1 m ichael b aker c orporation the oil service conference february 20, 2003 engineering & energy
TRANSCRIPT
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MICHAEL BAKER CORPORATION
The Oil Service ConferenceFebruary 20, 2003
Engineering & Energy
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Engineering & EnergySafe HarborSafe Harbor
This presentation will contain information related to events which may occur in the future. These
forward-looking statements may include future business trends, revenue and earnings forecasts,
and acquisition and corporate finance activity. These statements are subject to market, regulatory, operating and other risks and uncertainties and, as
a result, actual results may vary. Such forward-looking statements are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995.
This presentation will contain information related to events which may occur in the future. These
forward-looking statements may include future business trends, revenue and earnings forecasts,
and acquisition and corporate finance activity. These statements are subject to market, regulatory, operating and other risks and uncertainties and, as
a result, actual results may vary. Such forward-looking statements are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995.
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Engineering & EnergySummary / HighlightsSummary / Highlights
Focused on Two Segments Energy and Engineering
Leader in Professional Services Oil & Gas Production O&M
Transportation and Civil Infrastructure Engineering
Energy Segment Refocused Following
Management Transition
Debt-free, Leverageable Balance Sheet
Added to Russell 2000®
Currently Valued at 3x EBITDA
Focused on Two Segments Energy and Engineering
Leader in Professional Services Oil & Gas Production O&M
Transportation and Civil Infrastructure Engineering
Energy Segment Refocused Following
Management Transition
Debt-free, Leverageable Balance Sheet
Added to Russell 2000®
Currently Valued at 3x EBITDA
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Engineering & Energy
Performance Record of Core BusinessesPerformance Record of Core Businesses
$150 $162 $165 $179$203
$228 $244
$39$43 $55
$69
$80
$121
$158
$93$127$115 $134
$43$42
$72 $45
$402
$199
$136$157
$349
$205$189
$283
$210$248
$179
$0
$100
$200
$300
$400
$500
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Dollars in Millions
Engineering Energy
Co
nti
nu
ing
Bu
sin
es
s R
ev
en
ue
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Engineering & EnergyGlobal ReachGlobal Reach
Bangkok, ThailandBangkok, Thailand
Abu Dhabi, UAEAbu Dhabi, UAE
London, EnglandLondon, England
Caracas, VenezuelaCaracas, Venezuela
Mexico City, MexicoMexico City, Mexico
Lagos, NigeriaLagos, Nigeria
Pittsburgh, Pa. (HQ)Pittsburgh, Pa. (HQ)
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Engineering & Energy
Key Customer RelationshipsKey Customer Relationships
Engineering Engineering Energy Energy
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Engineering & Energy
Core Energy Service OfferingsCore Energy Service Offerings
Oil & Gas Operations & Maintenance Operations Engineering Competency-Based Training Supply Chain Management Total Asset Management
Oil & Gas Operations & Maintenance Operations Engineering Competency-Based Training Supply Chain Management Total Asset Management
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Engineering & EnergyMarkets and ServicesMarkets and Services
HoustonHouston
LafayetteLafayette
LondonLondon
LagosLagos
CaracasCaracas
BangkokBangkok
AnchorageAnchorage
Supply Chain ManagementSupply Chain Management
O&M ServicesO&M Services
ManpowerManpower
TrainingTraining
RecruitingRecruiting
Major and Large Independent Oil & Gas Producers
Major and Large Independent Oil & Gas Producers
LOC
ATIO
N
LOC
ATIO
N
SE
RV
ICE
S
SE
RV
ICE
SCUSTOMERSCUSTOMERS Abu DhabiAbu DhabiOperations EngineeringOperations Engineering
Total Asset ManagementTotal Asset Management
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Engineering & Energy
Energy Differentiation of ServicesEnergy Differentiation of Services
Integrated Services and Solutions for Global O&G Upstream Production Operations
OPCOSM and Total Asset Management (TAM)
Competency-Based Training and Nationalization Programs
Integrated Services and Solutions for Global O&G Upstream Production Operations
OPCOSM and Total Asset Management (TAM)
Competency-Based Training and Nationalization Programs
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Engineering & EnergyEnergy Growth DriversEnergy Growth Drivers
ClientBaker Fixed Fee Income Annual Performance Bonus Shared Cost Savings
Reduced Operating Costs Increased Revenues Better Efficiencies
OPCOSM
Value CreationShared Savings
Leveraged Economies of Scale
Flexibility Reliability Innovation Asset Utilization Information Regulatory Compliance Safety
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Engineering & Energy
Our OPCO/TAM Potential MarketOur OPCO/TAM Potential Market
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Engineering & EnergyOur OPCO/TAM-Served MarketOur OPCO/TAM-Served Market
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Engineering & EnergyTarget Business ModelTarget Business Model
72.0% 70.0%
40.0%
28.0%
60.0%
30.0%
0.0%
25.0%
50.0%
75.0%
100.0%
2000 2001 Targets
% o
f E
ne
rgy
To
tal C
on
tra
ct
Re
ve
nu
es
OPCO All Other Services (Dom. & Int'l.)
OPCO/TAM@ 10-14%Margins
All Others@ 5-8%Margins
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Engineering & EnergyDeepwater OpportunitiesDeepwater Opportunities
Largest Supplier of Manpower to Deepwater GOM
Ops Engineering Support to New Facilities Worldwide
Largest Supplier of Manpower to Deepwater GOM
Ops Engineering Support to New Facilities Worldwide
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Engineering & Energy
The Energy Value StepsThe Energy Value Steps
Ops. Eng.
Training
Contract Labor
Supply Chain Management
OPCO / TAMV
AL
UE
TIME
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Engineering & Energy
Core Engineering Service OfferingsCore Engineering Service Offerings
Transportation Engineering Services Highways Bridges (Structures) Program Management Asset Management
Civil InfrastructureServices DoD / Federal Markets Water/Waste Water Cold Region Pipelines Asset Management
Transportation Engineering Services Highways Bridges (Structures) Program Management Asset Management
Civil InfrastructureServices DoD / Federal Markets Water/Waste Water Cold Region Pipelines Asset Management
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Engineering & EnergyFederal Budget ImpactFederal Budget Impact
1999 2000 2001 2002 2003 (E) 2004 (E)
? ?
Transportation Funding (Highways, Transit, Aviation)
Funding Redirects (Homeland Security, Emergency Response, FEMA, EPA, INS, etc.)
TEA-21 Reauthorization
• Baker Strengths: Highways, Bridges, Transit, Aviation
• Baker Strengths: CCMP, DoD, FEMA, Pipelines (OPS), Aviation (TSA)
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Engineering & EnergyEngineering HighlightsEngineering Highlights
New Work Added $290mm in 2001
$258mm in 2002
Have $118mm in Open-End Contracts with
Department of Defense/Federal Programs
Won $10.4mm GIS Contract for NYC DEP
Successful Entry into Texas Market
New Work Added $290mm in 2001
$258mm in 2002
Have $118mm in Open-End Contracts with
Department of Defense/Federal Programs
Won $10.4mm GIS Contract for NYC DEP
Successful Entry into Texas Market
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Engineering & Energy
Total RevenuesTotal Revenues
$390.7$403.2
$506.0
$401.8
$348.7
$281.9
$0
$100
$200
$300
$400
$500
$600
1999 2000 2001 2002 Est.
Do
lla
rs i
n M
illi
on
s
Total Reported Revenues Engineering Energy
$400-$410m
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Engineering & Energy
Operating Performance(in Thousands of $)
Operating Performance(in Thousands of $)
Adjusted for $1 Million Non-Recurring ChargeAdjusted for $1 Million Non-Recurring Charge
1999 2000 2001TOTAL CONTRACT REVENUES
Total Reported $506,012 $390,710 $403,222Less Non-Core 223,236 41,625 1,372
ENERGY 80,158 120,708 158,236ENGINEERING 202,618 228,377 243,614
Total Core 282,776 349,085 401,850
TOTAL OPERATING INCOME (Pre-Corp. O/H and I/C Ins. Premiums)Total Reported (511) 17,543 31,436% -.1% 4.5% 7.8%
ENERGY 4,252 9,759 12,842% 6.6% 8.1% 8.1%ENGINEERING 12,544 16,007 18,582% 6.2% 7.0% 7.6%
Total Core $17,796 $25,766 $31,424% 6.4% 7.4% 7.8%
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Engineering & Energy
Cash Flow(in millions of $)
Cash Flow(in millions of $)
1999 2000 2001Net Income $(8.2) $5.4 $11.2
Depreciation & Amortization 7.4 7.1 5.2Other 1.9 (0.1) 3.2
Cash from Operations 1.1 12.4 19.6
Capital Expenditures (5.3) (2.9) (4.1)Acquisition/Investments (4.9) (9.0) 9.0Funding of Litigation Escrow - - (12.7)Share Repurchase - - (0.4)Proceeds from Sale of Assets/Stock Options - 15.0 0.3NET Borrowings (Repayments) 7.8 (10.1) (2.3)
NET Increase (Decrease) in Cash $(1.3) $5.4 $9.4
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Engineering & Energy
Balance Sheet(in millions of $)
Balance Sheet(in millions of $)
1999 2000 2001ASSETSCash $3.7 $9.1 $18.5Short-Term Investment - 9.0 -A/R 77.4 67.7 67.6Cost in Excess of Billing 26.6 20.5 25.3
PPE 17.1 10.1 10.3Intangibles 14.6 10.8 9.8Other 15.6 10.2 20.1
$155.0 $137.4 $151.6LIABILITIESCurrent Portion LTD 3.5 2.2 -Trade A/P 28.9 25.7 21.9Accrued Other 62.9 59.1 68.2
Long-Term Debt 14.9 0.1 -
Owners’ Equity 44.8 50.3 61.5$155.0 $137.4 $151.6
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Engineering & EnergyEPS GrowthEPS Growth
1999 2000 2001 2002 Est.Reported
EPS $(1.00) $.65 $1.33 $1.11 - $1.15
Pro Forma EPSCore Operating Income 17,796 25,766 31,424Less Corporate Overhead (7,664) (7,715) (11,058)Operating Income 10,132 18,051 20,366
Provisions for Income Tax (47% for 1999, 51% for 2001 and 45.5% for 2001) 4,764 (9,206) (9,267)
5,370 8,845 11,099
Pro Forma EPS $0.66 $1.07 $1.32 $1.11 - $1.15
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Engineering & Energy
Stock Performance (24 mos.)Stock Performance (24 mos.)
$8.30
$12.26
$15.00$15.20
$13.60$13.38 $14.25
$14.00
$12.70
$14.00$13.85
$11.55$10.00
$8.93
$14.90
$15.48
$15.00$14.25
$13.75
$10.30
$10.00 $9.78
$10.95
$8.60$8.45
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
$16.00
Clo
sin
g S
ha
re P
ric
e
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Engineering & EnergyOwnershipOwnership
Top Holders Shares
Baker ESOP 3,247,039
Dimensional Fund Advisors 458,814
Dalton, Greiner 451,500
Wellington Management 406,000
CL King & Associates 309,900
Smith (Donald) & Co. 308,100
Corbyn Investment Management 288,587
Barclay Global Investors 285,239
Munder Capital Management 200,575
Tontine Management L.L.C. 127,500
Emerald Advisers 122,800
Brandywine Asset Management 101,500
Top Holders Shares
Baker ESOP 3,247,039
Dimensional Fund Advisors 458,814
Dalton, Greiner 451,500
Wellington Management 406,000
CL King & Associates 309,900
Smith (Donald) & Co. 308,100
Corbyn Investment Management 288,587
Barclay Global Investors 285,239
Munder Capital Management 200,575
Tontine Management L.L.C. 127,500
Emerald Advisers 122,800
Brandywine Asset Management 101,500
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Engineering & EnergyFinancial HighlightsFinancial Highlights
Eliminated Series B Super Voting Shares
Secured $40 Million Credit Facility
Added 8 New Institutional Holders
Added to Russell 2000®
Reactivated Stock Repurchase Program
Eliminated Series B Super Voting Shares
Secured $40 Million Credit Facility
Added 8 New Institutional Holders
Added to Russell 2000®
Reactivated Stock Repurchase Program
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Engineering & EnergyFour-Point StrategyFour-Point Strategy
Maximize the growth potential of the Energy business
Optimize the overall performance of the Engineering business
Innovate by investing to enhance service delivery methods
Leverage the relationships and skills of the entire company
Maximize the growth potential of the Energy business
Optimize the overall performance of the Engineering business
Innovate by investing to enhance service delivery methods
Leverage the relationships and skills of the entire company
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Engineering & EnergyConclusionConclusion Energy Segment Refocused Following
Management Transition
Rapidly Changing Energy Market Favoring Increased Outsourcing
Transportation Infrastructure and DoD/Federal Markets Providing Opportunity
Debt-free, Leverageable Balance Sheet
Currently Valued at 3x EBITDA
Energy Segment Refocused Following Management Transition
Rapidly Changing Energy Market Favoring Increased Outsourcing
Transportation Infrastructure and DoD/Federal Markets Providing Opportunity
Debt-free, Leverageable Balance Sheet
Currently Valued at 3x EBITDA
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MICHAEL BAKER CORPORATION
The Oil Service ConferenceFebruary 20, 2003
Engineering & Energy