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UNITED STATES
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, 2004
COMMISSION FILE NUMBER 1-6627
MICHAEL BAKER CORPORATION
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(Exact name of Company 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.)
AIRSIDE BUSINESS PARK,
100 AIRSIDE DRIVE, MOON TOWNSHIP, PA 15108
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(Address of principal executive offices) (Zip Code)
COMPANY'S TELEPHONE NUMBER, INCLUDING AREA CODE: (412) 269-6300
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of Class Name of each exchange on which registered
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COMMON STOCK, PAR VALUE $1 PER SHARE AMERICAN STOCK EXCHANGE
Indicate by check mark whether the Company (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 Company 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 Company'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.
-----
Indicate by check mark whether the Company is an accelerated filer (as defined
in Exchange Act Rule 12b-2). Yes X No
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The aggregate market value of Common Stock held by non-affiliates as of June 30,
2004 (the last business day of the Company's most recently completed second
fiscal quarter) was $89.0 million. This amount is based on the closing price of
the Company's Common Stock on the American Stock Exchange for that date. Shares
of Common Stock held by executive officers and directors of the Company and by
the Company's Employee Stock Ownership Plan are not included in the computation.
As of March 1, 2005, the Company had 8,519,134 outstanding shares of Common
Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Parts of Form 10-K into which
Document Document is incorporated
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Financial Section of Annual Report to
Shareholders for the year ended
December 31, 2004 I, II
Proxy Statement to be distributed in
connection with the 2005 Annual Meeting
of Shareholders III
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 Company. Forward-looking statements are subject to market, operating and
economic risks and uncertainties that may cause the Company'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; changes in
industry trends; changes in the regulatory environment; changes in the Company's
relationship and/or contracts with FEMA; changes in anticipated levels of
government spending on infrastructure, including TEA-21; changes in loan
relationships or sources of financing; changes in management; changes in
information systems; and costs to comply with the requirements of the
Sarbanes-Oxley Act of 2002. 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
GENERAL
Michael Baker Corporation ("Baker" or "the Company") was founded in 1940 and
organized as a Pennsylvania corporation in 1946. Today, through its operating
subsidiaries, Baker provides engineering and energy expertise for public and
private sector clients worldwide.
Information regarding the amounts of revenues, income from operations before
Corporate overhead allocations, total assets, capital expenditures, and
depreciation and amortization expense attributable to the Company's reportable
segments is contained in Note 5 to the consolidated financial statements, which
is included within Exhibit 13.1 to this Form 10-K. Such information is
incorporated herein by reference.
According to the annual listings published in 2004 by Engineering News Record
magazine, based on total engineering revenues, Baker ranked 37th among the top
500 U.S. design firms; 16th among "pure design" firms; 17th among water supply
firms; 19th among site assessment and compliance firms; 14th among
transportation design firms, including 15th in highways, 12th in bridges and
23rd in airports; 39th among construction management-for-fee firms; 14th among
telecommunications firms, including 24th in transmission lines and aqueducts;
64th among environmental firms; and 69th among global design firms. These
rankings were based on 2003 revenues. In addition, the Company believes that it
is one of the largest providers of outsourced operations and maintenance
services to the energy industry in the Gulf of Mexico.
STRATEGY
The Company's strategy is based on four concepts: maximizing growth, optimizing
profitability, innovating and leveraging.
Maximizing growth - The Company seeks to maximize growth by securing larger and
more complex projects and program management opportunities in both the
Engineering and Energy service lines in the United States and abroad. The
addition of the Multi-hazard flood mapping and modernization program ("MHFMM")
with the Federal Emergency Management Agency ("FEMA") is a prime example of the
Company's execution of this concept.
Optimizing profitability - The Company seeks to optimize its profitability
through long-term, performance based contracting vehicles. This strategy is
evident in the Company's recent wins, including contracts such as the Base
Realignment and Closure Act project in Honey Lake, California for the
Engineering segment and the onshore managed services contracts for the Energy
segment.
Innovating - The Company strives to constantly and consistently innovate ways to
deliver services to clients. It utilizes 3-D and Virtual Reality software
applications to provide training services to its Energy and Engineering clients.
Leveraging - The Company strives to leverage its expertise in the Engineering
and Energy segments to enhance its competitive position with customers. The
Company's expertise in the areas of recruitment, training, workforce
nationalization and applied technologies, which were once only Energy areas of
expertise, is now providing valuable opportunities to clients within the
Engineering segment.
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BUSINESS SEGMENTS
The Company's business segments have been determined based on how executive
management makes resource decisions and assesses its performance. The Company's
three reportable segments are Engineering, Energy and Non-Core. Information
regarding these business segments is contained in Management's Discussion and
Analysis of Financial Condition and Results of Operations, which is included
within Exhibit 13.1 to this Form 10-K. Such information is incorporated herein
by reference.
The following briefly describes the Company's business segments:
Engineering - The Engineering segment provides a variety of design and related
consulting services, principally in the U.S. Such services include program
management, design-build, construction management, consulting, planning,
surveying, mapping, geographic information systems, architectural and interior
design, construction inspection, constructability reviews, site assessment and
restoration, strategic regulatory analysis, regulatory compliance, and advanced
management systems. The Engineering segment has designed a wide range of
projects, such as highways, bridges, airports, busways, corporate headquarters,
data centers, correctional facilities and educational facilities. This segment
also provides services in the water/wastewater, pipeline, emergency and
consequence management, resource management, and telecommunications markets.
This segment is susceptible to upward and downward fluctuations in federal and
state government spending.
The Company's transportation services have benefited from the U.S. government's
federal transportation infrastructure legislation (TEA-21) in recent years.
Additionally, the Company has benefited from increased federal government
spending in the Departments of Defense and Homeland Security, including FEMA.
The Company partners with other contractors to pursue selected design-build
contracts, which continue to be a growing project delivery method within the
transportation and civil infrastructure markets.
Energy - The Energy segment provides a full range of services to operating
energy production facilities worldwide. This segment's comprehensive services
range from complete outsourcing solutions to specific services such as training,
personnel recruitment, pre-operations engineering, maintenance management
systems, field operations and maintenance, procurement and supply chain
management. The Energy segment serves both major and smaller independent oil and
gas producing companies, but does not pursue exploration opportunities for its
own account.
One delivery method employed by the segment is Managed Services, an operating
model that has broadened the Energy segment's service offerings in the offshore
Gulf of Mexico and the onshore United States. This model has the potential to
enhance both the Company's and its clients' operating margins. Onshore, the
Company has taken over full managerial and administrative responsibility for
clients' producing properties. Offshore, the segment has organized a network of
marine vessels, helicopters, shore bases, information technology, safety and
compliance systems, specialists, and a leadership team that manages the sharing
of resources, thereby resulting in improved profitability for participants.
Presently, the Company is working under Managed Services agreements with oil and
gas producers in the Gulf of Mexico, the Panhandle of Texas, and in the Powder
River Basin in Wyoming and Montana.
The segment also operates in over a dozen foreign countries, with major projects
in Venezuela, Thailand, Trinidad, Algeria and Nigeria. The local political
environment in certain of these countries subjects the Company's related trade
receivables, due from subsidiaries of major oil companies, to lengthy collection
delays. Based upon past experience with these clients, after giving effect to
the Company's related
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allowance for doubtful accounts balance at December 31, 2004, management
believes that these receivable balances will be fully collectible.
Non-Core - The Non-Core segment includes activity associated with the former
buildings and transportation construction operations that are being wound down
and the former Baker Support Services, Inc. subsidiary, which was sold in 2000.
This segment has no active operations or employees.
DOMESTIC AND FOREIGN OPERATIONS
For the years ended December 31, 2004, 2003 and 2002, approximately 88%, 87% and
88% of the Company's total contract revenues, respectively, were derived from
work performed for U.S.-based clients within the United States. Further
financial information regarding the Company's domestic and foreign operations is
contained in Notes 5 and 12 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 Company's domestic revenues, the majority comprises
engineering work performed in the Mid-Atlantic region of the U.S. and operations
and maintenance work performed by its Energy segment in Texas, Louisiana,
Wyoming, Montana and the Gulf of Mexico. The Company's international revenues
are derived primarily from its Energy segment.
BACKLOG
(In millions) DECEMBER 31, 2004 December 31, 2003
- ------------- ----------------- -----------------
Engineering $1,115.2 $470.7
Energy 336.5 250.0
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Total $1,451.7 $720.7
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The Company's backlog consists of that portion of uncompleted work that is
represented by signed or executed contracts. Most of the Company's contracts
with the Federal government and other clients may be terminated at will, or
option years may not be exercised; therefore, no assurance can be given that all
backlog will be realized. Of the Company's total backlog at December 31, 2004,
amounts totaling $241 million and $160 million are expected to be recognized as
revenue within the next year by the Engineering and Energy segments,
respectively.
Among the more significant new work added during 2004 was a new $750 million
contract in the Engineering segment to assist FEMA in conducting a large-scale
overhaul of the nation's flood hazard maps. The MHFMM Program includes data
collection and analysis, map production, product delivery, and effective program
management; and seeks to produce digital flood hazard data, provide access to
flood hazard data and maps via the Internet, and implement a nationwide
state-of-the-art infrastructure that enables all-hazard mapping. For Year 1
program objectives, FEMA awarded Baker Core Task Order 001 with a total
cost-plus-award fee value of $107 million and a performance period of March 11,
2004 to April 1, 2005. Baker is currently negotiating a Core Task Order 001
modification to extend the performance period and provide additional funding.
Thereafter, Baker expects that FEMA will be willing to negotiate and enter into
a new Core Task Order for Year 2 program objectives. Due to the task order
structure of the contract, realization of the timing and amount of the original
contract value of $750 million is difficult to predict. In the Energy segment,
backlog increased significantly during 2004 due to the third quarter addition of
a new $50 million contract to operate, maintain and optimize the performance of
oil and gas producing properties in the Gulf of Mexico. Several other
multi-million dollar Energy contracts also increased the Company's backlog
during 2004. These contracts include the provision of
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operations and maintenance services for a liquified natural gas facility in
Nigeria and manpower services for facility operators in Venezuela. Oil and gas
industry merger, acquisition and divestiture programs affecting the Company's
clients can result in increases or decreases to the Company's Energy backlog.
There is no direct correlation between the Company's total backlog amounts and
its annual total contract revenues. Further, the Company's backlog amounts do
not represent a guarantee of future revenues or results of operations. 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 Company'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
Company's experience has been that these optional contract renewals have
generally been exercised. Engineering backlog generally is highest during the
last quarter of the Company'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 26%, 17%
and 14% of the Company's total contract revenues for the years ended December
31, 2004, 2003 and 2002, respectively. The Company's contracts with FEMA
accounted for approximately 15% of the Company's revenues in 2004. No individual
customer accounted for more than 10% of the Company's total contract revenues in
2003 or 2002.
COMPETITIVE CONDITIONS
The Company's business is highly competitive with respect to all principal
services it offers. Baker's Engineering and Energy segments compete with
numerous public and private firms that provide some or all of the services
provided by the Company. In the Engineering segment, the Company's competitors
range from large national firms such as Parsons Brinkerhoff Inc., CH2M Hill
Companies, PBS&J, URS Corporation and CDM to a vast number of smaller, more
localized firms. In the Energy segment, the Company competes with units of the
Wood Group and Offshore Logistics, Inc.
The competitive conditions in the Company'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 Company's business segments employ cost estimating, scheduling
and other techniques for the preparation of these competitive bids.
Private-sector contractors compete primarily on the basis of qualifications,
quality of performance and price of services. Most private and public-sector
contracts for professional services are awarded on a negotiated basis.
The Company 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, local geographic presence and
cost of service. The Company believes that it is well positioned to compete
effectively by emphasizing the quality of services it offers and its widely
known reputation in providing professional engineering services in the
Engineering segment and technical and operations and maintenance services in the
Energy segment. The Company is also dependent upon the availability of staff and
its ability to recruit.
SEASONALITY
Based upon the Company's experience, the Engineering segment's total contract
revenues and net income have historically been lower for the first fiscal
quarter than for the remaining quarters due to the effect of
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winter weather conditions, particularly in the Mid-Atlantic and Midwest regions
of the United States. Typically, these seasonal weather conditions unfavorably
impact the Company's offering of construction management services.
PERSONNEL
At December 31, 2004, the Company had 4,228 total employees. Of this year-end
2004 total, the Engineering segment had 2,201 employees, the Energy segment had
1,981 employees, and the Company's Corporate staff included 46 employees.
Certain employees of the Company's 53%-owned Nigerian subsidiary are subject to
an in-country collective bargaining agreement. The remainder of the Company's
workforce is not subject to collective bargaining arrangements. Management
believes that its relations with its employees are good.
AVAILABLE INFORMATION
The Company's Internet website address is www.mbakercorp.com. The Company posts
its annual reports on Form 10-K, its quarterly reports on Form 10-Q, its current
reports on Form 8-K, and all amendments to those reports to its website as soon
as reasonably practicable after such reports are electronically filed with the
Securities and Exchange Commission. These reports and any amendments to them are
also available at the website of the Securities and Exchange Commission,
http://www.sec.gov. The Company also posts all press releases, earnings
releases, the Code of Ethics for Senior Officers and the Charters related to the
Governance and Nominating Committee, Audit Committee and Compensation Committee
to its website. The Company's website and the information contained on it are
not incorporated by reference into this Form 10-K.
ITEM 2. PROPERTIES
The Company's headquarters offices were relocated in January 2003 to Moon
Township, Pennsylvania, at which location approximately 117,000 square feet of
office space is leased for use by the Company's Engineering segment and its
Corporate staff. The Company's Engineering and Energy segments primarily occupy
leased office space in stand-alone or multi-tenant buildings at costs based on
prevailing market prices at lease inception. Aside from its Moon Township
offices, the Company's Engineering segment also has a major leased office in
Alexandria, VA, and leases other office space totaling approximately 427,000
square feet in the U.S. and Mexico. Likewise, the Company's Energy segment has
its principal offices in Houston, TX, and leases office space totaling
approximately 102,000 square feet in the U.S. and abroad. These leases expire at
various dates through the year 2013.
The Company also owns a 75,000 square foot office building located in Beaver,
Pennsylvania, which is situated on approximately 230 acres and utilized by the
Company's Engineering segment. The Company believes that its current facilities
will be adequate for the operation of its business during the next year, and
that suitable additional office space is readily available to accommodate any
needs that may arise.
ITEM 3. LEGAL PROCEEDINGS
In July 2001, the Company announced that it had become aware that certain
activities related to the operations of a 53% owned Nigerian subsidiary acquired
in 1993 were the subject of an inquiry by the U.S. Department of Justice. There
has been no activity in this matter since 2002. At this time, the Company does
not expect that any remaining costs associated with this matter will have a
material adverse effect on its consolidated financial statements.
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The Company has been named as a defendant or co-defendant in other legal
proceedings wherein substantial damages are claimed. Such proceedings are not
uncommon to the Company's business. After consultations with counsel, management
believes that the Company has recognized adequate provisions for probable and
reasonably estimable liabilities associated with these proceedings, and that
their ultimate resolutions will not have a material adverse effect on the
consolidated financial position or annual results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders during the
fourth quarter of 2004.
ITEM 4A. EXECUTIVE OFFICERS OF THE COMPANY
The following represents a listing of executive officers of the Company as of
December 31, 2004.
Donald P. Fusilli, Jr. - Age 53; President and Chief Executive Officer of the
Company since April 2001. Mr. Fusilli has been employed by the Company in
various capacities since 1973, including President and Chief Operating Officer
of the Company from 2000 to 2001; and Executive Vice President-Energy from 1994
to 2000.
William P. Mooney - Age 54; Executive Vice President and Chief Financial Officer
of the Company since June 2000. Prior to joining the Company, Mr. Mooney served
as Executive Vice President and Chief Financial Officer of FEI Company in
Hillsboro, Oregon, a global supplier of capital equipment to the semiconductor
and data storage industries, from 1999 to June 2000.
H. James McKnight - Age 60; Executive Vice President, General Counsel and
Secretary of the Company since June 2000. Mr. McKnight has been employed by the
Company since 1995, serving as Senior Vice President, General Counsel and
Secretary of the Company from 1998 to 2000 and as Vice President, General
Counsel and Secretary of the Company from 1995 to 1998.
Monica L. Iurlano - Age 47; Executive Vice President and Chief Resources Officer
of the Company since May 2002. Ms. Iurlano previously served as Vice President
of Human Resources with L.B. Foster from November 1999 to May 2002. Prior to
joining L.B. Foster, Ms. Iurlano served in various management positions at
Highmark Blue Cross Blue Shield from 1995 to 1999. Ms. Iurlano was also
previously employed by the Company from 1992 to 1995 as Benefits Manager.
Craig O. Stuver - Age 44; Senior Vice President, Corporate Controller, Treasurer
and Chief Accounting Officer of the Company since April 2001. Prior to joining
the Company, Mr. Stuver served as a vice president of finance for Marconi
Communications from September 2000 to April 2001. Mr. Stuver was also previously
employed by the Company from 1992 to 2000, serving in various capacities
including Senior Vice President, Corporate Controller and Treasurer briefly in
2000 and as Vice President, Corporate Controller and Assistant Treasurer from
1997 to 2000.
Bradley L. Mallory - Age 52; President of Engineering since October 2003. Mr.
Mallory previously served as Senior Vice President of the Company from March
2003 through September 2003. Prior to joining the Company, Mr. Mallory worked in
various management capacities with the Pennsylvania Department of
Transportation, including Department Secretary from 1995 to 2003.
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Richard W. Giffhorn - Age 55; President of Baker Energy since September 2002.
Prior to joining Baker Energy, Mr. Giffhorn was a self-employed consultant in
2001 and 2002, and previously served as Vice President of Operations for Baker
Hughes INTEQ in Houston, Texas from 1993 to 2000.
John D. Whiteford - Age 45; Executive Vice President of Michael Baker Jr., Inc.,
a subsidiary of the Company, and Manager of its North Region since June 2000.
Mr. Whiteford previously served in various capacities with the Company since
1983, including Vice President of Baker Energy from 1997 to 2000.
James B. Richards - Age 58; Executive Vice President of Michael Baker Jr., Inc.
and Manager of its South Region since June 2000. Since joining the Company in
1996, Mr. Richards served as Vice President of Michael Baker Jr., Inc. and
Regional Manager of the Southeast Region from 1996 to 2000.
John D. Swanson - Age 48; Senior Vice President of Baker Energy since October
2003. Mr. Swanson previously served as Senior Vice President of Michael Baker
Jr., Inc. and Manager of its West Region from June 2000 through September 2003.
Mr. Swanson joined the Company in 1993 and was Assistant Vice President of
Michael Baker Jr., Inc. from 1998 to 2000.
Rex P. Doyle - Age 46; Senior Vice President of Baker Energy since September
2003. Mr. Doyle also served as Vice President of Sales and Marketing for Baker
Energy from September 2002 to September 2003 and held various management
positions at the Corporate level from August 2000 through August 2002. Prior to
joining the Company in August 2000, Mr. Doyle served as Director of Account
Management for Enron from August 1999 to July 2000.
Executive officers of the Company serve at the discretion 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.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
Information relating to the market for the Company'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.
During the year ended December 31, 2004, there were no repurchases made by the
Company or on its behalf or any "affiliated purchaser" of shares of the common
stock registered by the Company pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended.
The Company's present policy is to retain any earnings to fund the operations
and growth of the Company. The Company has not paid any cash dividends since
1983 and has no plans to do so in the foreseeable future. The Company's loan
agreement with its banks places certain restrictions on payments of dividends.
At March 1, 2005, the Company had 1,520 holders of its Common Stock
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ITEM 6. SELECTED FINANCIAL DATA
A summary of selected financial data for the five years ended December 31, 2004
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 Company's results of operations, cash flow and financial
condition 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
Currently, the Company's primary interest rate risk relates to its variable-rate
investments, which totaled $13.0 million as of December 31, 2004 and zero as of
December 31, 2003. Assuming a 10% decrease in interest rates on these
variable-rate investments (i.e., a decrease from the actual weighted average
interest rate of 1.16% as of December 31, 2004, to a weighted average interest
rate of 1.05%), annual interest income would have been approximately $15,000
lower in 2004 based on the outstanding balance of variable-rate investments as
of December 31, 2004. The Company's primary interest rate risk relates to its
variable-rate debt obligations, which totaled zero as of December 31, 2004 and
$13.5 million as of December 31, 2003. Assuming a 10% increase in interest rates
on these variable-rate debt obligations (i.e., an increase from the actual
weighted average interest rate of 3.42% as of December 31, 2003, to a weighted
average interest rate of 3.76%), annual interest expense would have been
approximately $46,000 higher in 2003 based on the outstanding balance of
variable-rate obligations as of December 31, 2003. Accordingly, the Company has
no material exposure to interest rate risk, nor does it have any interest rate
swap or exchange agreements.
The Company has several foreign subsidiaries that transact portions of their
local activities in currencies other than the U.S. Dollar. At December 31, 2004,
such currencies included the British Pound, Mexican Peso, Nigerian Naira, Thai
Baht and Venezuelan Bolivar. These subsidiaries composed 13.3% of the Company's
consolidated total assets at December 31, 2004, and 4.4% of its consolidated
total contract revenues for the year then ended. In assessing its exposure to
foreign currency exchange rate risk, the Company recognizes that the majority of
its foreign subsidiaries' assets and liabilities reflect ordinary course
accounts receivable and accounts payable balances. These receivable and payable
balances are substantially settled in the same currencies as the functional
currencies of the related foreign subsidiaries, thereby not exposing the Company
to material transaction gains and losses. Accordingly, assuming that foreign
currency exchange rates could change unfavorably by 10%, the Company has no
material exposure to foreign currency exchange rate risk. The Company has no
foreign currency exchange contracts.
Based on the nature of the Company's business, it has no direct exposure to
commodity price risk.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements, together with the report thereon of
PricewaterhouseCoopers LLP, dated March 15, 2005, 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.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
(a) Conclusions Regarding the Effectiveness of Disclosure Controls and
Procedures
Under the supervision and with participation of the Company's management,
including the chief executive officer and chief financial officer, the Company
conducted an evaluation of its disclosure controls and procedures, as such term
is defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), as of December 31, 2004. Based upon this
evaluation, the Company's chief executive officer and chief financial officer
concluded that the Company's disclosure controls and procedures were effective
as of the end of the period covered by this report to provide reasonable
assurance that information required to be disclosed by the Company in the
reports filed or submitted by it under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the SEC's rules and
forms, and to provide reasonable assurance that information required to be
disclosed by the Company in such reports is accumulated and communicated to the
Company's management, including its principal executive officer and principal
financial officer, as appropriate to allow timely decisions regarding required
disclosure.
(b) Management's Report on Internal Control Over Financial Reporting
See "Item 8. Financial Statements and Supplementary Data - Management's Reports
to Shareholders - Management's Report on Internal Control Over Financial
Reporting."
(c) Report of Independent Registered Public Accounting Firm
See "Item 8. Financial Statements and Supplementary Data - Report of Independent
Registered Public Accounting Firm."
(d) Changes in Internal Controls
There was no change in the Company's "internal control over financial reporting"
(as such term is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act)
that occurred during the quarter ended December 31, 2004, and that has
materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Information relating to the Directors of the Company appears beneath the caption
"Director Nominees" in the Company's definitive Proxy Statement which will be
distributed in connection with the 2005 Annual Meeting of Shareholders and which
will be filed with the Securities and Exchange Commission pursuant
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to Regulation 14A. Information relating to compliance with Section 16(a) of the
Securities Exchange Act of 1934 appears beneath the caption "Section 16(a)
Beneficial Ownership Reporting" of such Proxy Statement. Such information is
incorporated herein by reference. Information relating to the executive officers
of the Company is set forth in Part I of this Report under the caption
"Executive Officers of the Company." Such information is incorporated herein by
reference.
Information relating to the identification of the audit committee and the audit
committee financial expert appears beneath the caption "The Audit Committee" in
the Company's definitive Proxy Statement and is incorporated herein by
reference.
The Company has adopted a Code of Ethics for Senior Officers incorporating the
provisions required by the Securities and Exchange Commission for senior
financial officers of the Company. A copy of the Code of Ethics for Senior
Officers is posted on the Company's website at www.mbakercorp.com. In the event
the Company makes any amendments to, or grants any waivers from a provision of
this code, the Company will disclose the amendment or waiver and the reasons for
such on our website.
ITEM 11. EXECUTIVE COMPENSATION
Information relating to executive compensation appears beneath the caption
"Proposal 1--Elect Directors" in the Company's definitive Proxy Statement which
will be distributed in connection with the 2005 Annual Meeting of Shareholders
and which will be filed with the Securities and Exchange Commission pursuant to
Regulation 14A. Such information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
Information relating to the ownership of equity securities by beneficial owners
of 5% or more of the common stock of the Company and by management has been set
forth under the caption "Common Stock Ownership" in the Company's definitive
Proxy Statement which will be distributed in connection with the 2005 Annual
Meeting of Shareholders and which will be filed with the Securities and Exchange
Commission pursuant to Regulation 14A. Such information is incorporated herein
by reference. Information related to securities authorized for issuance under
equity compensation plans has been set forth under the caption "Equity
Compensation Plan Information" in the Company's definitive Proxy Statement which
will be distributed in connection with the 2005 Annual Meeting of Shareholders
and which will be filed with the Securities and Exchange Commission pursuant to
Regulation 14A. Such information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning certain relationships and transactions between the
Company and its directors and officers appears beneath the caption "Proposal
1--Elect Directors" in the Company's definitive Proxy Statement which will be
distributed in connection with its 2005 Annual Meeting of Shareholders and which
will be filed with the Securities and Exchange Commission pursuant to Regulation
14A. Such information is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information concerning fees billed by the Principal Accountant during the
previous two fiscal years for audit, audit-related, tax and other fees as well
as the audit committees pre-approval policies and procedures for such services
appears beneath the caption "Other Information" in the Company's definitive
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Proxy Statement which will be distributed in connection with its 2005 Annual
Meeting of Shareholders and which will be filed with the Securities and Exchange
Commission pursuant to Regulation 14A. Such information is incorporated herein
by reference.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(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 Statements of Income for the three years ended December 31,
2004
Consolidated Balance Sheets as of December 31, 2004 and 2003
Consolidated Statements of Cash Flows for the three years ended December
31, 2004
Consolidated Statements of Shareholders' Investment for the three years
ended December 31, 2004
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
(a)(2) Financial statement schedule for the year ended December 31, 2004:
Schedule II - Valuation and Qualifying Accounts
Report of Independent Registered Public Accounting Firm on Financial
Statement Schedule for the three years ended December 31, 2004 (included as
Exhibit 99.1 to this Form 10-K)
All other 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 Company, as amended, filed as
Exhibit 3.1 to the Company'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 Company, as amended, filed as Exhibit 3.2 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, and incorporated herein by reference.
4.1 Rights Agreement dated November 16, 1999, between the Company and
American Stock Transfer and Trust Company, as Rights Agent, filed
as Exhibit 4.1 to the Company's Report on Form 8-K dated November
16, 1999, and incorporated herein by reference.
10.1 2004 Incentive Compensation Plan of Michael Baker Corporation,
filed herewith.
10.2 Consulting Agreement dated April 25, 2001, by and between the
Company and Richard L. Shaw, filed as Exhibit 10.2(c) to the
Company's Quarterly Report on Form 10-Q for the period ended June
30, 2001, and incorporated herein by reference.
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Exhibit No. Description
- ----------- -----------
10.2(a) First Amendment to Consulting Agreement dated April 26, 2003, by
and between the Company and Richard L. Shaw, filed as Exhibit
10.2(a) to the Company's Annual Report on Form 10-K for the year
ended December 31, 2003, and incorporated herein by reference.
10.3 Employment Continuation Agreement dated as of October 27, 2000, by
and between the Company and Donald P. Fusilli, Jr., William P.
Mooney and H. James McKnight, filed as Exhibit 10.2(c) to the
Company's Annual Report on Form 10-K for the year ended December
31, 2000, and incorporated herein by reference.
10.3(a) Employment Continuation Agreement dated as of October 27, 2000, by
and between the Company and James B. Richards, John D. Swanson and
John D. Whiteford, filed as Exhibit 10.2(d) to the Company's
Annual Report on Form 10-K for the year ended December 31, 2000,
and incorporated herein by reference.
10.3(b) Employment Continuation Agreement dated April 16, 2001, by and
between the Company and Craig O. Stuver, filed as Exhibit 10.6 to
the Company's Quarterly Report on Form 10-Q for the period ended
June 30, 2001, and incorporated herein by reference.
10.3(c) Employment Continuation Agreement dated September 23, 2002, by and
between the Company and Richard W. Giffhorn, filed as Exhibit
10.3(c) to the Company's Annual Report on Form 10-K for the year
ended December 31, 2002, and incorporated herein by reference.
10.3(d) Employment Continuation Agreement dated April 1, 2003, by and
between the Company and Monica L. Iurlano, filed as Exhibit
10.3(d) to the Company's Quarterly Report on Form 10-Q for the
period ended March 31, 2003, and incorporated herein by reference.
10.3(e) Employment Continuation Agreement dated February 23, 2004, by and
between the Company and Bradley L. Mallory, filed as Exhibit
10.3(e) to the Company's Annual Report on Form 10-K for the year
ended December 31, 2003, and incorporated herein by reference.
10.4 First Amended and Restated Loan Agreement dated September 17,
2004, by and between the Company and Citizens Bank of
Pennsylvania, PNC Bank, National Association and Fifth Third Bank,
filed as Exhibit 10.4(a) to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 2004, and incorporated
herein by reference.
10.5 Michael Baker Corporation 1995 Stock Incentive Plan amended
effective April 23, 1998, filed as Exhibit 10.4 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1998,
and incorporated herein by reference.
10.6 Michael Baker Corporation 1996 Nonemployee Directors' Stock
Incentive Plan, filed as Exhibit A to the Company's definitive
Proxy Statement with respect to its 1996 Annual Meeting of
Shareholders, and incorporated herein by reference.
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Exhibit No. Description
- ----------- -----------
10.7 Office Sublease Agreement dated August 6, 2001, by and between the
Company and Airside Business Park, L.P. (exhibits omitted), and
incorporated herein by reference.
10.7(a) Third Amendment to Office Sublease Agreement dated February 19,
2003, by and between the Company and Airside Business Park, L.P.,
filed as Exhibit 10.7(a) to the Company's Annual Report on Form
10-K for the year ended December 31, 2002, and incorporated herein
by reference.
10.8 2003 Long-Term Incentive Compensation Plan of Michael Baker
Corporation, filed as Exhibit A to the Company's April 24, 2003
Notice of Annual Meeting and Proxy Statement, 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, 2004 and for the three
years then ended, Report of Independent Registered Public
Accounting Firm, 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, 2004.
21.1 Subsidiaries of the Company, filed herewith.
23.1 Consent of Independent Registered Public Accounting Firm, filed
herewith.
31.1 Certification of the Chief Executive Officer pursuant to Rule
13a-14(a), filed herewith.
31.2 Certification of the Chief Financial Officer pursuant to Rule
13a-14(a), filed herewith.
32.1 Certifications pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, filed herewith.
99.1 Report of Independent Registered Public Accounting Firm on
financial statement schedule for the three years ended December
31, 2004, filed herewith.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this Report to be signed on its behalf
by the undersigned, thereunto duly authorized.
MICHAEL BAKER CORPORATION
Dated: March 15, 2005 By: /s/ Donald P. Fusilli, Jr.
------------------------------------
Donald P. Fusilli, Jr.
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 Company and in
the capacities and on the dates indicated:
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Signature Title Date
- --------- ----- ----
/s/ Donald P. Fusilli, Jr. Director, President and Chief March 15, 2005
- ------------------------------ Executive Officer
Donald P. Fusilli, Jr.
/s/ William P. Mooney Executive Vice President March 15, 2005
- ------------------------------ and Chief Financial Officer
William P. Mooney
/s/ H. James McKnight Executive Vice President, March 15, 2005
- ------------------------------ General Counsel and Secretary
H. James McKnight
/s/ Craig O. Stuver Senior Vice President, Corporate March 15, 2005
- ------------------------------ Controller and Treasurer (Chief
Craig O. Stuver Accounting Officer)
/s/ Richard L. Shaw Chairman of the Board March 15, 2005
- ------------------------------
Richard L. Shaw
/s/ Robert N. Bontempo Director March 15, 2005
- ------------------------------
Robert N. Bontempo
/s/ Nicholas P. Constantakis Director March 15, 2005
- ------------------------------
Nicholas P. Constantakis
Director March 15, 2005
- ------------------------------
William J. Copeland
Director March 15, 2005
- ------------------------------
Roy V. Gavert, Jr.
/s/ Thomas D. Larson Director March 15, 2005
- ------------------------------
Thomas D. Larson
Director March 15, 2005
- ------------------------------
John E. Murray, Jr.
Director March 15, 2005
- ------------------------------
Pamela S. Pierce
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MICHAEL BAKER CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
(IN THOUSANDS)
Column C
Additions
Column B --------------------------- Column D Column E
Column A Balance at Charged to Charged to Deductions - Balance at
Description beg. of year expense other accounts describe end of year
----------- ------------ ---------- -------------- ------------ -----------
For the year ended December 31, 2004:
Income tax valuation allowance $2,188 $ 0 $0 $ (192)(a) $1,996
Allowance for doubtful accounts $2,392 $ 587 $0 $ (2,296)(b) $ 683
====== ====== === ======== ======
For the year ended December 31, 2003:
Income tax valuation allowance $ 0 $2,188 $0 $ 0 $2,188
Allowance for doubtful accounts $2,425 $ 312 $0 $ (345)(b) $2,392
====== ====== === ======== ======
For the year ended December 31, 2002:
Allowance for doubtful accounts $1,508 $1,204 $0 $ (287)(b) $2,425
====== ====== === ======== ======
(a) Relates to utilization of tax loss carryforwards
(b) For the years ended December 31, 2004, 2003 and 2002, the deduction amount
primarily reflects accounts receivable balances written off during the year
as well as recoveries of allowances previously expensed.
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