy unit from Baker/MO having terminated certain lower margin and loss contracts during the year.
TOTAL CONTRACT REVENUES - 1996 BUILDINGS 30% CIVIL 26% ENERGY 10% ENVIRONMENTAL 7% TRANSPORTATION 27%
GROSS PROFIT The Company's gross profit increased to $46.6 million in 1996 from $40.0 million in 1995. As a percentage of total contract revenues, gross profit remained relatively constant at 11% in both 1996 and 1995. Lower gross profit percentages in the Transportation and Environmental units were offset by an improvement in the Energy unit. The percentage decline in the Transportation unit resulted from its performance on certain construction projects, while Environmental's decrease followed the 1996 award of a major contract, under which the Company now works as a subcontractor instead of being the prime contractor as was the case under the related but expired previous contract. In the Energy unit, Baker/MO received several awards of profitable new work in 1996 and received the first full year's benefit from having terminated certain lower margin and loss contracts during 1995, thus contributing to its continued profitability improvement. The 1995 gross profit represented an increase from $32.9 million in 1994. Gross profit expressed as a percentage of total contract revenues climbed from 8% in 1994. With the exception of the Civil unit, each of the Company's business units reported improvements in its gross profit 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 in the Energy unit resulted primarily from a combination of certain 1994 contract-related charges at Baker/MO and improved 1995 margins related to the previously mentioned terminations of several Baker/MO contracts during the year. In the Buildings unit, the 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.
INCOME FROM OPERATIONS - 1996 BUILDINGS 12% CIVIL 43% ENERGY 29% ENVIRONMENTAL 5% TRANSPORTATION 11%
GENERAL AND ADMINISTRATIVE EXPENSES General and administrative ("G&A") expenses increased to $39.2 million in 1996 from $34.9 million in 1995. The 1996 increase principally reflects the general increase in revenue volumes combined with higher marketing costs in several of the Company's business units. Expressed as a percentage of total contract revenues, G&A expense decreased slightly to 9.4% in 1996 from 9.8% in 1995. G&A expenses decreased in 1995 from $42.0 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. Expressed as a percentage of total contract revenues, G&A expenses for 1995 increased from 9.6% in 1994. OTHER INCOME AND EXPENSE Interest expense decreased to $76,000 in 1996 from $336,000 in 1995, as a result of the Company's limited borrowings under its revolving credit agreement during the year. Interest income increased to $402,000 in 1996 from $221,000 in 1995, due to the Company's maintenance of its invested cash balance throughout 1996. Despite higher interest rates during 1995, interest expense decreased from $732,000 in 1994 as a result of the Company's repayment of all working capital borrowings under its revolving credit agreement in September 1995. Interest income increased in 1995 from $80,000 in 1994, again due to the Company's repayment of its borrowings and its subsequent investment of cash generated from operations. INCOME TAXES The provision for/(benefit from) income taxes resulted in an effective tax rate of 48% in 1996, 43% in 1995, and (17%) in 1994. The difference between these percentages and the 34% statutory U.S. federal rate is attributable primarily to state and foreign income and withholding taxes. The 1996 provision rate was unfavorably impacted by higher foreign taxes paid. 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 Services joint venture. 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 $333 million at December 31, 1996, an increase from $300 million at the end of 1995. The overall 1996 increase in funded backlog is attributable to a combination of new work added and transfers from unfunded backlog during the year. Total backlog, which incrementally includes that portion of contract value for which options are still to be exercised (unfunded backlog), was $544 million at the end of 1996 versus $508 million at the end of 1995. A portion of this increase resulted from the first-time inclusion of total backlog for the Energy unit's Baker/OTS division in the amount of $24 million as of December 31, 1996, without a restatement of the related year-end 1995 amount. As the Company entered 1997, its Civil, Transportation and Energy units showed improvements in funded backlog relative to the prior year. While the Environmental unit replaced its 1996 revenues with new funded work during the year, the Buildings unit's construction division did not, thereby resulting in a 1996 decrease in this unit's funded backlog amount.
FUNDED BACKLOG - YEAR END 1996 BUILDINGS 38% CIVIL 19% ENERGY 5% ENVIRONMENTAL 7% TRANSPORTATION 31%
LIQUIDITY AND CAPITAL RESOURCES - ----------------------------------------------------------------------------- Net cash provided by operating activities declined to $1.2 million in 1996, compared to $15.5 million in 1995 and $5.4 million in 1994. The 1996 decrease is mainly attributed to increases in accounts receivable associated with the 1996 increase in revenue volumes. The 1995 cash flow improvement resulted primarily from the Company achieving net income totaling $2.9 million for 1995 versus 1994's net loss of $7.9 million. Net cash used in investing activities was $3.7 million in 1996, compared to $2.3 million in 1995 and $5.4 million in 1994. These amounts solely comprise purchases of property, plant and equipment for all years. The 1996 increase in capital purchases resulted in large part from equipment purchases required under certain new contracts that were awarded during the year. 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 reflected 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. This leasing arrangement was also utilized for the majority of computer equipment acquired in 1996. Net cash used in financing activities was $1.3 million in 1996, compared to $2.5 million in 1995 and $1.5 million in 1994. In late 1996, pursuant to an announced stock repurchase program, the Company paid $1.3 million to acquire approximately 208,000 treasury shares. In 1995, the Company totally repaid its borrowings under its revolving credit facility. All 1994 and 1995 cash uses resulted from repayments of long-term debt and borrowings on the revolving credit facility. Working capital increased to $27.4 million at December 31, 1996 from $25.2 million at December 31, 1995. This slight increase is again attributable to the Company's 1996 revenue volume improvement, which caused expected increases in the related receivable and payable balances. The Company's current ratios were 1.36:1 at the end of both 1996 and 1995. In March 1997, the Company agreed with Mellon Bank, N.A. to revised and improved terms under its credit agreement. Under the revised terms, the commitment of $25 million, which covers loans and letters of credit, will be extended through May 31, 2000, and the bank will release all security in Company assets previously held. As of December 31, 1996, no loans were outstanding; however, letters of credit totaling $3.8 million were outstanding under the agreement. Management believes that the credit agreement will be adequate to meet its borrowing and letter of credit requirements for at least the next year. 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 at least the next year. Short and long-term liquidity is dependent upon appropriations of public funds for infrastructure and other government-funded projects, capital spending levels in the private sector, and the demand for the Company's services in the oil and gas markets. 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 and its existing credit facility will be sufficient to meet its operating and capital expenditure requirements for at least the next year.
CONSOLIDATED BALANCE SHEET - ---------------------------------------------------------------------------- As of December 31, ------------------ ASSETS 1996 1995 - ---------------------------------------------------------------------------- (In thousands) CURRENT ASSETS Cash $ 10,480 $ 14,303 Receivables 69,621 53,708 Cost of contracts in progress and estimated earnings, less billings 16,276 19,104 Prepaid expenses and other 6,370 7,816 - ---------------------------------------------------------------------------- Total current assets 102,747 94,931 - ---------------------------------------------------------------------------- PROPERTY, PLANT AND EQUIPMENT, NET 12,265 12,558 - ---------------------------------------------------------------------------- OTHER ASSETS Goodwill, net of accumulated amortization of $2,005,000 and $1,649,000 in 1996 and 1995, respectively 5,297 4,667 Other intangible assets, net of accumulated amortization of $2,157,000 and $1,625,000 in 1996 and 1995, respectively 1,945 2,467 Other assets 3,828 2,753 - ---------------------------------------------------------------------------- Total other assets 11,070 9,887 - ---------------------------------------------------------------------------- TOTAL ASSETS $126,082 $117,376 - ----------------------------------------------------------------------------
The accompanying notes are an integral part of this statement.
CONSOLIDATED BALANCE SHEET - ---------------------------------------------------------------------------- As of December 31, ------------------ LIABILITIES AND SHAREHOLDERS' INVESTMENT 1996 1995 - ---------------------------------------------------------------------------- (In thousands) CURRENT LIABILITIES Accounts payable $ 34,960 $ 30,879 Accrued employee compensation 6,596 5,703 Accrued insurance 5,425 6,204 Other accrued expenses 19,045 16,465 Excess of billings on contracts in progress over cost and estimated earnings 9,304 10,494 - ---------------------------------------------------------------------------- Total current liabilities 75,330 69,745 - ---------------------------------------------------------------------------- SHAREHOLDERS' INVESTMENT Common Stock, par value $1, authorized 44,000,000 shares, issued 7,055,784 and 7,011,302 shares, in 1996 and 1995, respectively 7,056 7,012 Series B Common Stock, par value $1, authorized 6,000,000 shares, issued 1,348,632 and 1,352,250 shares, in 1996 and 1995, respectively 1,349 1,352 Additional paid-in capital 36,694 36,534 Retained earnings 6,913 2,733 Less 207,560 shares of Common Stock in treasury, at cost (1,260) -- - ---------------------------------------------------------------------------- Total shareholders' investment 50,752 47,631 - ---------------------------------------------------------------------------- TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT $126,082 $117,376 - ----------------------------------------------------------------------------
The accompanying notes are an integral part of this statement.
CONSOLIDATED STATEMENT OF INCOME - ---------------------------------------------------------------------------- For the years ended December 31, --------------------------------- 1996 1995 1994 - ---------------------------------------------------------------------------- (In thousands, except per share amounts) Total contract revenues $418,388 $354,728 $437,193 Cost of work performed 371,766 314,774 404,262 - ---------------------------------------------------------------------------- Gross profit 46,622 39,954 32,931 General and administrative expenses 39,162 34,850 42,028 - ---------------------------------------------------------------------------- Income/(loss) from operations 7,460 5,104 (9,097) Other income/(expense): Interest expense (76) (336) (732) Interest income 402 221 80 Other, net 253 91 204 - ---------------------------------------------------------------------------- Income/(loss) before inc taxes 8,039 5,080 (9,545) Prov for/(benefit from) inc taxes 3,859 2,180 (1,600) - ---------------------------------------------------------------------------- NET INCOME/(LOSS) $ 4,180 $ 2,900 $ (7,945) - ---------------------------------------------------------------------------- NET INCOME/(LOSS) PER SHARE $ 0.50 $ 0.35 $ (0.95) - ----------------------------------------------------------------------------
The accompanying notes are an integral part of this statement.
CONSOLIDATED STATEMENT OF CASH FLOWS - ---------------------------------------------------------------------------- For the years ended December 31, -------------------------------- 1996 1995 1994 - ----------------------------------------------------------------------------- (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES Net income/(loss) $ 4,180 $ 2,900 $(7,945) Adjustments to reconcile net income/(loss) to net cash provided by operating activities: Depreciation and amortization 4,851 5,049 5,279 Deferred income taxes 1,523 460 (1,765) Changes in assets and liabilities: (Increase)/decrease in receivables and contracts in progress (14,275) 22,909 8,406 (Increase)/decrease in other net assets (1,878) 3,847 (1,007) Increase/(decrease) in accounts payable and accrued expenses 6,787 (19,626) 2,447 - ----------------------------------------------------------------------------- Total adjustments (2,992) 12,639 13,360 - ----------------------------------------------------------------------------- Net cash prov by operating activities 1,188 15,539 5,415 - ----------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Additions to property, plant and equipment (3,739) (2,294) (5,436) - ----------------------------------------------------------------------------- Net cash used in investing activities (3,739) (2,294) (5,436) - ----------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Repayments of revolving credit loans -- (2,035) (965) Repayments of other long-term debt (12) (512) (512) Payments to acquire treasury stock (1,260) -- -- - ----------------------------------------------------------------------------- Net cash used in financing activities (1,272) (2,547) (1,477) - ----------------------------------------------------------------------------- Net (decrease)/increase in cash (3,823) 10,698 (1,498) - ----------------------------------------------------------------------------- Cash at beginning of year 14,303 3,605 5,103 - ----------------------------------------------------------------------------- CASH AT END OF YEAR $ 10,480 $ 14,303 $ 3,605 - ----------------------------------------------------------------------------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW DATA Interest paid $ 73 $ 537 $ 690 Income taxes paid $ 950 $ 1,671 $ 3,184
The accompanying notes are an integral part of this statement.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' INVESTMENT - ----------------------------------------------------------------------------- Series B Common Common Stock Stock Par Par Value $1 Value $1 Treasury Additional (In thousands) (1 vote/ (10 votes/ --------- Paid-in Retained share) share) Shrs Amt Capital Earnings - ----------------------------------------------------------------------------- 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 Net income -- -- -- -- -- 4,180 Series B Common Stock conversions to regular Common Stock 3 (3) -- -- -- -- Stock issued for Maguire acquisition 33 -- -- -- 129 -- Restricted stock issued 4 -- -- -- 14 -- Treasury stock purchases -- -- 208 1,260 -- -- Stock options exercised 4 -- -- -- 17 -- - ----------------------------------------------------------------------------- Balance, Dec 31, 1996 $7,056 $1,349 208 $1,260 $36,694 $ 6,913 - -----------------------------------------------------------------------------
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. 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 a straight-line basis over periods ranging from 15 to 40 years. EARNINGS PER COMMON SHARE Per share computations are based upon weighted averages of 8,382,592, 8,368,206, and 8,363,552 shares outstanding for the years 1996, 1995, and 1994, respectively. Stock options are included as share equivalents in the computation of weighted average shares outstanding using the treasury stock method. RECLASSIFICATIONS Certain 1995 and 1994 financial statement amounts have been reclassified to conform with 1996 classifications. 2 CONTRACTS - ----------------------------------------------------------------------------- The total cost of contracts in progress (used to determine cost of work performed) plus accumulated gross profit recorded was $761,153,000 and $624,971,000 at December 31, 1996 and 1995, respectively. Billings to date on contracts in progress at December 31, 1996 and 1995 were $754,181,000 and $616,361,000, respectively. Trade accounts receivable totaling $11,855,000 and $7,384,000 at December 31, 1996 and 1995, respectively, relate to retainage provisions under long-term contracts which will be due upon completion of the contracts. Based on management's estimates, substantially all of the retention balance at December 31, 1996 is expected to be collected in 1997. As of December 31, 1996 and 1995, the Company had an allowance for doubtful accounts of $385,000 and $1,357,000, respectively. As of December 31, 1996 and 1995, accounts payable included amounts due to subcontractors of $8,051,000 and $4,553,000, 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 $1,612,000 and $1,891,000 at December 31, 1996 and 1995, 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 BUSINESS SEGMENT INFORMATION - ----------------------------------------------------------------------------- The Company is organized into the following five market-focused business unit segments: Buildings, Civil, Energy, Environmental and Transportation. The following tables reflect the revenues and income from operations for the five business units (in millions):
1996 1995 1994 - ----------------------------------------------------------------------------- Total contract revenues from: Buildings Unit $127.4 $116.3 $186.2 Civil Unit 109.4 73.9 78.2 Energy Unit 43.2 37.0 45.5 Environmental Unit 27.3 27.7 30.2 Transportation Unit 111.1 99.8 97.1 - ----------------------------------------------------------------------------- Total $418.4 $354.7 $437.2 - -----------------------------------------------------------------------------
1996 1995 1994 - ----------------------------------------------------------------------------- Income/(loss) from operations from: Buildings Unit $0.9 $ 1.8 $(5.4) Civil Unit 3.2 (0.6) 4.8 Energy Unit 2.2 0.8 (7.7) Environmental Unit 0.4 1.9 1.0 Transportation Unit 0.8 1.2 (1.8) - ----------------------------------------------------------------------------- Total $7.5 $ 5.1 $(9.1) - -----------------------------------------------------------------------------
The following represents identifiable assets (both tangible and intangible) that are associated with the operations of each business unit (in millions):
1996 1995 - ----------------------------------------------------------------------------- Identifiable assets from: Buildings Unit $ 29.9 $ 33.1 Civil Unit 30.7 22.5 Energy Unit 17.5 14.2 Environmental Unit 5.8 6.1 Transportation Unit 29.4 27.1 Corporate 12.8 14.4 - ----------------------------------------------------------------------------- Total $126.1 $117.4 - -----------------------------------------------------------------------------
Based on total contract revenues, the principal markets for the Company's services are as follows:
1996 1995 1994 - ----------------------------------------------------------------------------- United States government 22.5% 24.1% 24.7% Various state governmental and quasi-governmental agencies 46.6% 44.4% 35.6% Commercial, industrial and private clients 30.9% 31.5% 39.7% - -----------------------------------------------------------------------------
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 1996, 1995, or 1994; 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% and 12.1% of the Company's 1995 and 1994 total contract revenues, respectively. 4 PROPERTY, PLANT AND EQUIPMENT - ----------------------------------------------------------------------------- Property, plant and equipment consists of the following (in thousands):
1996 1995 - ----------------------------------------------------------------------------- Land $ 693 $ 693 Buildings and improvements 6,345 5,952 Equipment and vehicles 30,873 28,202 - ----------------------------------------------------------------------------- Total, at cost 37,911 34,847 Less - Accumulated depreciation 25,646 22,289 - ----------------------------------------------------------------------------- Net property, plant and equipment $12,265 $12,558 - ----------------------------------------------------------------------------- /TABLE 5 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, 1996, no loans were outstanding; however, letters of credit totaling $3,829,000 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. Under the Agreement, the Company also pays the Bank commitment fees of 1/2% per year based on the unused portion of the commitment. The maximum amount of borrowings outstanding under the Agreement during 1996 was $695,000. For 1996, the average daily balance outstanding when the Company was in a net borrowing position was $324,000 at a weighted average rate of 8.5%. For the period during 1995 in which the Company was in a net borrowing position, the average daily balance outstanding was $4,249,000 at a weighted average rate of 9.1%. The proceeds of any loans under the Agreement have been used to meet various working capital requirements. In March 1997, the Company agreed with the Bank to revised and improved terms of its Agreement, under which the $25 million commitment will be extended through May 31, 2000. Other significant terms that have already been agreed between the parties include the release of all security in Company assets held under the Agreement, a reduction in the borrowing rate to the Bank's prime interest rate or other indexed rates that may be lower, and a reduction in the commitment fees to 3/8% per year based on the unused portion of the commitment. 6 CAPITAL STOCK - ----------------------------------------------------------------------------- During 1996, the Board of Directors authorized the repurchase of up to 500,000 shares of the Company's common stock in the open market. During 1996, the Company repurchased 207,560 treasury shares of common stock at market prices ranging from $5.63 to $6.25 per share, for a total price paid of $1,260,000. Under the 1996 Nonemployee Directors' Stock Incentive Plan, each nonemployee director was issued 500 restricted shares of common stock for a total of 3,500 restricted shares issued. Restrictions on the 3,500 shares expire two years after the issue date. 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, 1996, there were no shares of such Preferred Stock outstanding. 7 LEASE COMMITMENTS - ----------------------------------------------------------------------------- Rent expense under noncancelable leases was $9,972,000 in 1996, $8,388,000 in 1995, and $8,111,000 in 1994. Minimum annual rentals payable under noncancelable leases in each of the five years after December 31, 1996 are $10,011,000, $8,111,000, $5,738,000, $5,104,000, and $3,697,000, respectively. These noncancelable leases relate to office space, computer equipment, office equipment, and vehicles with lease terms ranging from one to 10 years. 8 INCOME TAXES - ----------------------------------------------------------------------------- The provision for/(benefit from) income taxes consisted of the following (in thousands):
1996 1995 1994 - ----------------------------------------------------------------------------- Current income taxes: Federal $ (176) $ -- $ (808) State -- 837 80 Foreign 1,406 883 893 - ----------------------------------------------------------------------------- Total current income taxes 1,230 1,720 165 - ----------------------------------------------------------------------------- Deferred income taxes: Federal 2,538 994 (2,190) State 91 (534) 425 - ----------------------------------------------------------------------------- Total deferred income taxes 2,629 460 (1,765) - ----------------------------------------------------------------------------- Total provision for/(benefit from) income taxes $3,859 $2,180 $(1,600) - -----------------------------------------------------------------------------
The following is a reconciliation of income taxes at the federal statutory rate to income taxes recorded by the Company (in thousands):
1996 1995 1994 - ----------------------------------------------------------------------------- Computed income taxes at U.S. federal statutory rate $2,733 $1,727 $(3,245) Loss of foreign tax credits -- -- 629 Foreign taxes, net of federal income tax benefit 928 583 377 State income taxes, net of federal income tax benefit 61 153 333 Nondeductible charges 249 246 179 Realization of tax benefit -- (600) -- Other, net (112) 71 127 - ----------------------------------------------------------------------------- Total provision for/(benefit from) income taxes $3,859 $2,180 $(1,600) - -----------------------------------------------------------------------------
The domestic and foreign components of income/(loss) before income taxes are as follows (in thousands):
1996 1995 1994 - ----------------------------------------------------------------------------- Domestic $3,530 $2,816 $(12,120) Foreign 4,509 2,264 2,575 - ----------------------------------------------------------------------------- Total $8,039 $5,080 $ (9,545) - -----------------------------------------------------------------------------
The components of the Company's deferred income tax assets and liabilities at December 31, 1996 and 1995 are as follows (in thousands):
1996 1995 - ----------------------------------------------------------------------------- Deferred income tax assets: Deductible temporary differences: Provision for expenses and losses $ 3,098 $ 4,540 Contract overbillings 633 1,326 Federal tax operating loss carryforward 808 1,476 Accrued vacation pay 1,255 1,134 Fixed and intangible assets 724 517 Other 570 1,721 - ----------------------------------------------------------------------------- Total deferred income tax assets 7,088 10,714 - ----------------------------------------------------------------------------- Deferred income tax liabilities: Contract underbillings (5,692) (6,689) - ----------------------------------------------------------------------------- Total deferred income tax liabilities (5,692) (6,689) - ----------------------------------------------------------------------------- Net deferred tax asset $ 1,396 $ 4,025 - ----------------------------------------------------------------------------- /TABLE 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, 1996 will be realized. As of December 31, 1996, the Company had a U.S. net operating loss carryforward of $2,377,000. This carryforward expires in the year 2010. The Company's U.S. income tax returns are currently being examined by the Internal Revenue Service for the years 1990 through 1994. Management believes that adequate provisions have been made for income taxes at December 31, 1996. 9 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, 1996, 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. 10 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 $3,306,000, $2,912,000, and $2,925,000 in 1996, 1995, and 1994, respectively. As of December 31, 1996, the market value of all ESOP investments was approximately $55,439,000, of which 44% represented the market value of the ESOP's investment in Michael Baker Corporation Common Stock. The Company's ESOP held 46% of the shares and 72% of the voting power for the outstanding Common Stock and Series B Common Stock of the Company at the end of 1996. 11 STOCK OPTION PLANS - ----------------------------------------------------------------------------- As of December 31, 1996, the Company had two fixed stock option plans. Under the 1995 Stock Incentive Plan (the "Plan"), the Company may grant options for an aggregate of 500,000 shares of Common Stock to key employees. Under the 1996 Nonemployee Directors' Stock Incentive Plan (the "Directors' Plan"), the Company may grant options for an aggregate of 150,000 shares of Common Stock to nonemployee board members. Under both plans, the exercise price of each option equals the market price of the Company's stock on the date of grant. One-fourth of the options granted become immediately vested, and the remaining three-fourths vest in annual one-fourth increments under the Plan, while the options under the Directors' Plan are fully vested at date of grant. Vested options remain exercisable for a period of ten years from the grant date under both plans. The following table summarizes all stock option activity for both plans in 1995 and 1996:
Shares Average subject exercise price to option per share - ----------------------------------------------------------------------------- Balance at January 1, 1995 -- -- Options granted 176,894 $5.00 Options exercised -- -- Options forfeited (25,106) $5.00 - ----------------------------------------------------------------------------- Balance at December 31, 1995 151,788 $5.00 Options granted 67,947 $4.83 Options exercised (4,125) $5.00 Options forfeited (20,918) $4.97 - ----------------------------------------------------------------------------- Balance at December 31, 1996 194,692 $4.94 - -----------------------------------------------------------------------------
The following table summarizes information about stock options outstanding under both plans as of December 31, 1996:
Options Exercise Outstanding Average Exercisable granted in price options life* options - ----------------------------------------------------------------------------- Jan. 1995 $5.00 130,094 8.0 120,180 Feb. 1996 $4.81 57,598 9.2 15,236 May 1996 $5.03 7,000 9.6 7,000 - ----------------------------------------------------------------------------- Total 194,692 8.4 142,416 - -----------------------------------------------------------------------------
*Average life remaining in years During 1996, the Company adopted Statement of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based Compensation," for disclosure purposes only. As allowed under SFAS 123, the Company continues to apply APB Opinion No. 25, "Accounting for Stock Issued to Employees," and related Interpretations in its accounting for stock-based compensation plans. Accordingly, no compensation cost was recognized in 1996. Had compensation cost for the Company's stock incentive plans been determined based on the fair value at the grant dates for awards under those plans, consistent with the method prescribed by SFAS 123, the Company's net income and earnings per share would have been reduced by immaterial amounts. 12 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 were approximately $1,161,000, $863,000, and $1,060,000 for the years ended December 31, 1996, 1995, and 1994, respectively. 13 QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) - ----------------------------------------------------------------------------- The following is a summary of the unaudited quarterly results of operations for the two years ended December 31, 1996. 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 reflected more favorable levels of insurance experience over the preceding 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 during the fourth quarter of 1995, or from changes in accounting estimates based on information which became available during that period.
(In thousands, except per share amounts) - ----------------------------------------------------------------------------- 1996 - Three Months Ended March 31 June 30 Sept. 30 Dec. 31 - ----------------------------------------------------------------------------- Total contract revenues $84,019 $102,996 $114,710 $116,663 Gross profit 10,406 12,214 12,370 11,632 Income before income taxes 948 2,393 2,333 2,365 Net income 512 1,292 1,260 1,116 Net income per common share $ 0.06 $ 0.15 $ 0.15 $ 0.13 - -----------------------------------------------------------------------------
(In thousands, except per share amounts) - ----------------------------------------------------------------------------- 1995 - Three Months Ended March 31 June 30 Sept. 30 Dec. 31 - ----------------------------------------------------------------------------- Total contract revenues $86,543 $88,946 $90,620 $88,619 Gross profit 9,890 11,411 10,405 8,248 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 - -----------------------------------------------------------------------------
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, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, 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. /s/ Price Waterhouse LLP - ------------------------ Price Waterhouse LLP Pittsburgh, Pennsylvania February 6, 1997 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 1996 and 1995 were as follows:
1996 1995 ---------------------------------------------------------------------- First Second Third Fourth First Second Third Fourth - ----------------------------------------------------------------------------- High 5 3/8 5 3/4 5 5/16 6 7/16 4 3/8 5 5/8 6 1/4 6 1/4 Low 4 5/16 4 3/4 4 9/16 4 3/4 3 3/4 3 15/16 4 3/4 4 1/4 - -----------------------------------------------------------------------------
EX-21.1 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, 1996:
State or Country Name of Organization ----- ----------------- 1. Baker Environmental, Inc. Pennsylvania 2. Baker Heavy & Highway, Inc. Pennsylvania 3. Baker Mellon Stuart Construction, Inc. Pennsylvania 4. Mellon Stuart Building Services, Inc. Pennsylvania 5. Mellon Stuart Construction International, Inc. Pennsylvania 6. Michael Baker Development Corporation Pennsylvania 7. Michael Baker Global, Inc. Pennsylvania 8. Michael Baker Jr., Inc. Pennsylvania 9. Michael Baker Alaska, Inc. Alaska 10. Baker Construction, Inc. Delaware 11. Baker Holding Corporation Delaware 12. Baker/OTS, Inc. Delaware 13. Michael Baker International, Inc. Delaware 14. Baker Engineering, Inc. Illinois 15. Michael Baker Jr. Company Nevada 16. Michael Baker Architects/Engineers, P.C. New Jersey 17. Baker Engineering NY, Inc. New York 18. Baker/MO Services, Inc. Texas 19. Baker Support Services, Inc. Texas 20. Vermont General Insurance Company Vermont 21. Michael Baker Barbados Ltd. Barbados 22. Baker O&M International, Ltd. Cayman Islands 23. Baker/OTS International, Inc. Cayman Islands 24. Overseas Technical Services (Middle East) Ltd. Cayman Islands 25. Michael Baker de Mexico, S.A. de C.V. Mexico 26. OTS International Training Services Ltd. United Kingdom 27. Overseas Technical Services (Harrow) Ltd. United Kingdom 28. Baker/OTS Ltd. United Kingdom 29. SD Forty Five Ltd. United Kingdom 30. Hanseatic Oilfield Services Ltd. Vanuatu 31. Oilfield Personnel Recruitment and Management Ltd. Vanuatu 32. OTS Finance and Management Ltd. Vanuatu 33. OTS International Training Services Ltd. Vanuatu 34. Overseas Technical Services International Ltd. Vanuatu
1 EX-23.1 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) our report dated February 6, 1997, 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, 1996. We also consent to the incorporation by reference of our report on the Financial Statement Schedule, which appears as Exhibit 99.2 of this Form 10-K. /s/ Price Waterhouse LLP - ------------------------- Price Waterhouse LLP Pittsburgh, Pennsylvania March 28, 1997 EX-99.1 7 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, 1996 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 and Additional Information December 31, 1996 and 1995 Michael Baker Corporation Employee Stock Ownership Plan Financial Statements December 31, 1996 and 1995 Index - -------------------------------------------------------- Report of Independent Accountants Financial Statements: Statements of Financial Condition - December 31, 1996 and 1995 Statements of Income and Changes in Participants' Equity With Fund Information - For the Periods Ended December 31, 1996 and 1995 Notes to Financial Statements Additional Information:* Schedule of Assets Held for Investment Purposes - December 31, 1996 * Other schedules required by Section 2520.103-10 of the Department of Labor Rules and Regulations for Reporting and Disclosure under ERISA have been omitted because they are not applicable. Report of Independent Accountants March 15, 1997 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, 1996 and 1995, 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. Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule of assets held for investment purposes is presented for the purposes of additional analysis and is not a required part of the basic financial statements but is additional information required by the Employee Retirement Income Security Act of 1974 (ERISA). The fund information in the statement of income and changes in participants' equity is presented for purposes of additional analysis rather than to present the changes in participants' equity of each fund. The supplemental schedule and the 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. /s/ Price Waterhouse LLP - ------------------------ Price Waterhouse LLP Michael Baker Corporation Employee Stock Ownership Plan Statement of Financial Condition December 31, 1996 and 1995
December 31, 1996 1995 Assets Investments, at quoted market value: Investments in common stock of Michael Baker Corporation: Common Stock $16,661,483 $11,055,430 Series B Common Stock 7,813,775 6,129,240 Temporary investments 121,082 276,391 Investments in trust funds managed by Putnam Investments, Inc.: Putnam Growth and Income Fund 11,791,338 -- George Putnam Fund of Boston 8,974,703 -- Putnam New Opportunities Fund 3,338,982 -- Putnam Money Market Fund 3,284,128 -- Putnam Voyager Fund 2,069,616 -- Putnam Income Fund 746,635 -- Putnam International Growth Fund 614,208 -- Investments in trust funds managed by Mellon Bank N.A.: Dreyfus/Laurel Prime Money Market Fund -- 3,477,286 Premier Balanced Fund -- 8,770,757 Dreyfus Disciplined Stock Fund -- 10,778,934 Dreyfus Bond Market Index Fund -- 454,565 Participants' loan fund (market value approximates costs) 44,782 48,440 ----------- ----------- Total investments 55,460,732 40,991,043 Receivables: Contributions receivable from Michael Baker Corporation 300,099 233,654 Accrued interest and securities sold 274 -- ----------- ---------- Total Receivables 300,373 233,654 Cash and cash equivalents 2,046 -- ----------- ---------- Total Plan assets 55,763,151 41,224,697 =========== ========== Liabilities Accrued liabilities 119,947 -- ----------- ---------- Total Plan liabilities 119,947 -- ----------- ---------- Participants' equity $55,643,204 $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, 1996 - -----------------------------------------------------------------------------
Changes in Participants' Equity Period Ended December 31, 1996 ------------------------------- Michael Dreyfus/ Baker Laurel Prime Common Stock Money Market Fund Fund Contributions: Participants' $ 629,166 $ 119,472 Employer's 3,392,910 -- Dividends/interest income 276 41,979 Net appreciation in market value of investments 4,610,960 -- Interfund transfers - net (537,070) 102,309 ----------- ------------ Total additions 8,096,242 263,760 Distributions to participants 1,011,910 213,895 Fees 235 -- ----------- ------------ Total deductions 1,012,145 213,895 ----------- ------------ Net increase (decrease) in participants' equity during the period 7,084,097 49,865 Transfer from Mellon to Putnam (Note 1) -- (3,527,151) Participants' equity at beginning of period 17,694,715 3,477,286 ------------ ------------ Participants' equity at end of period $24,778,812 $ -- ============ ============
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, 1996 - -----------------------------------------------------------------------------
Changes in Participants' Equity Period Ended December 31, 1996 ------------------------------- Dreyfus Premier Disciplined Balanced Stock Fund Fund Contributions: Participants' $ 335,999 $ 486,900 Employer's -- -- Dividends/interest income 434,097 443,089 Net appreciation in market value of investments -- -- Interfund transfers - net (239,141) 180,106 ------------ -------------- Total additions 530,955 1,110,095 Distributions to participants 290,512 322,437 Fees -- -- ------------ -------------- Total deductions 290,512 322,437 ------------ -------------- Net increase (decrease) in participants' equity during the period 240,443 787,658 Transfer from Mellon to Putnam (Note 1) (9,011,200) (11,566,592) Participants' equity at beginning of period 8,770,757 10,778,934 ------------ ------------- Participants' equity at end of period $ -- $ -- ============ =============
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, 1996 - -----------------------------------------------------------------------------
Changes in Participants' Equity Period Ended December 31, 1996 ------------------------------- Dreyfus Putnam Bond Growth & Market Index Income Fund Fund Contributions: Participants' $ 58,271 $ 827,363 Employer's -- -- Dividends/interest income (12,582) 945,122 Net appreciation in market value of investments -- 499,701 Interfund transfers - net 70,050 (1,595,842) ------------- ------------- Total additions 115,739 676,344 Distributions to participants 12,848 451,512 Fees -- 86 ------------- ------------- Total deductions 12,848 451,598 ------------- ------------- Net increase (decrease) in participants' equity during the period 102,891 224,746 Transfer from Mellon to Putnam (Note 1) (557,456) 11,566,592 Participants' equity at beginning of period 454,565 -- ------------- ------------ Participants' equity at end of period $ -- $11,791,338 ============= ============
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, 1996 - -----------------------------------------------------------------------------
Changes in Participants' Equity Period Ended December 31, 1996 ------------------------------- George Putnam Putnam New Fund of Opportunities Boston Fund Contributions: Participants' $ 416,460 $ 1,386,648 Employer's -- -- Dividends/interest income 744,618 25,595 Net appreciation in market value of investments 242,783 (103,031) Interfund transfers - net (1,037,678) 2,125,032 ------------- ------------- Total additions 366,183 3,434,244 Distributions to participants 402,629 95,196 Fees 51 66 ------------- ------------- Total deductions 402,680 95,262 ------------- ------------- Net increase (decrease) in participants' equity during the period (36,497) 3,338,982 Transfer from Mellon to Putnam (Note 1) 9,011,200 -- Participants' equity at beginning of period -- -- ------------- ------------- Participants' equity at end of period $ 8,974,703 $ 3,338,982 ============= =============
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, 1996 - -----------------------------------------------------------------------------
Changes in Participants' Equity Period Ended December 31, 1996 ------------------------------- Putnam Money Putnam Market Voyager Fund Fund Contributions: Participants' $ 333,200 $ 965,526 Employer's -- -- Dividends/interest income 133,673 128,401 Net appreciation in market value of investments -- (99,125) Interfund transfers - net (448,463) 1,085,514 ----------- ------------ Total additions 18,410 2,080,316 Distributions to participants 261,298 10,677 Fees 135 23 ----------- ------------ Total deductions 261,433 10,700 ----------- ------------ Net increase (decrease) in participants' equity during the period (243,023) 2,069,616 Transfer from Mellon to Putnam (Note 1) 3,527,151 -- Participants' equity at beginning of period -- -- ----------- ------------ Participants' equity at end of period $3,284,128 $2,069,616 =========== ============
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, 1996 - -----------------------------------------------------------------------------
Changes in Participants' Equity Period Ended December 31, 1996 ------------------------------- Putnam Putnam International Income Growth Fund Fund Contributions: Participants' $ 169,146 $ 260,009 Employer's -- -- Dividends/interest income 33,956 8,064 Net appreciation in market value of investments 10,783 32,430 Interfund transfers - net (14,086) 316,803 ------------ ------------- Total additions 199,799 617,306 Distributions to participants 10,618 3,091 Fees 2 7 ------------ ------------- Total deductions 10,620 3,098 ------------ ------------- Net increase (decrease) in participants' equity during the period 189,179 614,208 Transfer from Mellon to Putnam (Note 1) 557,456 -- Participants' equity at beginning of period -- -- ------------ ------------ Participants' equity at end of period $ 746,635 $ 614,208 ============ ============
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, 1996 - -----------------------------------------------------------------------------
Changes in Participants' Equity Period Ended December 31, 1996 ------------------------------- Participant Notes Receivable Combined Contributions: Participants' $ -- $ 5,988,160 Employer's -- 3,392,910 Dividends/interest income 3,876 2,930,164 Net appreciation in market value of investments -- 5,194,501 Interfund transfers - net (7,534) -- ------------ ------------ Total additions (3,658) 17,505,735 Distributions to participants -- 3,086,623 Fees -- 605 ------------ ------------ Total deductions -- 3,087,228 ------------ ------------ Net increase (decrease) in participants' equity during the period (3,658) 14,418,507 Transfer from Mellon to Putnam (Note 1) -- -- Participants' equity at beginning of period 48,440 41,224,697 ------------ ------------ Participants' equity at end of period $ 44,782 $55,643,204 ============ ============
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 -- -- Investment income 199,749 342,998 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 Period Ended December 31, 1995 - ------------------------------------------------------------------------------
Changes in Participants' Equity Period Ended December 31, 1995 ------------------------------- Dreyfus Dreyfus Disciplined Bond Market Stock Index Fund Fund Contributions: Participants' $ 1,598,206 $ 181,499 Employer's - - Investment 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 Period Ended December 31, 1995 - -----------------------------------------------------------------------------
Changes in Participants' Equity Period Ended December 31, 1995 ------------------------------- Michael Baker Participant Common Stock Loan Fund Fund Total Contributions: Participants' $1,088,589 $ - $4,581,761 Employer's 2,918,272 - 2,918,272 Investment income 23,442 - 938,163 Unrealized 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 Periods Ended December 31, 1996 and 1995 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 provisions. 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). 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). At times, however, 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 short-term investment funds, 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 2,613,566(cost of $14,016,656) and 2,211,086 (cost of $11,966,196) shares of Common Stock and 1,225,689(cost of $7,448,445) and 1,225,848 (cost of $7,440,333) shares of Series B Common Stock at December 31, 1996 and 1995, 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 maximum amount of a participant's salary which may be eligible for withholding for any Plan year can not exceed $150,000. Additionally, 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 tax-qualified plan. INVESTMENT OPTIONS Each participant may direct Putnam Investments, Inc. (the Trustee) to invest certain portions of his or her account in investment funds managed by the Trustee. Effective April 1, 1996, the Plan agreement was amended as a result of a change in trustees from Mellon Bank N.A. (Mellon) to Putnam. Approximately $44,420,000 in Plan assets (including the Michael Baker Common Stock Fund) was transferred from Mellon to Putnam, which replaced Mellon as investment Michael Baker Corporation Employee Stock Ownership Plan Periods Ended December 31, 1996 and 1995 Notes to Financial Statements - ----------------------------------------------------------------------------- manager. 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 International 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 short-term money market securities). Prior to April 1, 1996, the investment fund options available to employees included the Michael Baker Common Stock Fund (invested exclusively in common stock of the Company), managed by Mellon; the Dreyfus/Laurel Prime Money Market Fund (invested in short-term, income producing securities); the Premier Balanced Fund (invested in common stocks and bonds in proportions consistent with their expected returns and risks as determined by the portfolio's adviser); the Dreyfus Disciplined Stock Fund (invested in diversified corporate stocks); and the Dreyfus Bond Market Index Fund (investing in U.S. government and Securities and Exchange Commission (SEC)-registered obligations of domestic corporations, foreign governments and supranational organizations). During this time, Mellon served as the Adviser, Custodian, Fund Accountant and Transfer Agent for the aforementioned investment funds. Contributions by participants cannot be further directed within The Michael Baker Common Stock Fund. 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 Company's Common Stock or Series B Common Stock. During 1996 and 1995, the Company matched participants' contributions on a dollar-for-dollar basis for the first 5 percent of participants' salaries contributed to the Plan. 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 1996 or 1995. 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 tax-qualified 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 Michael Baker Corporation Employee Stock Ownership Plan Periods Ended December 31, 1996 and 1995 Notes to Financial Statements - ----------------------------------------------------------------------------- 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 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 9.75 percent to 12.85 percent. PLAN TERMINATION Although it has not expressed an 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 closing market values as of December 31, 1996 and 1995. As of December 31, 1996 and 1995, the ESOP owns approximately 46 percent and 41 percent, respectively, 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. Michael Baker Corporation Employee Stock Ownership Plan Periods Ended December 31, 1996 and 1995 Notes to Financial Statements - ----------------------------------------------------------------------------- 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 net appreciation (depreciation) 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 or are readily convertible shares of Series B 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. 4. QUALIFICATION OF THE PLAN By a 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. Michael Baker Corporation Employee Stock Ownership Plan Periods Ended December 31, 1995 and 1994 Notes to Financial Statements - ----------------------------------------------------------------------------- 5. DISTRIBUTIONS TO PARTICIPANTS At December 31, 1996 and 1995, the Plan had distributions to employees that had been authorized but not paid of $103,234 and $314,453, respectively. The following table is a reconciliation of participants' equity at December 31, 1996 and 1995 per the financial statements to the Plan's Form 5500, respectively:
December 31, 1996 1995 Participants' equity per the financial statements $55,643,205 $41,224,697 ------------ ------------ Amounts allocated to withdrawing participants: Michael Baker Common Stock Fund (94,277) (110,060) Putnam Money Market Fund (8,063) -- Putnam New Opportunities Fund (894) -- Dreyfus/Laurel Prime Money Market Fund -- (115,740) Dreyfus Premier Balanced Fund -- (52,745) Dreyfus Disciplined Stock Fund -- (31,039) Dreyfus Bond Market Index Fund -- (4,869) ----------- ------------ (103,234) (314,453) ----------- ------------ Participants' equity per Form 5500 $55,539,971 $40,910,244 ============ ============
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, 1996:
December 31, 1996 Distributions to employees per the financial statements $3,086,623 Add: Distributions to employees authorized but not paid as of December 31, 1996 103,234 Less: Distributions to employees authorized but not paid as of December 31, 1995 (314,453) ----------- Distributions to employees per Form 5500 $2,875,404 ===========
Michael Baker Corporation Employee Stock Ownership Plan Schedule of Assets Held for Investment Purposes - Form 5500, Item 27a December 31, 1996 Additional Information - Schedule I - ---------------------------------------------------------------------
Cost of Current Shares Description asset value *Michael Baker Corporation 2,613,566 Common Stock $14,016,656 $16,661,483 *Michael Baker Corporation 1,225,689 Common Stock - Series B 7,448,445 7,813,775 121,082 *Putnam Temporary Investments 121,082 121,082 547,238 *George Putnam Fund of Boston 8,764,343 8,974,703 654,347 *Putnam Growth & Income Fund 11,345,809 11,791,338 106,510 *Putnam Income Fund 735,342 746,635 128,388 *Putnam Voyager Fund 2,170,262 2,069,616 82,180 *Putnam New Opportunities Fund 3,438,892 3,338,982 40,865 *Putnam International Growth Fund 581,895 614,208 3,284,128 *Putnam Money Market Fund 3,284,128 3,284,128 N/A *Participant notes receivable: 9.75% to 12.85%, due April 18, 1998 to August 28, 2000 44,782 44,782 ---------- ----------- $51,951,636 $55,460,732 =========== =========== *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, 1997 By:/s/ Michael J. Hegarty -------------------------- Michael J. Hegarty Chairman of the Plan Administrative Committee CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use in this Form 11-K of our report dated March 15, 1997, 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, 1996. 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, 1997 EX-99.2 8 Exhibit 99.2 REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE To the Board of Directors of Michael Baker Corporation Our audits of the consolidated financial statements referred to in our report dated February 6, 1997, 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, also included an audit of the Financial Statement Schedule listed in Item 14(a) of the Form 10-K. In our opinion, this Financial Statement Schedule presents 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 6, 1997 -----END PRIVACY-ENHANCED MESSAGE-----