PITTSBURGH, Nov. 8 /PRNewswire-FirstCall/ -- Michael Baker Corporation today announced its financial results for the third quarter of 2006.
(Logo: http://www.newscom.com/cgi-bin/prnh/20020605/BAKERLOGO )
For the quarter, Baker reported operating income of $1.5 million, and a net loss of $(0.3) million, or $(0.04) per diluted share, on total contract revenues of $170 million. This compares to operating income of $4.1 million, and net income of $1.3 million, or $0.15 per diluted share, on total contract revenues of $149 million in the third quarter of 2005. Key items contributing to this net loss include $1.7 million of litigation and legal costs related to the protest of the FEMA housing inspection contract award and an unfavorable contract settlement of approximately $0.4 million. Additionally, the current period was adversely impacted by lower labor utilization rates and an effective tax rate that exceeded 100 percent.
Third quarter 2006 revenues in the Engineering business increased slightly compared to the same period last year. Transportation-related revenues increased 12 percent in the current quarter compared to third quarter 2005, but were offset by a year-over-year decline of approximately $5 million in revenues related to the company's FEMA map modernization contract. This reduced volume of year-over-year revenue also contributed to lower FEMA- related incentive awards in the 2006 third quarter compared to the same period in 2005. In addition, an acquisition in April 2006 contributed revenue of approximately $2 million in the current quarter. Operating income before corporate overhead allocations in Engineering declined, with a major factor being the $1.7 million in litigation and legal costs related to a protest by a competitor of Baker's initial selection by FEMA for the disaster-related housing inspection contract. FEMA is currently conducting a re-selection process on this contract. Also contributing to the operating income decline were the lower FEMA-related incentive awards mentioned earlier for the map modernization contract, and a slight decrease in labor utilization rates in the current period compared to the year-ago quarter. Operating income before corporate overhead allocations expressed as a percentage of Engineering segment revenues was 4.9 percent for third quarter of 2006, compared to 9.0 percent in third quarter 2005.
Third quarter 2006 revenues in the Energy business increased 37 percent compared to the third quarter of 2005 due primarily to higher volumes of domestic operations and maintenance services provided to existing clients, and the addition of new domestic onshore Managed Services contracts with Storm Cat Energy and Escambia Operating Company. Operating income before corporate overhead allocations more than doubled in the current period compared to the same period last year. As a result, operating income before corporate overhead allocations expressed as a percentage of segment revenues was 2.9 percent for the current quarter 2006, compared to 1.7 percent for the third quarter of 2005.
The company completed its restatement of financial results during the third quarter of 2006, and incurred related fees of $0.8 million in the current period and $2.5 million during the first nine months of the year.
The effective tax rate for the first nine months of 2006 was 64 percent, which is lower than the 65 percent for the first nine months of 2005 but higher than the 50 percent estimated rate at June 30, 2006. As a result of this year-to-date adjustment, the effective tax rate for the current period exceeded 100 percent, which resulted from lower than expected actual operating income for the quarter, and a reduction in the company's estimated domestic and foreign income before taxes for the fourth quarter of 2006.
Total backlog for the Company was $1.28 billion at September 30, 2006, compared to $1.32 billion at year-end 2005. The third quarter 2006 backlog includes approximately $491 million related to the FEMA map modernization contract, compared to $566 million at December 31, 2005. The Energy segment's backlog increased compared to year-end 2005, while the Engineering segment's backlog declined slightly. The company discloses backlog but cautions that the full value of the current backlog may not ultimately be converted to revenue.
For the first nine months of 2006, the Company recorded net income of $2.5 million, or $0.29 per diluted share, on total contract revenues of $472 million, compared with net income of $4.2 million, or $0.49 per diluted share, on total contract revenues of $436 million in the first nine months of 2005.
Commenting on the results, Chairman and Chief Executive Officer Richard L. Shaw, said, "I am extremely disappointed with our performance in the third quarter. After having now been in this position for almost two months, I see several areas in need of improvement. We need to more effectively utilize our personnel, actively manage our costs, control our overhead, and improve project performance. Progress is being made in all of these areas." He added that while the outlook for 2007 is encouraging, additional work remains to be done.
Michael Baker Corporation has scheduled a conference call and webcast for Friday, November 10, at 10:00 a.m. EST, to discuss the third quarter and first nine months' results. Please call 800-860-2442 at least 10 minutes prior to the start of the call. To access the webcast, please visit the investor relations portion of Baker's website at http://www.mbakercorp.com/.
Michael Baker Corporation provides engineering and operations and maintenance services for its clients' most complex challenges worldwide. The firm's primary practice areas are aviation, environmental, facilities, geospatial information technologies, pipelines & telecommunications, transportation, water/wastewater, and oil & gas. With more than 5,000 employees in over 40 offices across the United States and internationally, Baker is focused on providing services that span the complete life cycle of infrastructure and managed asset projects.
(The above information contains forward-looking statements concerning our future operations and performance. Forward-looking statements are subject to market, operating and economic risks and uncertainties that may cause our 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 our relationship and/or contracts with the Federal Emergency Management Agency ("FEMA"); changes in anticipated levels of government spending on infrastructure, including the Safe, Accountable, Flexible, Efficient Transportation Equity Act-A Legacy for Users ("SAFETEA- LU"); changes in loan relationships or sources of financing; changes in management; and changes in information systems. Such forward-looking statements are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995.)
FINANCIAL SUMMARY
(Unaudited)
Operating Results For the quarter ended September 30
(In thousands, except
per share amounts) 2006 2005
Total contract revenues $170,194 $148,733
Gross profit $20,209 $20,838
Income from operations $1,494 $4,132
Income before income taxes $1,429 $3,543
Net (loss)/income $(324) $1,340
Weighted average shares outstanding:
Basic 8,500 8,474
Diluted 8,500 8,696
Net (loss)/income per share:
Basic $(0.04) $0.16
Diluted $(0.04) $0.15
Operating Results For the nine months ended
September 30
(In thousands, except
per share amounts) 2006 2005
Total contract revenues $471,644 $435,694
Gross profit $64,453 $61,857
Income from operations $6,869 $13,138
Income before taxes $7,385 $12,093
Net income $2,522 $4,237
Weighted average shares outstanding:
Basic 8,497 8,514
Diluted 8,713 8,715
Net income per share:
Basic $0.30 $0.50
Diluted $0.29 $0.49
For the three For the nine
Segment results months ended months ended
(In millions) 9/30/06 9/30/05 9/30/06 9/30/05
Engineering
Total contract revenues $97.8 $96.0 $281.8 $281.9
Income from operations before
Corporate overhead 4.8 8.6 20.4 31.2
Less: Corporate overhead (3.5) (3.5) (12.4) (9.9)
Income from operations 1.3 5.1 8.0 21.3
Energy
Total contract revenues 72.4 52.7 189.8 153.8
Income/(loss) from operations before
Corporate overhead 2.1 0.9 4.7 (1.1)
Less: Corporate overhead (1.3) (1.3) (4.6) (3.8)
Income/(loss) from operations 0.8 (0.4) 0.1 (4.9)
Total Reportable Segments
Total contract revenues 170.2 148.7 471.6 435.7
Income from operations before
Corporate overhead 6.9 9.5 25.1 30.1
Less: Corporate overhead (4.8) (4.8) (17.0) (13.7)
Income from operations 2.1 4.7 8.1 16.4
Other Corporate/Insurance expense (0.6) (0.6) (1.2) (3.3)
Total Company - Income from operations $1.5 $4.1 $6.9 $13.1
Backlog
(In millions) At 9/30/06 At 12/31/05
Total $1,281.7 $1,321.8
Condensed Consolidated Balance Sheets
(In thousands) At 9/30/06 At 12/31/05
ASSETS
Cash and cash equivalents $9,905 $19,041
Receivables, net 92,094 79,177
Unbilled revenues on contracts in
progress 103,498 84,654
Prepaid expenses and other 10,975 8,373
Total current assets 216,472 191,245
Property, plant and equipment, net 21,220 21,805
Goodwill and other intangible assets,
net 17,333 8,661
Other assets 8,523 3,750
Total assets $263,548 $225,461
LIABILITIES & SHAREHOLDERS'
INVESTMENT
Accounts payable 53,088 45,570
Accrued employee compensation and
insurance 37,816 37,019
Other accrued expenses and current
liabilities 25,545 23,308
Income taxes payable 5,144 9,827
Billings in excess of revenues on
contracts in progress 16,546 13,060
Current deferred tax liability 16,261 13,197
Total current liabilities 154,400 141,981
Long-term debt 22,740 -
Other long-term liabilities 3,462 3,656
Total liabilities 180,602 145,637
Common Stock 8,996 8,985
Additional paid-in capital 42,193 42,138
Retained earnings 36,861 34,339
Accumulated other comprehensive loss (273) (704)
Unearned compensation (70) (173)
Less - Treasury shares (4,761) (4,761)
Total shareholders' investment 82,946 79,824
Total liabilities &
shareholders' investment $263,548 $225,461
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