Edgar Filing: BAKER MICHAEL CORP

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, 2002
COMMISSION FILE NUMBER 1-6627

MICHAEL BAKER CORPORATION
(Exact name of Company as specified in its charter)

PENNSYLVANIA 25-0927646
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

AIRSIDE BUSINESS PARK, 100 AIRSIDE DRIVE, MOON TOWNSHIP, PA 15108
(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
-------------- -----------------------------------------
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. |X|

Indicate by check mark whether the Company is an accelerated filer (as defined
in Exchange Act Rule 12b-2). Yes |X| No | |

The aggregate market value of Common Stock held by non-affiliates as of June 28,
2002 (the last business day of the Company's most recently completed second
fiscal quarter) was $79.1 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 17, 2003, the Company had 8,303,123 outstanding shares of Common
Stock.

DOCUMENTS INCORPORATED BY REFERENCE

Parts of Form 10-K into which
Document Document is incorporated
-------- -----------------------------

Financial Section of Annual Report to Shareholders
for the year ended December 31, 2002 I, II
Proxy Statement to be distributed in connection with
the 2003 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 anticipated
levels of government spending on infrastructure, and changes in loan
relationships or sources of financing. Such forward-looking statements are made
pursuant to the Safe Harbor Provisions of the Private Securities Litigation
Reform Act of 1995.

PART I

ITEM 1. BUSINESS

Michael Baker Corporation ("Baker" or "the 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.

The Company's business segments reflect how 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.

Information regarding the amounts of revenues, income from operations
without corporate expenses allocated, 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 2002 by Engineering News Record
magazine, Baker ranked 41st among the top 500 U.S. design firms; 16th among
"pure design" firms; 20th among water supply firms; 18th among transportation
design firms, including 17th in highways, 15th in bridges and 21st in airports;
33rd among construction management-for-fee firms; 67th among environmental
firms; 63rd among global design firms; and 152nd among international design
firms. These rankings were based on 2001 revenues. In addition, the Company
believes that it is one of the largest providers of outsourced operations and
maintenance services in the Gulf of Mexico.

BUSINESS SEGMENTS

The following briefly describes the Company's business segments:

Engineering - The Engineering segment provides a variety of design and related
consulting services. Such services include design-build, construction
management, consulting, planning, program management, surveying, mapping,
geographic information systems, architectural and interior design, construction
inspection, constructability reviews, software development, 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
has also provided 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 and AIR-21) in recent
years. The Company intends to partner with other contractors to pursue selected
design-build contracts, which continue to be a growing project delivery method
within the transportation marketplace.

Energy - The Energy segment specializes in providing a full range of Total Asset
Management services for operating energy production facilities worldwide. The
segment's comprehensive services range from complete outsourcing solutions to
specific services such as training, personnel recruitment, pre-operations

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engineering, maintenance management systems, field operations and maintenance,
mechanical equipment maintenance, procurement and supply chain management. The
Energy segment primarily serves both major and smaller independent oil and gas
producing companies.

One innovative service delivery method employed by the segment is OPCO(R), a
sophisticated operating model that has broadened the Energy segment's service
offerings in the Gulf of Mexico and enhanced both the Company's and its clients'
operating margins. In connection with its offering of OPCO services, the segment
has built 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 OPCO participants. Presently, the Company is working under
OPCO agreements with major and large independent oil and gas producers.

This segment operates in over a dozen foreign countries, with major projects in
the U.S., Venezuela, Thailand 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 allowance for doubtful accounts balance at December 31, 2002, 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 June
2000.

DOMESTIC AND FOREIGN OPERATIONS

For the years ended December 31, 2002, 2001 and 2000, approximately 88%, 86% and
91% 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 Northeast region of the U.S. and operations
and maintenance work performed by its Energy segment in Texas, Louisiana and the
Gulf of Mexico. The Company's international revenues are derived primarily from
its Energy segment.

BACKLOG

(In millions) DECEMBER 31, 2002 December 31, 2001
------------- ----------------- -----------------

Engineering $ 448.8 $ 378.9
Energy 96.4 130.7
Non-Core -- --
------- -------
Total $ 545.2 $ 509.6
======= =======

The Company's backlog consists of that portion of uncompleted work that is
represented by signed or executed contracts. Certain 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. The Company's backlog at December 31, 2002 and 2001
was $545 million and $510 million, respectively. The overall 2002 increase
reflects an 18% increase in backlog in the Company's Engineering segment as a
result of continued TEA-21 funding. In the Energy segment, backlog decreased
during 2002 due to expected reductions associated with certain OPCO properties
in the

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Gulf of Mexico. Oil and gas industry merger, acquisition and disposition
programs affecting the Company's clients can also result in increases or
decreases to the Company's Energy backlog.

There is not necessarily a direct correlation between the Company's 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 14%, 12%
and 17% of the Company's total contract revenues for the years ended December
31, 2002, 2001 and 2000, respectively. No individual contract accounted for more
than 10% of the Company's total contract revenues in 2002, 2001 or 2000.

COMPETITIVE CONDITIONS

The Company's business is highly competitive with respect to all principal
services it offers. Baker competes with numerous public and private firms that
provide some or all of the services provided by the Company. 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 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
engineering, management and operations services.

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 winter weather
conditions, particularly in the Northeast 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, 2002, the Company had 4,179 total employees. Of this year-end
2002 total, the Engineering segment had 2,030 employees, the Energy segment had
2,111, and the Company's Corporate staff included 38 employees. Certain
employees of the Company's 53%-owned Nigerian subsidiary are

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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. The Company also posts all press releases
and earnings releases to its web site.

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
market prices. 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 327,000 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 52,000 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 a 175-acre site 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 available to accommodate any needs that may
arise.

ITEM 3. LEGAL PROCEEDINGS

As discussed more fully in Note 4 to the consolidated financial statements
referenced herein, pursuant to a March 2000 settlement agreement, Baker Mellon
Stuart Construction, Inc. ("BMSCI"), a wholly-owned subsidiary of the Company,
paid Universal City Development Partners ("UCDP") $2.0 million to resolve the
claims between them. BMSCI remained responsible for resolution of remaining
subcontractor and vendor claims, the most significant of which was a suit
brought by ADF International, Inc. ("ADF"). A liability judgment totaling $10.0
million was entered in favor of ADF by the U.S. District Court during the fourth
quarter of 2000.

In January 2001, BMSCI filed an appeal of the ADF liability judgment with the
U.S. Court of Appeals for the 11th Circuit ("Court of Appeals"). In April 2001,
the District Court entered an additional judgment totaling $1.1 million on
behalf of ADF relative to its claim for attorney's fees and costs in connection
with the foregoing action. BMSCI and ADF subsequently filed appeals of this
judgment with the Court of Appeals.

In separate rulings during February 2002, the Court of Appeals reversed both of
the District Court's prior judgments for liability and attorney's fees and costs
on behalf of BMSCI, and remanded the ADF matters back to the District Court for
further proceedings. Based on the decisions of the Court of Appeals, on August
2, 2002, the Company received approximately $12.3 million of a $12.7 million
amount previously being held in escrow as a result of this litigation. The
remaining escrow amount of approximately $0.4 million, relating to an aspect of
the litigation that was not contested by BMSCI, was also disbursed by the escrow
agent in August 2002 to ADF.

Court-mandated mediation of the ADF litigation was conducted in Orlando, Florida
on October 23-25, 2002. As a result of the mediation, the Company reached a
settlement with ADF providing for the payment of $5.0 million by the Company to
ADF. Also resulting from the mediation, the Company agreed to release its
existing claim against Hellmuth, Obata & Kassabaum, Inc. ("HOK") arising out of
the same project, in exchange for an additional payment of $2.75 million by HOK
to ADF. As a result of the settlement, the Company became obligated to pay
contingent legal fees related to its claim against HOK.

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Both the ADF settlement of $5.0 million and the contingent legal fees of $1.0
million were paid by the Company during the fourth quarter of 2002.

The Company's professional liability insurance coverage had been placed on a
claims-made basis with Reliance Insurance Group ("Reliance") for the period July
1, 1994 through June 30, 1999. On May 29, 2001, the Pennsylvania Insurance
Commissioner placed Reliance into rehabilitation; and on October 3, 2001,
Reliance was placed into liquidation. The Company is uncertain at this time what
effect these actions will have on any claim the Company or its subsidiaries may
have for insurance coverage under policies issued by Reliance with respect to
past years. Baker Environmental, Inc. ("BEI"), a wholly-owned subsidiary of the
Company, is subject to one substantial claim which falls within the Reliance
coverage period. This claim reflects an action by LTV Steel Company ("LTV")
against BEI, resulting from the failure of a landfill for which BEI provided
services. In December 2002, after a hearing in the U.S. District Court for the
Western District of Pennsylvania, out-of-court settlement discussions between
LTV and BEI commenced. In February 2003, LTV and BEI reached an out-of-court
settlement that will provide a payment to LTV in the amount of $2.5 million.
This settlement is subject to the approval of the Bankruptcy Court overseeing
the LTV bankruptcy proceeding. The Company expects the Bankruptcy Court to take
action by the end of March 2003. Due to the liquidation of Reliance, the Company
is currently uncertain what amounts paid to LTV will be recoverable under the
insurance policy with Reliance. Accordingly, the Company has recorded no
receivable from Reliance as of December 31, 2002.

On July 24, 2001, the Company announced that it had become aware that certain
activities related to the operations of a 53% owned Nigerian subsidiary engaged
in energy-related operations are the subject of an inquiry by the U.S.
Department of Justice. The Company acquired the Nigerian subsidiary as part of
its acquisition of the Overseas Technical Services companies in 1993. The
inquiry appears to be focused upon payments made to certain individuals in
connection with the subsidiary's operations in Nigeria as they relate to
potential violations of the Foreign Corrupt Practices Act and other relevant
statutes. The Company has retained legal counsel to represent it in this matter
and is conducting an internal investigation of these issues. The Company has
been cooperating fully with the government's inquiry. At this time, the Company
is uncertain but does not expect the costs of its investigation, its cooperation
in the government's inquiry or the outcome thereof, to have a material adverse
financial impact on its future financial results. However, the Company's
internal investigation and the government's inquiry are ongoing and the
Company's assessment of the outcome may vary as the investigation and inquiry
proceed.

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 2002.

EXECUTIVE OFFICERS OF THE COMPANY

The following represents a listing of executive officers of the Company as of
December 31, 2002.

Donald P. Fusilli, Jr. - Age 51; 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

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Chief Operating Officer of the Company from 2000 to 2001; and Executive Vice
President-Energy from 1994 to 2000.

William P. Mooney - Age 52; 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. Prior to joining FEI, he
was the Chief Financial Officer for Calgon Carbon Corporation from 1998 to 1999
and for Sylvan, Inc. from 1990 to 1998.

H. James McKnight - Age 58; 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 45; 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 42; 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.

Richard W. Giffhorn - Age 53; 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 42; 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 55; 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 46; Senior Vice President of Michael Baker Jr., Inc. and
Manager of its West Region since June 2000. Mr. Swanson joined the Company in
1993 and was Assistant Vice President of Michael Baker Jr., Inc. from 1998 to
2000.

Executive officers of the Company serve at the pleasure of the Board of
Directors and are elected by the Board or appointed annually for a term of
office extending through the election or appointment of their successors.

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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.

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.

At March 17, 2003, the Company had 1,645 holders of its Common Stock. During the
fourth quarter of 2001, the Company announced that all of its Series B Common
Stock would be exchanged into Common Stock. Under this program, each Series B
share held by the Company's Employee Stock Ownership Plan ("ESOP") was exchanged
for approximately 1.018 shares of Common Stock during the first quarter of 2002.
Immediately following that exchange, the remaining Series B shares were
automatically converted into Common equivalents in accordance with provisions of
the Company's Articles of Incorporation. This exchange resulted in 23,452 shares
of Common Stock being withdrawn from the Company's treasury stock.

ITEM 6. SELECTED FINANCIAL DATA

A summary of selected financial data for the five years ended December 31, 2002
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 $3.9 million and $24.7 million as of December 31,
2002 and 2001, respectively. Assuming a 10% decrease in interest rates on these
variable-rate investment balances (i.e., a decrease from the actual weighted
average investment rates of 1.16% and 1.64%, to weighted average investment
rates of 1.04% and 1.47%, as of December 31, 2002 and 2001, respectively),
annual interest income would have been approximately $5,000 lower in 2002 and
$40,000 lower in 2001, based on the respective year-end outstanding balances for
variable-rate investments. 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, 2002,
such currencies included the Brazilian Real, British Pound, Mexican Peso,
Nigerian Naira, Thai Baht and Venezuelan Bolivar. These subsidiaries composed
6.3% of the Company's consolidated total assets at December 31, 2002, and 5.1%
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

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ordinary 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 17, 2003, and supplementary financial
information are set forth within Exhibit 13.1 to this Form 10-K. Such financial
statements and supplementary financial information are incorporated herein by
reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Not applicable.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE 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 2003 Annual Meeting of Shareholders and which
will be filed with the Securities and Exchange Commission pursuant 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.

ITEM 11. EXECUTIVE COMPENSATION

Information relating to executive compensation appears beneath the captions
"Proposal 1--Elect Directors" and "Proposal 2--Approve New Long-Term Incentive
Compensation Plan" in the Company's definitive Proxy Statement which will be
distributed in connection with the 2003 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 2003 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

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forth under the caption "Equity Compensation Plans" in the Company's definitive
Proxy Statement which will be distributed in connection with the 2003 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 2003 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. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

The Chief Executive Officer and the Chief Financial Officer of the Company (its
principal executive officer and principal financial officer, respectively) have
concluded, based on their evaluation as of a date within 90 days prior to the
date of the filing of this report, that the Company's disclosure controls and
procedures are effective to ensure that information required to be disclosed by
the Company in the reports filed or submitted by it under the Securities
Exchange Act of 1934, as amended, is recorded, processed, summarized and
reported within the time periods specified in the SEC's rules and forms, and
include controls and procedures designed to ensure that information required to
be disclosed by the Company in such reports is accumulated and communicated to
the Company's management, including the Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow timely decisions regarding required
disclosure.

(b) Changes in Internal Controls

There were no significant changes in the Company's internal controls or in other
factors that would significantly impact the effectiveness of these controls
subsequent to the date of such evaluation.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)(1) The following financial statements are incorporated in Item 8 of Part II
of this Report by reference to the consolidated financial statements
within Exhibit 13.1 to this Form 10-K:

Consolidated Statements of Income for the three years ended December 31,
2002

Consolidated Balance Sheets as of December 31, 2002 and 2001

Consolidated Statements of Cash Flows for the three years ended December
31, 2002

Consolidated Statements of Shareholders' Investment for the three years
ended December 31, 2002

Notes to Consolidated Financial Statements

Report of Independent Accountants

(a)(2) Financial statement schedules for the year ended December 31, 2002:

Schedule II - Valuation and Qualifying Accounts

-9-

Report of Independent Accountants on Financial Statement Schedule for
the two years ended December 31, 2002 (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 2002 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.

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
herewith.

10.4 Loan Agreement dated September 5, 2001, by and between the
Company and Mellon Bank, N.A., National City Bank of
Pennsylvania, and Fifth Third Bank (schedules and exhibits
omitted), filed as Exhibit 10.3 to the Company's Quarterly
Report on Form 10-Q for the period ended September 30, 2001,
and incorporated herein by reference.

-10-

Exhibit No. Description
----------- -----------

10.4(a) First Amendment to Loan Agreement dated February 20, 2002, by
and between the Company and Citizens Bank of Pennsylvania
(assignee of Mellon Bank, N.A.), National City Bank of
Pennsylvania and Fifth Third Bank, filed as Exhibit 10.4(a) to
the Company's Annual Report on Form 10-K for the year ended
December 31, 2001, and incorporated herein by reference.

10.4(b) Second Amendment to Loan Agreement dated April 25, 2002, by
and between the Company and Citizens Bank of Pennsylvania,
National City Bank of Pennsylvania and Fifth Third Bank, filed
as Exhibit 10.4(b) to the Company's Quarterly Report on Form
10-Q for the period ended June 30, 2002, and incorporated
herein by reference.

10.4(c) Third Amendment to Loan Agreement dated July 31, 2002, by and
between the Company and Citizens Bank of Pennsylvania,
National City Bank of Pennsylvania and Fifth Third Bank, filed
as Exhibit 10.4(c) to the Company's Quarterly Report on Form
10-Q for the period ended September 30, 2002, and incorporated
herein by reference.

10.4(d) Fourth Amendment to Loan Agreement dated March 24, 2003, by
and between the Company and Citizens Bank of Pennsylvania,
National City Bank of Pennsylvania and Fifth Third Bank, filed
herewith.

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.

10.7 Office Sublease Agreement dated August 6, 2001, by and between
the Company and Airside Business Park, L.P. (exhibits
omitted), filed herewith.

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 herewith.

13.1 Selected Financial Data, Management's Discussion and Analysis
of Financial Condition and Results of Operations, Consolidated
Financial Statements as of December 31, 2002 and for the three
years then ended, Report of Independent Accountants, and
Supplemental Financial Information, filed herewith and to be
included as the Financial Section of the Annual Report to
Shareholders for the year ended December 31, 2002.

21.1 Subsidiaries of the Company, filed herewith.

23.1 Consent of Independent Accountants, filed herewith.

99.1 Report of Independent Accountants on financial statement
schedule for the year ended December 31, 2002, filed herewith.

(b)(1) The Company filed no reports on Form 8-K during the fourth quarter of
2002.

-11-

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 28, 2003 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:

Signature Title Date
--------- ----- ----

/s/ Donald P. Fusilli, Jr. Director, President and Chief March 28, 2003
--------------------------------- Executive Officer
Donald P. Fusilli, Jr.

/s/ William P. Mooney Executive Vice President March 28, 2003
--------------------------------- and Chief Financial Officer
William P. Mooney

/s/ H. James McKnight Executive Vice President, March 28, 2003
--------------------------------- General Counsel and Secretary
H. James McKnight

/s/ Craig O. Stuver Senior Vice President, Corporate March 28, 2003
--------------------------------- Controller and Treasurer (Chief
Craig O. Stuver Accounting Officer)

/s/ Richard L. Shaw Chairman of the Board March 28, 2003
---------------------------------
Richard L. Shaw

/s/ Robert N. Bontempo Director March 28, 2003
---------------------------------
Robert N. Bontempo

/s/ Nicholas P. Constantakis Director March 28, 2003
---------------------------------
Nicholas P. Constantakis

Director March 28, 2003
---------------------------------
William J. Copeland

Director March 28, 2003
---------------------------------
Roy V. Gavert, Jr.

/s/ Thomas D. Larson Director March 28, 2003
------------------------------------
Thomas D. Larson

Director March 28, 2003
---------------------------------
John E. Murray, Jr.

-12-

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Donald P. Fusilli, Jr., certify that:

1. I have reviewed this annual report on Form 10-K of Michael Baker Corporation;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
Michael Baker Corporation as of, and for, the periods presented in this annual
report;

4. Michael Baker Corporation's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for Michael Baker Corporation and we
have:

a) designed such disclosure controls and procedures to ensure that
material information relating to Michael Baker Corporation, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being prepared;

b) evaluated the effectiveness of Michael Baker Corporation's disclosure
controls and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. Michael Baker Corporation's other certifying officer and I have disclosed,
based on our most recent evaluation, to Michael Baker Corporation's auditors and
the audit committee of Michael Baker Corporation's board of directors (or
persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect Michael Baker Corporation's ability to
record, process, summarize and report financial data and have identified for
Michael Baker Corporation's auditors any material weaknesses in internal
controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in Michael Baker Corporation's internal
controls; and

6. Michael Baker Corporation's other certifying officer and I have indicated in
this annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

/s/ Donald P. Fusilli, Jr. Dated: March 28, 2003
-----------------------------------------
Donald P. Fusilli, Jr.
President and Chief Executive Officer

-13-

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, William P. Mooney, certify that:

1. I have reviewed this annual report on Form 10-K of Michael Baker Corporation;

c) presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in Michael Baker Corporation's internal
controls; and

/s/ William P. Mooney Dated: March 28, 2003
-------------------------------------
William P. Mooney
Executive Vice President and
Chief Financial Officer

-14-

ADDITIONAL CERTIFICATIONS

Pursuant to 18 U.S.C. ss. 1350, the undersigned officer of Michael Baker
Corporation (the "Company"), hereby certifies that the Company's Annual Report
on Form 10-K for the year ended December 31, 2002 (the "Report") fully complies
with the requirements of Section 13(a) or 15(d), as applicable, of the
Securities Exchange Act of 1934 and that the information contained in the Report
fairly presents, in all material respects, the financial condition and results
of operations of the Company.

/s/ Donald P. Fusilli, Jr. Dated: March 28, 2003
-------------------------------------
Donald P. Fusilli, Jr.
President and Chief Executive Officer

/s/ William P. Mooney Dated: March 28, 2003
---------------------------------
William P. Mooney
Executive Vice President and
Chief Financial Officer

These additional certifications are being furnished solely pursuant to 18 U.S.C.
Section 1350, and are not being filed as part of the Report or as a separate
disclosure document.

-15-

MICHAEL BAKER CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the years ended December 31, 2002
(IN THOUSANDS)

-----------------------------------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
Additions
--------------------------------
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, 2002:

Allowance for doubtful accounts $1,508 $1,204 $0 $(287) $2,425
-----------------------------------------------------------------------------------------------------------------------------------

For the year ended December 31, 2001:

Allowance for doubtful accounts $ 26 $1,547 $0 $ (65) $1,508
-----------------------------------------------------------------------------------------------------------------------------------

* For the year ended December 31, 2002, the deduction amount primarily
reflects recoveries of allowances previously expensed as well as accounts
receivable balances written off during the year. For the year ended
December 31, 2001, the deduction is entirely related to accounts receivable
balances written off during the year.