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