For the quarter, Baker posted net income of $3.1 million, or $0.37 per diluted share, on total contract revenues of $125 million. This compares with a net loss of ($97,000), or ($0.01) per diluted share, on total contract revenues of $99 million in first-quarter 2003. The current quarter benefited from a particularly strong revenue and operating performance in the Engineering segment, relatively lower medical and retirement program benefit costs, and a non-recurring gain on the sale of shares held of an insurance firm. The 2003 first-quarter performance was adversely impacted by a number of operating and other factors, including project mix in the Energy segment, lower than anticipated volume and labor utilization rates in the Engineering segment, and the startup and other costs associated with the company's new information systems.
Revenues in the Engineering business were 28 percent greater than the same period last year, while operating income before corporate overhead allocations increased 154 percent. The major factor in the operating income improvement was a significant increase in labor utilization rates during the quarter compared to first-quarter 2003, the result of the substantial backlog of work the segment had to begin 2004, including the recently awarded, up to $750 million Program Management contract with the Federal Emergency Management Agency (FEMA). Operating margins, before corporate overhead, were 9.5 percent for first-quarter 2004, compared to 4.8 percent in first-quarter 2003.
Revenues in the Energy business were 23 percent higher, while operating income before corporate overhead allocations increased 85 percent, in first- quarter 2004 compared to first-quarter 2003. Contributing to these improved results were higher volume and improved margins in several of the segment's projects. Operating margins, before corporate overhead, were 4.8 percent for the current quarter 2004, compared to 3.2 percent in the year-ago period.
Both the Engineering and Energy segments' operating results benefited from the company's continuing cost containment efforts, including the adjustments in the medical and retirement plans mentioned earlier.
Net interest expense was ($113,000) for the current quarter, compared to net interest expense of ($82,000) for the prior period. At quarter's end, the company had borrowings of $3.9 million, a reduction of approximately $9.6 million from year-end levels.
Total backlog for the company was $1.4 billion at March 31, 2004, compared to $721 million at year-end 2003. The first-quarter 2004 backlog includes approximately $740 million for the FEMA contract.
Commenting on the results, President and Chief Executive Officer Donald P. Fusilli, Jr., said, "Michael Baker Corporation is committed to our strategy of focusing on the Engineering and Energy business to deliver improved financial performance to our shareholders. We are pleased with these results, as they indicate the potential this strategy has for our company. The backlog of work we built in both segments during 2003 and early 2004 are yielding the expected earnings growth. Engineering continues to receive contract awards across our focused practice lines, especially in the Federal sector. Market conditions in the Energy sector are improving with a stronger outlook for investment in new projects, which we believe will benefit both our onshore managed services and international O&M businesses. We remain optimistic about our 2004 performance, which we expect to be in line with our previously provided guidance."
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