<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
Commission file number 1-6627
<TABLE>
<CAPTION>
MICHAEL BAKER CORPORATION
--------------------------
(Exact name of registrant as specified in its charter)
<S> <C>
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)
(412) 269-6300
--------------
(Registrant's telephone number,
including area code)
</TABLE>
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
As of March 31, 1996:
--------------------
<S> <C>
Common Stock 7,045,588 shares
Series B Common Stock 1,351,203 shares
</TABLE>
<PAGE>
PART I
FORM 10-Q
PAGE 1
MICHAEL BAKER CORPORATION
PART I. FINANCIAL INFORMATION
The condensed consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that
the disclosures are adequate to make the information presented not
misleading. The statements reflect all adjustments which are, in the opinion
of management, necessary for a fair presentation of the results for the
periods presented. These condensed consolidated financial statements should
be read in conjunction with the consolidated financial statements and the
notes thereto included in the Company's latest annual report and Form 10-K.
<PAGE>
PART I
FORM 10-Q
PAGE 2
<TABLE>
MICHAEL BAKER CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
===========================================================================
<CAPTION>
For the three months ended
--------------------------
March 31, 1996 March 31, 1995
---------------------------------------------------------------------------
(In thousands, except per share amounts)
<S> <C> <C>
Total contract revenues $84,019 $86,543
Cost of work performed 73,338 76,563
--------------------------------------------------------------------------
Gross profit 10,681 9,980
General and administrative expenses 9,853 9,111
--------------------------------------------------------------------------
Income from operations 828 869
Other income/(expense):
Interest expense (31) (124)
Interest income 131 27
Other, net 20 57
--------------------------------------------------------------------------
Income before income taxes 948 829
Provision for income taxes 436 398
--------------------------------------------------------------------------
Net income $512 $431
==========================================================================
Net income per share $0.06 $0.05
==========================================================================
<FN>
The accompanying notes are an integral part of this financial statement.
</TABLE>
<PAGE>
PART I
FORM 10-Q
PAGE 3
<TABLE>
MICHAEL BAKER CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
===========================================================================
<CAPTION>
ASSETS March 31, 1996 Dec. 31, 1995
----------------------------------------------------------------------------
(In thousands)
<S> <C> <C>
Current Assets
Cash $9,420 $14,303
Trade receivables 56,339 53,708
Cost of contracts in progress, plus estimated
earnings recorded, less billings thereon 19,240 19,104
Prepaid expenses and other 8,165 7,816
--------------------------------------------------------------------------
Total current assets 93,164 94,931
--------------------------------------------------------------------------
Property, Plant and Equipment, net 12,320 12,558
Other Assets
Goodwill, net of accum. amort. of $1,738,000
and $1,649,000 at Mar. 31, 1996 and
Dec. 31, 1995, respectively 5,564 4,667
Other intangible assets, net of accum. amort.
of $1,762,000 and $1,625,000 at Mar. 31, 1996
and Dec. 31, 1995, respectively 2,341 2,467
Other assets 3,040 2,753
-------------------------------------------------------------------------
Total other assets 10,945 9,887
-------------------------------------------------------------------------
Total assets $116,429 $117,376
=========================================================================
<FN>
The accompanying notes are an integral part of this financial statement.
</TABLE>
<PAGE>
PART I
FORM 10-Q
PAGE 4
<TABLE>
MICHAEL BAKER CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
===========================================================================
<CAPTION>
LIABILITIES AND SHAREHOLDERS' INVESTMENT March 31, 1996 Dec. 31, 1995
---------------------------------------------------------------------------
(In thousands)
<S> <C> <C>
Current Liabilities
Current portion of long-term debt $1,517 $1,204
Accounts payable 25,858 30,879
Accrued employee compensation 6,159 5,703
Accrued insurance 5,936 6,204
Other accrued expenses 16,320 15,261
Excess of billings on contracts in progress over
cost and estimated earnings recorded thereon 12,334 10,494
--------------------------------------------------------------------------
Total current liabilities 68,124 69,745
--------------------------------------------------------------------------
Shareholders' Investment
Common Stock, par value $1, authorized 44,000,000
shares, issued 7,046,000 and 7,012,000 shares at
Mar. 31, 1996 and Dec. 31, 1995, respectively 7,046 7,012
Series B Common Stock, par value $1, authorized
6,000,000 shares, issued 1,351,000 and 1,352,000
shares at Mar. 31, 1996 and Dec. 31, 1995,
respectively 1,351 1,352
Paid-in surplus 36,663 36,534
Retained earnings 3,245 2,733
-------------------------------------------------------------------------
Total shareholders' investment 48,305 47,631
-------------------------------------------------------------------------
Total liab. and shareholders' investment $116,429 $117,376
=========================================================================
<FN>
The accompanying notes are an integral part of this financial statement.
</TABLE>
<PAGE>
PART I
FORM 10-Q
PAGE 5
<TABLE>
MICHAEL BAKER CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
===========================================================================
<CAPTION>
For the three months ended
--------------------------
March 31, 1996 March 31, 1995
---------------------------------------------------------------------------
(In thousands)
<S> <C> <C>
Cash Flows from Operating Activities
Net income $512 $431
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 1,160 1,272
Deferred income taxes (47) (406)
Changes in assets and liabilities:
(Incr)/decr in receivables, contracts in
progress and advance billings (927) 8,399
Decr in accounts payable and accrued expenses (3,451) (12,000)
Increase in other net assets (1,420) (311)
-------------------------------------------------------------------------
Total adjustments (4,685) (3,046)
-------------------------------------------------------------------------
Net cash used in operating activities (4,173) (2,615)
-------------------------------------------------------------------------
Cash Flows from Investing Activities
Additions to property, plant and equipment (698) (726)
-------------------------------------------------------------------------
Net cash used in investing activities (698) (726)
-------------------------------------------------------------------------
Cash Flows from Financing Activities
Proceeds from revolving credit loans -- 4,880
Repayments of long-term debt (12) (1,415)
-------------------------------------------------------------------------
Net cash (used in)/prov. by financing activ. (12) 3,465
-------------------------------------------------------------------------
Net (decrease)/increase in cash (4,883) 124
Cash at beginning of year 14,303 3,605
-------------------------------------------------------------------------
Cash at end of period $9,420 $3,729
=========================================================================
Supplemental Disclosure of Cash Flow Data
Interest paid $17 $309
Income taxes paid $31 $16
=========================================================================
<FN>
The accompanying notes are an integral part of this financial statement.
/TABLE
<PAGE>
PART I
FORM 10-Q
PAGE 6
MICHAEL BAKER CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE PERIOD ENDED MARCH 31, 1996
(Unaudited)
NOTE 1 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
At 3/31/96 At 12/31/95
----------- -----------
<S> <C> <C>
Land $ 693 $ 693
Buildings and improvements 6,030 5,952
Equipment and vehicles 28,812 28,202
-----------------------------------------------------------------------
Total, at cost 35,535 34,847
Less - Accumulated depreciation 23,215 22,289
-----------------------------------------------------------------------
Net property, plant and equipment $12,320 $12,558
=======================================================================
</TABLE>
NOTE 2 - 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. 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 borrowings outstanding and the aggregate face value of
outstanding letters of credit.
As of March 31, 1996, no borrowings were outstanding; however, letters of
credit totaling $6,608,000 were outstanding under the Agreement.
NOTE 3 - EARNINGS PER SHARE
Per share computations are based upon weighted averages of 8,397,277 and
8,363,552 shares for the three-month periods ended March 31, 1996 and 1995,
respectively.
The Company's 1995 Stock Incentive Plan had no significant impact on earnings
per share for the three-month periods ended March 31, 1996 and 1995.
<PAGE>
PART I
FORM 10-Q
PAGE 7
MICHAEL BAKER CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE PERIOD ENDED MARCH 31, 1996
(Unaudited)
NOTE 4 - LITIGATION
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.
<PAGE>
PART I
FORM 10-Q
PAGE 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
TOTAL CONTRACT REVENUES
Total contract revenues were $84.0 million for the first quarter of fiscal
1996, compared to $86.5 million for the same period in fiscal 1995, a
decrease of $2.5 million. The Transportation and Civil business units showed
increases in total contract revenues of $3.3 million and $3.1 million,
respectively, offset by a decrease from the Buildings business unit of $7.7
million. Transportation's overall increase is attributable to its
construction division which improved revenues primarily through work
performed on a new contract awarded during the first quarter of 1996 and by
generating significantly higher volumes on an existing contract. The
increase in the Civil unit's revenue is the result of its engineering
division having performed work on a new contract in Mexico.
The reduction in the Buildings unit's revenues resulted from the substantial
completion of Baker Support Services' military housing renovation business and
from lower volumes in its construction division. A significant portion of the
construction division's 1995 new work was awarded in the second half of the
year and, because of winter weather conditions, did not significantly enhance
its revenues for the first quarter of 1996.
GROSS PROFIT
The Company's gross profit of $10.7 million for the first quarter of 1996
represents a 7% improvement over the gross profit of $10.0 million from its
year ago first quarter. As a percentage of total contract revenues, gross
profit climbed to 12.7% in the first quarter of 1996 from 11.5% in the first
quarter of 1995. These overall increases resulted principally from
improvements in the Transportation and Buildings units. Within the
Transportation unit, improved project performance on contracts in its
engineering division caused the increase. The improvement in the Buildings
unit resulted from a combination of having completed certain lower
profitability jobs since the prior year and a margin improvement on one
significant contract during the first quarter of 1996.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative ("G&A") expenses increased to $9.9 million for the
first quarter of 1996 from $9.1 million in the prior year first quarter.
This increase is partially attributable to higher marketing costs,
particularly in the Buildings and Transportation business units, as a
<PAGE>
PART I
FORM 10-Q
PAGE 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL AND ADMINISTRATIVE EXPENSES (CONT.)
result of the hiring of several new employees and the redirection of certain
existing employees toward better marketing the Company's integrated services.
In addition, an asset acquisition which became effective January 1, 1996 also
caused higher G&A expenses in the Transportation and Civil units during the
first quarter of 1996.
INCOME TAXES
The Company had a provision for income taxes of 46.0% and 48.0% for the first
quarter of 1996 and 1995, respectively. The 1996 provision rate decrease
primarily reflects certain increases in estimated tax benefits on prior year
expenditures offset by an increase in foreign taxes.
CONTRACT BACKLOG
The funded backlog of work to be performed was $322 million as of March 31,
1996, compared to funded backlog of $300 million at December 31, 1995.
Funded backlog represents that portion of work supported by signed contracts
and for which the procuring agency has appropriated and allocated the funds
to pay for the work.
Total backlog, which incrementally includes that portion of contract value
for which options are still to be exercised ("unfunded backlog"), was $512
million as of March 31, 1996 and $508 million as of December 31, 1995. Among
the more significant new projects added during the first quarter of 1996 were
a $12 million project for infrastructure construction services to be provided
by the Buildings unit at the Buffalo Airport and a $24 million project
for a major street renovation project in Chicago by the Transportation unit.
In addition, another $12 million of total backlog at March 31, 1996 relates
to new work added through the asset acquisition which became effective
January 1, 1996.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities was $4.2 million for the first quarter
of 1996, compared to $2.6 million for the same period in 1995. The 1996
increase in cash used resulted from higher receivables associated with several
new projects and one existing project.
<PAGE>
PART I
FORM 10-Q
PAGE 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (Cont.)
Net cash used in investing activities approximated $700,000 for the first
quarters of 1996 and 1995. This amount solely comprises capital expenditures
for both periods.
Net cash used in financing activities was negligible for the first quarter
of 1996, as compared with net cash provided by financing activities of $3.5
million for the first quarter of 1995. The Company borrowed working capital
under its revolving credit facility in the first quarter of 1995 and then
totally repaid such borrowings later in the year. The long-term debt
repayments made in the first quarter of 1995 related principally to the
subsidiaries acquired and asset purchases made in 1990 and 1991.
Working capital decreased slightly during the first quarter of 1996 to $25.0
million at March 31, 1996, from $25.2 million at December 31, 1995. The
current ratio increased slightly to 1.37:1 at the end of the first quarter
of 1996, compared to 1.36:1 at the end of fiscal 1995.
In March 1996, the Company entered into an amended secured credit agreement
with Mellon Bank, N.A. Under its terms, the agreement provides for a
commitment of $25 million, which covers borrowings and letters of credit,
through May 31, 1998. As of March 31, 1996, no borrowings were outstanding;
however, letters of credit totaling $6.6 million were outstanding under the
agreement.
The Company is required to provide bid and performance bonding on certain
construction contracts, and has a $350 million bonding line available through
Aetna Casualty and Surety Company of America. Management believes that its
bonding line will be sufficient to meet its bid and performance needs for the
foreseeable future.
A significant portion of the Company's cash flow is dependent upon
appropriations of public funds and financial terms under long-term contracts.
The Company's short- and long-term liquidity will be affected by the improved
but still narrow margins on construction work in backlog, and its ability to
sustain profitable operations and to control costs during periods of lower
volumes. Additional external factors such as price fluctuations in the
energy industry and the effects of interest rates on private construction
projects could affect the Company. At this time, management believes that
its funds generated from operations, its existing credit facility and its
longer-term borrowing capabilities will be sufficient to meet its operating
requirements for the foreseeable future.
<PAGE>
PART II
FORM 10-Q
PAGE 11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(b) Reports on Form 8-K
During the quarter ended March 31, 1996, the Company filed no
reports on Form 8-K.
SIGNATURES
Pursuant to the requirements 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.
<TABLE>
<S> <C>
MICHAEL BAKER CORPORATION
Dated: May 13, 1996 By: /s/ J. Robert White
-----------------------
J. Robert White
Executive Vice President,
Chief Financial Officer
and Treasurer
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 9,420
<SECURITIES> 0
<RECEIVABLES> 56,339
<ALLOWANCES> 0
<INVENTORY> 19,240
<CURRENT-ASSETS> 93,164
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 116,429
<CURRENT-LIABILITIES> 68,124
<BONDS> 0
0
0
<COMMON> 8,397
<OTHER-SE> 39,908
<TOTAL-LIABILITY-AND-EQUITY> 116,429
<SALES> 84,019
<TOTAL-REVENUES> 84,019
<CGS> 73,338
<TOTAL-COSTS> 73,338
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 31
<INCOME-PRETAX> 948
<INCOME-TAX> 436
<INCOME-CONTINUING> 512
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 512
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
