<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 June 30, 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 June 30, 1996:
--------------------
<S> <C>
Common Stock 7,045,957 shares
Series B Common Stock 1,350,834 shares
</TABLE>
<PAGE>
FORM 10-Q
PART I
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. Although 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, 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. Certain 1995 financial statement amounts have been reclassified to
conform with 1996 classifications. 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>
FORM 10-Q
PART I
PAGE 2
<TABLE>
MICHAEL BAKER CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
============================================================================
<CAPTION>
For the three months ended
-------------------------------
June 30, 1996 June 30, 1995
- ----------------------------------------------------------------------------
(In thousands, except per share amounts)
<S> <C> <C>
Total contract revenues $102,996 $88,946
Cost of work performed 90,782 77,535
- ----------------------------------------------------------------------------
Gross profit 12,214 11,411
General and administrative expenses 10,049 9,487
- ----------------------------------------------------------------------------
Income from operations 2,165 1,924
Other income/(expense):
Interest expense (15) (134)
Interest income 85 21
Other, net 158 41
- ----------------------------------------------------------------------------
Income before income taxes 2,393 1,852
Provision for income taxes 1,101 937
- ----------------------------------------------------------------------------
Net income $1,292 $915
============================================================================
Net income per share $0.15 $0.11
============================================================================
<FN>
The accompanying notes are an integral part of this financial statement.
</TABLE>
<PAGE>
FORM 10-Q
PART I
PAGE 3
<TABLE>
MICHAEL BAKER CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
============================================================================
<CAPTION>
For the six months ended
-------------------------------
June 30, 1996 June 30, 1995
- ----------------------------------------------------------------------------
(In thousands, except per share amounts)
<S> <C> <C>
Total contract revenues $187,015 $175,490
Cost of work performed 164,395 154,189
- ----------------------------------------------------------------------------
Gross profit 22,620 21,301
General and administrative expenses 19,627 18,508
- ----------------------------------------------------------------------------
Income from operations 2,993 2,793
Other income/(expense):
Interest expense (46) (258)
Interest income 216 48
Other, net 178 99
- ----------------------------------------------------------------------------
Income before income taxes 3,341 2,682
Provision for income taxes 1,537 1,336
- ----------------------------------------------------------------------------
Net income $1,804 $1,346
============================================================================
Net income per share $0.21 $0.16
============================================================================
<FN>
The accompanying notes are an integral part of this financial statement.
</TABLE>
<PAGE>
FORM 10-Q
PART I
PAGE 4
<TABLE>
MICHAEL BAKER CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
============================================================================
<CAPTION>
ASSETS June 30, 1996 Dec. 31, 1995
- ----------------------------------------------------------------------------
(In thousands)
<S> <C> <C>
Current Assets
Cash $4,473 $14,303
Trade receivables 66,421 53,708
Cost of contracts in progress, plus estimated
earnings recorded, less billings thereon 22,302 19,104
Prepaid expenses and other 8,934 7,816
- ----------------------------------------------------------------------------
Total current assets 102,130 94,931
- ----------------------------------------------------------------------------
Property, Plant and Equipment, net 11,922 12,558
Other Assets
Goodwill, net of accumulated amortization of
$1,827,000 and $1,649,000 at June 30, 1996
and December 31, 1995, respectively 5,475 4,667
Other intangible assets, net of accumulated
amortization of $1,899,000 and $1,625,000
at June 30, 1996 and December 31, 1995,
respectively 2,204 2,467
Other assets 3,023 2,753
- ----------------------------------------------------------------------------
Total other assets 10,702 9,887
- ----------------------------------------------------------------------------
Total assets $124,754 $117,376
============================================================================
<FN>
The accompanying notes are an integral part of this financial statement.
</TABLE>
<PAGE>
FORM 10-Q
PART I
PAGE 5
<TABLE>
MICHAEL BAKER CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
============================================================================
<CAPTION>
LIABILITIES AND SHAREHOLDERS' INVESTMENT June 30, 1996 Dec. 31, 1995
- ----------------------------------------------------------------------------
(In thousands)
<S> <C> <C>
Current Liabilities
Notes payable $1,280 $1,204
Accounts payable 30,560 30,879
Accrued employee compensation 6,596 5,703
Accrued insurance 6,072 6,204
Other accrued expenses 17,750 15,261
Excess of billings on contracts in progress
over cost and est. earnings recorded thereon 12,899 10,494
- ----------------------------------------------------------------------------
Total current liabilities 75,157 69,745
- ----------------------------------------------------------------------------
Shareholders' Investment
Common Stock, par value $1, authorized 44,000,000
shares, issued 7,046,000 and 7,012,000 shares
at June 30, 1996 and December 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 June 30, 1996 and
December 31, 1995, respectively 1,351 1,352
Paid-in surplus 36,663 36,534
Retained earnings 4,537 2,733
- ---------------------------------------------------------------------------
Total shareholders' investment 49,597 47,631
- ---------------------------------------------------------------------------
Total liab. and shareholders' investment $124,754 $117,376
===========================================================================
<FN>
The accompanying notes are an integral part of this financial statement.
</TABLE>
<PAGE>
FORM 10-Q
PART I
PAGE 6
<TABLE>
MICHAEL BAKER CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
=============================================================================
<CAPTION>
For the six months ended
----------------------------
June 30, 1996 June 30, 1995
- -----------------------------------------------------------------------------
(In thousands)
<S> <C> <C>
Cash Flows from Operating Activities
Net income $1,804 $1,346
Adjustments to reconcile net income to net cash
(used in)/provided by operating activities:
Depreciation and amortization 2,392 2,585
Deferred income taxes 461 (314)
Changes in assets and liabilities:
(Increase)/decrease in receivables, contracts
in progress and advance billings (13,506) 9,754
Increase/(decrease) in accounts payable
and accrued expenses 3,018 (10,603)
Increase in other net assets (2,670) (79)
- ----------------------------------------------------------------------------
Total adjustments (10,305) 1,343
- ----------------------------------------------------------------------------
Net cash (used in)/prov by operating act. (8,501) 2,689
- ----------------------------------------------------------------------------
Cash Flows from Investing Activities
Additions to property, plant and equipment (1,317) (2,000)
- ----------------------------------------------------------------------------
Net cash used in investing activities (1,317) (2,000)
- ----------------------------------------------------------------------------
Cash Flows from Financing Activities
Repayments of revolving credit loans 0 (1,553)
Repayments of long-term debt (12) (1,415)
- ----------------------------------------------------------------------------
Net cash used in financing activities (12) (2,968)
- ----------------------------------------------------------------------------
Net decrease in cash (9,830) (2,279)
Cash at beginning of year 14,303 3,605
- ----------------------------------------------------------------------------
Cash at end of period $4,473 $1,326
============================================================================
Supplemental Disclosure of Cash Flow Data
Interest paid $33 $419
Income taxes paid $204 $313
============================================================================
<FN>
The accompanying notes are an integral part of this financial statement.
</TABLE>
<PAGE>
FORM 10-Q
PART I
PAGE 7
MICHAEL BAKER CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE PERIODS ENDED JUNE 30, 1996
(Unaudited)
NOTE 1 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
At 6/30/96 At 12/31/95
---------------------------
<S> <C> <C>
Land $ 693 $ 693
Buildings and improvements 6,059 5,952
Equipment and vehicles 29,018 28,202
- ------------------------------------------------------------------------
Total, at cost 35,770 34,847
Less - Accumulated depreciation 23,848 22,289
- ------------------------------------------------------------------------
Net property, plant and equipment $11,922 $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 June 30, 1996, no borrowings were outstanding; however, letters of
credit totaling $4.0 million were outstanding under the Agreement.
NOTE 3 - EARNINGS PER SHARE
Earnings per share computations are based upon weighted average shares of
8,410,851 and 8,363,552 for the three-month periods, and 8,404,064 and
8,363,552 for the six-month periods, ended June 30, 1996 and 1995,
respectively.
<PAGE>
FORM 10-Q
PART I
PAGE 8
MICHAEL BAKER CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE PERIODS ENDED JUNE 30, 1996
(Unaudited)
NOTE 3 - EARNINGS PER SHARE (Cont.)
The Company's 1995 Stock Incentive Plan and 1996 Nonemployee Directors' Stock
Incentive Plan had no significant impact on earnings per share for the three-
month or six-month periods ended June 30, 1996 and 1995.
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 million. 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>
FORM 10-Q
PART I
PAGE 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
TOTAL CONTRACT REVENUES
Total contract revenues were $103.0 million for the second quarter of 1996,
compared to $88.9 million for the second quarter of 1995, an increase of $14.1
million. The Civil business unit accounted for $8.1 million of this increase,
while the Buildings, Energy and Transportation units each showed second
quarter increases in the $1.8 to $2.1 million range. The increase in the
Civil unit's revenue is primarily the result of its engineering division
having generated second quarter revenues totaling $6.0 million on a
significant contract in Mexico that was awarded during late 1995.
Total contract revenues were $187.0 million for the first six months of 1996
compared to $175.5 million for the same period in 1995, an increase of $11.5
million. Inherent in this overall improvement are increases of $11.1 million
and $5.1 million in the Civil and Transportation business units, respectively,
offset by a decrease in the Buildings unit of $5.7 million. Again, Civil's
increase relates primarily to work performed on its significant engineering
contract in Mexico. Transportation's increase is attributable to its
construction division which improved revenues through work performed on
several new contracts. The reduction in the Buildings unit's revenues
resulted primarily from the completion of Baker Support Services' military
housing renovation business.
GROSS PROFIT
The Company's gross profit of $12.2 million for the second quarter of 1996
represents a 7% improvement over the gross profit of $11.4 million from its
year ago second quarter. The most significant individual component of the
improvement in gross profit emanated from the Energy business unit, wherein
Baker/MO benefitted from profitable new business in its technical services
division. As a percentage of total contract revenues, gross profit decreased
to 11.9% in the second quarter of 1996 from 12.8% in the second quarter of
1995. While the Civil unit increased its gross profit in the second quarter
of 1996, its gross profit expressed as a percentage of total contract revenues
decreased slightly. This is again attributable to the aforementioned
engineering contract in Mexico which has realized a lower margin to date than
is normal for that division, due to the lower margins on its subcontracted
components.
<PAGE>
FORM 10-Q
PART I
PAGE 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GROSS PROFIT (Cont.)
Gross profit for the first six months of 1996 was $22.6 million versus $21.3
million for the first six months of 1995, representing a 6% increase. The
major contributors to this increase included the Civil and Energy business
units for the same reasons as mentioned in the preceding paragraph. As a
percentage of total contract revenues, gross profit was 12.1% in both years'
six-month periods.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative ("G&A") expenses increased to $10.0 million for the
second quarter of 1996 from $9.5 million in 1995's second quarter. This
increase is partially attributable to higher marketing costs, particularly in
the Civil, Buildings and Transportation business units, as a result of the
hiring of several employees and the redirection of certain existing employees
toward 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 second quarter of
1996.
G&A expenses increased to $19.6 million for the first six months of 1996 from
$18.5 million for the same period in 1995. This increase is attributable to
the same reasons as provided in the preceding paragraph.
INCOME TAXES
The Company had a provision for income taxes of 46.0% and 50.6% for the second
quarter, and 46.0% and 49.8% for the first six months, of 1996 and 1995,
respectively. The 1996 provision rate decreases primarily reflect certain
increases in estimated tax benefits on prior year expenditures, partially
offset by an increase in foreign taxes.
CONTRACT BACKLOG
The funded backlog of work to be performed was $301 million as of June 30,
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.
<PAGE>
FORM 10-Q
PART I
PAGE 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CONTRACT BACKLOG (Cont.)
Total backlog, which incrementally includes that portion of contract value for
which options are still to be exercised ("unfunded backlog"), was $528 million
as of June 30, 1996 and $508 million as of December 31, 1995. Some of the
more significant new projects added during the second quarter of 1996 were by
the Civil business unit and included a $14.5 million project for multi-family
housing maintenance at Patrick Air Force Base in Florida, a $12.5 million
project for master planning services for the United States Army Corps of
Engineers' Fort Worth District and an $11.5 million project for vehicle
operations and maintenance services at Naval Station Mayport in Florida. The
Transportation unit also added an $8 million contract to provide
infrastructure construction services at a railyard site.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities was $8.5 million for the first six
months of 1996, compared to net cash provided by operating activities of $2.7
million for the same period in 1995. The 1996 increase in cash used resulted
primarily from higher receivables associated with several new projects, a
number of existing projects and the overall higher volumes achieved during the
second quarter.
Net cash used in investing activities was $1.3 million for the first six
months of 1996 compared to $2.0 million in the first six months of 1995. This
amount solely comprises capital expenditures for both periods.
Net cash used in financing activities was negligible for the first six months
of 1996, as compared with net cash used in financing activities of $3.0
million for the first six months of 1995. The Company repaid most of its
borrowed working capital under its revolving credit facility in the first half
of 1995 and then totally repaid such borrowings later in the year.
Working capital increased slightly during the first six months of 1996 to
$27.0 million at June 30, 1996, from $25.2 million at December 31, 1995. The
current ratio remained the same as of June 30, 1996 and December 31, 1995 at
1.36:1.
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,
<PAGE>
FORM 10-Q
PART I
PAGE 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (Cont.)
through May 31, 1998. As of June 30, 1996, no borrowings were outstanding;
however, letters of credit totaling $4.0 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>
FORM 10-Q
PART II
PAGE 13
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
(a) The Company's annual meeting of shareholders was held on May 13,
1996.
(b) Each of management's nominees to the board of directors, as
listed in the Company's proxy statement, was elected. There was
no solicitation in opposition to management's nominees.
(c) The first matter voted upon at the meeting was the election of
the Company's directors to one-year terms or until their
respective successors have been elected. The votes cast by
holders of the Company's Common Stock and Series B Common Stock
in approving the following directors were:
<TABLE>
<CAPTION>
Name of Director Votes for Votes withheld
---------------- --------- --------------
<S> <C> <C>
Charles I. Homan 18,020,002 248,020
Thomas D. Larson 18,184,991 83,031
Richard L. Shaw 18,145,455 122,567
Konrad M. Weis 17,906,659 361,363
J. Robert White 18,075,025 192,997
William A. Wulf 17,441,829 826,193
</TABLE>
The votes cast by holders of the Company's Common Stock in
approving the following directors were:
<TABLE>
<CAPTION>
Name of Director Votes for Votes withheld
---------------- --------- --------------
<S> <C> <C>
William J. Copeland 5,974,219 53,843
Roy V. Gavert, Jr. 5,980,977 47,085
Jack B. Hoey 5,981,326 46,736
</TABLE>
The second and final matter voted upon at the meeting was the
adoption of the 1996 Nonemployee Directors' Stock Incentive
Plan, which will provide long-term incentive compensation to all
nonemployee directors. The votes cast by holders of the
Company's Common Stock and Series B Common Stock in approving
such plan were 15,076,614 votes in favor, 2,746,847 votes
against, and 444,561 abstentions.
<PAGE>
FORM 10-Q
PART II
PAGE 14
PART II. OTHER INFORMATION (Cont.)
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(b) Reports on Form 8-K
During the quarter ended June 30, 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: August 12, 1996 By: /s/ J. Robert White
-------------------------
Executive Vice President, Chief
Financial Officer and Treasurer
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 4,473
<SECURITIES> 0
<RECEIVABLES> 66,421
<ALLOWANCES> 0
<INVENTORY> 22,302
<CURRENT-ASSETS> 102,130
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 124,754
<CURRENT-LIABILITIES> 75,157
<BONDS> 0
0
0
<COMMON> 8,397
<OTHER-SE> 41,200
<TOTAL-LIABILITY-AND-EQUITY> 124,754
<SALES> 187,015
<TOTAL-REVENUES> 187,015
<CGS> 164,395
<TOTAL-COSTS> 164,395
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 46
<INCOME-PRETAX> 3,341
<INCOME-TAX> 1,537
<INCOME-CONTINUING> 1,804
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,804
<EPS-PRIMARY> .21
<EPS-DILUTED> .21
</TABLE>
