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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, 1998
COMMISSION FILE NUMBER 1-6627
MICHAEL BAKER CORPORATION
-------------------------
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 25-0927646
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(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
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(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (412) 269-6300
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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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 31, 1999, 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, 2,504,311
shares of Common Stock and 1,224,553 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 $31,550,101 for the Common Stock and $664,426 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).
As of March 31, 1999, the Registrant had outstanding 7,159,408 shares of its
Common Stock and 1,316,198 shares of its Series B Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Parts of Form 10-K into which
Document Document is Incorporated
- --------------------------------------------------------------------------------
None
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. Factors that may cause such differences include, among others:
increased competition, increased costs, changes in general market conditions,
and changes in anticipated levels of government spending on infrastructure. Such
forward looking statements are made pursuant to the Safe Harbor Provisions of
the Private Securities Litigation Reform Act of 1995.
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, heavy and highway
construction, construction management, and operations and technical services
worldwide.
The Registrant is organized into the following five market-focused business
units: Buildings, Civil, Energy, Environmental and Transportation. These
business units have coincided with the Registrant's reportable segments in
previous years; however, under the Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 131, "Disclosures about Segments
of an Enterprise and Related Information," adopted by the Registrant in 1998,
two business units are required to be presented in greater detail. Accordingly,
the Registrant's reportable segments now include the Engineering and Baker
Support Services, Inc. ("BSSI") divisions of the Civil unit, and the Engineering
and Construction (heavy and highway) divisions of the Transportation unit.
Information regarding the amounts of revenues, income before taxes, total
assets, capital expenditures, and depreciation and amortization expense
attributable to the Registrant's reportable 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 1998 by Engineering News Record
magazine, Baker ranked 43rd among U.S. design firms, 18th among transportation
design firms, 102nd among environmental firms, 132nd among international design
firms and 150th among U.S. construction contractors. Baker also ranked 104th
among government contractors according to a listing published in 1998 by
Government Executive magazine. These rankings were based on 1997 revenues.
BUSINESS UNITS
- --------------
BUILDINGS. Through March 1999, the Buildings unit comprised a general
construction, construction management and design-build division and a facilities
planning and design division, that together or separately pursued the
design-build market. This unit offered a variety of services including design-
build, construction management, planning, program management, general
contracting, architectural and interior design, construction inspection, and
constructability reviews. The Buildings unit has completed a wide range of
projects, such as corporate headquarters, data centers, correctional facilities,
educational facilities, airports and entertainment facilities.
Following a significant 1998 loss on a construction project in the Buildings
unit, effective in April 1999, the Buildings unit has been restructured such
that its low-bid, high-risk, general construction activities have been
discontinued, and the Registrant will no longer propose on these types of
construction projects. Existing low-bid, high-risk construction projects will be
completed or sold. In the future, Baker will place increased emphasis on growing
its construction management-for-fee business (for which the risk to the
Registrant is lower than general construction), and will partner with
contractors to pursue larger design-build contracts in the buildings market. The
Registrant will continue the facilities planning and design division of the
Buildings unit.
CIVIL. As previously stated, the Civil unit includes two divisions, Engineering
and BSSI. This unit has combined Baker's military infrastructure work in
planning and operations and maintenance ("O&M") to improve its ability to market
to, and serve, the U.S. Department of Defense, a significant Baker client. The
Engineering division provides services which include surveying, mapping,
geographic information systems ("GIS"), planning, design, construction
management and total program management. The BSSI division principally provides
O&M services on U.S. military bases. The Civil unit serves clients in the fields
of telecommunications, water resources, pipelines, emergency management,
resources management, water/wastewater systems and facilities O&M.
ENERGY. The Energy unit specializes in providing a full range of technical
services for operating energy production facilities. The unit's comprehensive
services consist of training, personnel recruitment, pre-operations engineering,
field operations and maintenance, mechanical equipment maintenance and logistics
management. The Energy unit serves both major and independent oil and gas
producing companies, as well as domestic regulated utilities and independent
power producers. This unit operates in over a dozen foreign countries, with
major projects in the U.S., Venezuela, Thailand and Nigeria.
ENVIRONMENTAL. The Environmental unit provides environmental, health, and safety
related engineering and consulting services in both the public and private
markets. This unit provides services which include site restoration, strategic
regulatory analysis, compliance, and advanced management systems. Clients of the
Environmental unit include commercial entities, Fortune 100 companies and the
Department of Defense, including the U.S. Army Corps of Engineers and the U.S.
Navy. Under the Navy's Comprehensive Long-term Environmental Action Navy (CLEAN)
program, this unit has been providing environmental support services throughout
the mid-Atlantic states, the Caribbean and Europe since 1991.
TRANSPORTATION. Through its two divisions, Engineering and Construction, the
Transportation unit provided planning, design, construction and operations
support services to governmental transportation agencies throughout the nation
in 1998. Within the Engineering division, Baker serves the professional services
segment of the market providing planning, design, construction management and
inspection, and management consulting services to municipal, state and federal
highway, toll road and transit agencies. This division is consistently among the
twenty largest providers of such services and enjoys a national reputation for
its work in developing highways, bridges, airports, busways and other transit
facilities. The Construction division converts design plans into steel and
concrete infrastructure as a general contractor for highways, bridges, track
installation, sewer, water and other heavy civil construction projects. The
primary customers for this division are the same as the Engineering division,
but more geographically restricted to Pennsylvania, Illinois, New York and
Florida.
In connection with the previously mentioned restructuring of the Buildings unit
in April 1999, the Registrant announced that its heavy and highway construction
business will be sold. The Registrant initiated activities related to the sale
of the heavy and highway business during the second quarter of 1999. Normal
construction bidding activity will continue during the period through the sale.
Following the sale of this business, the Transportation Engineering division
will partner with other contractors to pursue selected design-build contracts,
which are becoming a growing project delivery method within the transportation
marketplace. The Registrant will continue its transportation engineering/design
division of the Transportation unit, which is poised to benefit significantly
from the U.S. government's TEA-21 legislation signed during 1998.
DOMESTIC AND FOREIGN OPERATIONS
- -------------------------------
Approximately 91%, 90% and 88% of the Registrant's total contract revenues were
derived from work performed within the United States for the years ended
December 31, 1998, 1997 and 1996, respectively. Further financial information
regarding the Registrant's domestic and foreign operations is contained in Notes
4 and 10 to the consolidated financial statements, which are included within
Exhibit 13.1 to this Form 10-K. Such information is incorporated herein by
reference. Of the Registrant's domestic revenues, the majority comprises
engineering and construction work performed in the Northeast region of the U.S.
The Registrant's international revenues are derived primarily from its Energy
unit.
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 $448 million at
December 31, 1998 and $393 million at December 31, 1997. Total backlog, which
incrementally includes that portion of contract value for which options are
still to be exercised (unfunded backlog), was $735 million at December 31, 1998
and $649 million at December 31, 1997. With reference to the Registrant's
restructuring announced in April 1999, funded backlog related to the businesses
that will be continued by the Registrant was $300 million and $252 million, and
total backlog was $587 million and $508 million, as of year-end 1998 and 1997,
respectively.
There is not necessarily a direct 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, which are included in unfunded
backlog, have generally been exercised. Funded backlog generally is highest
during the last quarter of the Registrant's fiscal year because that corresponds
to the first quarter of the U.S. government's fiscal year, which is when many
government contract renewals occur.
SIGNIFICANT CUSTOMERS
- ---------------------
Contracts with various branches of the U.S. government accounted for 27%, 24%
and 23% of the Registrant's total contract revenues for the years ended December
31, 1998, 1997 and 1996, respectively. In addition, an individual Buildings unit
construction contract with Universal City Development Partners accounted for
11.5% of the Registrant's total contract revenues in 1998. Further financial
information regarding this contract is contained in Note 2 to the consolidated
financial statements, which are included within Exhibit 13.1 to this Form 10-K.
Such information is incorporated herein by reference. No individual contract
accounted for more than 10% of the Registrant's total contract revenues in 1997
or 1996.
COMPETITIVE CONDITIONS
- ----------------------
The Registrant's business is highly competitive with respect to all principal
services it offers. Baker competes with numerous firms that 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 process,
subject to the contractors' qualifications and experience. The Baker business
units employ extensive cost estimating, scheduling and other techniques for the
preparation of these competitive bids. Private-sector contractors compete
primarily on the bases of qualifications, quality of performance and price of
services. 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.
SEASONALITY
- -----------
Based upon the Registrant's experience, total contract revenues and net income
from engineering and construction-related services tend to be lower for the
first quarter than for 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, 1998, the Registrant employed approximately 3,824 persons,
broken down by business unit as follows:
Buildings unit-287 Environmental unit-159
Civil unit-1,472 Transportation unit-1,026
Energy unit-841 Corporate staff-39
The Registrant's employees are not represented by labor unions, with the
exception of its construction personnel which are generally covered by
collective bargaining agreements, as are certain BSSI employees in the Civil
unit. The majority of current construction-related collective bargaining
agreements do not expire until the year 2005. During 1999, several BSSI
collective bargaining agreements are scheduled for renegotiation, but no
significant issues are expected. Currently, the Registrant considers its
relationships with labor unions to be good.
Item 2. PROPERTIES
----------
The principal offices of the Registrant are located at the Airport Office Park,
410 and 420 Rouser Road, Coraopolis, Pennsylvania 15108, at which approximately
165,000 square feet of office space is leased for use by the Registrant's Civil,
Buildings, Environmental and Transportation units and, to a 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 by the Registrant's Civil unit. The Beaver building and property are
currently for sale. Upon any such sale, the Registrant would expect to either
continue leasing this building from the new owner or relocate the affected
employees to the Coraopolis area.
The Registrant leases an aggregate of approximately 466,000 square feet of
office-related floor space, including its principal offices. The space leased by
business unit is as follows:
The Buildings unit leases approximately 75,000 square feet in:
Rocky Hill, Connecticut Annapolis, Maryland
Orlando, Florida Coraopolis, Pennsylvania
Chicago, Illinois Alexandria, Virginia
The Civil unit leases approximately 150,000 square feet in:
Anchorage, Alaska Elmsford, New York
Fairbanks, Alaska Coraopolis, Pennsylvania
Phoenix, Arizona Dallas, Texas
Rocky Hill, Connecticut Salt Lake City, Utah
Annapolis, Maryland Alexandria, Virginia
Bethesda, Maryland Virginia Beach, Virginia
Jackson, Mississippi Mexico City, Mexico
Billings, Montana
The Energy unit leases approximately 30,000 square feet in:
Lafayette, Louisiana Abu Dhabi, United Arab Emirates
Houston, Texas Middlesex, United Kingdom
The Environmental unit leases approximately 46,000 square feet in:
Merrillville, Indiana Princeton, New Jersey
Annapolis, Maryland Coraopolis, Pennsylvania
The Transportation unit leases approximately 148,000 square feet in:
Birmingham, Alabama Cleveland, Ohio
Phoenix, Arizona Columbus, Ohio
Fort Smith, Arkansas Coraopolis, Pennsylvania
Rocky Hill, Connecticut Gibsonia, Pennsylvania
Tampa, Florida Harrisburg, Pennsylvania
Chicago, Illinois Horsham, Pennsylvania
Shreveport, Louisiana Alexandria, Virginia
Annapolis, Maryland Richmond, Virginia
Princeton, New Jersey Virginia Beach, Virginia
Brooklyn, New York Charleston, West Virginia
Elmsford, New York
The Corporate staff utilizes approximately 17,000 square feet of leased space in
Coraopolis and Beaver, 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, except
as discussed below, 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 Registrant currently has two significant legal proceedings outstanding. The
more significant one relates to a contract for the construction of the CityWalk
project at the Universal Studios theme park in Orlando, Florida between Baker
Mellon Stuart Construction, Inc. ("BMSCI"), a wholly-owned subsidiary of the
Registrant, and Universal City Development Partners ("UCDP"). BMSCI was
providing project-related construction services to UCDP under the contract.
During BMSCI's performance under the contract, which began in 1997, the project
suffered delays due to substantial changes in the design of the project and the
related drawings.
On March 5, 1999, UCDP terminated BMSCI's right to proceed with the project work
by alleging default. UCDP has also notified BMSCI of UCDP claims for damages
resulting from the alleged default, including the cost to complete or correct
the work, additional maintenance or operation costs, and alleged lost revenues
or other damages. UCDP simultaneously filed a lawsuit for breach of contract in
the Federal District Court in the Middle District of Florida ("Federal Court").
The Registrant will answer the complaint, or file a motion to dismiss or other
responsive pleading in the action. On March 8, 1999, BMSCI filed a lawsuit
against UCDP in the Circuit Court for the Ninth Judicial Circuit in and for
Orange County, Florida ("State Court") alleging breach of contract, wrongful
termination and other counts and seeking damages, interest, court costs and
other relief, including potential counterclaims. Discovery has not begun in
either case, although the parties are cooperating in the initial exchange of
documents for the cases. No other scheduling order or other case management
documents have been filed.
In addition, two of BMSCI's subcontractors have also filed suit against BMSCI in
connection with the project. On November 24, 1998, ADF International Inc.,
BMSCI's subcontractor for structural steel/miscellaneous metals, filed suit in
Federal Court against BMSCI and its surety seeking damages for breach of
contract relating to the project. BMSCI and its surety have answered the
complaint (and amended complaint) and BMSCI has filed a counterclaim. Discovery
in the matter is beginning, and no trial date has been set. On February 10,
1999, Martin K. Eby Construction Company, Inc., BMSCI's subcontractor for
foundations, also filed suit in Federal Court against BMSCI and its surety
seeking damages for breach of contract relating to the project. BMSCI and its
surety have answered the complaint. Discovery in the matter is beginning, and no
trial date has been set. BMSCI has held discussions with both ADF International
Inc. and Martin K. Eby Construction Company, Inc. with the intent of jointly
pursuing the subcontractors' claims and those of BMSCI against UCDP, which may
be ultimately responsible for the claims arising from the project.
Additional claims may be filed in connection with this matter. Baker and its
counsel believe that BMSCI has valid claims against UCDP and its subcontractors
and intends to defend these claims vigorously. However, an unfavorable
resolution of these matters could have a material adverse effect on the
Registrant's consolidated financial position, results of operations and cash
flow.
The other 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 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.
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 1998.
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 in the foreseeable future.
At March 31, 1999, the Registrant had 1,444 holders of its Common Stock and 659
holders of its Series B Common Stock.
Item 6. SELECTED FINANCIAL DATA
-----------------------
A summary of selected financial data for the Registrant, including each of the
last five fiscal years for the period ended December 31, 1998, 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.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
Based on the Registrant's current and long-term debt balances totaling $4.0
million at December 31, 1998, Baker has no material exposure to interest rate
risk. Less than 1% of the Registrant's total assets and total contract revenues
as of and for the year ended December 31, 1998 were denominated in British
Pounds Sterling; accordingly, the Registrant has no material exposure to foreign
currency exchange risk. These materiality assessments are based on the
assumption that either the interest rates or the foreign currency exchange rates
could change unfavorably by 10%. Based on the nature of the Registrant's
business, it has no exposure to commodity price risk. In accordance with the
foregoing, the Registrant has no interest rate swap or exchange agreements, nor
does it have any foreign currency exchange contracts.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
The consolidated financial statements, together with the report thereon of
PricewaterhouseCoopers LLP, dated April 20, 1999, and supplementary financial
information are set forth within Exhibit 13.1 to this Form 10-K. Such financial
statements and supplementary financial information are incorporated herein by
reference.
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
--------------------------------------------------
Directors and Executive Officers
The following table sets forth certain information regarding the directors of
the Registrant. Each director was elected by the Registrant's shareholders at
the 1998 Annual Meeting for a one year term to expire on the date of the next
annual meeting of shareholders or until his respective successor shall have been
elected and shall have qualified. Except as otherwise indicated, each director
has held the principal occupation listed or another executive position with the
same entity for at least the past five years.
Director Principal Occupation; Other
Director Since Directorships; Age
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Robert N. Bontempo 1997 Associate Professor of International Business
at Columbia University since July 1994;
formerly Assistant Professor of International
Business at Columbia University from July
1989 to July 1994; Fellow at the Center for
Advanced Study at Stanford University,
Summer 1992; formerly Personnel Research
Analyst at IBM Corporate Headquarters;
Age 40
William J. Copeland 1983 Retired; formerly Chairman of the Board of
the Registrant; formerly Vice Chairman of
the Board of PNC Financial Corp. and
Pittsburgh National Bank; Director or
trustee of various investment companies
affiliated with Federated Investors; Age 80
Roy V. Gavert, Jr. 1988 President and Chief Executive Officer of
Kiplivit North America, Inc. (manufacturing)
since July 1995; Managing Director of World
Class Processing, Inc.(manufacturing);
principal of the Horton Company (manufacturer
of valves for household appliances); formerly
Managing Director of Gavert Wennerholm & Co.
(venture capital); formerly Managing Director
of Eagle Capital, Inc. (investment bank and
venture capital); formerly Executive Vice
President, Westinghouse Electric Corporation;
Age 65
Charles I. Homan 1994 President and Chief Executive Officer since
October 1994; formerly Executive Vice
President from January 1990 to September
1994; formerly Senior Vice President from
April 1988 to December 1989; formerly
President of Michael Baker, Jr., Inc. (a
subsidiary) from May 1983 to September 1994;
Director of Citizens Banking Company; Age 55
Thomas D. Larson 1993 Self employed (consultant); formerly
Administrator, United States Federal Highway
Administration until January 1992; formerly
Secretary of the Pennsylvania Department of
Transportation; formerly Professor of
Engineering, The Pennsylvania State
University; Age 70
John E. Murray, Jr. 1997 President and Professor of Duquesne
University since July 1988; formerly
University Distinguished Service Professor at
University of Pittsburgh; formerly Dean of
Villanova University School of Law; formerly
Acting Dean and Professor at Duquesne
University School of Law; Director of
Federated Investors; Age 66
Richard L. Shaw 1966 Chairman of the Board; formerly Chairman of
the Board, President and Chief Executive
Officer of the Registrant from September 1993
through September 1994; formerly President
and Chief Executive Officer of the Registrant
from April 1984 to May 1992; Director of L.B.
Foster Company (manufacturing); Age 71
Konrad M. Weis 1991 Retired; formerly President and Chief
Executive Officer of Bayer USA Inc.
(chemicals, health care and imaging
technologies); Director of PNC Equity
Management Corporation, Titan
Pharmaceuticals, Inc. and Dravo Corporation;
Age 70
J. Robert White 1994 Executive Vice President, Chief Financial
Officer and Treasurer since July 1994;
formerly Assistant Director of Investor
Relations for Westinghouse Electric
Corporation from prior to 1990 through June
1994; formerly Adjunct Professor of
Accounting and Finance at the University of
Pittsburgh and Carnegie Mellon University;
Age 56
Charles I. Homan and J. Robert White are both directors and executive officers
of the Registrant. With the exception of Messrs. Homan and White, who are listed
above, the following represents a listing of executive officers of the
Registrant as of December 31, 1998:
H. James McKnight - Age 54; Senior Vice President, General Counsel and Secretary
of the Registrant since 1995. Mr. McKnight previously served as counsel to
International Technology Corporation from February 1995 through September 1995,
and was a self-employed consultant from 1992 through February 1995.
Glenn S. Burns - Age 49; Executive Vice President of the Registrant and
President of Baker Mellon Stuart Construction, Inc., a subsidiary of the
Registrant, from 1995 until his resignation in February 1999. Mr. Burns
previously served as Vice President, General Counsel and Secretary of the
Registrant from 1994 through 1995 and as Assistant General Counsel from 1991
through 1994.
Donald P. Fusilli, Jr. - Age 47; Executive Vice President of the Registrant
since 1991 and President of Baker/MO Services, Inc., a subsidiary of the
Registrant, since 1995. Mr. Fusilli previously served as General Counsel and
Secretary of the Registrant from 1986 through 1994. He has been employed by the
Registrant in various capacities since 1973.
John C. Hayward - Age 51; Executive Vice President of the Registrant since 1995
and President of Michael Baker Jr., Inc. since 1994. Mr. Hayward previously
served as Senior Vice President of Michael Baker Jr., Inc. from 1989 through
1994. He has been employed by the Registrant in various capacities since 1974.
Philip A. Shucet - Age 48; Executive Vice President of the Registrant and
President of Baker Environmental, Inc., a subsidiary of the Registrant, since
1996. Mr. Shucet previously served as Vice President of Michael Baker Jr., Inc.
from 1995 to 1996. Mr. Shucet has been employed by the Registrant in various
capacities since 1989.
Edward L. Wiley - Age 55; Executive Vice President of the Registrant since 1995
and Executive Vice President of Michael Baker Jr., Inc. since 1994. Mr. Wiley
previously served as Senior Vice President of Michael Baker Jr., Inc. from 1989
through 1994. He has been employed by the Registrant in various capacities since
1968.
Executive officers of the Registrant serve at the pleasure of the Board of
Directors and are elected by the Board or appointed annually for a term of
office extending through the election or appointment of their successors.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 (the "1934 Act") requires
the Registrant's directors and executive officers, and persons who own more than
ten percent of a registered class of the Registrant's equity securities, to file
with the Securities and Exchange Commission (the "Commission") initial reports
of ownership and reports of changes in ownership of Common Stock and other
equity securities of the Registrant. Such persons are required by Commission
regulations to furnish the Registrant with copies of all Section 16(a) forms
which they file. The Registrant believes that all such filing requirements
applicable to its executive officers and directors were complied with in 1998
except that a Form 5 filed by Philip A. Shucet, an officer of the Registrant,
was deemed to be late because it inadvertently omitted certain information.
ITEM 11. EXECUTIVE COMPENSATION
----------------------
The following table sets forth certain information regarding compensation
received by the Chief Executive Officer and the four remaining most highly
compensated executive officers of the Registrant for the last three completed
fiscal years.
Summary Compensation Table
Long-Term
Compensation
------------
Shares of
Annual Compensation Common Stock
Name and Principal ------------------- Underlying All Other
Position Year Salary Bonus Options(2) Compensation(1)
- --------------------------------------------------------------------------------
Charles I. Homan 1998 $385,300 $ -- 58,362 $12,592
President and Chief 1997 $341,600 $62,757 23,529 $12,092
Executive Officer 1996 $319,400 $54,412 12,571 $11,455
Donald P. Fusilli, Jr. 1998 $201,200 $23,022 27,480 $10,000
Executive Vice 1997 $188,200 $25,642 9,122 $ 8,700
President-Energy 1996 $180,000 $24,750 5,236 $ 8,658
John C. Hayward 1998 $195,700 $22,569 26,738 $12,592
Executive Vice 1997 $188,200 $15,643 9,122 $10,578
President- 1996 $180,000 $15,000 5,236 $ 9,267
Transportation
Edward L. Wiley 1998 $206,200 $11,068 28,161 $11,400
Executive Vice 1997 $192,300 $36,314 9,122 $10,075
President-Civil 1996 $180,000 $35,776 5,236 $ 9,351
J. Robert White 1998 $209,100 $ -- 28,664 $10,827
Executive Vice 1997 $192,300 $31,923 9,122 $ 8,030
President, Chief 1996 $180,000 $30,001 5,236 $ 9,479
Financial Officer
and Treasurer
(1) Includes matching contributions made by the Registrant under its 401(k)
plan paid on behalf of the following individuals in 1998, 1997 and 1996,
respectively: Mr. Homan, $10,000, $9,500 and $9,151; Mr. Fusilli, $10,000,
$7,254 and $7,873; Mr. Hayward, $10,000, $9,012 and $ 7,962; Mr. Wiley,
$10,000, $8,802 and $8,211; and Mr. White, $6,777, $5,438 and $7,860. Also
includes group life insurance premiums paid by the Registrant on behalf of
the following individuals in 1998, 1997 and 1996, respectively: Mr. Homan,
$2,592, $2,592 and $2,304; Mr. Fusilli, $0, $1,446 and $785; Mr. Hayward
$2,592, $1,566, and $1,305; Mr. Wiley, $1,400, $1,273 and $1,140; and Mr.
White, $4,050, $2,592 and $1,619.
(2) Stock options were granted February 27, 1996, February 27, 1997 and
February 27, 1998, under the Registrant's 1995 Stock Incentive Plan. In
addition the Registrant also granted certain performance based stock
options to the executive officers on April 23, 1998, which will vest in the
first quarter of 2001 if the Registrant achieves certain performance goals
in the year 2000.
Options Granted in 1998
Potential
Realizable Value
No. of % of Total at Assumed Annual
Shares Options Rates of Stock
Subject Granted to Price Appreciation
to Employees For Option Term
Options in Exercise Expiration ------------------
Name Granted 1998 Price/Share Date 5% 10%
- --------------------------------------------------------------------------------
Charles I. Homan 18,361(1) 4.6% $ 9.5313 27-Feb-08 $110,059 $278,912
40,001(2) 10.1% $10.1250 23-Apr-08 $254,709 $645,482
Donald P. Fusilli, 6,977(1) 1.8% $ 9.5313 27-Feb-08 $ 41,821 $105,984
Jr. 20,503(2) 5.2% $10.1250 23-Apr-08 $130,554 $330,850
John C. Hayward 6,977(1) 1.8% $ 9.5313 27-Feb-08 $ 41,821 $105,984
19,761(2) 5.0% $10.1250 23-Apr-08 $125,829 $318,876
Edward L. Wiley 7,161(1) 1.8% $ 9.5313 27-Feb-08 $ 42,924 $108,779
21,000(2) 5.3% $10.1250 23-Apr-08 $133,719 $338,869
J. Robert White 7,163(1) 1.8% $ 9.5313 27-Feb-08 $ 42,936 $108,809
21,501(2) 5.4% $10.1250 23-Apr-08 $136,909 $346,954
(1) All options were granted pursuant to the 1995 Stock Incentive Plan and
vest in four equal annual installments beginning on the date of grant. The
dollar amounts under the potential realizable value columns are the result
of calculations at assumed annually compounded rates of stock price
appreciation over the ten-year life of the options in accordance with the
proxy regulations of the Securities and Exchange Commission, and are not
intended to forecast actual future appreciation, if any, of the
Registrant's Common Stock. The actual value, if any, an executive may
realize will depend on the excess of the market price of the shares over
the exercise price on the date the option is exercised.
(2) These options were granted April 23, 1998, pursuant to the 1995 Stock
Incentive Plan. The options become fully exercisable on April 23, 2006,
but will vest in the first quarter of 2001 if certain performance goals
are satisfied for the year 2000.
Aggregated Option Exercises in 1998
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Shares Options at Options at
Acquired December 31, 1998 December 31, 1998
On Value Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable(1)
- --------------------------------------------------------------------------------
Charles I. Homan -- -- 53,282/68,680 $211,633/$51,986
Donald P. Fusilli, Jr. -- -- 22,832/31,606 $ 92,591/$20,578
John C. Hayward -- -- 22,132/30,864 $ 89,266/$20,578
Edward L. Wiley -- -- 21,828/32,241 $ 87,614/$20,608
J. Robert White 15,477 $67,525 6,351/32,742 $ 13,362/$20,608
(1) Based on the exercise price and fair market value of the Common Stock as
of December 31, 1998.
Compensation of Directors
Compensation for non-employee directors is as follows: Annual retainer--$15,000;
Attendance at each regularly scheduled or special meeting of the Board of
Directors--$1,000; Attendance at a Board of Directors committee meeting--$500;
Telephonic attendance at a Board of Directors or committee meeting--$100;
Additional annual retainer for chairman of the Board of Directors--$5,000; and
Additional annual retainer for committee chairmen--$2,500.
Notwithstanding anything to the contrary set forth in any of the Registrant's
previous filings under the Securities Act of 1933, as amended, or the Securities
and Exchange Act of 1934, as amended, that might incorporate future filings,
including this Form 10-K in whole or in part, the following report and the Stock
Performance Graphs shall not be incorporated by reference into any such filings.
Report of the Compensation Committee
Introduction
Decisions regarding compensation of the Registrant's executives generally are
made by a three-member Compensation Committee of the Board.
All decisions of the Compensation Committee relating to compensation of the
Registrant's executive officers are reviewed and approved by the full Board. Set
forth below is a report submitted by Messrs. Larson, Murray and Weis in their
capacity as the Board's Compensation Committee addressing the Registrant's
compensation policies for 1998 as they affected executive officers of the
Registrant, including Mr. Homan, the President and Chief Executive Officer, and
Messrs. Fusilli, Hayward, Wiley and White, the four executive officers other
than Mr. Homan who were, for 1998, the Registrant's most highly paid executive
officers.
Compensation Philosophy
The Registrant applies a consistent philosophy toward compensation based upon
the following objectives: (i) to attract and retain executive officers and other
key employees of outstanding ability, and to motivate all employees to perform
to the full extent of their abilities; (ii) to ensure that pay is competitive
with other leading companies in the Registrant's industry; (iii) to reward
executive officers for corporate, group and individual performance; and (iv) to
ensure that total compensation to the executive officers as a group is not
disproportionate when compared to the Registrant's total employee population.
Compensation
The Compensation Committee retains the services of Hewitt Associates, a
compensation consulting firm, to assist the Committee in connection with
performance of its duties. Hewitt Associates provides ongoing advice to the
Committee with respect to the reasonableness of compensation paid to executive
officers of the Registrant.
The Registrant applies a compensation program consisting of base salary and
annual incentive compensation. In determining Mr. Homan's salary as President
and Chief Executive Officer and the remaining executive officers' base salaries
for 1998, the Compensation Committee reviewed the relationship of his
compensation to that of other executive officers of the Registrant and, the
Registrant's current and projected growth and profitability performance.
Incentive compensation for Mr. Homan and the other executive officers is
determined based on the achievement of such predetermined corporate performance
goals as profitability and earnings per share. Each such officer's annual
performance is measured by reviewing contribution to overhead and profit, new
work added, cash flow return on investment, human resources development and
continuous improvement management goals.
The Chief Executive Officer recommends to the Compensation Committee salary
adjustments for executive officers. The committee reviews these recommendations
in light of the above factors and with reference to the Hewitt Report and the
executive salary studies described above. A final comparison is made to verify
that the total percentage increase in compensation paid to the executive
officers as a group is not disproportionate to the percentage increase
applicable to other Registrant employee groups.
All executive employees participate in an annual incentive program. The
components of the plan are based upon corporate and individual performance.
Measures of corporate performance may include, but are not limited to, one or
more financial measures such as earnings per share and profitability. Individual
performance is based on the performance rating received as part of the annual
Performance Management Process. The Performance Management Process is a program
which emphasizes performance planning (management/employee goal setting),
progress reviews and management feedback to employees. Primary objectives of the
program are to enhance the professional development of the individual employee
and to align individual performance goals with those of the Registrant. The
rating is based upon factors agreed to by the Chief Executive Officer and the
individual executive employees.
1995 Stock Incentive Plan
On December 15, 1994, the Board of Directors approved the 1995 Stock Incentive
Plan (the "Option Plan"), which was approved by the shareholders at the 1995
Annual Meeting and provides long-term incentive compensation to eligible
employees. The Compensation Committee retains the services of Buck Consultants
to assist the Committee in evaluating the Option Plan relative to practices of
other publicly-traded companies engaging in one or more lines of business
comparable to those of the Registrant.
Stock options are awarded based on the Compensation Committee's judgment
concerning the position and responsibilities of the employee being considered,
the nature and value of his or her services, his or her current contribution to
the success of the Registrant, and any other factors which the Compensation
Committee may deem relevant. Stock option awards tie the interests of employees
to the long-term performance of the Registrant, and provide an effective
incentive for employees to create shareholder value over the long term since the
full benefit of the compensation package cannot be realized unless an
appreciation in the Registrant's stock price occurs over a number of years.
In 1998, the Compensation Committee reviewed the Option Plan and, based on its
review, recommended to the Board of Directors that the Option Plan be amended to
increase by 1,000,000 the number of shares available for grants thereunder and
to increase the maximum number of shares as to which options may be granted to
any one employee during any calendar year from 30,000 to 100,000 shares. The
Board of Directors approved the amendment on February 27, 1998, and the
Shareholders adopted the amendment on April 22, 1998 at the 1998 Annual Meeting
of Shareholders. The Compensation Committee believes these changes were
desirable in order to ensure that there are sufficient options available under
the Option Plan to continue to motivate and reward employees and to ensure that
the grants are significant enough to provide meaningful inducement and reward to
key employees.
In addition, on April 23, 1998, the Compensation Committee adopted a proposal to
award a one-time grant of stock options to certain employees, the vesting of
which will be based upon the Registrant achieving earnings for the year ended
December 31, 2000 (the "Fiscal Year 2000") equal to or in excess of $1.25 per
share of Common Stock (the "Vision 2000 Options"). The Vision 2000 Options will
vest and may be exercisable immediately upon the determination of the Board of
Directors, based on the audited financial results of the Registrant for the
Fiscal Year 2000, that the Registrant has achieved earnings of at least $1.25
per share for the Fiscal Year 2000. In the event that the Registrant does not
achieve such earnings, the Vision 2000 Options will become exercisable eight
years from the date of the grant. The exercise price of the Vision 2000 Options
will be the fair market value of the Common Stock on the date of the grant. The
Vision 2000 Options were granted on April 23, 1998, and have an exercise price
equal to $10.125.
1996 Nonemployee Directors' Stock Incentive Plan
On February 27, 1996, the Board of Directors approved the 1996 Nonemployee
Directors' Stock Incentive Plan, which was approved by the shareholders at the
1996 Annual Meeting. This plan provides long-term incentive compensation to
eligible directors. Under this plan, each member of the Board of Directors who
is not an employee of the Registrant or any of its subsidiaries is granted 500
restricted shares and an option to purchase 1,000 shares of Common Stock on the
first business day following each Annual Meeting of Shareholders.
This report is submitted by the Compensation Committee of the Registrant's Board
of Directors.
Thomas D. Larson John E. Murray, Jr. Konrad M. Weis
Compensation Committee Interlocks and Insider Participants
The members of the Compensation Committee in 1998, Thomas D. Larson, John E.
Murray, Jr. and Konrad M. Weis, are nonemployee directors. During 1998, no
executive officer of the Registrant served on a compensation committee (or other
board committee performing equivalent functions) or on the board of directors of
any entity (other than the Registrant's Board of Directors) related to any
member of the Registrant's Board of Directors.
Stock Performance Graph
The graph below compares for the five-year period commencing December 31, 1993,
the yearly percentage change in the cumulative total shareholder return on the
Registrant's Common Stock with the cumulative total return of the S&P 500 Stock
Index, the Russell 2000 Stock Index and with a peer group identified by the
Registrant to best approximate the Registrant's diverse business groups.
The peer group was selected to include publicly-traded companies engaging in one
or more of the Registrant's lines of business: engineering, construction and
operations and maintenance.
The peer group consists of the following companies: Aqua Alliance, Inc. (f/k/a
Air and Water Technologies Corp.), Dames & Moore Group, Granite Construction,
Inc., Harding Lawson Associates Group, Inc., ICF Kaiser International, Inc.,
Jacobs Engineering Group, Inc., Morrison Knudsen Corp., Perini Corp., Stone &
Webster, Inc., STV Group, Inc., Tetra Tech, Inc., Turner Corp., URS Corp., Roy
F. Weston, Inc. [Note: Guy F. Atkinson Registrant of California, a member of the
peer group in previous years, ceased operations during 1998.]
The following five year total shareholder return chart compares the Registrant's
total shareholder return on the Registrant's Common Stock with that of the peer
group used for the year ended December 31, 1998.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
Among Michael Baker Corporation, S&P 500 Index,
Russell 2000 Index and The Peer Group*
Cumulative Total Return
- --------------------------------------------------------------------------------
12/93 12/94 12/95 12/96 12/97 12/98
- --------------------------------------------------------------------------------
Michael Baker Corporation 100 34 45 58 89 89
Peer Group 100 80 97 96 111 152
S&P 500 100 101 139 171 229 294
Russell 2000 100 98 126 147 180 179
* Assumes $100 invested at the close of trading on December 31, 1993 in the
Registrant's Common Stock, the S&P 500 Index, the Russell 2000 Index, and
the peer group and assumes the reinvestment of dividends.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
The following table sets forth certain information as to the beneficial
ownership of the Registrant's Common Stock and Series B Common Stock held by
each person known by the Board of Directors of the Registrant to own
beneficially more than 5% of the outstanding shares of Common Stock or Series B
Common Stock of the Registrant, by each director, by each of the executive
officers named in the Summary Compensation Table (the "Summary Compensation
Table"), and by all directors and executive officers as a group. The Michael
Baker Corporation Employee Stock Ownership Plan and Trust (the "ESOP") holds
72.4% of the voting power of the Registrant's outstanding Common Capital Stock.
Information contained in this Item 12 is as of the most recent practicable date,
which is December 31, 1998, for beneficial owners of more than 5%, March 31,
1999 as to shares held by the ESOP, and as to the directors and executive
officers. The information in the table concerning beneficial ownership is based
upon information furnished to the Registrant by or on behalf of the persons
named in the table.
Common Stock Series B Common Stock
------------------------- ----------------------
Number of Number of
Shares and Shares and
Nature of Nature of
Beneficial Beneficial
Name Ownership(1) Percent Ownership(1) Percent
- --------------------------------------------------------------------------------
Michael Baker Corporation 2,475,158 34.6 1,223,475 93.0
Employee Stock Ownership
Plan and Trust(1)
Michael Baker
Corporation
P.O. Box 12259
Pittsburgh, PA 15231-0259
Goldman Sachs(2) 882,800 12.4 None --
85 Broad Street
New York, New York 10004
Lord Abbett & Co. 787,690 11.0 None --
767 Fifth Avenue
New York, New York 10153
Dimensional Fund Advisors 456,114 6.4 None --
Inc.(3)
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
Robert N. Bontempo 3,000(7) * None --
William J. Copeland 5,500(7) * None --
Donald P. Fusilli, Jr. 40,581(5)(7) * 8,169(6) *
Roy V. Gavert, Jr. 4,500(7) * None --
John C. Hayward 39,907(5)(7) * 9,934(6) *
Charles I. Homan 95,460(4)(5)(7) 1.3 21,234(4)(6) 1.6
Thomas D. Larson 6,425(4)(7) * None --
John E. Murray, Jr. 3,000(7) * None --
Richard L. Shaw 12,705(7) * None --
Konrad M. Weis 12,000(4)(7) * None --
J. Robert White 17,985(5)(7) * 1,532(6) --
Edward L. Wiley 48,654(4)(5)(7) * 15,349(6) 1.2
All Directors and 352,639(4)(5)(7) 4.9 62,978(6) 4.8
Executive Officers as a group
(17) persons
* Less than 1%.
(1) Under regulations of the Securities and Exchange Commission, a person who
has or shares voting or investment power with respect to a security is
considered a beneficial owner of the security. Voting power is the power to
vote or direct the voting of shares, and investment power is the power to
dispose of or direct the disposition of shares. Unless otherwise indicated
in the other footnotes below, each person has sole voting power and sole
investment power as to all shares listed opposite his name. The ESOP
requires the trustee to vote the shares held by the trust in accordance
with the instructions from the ESOP participants for all shares allocated
to such participants' accounts. Allocated shares for which no such
instructions are given and shares not allocated to the account of any
employee are voted by the trustee in the same proportion as the votes for
which participant instructions are given. In the case of a tender offer,
allocated shares for which no instructions are given are not voted or
tendered, and shares not allocated to the account of any employee are voted
by the trustee in the same proportion as the votes for which participant
instructions are given.
(2) Shares held as a group by Goldman Sachs & Co. and the Goldman Sachs Group,
L.P., each of which disclaim beneficial ownership of all such shares. This
information has been taken from Schedule 13G dated as of December 31, 1998.
(3) Dimensional Fund Advisors Inc., ("Dimensional") an investment advisor
registered under Section 203 of the Investment Advisors Act of 1940,
furnishes investment advice to four investment companies registered under
the Investment Registrant Act of 1940, and serves as investment manager to
certain other investment vehicles, including commingled group trusts.
(These investment companies and investment vehicles are the "Portfolios").
In its role as investment advisor and investment manager, Dimensional
possesses both voting and investment power over the securities of the
Issuer described in this schedule that are owned by the Portfolios. All
securities reported in this schedule are owned by the Portfolios, and
Dimensional disclaims beneficial ownership of such securities.
(4) Some or all of such shares are jointly owned by such person and his spouse.
Voting and investment power as to such shares is shared by the nominee and
his spouse.
(5) Includes the number of shares of Common Stock indicated for each of the
following persons or group which are allocated to their respective accounts
as participants in the ESOP and as to which they are entitled to give
binding voting instructions to the trustee of the ESOP: Mr. Fusilli (12,416
shares); Mr. Hayward (12,442 shares); Mr. Homan (23,485 shares); Mr. White
(6,255 shares); Mr. Wiley (18,447 shares); and directors and executive
officers as a group (87,996 shares). ESOP holdings have been rounded to the
nearest full share.
(6) Includes the number of shares of Series B Common Stock indicated for each
of the following persons or group which are allocated to their respective
accounts as participants in the ESOP and as to which they are entitled to
give binding voting instructions to the trustee of the ESOP: Mr. Fusilli
(8,169 shares); Mr. Hayward (9,934 shares) Mr. Homan (20,156 shares); Mr.
White (1,532 shares); Mr. Wiley (15,349 shares); and directors and
executive officers as a group (61,900 shares). ESOP holdings have been
rounded to the nearest full share.
(7) Includes indicated number of shares of Common Stock issuable pursuant to
stock options which may be exercised within 60 days of the date of this
Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
The Registrant entered into an employment agreement with Richard L. Shaw
(formerly President and Chief Executive Officer of the Registrant) in April
1988, which agreement was supplemented in March 1992, October 1994 and February
1998. At the time of his retirement as of the end of September 1994, Mr. Shaw
was being compensated at an annual salary of approximately $400,000. The
agreement provides for Mr. Shaw's performance of consulting services to the
Registrant until May 31, 2000, with annual compensation equal to 20% of his
salary prior to retirement. In addition, during this period, the Registrant will
cover costs of health insurance, reimburse actual out-of-pocket expenses and
maintain a life insurance policy for Mr. Shaw. This agreement also provides for
a supplemental retirement benefit of $2,500 per month commencing after the
expiration of such period.
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, 1998 and 1997
Consolidated Statement of Income for the three years ended
December 31, 1998
Consolidated Statement of Cash Flows for the three years ended
December 31, 1998
Consolidated Statement of Shareholders' Investment for the three years
ended December 31, 1998
Notes to Consolidated Financial Statements
Report of Independent Accountants
(a)(2) All financial statement schedules are omitted because they are either 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:
EXHIBIT NO. DESCRIPTION
- ----------- -----------
3.1 Articles of Incorporation of the Registrant, as amended, filed
as Exhibit 3.1 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1993, and incorporated
herein by reference.
3.2 By-laws of the Registrant, as amended, filed as Exhibit 3.2 to
the Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994, and incorporated herein by reference.
10.1 1998 Incentive Compensation Plan of Michael Baker Corporation,
filed herewith.
10.2 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.
10.2(a) Supplemental Employment Agreement No. 3 dated as of June 1,
1995 and Supplemental Agreement No. 4 dated as of March 1,
1998, by and between the Registrant and Richard L. Shaw, filed
as Exhibit 10.2(a) to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1997, and incorporated
herein by reference.
10.3 Loan Agreement by and among Michael Baker Corporation and
Subsidiaries and Mellon Bank, N.A. dated as of June 12, 1997,
filed as Exhibit 10.1 to the Registrant's Quarterly Report on
Form 10-Q for the period ended June 30, 1997, and incorporated
herein by reference.
10.3(a) First Amendment to Loan Agreement by and among Michael Baker
Corporation and Subsidiaries and Mellon Bank, N.A. dated as of
July 24, 1998, filed as Exhibit 10.1 to the Registrant's
Quarterly Report on Form 10-Q for the period ended September
30, 1998, and incorporated herein by reference.
10.4 Michael Baker Corporation 1995 Stock Incentive Plan amended
effective April 23, 1998, filed herewith.
10.5 Michael Baker Corporation 1996 Nonemployee Directors' Stock
Incentive Plan, filed as Exhibit A to the Registrant's
definitive Proxy Statement with respect to its 1996 Annual
Meeting of Shareholders, and incorporated herein by reference.
13.1 Selected Financial Data, Management's Discussion and
Analysis of Financial Condition and Results of
Operations, Consolidated Financial Statements as of
December 31, 1998 and for the three years then ended, Report
of Independent Accountants, and Supplemental Financial
Information, filed herewith and to be included as the
Financial Section of the Annual Report to Shareholders for the
year ended December 31, 1998.
21.1 Subsidiaries of the Registrant, filed herewith.
23.1 Consent of Independent Accountants, filed herewith.
(b) The Registrant filed no reports on Form 8-K during the fourth
quarter of 1998.
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: April 29, 1999 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:
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Richard L. Shaw Chairman of the Board April 29, 1999
- ------------------------------
Richard L. Shaw
/s/ Charles I. Homan Director, President April 29, 1999
- ------------------------------ and Chief Executive
Charles I. Homan Officer
/s/ J. Robert White Director, Executive Vice April 29, 1999
- ------------------------------ President, Chief Financial
J. Robert White Officer and Treasurer
(Principal Financial and
Accounting Officer)
/s/ Robert N. Bontempo Director April 29, 1999
- ------------------------------
Robert N. Bontempo
Director April 29, 1999
- ------------------------------
William J. Copeland
/s/ Roy V. Gavert, Jr. Director April 29, 1999
- ------------------------------
Roy V. Gavert, Jr.
/s/ Thomas D. Larson Director April 29, 1999
- ------------------------------
Thomas D. Larson
/s/ John E. Murray, Jr. Director April 29, 1999
- ------------------------------
John E. Murray, Jr.
/s/ Konrad M. Weis Director April 29, 1999
- ------------------------------
Konrad M. Weis