SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): SEPTEMBER 1, 1999
-----------------
MICHAEL BAKER CORPORATION
-------------------------
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 1-6627 25-0927646
- ------------ ------ ----------
(State or other (Commission (I.R.S. Employer
jurisdiction of incorporation) File Number) 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
--------------
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
----------------------------------
(a) The following financial statements for Steen Production Service,
Inc. ("Steen") are filed herewith:
AUDITED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 1998 AND
- --------------------------------------------------------------------------------
1997:
- -----
o Report of independent accountants
o Balance sheet as of December 31, 1998 and 1997
o Statement of operations for the years ended December 31, 1998 and 1997
o Statement of changes in stockholders' equity for the years ended
December 31, 1998 and 1997
o Statement of cash flows for the years ended December 31, 1998 and 1997
o Notes to financial statements
UNAUDITED INTERIM FINANCIAL STATEMENTS:
- ---------------------------------------
o Balance sheet as of June 30, 1999 and December 31, 1998
o Statement of operations and retained earnings for the six-month
periods ended June 30, 1999 and 1998
o Statement of cash flows for the six-month periods ended June 30, 1999
and 1998
o Notes to financial statements
(b) The following unaudited pro forma consolidated financial
information for Michael Baker Corporation ("Baker") and Steen is filed herewith:
o Pro forma consolidated balance sheet as of June 30, 1999
o Notes to pro forma consolidated balance sheet
o Pro forma consolidated statement of income for the year ended December
31, 1998
o Pro forma consolidated statement of income for the six-month period
ended June 30, 1999
o Notes to pro forma consolidated statements of income
(c) In addition to the Exhibit filed with the Form 8-K dated September 15,
1999, the following exhibit is filed herewith as part of this
amendment:
Exhibit 23.1 Consent of independent accountants
<PAGE>
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 hereunto duly authorized.
MICHAEL BAKER CORPORATION
Date: November 15, 1999 /s/ J. ROBERT WHITE
--------------------------------------
J. Robert White
Executive Vice President, Chief
Financial Officer and Treasurer
<PAGE>
STEEN PRODUCTION SERVICE, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 1998 and 1997
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of
Michael Baker Corporation and Steen Production Service, Inc.
In our opinion, the accompanying balance sheets and the related statements of
operations, of cash flows and of changes in stockholders' equity present fairly,
in all material respects, the financial position of Steen Production Service,
Inc. (the Company) at December 31, 1998 and 1997, and the results of its
operations and its 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.
As discussed in Note 13 to the financial statements, the Company was purchased
on September 1, 1999 by a wholly-owned subsidiary of Michael Baker Corporation.
/s/ PricewaterhouseCooopers LLP
- -------------------------------
PricewaterhouseCoopers LLP
October 1, 1999
<PAGE>
<TABLE>
STEEN PRODUCTION SERVICE, INC.
BALANCE SHEET
DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
<CAPTION>
ASSETS 1998 1997
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 161,830 $ 89,059
Accounts receivable 2,702,285 3,335,010
Investments 219,967 207,313
Other receivables 72,199 52,463
Prepaid expenses 162,091 124,734
Prepaid taxes 114,854 --
Deferred tax asset 58,563 15,300
------------ ------------
Total current assets 3,491,789 3,823,879
------------ ------------
Property and equipment:
Buildings and improvements 5,763 30,263
Leasehold improvements 15,378 15,378
Barges 90,000 187,436
Marine equipment 721,951 716,791
Furniture and fixtures 41,243 64,723
Equipment 69,652 94,879
Autos -- 279,629
------------ ------------
943,987 1,389,099
Less - Accumulated depreciation (717,417) (889,033)
------------ ------------
Net property, plant and equipment 226,570 500,066
Other assets 164,533 146,018
------------ ------------
Total assets $ 3,882,892 $ 4,469,963
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 132,681 $ 173,383
Notes payable 605,882 119,012
Current portion of long-term debt 1,223,849 1,983,920
Payroll taxes payable 149,862 143,208
Accrued expenses 383,817 291,747
Income taxes payable 639 134,724
------------- ------------
Total current liabilities 2,496,730 2,845,994
Long-term liabilities:
Long-term debt 78,252 158,768
Deferred tax liability 29,874 9,705
------------ ------------
Total long-term liabilities 108,126 168,473
Stockholders' equity:
Common stock, no par value, 10 shares authorized,
6 shares issued and outstanding 20,312 20,312
Accumulated other comprehensive loss (2,263) (877)
Retained earnings 1,259,987 1,436,061
------------ ------------
Total stockholders' equity 1,278,036 1,455,496
------------ ------------
Total liabilities and stockholders' equity $ 3,882,892 $ 4,469,963
============ ============
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
STEEN PRODUCTION SERVICE, INC.
STATEMENT OF OPERATIONS
YEARS ENDED DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
<CAPTION>
1998 1997
<S> <C> <C>
Revenues $ 16,975,691 $ 17,342,411
Operating costs and expenses:
Operating 861,550 998,823
Personnel 13,042,571 12,641,236
Depreciation 104,823 161,787
General and administrative 2,249,771 2,200,495
------------- -------------
Total operating cost and expenses 16,258,715 16,002,341
Operating income 716,976 1,340,070
Other income (expense):
Interest expense (96,086) (134,094)
Interest income 17,748 27,614
Other (54,626) 73,403
------------- -------------
Other income (expense) (132,964) (33,077)
Income before taxes 584,012 1,306,993
Income taxes 7,801 200,833
------------- -------------
Net income $ 576,211 $ 1,106,160
============= =============
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
STEEN PRODUCTION SERVICE, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
<CAPTION>
ACCUMULATED
OTHER
COMMON COMPREHENSIVE COMPREHENSIVE RETAINED
STOCK GAIN (LOSS) LOSS EARNINGS
<S> <C> <C> <C> <C>
Balance, January 1, 1997 $ 20,312 $ 60 $ -- $ 1,219,901
Net income -- -- 1,106,160 1,106,160
Other comprehensive loss -- (937) (937) --
-----------
Comprehensive income -- -- $1,105,223 --
===========
Distributions -- -- (890,000)
-------- -------- -----------
Balance, December 31, 1997 20,312 (877) 1,436,061
Net income -- -- $ 576,211 576,211
Other comprehensive loss -- (1,386) (1,386) --
-----------
Comprehensive income -- -- $ 574,825 --
===========
Distributions -- -- (752,285)
-------- -------- -----------
Balance, December 31, 1998 $ 20,312 $(2,263) $1,259,987
======== ======== ===========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
STEEN PRODUCTION SERVICE, INC.
STATEMENT OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
<CAPTION>
1998 1997
<S> <C> <C>
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income (loss) $ 576,211 $ 1,106,160
Adjustments to reconcile net income to cash
provided (used) by operating activities:
Depreciation and amortization 104,823 161,787
(Gain) loss on sale of assets 52,839 (33,657)
Deferred income taxes (23,094) (2,373)
Changes in assets and liabilities:
Receivables 632,725 (1,282,304)
Prepaid income taxes (114,854) 24,804
Accounts payable (40,702) (85,246)
Income taxes payable (134,085) 62,855
Life insurance cash surrender value (38,121) (38,844)
Other net assets 59,851 106,981
------------ ------------
Net cash provided by operating activities 1,075,593 20,163
------------ ------------
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Purchases of investments (12,654) --
Proceeds from sale of investments -- 236,769
Proceeds from sale of assets 166,300 106,595
Capital expenditures (50,466) (207,374)
------------ -----------
Net cash provided by investing activities 103,180 135,990
------------ ------------
CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES:
Net proceeds from (payments on) revolving
line of credit (564,943) 825,141
Proceeds from issuance of notes payable 910,770 458,828
Principal payments on notes payable (423,900) (468,423)
Principal payments on long-term debt (275,644) (222,168)
Proceeds from issuance of long-term debt -- 139,425
Distributions (752,285) (890,000)
------------ ------------
Net cash (used in) financing activities (1,106,002) (157,197)
------------ ------------
Net increase (decrease) in cash 72,771 (1,044)
Cash at beginning of year 89,059 90,103
------------ ------------
Cash at end of year $ 161,830 $ 89,059
============ ============
Cash paid during the period for:
Interest $ 112,434 $ 138,870
============ ============
Income taxes $ 279,834 $ 40,977
============ ============
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
STEEN PRODUCTION SERVICE, INC.
DECEMBER 31, 1998 AND 1997
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANIZATION
Steen Production Service, Inc. (Steen or the Company) was incorporated in
the state of Louisiana on September 1, 1960. The Company provides
supervised labor to companies engaged in inland and offshore oil and
drilling activities.
2. BUSINESS COMBINATIONS
On December 31, 1998, Production Barges, Inc. (a Subchapter S Corporation
under common control with Steen) (Barges) was merged into Steen. The merger
was accounted for similar to the pooling-of-interests method and all
financial data for the necessary periods have been restated to include the
results of Barges.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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
disclosure of contingent assets and liabilities at the date of the
financial statements and reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand and highly liquid
investments with original maturities of 3 months or less.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets, which range from 3 to 10 years. Expenditures
for maintenance and repairs are expensed as incurred; expenditures for
renewals and improvements are generally capitalized. Upon sale or
retirement of property, plant and equipment, the related cost and
accumulated depreciation are removed from the accounts and any gain or loss
is recognized.
REVENUE RECOGNITION
Revenue is recorded when earned which is based on the work performed.
INCOME TAXES
The Company accounts for certain income and expense items differently for
financial reporting and income tax purposes. In accordance with SFAS No.
109, "Accounting for Income Taxes," deferred tax assets and liabilities are
determined based on the difference between the financial statement and tax
bases of assets and liabilities applying enacted statutory tax rates in
effect for the year in which the differences are expected to reverse.
<PAGE>
STEEN PRODUCTION SERVICE, INC.
DECEMBER 31, 1998 AND 1997
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Income for the years ended December 31, 1998 and 1997 includes earnings
from a "C" Corporation (Steen) as well as an "S" Corporation (Barges).
Income tax is provided for only the earnings of the "C" Corporation. The
earnings of the "S" Corporation are taxed to the individual shareholders.
CONCENTRATION OF CREDIT RISK
The Company's customer base includes companies engaged in both inland and
offshore producing/drilling activities. Although the Company is directly
affected by the oil industry, management does not believe significant
credit risk exists at December 31, 1998.
Three customers represent approximately 37.7 percent, 12.1 percent and 9.9
percent of revenues for the year ended December 31, 1998. For the year
ended December 31, 1997, one customer represented approximately 22.5
percent of revenues. Additionally, these customers represented 41.1 percent
and 18.5 percent of receivables at December 31, 1998 and 1997,
respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of cash, investments, receivables, payables and short-term
borrowings approximate carrying amounts due to the short maturities of
these instruments.
4. INVESTMENTS
The following securities have been classified as available for sale. The
carrying amount of securities available for sale and their estimated fair
value at December 31, 1998 and 1997, were as follows:
<TABLE>
<CAPTION>
HISTORICAL UNREALIZED FAIR
COST LOSS VALUE
1998
----------------------------------------
<S> <C> <C> <C>
Van Kampen Mutual Funds $222,230 $ 2,263 $219,967
-------- -------- --------
1997
-----------------------------------------
Van Kampen Mutual Funds $208,190 $ 877 $207,313
--------- -------- --------
</TABLE>
<PAGE>
STEEN PRODUCTION SERVICE, INC.
DECEMBER 31, 1998 AND 1997
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5. INCOME TAXES
As noted in Note 3 to the financial statements, the Company's income tax
provision is calculated only on the pretax income of Steen. The remaining
income is attributable to Barges, a subchapter "S" Corporation.
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Current tax provision:
Federal $ 30,256 $193,481
State 639 9,725
--------- ---------
Total current tax provision 30,895 203,206
-------- ---------
Deferred tax benefit (23,094) (2,373)
-------- ---------
Provision for income taxes $ 7,801 $200,833
========= =========
Deferred tax assets (liabilities) consisted at December 31:
1998 1997
LIABILITIES
Depreciation $(29,874) $ (9,705)
--------- ---------
ASSETS
Accruals and allowances 58,563 15,300
--------- ---------
Net deferred tax asset $ 28,689 $ 5,595
========= =========
<PAGE>
STEEN PRODUCTION SERVICE, INC.
DECEMBER 31, 1998 AND 1997
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The following table summarizes the significant differences between the U.S.
Federal statutory tax rate and the Company's effective tax for financial
statement purposes:
1998 1997
Statutory tax rate 34.0 % 34.0 %
Rate adjustment due to reduced level of taxable loss (9.0) --
Nondeductible items 14.3 8.5
State taxes 1.8 (1.1)
S Corporation earnings (39.8) (26.0)
------- -------
Effective tax rate 1.3 % 15.4 %
======= =======
</TABLE>
6. Notes Payable
The following notes payable were outstanding at December 31:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Notes payable to James Orville Steen (shareholder);
due on demand or, if no demand, on December 31, 1999
including interest at 8.5% $485,000 $ --
Notes payable to The Insurance House, Inc.; maturing
March 10, 1999 payable in equal monthly installments
of $40,294; including interest at 7.46% 120,882 --
Notes payable to The Insurance House, Inc.; maturing
March 10, 1998, payable in equal monthly installments
of $40,165; including interest at 7.46% -- 119,012
-------- --------
Total notes payable $605,882 $119,012
======== ========
</TABLE>
<PAGE>
STEEN PRODUCTION SERVICE, INC.
DECEMBER 31, 1998 AND 1997
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
7. LONG-TERM DEBT
The following long-term debt is outstanding at December 31:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Notes payable to Doyle Landry; maturing February 15
2001; payable in equal monthly installments of
$3,913; including interest at 10%; secured by a
boat. $ 91,135 $ 127,007
Revolving line of credit in the amount of $2,000,000;
due June 30, 1999; interest payable at Chase
Manhattan Prime plus .5%; collateralized primarily
by accounts receivable and the guarantee of the
shareholders. 1,197,872 --
Revolving line-of-credit in the amount of $2,000,000;
due June 30, 1998; interest payable at Chase
Manhattan Prime plus 1.25%; collateralized primarily
by accounts receivable and the guarantee of the
stockholders. -- 1,762,815
Vehicle line-of-credit in the amount of $130,000; due
June 30, 1998; interest payable at 8.25%;
collateralized primarily by vehicles, accounts
receivable, and the guarantee of stockholders. -- 29,191
Note payable to Hibernia National Bank; maturing
November 10, 1998; payable in equal monthly
installments of $863; including interest at 8.99%;
collateralized primarily by a vehicle. -- 9,081
Note payable to Ford Motor Credit; maturing May 13,
2000; payable in equal monthly installments of
$1,104; including interest at 8.75%; collateralized
by a vehicle. -- 28,755
Note payable First National Bank; maturing October 8,
1999; payable in 38 equal monthly installments of
$1,744 and one installment of $909, including interest
at Chase Manhattan Prime plus 1.5%; collateralized
primarily by equipment and boats. -- 34,359
Note payable to First National Bank; maturing February 10,
1999; payable in equal monthly installments of $4,742;
including interest at 8.48%; collateralized primarily
by vehicles, accounts receivable and the guarantee of
the stockholders. -- 78,019
Note payable to First National Bank; maturing February 10,
1999; payable in equal monthly installments of $4,433;
including interest at Chase Manhattan Prime plus 1%;
collateralized primarily by accounts receivable and the
guarantee of the stockholders. 13,094 58,490
Note payable by CDG Boat Rentals; payable in seven
monthly installments of $4,000; including interest at
9.5%; collateralized by a boat. -- 14,971
---------- ----------
Total 1,302,101 2,142,688
Less - current portion 1,223,849 1,983,920
---- ---------- ----------
Long-term debt $ 78,252 $ 158,768
========== ==========
</TABLE>
<PAGE>
STEEN PRODUCTION SERVICE, INC.
DECEMBER 31, 1998 AND 1997
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Long-term debt matures as follows:
<TABLE>
<CAPTION>
<S> <C>
1999 $1,223,849
2000 55,443
2001 22,809
----------
Total $1,302,101
==========
</TABLE>
Underthe terms of a loan agreement with a bank, the Company is required to
maintain specified current ratios and debt to worth ratios. The Company was
not in compliance at December 31, 1998 with certain covenants contained in
the agreement; however, the Company obtained a waiver from the bank on the
1998 covenant violations.
8. RELATED PARTY TRANSACTIONS
Included in notes payable at December 31, 1998 is a $485,000 note to a
shareholder/officer of the Company. The note is due on demand, or December
31, 1999 if no demand is presented. The Company pays interest of 8.5
percent on the note. Also, included in other receivables at December 31,
1997 is a $15,000 receivable from a shareholder/officer of the Company. The
note is due on demand and bears interest of 6.25 percent. At December 31,
1997, the accrued interest on the receivable was $707.
9. OPERATING LEASES
The Company has leased its office space under a noncancelable operating
lease that expires in May 2003 and requires monthly payments ranging from
$4,837 to $6,078.
In December 1998, the Company entered into a sale-leaseback transaction
with a third-party for its automobiles. As a result of this transaction,
the Company recognized a loss of approximately $29,000, which has been
included in other income in the accompanying financial statements
Beginning in December 1998, the Company leases various automobiles under
various noncancelable operating leases that expire between March 1999 and
December 2001.
The following is a schedule of minimum lease payments required under
noncancelable operating leases as of December 31, 1998:
<TABLE>
<CAPTION>
<S> <C>
1999 $ 149,498
2000 124,974
2001 92,043
2002 76,545
2003 42,548
----------
$ 485,608
==========
</TABLE>
<PAGE>
STEEN PRODUCTION SERVICE, INC.
DECEMBER 31, 1998 AND 1997
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
10. PROFIT SHARING PLAN
The Company has a profit sharing 401(k) plan which is available to all
employees over the age of 21 who have completed one year of service with
the Company. Company matching contributions to the plan in 1998 and 1997
were approximately $39,000 and $47,000, respectively.
11. INVESTMENTS IN LIFE INSURANCE
The Company has entered into various equity split dollar life insurance
agreements whereby the Company has agreed to pay the premiums on life
insurance policies covering the lives of the shareholders/officers of the
Company. In addition, the Company owns key man insurance on the two
officers. The Company's investment on the policies was $133,788 and $95,667
at December 31, 1998 and 1997, respectively.
12. COMMITMENTS AND CONTINGENCIES
SELF-INSURED HEALTH INSURANCE PROGRAM
The Company has a self-insured health insurance program. Under the program
the Company is liable for the first $40,000 of claims per participant with
an annual aggregate stop-loss provision of approximately $520,000.
13. SUBSEQUENT EVENT
On September 1, 1999, 100% of the common stock of Steen was purchased by a
wholly-owned subsidiary of Michael Baker Corporation. The accompanying
financial statements do not reflect any adjustments related to this
transaction.
<PAGE>
<TABLE>
STEEN PRODUCTION SERVICE, INC.
BALANCE SHEET (UNAUDITED)
JUNE 30, 1999 AND DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<CAPTION>
1999 1998
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 100,382 $ 161,830
Accounts receivable 2,430,648 2,702,285
Investments 283,117 219,967
Other receivables 1,624 72,199
Prepaid expenses 307,826 162,091
Prepaid taxes -- 114,854
Deferred tax asset -- 58,563
------------ ------------
Total current assets 3,123,597 3,491,789
Property and equipment:
Buildings and improvements 5,763 5,763
Leasehold improvements 8,713 15,378
Boats and barges 90,000 90,000
Marine equipment 721,951 721,951
Furniture and fixtures 63,293 41,243
Equipment 69,652 69,652
------------ ------------
959,372 943,987
Less - Accumulated depreciation (735,408) (717,417)
---- ------------ ------------
Net property, plant and equipment 223,964 226,570
Other assets 166,691 164,533
------------ ------------
Total assets $ 3,514,252 $ 3,882,892
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 216,903 $ 132,681
Notes payable 758,749 605,882
Current portion of long-term debt 39,301 1,223,849
Payroll taxes payable 152,931 149,862
Accrued expenses 580,108 383,817
Income taxes payable 720 639
------------ ------------
Total current liabilities 1,748,712 2,496,730
Long-term liabilities:
Long-term debt 334,534 78,252
Deferred tax liability -- 29,874
------------ ------------
Total long-term liabilities 334,534 108,126
Stockholders' equity:
Common stock, no par value, 10 shares authorized
6 shares issued and outstanding 20,312 20,312
Accumulated other comprehensive loss (1,915) (2,263)
Retained earnings 1,412,609 1,259,987
------------ ------------
Total stockholders' equity 1,431,006 1,278,036
------------ ------------
Total liabilities and stockholders' equity $ 3,514,252 $ 3,882,892
============ ============
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
STEEN PRODUCTION SERVICE, INC.
STATEMENT OF OPERATIONS AND RETAINED EARNINGS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
- --------------------------------------------------------------------------------
<CAPTION>
1999 1998
<S> <C> <C>
Revenues $ 7,961,337 $ 8,660,621
Operating costs and expenses:
Operating 715,188 539,925
Personnel 5,772,175 6,096,085
Depreciation 19,020 53,202
General and administrative 1,221,652 1,270,058
------------ ------------
Total operating cost and expenses 7,728,035 7,959,270
Operating income 233,302 701,351
Other income (expense):
Interest expense (52,910) (52,367)
Interest income 9,033 9,387
Miscellaneous income (expense) (2,478) 547
Gain (loss) on sale of assets (5,636) (3,556)
------------ ------------
Total other income (51,991) (45,989)
Income before taxes 181,311 655,362
Income taxes 28,689 (3,410)
------------ ------------
Net income $ 152,622 $ 658,772
============ ============
Retained earnings balance, January 1 $ 1,259,987 $ 1,436,061
Net income 152,622 658,772
Distributions ("S" dividends) -- (401,345)
------------ ------------
Retained earnings balance, end of period $ 1,412,609 $ 1,693,488
============ ============
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
STEEN PRODUCTION SERVICE, INC.
STATEMENT OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
- --------------------------------------------------------------------------------
<CAPTION>
1999 1998
<S> <C> <C>
CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES:
Net income $ 152,622 $ 658,772
Adjustments to reconcile net income to cash
provided (used) by operating activities:
Depreciation and amortization 19,020 53,202
Gain (loss) on sale of assets 5,636 3,556
Unrealized loss on investments 348 591
Changes in assets and liabilities:
Receivables 271,637 727,330
Prepaid expenses (145,735) (249,178)
Prepaid income taxes 114,854 (96,740)
Accounts payable 84,222 47,513
Accrued liabilities 199,360 228,211
Income taxes payable 81 9,865
Other receivables and payables 97,106 (19,599)
---------- -----------
Net cash provided by operating activities 799,151 1,363,523
---------- -----------
CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES:
Purchases of investments (63,150) (33,450)
Proceeds from sale of assets -- 11,800
Capital expenditures (22,050) (50,148)
---------- ----------
Net cash (used in) investing activities (85,200) (71,798)
---------- ----------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Net proceeds from (payments on) revolving line
of credit (895,852) (1,431,889)
Proceeds from issuance of notes payable 365,131 925,770
Principal payments on notes payable (212,264) (193,701)
Principal payments on long-term debt (32,414) (102,840)
Distributions -- (401,345)
---------- -----------
Net cash (used in) financing activities (775,399) (1,204,005)
---------- -----------
Net increase (decrease) in cash (61,448) 87,720
Cash at beginning of year 161,830 89,059
---------- -----------
Cash at June 30 $ 100,382 $ 176,779
========== ===========
Cash paid (refunded) during the period for:
Interest $ 46,127 $ 68,404
========== ===========
Income taxes $(114,854) $ 231,464
========== ===========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
STEEN PRODUCTION SERVICE, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 1999
- --------------------------------------------------------------------------------
1. GENERAL
The balance sheet as of June 30, 1999, the statement of operations for the
six-month periods ended June 30, 1999 and 1998, and the consolidated
statement of cash flows for the six-month periods ended June 30, 1999 and
1998, have been prepared by the Company without audit. In the opinion of
management, all normal and recurring adjustments necessary to present
fairly the financial position at June 30, 1999 and the results of
operations and changes in cash flows for the periods presented have been
made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. This information should be read
in conjunction with the Company's audited financial statements for the year
ended December 31, 1998. The results of operations for the periods ended
June 30, 1999 and 1998 are not necessarily indicative of the operating
results for the full year.
2. ORGANIZATION
Steen Production Service, Inc. (Steen or the Company) was incorporated in
the state of Louisiana on September 1, 1960. The Company provides
supervised labor to companies engaged in inland and offshore oil and
drilling activities.
3. SUBSEQUENT EVENT
On September 1, 1999, Steen was purchased by a wholly-owned subsidiary of
Michael Baker Corporation. These financial statements do not reflect any
adjustments related to this acquisition.
4. LONG-TERM DEBT
During June 1999, the Company's revolving line-of-credit due June 30, 1999
was renewed with substantially the same terms and is now due June 30, 2000.
5. INCOME TAXES
Prior to 1999, the Company accounted for certain income and expense items
differently for financial reporting and income tax purposes. In accordance
with SFAS No. 109, "Accounting for Income Taxes," deferred tax assets and
liabilities were determined based on the difference between the financial
statement and tax bases of assets and liabilities applying enacted
statutory tax rates in effect for the year in which the differences were
expected to reverse.
Effective January 1, 1999, the Company elected Subchapter S status under
the Internal Revenue Code. As such, the Company will not be subject to
federal and most state income taxes, and the effects of the Company's
transactions will accrue directly to the Company's shareholders. In
connection with the Subchapter S election, the tax provision at June 30,
1999 represents a reversal of all the deferred tax assets and liabilities
existing as of January 1, 1999.
<PAGE>
MICHAEL BAKER CORPORATION AND STEEN PRODUCTION SERVICE, INC.
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
The following pro forma consolidated financial information is based on the
historical financial statements of Michael Baker Corporation (the "Company") and
Steen Production Service, Inc. ("Steen"), and reflects the pro forma effects of
the acquisition of Steen. Relevant information regarding the acquisition, which
became effective on September 1, 1999, was provided in the Company's Form 8-K
dated September 15, 1999, of which this financial information constitutes a
part.
The pro forma consolidated balance sheet as of June 30, 1999 was prepared as if
the acquisition of Steen had occurred on that date. The pro forma consolidated
statements of income for the year ended December 31, 1998 and the six-month
period ended June 30, 1999 were prepared as if the acquisition had occurred on
January 1, 1998.
In the opinion of management, the pro forma financial information presented is
not necessarily indicative of the periods presented or the future operations of
Steen. The pro forma financial information should be read in conjunction with
the historical financial statements of the Company for the year ended December
31, 1998.
<PAGE>
<TABLE>
MICHAEL BAKER CORPORATION AND STEEN PRODUCTION SERVICE, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1999
(UNAUDITED--AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
<CAPTION>
PRO FORMA PRO FORMA
BAKER STEEN (1) ADJUSTMENTS CONSOLIDATED
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 1,165 $ 100 $ 1,265
Receivables 75,802 2,433 78,235
Cost of contracts in progress and
estimated earnings, less billings 23,833 -- 23,833
Prepaid expenses and other 5,958 591 257 (2) 6,806
- --------------------------------------------------------------------------------
Total current assets 106,758 3,124 257 110,139
Property, plant and equipment, net 17,462 224 1,253 (3) 18,939
Goodwill and other intangible
assets, net 6,965 -- 8,602 (4) 15,567
Other assets 6,695 166 6,861
- --------------------------------------------------------------------------------
Total assets $137,880 $3,514 $10,112 $151,506
================================================================================
LIABILITIES
CURRENT LIABILITIES
Accounts payable $ 28,015 $ 217 $ 28,232
Current portion of long-term debt -- 798 1,909 (5) 2,707
Accrued employee compensation 10,380 -- 10,380
Accrued insurance 8,476 -- 8,476
Other accrued expenses 17,868 734 18,602
Excess of billings on contracts in
progress over cost and estimated
earnings 6,388 -- 6,388
- --------------------------------------------------------------------------------
Total current liabilities 71,127 1,749 1,909 74,785
Long-term debt 3,478 335 9,186 (6) 12,999
Other liabilities 8,068 -- 447 (2) 8,515
- --------------------------------------------------------------------------------
Total liabilities 82,673 2,084 11,542 96,299
SHAREHOLDERS' INVESTMENT
Common Stock 7,162 20 (20)(7) 7,162
Series B Common Stock 1,316 -- 1,316
Additional paid-in capital 37,048 -- 37,048
Retained earnings 11,735 1,410 (1,410)(7) 11,735
Less - Treasury shares, at cost (2,054) -- (2,054)
- --------------------------------------------------------------------------------
Total shareholders' investment 55,207 1,430 (1,430) 55,207
- --------------------------------------------------------------------------------
Total liabilities and
shareholders'investment $137,880 $3,514 $10,112 $151,506
================================================================================
<FN>
The accompanying notes are an integral part of this financial statement
</FN>
</TABLE>
<PAGE>
MICHAEL BAKER CORPORATION AND STEEN PRODUCTION SERVICE, INC.
NOTES TO THE PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1999
(UNAUDITED)
- --------------------------------------------------------------------------------
1. Certain Steen line items have been reclassified to conform with Baker's
historical balance sheet presentation.
2. These adjustments account for the recording of deferred tax assets and
liabilities based on Steen's temporary differences between book and tax
asset and liability balances.
3. This adjustment results from the net book value of certain Steen marine
equipment being lower than the fair market value of such equipment as of
the acquisition date.
4. This adjustment represents goodwill and the non-competition covenant
resulting from the preliminary allocation of the purchase price.
5. This adjustment represents the repayment of certain Steen debt outstanding
as of the balance sheet date, and the addition of notes payable within one
year of the acquisition date to the former shareholders of Steen.
6. This adjustment represents the addition of acquisition-related long-term
notes payable to the former shareholders of Steen, as well as the
incremental bank borrowings resulting from (a) cash payments to the former
shareholders of Steen, (b) cash payments related to the repayment of
certain Steen debt outstanding as of the balance sheet date, and (c) cash
payments for legal and accounting services associated with the acquisition.
7. This adjustment represents the elimination of the common stock and retained
earnings balances existing on the books of Steen as of the acquisition
date.
<PAGE>
<TABLE>
MICHAEL BAKER CORPORATION AND STEEN PRODUCTION SERVICE, INC.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
(UNAUDITED--AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------
<CAPTION>
PRO FORMA PRO FORMA
BAKER STEEN (1) ADJUSTMENTS CONSOLIDATED
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total contract revenues $521,271 $16,976 $538,247
Cost of work performed 474,027 14,009 488,036
- --------------------------------------------------------------------------------
GROSS PROFIT 47,244 2,967 50,211
Selling, general and administrative
expenses 48,911 2,250 900 (2) 52,061
- --------------------------------------------------------------------------------
INCOME/(LOSS) FROM OPERATIONS (1,667) 717 (900) (1,850)
Other income/(expense):
Interest income 439 18 (269)(3) 188
Interest expense (145) (96) (641)(4) (882)
Other, net 42 (55) (13)
- --------------------------------------------------------------------------------
INCOME/(LOSS) BEFORE INCOME TAXES (1,331) 584 (1,810) (2,557)
Provision for income taxes 1,088 8 (304)(5) 792
- --------------------------------------------------------------------------------
NET INCOME/(LOSS) $ (2,419) $ 576 $(1,506) $ (3,349)
================================================================================
Basic and diluted net income/
(loss) per share $ (0.30) $ (0.41)
================================================================================
<FN>
The accompanying notes are an integral part of this financial statement.
</FN>
</TABLE>
<PAGE>
<TABLE>
MICHAEL BAKER CORPORATION AND STEEN PRODUCTION SERVICE, INC.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 1999
(UNAUDITED--AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------
<CAPTION>
PRO FORMA PRO FORMA
BAKER STEEN (1) ADJUSTMENTS CONSOLIDATED
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total contract revenues $249,185 $ 7,961 $257,146
Cost of work performed 219,840 6,506 226,346
- --------------------------------------------------------------------------------
GROSS PROFIT 29,345 1,455 30,800
Selling, general and administrative
expenses 24,690 1,222 450 (2) 26,362
- --------------------------------------------------------------------------------
INCOME/(LOSS) FROM OPERATIONS 4,655 233 (450) 4,438
Other income/(expense):
Interest income 85 9 (11)(3) 83
Interest expense (334) (53) (456)(4) (843)
Other, net (89) (8) (97)
- --------------------------------------------------------------------------------
INCOME/(LOSS) BEFORE INCOME TAXES 4,317 181 (917) 3,581
Provision for income taxes 2,029 28 (293)(5) 1,764
- --------------------------------------------------------------------------------
NET INCOME $ 2,288 $ 153 $(624) $ 1,817
================================================================================
Basic and diluted net income
per share $ 0.28 $ 0.22
================================================================================
<FN>
The accompanying notes are an integral part of this financial statement.
</FN>
</TABLE>
<PAGE>
MICHAEL BAKER CORPORATION AND STEEN PRODUCTION SERVICE, INC.
NOTES TO THE PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998, AND
THE SIX-MONTH PERIOD ENDED JUNE 30, 1999
(UNAUDITED)
- --------------------------------------------------------------------------------
1. Certain Steen line items have been reclassified to conform with Baker's
historical income statement presentation.
2. This adjustment represents (a) the amortization of the goodwill and the
non-competition covenant resulting from the preliminary allocation of the
purchase price, (b) additional depreciation expense on assets written up to
fair market value as a result of the acquisition and (c) incremental
benefit costs resulting from the acquisition.
3. This adjustment represents interest income that would not have been earned
by the Company due to reduced cash investments.
4. This adjustment represents additional interest expense that would have been
incurred by the Company on the notes payable to the former shareholders of
Steen and in borrowing the initial cash payments related to the
acquisition.
5. This adjustment represents the income tax benefit associated with the
adjustments included in notes 2 through 4 above.
6. Basic and diluted net income per share computations for the year ended
December 31, 1998 are based upon 8,178,067 weighted average shares
outstanding. For the six-month period ended June 30, 1999, basic and
diluted net income per share computations are based upon weighted averages
of 8,170,826 and 8,242,804 shares, respectively. No additional Baker stock
was issued as a result of the Steen acquisition.
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 33-69306; No. 33-62887; No. 333-05987; and No.
333-59941) of Michael Baker Corporation of our report dated October 1, 1999,
which appears within Item 7(a) of Michael Baker Corporation's Form 8-K/A dated
November 15, 1999.
/s/ PricewaterhouseCoopers, LLP
- -------------------------------
PricewaterhouseCoopers, LLP
Pittsburgh, Pennsylvania
November 15, 1999
