SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 11-K
Annual Report Pursuant to Section 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2003
Commission file number 33-14058
A. Full title of the plan and the address of the plan, if different from that
of the issuer named below:
Michael Baker Corporation Employee Stock Ownership Plan
B. Name of issuer of the securities held pursuant to the plan and the address
of its principal executive office:
Michael Baker Corporation
Airside Business Park
100 Airside Drive
Moon Township, PA 15108
MICHAEL BAKER CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
Financial Statements and Additional Information
December 31, 2003 and 2002
MICHAEL BAKER CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
CONTENTS
DECEMBER 31, 2003 AND 2002
Page(s)
REPORTS OF INDEPENDENT AUDITORS 1 - 2
FINANCIAL STATEMENTS
Statements of Net Assets Available for Benefits 3
Statements of Changes in Net Assets Available for Benefits 4
Notes to Financial Statements 5 - 9
SUPPLEMENTARY FINANCIAL INFORMATION
Schedule H, Line 4(i) - Schedule of Assets (Held at End of Year) 10
Schedule H, Line 4(j) - Schedule of Reportable Transactions 11
Note: Other schedules required by Section 2520.103-10 of the Department of
Labor's Rules and Regulations for Reporting and Disclosure under
ERISA have been omitted because they are not applicable.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Employee Stock Ownership Plan and Trust Committee
Michael Baker Corporation
Moon Township, Pennsylvania
We have audited the accompanying statement of net assets available for benefits
of the Michael Baker Corporation Employee Stock Ownership Plan as of December
31, 2003, and the related statement of changes in net assets available for
benefits for the year then ended. These financial statements are the
responsibility of the Plan administrator.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits as of December 31,
2003, and the changes in net assets available for benefits for the year then
ended in conformity with accounting principles generally accepted in the United
States of America.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets
(held at end of year) and reportable transactions are presented for purposes of
additional analysis and are not a required part of the basic financial
statements, but are supplementary information required by Department of Labor's
Rules and Regulations for reporting and disclosure under the Employee Retirement
Income Security Act of 1974. These supplemental schedules are the responsibility
of the Plan administrator. The supplemental schedules have been subjected to the
auditing procedures applied in the audit of the basic financial statements, and
in our opinion, are fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
/s/ Schneider Downs & Co., Inc.
--------------------------------
Pittsburgh, Pennsylvania
June 14, 2004
1
REPORT OF INDEPENDENT AUDITORS
To the Participants and Administrator of the
Michael Baker Corporation Employee Stock Ownership Plan
In our opinion, the accompanying statements of net assets available for benefits
and the related statements of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of the Michael Baker Corporation Employee Stock Ownership Plan (the "Plan") at
December 31, 2002 and December 31, 2001, and the changes in net assets available
for benefits for the years then ended, in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the responsibility of the Plan's management. Our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States) and auditing standards
generally accepted in the United States of America. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of Assets
(Held at End of Year) and Reportable Transactions are presented for the purpose
of additional analysis and are not a required part of the basic financial
statements but are supplementary information required by the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. These supplemental schedules are the
responsibility of the Plan's management. The supplemental schedules have been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, are fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
/s/ PricewaterhouseCoopers LLP
-------------------------------
Pittsburgh, PA
June 20, 2003
2
MICHAEL BAKER CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 31,
------------------------------
ASSETS 2003 2002
-------------------------------------------------------------------------------------------------------
INVESTMENTS, AT FAIR VALUE
Investments in common stock of Michael Baker Corporation $ 28,666,135 $ 32,778,220
Investments in mutual funds 92,373,838 64,850,223
Participant loans (market value approximates cost) 1,436,028 388,889
-------------------------------------------------------------------------------------------------------
Total investments 122,476,001 98,017,332
-------------------------------------------------------------------------------------------------------
Total assets 122,476,001 98,017,332
-------------------------------------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $ 122,476,001 $ 98,017,332
=======================================================================================================
The accompanying notes are an integral part of the financial statements.
3
MICHAEL BAKER CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
2003 2002
-----------------------------------------------------------------------------------------------------------
ADDITIONS TO NET ASSETS ATTRIBUTED TO
Investment income
Interest and dividends $ 1,011,076 $ 854,235
Net appreciation/(depreciation) in fair value of investments 13,243,308 (28,108,782)
----------------------------------------------------------------------------------------------------------
Total investment income/(loss) 14,254,384 (27,254,547)
----------------------------------------------------------------------------------------------------------
Participant contributions 11,785,219 11,129,646
Employer contributions 5,932,868 5,392,222
Series B stock conversion - 328,328
----------------------------------------------------------------------------------------------------------
Total contributions 17,718,087 16,850,196
----------------------------------------------------------------------------------------------------------
Total additions/(deductions) 31,972,471 (10,404,351)
----------------------------------------------------------------------------------------------------------
DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO
Participant withdrawals 7,504,885 8,880,732
Administrative fees 8,917 3,376
----------------------------------------------------------------------------------------------------------
Total deductions 7,513,802 8,884,108
----------------------------------------------------------------------------------------------------------
Net increase/(decrease) in net assets 24,458,669 (19,288,459)
Net assets available for benefits, beginning of year 98,017,332 117,305,791
----------------------------------------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS, END OF YEAR $ 122,476,001 $ 98,017,332
==========================================================================================================
The accompanying notes are an integral part of the financial statements.
4
MICHAEL BAKER CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
1. DESCRIPTION OF THE PLAN
GENERAL
The following description of the Michael Baker Corporation Employee Stock
Ownership Plan (the "Plan") is provided for general information purposes
only. Participants should refer to the Plan agreement for more complete
information.
The Plan is a defined contribution plan that provides all eligible
employees of Michael Baker Corporation (the "Company") with an opportunity
to accumulate additional retirement benefits as well as invest in
Company's stock. The Plan is subject to provisions of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). Effective
January 1, 2004, part-time and temporary employees will be required to
work 1,000 hours before becoming eligible to join the plan.
PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's
contributions and allocations of (a) the Company's contribution and (b)
Plan earnings or losses, and charged with an allocation of certain
administrative fees. Allocations are based on participant earnings or
account balances, as defined. The benefit to which a participant is
entitled is the benefit that can be provided from the participant's vested
account.
CONTRIBUTIONS
Participants contribute to the Plan through a Section 401(k) Employee
Salary Redirection Election. During 2003 and 2002, the Plan participants
were able to choose to contribute up to the lower of 50 percent of their
salaries (including commissions and overtime) or the annual limitation
established by the Internal Revenue Service ("IRS"). The maximum amount of
a participant's salary, which may be eligible for withholding for any Plan
year, could not exceed $200,000 in 2003 or 2002. The Plan also allows
participants to roll over funds from a previous employer's tax-qualified
plan or tax-qualified individual retirement account. All employees who are
eligible to make deferred contributions under this Plan and who have
attained age 50 before the close of the plan year shall be eligible to
make catch-up contributions in accordance with and subject to the
limitation established by the IRS.
Effective January 1, 2004, participants can choose to contribute up to 75
percent of their salaries or the annual limitation established by the IRS.
COMPANY MATCHING CONTRIBUTIONS
In 2003 and 2002, under the provisions of the Plan, the Company made
matching contributions to the participants' accounts in an amount of 100
percent of the first 5 percent and 50 percent of the next 1 percent of
eligible salary (including commissions but excluding overtime, except for
Energy employees regularly scheduled to work over 40 hours per week, which
will be matched on overtime up to a maximum of 84 hours per two-week pay
period) contributed by each participant. The Company is not required to
match contribution amounts over the 6 percent limit.
Effective January 1, 2004, the match amount has been changed as follows:
Employees in the Engineering division will be matched 100 percent of the
first 3 percent of eligible salary and 50% on the next
5
3% of eligible salary contributed by each participant, and Employees in
the Energy Division will be matched 50% on the first 6% of eligible
salary contributed by each participant.
The Company's matching contributions were invested in not less than 25
percent of Michael Baker Corporation common stock in 2003 and 2002, with
the remaining 75 percent invested in accordance with the participants'
investment elections for participant contributions.
The Board of Directors of the Company is authorized to make additional
discretionary contributions to the Plan from time to time. However, no
discretionary contributions were made in 2003 or 2002.
VESTING
Participants are vested immediately in their contributions plus actual
earnings thereon. All amounts in the participants' Plan accounts that are
attributable to the transfer of funds from a previously terminated
retirement plan, the rollover from a previous employer's tax-qualified
plan, and participant contributions are 100 percent vested and
nonforfeitable at all times.
All Company matching contributions will become 100 percent vested upon
attainment of three years of service with the Company or earlier, upon
attainment of normal retirement date, disability or death. If a
participant leaves employment with the Company before attaining a vested
interest in his or her Company contribution, the contributions are
forfeited and will reduce future Company matching contributions.
DISTRIBUTIONS
The Plan provides for distributions of benefits upon retirement, total and
permanent disability, death, or termination of employment for any other
reason. The amount of distribution that a participant, or his or her
beneficiary is entitled to, is based on the vesting requirements discussed
above. All distributions will be made in the form of a single, lump-sum
distribution or in substantially equal annual installments over a period
not exceeding five years. For participant accounts invested in the
Company's common stock, distributions may be made in cash and/or shares of
common stock, at the discretion of the participant. Effective January 1,
2003, as a one-time option, participants may apply in writing to the
administrator for a withdrawal of up to 50 percent of their vested account
balance for certain limited situations qualifying as financial hardships
under IRS guidelines in effect at the time of the withdrawal.
PARTICIPANT LOANS
A participant may borrow money from the portion of his or her account
attributable to his or her own 401(k) plan contributions. The participant
is allowed one outstanding loan that may be obtained for any reason. Loan
amounts shall not exceed the lesser of: (a) 50 percent of the
participant's vested account balance, including rollovers, (b) $50,000
adjusted for pre-existing loans, or (c) such amount as may be determined
by the Plan administrator. All loans will be drawn against the
participant's account among the respective investment options as directed,
and are secured by the assets within the participant's accounts. Interest
rates on outstanding notes receivable ranged from 5.0 percent to 10.5
percent at December 31, 2003, and from 5.25 percent to 10.5 percent at
December 31, 2002.
FORFEITED ACCOUNTS
At December 31, 2003 and 2002, forfeited nonvested accounts totaled $0. If
there were forfeited nonvested account balances at year end, they would be
used to reduce future employer contributions. Also in 2003 and 2002,
employer contributions were reduced by $433,030 and $613,733,
respectively, from forfeited nonvested accounts.
6
COMMON STOCK
The Plan enables participating employees to acquire an equity interest in
the Company; as such, contributions to the Plan can be invested in the
Company's common stock. The Plan's investment in the Company's common
stock comprises 2,769,675 and 3,012,270 shares (cost of $20,880,364 and
$21,864,313) at December 31, 2003 and 2002, respectively. Effective
January 1, 2003, participants became able to divest themselves of Michael
Baker Corporation common stock after they are vested.
INVESTMENT OPTIONS
Each participant may direct Putnam Investments, Inc. ("Putnam") to invest
certain portions of his or her account in investment funds. Investment
funds available to participants are the Michael Baker Common Stock Fund
(invests in common stock of the Company), the Putnam New Opportunities
Fund (invests in long-term growth stocks within emerging industries), the
Putnam International Growth Fund (invests in diversified corporate stocks
outside of North America), the Putnam Voyager Fund (invests in diversified
corporate stocks), the Putnam Money Market Fund (invests in short-term
money market securities), the Putnam S&P 500 Index Fund (invests with the
objective of achieving a return that approximates the return of the S&P
500 Composite Stock Price Index), American Balanced Fund (invests in broad
range of securities including stocks and bonds), the MFS Massachusetts
Investors Trust (invests primarily in common stock, seeking current income
and long-term growth of capital and income), the PIMCO Total Return Fund
(invests in debt securities, seeking a total return consistent with the
preservation of capital), the Franklin Small Cap Growth Fund (invests in
equity securities of small companies, seeking long-term capital growth),
the Loomis Sayles Small Cap Value Fund (invests in common stocks or other
equity securities with the objective of long-term growth), the American
Funds New Prospective Fund (invests primarily in common stocks, seeking
long-term growth of capital and future income), the Alliance Capital
Growth and Income Fund (invests primarily in dividend-paying common stocks
and with the objective of appreciation), and the Putnam Asset Allocation
Funds (includes the Growth Portfolio, which invests with the goal of
seeking maximum growth of an investment over time, the Balanced Portfolio,
which invests with the goal of seeking a total return for investors in
their peak accumulation years and the Conservative Portfolio, which
invests primarily in domestic fixed income securities).
PLAN ADMINISTRATION AND FEES
The Company provides certain administrative and accounting services to the
Plan at no cost. In addition, the Company pays the cost of services
provided to the Plan by Putnam, legal counsel and independent accountants.
Certain reasonable distribution and loan processing fees charged by Putnam
are deducted from the respective participant account balances.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
Putnam performs the recordkeeping function for the Plan and the records
are maintained on a cash basis. The financial statements included herein
include all adjustments to reflect the financial statements on the accrual
basis of accounting in accordance with accounting principles generally
accepted in the United States of America.
INVESTMENTS
Investments are stated at fair value based upon quoted market values.
Purchases and sales and securities are recorded on a trade-date basis. The
investment in common stock of the Company is stated at publicly-traded
closing market values as of December 31, 2003 and 2002. As of December 31,
2003 and 2002, the Plan owned approximately 33 percent and 36 percent,
respectively, of the outstanding shares of the Company's common stock;
therefore, such valuation might be subject to significant fluctuation in
the event of a substantial liquidation of such holdings by the Plan.
7
The difference between the cost and current market value of investments
purchased since the beginning of the period and the increase or decrease
in such stated market value of investments held at the beginning of the
period is included in the net appreciation (depreciation) in fair market
value of investments in the statements of changes in net assets available
for benefits.
CONTRIBUTIONS
Employee and employer contributions are recorded in the period during
which the Company makes payroll deductions from Plan participants'
earnings.
DISTRIBUTIONS
Distributions to participants are recorded when paid.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain
estimates and assumptions that may affect the reported amounts of assets,
liabilities and changes therein, and disclosure of contingent assets and
liabilities. Actual results could differ from those estimates.
CONCENTRATION OF RISK
Investments are exposed to various risks, such as interest rate, market
and credit. Due to the level of risk associated with these investments and
the level of uncertainty related to changes in the value of these
investments, it is at least reasonably possible that changes in the near
term could materially affect participants' account balances and the
amounts reported in the statement of net assets available for benefits and
the statements of changes in net assets available for benefits.
3. INVESTMENTS
The following presents the fair value of investments that represent 5
percent or more of the Plan's net assets at December 31, 2003 and 2002
respectively:
2003 2002
------------------------------------------------------------------------------
Michael Baker Corporation Common Stock* $ 28,666,135 $ 32,778,220
Putnam New Opportunities Fund $ 15,776,160 $ 11,211,671
Putnam Voyager Fund $ 13,242,572 $ 10,198,297
MFS Massachusetts Investors Trust $ 11,869,538 $ 9,680,960
Putnam International Equity Fund $ 9,278,395 $ 6,212,299
American Balanced Fund $ 7,968,361 $ -
PIMCO Total Return Fund $ 7,736,008 $ 6,970,804
Putnam Money Market Fund $ 5,457,717 $ 6,491,310
AIM Balanced Fund $ - $ 6,369,034
------------------------------------------------------------------------------
*Includes nonparticipant-directed investments
The Plan's investments (including gains and losses on investments bought
and sold, as well as held during the year) appreciated in value by
$13,243,308 and depreciated in value by $28,108,782 during 2003 and 2002,
respectively.
2003 2002
--------------------------------------------------------------------------------
Mutual funds $ 15,207,252 $ (15,157,063)
Common stock (1,963,944) (12,951,719)
--------------------------------------------------------------------------------
Net appreciation/(depreciation) $ 13,243,308 $ (28,108,782)
================================================================================
8
4. NONPARTICIPANT-DIRECTED INVESTMENTS
Information about the net assets and the significant components of the
changes in net assets relating to investments having
nonparticipant-directed components is as follows:
2003 2002
---------------------------------------------------------------------------------------------------
NET ASSETS:
Common stock $ 28,666,135 $ 32,778,220
---------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $ 28,666,135 $ 32,778,220
===================================================================================================
---------------------------------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS AS OF DECEMBER 31, 2002 $ 32,778,220
Changes in net assets:
Contributions 2,591,295
Interest and dividends 10,473
Net depreciation in fair value of investment (1,963,944)
Benefits paid to participants (1,625,829)
Transfers to participant-directed investments (3,123,640)
Fees (440)
---------------------------------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS AS OF DECEMBER 31, 2003 $ 28,666,135
===================================================================================================
5. TAX STATUS
The Internal Revenue Service has determined and informed the Company by a
letter dated October 30, 2003, that the Plan and related trust are
designed in accordance with the applicable sections of the Internal
Revenue Code ("IRC"). The Plan has been amended since receiving the
determination letter. However, the Plan administrator and the Plan's
counsel believe that the Plan is designed and is currently being operated
in compliance with applicable requirements of the IRC.
6. PLAN TERMINATION
Although it has not expressed an intention to do so, the Company has the
right under the Plan to discontinue its contributions at any time and to
terminate the Plan subject to the provisions of ERISA. In the event of
Plan termination, participants will become 100 percent vested in their
accounts.
7. RELATED PARTY TRANSACTIONS
Certain investments of the Plan are mutual funds managed by Putnam. These
transactions qualify as party-in-interest transactions.
One of the investment fund options available to employees contains stock
of the Company, the plan sponsor. As a result, transactions related to
this investment fund qualify as party-in-interest transactions (Note 1).
9
MICHAEL BAKER CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
EIN# 25-0927646
SCHEDULE H, LINE 4(i) - SCHEDULE OF ASSETS (HELD AT END OF YEAR)
DECEMBER 31,2003 SCHEDULE I
COST OF CURRENT
IDENTITY OF ISSUER DESCRIPTION OF INVESTMENT ASSET VALUE
----------------------------------------------------------------------------------------------------------------------------
Michael Baker Corporation* Michael Baker Corporation Common Stock** $ 20,880,364 $ 28,666,135
Putnam Investments* Putnam New Opportunities Fund $ 15,776,160
Putnam Investments* Putnam Voyager Fund $ 13,242,572
MFS Investment Management Inc. MFS Massachusetts Investors Trust $ 11,869,538
Putnam Investments* Putnam International Equity Fund $ 9,278,395
American Funds American Balanced Fund $ 7,968,361
PIMCO Funds Distributors LLC PIMCO Total Return Fund $ 7,736,008
Putnam Investments* Putnam Money Market Fund $ 5,457,717
Franklin Templeton Investments Franklin Small Cap Growth Fund\ $ 5,158,735
Putnam Investments* Putnam S&P 500 Index Fund $ 3,874,614
Alliance Capital Management Alliance Bernstein Growth and Income Fund $ 3,210,411
American Funds New Perspective Fund $ 2,854,481
Loomis Sayles Funds Loomis Sayles Small Cap Value Fund $ 2,010,268
Putnam Investments* Putnam Asset Allocation - Growth Portfolio $ 1,634,833
Putnam Investments* Putnam Asset Allocation - Balanced Portfolio $ 1,592,465
Putnam Investments* Putnam Asset Allocation - Conservative Portfolio $ 709,280
Participant Loans* 5.0% to 10.5% due January 16, 2004 to January $ 1,436,028
16, 2018
----------------------------------------------------------------------------------------------------------------------------
$ 122,476,001
============================================================================================================================
*Party-in-interest
**Includes nonparticipant-directed investments
10
MICHAEL BAKER CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
EIN #25-0927646
SCHEDULE H, LINE 4(j) - SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 2003 SCHEDULE II
DESCRIPTION OF NUMBER OF
PARTY INVOLVED ASSET TRANSACTIONS PURCHASE PRICE SELLING PRICE NET GAIN/(LOSS)
--------------------------------------------------------------------------------------------------------
Putnam Michael Baker 213 $3,586,020 $ - $ -
Investments, Corporation
Inc.* Common
Stock** 619 $7,245,980 $ 8,442,848 $ 1,196,868
========================================================================================================
*Party-in-interest
**Includes nonparticipant-directed investments
11
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Senior
Vice President, Corporate Controller and Treasurer of Michael Baker Corporation,
the plan sponsor, has duly caused this annual report to be signed by the
undersigned thereunto duly authorized.
MICHAEL BAKER CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
Date: June 25, 2004 By: /s/ Craig O. Stuver
-----------------------------------------
Craig O. Stuver
Senior Vice President, Corporate
Controller and Treasurer of Michael Baker
Corporation, the Plan Sponsor