<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
Commission file number 1-6627
<TABLE>
<CAPTION>
MICHAEL BAKER CORPORATION
--------------------------
(Exact name of registrant as specified in its charter)
<S> <C>
PENNSYLVANIA 25-0927646
------------- -----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Airport Office Park, Building 3, 420 Rouser Road, Coraopolis, PA 15108
- ---------------------------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(412) 269-6300
--------------
(Registrant's telephone number,
including area code)
</TABLE>
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
As of March 31, 1997:
<S> <C>
Common Stock 6,850,421 shares
Series B Common Stock 1,346,435 shares
/TABLE
<PAGE>
FORM 10-Q
PART I
PAGE 1
MICHAEL BAKER CORPORATION
PART I. FINANCIAL INFORMATION
The condensed consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission. Although certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed
or omitted pursuant to such rules and regulations, the Company believes that
the disclosures are adequate to make the information presented not
misleading. The statements reflect all adjustments which are, in the opinion
of management, necessary for a fair presentation of the results for the
periods presented. Certain 1996 financial statement amounts have been
reclassified to conform with 1997 classifications. These condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements and the notes thereto included in the
Company's latest annual report and Form 10-K.<PAGE>
FORM 10-Q
PART I
PAGE 2
<TABLE>
MICHAEL BAKER CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
<CAPTION>
For the three months ended
---------------------------
MARCH 31, 1997 March 31, 1996
-------------------------------------------------------------------------
(In thousands, except per share amounts)
<S> <C> <C>
Total contract revenues $94,092 $84,019
Cost of work performed 83,216 73,613
------------------------------------------------------------------------
Gross profit 10,876 10,406
General and administrative expenses 10,397 9,578
------------------------------------------------------------------------
Income from operations 479 828
Other income/(expense):
Interest expense (18) (31)
Interest income 130 131
Other, net 518 20
------------------------------------------------------------------------
Income before income taxes 1,109 948
Provision for income taxes 532 436
------------------------------------------------------------------------
NET INCOME $577 $512
========================================================================
NET INCOME PER SHARE $0.07 $0.06
========================================================================
<FN>
The accompanying notes are an integral part of this financial statement.
</TABLE> <PAGE>
FORM 10-Q
PART I
PAGE 3
<TABLE>
MICHAEL BAKER CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
<CAPTION>
ASSETS MARCH 31, 1997 Dec. 31, 1996
-----------------------------------------------------------------------------
(In thousands)
<S> <C> <C>
CURRENT ASSETS
Cash $13,847 $10,480
Receivables 61,331 69,621
Cost of contracts in progress and estimated
earnings, less billings 17,339 16,276
Prepaid expenses and other 7,618 6,370
---------------------------------------------------------------------------
Total current assets 100,135 102,747
---------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT, NET 11,775 12,265
OTHER ASSETS
Goodwill and other intangible assets, net 7,028 7,242
Other assets 3,359 3,828
---------------------------------------------------------------------------
Total other assets 10,387 11,070
---------------------------------------------------------------------------
TOTAL ASSETS $122,297 $126,082
============================================================================
LIABILITIES AND SHAREHOLDERS' INVESTMENT
----------------------------------------------------------------------------
CURRENT LIABILITIES
Accounts payable $32,860 $34,960
Accrued employee compensation 6,069 6,596
Accrued insurance 5,810 5,425
Other accrued expenses 17,349 19,045
Excess of billings on contracts in progress
over cost and estimated earnings 8,881 9,304
---------------------------------------------------------------------------
Total current liabilities 70,969 75,330
---------------------------------------------------------------------------
SHAREHOLDERS' INVESTMENT
Common Stock, par value $1, authorized 44,000,000 shares,
issued 7,057,981 and 7,055,784 shares at March 31, 1997
and December 31, 1996, respectively 7,058 7,056
Series B Common Stock, par value $1, authorized 6,000,000
shares, issued 1,346,435 and 1,348,632 shares at
March 31, 1997 and December 31, 1996, respective 1,346 1,349
Additional paid-in capital 36,694 36,694
Retained earnings 7,490 6,913
Less 207,560 shrs of Common Stock in treas, at cost (1,260) (1,260)
---------------------------------------------------------------------------
Total shareholders' investment 51,328 50,752
----------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT $122,297 $126,082
============================================================================
<FN>
The accompanying notes are an integral part of this financial statement.
/TABLE
<PAGE>
FORM 10-Q
PART I
PAGE 4
<TABLE>
MICHAEL BAKER CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<CAPTION>
For the three months ended
--------------------------
MARCH 31, 1997 March 31, 1996
----------------------------------------------------------------------------
(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $577 $512
Adjustments to reconcile net income to net cash
provided by/(used in) operating activities:
Depreciation and amortization 1,083 1,160
Deferred income taxes 180 (47)
Changes in assets and liabilities:
Decrease/(increase) in receivables and
contracts in progress 6,803 (927)
Decrease in accounts payable and
accrued expenses (3,938) (3,451)
Increase in other net assets (932) (1,420)
---------------------------------------------------------------------------
Total adjustments 3,196 (4,685)
---------------------------------------------------------------------------
Net cash provided by/(used in) operating
activities 3,773 (4,173)
---------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (406) (698)
--------------------------------------------------------------------------
Net cash used in investing activities (406) (698)
----------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of long-term debt 0 (12)
---------------------------------------------------------------------------
Net cash used in financing activities 0 (12)
---------------------------------------------------------------------------
Net increase/(decrease) in cash 3,367 (4,883)
Cash at beginning of year 10,480 14,303
---------------------------------------------------------------------------
CASH AT END OF PERIOD $13,847 $9,420
===========================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW DATA
Interest paid $15 $17
Income taxes paid $63 $31
===========================================================================
<FN>
The accompanying notes are an integral part of this financial statement.
</TABLE> <PAGE>
FORM 10-Q
PART I
PAGE 5
MICHAEL BAKER CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE PERIOD ENDED MARCH 31, 1997
(Unaudited)
NOTE 1 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31, 1997 Dec. 31, 1996
-------------- -------------
<S> <C> <C>
Land $ 693 $ 693
Buildings and improvements 6,353 6,345
Equipment and vehicles 31,110 30,873
------------------------------------------------------------------------
Total, at cost 38,156 37,911
Less - Accumulated depreciation (26,381) (25,646)
------------------------------------------------------------------------
Net property, plant and equipment $11,775 $12,265
========================================================================
</TABLE>
NOTE 2 - GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and other intangible assets consist of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31, 1997 Dec. 31, 1996
-------------- --------------
<S> <C> <C>
Goodwill, net of accumulated amortization of
of $2,095,000 and $2,005,000, respectively $5,208 $5,297
Other intangible assets, net of accumulated
amortization of $1,440,000 and $2,157,000,
respectively 1,820 1,945
- -------------------------------------------------------------------------
Net intangible assets $7,028 $7,242
========================================================================
</TABLE> <PAGE>
FORM 10-Q
PART I
PAGE 6
MICHAEL BAKER CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE PERIOD ENDED MARCH 31, 1997
(Unaudited)
NOTE 3 - 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 March 31, 1997, no loans were outstanding; however, letters of credit
totaling $5,713,000 were outstanding under the Agreement.
In March 1997, the Company agreed with the Bank to revised and improved terms
of its Agreement, under which the $25 million commitment will be extended
through May 31, 2000. Other significant terms that have already been agreed
between the parties include the release of all security in Company assets
held under the Agreement, a reduction in the borrowing rate to the Bank's
prime interest rate or other indexed rates that may be lower, and a reduction
in the commitment fees to 3/8% per year based on the unused portion of the
commitment. The revised Agreement is expected to be signed during the second
quarter of 1997.
NOTE 4 - EARNINGS PER SHARE
Earnings per share computations are based upon weighted averages of 8,255,310
and 8,397,277 shares outstanding for the three-month periods ended March 31,
1997 and 1996, respectively.<PAGE>
FORM 10-Q
PART I
PAGE 7
MICHAEL BAKER CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE PERIOD ENDED MARCH 31, 1997
(Unaudited)
NOTE 5 - LITIGATION
The Company has been named as a defendant or co-defendant in legal
proceedings wherein substantial damages are claimed. Such proceedings are
not uncommon to the Company's business. After consultations with counsel,
management believes that the Company has recognized adequate provisions for
these proceedings and their ultimate resolutions will not have a material
adverse effect on the consolidated financial position or annual results of
operations of the Company.
The only significant proceeding relates to a lawsuit brought in 1987 in the
Supreme Court of the State of New York, Bronx County, by the Dormitory
Authority of the State of New York against a number of parties, including the
Company and one of its wholly-owned subsidiaries, that asserts breach of
contract and alleges damages of $13,000,000. The Company, which was not a
party to the contract underlying the lawsuit, contends that there is no
jurisdiction with respect to the Company and that it cannot be held liable
for any conduct of the subsidiary. Both the Company and the subsidiary are
contesting liability issues and have filed cross-claims and third-party
claims against other entities involved in the project.
<PAGE>
FORM 10-Q
PART I
PAGE 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
TOTAL CONTRACT REVENUES
Total contract revenues were $94.1 million for the first quarter of 1997,
compared to $84.0 million for the same period in 1996, an increase of $10.1
million. With the exception of the Environmental unit, total contract
revenues increased for the first quarter of 1997 in all business units. The
Civil and Energy units had the greatest increases of $5.5 million and $3.7
million, respectively. Civil's increase resulted from higher 1997 revenues
on its significant engineering project in Mexico and from new operations &
maintenance ("O&M") contracts on which work commenced during the fourth
quarter of 1996. Energy's improvement is primarily attributable to new O&M
contracts which were added during the second and third quarters of 1996.
GROSS PROFIT
In absolute terms, the Company's gross profit of $10.9 million for the first
quarter of 1997 represents a small improvement over the gross profit of $10.4
million from its 1996 first quarter. As a percentage of total contract
revenues, however, gross profit decreased to 11.6% in the first quarter of
1997 from 12.4% in the first quarter of 1996. Each of the Company's business
units experienced slight decreases in its gross profit percentage. Despite
higher 1997 revenues and profitability on its engineering contract in Mexico
and on its O&M contracts, the Civil unit's profit percentage decreased due to
lower margins achieved on its remaining mix of engineering work. In the
Transportation unit, revenues improved by an insignificant amount, while its
gross profit declined by 10% due mainly to the recognition of revenue but no
profit on a now-completed loss construction contract.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative ("G&A") expenses increased to $10.4 million for
the first quarter of 1997 from $9.6 million in the prior year first quarter.
This 1997 increase in G&A expenses primarily reflects the general increase
in revenue volumes. Expressed as a percentage of total contract revenues,
G&A expenses decreased from 11.4% in the first quarter of 1996 to 11.0% in
1997.<PAGE>
FORM 10-Q
PART I
PAGE 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OTHER INCOME
Other income for the first quarter of 1997 included a gain of $0.5 million
from the sale of an investment in preferred stock.
INCOME TAXES
The Company had provisions for income taxes of 48% for the first quarter of
1997 and 46% for the same period in 1996. The higher 1997 provision rate
reflects expected increases in foreign income and withholding taxes.
NEW ACCOUNTING STANDARD
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128"),
which changes the computation and presentation of earnings per share ("EPS").
SFAS 128 must be adopted for interim and annual periods ending after December
15, 1997. Early adoption is prohibited, although previously reported EPS
amounts will have to be restated upon adoption.
The Company will adopt SFAS 128 in the fourth quarter of 1997. Based upon
management's computations, adoption of the new standard will not have a
material effect on previously reported EPS amounts for the first quarter of
1997 and all of 1996.
CONTRACT BACKLOG
The funded backlog of work to be performed was $320 million as of March 31,
1997, compared to funded backlog of $333 million at December 31, 1996.
Funded backlog represents that portion of work supported by signed contracts
and for which the procuring agency has appropriated and allocated the funds
to pay for the work.
Total backlog, which incrementally includes that portion of contract value
for which options are still to be exercised ("unfunded backlog"), was $528
million as of March 31, 1997 and $544 million as of December 31, 1996.
During the first quarter of 1997, the Company's Transportation unit added to
its funded backlog, while the Environmental and Energy units replaced their
first quarter revenues with new funded work. The Civil and Buildings units
did not replace their revenues with new work, thereby resulting in reductions
in their funded backlog amounts.<PAGE>
FORM 10-Q
PART I
PAGE 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $3.8 million for the first
three months of 1997, compared to net cash used in operating activities of
$4.2 million for the same period in 1996. The 1997 increase in cash provided
resulted from higher collections of receivables during the first quarter of
1997.
Net cash used in investing activities approximated $0.4 million for the first
three months of 1997 compared to $0.7 million in the first three months of
1996. These amounts solely comprise purchases of property, plant and
equipment for both periods.
Working capital increased marginally during the first three months of 1997
to $29.2 million at March 31, 1997, from $27.4 million at December 31, 1996.
The current ratio was 1.41:1 at the end of the first three months of 1997,
compared to 1.36:1 at year-end 1996.
In March 1997, the Company agreed with Mellon Bank, N.A. to revised and
improved terms under its credit agreement. Under the revised terms, the
commitment of $25 million, which covers loans and letters of credit, will be
extended through May 31, 2000, and the bank will release all security in
Company assets previously held. As of March 31, 1997, no loans were
outstanding; however, letters of credit totaling $5.7 million were
outstanding under the agreement. Management believes that the credit
agreement will be adequate to meet its borrowing and letter of credit
requirements for at least the next year.
The Company is required to provide bid and performance bonding on certain
construction contracts, and has a $350 million bonding line available through
Aetna Casualty and Surety Company of America. Management believes that its
bonding line will be sufficient to meet its bid and performance needs for at
least the next year.
Short and long-term liquidity is dependent upon appropriations of public
funds for infrastructure and other government-funded projects, capital
spending levels in the private sector, and the demand for the Company's
services in the oil and gas markets. Additional external factors such as
price fluctuations in the energy industry and the effects of interest rates
on private construction projects could affect the Company. At this time,
management believes that its funds generated from operations and its existing
credit facility will be sufficient to meet its operating and capital
expenditure requirements for at least the next year.<PAGE>
FORM 10-Q
PART II
PAGE 11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(b) Reports on Form 8-K
During the quarter ended March 31, 1997, the Company filed no
reports on Form 8-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
<TABLE>
<S> <C>
MICHAEL BAKER CORPORATION
Dated: May 13, 1997 By: /s/ J. Robert White
----------------------
J. Robert White
Executive Vice President, Chief
Financial Officer and Treasurer
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 13,847
<SECURITIES> 0
<RECEIVABLES> 61,331
<ALLOWANCES> 0
<INVENTORY> 17,339
<CURRENT-ASSETS> 100,135
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 122,297
<CURRENT-LIABILITIES> 70,969
<BONDS> 0
0
0
<COMMON> 8,197
<OTHER-SE> 36,694
<TOTAL-LIABILITY-AND-EQUITY> 122,297
<SALES> 94,092
<TOTAL-REVENUES> 94,092
<CGS> 83,216
<TOTAL-COSTS> 83,216
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18
<INCOME-PRETAX> 1,109
<INCOME-TAX> 532
<INCOME-CONTINUING> 577
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 577
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
