UNITED STATES
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, 2004
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, 2004 and 2003
MICHAEL BAKER CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
CONTENTS
DECEMBER 31, 2004 AND 2003
Page(s)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 1
FINANCIAL STATEMENTS
Statements of Net Assets Available for Benefits 2
Statements of Changes in Net Assets Available for Benefits 3
Notes to Financial Statements 4 - 8
SUPPLEMENTARY FINANCIAL INFORMATION
Schedule H, Line 4(i) - Schedule of Assets (Held at End of Year) 9
Schedule H, Line 4(j) - Schedule of Reportable Transactions 10
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, 2004 and 2003, and the related statement of changes in net assets available
for benefits for the years then ended. These financial statements are the
responsibility of the Plan administrator. Our responsibility is to express an
opinion on these financial statements based on our audits.
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. The Plan is not required to have,
nor were we engaged to perform, an audit of its internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Plan's internal control over financial reporting.
Accordingly, we express no such opinion. 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 audits provide 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,
2004 and 2003, 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.
Our audits were performed 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 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/ Schneider Downs & Co., Inc.
-------------------------------
Pittsburgh, Pennsylvania
June 2, 2005
1
MICHAEL BAKER CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 31,
----------------------------------
2004 2003
---------------- ---------------
ASSETS
INVESTMENTS, AT FAIR VALUE
Investments in common stock of Michael Baker Corporation $ 43,583,027 $ 28,666,135
Investments in mutual funds 114,343,669 92,373,838
Participant loans (market value approximates cost) 1,934,779 1,436,028
---------------- ---------------
Total investments 159,861,475 122,476,001
RECEIVABLES, AT FAIR VALUE
Employer contributions 1,499,996 -
Participant contributions 4,543 -
---------------- ---------------
Total receivables 1,504,539 -
---------------- ---------------
Total assets 161,366,014 122,476,001
---------------- ---------------
LIABILITIES
ACCOUNTS PAYABLE
Excess contributions 192,336 -
---------------- ---------------
Total liabilities 192,336 -
---------------- ---------------
NET ASSETS AVAILABLE FOR BENEFITS $ 161,173,678 $ 122,476,001
================ ===============
The accompanying Notes are an integral part of the Financial Statements.
2
MICHAEL BAKER CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
2004 2003
--------------- --------------
ADDITIONS TO NET ASSETS ATTRIBUTED TO
Investment Income
Interest and dividends $ 1,834,386 $ 1,011,076
Net appreciation in fair value of investments 31,371,066 13,243,308
--------------- --------------
Total investment income 33,205,452 14,254,384
--------------- --------------
Participant contributions 12,370,170 11,785,219
Employer contributions 6,036,138 5,932,868
--------------- --------------
Total contributions 18,406,308 17,718,087
--------------- --------------
Total additions 51,611,760 31,972,471
--------------- --------------
DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO
Participant withdrawals 12,905,213 7,504,885
Administrative fees 8,870 8,917
--------------- --------------
Total deductions 12,914,083 7,513,802
--------------- --------------
Net increase in net assets 38,697,677 24,458,669
Net assets available for benefits, beginning of year 122,476,001 98,017,332
--------------- --------------
NET ASSETS AVAILABLE FOR BENEFITS, END OF YEAR $ 161,173,678 $ 122,476,001
=============== ==============
The accompanying Notes are an integral part of the Financial Statements.
3
MICHAEL BAKER CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004 AND 2003
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 the
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 are required to work
1,000 hours before becoming eligible to join the plan.
The Company changed its Plan provider to Fidelity Institutional Retirement
Services Company from Putnam Investments, Inc. ("Putnam"), effective
January 1, 2005. No changes in contributions, vesting, distributions,
participant loans or forfeitures related to the Plan document will occur;
however, investment options will change from those offered by Putnam.
PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's contribution
and allocations of (a) the Company's contributions 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 2004, participants were able to choose
to contribute up to the lower of 75 percent of their salaries (including
commissions and overtime) or the annual limitation established by the
Internal Revenue Service ("IRS"). During 2003, 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 IRS. The maximum amount of a participant's salary, which may be
eligible for withholding for any Plan year, could not exceed $205,000 in
2004 or $200,000 in 2003. 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.
COMPANY MATCHING CONTRIBUTIONS
Effective January 1, 2004, under provisions of the Plan, the Company made
matching contributions to the participants' accounts in the amount of 100
percent of the first 3 percent of eligible salary and 50 percent on the
next 3 percent of eligible salary (including commissions but excluding
overtime, except for Energy employees regularly scheduled to work over 40
hours per week, they will be matched on overtime up to a maximum of 84
hours per two week pay period) contributed by each participant except for
the Company's Energy employees, which the Company made matching
contributions of 50 percent on the first 6 percent of eligible salary. The
Company is not required to match contribution amounts over the 6 percent
limit.
4
In 2003, 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, they were
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.
The Company's matching contributions were invested in not less than 25
percent of the Company's common stock in 2004 and 2003, with the remaining
75 percent invested in accordance with the participant's investment
elections for participant contributions.
The Company's Board of Directors is authorized to make additional
discretionary contributions to the Plan from time to time. No
discretionary contributions were made in 2004 or 2003, however, a $1.5
million discretionary contribution related to the 2004 plan year was
approved by the Board of Directors and allocated to non-highly compensated
participants' accounts during the first quarter of 2005.
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 of the Company's 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 ceases employment with the Company before attaining a vested
interest in the Company's contributions, he or she will forfeit those
contributions and those contributions will be used to reduce the Company's
future matching contributions.
DISTRIBUTIONS
The Plan provides for distribution of benefits upon retirement, total and
permanent disability, death, or termination of employment for any other
reason. The amount of distributions 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, 2004.
FORFEITED ACCOUNTS
At December 31, 2004 and 2003, forfeited nonvested accounts totaled
$72,135 and zero, respectively. Forfeited nonvested account balances are
used to reduce future employer contributions. Also in 2004 and 2003
employer contributions were reduced by $471,410 and $433,030,
respectively, as a result of forfeited nonvested accounts.
5
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 comprised 2,223,624 shares (cost of $18,164,444) and 2,769,675
shares (cost of $20,880,364) at December 31, 2004 and 2003, respectively.
Since January 1, 2003, participants have had the ability to divest
themselves of the Company's common stock after they were vested.
INVESTMENT OPTIONS
Each participant may direct 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
a 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 Bernstein 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 of securities are recorded on a trade-date basis. The
investment in the Company's common stock is stated at publicly-traded
closing market values as of December 31, 2004 and 2003. As of December 31,
2004 and 2003, the Plan owned approximately 27 percent and 33 percent,
respectively, of the Company's outstanding shares of common stock;
therefore, such valuation might be subject to significant fluctuation in
the event of a substantial liquidation of such holdings by the Plan.
6
The difference between the cost and current market value of investments
purchased since the beginning of the period and the increase in such
stated market value of investments held at the beginning of the period is
included in the caption, "Net appreciation in fair 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. Discretionary contributions are accrued in the period they are
earned.
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 Statements 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, 2004 and 2003
respectively:
2004 2003
------------- --------------
Michael Baker Corporation Common Stock* $ 43,583,027 $ 28,666,135
Putnam New Opportunities Fund $ 16,178,453 $ 15,776,160
Putnam Voyager Fund $ 13,994,532 $ 13,242,572
MFS Massachusetts Investors Trust $ 12,920,260 $ 11,869,538
Putnam International Equity Fund $ 11,685,137 $ 9,278,395
American Balanced Fund $ 9,683,298 $ 7,968,361
PIMCO Total Return Fund $ 9,071,321 $ 7,736,008
============= =============
*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 $31,371,066 and
$13,243,308 during 2004 and 2003, respectively.
2004 2003
------------- -------------
Mutual funds $ 8,225,627 $ 15,207,252
Common stock 23,145,439 (1,963,944)
------------- -------------
Net appreciation $ 31,371,066 $ 13,243,308
============= =============
7
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:
2004 2003
------------- ---------------
NET ASSETS:
Common stock $ 43,583,027 $ 28,666,135
------------- ---------------
$ 43,583,027 $ 28,666,135
============= ===============
-------------
NET ASSETS AVAILABLE FOR BENEFITS AS OF DECEMBER 31, 2003 $ 28,666,135
Changes in net assets:
Contributions 1,942,475
Interest and dividends 17,612
Net appreciation in fair value of investment 23,145,439
Benefits paid to participants (2,682,966)
Transfers to participant-directed investments (7,505,469)
Fees (199)
-------------
NET ASSETS AVAILABLE FOR BENEFITS AS OF DECEMBER 31, 2004 $ 43,583,027
=============
5. TAX STATUS
The Internal Revenue Service 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 the
Company's stock. As a result, transactions related to this investment fund
qualify as party-in-interest transactions (Note 1).
8
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, 2004 SCHEDULE I
COST OF CURRENT
IDENTITY OF ISSUER DESCRIPTION OF INVESTMENT ASSET VALUE
------------------------------ ------------------------------------------------ ------------- --------------
Michael Baker Corporation* Michael Baker Corporation Common Stock** $ 18,164,444 $ 43,583,027
Putnam Investments* Putnam New Opportunities Fund $ 16,178,453
Putnam Investments* Putnam Voyager Fund $ 13,994,532
MFS Investment Management Inc. MFS Massachusetts Investors Trust $ 12,920,260
Putnam Investments* Putnam International Equity Fund $ 11,685,137
American Funds American Balanced Fund $ 9,683,298
PIMCO Funds Distributors LLC PIMCO Total Return Fund $ 9,071,321
Putnam Investments* Putnam Money Market Fund $ 7,956,599
Franklin Templeton Investments Franklin Small Cap Growth Fund $ 7,163,235
American Funds New Perspective Fund $ 5,510,895
Alliance Capital Management Alliance Bernstein Growth and Income Fund $ 5,387,876
Putnam Investments* Putnam S&P 500 Index Fund $ 4,798,033
Loomis Sayles Funds Loomis Sayles Small Cap Value Fund $ 4,452,047
Putnam Investments* Putnam Asset Allocation - Growth Portfolio $ 2,187,786
Putnam Investments* Putnam Asset Allocation - Balanced Portfolio $ 1,950,450
Participant Investments* Putnam Asset Allocation - Conservative Portfolio $ 799,495
Fidelity Investments Fidelity Money Market Funds $ 604,252
5.0% to 10.5% due September 26, 2003 to
Participant Loans* August 30, 2019 $ 1,934,779
--------------
$ 159,861,475
==============
*Party-in-interest
**Includes nonparticipant-directed investments
9
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, 2004 SCHEDULE II
DESCRIPTION OF NUMBER OF NET
PARTY INVOLVED ASSET TRANSACTIONS PURCHASE PRICE SELLING PRICE GAIN/(LOSS)
-------------- -------------- ------------ -------------- ------------- -----------
Michael Baker 276 $ 3,315,646 $ - $ -
Putnam Corporation
Investments, Common
Inc.* Stock** 872 $ 9,356,845 $ 14,532,941 $ 5,176,097
=== ============== ============= ===========
*Party-in-interest
**Includes nonparticipant-directed investments
10
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 29, 2005 By: /s/ Craig O. Stuver
-------------------------
Craig O. Stuver
Senior Vice President, Corporate Controller
and Treasurer of Michael Baker
Corporation, the Plan Sponsor