10-K

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, 2010

Commission file number 1-6627

Michael Baker Corporation

(Exact name of registrant as specified in its charter)

Pennsylvania	25-0927646
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
Airside Business Park, 100 Airside Drive, Moon Township, PA	15108
(Address of principal executive offices)	(Zip Code)

Registrant’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	NYSE Amex

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes         No   ü  

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.  Yes          No   ü  

Indicate by check mark whether the registrant (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 registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   ü    No        

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes         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 registrant’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.         

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer          Non-accelerated filer	Accelerated filer    ü        Smaller reporting company
(Do not check if a smaller reporting company)

Indicate by check mark if the registrant is a shell company of the Act (as defined in Rule 12b-2 of the Act).
Yes         No   ü  

The aggregate market value of Common Stock held by non-affiliates as of June 30, 2010 (the last business day of the Company’s most recently completed second fiscal quarter) was $285.4 million. This amount is based on the closing price of the Company’s Common Stock on the New York Stock Exchange Amex for that date. Shares of Common Stock held by executive officers and directors of the Company and by the Company’s 401(k) plan are not included in the computation.

As of February 28, 2011, the Company had 9,222,814 outstanding shares of Common Stock.

DOCUMENTS INCORPORATED BY REFERENCE

Document	Parts of Form 10-K into which Document is incorporated
Financial Section of Annual Report to Shareholders for the year ended December 31, 2010	I, II
Proxy Statement to be distributed in connection with the 2011 Annual Meeting of Shareholders	III

MICHAEL BAKER CORPORATION
FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2010

TABLE OF CONTENTS

			Page
PART I
	Item 1.	BUSINESS		1
	Item 1A.	RISK FACTORS		6
	Item 1B.	UNRESOLVED STAFF COMMENTS		12
	Item 2.	PROPERTIES		12
	Item 3.	LEGAL PROCEEDINGS		12
	Item 4.	(REMOVED AND RESERVED)		12
PART II
	Item 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES		13
	Item 6.	SELECTED FINANCIAL DATA		15
	Item 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		15
	Item 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		15
	Item 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA		15
	Item 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE		15
	Item 9A.	CONTROLS AND PROCEDURES		15
	Item 9B.	OTHER INFORMATION		18
PART III
	Item 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE		18
	Item 11.	EXECUTIVE COMPENSATION		18
	Item 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS		18
	Item 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE		19
	Item 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES		19
PART IV
	Item 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES		20
EX-10.1
EX-10.5.H
EX-13.1
EX-21.1
EX-23.1
EX-23.2
EX-31.1
EX-31.2
EX-32.1
EX-99.1
EX-99.2
EX-99.3
EX-99.4

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 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: the events described in the “Risk Factors” section of this Form 10-K; 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”) and/or other U.S. Federal Government Departments and Agencies; changes in anticipated levels of government spending on infrastructure, including the Safe, Accountable, Flexible, Efficient Transportation Equity Act — A Legacy for Users (“SAFETEA-LU”) and the American Recovery and Reinvestment Act of 2009; changes in loan relationships or sources of financing; changes in management; changes in information systems; and the restatement of financial results. 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.

General

In this Form 10-K, the terms “the Company,” “we,” “us,” or “our” refer to Michael Baker Corporation and its subsidiaries collectively. We were founded in 1940 and organized as a Pennsylvania corporation in 1946. Today, through our operating subsidiaries, we provide engineering design and related consulting services expertise for public and private sector clients worldwide. Our business is principally in the United States of America (“U.S.”).

LPA Acquisition.  On May 3, 2010, we acquired 100% of the outstanding shares of The LPA Group Incorporated and substantially all of its subsidiaries and affiliates (“LPA”), an engineering, architectural and planning firm specializing primarily in the planning and design of airports, highways, bridges and other transportation infrastructure, headquartered in Columbia, South Carolina. LPA’s results are reflected in our Transportation segment for the period from May 3, 2010 through December 31, 2010.

Energy Disposition.  Our former Energy segment (“Baker Energy”) provided a full range of services for operating third-party oil and gas production facilities worldwide. On September 30, 2009, we divested substantially all of our subsidiaries that pertained to our former Energy segment. Additionally, we sold our interest in B.E.S. Energy Resources Company, Ltd., an Energy company, on December 18, 2009 to J.S. Technical Services Co., LTD., which is owned by our former minority partner in B.E.S. As such, the Energy business has been reclassified into “discontinued operations” in our accompanying consolidated financial statements. The results for the years ended December 31, 2010, 2009 and 2008 give effect to the dispositions.

Business Segments

Our business segments have been determined based on how executive management makes resource decisions and assesses our performance. Our two reportable segments are Transportation and Federal. Information regarding these business segments is contained in our “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and in the “Business Segments” note to our consolidated financial statements, which are included within Exhibit 13.1 to this Form 10-K. Such information is incorporated herein by reference.

The Transportation segment provides services for Transportation, Aviation, and Rail & Transit markets, and the Federal segment provides services for Defense, Environmental, Architecture, Geospatial Information Technology, Homeland Security, Municipal & Civil, Pipelines & Utilities and Water markets. Among the services the Company provides to clients in these markets are project and program management, design-build (for which we only provide the design portion of services), construction management and inspection, consulting, planning, surveying, mapping, geographic information systems, architectural, interior design, site planning and design, constructability reviews, site assessment and restoration, strategic regulatory analysis and compliance.

We have designed a wide range of projects, such as highways, bridges, airports, busways, corporate headquarters, data centers, correctional facilities and educational facilities. We also provide services in the water/wastewater, pipeline, emergency and consequence management, resource management, and telecommunications markets. Our business is susceptible to upward and downward fluctuations in federal and state government spending.

Our transportation services have benefited from the U.S. federal government’s Safe, Accountable, Flexible, Efficient Transportation Equity Act — A Legacy for Users (“SAFETEA-LU”) legislation in recent years and the American Recovery and Reinvestment Act of 2009 (Stimulus). Additionally, we have benefited from increased federal government spending in the Department of Defense (“DoD”) and the Department of Homeland Security (“DHS”), including FEMA, US-VISIT and the U.S. Coast Guard. We partner with construction contractors to pursue selected design-build contracts which continue to be a growing project delivery method within the transportation and civil infrastructure markets.

According to the annual listings published in “The 2010 Top 500 Design Firms Sourcebook” by Engineering News-Record (“ENR”) magazine and Building Design & Construction’s report “2010 Giants: Top 300 AEC Firms” based on

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total engineering revenues for 2009, we ranked as follows (as these rankings were compiled prior to our acquisition of LPA, their rankings are also listed as appropriate):

• Top 500 Design Firms — 36th (LPA ranked 119th)	• Green Design Multi-Unit Residential Buildings — 2nd
• Transportation — 14th (LPA ranked 30th)	• Top 100 “Pure Designers” — 16th
• Bridges — 10th	• Top Construction Management-for-fee Firms — 25th
• Highways — 22nd	• Top Program Management Firms — 37th
• Airports — 24th (LPA ranked 17th)	• Top Environmental Firms — 71st
• Water — 13th	• Top 150 Global Design Firms — 77th
• Multi-Unit Residential Buildings — 13th	• Engineers/Architects — 17th
• Distribution/Warehouse Buildings — 5th	• Top 100 Government Design Firms — 15th
• Top 100 Green Design Firms — 16th

Primary Markets/Services

Many of the ancillary services we offer are provided to the entire spectrum of markets we serve. These services include, but are not limited to, geographic information systems, geotechnical engineering and design, services related to the National Environmental Policy Act (“NEPA”), project and program management, construction management and construction services, and general architectural and engineering consulting services. The listing below describes, in more detail, services provided to the specific markets served by our Transportation segment and Federal segment.

Transportation

Aviation:

• Airfield Lighting, Signing & Navigation Aide Systems	• Master Planning & Airport Layout Plans
• Airport Facilities Planning & Design	• Roadway & Parking Facility Design
• De-icing Facilities	• Runway, Taxiway & Apron Design
• Environmental Planning & Design

Rail & Transit (Public Transit, High Speed Rail, Passenger Rail, Freight Rail):

• Architecture & Facilities Infrastructure Design	• Planning
• Environmental	• Pre-Project Consulting
• Engineering Design	• Rail Systems Engineering
• Fleet & Vehicles	• Value Engineering

Transportation:

• Bike & Pedestrian	• Intelligent Transportation Systems
• Bridge Design	• Planning
• Bridge Inspection & Training	• Public Involvement & Social Media
• Cost Estimation	• Software Development
• Ecosystem Restoration	• Toll Roads Traffic Planning, Design & Analysis
• Highway Design

2

Federal

Architecture:

• Building Information Modeling (“BIM”)	• Landscape Architecture
• Computer Aided Facility Management	• Maintenance Management Systems
• Condition Assessments	• Master Planning
• Electrical & Mechanical Engineering	• Site, Structural & Civil Engineering
• Feasibility Studies	• Sustainable Design
• Fire Protection Engineering	• Urban Design
• Interior Design & Space Planning

Defense:

• Conservation Conveyance	• Installation/Site Restoration
• Facilities Planning, Design & Support	• Military Construction Program Support

Environmental:

• Cultural Resources	• Health, Safety & Environmental
• Environmental Engineering, Permitting, Investigation & Restoration	• Multi-Media Compliance
• Environmental Program Management	• Natural Resources
• Environmental Risk Assessment	• Petroleum Storage Tank Management

Geospatial Information Technology:

• Application Design & Development	• Mobile LiDAR (“Light Detection And Ranging”) Data Acquisition
• Asset Management	• Surveying, Mapping, Data Acquisition & Processing
• Consulting	• Statewide Broadband Mapping
• Data Access & Visualization	• Staffing Support
• Database Development	• Systems Integration
• Global Positioning System Services

Homeland Security:

• Damage Forecasting & Loss Estimation	• Interagency Coordination & Public Outreach
• Debris Management	• Logistics
• Emergency Operations/Response Planning	• Resource Inventories
• Evacuation & Sheltering Plans	• Risk-Based Strategic Planning
• Hazard Mitigation Planning	• Security, Threat, Vulnerability & Risk Assessments
• Homeland Security Asset Management	• Training & Exercises
• Infrastructure Damage Assessments
• Infrastructure Protection Planning & Design

Municipal & Civil:

• Environmental Engineering Compliance	• Surface & Deep Mining Permitting & Reclamation
• Hydrologic & Hydraulic Models & Studies	• Water/Wastewater Conveyance & Treatment
• Municipal Infrastructure Engineering
• Site Development Plans & Permitting

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Pipelines & Utilities:

• Cold Region Engineering	• Pipeline Design and Hydraulic Analysis
• Competency Based Training	• Route Alignment and Feasibility Studies
• Failure Investigation and Analysis	• Telecommunications Studies, Design & Inspection
• Oil & Gas Pipeline Services	• Trans-Ocean Submarine Cable Services
• Operations Engineering	• Wireless Communications Services
• Outside Plant Services

Water:

• Flood Control	• Stormwater Management
• Flood Insurance Rate Maps & Studies	• Stream Stabilization/Restoration
• Floodplain Delineation & Studies	• Water Quality & TMDL Services
• Floodplain Management & River Engineering	• Water Resources Planning & Asset Management
• Hydrologic and Hydraulic Modeling	• Watershed Management
• Source Water Supply & Protection	• Wetlands

Strategy

Our strategy is based on four concepts — growth, profitability, innovation, and sustainability.

Growth — We seek to grow both organically and through strategic acquisitions. Organically, we will seek to grow by securing larger and more complex projects and programs that correspond well with our existing knowledge and capabilities, primarily in the United States. For example, we have begun to expand beyond the Departments of Defense and Homeland Security and are now providing services to other federal departments and agencies such as the Departments of Energy and State. Furthermore, we will seek to provide additional and related services to existing clients; for example, offering construction management services to a State Department of Transportation for which we are currently providing only design services. With regard to acquisitions, we will seek opportunities that expand our skill sets and/or our geographical presence in our core businesses.

Profitability — We seek to consistently improve the profitability of our businesses through long-term, performance-based contracting arrangements with our clients. This strategy is evident in our current mix of contracts. We will also be pursuing projects that utilize alternative delivery methods, such as design-build, which traditionally carry a higher margin as well as performance incentives.

Innovation — We strive to constantly and consistently innovate ways to deliver services to our clients. For example, in both our Transportation and Architecture service areas, we are partnering with preferred contractors and pursuing an increased level of design-build contracts, as opposed to the traditional design-bid-build method of project delivery. Additionally, we utilize mapping and geographic information technology in a number of innovative ways.

Sustainability — We are aggressively incorporating long-term environmental, social and economic goals into our daily activities and culture to achieve improved efficiencies, performance and prosperity. As such, we are working methodically to build the appropriate tools and applications to help us succeed in this endeavor and to better serve our clients and the communities where we live and work.

Domestic and Foreign Operations

For the years ended December 31, 2010, 2009 and 2008, our percentages of total contract revenues derived from work performed for U.S.-based clients within the U.S. totaled 95%, 90% and 92%, respectively. The majority of our domestic revenues comprises engineering work performed in the eastern region of the U.S.

Contract Backlog

Information relating to the contract backlog is set forth in the “Contract Backlog” section of Exhibit 13.1 to this Form 10-K. Such information is incorporated herein by reference.

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Significant Customers

Contracts with various branches, departments and agencies of the U.S. federal government accounted for 37%, 49% and 52% of our total contract revenues for the years ended December 31, 2010, 2009 and 2008, respectively. Our contracts with FEMA accounted for approximately 11%, 15% and 20% of our revenues in 2010, 2009 and 2008, respectively.

Competitive Conditions

Our business is highly competitive with respect to all principal services we offer. We compete with numerous public and private firms that provide some or all of the services that we provide. Our competitors range from large national and international architectural, engineering and construction services firms to a vast number of smaller, more localized firms. Our competitors vary based on the type of the services being proposed.

The competitive conditions in our 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. We 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.

We believe that the principal competitive factors in the areas of services we offer are quality of service, reputation, experience, technical proficiency, local geographic presence and cost of service. We believe that we are well positioned to compete effectively by emphasizing the quality of services we offer and our widely known reputation in providing professional engineering services. We are also dependent upon the availability of staff and our ability to recruit qualified employees.

Seasonality

Based upon our experience, our total contract revenues and income from operations have historically been slightly lower for our first and fourth fiscal quarters than for the remaining quarters due to the effect of winter weather conditions, particularly in the Mid-Atlantic and Midwest regions of the United States. Typically, these seasonal weather conditions unfavorably impact our performance of construction management services.

Personnel

As of December 31, 2010, we had 2,883 total employees, of which our operations had 2,817 employees and our corporate staff included 66 employees. Of our total employees, 2,517 were full-time and 366 were part-time. We believe that our relations with employees are good.

Executive Officers

The following represents a listing of our executive officers as of February 28, 2010:

Bradley L. Mallory — Age 58; President and Chief Executive Officer of Michael Baker Corporation since February 2008. Formerly Chief Operating Officer of Michael Baker Corporation from October 2007 to February 2008; President of Michael Baker Jr., Inc. from November 2003 to October 2007; Senior Vice President of Michael Baker Jr., Inc. from March 2003 to October 2003; and Secretary of Transportation of the Commonwealth of Pennsylvania from 1995 to 2003.

Michael J. Zugay — Age 59; Joined Michael Baker Corporation in February 2009 and has served as Executive Vice President and Chief Financial Officer since April 2009. Prior to joining Michael Baker Corporation, Mr. Zugay was Senior Vice President, Chief Financial Officer and Corporate Secretary of iGate Corporation from April 2001 to March 2008 and held various other positions at iGate from March 1995 to April 2001. Prior to that he served as President and CEO of Bliss-Salem, Inc.

H. James McKnight — Age 66; Executive Vice President, Chief Legal Officer and Corporate Secretary since June 2000. Mr. McKnight has been employed by Michael Baker Corporation since 1995, serving as Senior Vice President, General Counsel and Secretary from 1998 to 2000 and as Vice President, General Counsel and Secretary from 1995 to 1998.

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Joseph R. Beck — Age 66; Senior Vice President of Corporate Development since September 2008 and Director of Corporate Development since March 2008. Mr. Beck joined Michael Baker Corporation as an Operations Manager in June 2004. Prior to joining Michael Baker Corporation, Mr. Beck was a private consultant and an adjunct professor at the University of Pittsburgh from 2002 to 2004 and was a Senior Vice President with The IT Group from 1994 to 2002.

David G. Higie — Age 54; Vice President of Corporate Communications and Investor Relations for Michael Baker Corporation since 2006. Mr. Higie joined Michael Baker Corporation in 1996 as Director of Corporate Communications.

James M. Kempton — Age 36; Vice President, Corporate Controller and Treasurer of Michael Baker Corporation since April 2009, Vice President and Corporate Controller since December 2008 and Assistant Corporate Controller from January 2007 through November 2008. Mr. Kempton was previously employed with Ernst and Young from 1997 to 2007 in various positions, including Senior Manager in the Assurance and Advisory Business Services practice.

Samuel C. Knoch — Age 54; Vice President and Chief Risk Officer since March 2009. Prior to joining Michael Baker Corporation, Mr. Knoch was Chief Financial Officer from August 1996 to October 2008 and Treasurer from April 1997 to October 2008 at Tollgrade Communications, Inc. Prior to that appointment, he served as Corporate Controller and Director of Internal Audit at Amsco International, Inc. from July 1993 to August 1996.

G. John Kurgan — Age 61; Executive Vice President since 2007. Mr. Kurgan was previously a Senior Vice President of Michael Baker Jr., Inc. from 1995 to 2007. Mr. Kurgan has held various positions since joining Michael Baker Jr., Inc. in 1974.

Edward L. Wiley — Age 67; Executive Vice President since 2005. Mr. Wiley has also served as an Executive Vice President of Michael Baker Jr., Inc. Mr. Wiley has held various positions since joining Michael Baker Jr., Inc. in 1965.

Michael J. Ziemianski — Age 53; Vice President and Chief Resource Officer since June 2008. Mr. Ziemianski joined Michael Baker Corporation in 2006 as Manager of Corporate Recruiting. Prior to joining Michael Baker Corporation, Mr. Ziemianski was Director of Human Resources at Rapidigm Inc. from 2001 to 2006.

Our executive officers serve at the discretion 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.

Available Information

Our Internet website address is www.mbakercorp.com. We post our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports to our website as soon as reasonably practicable after such reports are electronically filed with the Securities and Exchange Commission (“SEC”). We make these reports available on our website free of charge. These reports and any amendments to them are also available at the SEC’s website, www.sec.gov. We also post press releases, earnings releases, the Code of Ethics for Senior Officers, the Code of Business Conduct, the Statement of Policy with Respect to Related Party Transactions and the Charters related to the Governance and Nominating Committee, Audit Committee, Environmental, Health, Safety and Compliance Committee and Compensation Committee to our website. The information contained on our website is not incorporated by reference into this Form 10-K and shall not be deemed “filed” under the Securities Exchange Act of 1934, as amended.

Item 1A.  RISK FACTORS.

In addition to other information referenced in this report, we are subject to a number of specific risks outlined below. If any of these events or uncertainties actually occurs, our business, financial condition, results of operations and cash flows, and/or the market price of our Common Stock could be materially affected. You should carefully consider the following factors and other information contained in this Annual Report on Form 10-K before deciding to invest in our Common Stock.

Our revenues are primarily derived from the public sector. Changes and fluctuations in the public sector’s spending priorities, or the loss of business from one of these key customers, could materially affect our future revenue and growth prospects.

Our primary customers, which compose a substantial portion of our revenue and backlog, include agencies of the U.S. federal government and state and local governments and agencies that depend on funding or partial funding

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provided by the U.S. federal government. Consequently, any loss of one or more of these key customers as well as any significant changes or fluctuations in the government’s spending priorities as a result of policy changes or economic downturns may directly affect our future revenue streams. Legislatures may appropriate funds for a given project on a year-by-year basis, even though the project may take more than one year to perform. As a result, at the beginning of a project, the related contract may only be partially funded, and additional funding is committed only as appropriations are made in each subsequent year. These appropriations, and the timing of payment of appropriated amounts, may be influenced by, among other things, the state of the economy, competing political priorities, curtailments in the use of government contracting firms, increases in raw material costs, delays associated with a lack of a sufficient number of government staff to oversee contracts, budget constraints, the timing and amount of tax receipts, and the overall level of government expenditures. Additionally, reduced spending by any of those key customers may increase competitive pressure within our industry which could result in lower revenues and margins in the future.

Unpredictable economic cycles or uncertain demand for our engineering capabilities and related services could cause our revenues to fluctuate or contribute to delays or the inability of customers to pay our fees.

Demand for our services is affected by the general level of economic activity in the markets in which we operate, both in the U.S. and internationally. Our customers, particularly our private sector customers, and the markets in which we compete to provide services, are likely to experience periods of economic decline from time to time. Adverse economic conditions may decrease our customers’ willingness to make capital expenditures or otherwise reduce their spending to purchase our services. In addition, adverse economic conditions could alter the overall mix of services that our customers seek to purchase, and increased competition during a period of economic decline could result in us accepting contract terms that are less favorable to us than we might be able to negotiate under other circumstances. Adverse economic conditions, changes in our mix of services or a less favorable contracting environment may cause our revenues and margins to decline. Moreover, our customers may experience difficult business climates from time to time that may decrease our clients’ ability to obtain financing and could cause delays or failures to pay our fees as a result.

Our ability to recruit, train, and retain professional personnel of the highest quality is a competitive advantage. Our future inability to do so would adversely affect our competitiveness.

Our contract obligations in our markets are performed by our staff of well-qualified engineers, technical professionals, and management personnel. Our future growth potential requires the effective recruiting, training, and retention of these employees. Our inability to retain these well-qualified personnel and recruit additional well-qualified personnel would adversely affect our business performance and limit our ability to perform new contracts.

If we are unable to accurately estimate and control our contract costs, then we may incur losses on our contracts, which could decrease our operating margins and significantly reduce or eliminate our profits.

It is important for us to control our contract costs so that we can maintain positive operating margins. Recently, more of our business is being conducted on a fixed price basis. Under our fixed-price contracts, we receive a fixed price regardless of what our actual costs will be. Consequently, we realize a profit on fixed-price contracts only if we control our costs and prevent cost over-runs on the contracts. Under our time-and-materials contracts, we are paid for labor at negotiated hourly billing rates and for other expenses. Profitability on our contracts is driven by billable headcount and our ability to manage costs. Under each type of contract, if we are unable to control costs, we may incur losses on our contracts, which could decrease our operating margins and significantly reduce or eliminate our profits.

Due to the nature of the work we perform to complete our contracts, we are subject to potential liability claims and contract disputes.

Our contracts often involve projects where design, construction or systems failures, or accidents, could result in substantially large or punitive damages for which we could have liability. Our practice involves professional judgments regarding the planning, design, development, construction, operations and management of facilities and public infrastructure projects. Although we have adopted a range of insurance, risk management, safety and risk avoidance programs designed to reduce potential liabilities, there can be no assurance that such programs will protect us fully from all risks and liabilities.

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If we miss a required performance standard, fail to timely complete, or otherwise fail to adequately perform on a project, then we may incur a loss on that project, which may reduce or eliminate our overall profitability.

We may commit to a client that we will complete a project by a scheduled date. We may also commit that a project, when completed, will achieve specified performance standards. If the project is not completed by the scheduled date or fails to meet required performance standards, we may either incur significant additional costs or be held responsible for the costs incurred by the client to rectify damages due to late completion or failure to achieve the required performance standards. The uncertainty of the timing of a project can present difficulties in planning the amount of personnel needed for the project. If the project is delayed or canceled, we may bear the cost of an underutilized workforce that was dedicated to fulfilling the project. In addition, performance of projects can be affected by a number of factors beyond our control, including unavoidable delays from weather conditions, changes in the project scope of services requested by clients or labor or other disruptions. In some cases, should we fail to meet required performance standards, we may also be subject to agreed-upon financial damages, which are determined by the contract. To the extent that these events occur, the total costs of the project could exceed our estimates or, in some cases, incur a loss on a project, which may reduce or eliminate our overall profitability.

We are subject to procurement laws and regulations associated with our government contracts. If we do not comply with these laws and regulations, we may be prohibited from completing our existing government contracts or suspended from government contracting and subcontracting for some period of time or debarred.

Our compliance with the laws and regulations relating to the procurement, administration, and performance of our government contracts is dependent upon our ability to ensure that we properly design and execute compliant procedures. Our termination from any of our larger government contracts or suspension from future government contracts for any reason would result in material declines in expected revenue. Because U.S. federal laws permit government agencies to terminate a contract for convenience, the U.S. federal government may terminate or decide not to renew our contracts with little or no prior notice.

We are subject to routine U.S. federal, state and local government audits related to our government contracts. If audit findings are unfavorable, we could experience a reduction in our profitability.

Our government contracts are subject to audit. These audits may result in the determination that certain costs claimed as reimbursable are not allowable or have not been properly allocated to government contracts according to federal government regulations. We are subject to audits for several years after payment for services has been received. Based on these audits, government entities may adjust or seek reimbursement for previously paid amounts. None of the audits performed to date on our government contracts have resulted in any significant adjustments to our financial statements. It is possible, however, that an audit in the future could have an adverse effect on our revenue, profits and cash flow.

Our inability to continue to win or renew government contracts could result in material reductions in our revenues and profits.

We have increased our contract activity with the U.S. federal, state and local governments in recent years. We compete for and win a number of these contracts based on application of a quality based standard. Our ability to earn revenues and maintain margins from our existing and future government projects will depend upon the continuation of these quality based selection standards as well as the availability of funding by our served and targeted government agencies. We cannot control whether those clients will fund or continue funding our outstanding projects.

If our relationship or reputation with government clients deteriorates for any reason and affects our ability to win new contracts or renew existing ones, we could experience a material revenue decline.

Our involvement in partnerships, joint ventures, and use of subcontractors exposes us to additional legal and market reputation damages.

Our methods of service delivery include the use of partnerships, subcontractors, joint ventures and other ventures. If our partners or subcontractors fail to satisfactorily perform their obligations as a result of financial or other difficulties, we may be unable to adequately perform or deliver our contracted services. Under these circumstances, we may be required to make additional investments and provide additional services to ensure the adequate performance and

8

delivery of the contracted services. Additionally, we may be exposed to claims for damages that are a result of a partner’s or subcontractor’s performance. We could also suffer contract termination and damage to our reputation as a result of a partner’s or subcontractor’s performance.

In addition, we may participate in partnerships, joint ventures or other ventures in which we do not hold the controlling interest. To the extent the partner with the controlling interest in such an arrangement makes decisions that negatively impact that entity, our business, financial condition and results of operations could be negatively impacted.

Employee, partner, joint venture, or subcontractor misconduct or our overall failure to comply with laws or regulations could weaken our ability to win contracts, which could result in reduced revenues and profits.

Misconduct, fraud, non-compliance with applicable laws and regulations, or other improper activities by one of our employees, agents or partners could have a significant negative impact on our business and reputation. Such misconduct could include the failure to comply with government procurement regulations, regulations regarding the protection of classified information, regulations prohibiting bribery and other foreign corrupt practices, regulations regarding the pricing of labor and other costs in government contracts, regulations on lobbying or similar activities, regulations pertaining to the internal controls over financial reporting, environmental laws, and any other applicable laws or regulations. For example, we regularly provide services that may be highly sensitive or that relate to critical national security matters; if a security breach were to occur, our ability to procure future government contracts could be severely limited. The precautions we take to prevent and detect these activities may not be effective, and we could face unknown risks or losses. Our failure to comply with applicable laws or regulations or acts of misconduct could subject us to fines and penalties, loss of security clearance, and suspension or debarment from contracting, which could weaken our ability to win contracts and result in reduced revenues and profits and could have a material adverse impact on our business, financial condition, and results of operations.

Our profits and revenues could suffer if we are involved in legal proceedings, investigations and disputes.

We engage in services that can result in substantial injury or damages that may expose us to legal proceedings, investigations and disputes. For example, in the ordinary course of our business, we may be involved in legal disputes regarding personal injury and wrongful death claims, employee or labor disputes, professional liability claims, and general commercial disputes involving project cost overruns and liquidated damages as well as other claims. In addition, in the ordinary course of our business, we frequently make professional judgments and recommendations about environmental and engineering conditions of project sites for our clients. We may be deemed to be responsible for these judgments and recommendations if they are later determined to be inaccurate. Any unfavorable legal ruling against us could result in substantial monetary damages or even criminal violations. We maintain insurance coverage as part of our overall legal and risk management strategy to minimize our potential liabilities. In addition, our insurance policies contain exclusions that insurance providers may use to deny us insurance coverage. If we sustain liabilities that exceed our insurance coverage or for which we are not insured, it could have a material adverse impact on our results of operations and financial condition, including our profits and revenues.

We are engaged in highly competitive markets that pose challenges to continued revenue growth.

Our business is characterized by competition for contracts within the government and private sectors in which service contracts are typically awarded through competitive bidding processes. We compete with a large number of other service providers who offer the principal services we offer. In this competitive environment, we must provide technical proficiency, quality of service, and experience to ensure future contract awards and revenue and profit growth.

Our international business operations are subject to unique risks and challenges that create increased uncertainty in these markets.

Our international operations are subject to unique risks. These risks can include: potentially dynamic social, political and economic environments; civil disturbances, unrest, or violence including terrorism associated with operating in a war zone; volatile labor conditions due to strikes and general difficulties in staffing international operations with highly qualified personnel; and logistical and communication challenges. Unexpected changes in regulatory requirements in foreign countries as well as inconsistent regulations, diverse licensing, and legal and tax requirements that differ from one country to another could also adversely affect our international projects. Additionally, there may be limitations on

9

our ability to repatriate foreign earnings in certain jurisdictions. Our international operations require compliance with a variety of international laws, as well as U.S. laws affecting the activities of U.S. companies abroad. Failure to comply with these various requirements could have an adverse effect on our business.

Our goodwill or other intangible assets could become impaired and result in a material reduction in our profits.

We have made acquisitions which have resulted in the recording of goodwill and intangible assets within our organization, and we plan to make additional acquisitions going forward. Our goodwill balance is evaluated for potential impairment during the second quarter of each year and as considered necessary based upon the identification of certain triggering events. The evaluation of impairment involves comparing the current fair value of the reporting unit to the carrying amount, including goodwill. To determine the fair value of the reporting unit, we utilize both the “Income Approach,” which is based on estimates of future net cash flows and the “Market Approach,” which observes transactional evidence involving similar businesses. We also perform an analysis of our intangible assets to test for impairment whenever events occur that indicate impairment could exist. Examples of such events are i) significant adverse changes in its market value, useful life, physical condition, or in the business climate that could affect its value; ii) a current-period operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of the intangible asset; and iii) a current expectation that, more likely than not, the intangible asset will be sold or otherwise disposed of before the end of its previously estimated useful life. If goodwill or other intangible assets become impaired, a material write-off in the required amount could lead to reductions in our profits.

We use “percentage-of-completion” accounting methods for many of our projects. This method may result in volatility in reported revenues and profits.

Our revenues and profits for many of our contracts are recognized ratably as those contracts are performed. This rate is based primarily on the proportion of labor costs incurred to date to total labor costs projected to be incurred for the entire project. This method of accounting requires us to calculate revenues and profit to be recognized in each reporting period for each project based on our predictions of future outcomes, including our estimates of the total cost to complete the project, project schedule and completion date, the percentage of the project that is completed and the amounts of any change orders that have been generally agreed upon but not approved. Our failure to accurately estimate these often subjective factors could result in reduced profits or losses for certain contracts.

Our government contracts may give the government the right to modify, delay, curtail or terminate our contracts at their convenience at any time prior to their completion. Therefore, our backlog is subject to unexpected adjustments, delays and cancellations.

We cannot assure that our funded or unfunded backlog will be realized as revenues or that, if realized, it will result in profits. Projects may remain in our backlog for an extended period of time prior to project execution and, once project execution begins, revenues may occur unevenly over current and future periods. Our ability to earn revenues from our backlog depends on the availability of funding for various U.S. federal, state, local and foreign government agencies. In addition, most of our domestic and international industrial clients have termination for convenience provisions in their contracts. Therefore, project terminations, suspensions or reductions in scope may occur from time to time with respect to contracts reflected in our backlog. Project cancellations, delays and scope adjustments could further reduce the dollar amount of our backlog and the revenues and profits that we actually earn.

We are self-insured or carry deductibles for a significant portion of our claims exposure, which could materially and adversely affect our operating income and profitability.

We are self-insured or carry deductibles for most of our insurance coverages, including certain insurance programs related to discontinued businesses. Because of these deductibles and self-insured retention amounts, we have significant exposure to fluctuations in the number and severity of claims. As a result, our insurance and claims expense could increase in the future. Under certain conditions, we may elect or be required to increase our self-insured or deductible amounts, which would increase our already significant exposure to expense from claims. If any claim exceeds our coverage, we would bear the excess expense, in addition to our other self-insured amounts. If the frequency or severity of claims or our expenses increase, our operating income and profitability could be materially adversely affected.

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Foreign governmental regulations could adversely affect our business.

Many aspects of our foreign operations are subject to governmental regulations in the countries in which we operate, including regulations relating to currency conversion, repatriation of earnings, taxation of our earnings and the earnings of our personnel, and the increasing requirement in some countries to make greater use of local employees and suppliers, including, in some jurisdictions, mandates that provide for greater local participation in the ownership and control of certain local business assets.

Our operations are also subject to the risk of changes in laws and policies which may impose restrictions on our business, including trade restrictions, and could have a material adverse effect on our operations. Our future operations and earnings may be adversely affected by new legislation, new regulations or changes in, or new interpretations of, existing regulations, and the impact of these changes could be material.

Our inability to achieve the Credit Agreement’s financial covenants, after a cure period, or the inability of one or more financial institutions in the consortium to meet its commitment under our Credit Agreement could impact our liquidity for working capital needs or our growth strategy.

Our Unsecured Credit Agreement (“Credit Agreement”) is with a consortium of financial institutions and provides for a commitment of $125 million through September 30, 2015. The commitment includes the sum of the principal amount of revolving credit loans outstanding and the aggregate face value of outstanding standby letters of credit. The Credit Agreement requires us to meet minimum equity, leverage, interest and rent coverage, and current ratio covenants. If any of these financial covenants or certain other conditions of borrowing is not achieved, under certain circumstances, after a cure period, the banks may demand the repayment of all borrowings outstanding and/or require deposits to cover the outstanding letters of credit. In addition, in future periods we may leverage our Credit Agreement for working capital needs or to facilitate our growth strategy, specifically utilizing our available credit to fund strategic acquisitions. Our inability to achieve the Credit Agreement’s financial covenants, after a cure period, or the inability of one or more financial institutions in the consortium to meet its commitment under our Credit Agreement could impact our liquidity for working capital needs or our growth strategy.

Our business strategy is to grow the business both organically and through acquisitions. This strategy of growth may subject us to certain risks and uncertainties.

As part of our strategy, we seek to grow both organically and through strategic acquisitions. Our organic initiatives may involve entering new markets where we currently do not have a presence. Risks associated with achieving our organic growth objectives include higher than anticipated levels of competition, incorrect assumptions about the timing of market development and size, and the relative experience levels of key company personnel involved in the development of new markets on our behalf. In addition, we may invest resources currently into organic growth initiatives that may take a significant amount of time to come to fruition, or may never materialize at all. This would result in reduced margins and cash flow. Acquisitions also present a myriad of risks, including failure to realize anticipated synergies, difficulties with the integration of the acquired business and/or with the retention of key management personnel from the acquired company, cultural differences with the acquired company, significant transaction costs associated with the purchase and assimilation of the business, the risk of subjecting our company to unknown liabilities associated with the acquired business, and the potential impairment of goodwill associated with the transaction. In addition, there is a risk that we may not be able to identify suitable targets at appropriate valuations that will enable us to execute on our growth strategy. Also, as part of executing an acquisition, we may utilize equity in the Company to partially fund the transaction, which could dilute share ownership. In the event we use our cash or borrowings under our Credit Agreement as consideration for certain acquisitions we may make, we could significantly reduce our liquidity.

Our business depends on continuous uninterrupted service to clients

As a provider of professional services, we rely heavily on computer, information and communications technology and related systems in order to properly operate and control our business. Our computer and communications systems and operations could be damaged or interrupted by natural disasters, telecommunications failures, acts of war or terrorism, computer viruses, physical or electronic security breaches and similar events or disruptions. If we are unable to continually add software and hardware, effectively upgrade our systems and network infrastructure and take other steps to improve the efficiency of and protect our systems, systems operation could be interrupted or delayed. Additionally, because of our geographic diversification, severe weather can cause our employees to miss work and

11

interrupt the delivery of our services, resulting in a loss of revenue. In the event we experience a temporary or permanent interruption at one or more of our locations (including our corporate headquarters building), our business could be materially adversely affected and we may be required to pay contractual damages or face the suspension or loss of a client’s business.

Item 1B.  UNRESOLVED STAFF COMMENTS.

Not applicable.

Item 2.  PROPERTIES.

Our headquarters office is located in Moon Township, Pennsylvania. This building, which we lease, has approximately 117,000 square feet of office space and is used by our corporate and operations staff. We primarily occupy leased office space in stand-alone or multi-tenant buildings at costs based on prevailing market prices at lease inception. In addition to our Moon Township offices, we also have leased office space totaling approximately 536,000 square feet in the U.S. as of December 31, 2010, which includes major leased offices in Alexandria, VA and Columbia, SC. These leases expire at various dates through the year 2021.

We also own a 75,000 square foot office building located in Beaver, Pennsylvania, which is situated on approximately 177 acres. We believe that our current facilities will be adequate for the operation of our business during the next year, and that suitable additional office space is readily available to accommodate any needs that may arise.

Item 3.  LEGAL PROCEEDINGS.

We have been named as a defendant or co-defendant in legal proceedings wherein damages are claimed. Such proceedings are not uncommon to our business. We believe that we have recognized adequate provisions for probable and reasonably estimable liabilities associated with these proceedings, and that their ultimate resolutions will not have a material impact on our consolidated financial position or annual results of operations or cash flows. We currently have no material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which we or any of our subsidiaries is a party or of which any of our property is the subject.

Item 4.  REMOVED AND RESERVED.

Not applicable.

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PART II

Item 5.  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information

Information relating to the market for our 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.

Holders

As of February 28, 2011, we had 995 holders of our Common Stock.

Dividends

Our present policy is to retain any earnings to fund our operations and growth. We have not paid any cash dividends since 1983 and have no plans to do so in the foreseeable future. Our Credit Agreement with our banks places certain limitations on dividend payments.

Sales of Unregistered Securities

The Company issued 226,447 shares of the Company’s common stock to the former owners of LPA as part of the purchase of LPA. The fair market value of the stock on the acquisition date approximated $8.1 million based on the closing price of $35.60 per share on May 3, 2010. We did not sell any other unregistered securities during the year ended December 31, 2010.

Purchases of Equity Securities

Neither we nor any affiliated purchaser bought any Michael Baker Corporation equity securities during the fourth quarter of 2010.

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Performance Graph

The following graph shows the changes over the past five-year period in the value of $100 invested in (1) the Common Stock of Michael Baker Corporation, (2) the Russell 2000 Index and (3) our peer group (consisting of AECOM Technology Corp., Hill International, Inc., Jacobs Engineering Group Inc., Stantec Inc. and URS Corp.). The values of each investment are based on share price appreciation, with reinvestment of all dividends, assuming any were paid. For each graph, the investments are assumed to have occurred at the beginning of each period presented.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*

Among Michael Baker Corporation, The Russell 2000 Index

and a Peer Group

	12/05		12/06		12/07		12/08		12/09		12/10
Michael Baker Corporation		100.00		88.65		160.86		144.46		162.04		121.72
Russell 2000		100.00		118.37		116.51		77.15		98.11		124.46
Peer Group		100.00		119.33		236.17		151.68		139.09		147.63

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Item 6.  SELECTED FINANCIAL DATA.

A summary of selected financial data for the five years ended December 31, 2010 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 and analysis of our 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. This discussion is incorporated herein by reference.

Item 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

As of December 31, 2010, we had highly liquid investments included in our cash and cash equivalents which totaled $77.4 million and highly-rated corporate, U.S. Treasury and U.S. federally-sponsored agency bonds (“variable-rate investments”), which totaled $9.8 million as of December 31, 2010. The majority of the Company’s cash and cash equivalents were held in money market funds as of December 31, 2010. Our Credit Agreement provides for a commitment of $125 million through September 30, 2015. As of December 31, 2010, there were no borrowings (“variable-rate debt”) outstanding under the Credit Agreement. Based on the amounts of our investments and borrowings, we have no material exposure to interest rate risk.

Based on the nature of our business, we have no direct exposure to commodity price risk. We have no material exposure to foreign currency exchange rate risk and no foreign currency exchange contracts.

Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Our consolidated financial statements as of December 31, 2010 and 2009 and for the three years ended December 31, 2010, together with the report thereon of our independent registered public accounting firm (Deloitte & Touche LLP), and supplementary financial information are set forth within Exhibit 13.1 to this Form 10-K. Such financial statements, the report thereon, and the supplementary financial information are incorporated herein by reference.

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

Not applicable.

Item 9A.  CONTROLS AND PROCEDURES.

Conclusions Regarding the Effectiveness of Disclosure Controls and Procedures

Under the supervision and with participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of December 31, 2010. This evaluation considered various procedures designed to ensure that information we disclose in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2010. Our assessment of and conclusion on the effectiveness of our disclosure controls and procedures did not include an assessment of and conclusion on the effectiveness of the internal control over financial reporting of LPA, which was acquired in May 2010.

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Our internal control over financial reporting is a process designed under the supervision of our principal executive and principal financial officers to provide reasonable

15

assurance regarding the reliability of financial reporting and the preparation of our consolidated financial statements for external purposes in accordance with Generally Accepted Accounting Principles. Our internal control over financial reporting includes policies and procedures that:

(i) Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of our assets;

(ii) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and our directors; and

(iii) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of company assets that could have a material effect on our financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2010. The assessment was based on criteria established in the framework Internal Control — Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s internal control over financial reporting was effective as of December 31, 2010. As permitted for acquired businesses, the scope of our assessment of the effectiveness of internal control over financial reporting does not include LPA. LPA represented 26% of our consolidated assets, and 12% of our consolidated revenues as of and for the year ended December 31, 2010. Our assessment of internal control over financial reporting for fiscal year 2011 will include LPA.

Changes in Internal Control Over Financial Reporting

There were no changes in our “internal control over financial reporting” (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended December 31, 2010, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. However, during the quarter ended June 30, 2010, the Company completed the acquisition of LPA. We are in the process of integrating LPA. We are analyzing, evaluating and, where necessary, implementing changes in controls and procedures relating to LPA as the integration proceeds. As a result, this process may result in additions or changes to our internal control over financial reporting. During the fourth quarter of 2010, LPA was integrated into the Company’s corporate-wide Enterprise Resource Planning System, Oracle.

16

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Michael Baker Corporation

We have audited the internal control over financial reporting of Michael Baker Corporation and subsidiaries (the “Company”) as of December 31, 2010, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. As described in Management’s Report on Internal Control over Financial Reporting, management excluded from its assessment the internal control over financial reporting at LPA, which was acquired on May 3, 2010, and whose financial statements constitute 26% of consolidated assets and 12% of consolidated revenues as of and for the year ended December 31, 2010. Accordingly, our audit did not include the internal control over financial reporting at LPA. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

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 effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2010 of the Company and our report dated March 3, 2011 expressed an unqualified opinion on those consolidated financial statements and includes an explanatory paragraph relating to the change in accounting for noncontrolling interests in 2009.

/s/ Deloitte & Touche LLP
Pittsburgh, Pennsylvania

March 3, 2011

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Item 9B.  OTHER INFORMATION.

Not applicable.

PART III

Item 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

Information required by Items 401, 405, 406 and 407(c)(3), (d)(4) and (d)(5) of Regulation S-K appears in our definitive Proxy Statement, which will be distributed in connection with the 2011 Annual Meeting of Shareholders and which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A, or in Part I of this Form 10-K under the caption “Executive Officers.” This information is incorporated herein by reference.

Code of Ethics for Senior Officers

We have adopted a Code of Ethics for Senior Officers that includes the provisions required under applicable Securities and Exchange Commission regulations for a code of ethics. A copy of the Code of Ethics for Senior Officers is posted on our website at http://www.mbakercorp.com and is available in print to any shareholder who requests it. In the event that we make any amendments to or waivers from this Code, we will discuss the amendment or waiver and the reasons for such on our website.

The obligations of the Code of Ethics for Senior Officers supplement, but do not replace, the Code of Business Conduct applicable to our directors, officers and employees. A copy of the Code of Business Conduct is posted on our website at http://www.mbakercorp.com and is available in print to any shareholder who requests it.

Item 11.  EXECUTIVE COMPENSATION.

Information required by Items 402 and 407(e)(4) and (e)(5) of Regulation S-K appears in our definitive Proxy Statement, which will be distributed in connection with the 2011 Annual Meeting of Shareholders and which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A. This information is incorporated herein by reference.

Item 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

Information required by Item 403 of Regulation S-K appears in our definitive Proxy Statement, which will be distributed in connection with the 2011 Annual Meeting of Shareholders and which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A. This information is incorporated herein by reference.

Equity Compensation Plan Information

The following table provides information as of December 31, 2010 about equity awards under our equity compensation plans and arrangements in the aggregate:

	(a)		(b)		(c)
	Number of Securities to		Weighted-average		Securities available
Plan Category	be issued upon Exercise		exercise price		for future issuance
Equity compensation plans approved by shareholders(d)		154,301	$	25.67		492,093
Equity compensation plans not approved by shareholders		—		—		—
Total		154,301	$	25.67		492,093

(a)	Number of securities to be issued upon exercise of outstanding options, warrants and rights.
(b)	Weighted-average exercise price of outstanding options, warrants and rights.
(c)	Number of securities remaining available for future issuance under equity compensation plans [excluding securities reflected in column (a)].

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^(d) This balance includes 40,000 shares of common stock that may be issued pursuant to stock appreciation rights that may be satisfied through issuance of shares under the Plan.

Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

Information required by Items 404 and 407(a) of Regulation S-K appears in our definitive Proxy Statement, which will be distributed in connection with the 2011 Annual Meeting of Shareholders and which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A. This information is incorporated herein by reference.

Item 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Information required by Item 9(e) of Schedule 14A appears in our definitive Proxy Statement, which will be distributed in connection with the 2011 Annual Meeting of Shareholders and which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A. This information is incorporated herein by reference.

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PART IV

Item 15.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(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 each of the three years in the period ended December 31, 2010	17
Consolidated Balance Sheets as of December 31, 2010 and 2009	18
Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2010	19
Consolidated Statements of Shareholders’ Investment for each of the three years in the period ended December 31, 2010	20
Notes to Consolidated Financial Statements	21
Management’s Report to Shareholders on Its Responsibility for Financial Statements	51
Report of Independent Registered Public Accounting Firm (Deloitte & Touche LLP)	52

(a)(2)   Financial statement schedule for the year ended December 31, 2010:

Schedule II — Valuation and Qualifying Accounts

(in thousands)			Additions charged to
	Beginning					Other						Ending
Description	balance		Expense			accounts			Deductions			balance
For the year ended December 31, 2010:
Income tax valuation allowance	$	11,458	$	529	(1)	$	—		$	(546	)(2)	$	11,441
Allowance for doubtful accounts		723		519	(3)		—			(641	)(4)		601
For the year ended December 31, 2009:
Income tax valuation allowance	$	5,085	$	10,518	(5)	$	(3,007	)(6)	$	(1,138	)(7)	$	11,458
Nigerian prepaid tax allowance		1,669		—			(1,669	)(6)		—			—
Allowance for doubtful accounts		2,765		6,761	(3)		(703	)(6)		(8,100	)(4)		723
For the year ended December 31, 2008:
Income tax valuation allowance	$	6,245	$	—		$	—		$	(1,160	)(7)	$	5,085
Nigerian prepaid tax allowance		1,799		152	(8)		—			(282	)(9)		1,669
Allowance for doubtful accounts		1,463		3,436	(3)		—			(2,134	)(4)		2,765

(1)	Relates to additions to valuation allowances for capital loss carryforwards.
(2)	Relates to reductions in valuation allowances against state net operating losses, foreign tax credits carryforwards, capital loss and other deferred tax assets.
(3)	The expense primarily reflects accounts receivable balances reserved during the year. Accounts receivable balances related to Storm Cat Energy, a customer of our former Energy business, accounted for $6.0 million and $1.6 million of the expense for the years ended December 31, 2009 and 2008, respectively.
(4)	The deduction amount primarily reflects accounts receivable balances written off during the year as well as recoveries of allowances previously expensed. The Storm Cat reserves totaling $7.6 million were written off in the third quarter of 2009 and are presented as a reduction.
(5)	Relates to valuation allowances for capital losses totaling approximately $9.0 million and foreign tax credits totaling approximately $1.5 million.
(6)	Primarily relates to reserves that were included in the net assets that were part of the sale of our Energy business.

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(7)	Relates to a reduction in federal, state, and foreign net operating losses and related valuation allowances.
(8)	Relates to the inability to realize Nigerian prepaid income tax assets.
(9)	The deduction amount primarily reflects recoveries of prepaid tax amounts previously expensed.

Report of Independent Registered Public Accounting Firm (Deloitte & Touche LLP) on Financial Statement Schedule for the years ended December 31, 2010, 2009 and 2008 (included as Exhibit 99.4 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	Restated Articles of Incorporation, as amended, filed as Exhibit 4.1 to our Registration Statement on Form S-3 dated February 4, 2011, and incorporated herein by reference.
	3	.2	By-laws, as amended, filed as Exhibit 3.1 to our Report on Form 8-K dated October 29, 2009, and incorporated herein by reference.
	4	.1(a)	Rights Agreement dated November 16, 1999, between us and American Stock Transfer and Trust Company, as Rights Agent, filed as Exhibit 4.1 to our Report on Form 8-K dated November 16, 1999, and incorporated herein by reference.
	4	.1(b)	Amendment to Rights Agreement dated November 5, 2009, between us and American Stock Transfer and Trust Company, as Rights Agent, filed as Exhibit 4.1 to our Report on Form 8-K dated November 5, 2009, and incorporated herein by reference.
	4	.2	Form of Indenture, between the Company and one or more trustees to be named, filed as Exhibit 4.6 to our Registration Statement on Form S-3 dated February 4, 2011, and incorporated herein by reference.
	10	.1	2010 Incentive Compensation Plan (attachments excluded), filed herewith.*
	10	.2	Michael Baker Corporation Employee Stock Purchase Plan, filed as Exhibit A to our Definitive Proxy Statement on Schedule 14A on April 16, 2010, and incorporated herein by reference.*
	10	.3	Michael Baker Corporation Long-Term Incentive Plan, filed as Exhibit B to our Definitive Proxy Statement on Schedule 14A on April 16, 2010, and incorporated herein by reference.*
	10	.4	Form of Michael Baker Corporation Long-Term Incentive Plan, Restricted Stock Agreement between Joseph R. Beck, David G. Higie, James M. Kempton, Samuel C. Knoch, G. John Kurgan, Bradley L. Mallory, H. James McKnight, Edward L. Wiley, Michael Ziemianski and Michael J. Zugay, filed as Exhibit 10.2 to our quarterly report on Form 10-Q for the period ended June 30, 2010, and incorporated herein by reference.*
	10	.5	Consulting Agreement dated April 25, 2001, by and between us and Richard L. Shaw, filed as Exhibit 10.2(c) to our Quarterly Report on Form 10-Q for the period ended June 30, 2001, and incorporated herein by reference.*
	10	.5(a)	First Amendment to Consulting Agreement effective April 26, 2003, by and between us and Richard L. Shaw, filed as Exhibit 10.2(a) to our Annual Report on Form 10-K for the year ended December 31, 2003, and incorporated herein by reference.*
	10	.5(b)	Second Amendment to Consulting Agreement effective April 26, 2005, by and between us and Richard L. Shaw, filed as Exhibit 10.2(a) to our Quarterly Report on Form 10-Q for the period ended June 30, 2005, and incorporated herein by reference.*
	10	.5(c)	Third Amendment to Consulting Agreement effective April 26, 2006, by and between us and Richard L. Shaw, filed as Exhibit 10.2(c) to our Annual Report on Form 10-K for the year ended December 31, 2006, and incorporated herein by reference.*
	10	.5(d)	Fourth Amendment to Consulting Agreement effective April 26, 2007, by and between us and Richard L. Shaw, filed as Exhibit 10.2(d) to our Annual Report on Form 10-K for the year ended December 31, 2006, and incorporated herein by reference.*
	10	.5(e)	Fifth Amendment to Consulting Agreement effective April 26, 2008, by and between us and Richard L. Shaw, filed as Exhibit 10.2(e) to our Annual Report on Form 10-K for the year ended December 31, 2007, and incorporated herein by reference.*

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Exhibit No.			Description
	10	.5(f)	Sixth Amendment to Consulting Agreement effective April 26, 2009, by and between us and Richard L. Shaw, filed as Exhibit 10.2 to our Report on Form 8-K dated April 17, 2009, and incorporated herein by reference.*
	10	.5(g)	Seventh Amendment to Consulting Agreement effective April 26, 2010, filed as Exhibit 10.2(g) to our Annual Report on Form 10-K for the year ended December 31, 2009, and incorporated herein by reference.*
	10	.5(h)	Eighth Amendment to Consulting Agreement effective April 26, 2011, by and between us and Richard L. Shaw, filed herewith.*
	10	.6	Credit Agreement dated September 30, 2010 by and between the Company and Citizens Bank of Pennsylvania, PNC Bank, National Association and Wells Fargo Bank, National Association, filed as Exhibit 10.1 to our Report on Form 8-K dated September 30, 2010, and incorporated herein by reference.
	10	.7	1995 Stock Incentive Plan amended effective April 23, 1998, filed as Exhibit 10.4 to our Annual Report on Form 10-K for the year ended December 31, 1998, and incorporated herein by reference.*
	10	.8	1996 Nonemployee Directors’ Stock Incentive Plan, filed as Exhibit A to our definitive Proxy Statement on schedule 14A on April 24, 1996, and incorporated herein by reference.*
	10	.8(a)	Amendment to the 1996 Nonemployee Directors’ Stock Incentive Plan, filed as Appendix B to our definitive Proxy Statement on schedule 14A on March 24, 2004, and incorporated herein by reference.*
	10	.9	Office Sublease Agreement dated August 6, 2001, by and between us and Airside Business Park, L.P., filed as Exhibit 10.7 to our Annual Report on Form 10-K for the year ended December 31, 2002 (exhibits omitted), and incorporated herein by reference.
	10	.9(a)	Third Amendment to Office Sublease Agreement dated February 19, 2003, by and between us and Airside Business Park, L.P., filed as Exhibit 10.7(a) to our Annual Report on Form 10-K for the year ended December 31, 2002, and incorporated herein by reference.
	10	.10	Employment Agreement between us and Bradley L. Mallory, dated June 17, 2008, filed as Exhibit 10.1 to our Report on Form 8-K dated June 17, 2008, and incorporated herein by reference.*
	10	.11	Form of Employment Continuation Agreement between Joseph R. Beck, David G. Higie, James M. Kempton, Samuel C. Knoch, G. John Kurgan, Bradley L. Mallory, H. James McKnight, Edward L. Wiley, Michael Ziemianski and Michael J. Zugay, filed as Exhibit 10.1 to our Report on Form 8-K dated April 17, 2009, and incorporated herein by reference.*
	10	.12	Share Purchase Agreement, dated as of September 30, 2009, by and among Michael Baker Corporation, Baker Holding Corporation, Baker OTS, Inc., Michael Baker International, Inc., Wood Group E.&P.F. Holdings, Inc., Wood Group Holdings (International) Limited and Wood Group Engineering and Operations Support Limited, filed as Exhibit 10.1 to our Report on Form 8-K dated September 30, 2009, and incorporated herein by reference.
	10	.13	Stock Purchase Agreement, dated as of May 3, 2010, by and among The LPA Group Incorporated, Arthur E. Parrish, Robert Glenn Lott, Arthur E. Parrish, as Shareholders’ Representative, and Michael Baker Corporation filed as Exhibit 10.1 to our Report on Form 8-K dated May 3, 2010, and incorporated herein by reference.
	13	.1	Selected Financial Data, Management’s Discussion and Analysis of Financial Condition and Results of Operations, Consolidated Financial Statements as of December 31, 2010 and 2009 and for each of the three years in the period ended December 31, 2010, Report of Independent Registered Public Accounting Firm (Deloitte & Touche LLP), 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, 2010.
	21	.1	Subsidiaries, filed herewith.
	23	.1	Consent of Independent Registered Public Accounting Firm (Deloitte & Touche LLP), filed herewith.
	23	.2	Consent of Independent Registered Public Accounting Firm (Schneider Downs & Co., Inc.), filed herewith.
	31	.1	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a), filed herewith.
	31	.2	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a), filed herewith.
	32	.1	Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.
	99	.1	Unaudited financial statements for our unconsolidated subsidiary, Stanley Baker Hill, LLC, for the year ended December 31, 2010, filed herewith.

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Exhibit No.			Description
	99	.2	Audited financial statements for our unconsolidated subsidiary, Stanley Baker Hill, LLC, for the year ended December 31, 2009, filed herewith.
	99	.3	Unaudited financial statements for our unconsolidated subsidiary, Stanley Baker Hill, LLC, for the years ended December 31, 2008 and 2007, filed herewith.
	99	.4	Report of Independent Registered Public Accounting Firm (Deloitte & Touche LLP) on financial statement schedule for the years ended December 31, 2010, 2009 and 2008, filed herewith.

* Management contract or compensatory plan.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, we have duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

	MICHAEL BAKER CORPORATION
Dated: March 3, 2011	By:	/s/ Bradley L. MalloryBradley L. Mallory President, Chief Executive Officer and Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on our behalf and in the capacities indicated as of March 3, 2011:

Signature	Title
/s/ Bradley L. Mallory Bradley L. Mallory	President, Chief Executive Officer and Director (Principal Executive Officer)
/s/ Michael J. Zugay Michael J. Zugay	Executive Vice President and Chief Financial Officer (Principal Financial Officer)
/s/ James M. Kempton James M. Kempton	Vice President, Corporate Controller and Treasurer (Principal Accounting Officer)
/s/ Richard L. Shaw Richard L. Shaw	Chairman of the Board
/s/ Robert N. Bontempo Robert N. Bontempo	Director
/s/ Nicholas P. Constantakis Nicholas P. Constantakis	Director
/s/ Robert H. Foglesong Robert H. Foglesong	Director
/s/ Mark E. Kaplan Mark E. Kaplan	Director
/s/ John E. Murray, Jr. John E. Murray, Jr.	Director
/s/ Pamela S. Pierce Pamela S. Pierce	Director
/s/ David N. Wormley David N. Wormley	Director

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EX-10.1

Exhibit 10.1

MICHAEL BAKER CORPORATION

INCENTIVE COMPENSATION PLAN

     Section 1. Purpose. The purpose of the Michael Baker Corporation Incentive Compensation Plan (the “Plan”) is to provide for an incentive payment opportunity to employees of Michael Baker Corporation (the “Company”) and its subsidiaries, which may be earned upon the achievement of established financial performance goals. By providing a payment based upon profitability, the Company will establish rewards based on the overall performance of the Company and the individual contribution of each employee.

     Section 2. Effective Date. The effective date of this Plan is January 1, 2010. The Plan will remain in effect from year to year (each calendar year shall be referred to herein as a “Plan Year”) until formally amended or terminated in writing by the Company’s Board of Directors (the “Board”).

     Section 3. Administration of the Plan.

          Section 3.01. Committee. Full power and authority to administer, construe and interpret the Plan, and any incentive program described within the Plan (any “Incentive Program”) shall be vested in the Compensation Committee of the Board (the “Committee”). The Committee may delegate to any agent as it deems appropriate to assist it with the administration of the Plan. Any determination, action or records of the Committee shall be final, conclusive and binding on all Plan Participants, as defined in Section 3.04 of the Plan, and their beneficiaries, heirs, personal representatives, executors and administrators, and upon the Company and all other persons having or claiming to have any right or interest in or under the Plan.

          Section 3.02. Rules and Regulations. The Committee may, from time to time, establish rules, forms and procedures of general application for the administration of the Plan and each Incentive Program. The Committee shall determine the Targets and Awards, as defined in Sections 5.01 and 5.02 of the Plan, designate the employees who are to participate in the Plan and determine the Group to which a Participant is assigned, as defined in Section 4.02 of the Plan.

          Section 3.03. Quorum. A majority of the members of the Committee shall constitute a quorum for purposes of transacting business relating to the Plan. The acts of a majority of the members present (in person, or by conference telephone) at any meeting of the Committee at which there is a quorum, or acts reduced to and approved unanimously in writing by all of the Committee members, shall be valid acts of the Committee.

          Section 3.04. Notice of Participation. Each employee who is designated to participate shall receive notice informing the employee of the Plan, which notice may also specify the group in which the employee is designated to participate. Designation of participation does not guarantee a participant (a “Participant”) that an Incentive Award will be earned, or that such Participant will continue to participate in the same group for the current Plan Year (based upon the achievement of Group qualification metrics) or for future Plan Years.

     Section 4. Eligibility, Groups and Incentive Programs.

          Section 4.01. Eligibility. Any employee of the Company or any wholly-owned subsidiary of the Company shall be eligible to participate in the Plan upon written designation by the Committee as provided in Section 3.04, excluding employees who are covered under a foreign government regulated bonus plan.

          Section 4.02. Designation of Groups. Any employee who is designated by the Committee as a Participant for a Plan Year may be assigned as a member of one of the following Groups:

Group 1.	Participants in Group 1 may include the Company’s executive officers, including Divisional, Department or Office Managers.
Group 2.	Participants in Group 2 may include Project Managers.
Group 3.	Participants in Group 3 may include any employee who is designated as a Participant in the Plan and who is not otherwise assigned as a member of Group 1 or 2.

          Section 4.03. Incentive Programs. The following Incentive Programs may be administered under the Plan:

• The Corporate Incentive Program;

• The Engineering Incentive Program;

• The Project Manager Incentive Program; and

• The Discretionary Incentive Program.

All Group 1 Participants are eligible to participate in the Corporate Incentive Program or the Engineering Incentive Program, if offered; provided that if such program(s) are not offered Group 1 Participants shall be eligible to participate in the Discretionary Incentive Program, if offered. All Group 2 Participants are eligible to participate in the Project Manager Incentive Plan, if offered; provided that if such program is not offered Group 2 Participants shall be eligible to participate in the Discretionary Incentive Program, if offered. All Group 3 Participants are eligible to participate in the Discretionary Incentive Program, if offered. Notwithstanding the foregoing, the Committee may elect to offer the discretionary bonus program as provided in Section 5.06 hereof, in lieu of any or all of such Incentive Programs.

          Section 4.04. Termination of Employment.

               (a) Except as provided in Section 4.05 of the Plan, a Participant whose employment with the Company and all subsidiaries is terminated, either voluntarily, by mutual agreement or by involuntary termination for cause following the end of a Plan Year but prior to the payment of an Incentive Award for such Plan Year will forfeit all right to such unpaid Incentive Awards, except as otherwise determined by the Committee or its delegate; provided further that a Participant whose employment is terminated by the Company and all subsidiaries involuntarily other than for cause following the end of a Plan Year shall not forfeit all right to such unpaid Incentive Awards.

               (b) Except as provided in Section 4.05 of the Plan, a Participant whose employment with the Company and all subsidiaries is terminated voluntarily, by mutual agreement or involuntarily for cause at any time during a Plan Year shall forfeit all rights to any Incentive Awards for the Plan Year during which termination occurs. A Participant whose employment is terminated by the Company and all subsidiaries involuntarily other than for cause on or before June 30 of any Plan Year shall forfeit all rights to any Incentive Awards for the Plan Year during which termination occurs; provided further that a Participant whose employment is terminated by the Company and all subsidiaries involuntarily other than for cause after June 30 of a Plan Year shall be entitled to a pro-rated Incentive Award for the period of employment,

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subject to the other terms and conditions of the Plan and the achievement of the applicable Performance Goals.

               (c) All incentive awards that are forfeited as provided in Section 4.04 (a) and (b) above may be allocated to or among remaining plan participants within the discretion of the Committee.

          Section 4.05. Death, Disability or Retirement. If, during a Plan Year, a Participant dies or becomes disabled, within the meaning of Section 409A(a)(2)(C) of the Internal Revenue Code of 1986, as amended, or retires after attainment of at least age 55 and with at least 10 years of service with the Company and/or its subsidiaries, the Committee may, in its discretion or under such rules as it may prescribe, make a partial or full Incentive Award to the Participant for the Plan Year provided that the applicable Performance Goals were achieved.

          Section 4.06. New Participants. New employees of the Company or any wholly-owned subsidiary of the Company hired after June 30 of a Plan Year and designated for participation will become Group 3 Participants during such Plan Year. New employees hired on or before June 30 and designated for participation may participate (on a pro-rated basis) in any Group during such Plan Year based upon achievement of Group qualification metrics.

     Section 5. Incentive Targets, Incentive Awards and Performance Goals. Incentive payment targets and performance goals may be established, as provided in this Section 5, for any program other than the Discretionary Incentive Program or discretionary bonus program and, may, to the extent determined by the Committee, be applicable to such discretionary programs.

          Section 5.01. Incentive Targets. Each Participant under the Plan may be assigned an incentive payment target (an “Incentive Target”) that shall be determined based on market competitive levels, and which may be expressed as a percentage of the Participant’s base salary or other basis, as related to the level of achievement attained. Incentive Targets shall be determined within 30 days after the commencement of each Plan Year and approved by the Committee. The Incentive Targets for the current Plan Year are attached hereto as Attachment A.

          Section 5.02. Incentive Awards. No incentive award payment (“Incentive Award”) may exceed the Participant’s Incentive Target. Payment of any Incentive Award under the Plan shall be contingent upon (i) the achievement of the Main Company Performance Goals (measured at target), as defined in Section 5.03(a) of the Plan, for the Plan Year, (ii) the achievement of the applicable Participant Performance Goals, as defined in Section 5.03 of the Plan, for the particular Incentive Program in which the Participant is a member for the Plan Year, (iii) the Participant’s receiving an overall “Meets Expectations” rating on the values/work standards portion of his or her Company performance review form for the Plan Year and (iv) the determination of the amount payable under Section 5.05 of the Plan.

     Section 5.03. Performance Goals.

               (a) Company Performance Goals. Within 30 days after the commencement of a Plan Year, the Committee shall establish specific performance goals for the Company (“Company Performance Goals”), which may be based upon one or more of the following objective performance measures and expressed in either, or a combination of, absolute values or rates of change: earnings per share, earnings per share growth rates, return on total capital, stock price, revenues, costs, net income, operating income, income before taxes, operating margin, cash flow, market share, return on equity, return on assets and total shareholder return. The Committee shall designate one or more of such Performance Goals as the main Company Performance Goals (the “Main Company Performance Goals”) and the

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weighting among the various Performance Goals established. The Company Performance Goals are attached hereto as Attachment B. In order for any Incentive Awards to be paid to Participants in any Incentive Program with respect to a Plan Year, the Main Company Performance Goals established by the Committee for such Plan Year (measured at target) must be achieved.

               (b) Divisional Performance Goals. Within 30 days after the commencement of a Plan Year, the Committee may establish specific performance goals for the Company’s divisions or business units (“Divisional Performance Goals”), which may be based upon one or more of the following objective performance measures and expressed in either, or a combination of, absolute values or rates of change: revenues, costs, net income, operating income, income before taxes, operating margin, cash flow, market share, return on equity or return on assets. The Divisional Performance Goals are attached hereto as Attachment C.

               (c) Participants’ Performance Goals. Within 90 days after the commencement of the Plan Year, the Committee may establish performance goals for the Participants in each of the Incentive Programs (“Participant Performance Goals”) as follows:

(i)	Corporate Incentive Program. The Participant Performance Goals for all Participants in the Corporate Incentive Program shall be the Company Performance Goals and, in the case of Group 1 Participants who are Divisional Managers, Divisional Performance Goals, weighted per Attachment F.
(ii)	Engineering Incentive Program. The Participant Performance Goals for all Participants in the Engineering Incentive Program shall be the Engineering Performance Goals and, in the case of Group 1 Participants who are Engineering Managers, Engineering Performance Goals, weighted per Attachment F.
(iii)	Project Manager Incentive Program. The Participant Performance Goals for each Group 2 Participant in the Project Manager Incentive Program shall be (x) the Main Company Performance Goals and (y) the level of achievement of budgeted project profits measured for the Plan Year on those particular projects for which the Participant is primarily responsible, weighted per Attachment F.
(iv)	Discretionary Incentive Program. The Participant Performance Goals for the Participants in the Discretionary Incentive Program shall be (x) the Main Company Performance Goals and (y) other goals as established by the Committee in its discretion, weighted per Attachment F.

               (d) When the Participant Performance Goals are established, the Committee shall also specify the manner in which the level of achievement of such Participant Performance Goals shall be calculated. The Committee may determine that unusual items or certain specified events or occurrences, including changes in accounting standards or tax laws, shall be excluded from the calculation, or may within their discretion adjust the performance goals.

          Section 5.04. Discretion. The Committee shall have no discretion to increase any Incentive Target or Incentive Award payable that would otherwise be due upon attainment of the

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Performance Goals, but the Committee may in its discretion reduce or eliminate such Incentive Target or Incentive Award.

          Section 5.05. Determination of Incentive Award. The amount of a Participant’s Incentive Award for a Plan Year, if any, shall be determined by the Committee or its delegate, in its discretion, after considering the level of achievement of the Company Performance Goals, and the extent to which that achievement results in funding of incentive awards, the applicable Participant Performance Goals, the Participant’s Incentive Target for such level of achievement, and the other terms of the Plan.

          Section 5.06. Determination of Other Bonuses. The Committee may grant, from time to time in its sole discretion, a bonus to any Participant based on any criteria it determines. Such bonus, if specifically designated by the Committee as payable under this Plan, shall be subject to such provisions of the Plan as it shall specify.

     Section 6. Payment to Participants.

          Section 6.01. Timing of Payment. Any Incentive Award for a Plan Year shall be paid to the Participant, or in the case of death to the Participant’s beneficiary, within 2¹/2 months following the end of such Plan Year in which the right to payment is no longer subject to a substantial risk of forfeiture. Notwithstanding the foregoing, in the event such amount is conditioned upon a separation from service and not compensation the Participant could receive without separating from service, then no such payments may be made to the Participant who is a “specified employee” under section 409A of the Internal Revenue Code of 1986, as amended, until the first day following the six-month anniversary of the Participant’s termination.

          Section 6.02. Beneficiary Designation. The deemed beneficiary of a Participant for this Plan will be the beneficiary elected by the Participant under the Company’s Life Insurance Plan; provided that a Participant may elect a different beneficiary by filing a completed designation of beneficiary form with the Committee or its delegate in the form prescribed. Such designation may be made, revoked or changed by the Participant at any time before death but such designation of beneficiary will not be effective and supersede all prior designations until it is received and acknowledged by the Committee or its delegate. If the Committee has any doubt as to the proper beneficiary to receive payments hereunder, the Committee shall have the right to withhold such payments until the matter is finally adjudicated. However, any payment made in good faith shall fully discharge the Committee, the Company, its subsidiaries and the Board from all further obligations with respect to that payment.

          Section 6.03. Tax Withholding. All Incentive Awards and bonuses shall be subject to Federal income, FICA, and other tax withholding as required by applicable law.

     Section 7. Miscellaneous.

          Section 7.01. No Recourse. If the actual level of achievement of any Performance Goal taken into account for determination of an Incentive Award is found to be incorrect by the Company’s independent certified public accountants and was more than the correct amount, there shall be no recourse by the Company against any person or estate. However, the Company shall have the right to correct such error by reducing any subsequent payments yet to be made under the Plan for current and future Plan Years by the entire excess amount of any Incentive Awards paid over the correct amounts.

          Section 7.02. Merger or Consolidation. All obligations for amounts earned but not yet paid under the Plan shall survive any merger, consolidation or sale of all or substantially all of the Company’s or a subsidiary’s assets to any entity, and be the liability of the successor to

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the merger or consolidation or the purchaser of assets, unless otherwise agreed to by the parties thereto.

          Section 7.03. Gender and Number. The masculine pronoun whenever used in the Plan shall include the feminine and vice versa. The singular shall include the plural and the plural shall include the singular whenever used herein unless the context requires otherwise.

          Section 7.04. Construction. The provisions of the Plan shall be construed, administered and governed by the laws of the Commonwealth of Pennsylvania, including its statute of limitations provisions, but without reference to conflicts of law principles. Titles of Sections of the Plan are for convenience of reference only and are not to be taken into account when construing and interpreting the provisions of the Plan.

          Section 7.05. Non-alienation. Except as may be required by law, neither the Participant nor any beneficiary shall have the right to, directly or indirectly, alienate, assign, transfer, pledge, anticipate or encumber (except by reason of death) any amount that is or may be payable hereunder, including in respect of any liability of a Participant or beneficiary for alimony or other payments for the support of a spouse, former spouse, child or other dependent, prior to actually being received by the Participant or beneficiary hereunder, nor shall the Participant’s or beneficiary’s rights to benefit payments under the Plan be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of the Participant or beneficiary or to the debts, contracts, liabilities, engagements, or torts of any Participant or beneficiary, or transfer by operation of law in the event of bankruptcy or insolvency of the Participant or any beneficiary, or any legal process.

          Section 7.06. No Employment Rights. Neither the adoption of the Plan nor any provision of the Plan shall be construed as a contract of employment between the Company or a subsidiary and any employee or Participant, or as a guarantee or right of any employee or Participant to future or continued employment with the Company or a subsidiary, or as a limitation on the right of the Company or a subsidiary to discharge any of its employees with or without cause. Specifically, designation as a Participant does not create any rights, and no rights are created under the Plan, with respect to continued or future employment or conditions of employment.

          Section 7.07. Minor or Incompetent. If the Committee determines that any Participant or beneficiary entitled to a payment under the Plan is a minor or incompetent by reason of physical or mental disability, it may, in its sole discretion, cause any payment thereafter becoming due to such person to be made to any other person for his benefit, without responsibility to follow application of amounts so paid. Payments made pursuant to this provision shall completely discharge the Company, its subsidiaries, the Plan, the Committee and the Board.

          Section 7.08. Illegal or Invalid Provision. In case any provision of the Plan shall be held illegal or invalid for any reason, such illegal or invalid provision shall not affect the remaining parts of the Plan, but the Plan shall be construed and enforced without regard to such.

          Section 7.09. Amendment or Termination of this Plan. The Board shall have the right to amend or terminate the Plan at any time, provided that any amendment or termination shall not affect any Incentive Awards earned but unpaid. No employee or Participant shall have any vested right to payment of any Incentive Award hereunder prior to its payment. The Company shall notify affected employees in writing of any amendment or Plan termination.

          Section 7.10. Unsecured Creditor. The Plan constitutes a mere promise by the Company or a subsidiary to make benefit payments in the future. The Company’s and the

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subsidiaries’ obligations under the Plan shall be unfunded and unsecured promises to pay. The Company and the subsidiaries shall not be obligated under any circumstance to fund their respective financial obligations under the Plan. Any of them may, in its discretion, set aside funds in a trust or other vehicle, subject to the claims of its creditors, in order to assist it in meeting its obligations under the Plan, if such arrangement will not cause the Plan to be considered a funded deferred compensation plan. To the extent that any Participant or beneficiary or other person acquires a right to receive payments under the Plan, such right shall be no greater than the right, and each Participant and beneficiary shall at all times have the status, of a general unsecured creditor of the Company or a subsidiary.

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EX-10.5.H

Exhibit 10.5.h

AMENDMENT NO. 8
TO CONSULTING AGREEMENT

     This AMENDMENT NO. 8 to the Consulting Agreement between the parties is entered into by and between Michael Baker Corporation, a Pennsylvania Corporation (the “Corporation”) and Richard L. Shaw, an individual (the “Executive”), effective April 26, 2011.

     WHEREAS, the Corporation and the Executive entered into the Consulting Agreement, effective April 25, 2001, a true and correct copy of which (along with all amendments thereto) is attached hereto as Exhibit A, as last amended by Amendment No. 7 to the Consulting Agreement, effective April 26, 2010 extending the term of the Agreement until April 26, 2011; and

     WHEREAS, the Corporation and the Executive now desire to extend the term of the Consulting Agreement upon the same terms and conditions for an additional one (1) year period until April 26, 2012;

     NOW THEREFORE, in consideration of the mutual promises contained herein and other good and valuable consideration, incorporating the foregoing WHEREAS clauses and intending to be legally bound hereby, THE PARTIES AGREE AS FOLLOWS:

The term of the Consulting Agreement effective April 25, 2001 between the parties as amended by Amendment No. 1 effective April 26, 2003, Amendment No. 2 effective April 26, 2005, Amendment No. 3 effective April 26, 2006, Amendment No. 4 effective April 26, 2007, Amendment No. 5 effective April 26, 2008, Amendment No. 6 effective April 26, 2009, and Amendment No. 7 effective April 26, 2010, shall be, and the same hereby is, extended for an additional one (1) year period from April 26, 2011 until April 26, 2012 upon the same terms and conditions.

     IN WITNESS WHEREOF, effective April 26, 2011, the parties have executed this AMENDMENT NO. 7 to the Consulting Agreement extending the term thereof until April 26, 2012.

	MICHAEL BAKER CORPORATION
Attest:	(The “Corporation”)
/s/ Marcia S. Wolk Marcia S. Wolk	By:	/s/ H. James McKnight H. James McKnight
Assistant Secretary		Executive Vice President
Witness:
	Richard L. Shaw
	(The “Executive”)
/s/ Patricia A. Smith	/s/ Richard L. Shaw

EX-13.1

EXHIBIT 13.1

SELECTED FINANCIAL DATA

The following table shows our selected consolidated financial information and has been derived from our audited financial statements. This financial information should be read in conjunction with, and is qualified by reference to, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the notes thereto included elsewhere in this exhibit.

(in thousands, except per share information)

	2010(1)			2009			2008			2007			2006
Results of Operations
Continuing Operations
Revenues	$	499,353		$	445,177		$	455,929		$	401,463		$	380,062
Operating income		22,289			30,558			33,300			26,491			8,146
Net income		14,678			24,572			22,558			17,330			5,654
Diluted earnings per share	$	1.60		$	2.75		$	2.54		$	1.95		$	0.65
Return on shareholders’ investment		8.0	%		15.5	%		17.5	%		16.6	%		6.5	%
Total Michael Baker Corporation
Net income	$	12,166		$	26,921		$	29,154		$	19,340		$	10,332
Diluted earnings per share	$	1.33		$	3.01		$	3.28		$	2.18		$	1.19
Return on shareholders’ investment		6.6	%		17.0	%		22.6	%		18.5	%		11.9	%
Financial Condition
Total assets	$	321,065		$	278,844		$	292,062		$	276,350		$	263,916
Working capital	$	123,974		$	154,357		$	114,209		$	84,629		$	67,227
Current ratio		2.17			2.59			1.84			1.56			1.44
Long-term debt	$	—		$	—		$	—		$	—		$	11,038
Shareholders’ Investment		195,815			173,433			142,644			115,057			93,621
Book value per outstanding share		21.23			19.47			16.11			13.06			10.76
Year-end closing share price	$	31.10		$	41.40		$	36.91		$	41.10		$	22.65
Cash Flow
Net cash provided by/(used in) operating activities	$	27,073		$	36,365		$	32,228		$	26,635		$	(9,343	)
Net cash (used in)/provided by investing activities		(53,805	)		19,398			(5,285	)		(1,560	)		(14,933	)
Net cash (used in)/provided by financing activities		(1,084	)		446			55			(16,205	)		18,417
(Decrease)/increase in cash	$	(27,816	)	$	56,209		$	26,998		$	8,870		$	(5,859	)
Backlog	$	1,575,100		$	1,425,200		$	984,200		$	1,122,200		$	1,057,100
Share Information
Year-end shares outstanding		9,223			8,907			8,855			8,810			8,698
Diluted weighted average shares outstanding		9,153			8,933			8,891			8,874			8,718

⁽¹⁾ These results included LPA for the period May 3, 2010 to December 31, 2010.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our “Selected Financial Data” and our consolidated financial statements and related notes. The discussion in this section contains forward-looking statements that involve risks and uncertainties. These forward-looking statements are based on our current expectations about future events. These expectations are subject to risks and uncertainties, many of which are beyond our control. For a discussion of important risk factors that could cause actual results to differ materially from those described or implied by the forward-looking statements contained herein, see the “Note with Respect to Forward-Looking Statements” and “Risk Factors” sections included in our Annual Report on Form 10-K for the year ended December 31, 2010.

Business Overview and Environment

We provide engineering expertise for public and private sector clients worldwide, with our Transportation and Federal business segments providing a variety of services to our markets. The Transportation segment provides services for Transportation, Aviation, and Rail & Transit markets and the Federal segment provides services for Defense, Environmental, Architecture, Geospatial Information Technology, Homeland Security, Municipal & Civil, Pipelines & Utilities and Water markets. Among the services we provide to clients in these markets are program management, design-build (for which we provide only the design portion of services), construction management, consulting, planning, surveying, mapping, geographic information systems, architectural and interior design, construction inspection, constructability reviews, site assessment and restoration, strategic regulatory analysis and regulatory compliance. We view our short and long-term liquidity as being dependent upon our results of operations, changes in working capital and our borrowing capacity. Our financial results are impacted by appropriations of public funds for infrastructure and other government-funded projects, capital spending levels in the private sector, and the demand for our services in the various engineering markets in which we compete.

On May 3, 2010, we acquired 100% of the outstanding shares of The LPA Group Incorporated and substantially all of its subsidiaries and affiliates (“LPA”), an engineering, architectural and planning firm specializing primarily in the planning and design of airports, highways, bridges and other transportation infrastructure, headquartered in Columbia, South Carolina. The majority of LPA’s clients are state and local governments as well as construction companies that serve those markets. Founded in 1981, LPA has a national reputation in the transportation consulting industry. With more than 35 offices across the United States (“U.S.”), LPA is consistently ranked in the Top 500 Design Firms by Engineering News-Record. The LPA acquisition has significantly expanded our presence in the southeastern U.S. Transportation market, and broadened our existing capabilities in planning, design, program management, and construction management in the Aviation, Highway, Bridge and Rail & Transit markets. LPA’s results are reflected in our Transportation segment for the period from May 3, 2010 through December 31, 2010.

We have significantly increased our revenues from U.S. federal government contracting in recent years and continue to view this as an important market, particularly the Department of Defense and the Department of Homeland Security. The Department of Homeland Security’s Federal Emergency Management Agency (“FEMA”), awarded BakerAECOM, LLC (“BakerAECOM”), a Delaware limited liability company of which we are the managing member, an Indefinite-Delivery/Indefinite-Quantity (“IDIQ”) contract for Production and Technical Services for FEMA’s Risk Mapping, Analysis and Planning Program (“Risk MAP Program”) on March 9, 2009. In February 2009, the U.S. Congress passed the American Recovery and Reinvestment Act of 2009, which contained approximately $130 billion for highways, buildings and other public works projects through December 31, 2010. We have benefited from work that the Federal government as well as state and local governments have procured as a result of this legislation, particularly in transportation design and construction phase services. In March 2010, the current legislation for transportation — the Safe, Accountable, Flexible, Efficient Transportation Equity Act — A Legacy for Users (“SAFETEA-LU”) was extended by Congress through March 31, 2011. Although this extension provides funding for transportation infrastructure projects through the first quarter of 2011, the level of funding, and whether further extensions of the program will occur based on the outcome of the Federal deficit debate in Congress, is uncertain. As a result, our key transportation clients are continuing to exercise a significant amount of caution in granting new infrastructure projects or entering into extensions of existing commitments. We presently expect that this trend will continue for the foreseeable future.

Our significant contracts awarded during 2010 and early 2011 include:

•  An estimated $75.0 million IDIQ contract, which is for one year and may be extended up to four additional years, was awarded by the Naval Facilities Engineering Command (“NAVFAC”) to provide architectural and engineering

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services for Multimedia Environmental Compliance Engineering Support to the Navy and other Department of Defense entities.

•  A five-year, $30 million IDIQ architectural and engineering contract was awarded to one of our joint ventures, which we will be a subcontractor for, by the U.S. Army Corps of Engineers — Sacramento District to provide master planning and related geographical information systems services for various federal, state, local and municipal agencies worldwide.

•  A $14.9 million, four-year contract with the Virginia Department of Transportation to deliver construction engineering and inspection services for the I-95 Bridges Rehabilitation Project in Richmond, Virginia.

•  An $8.9 million, three-year project with the Indiana Department of Transportation and the Kentucky Transportation Cabinet to provide construction oversight services for the Milton-Madison Ohio River Bridge project.

•  A twelve-month, $6.7 million contract with the Arizona Department of Transportation to design three miles of new freeway in the cities of Glendale and Surprise, Arizona.

•  Four separate design-build contracts with the U.S. Army Corps of Engineers, Louisville District, were awarded to our design-build team with the Korte Company to provide architecture and engineering design services for Armed Forces Reserve Facilities in Oklahoma, Texas and Puerto Rico. The total construction value of the facilities is $74.0 million, while our combined fees for the projects will be $5.0 million.

In addition, Baker is the lead architectural and engineering firm on a Kiewit-Mortenson joint venture. This Kiewit-Mortenson joint venture is one of seven companies to be awarded a multiple award construction contract (“MACC”) by the NAVFAC — Pacific to compete for design and construction projects on Guam and other areas in the NAVFAC Pacific area. The total capacity of the combined MACC contract for construction of facilities and infrastructure is $4.0 billion, with each of the seven contracts being for a twelve-month base period with four, one-year option periods.

Our five-year IDIQ contract with FEMA for up to $750 million to serve as the program manager to develop, plan, manage, implement and monitor the Multi-Hazard Flood Map Modernization Program (“FEMA Map Mod Program”) for flood hazard mitigation across the U.S. and its territories was scheduled to conclude on March 10, 2009. FEMA added a contract provision that extended the ordering period through September 2010. As of December 31, 2010, approximately $12 million is in our funded backlog related to this program. We expect work and revenue related to our current authorizations to continue through 2011.

Discontinued Operations — Energy

In our 2009 filings, we presented an Engineering and an Energy business segment. Our former Energy segment (“Baker Energy”) provided a full range of services for operating third-party oil and gas production facilities worldwide. On September 30, 2009, we divested substantially all of our subsidiaries that pertained to our former Energy segment (the “Energy sale”). Additionally, we sold our interest in B.E.S. Energy Resources Company, Ltd. (“B.E.S.”), an Energy company, on December 18, 2009 to J.S. Technical Services Co., LTD., which is owned by our former minority partner in B.E.S. As such, the Energy business has been reclassified into “discontinued operations” in our accompanying consolidated financial statements. The results for the years ended December 31, 2010, 2009 and 2008 give effect to the dispositions.

Executive Overview

Our earnings per diluted common share for continuing operations were $1.60 for the year ended December 31, 2010, compared to $2.75 per diluted common share reported for 2009. Our total earnings per diluted common share were $1.33 for the year ended December 31, 2010, compared to $3.01 per diluted common share reported for the same period in 2009.

Our revenues from continuing operations were $499.4 million for the year ended December 31, 2010, a 12% increase from the $445.2 million reported for the same period in 2009. This increase in revenues was driven by $58.5 million of revenues from LPA, which was acquired in the second quarter of 2010, and increases in other key Transportation segment projects, offset by a decrease in revenues in our Federal segment.

Income from continuing operations for the year ended December 31, 2010 was $14.7 million, compared to $24.6 million for the same period in 2009. These results were driven by a decrease in our Federal segment’s work performed on the FEMA Map Mod Program contract and for our unconsolidated joint venture in Iraq, as well as an overall increase in our selling, general and administrative (“SG&A”) expenses driven primarily by the LPA acquisition. In addition, income from our unconsolidated subsidiary, Stanley Baker Hill, LLC (“SBH”), decreased by $5.9 million

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year over year. These decreases were offset by an increase in revenues and margins in our Transportation segment, which includes the results of LPA, and a year-over-year decrease in our incentive compensation costs, partially offset by amortization expense for intangible assets related to the LPA acquisition.

We had a loss from discontinued operations related to our former Energy segment of $2.5 million for 2010, as compared to income of $2.3 million for the same period in 2009. The 2010 loss from discontinued operations was primarily attributable to the unfavorable development of legacy insurance claims and foreign tax accruals related to our former Energy business.

Results of Operations

Comparisons of the Year Ended December 31, 2010 and 2009

Revenues

Our revenues totaled $499.4 million for 2010 compared to $445.2 million for 2009, reflecting an increase of $54.2 million or 12%. This increase was driven by our Transportation segment, including $58.5 million of revenues from LPA which was acquired in the second quarter 2010, offset by a decrease in revenues in our Federal segment.

Transportation.  Revenues were $276.1 million for 2010 compared to $196.3 million for 2009, reflecting an increase of $79.8 million or 41%. The following table presents Transportation revenues by client type:

(in millions)	2010				2009
Revenues by client type
Federal government	$	9.5	4	%	$	9.7	5	%
State and local government		210.3	76	%		163.4	83	%
Domestic private industry		56.3	20	%		23.2	12	%
Total revenues	$	276.1	100	%	$	196.3	100	%

This increase was primarily driven by state and local government and domestic private industry revenues totaling $58.5 million from LPA, which was acquired in the second quarter of 2010. The increase was also driven by the period-over-period increase in services provided for Pennsylvania Department of Transportation projects of $7.5 million, revenues generated as a subcontractor for various projects related to the Utah Department of Transportation for design work on the expansion of the I-15 Corridor Reconstruction project totaling $6.8 million, and increases of services provided for the New Jersey Turnpike Commission of $4.3 million, the Arizona Department of Transportation of $3.3 million and for the Alamo Regional Mobility Authority of $2.8 million, partially offset by a decrease in work performed for the New Jersey Department of Transportation of $3.7 million.

Federal.  Revenues were $223.3 million for 2010 compared to $248.9 million for 2009, reflecting a decrease of $25.6 million or 10%. The following table presents Federal revenues by market:

(in millions)	2010				2009
Revenues by client type
Federal government	$	173.8	78	%	$	207.8	84	%
State and local government		29.6	13	%		17.6	7	%
Domestic private industry		19.9	9	%		23.5	9	%
Total revenues	$	223.3	100	%	$	248.9	100	%

The decrease in our Federal segment’s revenues for 2010 was driven by a decrease of $20.4 million in federal government work performed for our unconsolidated subsidiary operating in Iraq and the net decrease in work performed on our FEMA contracts of $13.2 million as compared to 2009, partially offset by an increase in services provide for the NAVFAC — Atlantic Division of $5.4 million, the Department of Public Works in Montgomery County, Maryland of $2.6 million and the Alaska Department of Natural Resources of $2.2 million.

Total revenues from FEMA were approximately $54 million and $67 million for 2010 and 2009, respectively. This decrease is primarily a result of the FEMA Map Mod Program being in its final stages, with this decrease partially offset with revenues from the Risk MAP Program, the intended successor to FEMA Map Mod Program. As a result of

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achieving certain performance levels on the FEMA Risk Map Program and FEMA Map Mod Program, we recognized revenues from project incentive awards totaling $1.4 million in 2010 compared to $3.1 million for 2009.

Gross Profit

Our gross profit totaled $99.1 million for 2010 compared to $88.0 million for 2009, reflecting an increase of $11.1 million or 13%. Gross profit expressed as a percentage of revenues was 19.8% for both 2010 and 2009. The increase in gross profit for 2010 is primarily attributable to the addition of LPA’s margin of $12.2 million (net of amortization expense of $3.7 million for intangible assets related to the acquisition), decrease in incentive compensation costs of $3.7 million and increased revenue volume and margin improvement in our Transportation segment exclusive of LPA’s results, partially offset by a decrease in our Federal segment’s revenue volume. Included in total gross profit for 2010 and 2009 were Corporate-related costs for self-insured professional liability claims of $1.6 million and $1.1 million, respectively, which were not allocated to our segments.

Direct labor and subcontractor costs are major components in our cost of work performed due to the project-related nature of our service businesses. Direct labor costs expressed as a percentage of revenues were 26.5% for 2010 compared to 27.5% for 2009, while subcontractor costs expressed as a percentage of revenues were 21.7% for 2010 compared to 21.5% for 2009. Direct labor costs were primarily affected by a decrease in work performed for FEMA and SBH, while subcontractor costs as a percentage of revenue remain essentially unchanged. Expressed as a percentage of revenues, direct labor decreased in both segments while subcontractor costs increased in our Transportation segment and decreased in our Federal segment period over period.

Transportation.  Gross profit was $53.5 million for 2010 compared to $36.3 million for 2009, reflecting an increase of $17.2 million or 47%. The increase in gross profit for 2010 is primarily attributable to improved revenue volume compared to 2009 coupled with the addition of LPA’s margin and a decrease in incentive compensation costs, partially offset by increased amortization expense for intangible assets related to the LPA acquisition. Transportation’s gross profit expressed as a percentage of revenues was 19.3% in 2010 compared to 18.5% in 2009. Gross profit expressed as a percentage of revenues increased as a result of increased margin related to project mix, as well as a decrease in incentive compensation costs totaling $1.4 million, partially offset by the aforementioned amortization expense of $3.7 million.

Federal.  Gross profit was $47.2 million for 2010 compared to $52.8 million for 2009, reflecting a decrease of $5.6 million or 11%. The decrease in gross profit for 2010 is primarily attributable to a decrease in revenue volume, partially offset by the decrease in incentive compensation costs. Gross profit expressed as a percentage of revenues was 21.2% for both 2010 and 2009. Gross profit expressed as a percentage of revenues was unfavorably impacted by a decrease in margin related to project mix, which was offset by a decrease in incentive compensation costs totaling $2.3 million compared to 2009.

Selling, General and Administrative Expenses

Our SG&A expenses totaled $76.8 million for 2010 compared to $57.4 million for 2009, reflecting an increase of $19.4 million or 34%. SG&A expenses for the Transportation segment were $45.1 million for 2010 compared to $28.3 million for 2009, reflecting an increase of $16.8 million or 59%. SG&A expenses for the Transportation segment expressed as a percentage of revenues increased to 16.3% for 2010 from 14.4% for 2009 driven primarily by an increase in costs related to the addition of LPA. SG&A expenses for the Federal segment were $31.6 million for 2010 compared to $28.8 million for 2009, reflecting an increase of $2.8 million or 9.7%. SG&A expenses for the Federal segment expressed as a percentage of revenues increased to 14.2% for 2010 from 11.6% for 2009 driven in part by the Federal segment’s decreased revenue volume.

Overhead costs are primarily allocated between the Transportation and Federal segments based on that segment’s percentage of total direct labor. As a result of the allocation, SG&A expenses by segment directly fluctuated in relation to the increases or decreases in the Transportation and Federal segment’s direct labor percentage of total direct labor. Also included in total SG&A expenses for 2010 and 2009 were Corporate-related costs of $0.1 million and $0.3 million, respectively, which were not allocated to our segments.

SG&A expenses increased period-over-period primarily due to additional SG&A expenses of $14.2 million from LPA, which includes amortization expense of $1.0 million for intangible assets related to the LPA acquisition. Also contributing to the increase in SG&A expenses was an increase in acquisition and integration-related costs, increased occupancy-related costs associated with significant renewal activity and the addition of new locations during the year, a favorable, non-recurring insurance settlement that was recognized in 2009, a nonrecurring indirect tax charge, and increased professional fees, partially offset by a decrease in incentive compensation costs. SG&A

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expenses expressed as a percentage of revenues increased to 15.4% for 2010 from 12.9% for 2009. This overall increase in SG&A expenses expressed as a percentage of revenues is primarily driven by the aforementioned increased acquisition and integration-related costs of $2.3 million, increased occupancy-related costs of $1.1 million, favorable non-recurring insurance settlements totaling approximately $1.0 million that was recognized in 2009, a nonrecurring indirect tax charge of $0.6 million and an increase in professional fees of $0.5 million. This was offset by a reduction of incentive compensation costs of $1.6 million.

Other Income/(Expense)

“Other income/(expense)” aggregated to income of $2.4 million for 2010 compared to $7.4 million for 2009. “Other income/(expense)” is comprised primarily of equity income from our unconsolidated subsidiaries of $2.6 million for 2010 compared to $7.1 million for 2009. The decrease in equity income from our unconsolidated subsidiaries was primarily due to SBH’s current Iraq IDIQ contract ending in September 2009 and the associated decrease in work performed as existing task orders were completed. It is not anticipated that further contract funding will be added to this contract vehicle. A modest amount of currently funded task order work was extended beyond September 30, 2010 but the contract was materially complete by September 2010. SBH will be dissolved in 2011 and we anticipate any activity for this entity until dissolution will be nominal. The decrease in SBH from $7.1 million for 2009 to $1.2 million for 2010 was partially offset by an increase of $1.4 million related to the addition of LPA’s joint venture, Louisiana TIMED Managers (“LTM”), during the period. We do not anticipate LTM to maintain this level of income in future periods. Interest income increased from $0.2 million in 2009 to $0.4 million in 2010, primarily due to the increased interest earned on available for sale securities Also included in “Other income/(expense)” is a minimal amount of interest expense and currency-related gains and losses.

Income Taxes

Our provisions for income taxes from continuing operations resulted in effective income tax rates of approximately 39% and 35% for the years ended December 31, 2010 and 2009, respectively. The variance between the U.S. federal statutory rate of 35% and our effective income tax rates for these periods is primarily due to state income taxes and permanent items that are not deductible for U.S. tax purposes. In 2009, the impact of state income taxes and permanent differences was fully offset by our ability to utilize $1.4 million of foreign tax credits.

Loss/Income from Discontinued Operations

As a result of the sale of our Energy business, we have presented those results on a discontinued operations basis. The net loss from discontinued operations was $2.5 million for 2010 as compared to net income from discontinued operations of $2.3 million in 2009. As part of the Energy sale we have indemnified the buyer for certain legacy costs related to our former Energy segment in excess of amounts accrued as of the transaction date. These costs include, but are not limited to, insurance and taxes. The 2010 net loss from discontinued operations primarily related to the unfavorable development of legacy insurance claims and adjustment of foreign tax accruals related to the Energy business. Reflected in our December 31, 2010 Consolidated Balance Sheet are both liabilities and assets related to Baker Energy’s workers’ compensation, automobile and health insurances through September 30, 2009. As part of the sale of Baker Energy, the buyer agreed to assume the liabilities associated with those insurances, subject to certain indemnifications, as of September 30, 2009. However, corresponding liabilities representing the reserves associated with these insurances, including reserves for incurred but not reported claims, are included in our Consolidated Balance Sheet as those insurances are written to us, rather than to a Baker Energy entity. As such, we are required to maintain reserves for these insurances in our Consolidated Balance Sheet. As the buyer assumed the liabilities associated with these insurances as of the closing balance sheet, we have also recorded a corresponding receivable from the buyer representing the amount of the aggregate insurance liabilities as of September 30, 2009 for the Energy Business, less reimbursements made to us through December 31, 2010. We have also indemnified the buyer for any taxes in excess of the amounts accrued as of September 30, 2009.

The income tax benefit attributable to discontinued operations was approximately $0.2 million in 2010, as compared to a benefit for income taxes of approximately $5.5 million in 2009. During 2010, the Company incurred additional non-deductible expenses related to its discontinued operations totaling $2.5 million and paid insurance liabilities totaling $1.8 million. This had the effect of increasing the capital loss carryforward and related valuation allowance to $23.3 million and $8.2 million, respectively. Additionally, the Company’s valuation allowance against its deferred tax asset for insurance liabilities was reduced to $1.4 million as of December 31, 2010 from $2.0 million as of December 31 2009. The 2009 income tax benefit was primarily attributable to utilizing credits for taxes paid in foreign jurisdictions as

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a result of generating sufficient foreign source income to offset our overall foreign loss. These benefits were partially offset by the normal course provisions for income tax during 2009 for our former Energy operations.

Comparisons of the Year Ended December 31, 2009 and 2008

Revenues

Our revenues totaled $445.2 million for 2009 compared to $455.9 million for 2008, reflecting a decrease of $10.7 million or 2%. This decrease was driven by our Federal segment, partially offset by an increase in revenues in our Transportation segment.

Transportation.  Revenues were $196.3 million for 2009 compared to $180.8 million for 2008, reflecting an increase of $15.5 million or 9%. The following table presents Transportation revenues by client type:

(in millions)	2009				2008
Revenues by client type
Federal government	$	9.7	5	%	$	7.0	4	%
State and local government		163.4	83	%		155.8	86	%
Domestic private industry		23.2	12	%		18.0	10	%
Total revenues	$	196.3	100	%	$	180.8	100	%

This increase was primarily driven by increases in work performed for the Pennsylvania Department of Transportation of $7.5 million, North Texas Tollway Authority of $2.7 million, the Ohio Department of Transportation of $2.6 million, as well as increases on several other existing projects.

Federal.  Revenues were $248.9 million for 2009 compared to $275.1 million for 2008, reflecting a decrease of $26.2 million or 10%. The following table presents Federal revenues by market:

(in millions)	2009				2008
Revenues by client type
Federal government	$	207.8	84	%	$	231.8	85	%
State and local government		17.6	7	%		20.0	7	%
Domestic private industry		23.5	9	%		23.3	8	%
Total revenues	$	248.9	100	%	$	275.1	100	%

The decrease in our Federal segment’s revenues for 2009 was driven by a decrease in work performed on our FEMA contracts of $26.3 million as compared to 2008, partially offset by an increase of $2.4 million in federal government work performed for our unconsolidated subsidiary operating in Iraq.

Total revenues from FEMA were approximately $67 million and $93 million for 2009 and 2008, respectively. This decrease is primarily a result of approaching the contract close out date for the FEMA Map Mod Program. As a result of achieving certain performance levels on the FEMA Map Mod Program, we recognized revenues from project incentive awards totaling $3.1 million and $4.1 million for 2009 and 2008, respectively.

Gross Profit

Our gross profit totaled $88.0 million for 2009 compared to $84.5 million for 2008, reflecting an increase of $3.5 million or 4%. Gross profit expressed as a percentage of revenues was 19.8% for 2009 compared to 18.5% for 2008. This increase in gross profit and gross profit expressed as a percentage of revenues was driven by margin improvement related to project mix, partially offset by a reduction in FEMA project incentive awards of $1.0 million. Total gross profit included Corporate expense of $1.1 million for 2009 versus $1.1 million of income for 2008 that was not allocated to our segments. We experienced a reduction in costs of $1.7 million related to our self-insured professional liability claims during 2008 as compared to unfavorable claims development related to our self-insured professional liability in 2009 which drove this year-over-year change in Corporate expense.

Direct labor and subcontractor costs are major components in our cost of work performed due to the project-related nature of our service businesses. Direct labor costs expressed as a percentage of revenues were 27.5% for 2009 compared to 25.1% for 2008, while subcontractor costs expressed as a percentage of revenues were 21.5% and

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26.9% for 2009 and 2008, respectively. Expressed as a percentage of revenues, direct labor increased due to work performed for our unconsolidated subsidiary operating in Iraq, while the decrease in work related to FEMA drove the decrease in subcontractor costs period over period.

Transportation.  Gross profit was $36.3 million for 2009 compared to $28.7 million for 2008, reflecting an increase of $7.6 million or 26%. The increase in gross profit for 2009 is primarily attributable to an increased revenue volume and margin improvements compared to 2008. Transportation’s gross profit expressed as a percentage of revenues was 18.5% in 2009 compared to 15.9% in 2008. The increase in gross profit expressed as a percentage of revenue was driven by margin improvement related to project mix.

Federal.  Gross profit was $52.8 million for 2009 compared to $54.7 million for 2008, reflecting a decrease of $1.9 million or 3%. The decrease in gross profit for 2009 is primarily attributable to a decreased revenue volume and a reduction in project incentive awards of $1.0 million. Gross profit expressed as a percentage of revenues was 21.2% in 2009 compared to 19.9% in 2008. The increase in gross profit expressed as a percentage of revenue was driven by margin improvement related to project mix, offset by a decrease in project incentive awards of $1.0 million compared to 2008.

Selling, General and Administrative Expenses

Our SG&A expenses totaled $57.4 million for 2009 compared to $51.2 million for 2008, reflecting an increase of $6.2 million or 12%. SG&A expenses for the Transportation segment were $28.3 million for 2009 compared to $24.8 million for 2008, reflecting an increase of $3.5 million or 14%. SG&A expenses for the Transportation segment expressed as a percentage of revenues increased to 14.4% for 2009 from 13.8% for 2008. SG&A expenses for the Federal segment were $28.8 million for 2009 compared to $26.3 million for 2008, reflecting an increase of $2.5 million or 10%. SG&A expenses for the Federal segment expressed as a percentage of revenues increased to 11.6% for 2009 from 9.6% for 2008.

SG&A expenses increased year-over-year due to an increase in corporate overhead costs and an increase of $0.5 million for organic growth initiatives, partially offset by favorable insurance settlements totaling approximately $1.0 million. SG&A expenses expressed as a percentage of revenues increased to 12.9% in 2009 compared to 11.2% for 2008. This overall increase in SG&A expenses expressed as a percentage of revenues is primarily driven by the aforementioned increase for organic growth initiatives and the increase in corporate overhead costs of $3.5 million, primarily related to incentive compensation accruals, stock-based compensation, and retention costs.

Overhead costs are primarily allocated between the Transportation and Federal segments based on that segment’s percentage of total direct labor. As a result of the allocation, SG&A expenses by segment directly fluctuated in relation to the increases or decreases in the Transportation and Federal segment’s direct labor percentage of total direct labor. Also included in total SG&A expenses for 2009 and 2008 were Corporate-related costs of $0.3 million and $0.1 million, respectively, which were not allocated to our segments.

Other Income/(Expense)

“Other income/(expense)” aggregated to income of $7.4 million for 2009 compared to income of $3.7 million for 2008. “Other income/(expense)” primarily included equity income from our unconsolidated subsidiary of $7.1 million for 2009 compared to $3.1 million for 2008. The increase in equity income from our unconsolidated subsidiary was primarily related to improved margins on extensions of work orders being performed by our unconsolidated subsidiary operating in Iraq. Also included in “Other income/(expense)” is a minimal amount of interest income, interest expense and currency-related gains and losses.

Income Taxes

Our provisions for income taxes from continuing operations resulted in effective income tax rates of approximately 35% and 39% for the years ended December 31, 2009 and 2008, respectively.

The variance between the U.S. federal statutory rate of 35% and our effective income tax rates for these periods is primarily due to state income taxes and permanent items that are not deductible for U.S. tax purposes. Additionally, in 2009, the impact of state income taxes and permanent differences was fully offset by our ability to utilize $1.4 million of foreign tax credits.

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Income from Discontinued Operations

As a result of the sale of our Energy business, we have presented those results on a discontinued operations basis. Income from discontinued operations was $2.3 million for 2009 as compared to $6.6 million in 2008, which represented a decrease of $4.3 million. These amounts are comprised as follows:

(in thousands)	2009			2008
Income from discontinued operations before income tax (benefit)/ provision and loss on sale	$	2,295		$	13,497
(Benefit)/provision for income taxes		(4,913	)		6,825
Income from discontinued operations before loss on sale		7,208			6,672
Loss on sale of discontinued operations before income tax benefit		(5,287	)		—
Benefit for income taxes		(563	)		—
Loss on sale of discontinued operations, net of tax		(4,724	)		—
Income from discontinued operations		2,484			6,672
Less: Net income attributable to noncontrolling interests		(135	)		(76	)
Income from discontinued operations	$	2,349		$	6,596

Income from Discontinued Operations Attributable to Michael Baker Corporation

We recorded income from discontinued operations before income taxes of approximately $2.3 million for 2009 as compared to $13.5 million for 2008. This represents a decrease as compared to the corresponding period of $11.2 million. The results of Baker Energy and B.E.S. are representative of their results through their respective sale dates, while other legacy discontinued operations costs related to the Energy business were still being incurred though the end of the 2009. The primary drivers for the year-over-year change resulted from the write-off of a bankrupt customer’s receivable balance totaling $6.0 million, accruals recorded related to an assessment received for payroll taxes of $1.9 million in one of our former international subsidiaries in 2009 and increased workers compensation expense of $1.0 million, partially offset by the favorable impact of the reversal of a $2.5 million reserve due to the settlement of a contract-related claim. The 2008 income amount benefited by the recognition of a non-recurring project incentive award of $1.1 million from a former onshore managed services client in 2008, coupled with the favorable impacts of tax penalty and interest reductions of $1.6 million and $1.6 million, respectively.

The income tax benefit attributable to discontinued operations was approximately $4.9 million in 2009, as compared to a provision for income taxes of approximately $6.8 million in 2008. Prior to the quarter ended September 30, 2009, we were in an overall foreign loss position for U.S. Federal income tax purposes, which precluded us from utilizing credits for taxes paid in foreign jurisdictions. However, as a result of generating sufficient foreign source income to offset our overall foreign loss, we have now concluded that we can utilize those tax credits. This resulted in the reversal of deferred tax liabilities for a net impact of $5.9 million related to unremitted foreign source earnings, which are taxable for U.S. federal tax purposes, but can be offset if there are sufficient foreign tax credits that can be utilized. Additionally, we recorded a deferred tax asset of approximately $2.0 million related to foreign tax credits. A valuation allowance totaling $1.5 million was placed against those foreign tax credits as we have concluded we will not be able to utilize those credits in future periods based on our forecasted foreign source income in future periods. In 2008 the provision for income taxes includes the normal course provisions for income taxes during the year for our former Energy operations, including income taxes in our former international operations, some of which are based on a deemed profits tax which are assessed based on revenues.

Loss on Sale of Energy

In conjunction with the sale of Baker Energy on September 30, 2009, we recorded a loss of $5.1 million. The loss for Baker Energy was the result of the recognition of transaction fees of approximately $2.2 million, the recognition of cumulative currency translation adjustments of approximately $2.2 million, and the deficiency between the net assets conveyed and the consideration received of approximately $0.6 million. The transaction fees were primarily comprised of investment banker fees of approximately $0.6 million, legal fees of approximately $0.3 million, and payments of approximately $1.3 million for an Energy management retention plan with the proceeds payable upon the sale of the business.

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The loss on the sale of Baker Energy was offset by a tax benefit of approximately $0.6 million. The majority of the loss resulted in a capital loss carryforward of approximately $19.0 million for tax purposes, for which a deferred tax asset and related valuation allowance totaling $6.7 million was recorded due to our expected inability to utilize it. The Company also recorded a full valuation allowance against $2.0 million in net deferred tax assets related to Legacy Baker Energy insurance liabilities. These liabilities are reimbursable from the buyer but the related accounts receivable has already been included within the previously mentioned capital loss. Should we be able to generate capital gains within the five-year carryforward period, the reserved portion of these deferred tax assets may also be utilized; however, our current projections do not forecast sufficient capital gains necessary to utilize that asset.

In conjunction with the sale of B.E.S. on December 18, 2009, we recorded a loss of $0.2 million. The loss for B.E.S. included nominal fees associated with the sale of this entity.

Contract Backlog

Funded backlog consists of that portion of uncompleted work represented by signed contracts and/or approved task orders, and for which the procuring agency has appropriated and allocated the funds to pay for the work. Total backlog incrementally includes that portion of contract value for which options have not yet been exercised or task orders have not been approved. We refer to this incremental contract value as unfunded backlog. U.S. government agencies and many state and local governmental agencies operate under annual fiscal appropriations and fund various contracts only on an incremental basis. In addition, our clients may terminate contracts at will or not exercise option years. Our ability to realize revenues from our backlog depends on the availability of funding for various federal, state and local government agencies; therefore, no assurance can be given that all backlog will be realized.

The following table presents our contract backlog:

	As of December 31,
(in millions)	2010		2009
Funded	$	569.5	$	461.3
Unfunded		1,005.6		963.9
Total	$	1,575.1	$	1,425.2

As of December 31, 2010, our funded backlog consisted of approximately $400 million for our Transportation segment and approximately $170 million for the Federal segment. Included in total backlog as of December 31, 2010 was $104 million of funded backlog related to LPA. Of our total funded backlog as of December 31, 2010, approximately $279 million is expected to be recognized as revenue within the next year. Additionally, we expect our sources of revenue within the next year to include recognized unfunded backlog and new work added. Due to the nature of unfunded backlog, consisting of options that have not yet been exercised or task orders that have not yet been approved, we are unable to reasonably estimate what, if any, portion of our unfunded backlog will be realized within the next year.

In March 2009, BakerAECOM was informed by FEMA that it has been awarded an IDIQ contract for the Risk MAP Program, which is the successor to the FEMA Map Mod Program. The resultant performance-based contract has a five-year term with a maximum contract value of up to $600 million. As of December 31, 2010, approximately $50 million is in our funded backlog and $504 million is in our unfunded backlog related to this program.

As of December 31, 2010 and 2009, approximately $12 million and $40 million of our funded backlog, respectively, related to the $750 million FEMA Map Mod Program contract to assist FEMA in conducting a large-scale overhaul of the nation’s flood hazard maps, which commenced late in the first quarter of 2004. This contract includes data collection and analysis, map production, product delivery, and effective program management; and seeks to produce digital flood hazard data, provide access to flood hazard data and maps via the Internet, and implement a nationwide state-of-the-art infrastructure that enables all-hazard mapping. This contract was scheduled to conclude on March 10, 2009; however, FEMA added a contract provision that extended the ordering through September 2010. We do not anticipate realizing most of the remaining contract balance ($191 million as of December 31, 2010); as such this was removed from our unfunded backlog in the first quarter of 2009. We expect modest work and revenue related to our current authorizations to continue through 2011.

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Liquidity and Capital Resources

We have three principal sources of liquidity to fund our operations: our existing cash, cash equivalents, and investments; cash generated by operations; and our available capacity under our Unsecured Credit Agreement (“Credit Agreement”), which is with a consortium of financial institutions and provides for a commitment of $125 million through September 30, 2015.

The following table reflects our available funding capacity as of December 31, 2010:

(in millions)
Available Funding Capacity
Cash & Cash Equivalents			$	77.4
Available for sale securities				9.8
Credit agreement
Revolving credit facility	125.0
Outstanding borrowings	—
Issued letters of credit	(7.7	)
Net line of credit capacity available				117.3
Total available funding capacity			$	204.5

Our cash flows are primarily impacted from period to period by fluctuations in working capital. Factors such as our contract mix, commercial terms, days sales outstanding (“DSO”) and delays in the start of projects may impact our working capital. In line with industry practice, we accumulate costs during a given month and then bill those costs in the following month for many of our contracts. While salary costs associated with the contracts are paid on a bi-weekly basis, certain subcontractor costs are generally not paid until we receive payment from our customers. As of December 31, 2010 and 2009, $20.6 million and $19.5 million, respectively, of our accounts payable balance is comprised of invoices with “pay-when-paid” terms. As a substantial portion of our customer base is with public sector clients, such as agencies of the U.S. Federal Government as well as Departments of Transportation for various states, we have not historically experienced a large volume of write-offs related to our receivables and our unbilled revenues on contracts in progress. We regularly assess our receivables and costs in excess of billings for collectability, and provide allowances for doubtful accounts where appropriate. We believe our reserves for doubtful accounts are appropriate as of December 31, 2010, but adverse changes in the economic environment may impact certain of our customers’ ability to access capital and compensate us for our services, as well as impact project activity for 2011. The following table represents our summarized working capital information:

	As of December 31,
(in millions, except ratios)	2010			2009			Change
Current assets	$	230.2		$	251.3		$	(21.1	)
Current liabilities		(106.2	)		(97.0	)		9.2
Working capital	$	124.0		$	154.3		$	(30.3	)
Current Ratio*		2.17			2.59			N/A

* Current ratio is calculated by dividing current assets by current liabilities.

The decrease in our working capital and current ratio in 2010 is driven by the acquisition of the LPA Group. We utilized approximately $52.4 million of our existing cash and cash equivalents for this transaction, and the acquisition generated approximately $43.8 million of goodwill, which is a non-current asset.

Cash Provided by Operating Activities

Cash provided by operating activities was $27.1 million, $36.4 million and $32.2 million for years ended December 31, 2010, 2009 and 2008, respectively. Non-cash charges for depreciation and amortization increased to $9.5 million in 2010 from $5.6 million and $5.0 million in 2009 and 2008, respectively, due to the amortization of intangible assets acquired as part of the acquisition of LPA in 2010.

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Our cash provided by operating activities for 2010 resulted primarily from the net income of $12.9 million, a decrease in receivables of $10.6 million and the dividends received from our unconsolidated subsidiary of $2.6 million. Unfavorably impacting our cash provided by operating activities was an increase in our prepaid taxes as of December 31, 2010 as compared to the prior year.

Our total days sales outstanding in receivables and unbilled revenues, net of billings in excess, increased from 81 days at year-end 2009 to 82 days as of December 31, 2010. This slight 2010 increase in DSO was primarily driven by the decrease in revenues during in the fourth quarter of 2010 and the year over year increase in unbilled revenues, net of billings in excess.

Our cash provided by operating activities for 2009 resulted primarily from net income of $27.2 million and the dividends received from our unconsolidated subsidiary of $7.3 million. Also favorably impacting our cash provided by operating activities was a decrease in our prepaid balance as of December 31, 2009.

Cash (Used in)/Provided by Investing Activities

Cash used in investing activities was $53.8 million in 2010, primarily as a result of our acquisition of LPA. We disbursed $52.4 million related to the LPA acquisition in the second quarter of 2010, which is reflected as an outflow for the year ended December 31, 2010. Conversely, $10.0 million related to a net asset adjustment provision in the terms of the Energy Sale was received in 2010, and is reflected as an inflow for the year ended December 31, 2010. Cash used in investing activities for 2010 reflects $7.7 million related to the net purchases of available-for-sale securities partially offset by net cash inflows of $2.5 million related to the maturity of short-term investments.

Cash provided by investing activities for 2009 included approximately $37.9 million of cash conveyed to us from the buyer upon the sale of Baker Energy. This cash receipt was partially offset by existing cash of approximately $7.8 million conveyed to the buyer upon the sale of Baker Energy. This cash, which related to our former Energy business’ international operations, was reimbursed through the sale agreement net asset adjustment; however, the proceeds of the net asset adjustment were not received prior to December 31, 2009 and were reflected as an inflow of cash in 2010 as noted above. Cash provided by investing activities for 2009 also included approximately $0.9 million of net cash conveyed to us upon the sale of B.E.S. Partially offsetting the cash inflows from the sale of these businesses in 2009 was $2.5 million and $2.2 million related to the purchase of short-term investments and available-for-sale securities, respectively.

In addition, our cash used in investing activities for all periods presented also related to capital expenditures. The majority of our 2010 capital additions pertain to computer software purchases, office equipment and leasehold improvements related to office openings or relocations. We also acquired various assets through operating leases, which reduced the level of capital expenditures that would have otherwise been necessary to operate our business.

Cash (Used in)/Provided by Financing Activities

In 2010, in conjunction with the refinancing of our Credit Agreement, we incurred $0.6 million of costs, which are reflected as an outflow of cash from financing activities. Our other financing activities primarily related to noncontrolling interest distributions and capital contributions related to our BakerAECOM partners, excess tax expense from stock based compensation and payments on capital lease obligations partially offset by the proceeds received from the exercise of stock options for the periods presented.

Credit Agreement

On September 30, 2010, we entered into a new Credit Agreement. Our new Credit Agreement is with a consortium of financial institutions and provides for an aggregate commitment of $125.0 million revolving credit facility with a $50 million accordion option through September 30, 2015. The new arrangement increased our credit capacity by $65 million. The Credit Agreement includes a $5.0 million swing line facility and $20.0 million sub-facility for the issuance of letters of credit (“LOCs”). As of December 31, 2010 and 2009, there were no borrowings outstanding under our respective Credit Agreements and outstanding LOCs were $7.7 million and $9.4 million, respectively.

The Credit Agreement provides pricing options for us to borrow at the bank’s prime interest rate or at LIBOR plus an applicable margin determined by our leverage ratio based on a measure of indebtedness to earnings before interest, taxes, depreciation, and amortization (“EBITDA”). Our Credit Agreement also contains usual and customary negative covenants for a credit facility, requires us to meet minimum leverage and interest and rent coverage ratio covenants and places certain limitations on dividend payments. Our Credit Agreement also contains usual and customary

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provisions regarding acceleration. In the event of certain defaults by us under the credit facility, the lenders will have no further obligation to extend credit and, in some cases, any amounts owed by us under the credit facility will automatically become immediately due and payable.

Although only $7.7 million of our credit capacity was utilized under this facility as of December 31, 2010, in future periods we may leverage our Credit Agreement to facilitate our growth strategy, specifically utilizing our available credit to fund strategic acquisitions. The inability of one or more financial institutions in the consortium to meet its commitment under our Credit Agreement could impact our growth strategy. Currently, we believe that we will be able to readily access our Credit Agreement as necessary.

Financial Condition & Liquidity

As of December 31, 2010, we had $77.4 million of cash & cash equivalents, as well as approximately $9.8 million in available for sale securities. Since our long-term plan is to grow both organically and through acquisitions, our management team determined that capital preservation is a critical factor in executing on this strategy. As such, the determination was made to maintain the majority of our cash balances in highly rated bonds and money market funds. We believe that this strategy to preserve our current cash position with sufficient liquidity to deploy those funds rapidly is the prudent course of action in light of our acquisition and organic growth initiatives. We principally maintain our cash & cash equivalents and bonds in accounts held by major banks and financial institutions. The majority of our funds are held in accounts in which the amounts on deposit are not covered by or exceed available insurance by the Federal Deposit Insurance Corporation. Although there is no assurance that one or more institutions in which we hold our cash & cash equivalents and bonds will not fail, we currently believe that we will be able to readily access our funds when needed.

We plan to utilize our cash, investments and borrowing capacity under the Credit Agreement for, among other things, short-term working capital needs, including the satisfaction of contractual obligations and payment of taxes, to fund capital expenditures, and to support strategic opportunities that management identifies. We continue to pursue growth in our core businesses and are specifically seeking to expand our engineering operations through organic growth and strategic acquisitions that align with our core competencies. We consider acquisitions, or related investments, for the purposes of geographic expansion and/or improving our market share as key components of our growth strategy and intend to use existing cash, investments and the Credit Agreement to fund such endeavors. Additionally, in February 2011, we filed a shelf registration with the Securities & Exchange Commission (“SEC”). Under the shelf registration, if and when declared effective by the SEC, we may sell, from time to time, up to $125 million of our common stock or debt securities, either individually or in units, in one or more offerings. While we have no specific plans to offer the securities covered by the registration statement, and are not required to offer the securities in the future, we believe the shelf registration will provide us with financial flexibility to fund our growth objectives, if necessary. We also periodically review our business, and our service offerings within our business, for financial performance and growth potential. As such, we may also consider realigning our current organizational structure if we conclude that such actions would further increase our operating efficiency and strengthen our competitive position over the long term.

On May 3, 2010, we entered into a Stock Purchase Agreement (“SPA”) to acquire 100% of the outstanding shares of LPA for $59.5 million. This transaction was funded with approximately $51.4 million of cash on hand and approximately $8.1 million of our stock. The transaction was subject to a working capital adjustment provision resulting in an additional payment of approximately $1.1 million to the former shareholders in June 2010. LPA is an engineering, architectural and planning firm specializing in the construction of airports, highways, bridges and other transportation infrastructure primarily in the southeastern United States. The majority of their clients are state and local governments, as well as construction companies that serve those markets. The acquisition was consummated because it contributes to our long-term strategic plan by enabling us to expand geographically into the southeastern United States. Additionally, this transaction strengthens our expertise in aviation, design-build and construction management services in state and local transportation markets. We anticipate continuing to utilize our cash, investments, equity and borrowing capacity for strategic acquisitions of firms that would enhance our current service offerings or allow us to expand our operations geographically, most likely domestically, in order to continue to grow our business.

If we commit to funding future acquisitions, we may need to issue debt or equity securities (including raising capital via our shelf registration, if and when declared effective by the SEC), add a temporary credit facility, and/or pursue other financing vehicles in order to execute such transactions. We believe that the combination of our cash and cash equivalents, investments, cash generated from operations and our existing Credit Agreement will be sufficient to meet our operating and capital expenditure requirements for the next twelve months and beyond.

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Contractual Obligations and Off-Balance Sheet Arrangements

A summary of our contractual obligations and off-balance sheet arrangements as of December 31, 2010 are as follows:

			Payments due by period
			Within 1		1-3		3-5		After 5
(in millions)	Total		year		years		years		years
Contractual obligations
Operating lease obligations(1)	$	86.0	$	19.0	$	26.6	$	18.9	$	21.5
Purchase obligations(2)		17.3		7.5		8.7		0.9		0.2
Other long-term liabilities(3)		1.1		—		—		—		1.1
Capital lease obligations(4)		0.2		0.2		—		—		—
Total contractual obligations	$	104.6	$	26.7	$	35.3	$	19.8	$	22.8

(1)	We utilize operating leases to provide for use of certain assets in our daily business activities. This balance includes office space of $79.2 million, with the remaining balance relating to computers, computer-related equipment and motor vehicles. The lease payments for use of these assets are recorded as expenses, but do not appear as liabilities on our Consolidated Balance Sheets.
(2)	Our purchase obligations relate to legally binding agreements to purchase goods or services at agreed prices, but do not appear as liabilities on our Consolidated Balance Sheets. These obligations primarily relate to office equipment and maintenance obligations.
(3)	The majority of the $1.1 million balance represents deferred compensation for our Board of Directors.
(4)	Capital leases include computers and computer-related equipment.

Liabilities totaling $2.6 million as of December 31, 2010 recorded for uncertainty in income taxes are excluded from the above table due to the inability to make a reliable estimate of the period of any future cash settlement.

			Amount of commitment expiration per period
			Within 1		2-3		4-5		After 5
(in millions)	Total		year		years		years		years
Off-Balance Sheet Arrangements
Standby letters of credit	$	7.7	$	7.7	$	—	$	—	$	—
Performance and payment bonds		14.3		6.3		6.4		1.6		—
Total commercial commitments	$	22.0	$	14.0	$	6.4	$	1.6	$	—

Our banks issue standby letters of credit on our behalf under the aforementioned Credit Agreement. As of December 31, 2010, the majority of our outstanding LOCs were issued to insurance companies to serve as collateral for payments the insurers are required to make under certain of our self-insurance programs. These LOCs may be drawn upon in the event that we do not reimburse the insurance companies for claims payments made on our behalf. Such LOCs renew automatically on an annual basis unless either the LOC is returned to the bank by the beneficiaries or our banks elect not to renew them.

Bonds are provided on our behalf by certain insurance carriers. The beneficiaries under these performance and payment bonds may request payment from our insurance carriers in the event that we do not perform under the project or if subcontractors are not paid. We do not expect any amounts to be paid under our outstanding bonds as of December 31, 2010. In addition, we believe that our bonding lines will be sufficient to meet our bid and performance bonding needs for at least the next year.

Critical Accounting Estimates

We have identified the following critical accounting estimates as those that are most important to the portrayal of our results of operations and financial condition, and which require management’s most difficult, subjective or complex judgments and estimates.

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Project Cost Estimates to Complete.  We utilize the percentage-of-completion method of accounting for the majority of our contracts. Revenues for the current period on these contracts are determined by multiplying the estimated margin at completion for each contract by the project’s percentage of completion to date, adding labor costs, subcontractor costs and other direct costs incurred to date, and subtracting revenues recognized in prior periods. In applying the percentage-of-completion method, a project’s percent complete as of any balance sheet date is computed as the ratio of labor costs incurred to date divided by the total estimated labor costs at completion. Estimated labor costs at completion reflect labor costs incurred to date plus an estimate of the labor costs to complete the project. As changes in estimates of total labor costs at completion and/or estimated total losses on projects are identified, appropriate earnings adjustments are recorded during the period that the change or loss is identified. Due to the volume and varying degrees of complexity of our active projects, as well as the many factors that can affect estimated costs at completion, the computations of these estimates require the use of complex and subjective judgments. Accordingly, labor cost estimates to complete require regular review and revision to ensure that project earnings are not misstated. We have a history of making reasonably dependable estimates of costs at completion on our contracts that follow the percentage-of-completion method; however, due to uncertainties inherent in the estimation process, it is possible that estimated project costs at completion could vary from our estimates. As of December 31, 2010, we do not believe that material changes to project cost estimates at completion for any of our open projects are reasonably likely to occur.

Revenue Recognition.  As referenced above, we recognize revenue under the percentage-of-completion method for the majority of our contracts. Under certain circumstances, we may agree to provide new or additional services to a client without a fully executed contract or change order. In these instances, although the costs of providing these services are expensed as incurred, the recognition of related contract revenues are delayed until the contracts and/or change orders have been fully executed by the clients, other suitable written project approvals are received from the clients, or until management determines that revenue recognition is appropriate based on the probability of client acceptance. The probability of client acceptance is assessed based on such factors as our historical relationship with the client, the nature and scope of the services to be provided, and management’s ability to accurately estimate the realizable value of the services to be provided. Under this policy, we had not recognized potential future revenues estimated at $4.2 million and $3.5 million as of December 31, 2010 and 2009, respectively, for which the related costs had already been expensed as of these dates. The consistent application of this policy may result in revenues being recognized in a period subsequent to the period in which the related costs were incurred and expensed. Profit incentives and/or award fees are recorded as revenues when the amounts are both probable and reasonably estimable.

Income and Other Taxes.  We record our annual current tax provision based upon our book income plus or minus any permanent and temporary differences multiplied by the statutory rate in the appropriate jurisdictions where we operate. In certain foreign jurisdictions where we previously operated, income tax is based on a deemed profit methodology. The calculation of our annual tax provision may require interpreting tax laws and regulations and could result in the use of judgments or estimates which could cause our recorded tax liability to differ from the actual amount due.

We recognize current tax assets and liabilities for estimated taxes refundable or payable on tax returns for the current year. We also recognize deferred tax assets or liabilities for the estimated future tax effects attributable to temporary differences, net operating losses, undistributed foreign earnings, and various other credits and carryforwards. Our current and deferred tax assets and liabilities are measured based on provisions in enacted tax laws in each jurisdiction where we operate. We do not consider the effects of future changes in tax laws or rates in the current period. We analyze our deferred tax assets and place a valuation allowance on those assets if we do not expect the realization of these assets to be more likely than not.

Goodwill and Intangible Assets.  We account for acquired businesses using the acquisition method of accounting, which requires that the assets acquired and liabilities assumed be recorded at the date of acquisition at their respective estimated fair values. The cost to acquire a business has been allocated to the underlying net assets of the acquired business based on estimates of their respective fair values. Intangible assets are amortized over the expected life of the asset. Any excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill.

The judgments made in determining the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact our results of operations. Fair values and useful lives are determined based on, among other factors, the expected future period of benefit of the asset, the various

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characteristics of the asset and projected cash flows. Because this process involves management making estimates with respect to future revenues and market conditions and because these estimates form the basis for the determination of whether or not an impairment charge should be recorded, these estimates are considered to be critical accounting estimates.

During the second quarter of each year and in certain other circumstances, we perform a valuation of the goodwill associated with our business. To the extent that the fair value of the business, including the goodwill, is less than the recorded value, we would write down the value of the goodwill. The valuation of the goodwill is affected by, among other things, our business plans for the future and estimated results of future operations. Changes in our business plans and/or in future operating results may have an impact on the valuation of the assets and therefore could result in our recording a related impairment charge.

Contingencies.  The preparation of financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, and also affect the amounts of revenues and expenses reported for each period. Specifically, management estimates are inherent in the assessment of our exposure to insurance claims that fall below policy deductibles or within self-insured retention levels and to litigation and other legal claims and contingencies, as well as in determining our liabilities for incurred but not reported insurance claims. Significant judgments by us and advice provided by third-party experts are utilized in determining probable and/or reasonably estimable amounts to be recorded or disclosed in our financial statements. The results of any changes in accounting estimates are reflected in the financial statements of the period in which the changes are determined. Based on the information that is currently available, we do not believe that material changes to these estimates are reasonably likely to occur.

Recent Accounting Pronouncements

In June 2009, the FASB issued authoritative guidance amending the timing and considerations of analyses performed to determine if our variable interests give it a controlling financial interest in a variable interest entity, as well as requiring additional disclosures. We adopted the provisions of this guidance on January 1, 2010. The adoption of this authoritative guidance did not have a material impact on our consolidated financial statements.

16

MICHAEL BAKER CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

	For the year ended December 31,
(in thousands, except per share amounts)	2010			2009			2008
Revenues	$	499,353		$	445,177		$	455,929
Cost of work performed		400,296			357,197			371,397
Gross profit		99,057			87,980			84,532
Selling, general and administrative expenses		76,768			57,422			51,232
Operating income		22,289			30,558			33,300
Other income/(expense):
Equity income from unconsolidated subsidiaries		2,576			7,057			3,065
Interest income		399			160			642
Interest expense		(276	)		(70	)		(93	)
Other, net		(296	)		257			66
Income before income taxes and noncontrolling interests		24,692			37,962			36,980
Provision for income taxes		9,246			13,234			14,422
Net income from continuing operations before noncontrolling interests		15,446			24,728			22,558
(Loss)/income from discontinued operations, net of tax		(2,512	)		7,208			6,672
Loss on sale of discontinued operations, net of tax		—			(4,724	)		—
Less: Net income attributable to noncontrolling interests		—			(135	)		(76	)
Net (loss)/income from discontinued operations attributable to Michael Baker Corporation		(2,512	)		2,349			6,596
Less: Net income attributable to noncontrolling interests — continuing operations		(768	)		(156	)		—
Net income attributable to Michael Baker Corporation		12,166			26,921			29,154
Other comprehensive (loss)/income
Unrealized loss on investments		(17	)		—			—
Foreign currency translation adjustments with reclassification adjustments		270			2,232			(2,661	)
Less: Foreign currency translation adjustments attributable to noncontrolling interests with reclassification adjustments		—			(233	)		526
Comprehensive income attributable to Michael Baker Corporation	$	12,419		$	28,920		$	27,019
Earnings per share (“E.P.S.”) attributable to Michael Baker Corporation
Basic E.P.S. — Continuing operations	$	1.64		$	2.77		$	2.56
Diluted E.P.S. — Continuing operations		1.60			2.75			2.54
Basic E.P.S. — Net income		1.36			3.04			3.31
Diluted E.P.S. — Net income	$	1.33		$	3.01		$	3.28

The accompanying notes are an integral part of the consolidated financial statements.

17

MICHAEL BAKER CORPORATION

CONSOLIDATED BALANCE SHEETS

	As of December 31,
(in thousands, except share amounts)	2010			2009
ASSETS
Current Assets
Cash and cash equivalents	$	77,443		$	105,259
Short term investments		—			2,500
Available for sale securities		9,795			2,155
Proceeds receivable — Energy sale		—			9,965
Receivables, net of allowances of $601 and $723, respectively		73,681			76,455
Unbilled revenues on contracts in progress		58,884			49,605
Prepaid expenses and other		10,400			5,407
Total current assets		230,203			251,346
Property, Plant and Equipment, net		16,847			12,578
Other Long-term Assets
Goodwill		53,441			9,626
Other intangible assets, net		14,569			76
Deferred tax asset		878			—
Other long-term assets		5,127			5,218
Total other long-term assets		74,015			14,920
Total assets	$	321,065		$	278,844
LIABILITIES AND SHAREHOLDERS’ INVESTMENT
Current Liabilities
Accounts payable	$	38,918		$	31,948
Accrued employee compensation		20,638			23,000
Accrued insurance		11,992			9,576
Billings in excess of revenues on contracts in progress		18,816			19,102
Deferred income tax liability		6,405			3,958
Income taxes payable		545			1,355
Other accrued expenses		8,915			8,050
Total current liabilities		106,229			96,989
Long-term Liabilities
Deferred income tax liability		9,894			346
Other long-term liabilities		8,405			7,769
Total liabilities		124,528			105,104
Shareholders’ Investment
Common Stock, par value $1, authorized 44,000,000 shares,
issued 9,718,351 and 9,402,835, respectively		9,718			9,403
Additional paid-in capital		59,637			49,989
Retained earnings		131,301			119,135
Accumulated other comprehensive loss		(80	)		(333	)
Less — 495,537 shares of Common Stock in treasury, at cost		(4,761	)		(4,761	)
Total Michael Baker Corporation shareholders’ investment		195,815			173,433
Noncontrolling interest		722			307
Total shareholders’ investment		196,537			173,740
Total liabilities and shareholders’ investment	$	321,065		$	278,844

The accompanying notes are an integral part of the consolidated financial statements.

18

MICHAEL BAKER CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the year ended December 31,
(in thousands)	2010			2009			2008
Cash Flows from Operating Activities
Net income	$	12,933		$	27,212		$	29,230
Adjustments to reconcile net income to net cash provided by/(used in) operating activities:
Net loss/(income) from discontinued operations		2,512			(2,484	)		(6,672	)
Depreciation and amortization		9,501			5,592			4,952
Stock-based compensation expense		1,384			1,063			772
Tax benefit of stock compensation		13			232			117
Excess tax benefit from stock-based compensation		—			(5	)		(17	)
Deferred income tax expense/(benefit)		144			(5,152	)		(2,794	)
Realized and unrealized loss on investments, net		36			—			—
Equity affiliates’ earnings		(2,576	)		(7,057	)		(3,065	)
Equity affiliates’ dividends received		2,600			7,300			2,700
Loss on disposal of fixed assets		391			154			94
Changes in assets and liabilities:
Decrease/(increase) in receivables		10,643			(2,234	)		(7,311	)
(Increase)/decrease in unbilled revenues and billings in excess, net		(2,710	)		4,103			5,480
(Increase)/decrease in other net assets		(1,569	)		7,764			1,114
(Decrease)/increase in accounts payable		(990	)		(4,652	)		439
(Decrease)/increase in accrued expenses		(4,713	)		(7,779	)		9,584
Net cash provided by continuing operations		27,599			24,057			34,623
Net cash (used in)/provided by discontinued operations		(526	)		12,308			(2,395	)
Net cash provided by operating activities		27,073			36,365			32,228
Cash Flows from Investing Activities
Additions to property, plant and equipment		(6,213	)		(5,421	)		(3,472	)
Cash portion of LPA acquisition		(52,381	)		—			—
Purchase of short-term investments		(250	)		(2,500	)		—
Maturity of short term investments		2,750			—			—
Purchase of available-for-sale securities		(13,564	)		(2,155	)		—
Sale of available-for-sale securities		5,888			—			—
Investment in equity affiliates		—			(400	)		—
Net cash used in continuing operations		(63,770	)		(10,476	)		(3,472	)
Net cash provided by/(used in) discontinued operations		9,965			29,874			(1,813	)
Net cash (used in)/provided by investing activities		(53,805	)		19,398			(5,285	)
Cash Flows from Financing Activities
Debt issuance costs		(621	)		—			—
Proceeds from exercise of stock options		50			632			366
Payments on capital lease obligations		(160	)		(333	)		(285	)
Excess tax benefit from stock-based compensation		—			5			17
Noncontrolling interest distributions		(353	)		—			—
Capital contributions from noncontrolling interests		—			152			—
Net cash (used in)/provided by continuing operations		(1,084	)		456			98
Net cash used in discontinued operations		—			(10	)		(43	)
Net cash (used in)/provided by financing activities		(1,084	)		446			55
Net (decrease)/increase in cash and cash equivalents		(27,816	)		56,209			26,998
Cash and cash equivalents, beginning of year		105,259			49,050			22,052
Cash and cash equivalents, end of year	$	77,443		$	105,259		$	49,050

The accompanying notes are an integral part of the consolidated financial statements.

19

MICHAEL BAKER CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ INVESTMENT

																			Accumulated
	Common stock,										Additional					Non-			other			Total
	par value $1				Treasury						paid-in			Retained		controlling			comprehensive			shareholders’
(in thousands)	Shares		Amount		Shares			Amount			capital			earnings		interest			income/(loss)			investment
Balance, January 1, 2008		9,306	$	9,306		(496	)	$	(4,761	)	$	47,356		$	63,060	$	196		$	96		$	115,253
Net income attributable to Michael
Baker Corporation		—		—		—			—			—			29,154		—			—			29,154
Stock options exercised		33		33		—			—			333			—		—			—			366
Options granted		—		—		—			—			287			—		—			—			287
Tax benefit of stock compensation		—		—		—			—			117			—		—			—			117
Restricted stock issued		12		12		—			—			(12	)		—		—			—			—
Amortization of restricted stock		—		—		—			—			324			—		—			—			324
Noncontrolling interest net loss		—		—		—			—			—			—		602			—			602
Other comprehensive loss, net of tax:
Foreign currency translation adjustments		—		—		—			—			—			—		(526	)		(2,661	)		(3,187	)
Balance, December 31, 2008		9,351	$	9,351		(496	)	$	(4,761	)	$	48,405		$	92,214	$	272		$	(2,565	)	$	142,916
Net income attributable to Michael
Baker Corporation		—		—		—			—			—			26,921		—			—			26,921
Stock options exercised		40		40		—			—			592			—		—			—			632
Options granted		—		—		—			—			359			—		—			—			359
Tax benefit of stock compensation		—		—		—			—			232			—		—			—			232
Restricted stock issued		12		12		—			—			(12	)		—		—			—			—
Amortization of restricted stock		—		—		—			—			413			—		—			—			413
Noncontrolling interest
Investment in shares		—		—		—			—			—			—		152			—			152
Divestiture of subsidiary		—		—		—			—			—			—		(176	)		—			(176	)
Net income		—		—		—			—			—			—		291			—			291
Other comprehensive income, net of tax:
Reclassification adjustment for foreign currency translation included in the current period loss from discontinued operations		—		—		—			—			—			—		(232	)		2,069			1,837
Foreign currency translation adjustments		—		—		—			—			—			—		—			163			163
Balance, December 31, 2009		9,403	$	9,403		(496	)	$	(4,761	)	$	49,989		$	119,135	$	307		$	(333	)	$	173,740
Net income attributable to Michael
Baker Corporation		—		—		—			—			—			12,166					—			12,166
Stock options exercised		6		6		—			—			44			—		—			—			50
Options granted		—		—		—			—			315			—		—			—			315
Restricted stock issued		83		83		—			—			(83	)		—		—			—			—
Amortization of restricted stock		—		—		—			—			1,018			—		—			—			1,018
Tax benefit of stock compensation		—		—		—			—			13			—		—			—			13
Stock appreciation rights		—		—		—			—			505			—		—			—			505
Stock issued for LPA acquisition		226		226		—			—			7,836			—		—			—			8,062
Noncontrolling interests
Net income		—		—		—			—			—			—		768			—			768
Profit distribution		—		—		—			—			—			—		(353	)		—			(353	)
Other comprehensive (loss)/income, net of tax:
Unrealized loss on investments		—		—		—			—			—			—		—			(17	)		(17	)
Foreign currency translation adjustments		—		—		—			—			—			—		—			270			270
Balance, December 31, 2010		9,718	$	9,718		(496	)	$	(4,761	)	$	59,637		$	131,301	$	722		$	(80	)	$	196,537

The accompanying notes are an integral part of the consolidated financial statements.

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MICHAEL BAKER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   NATURE OF BUSINESS

Michael Baker Corporation (the “Company”) was founded in 1940 and organized as a Pennsylvania corporation in 1946. Currently, through its operating subsidiaries, the Company provides engineering expertise for public and private sector clients worldwide. The Company’s Transportation and Federal business segments provide a variety of services to the Company’s markets. The Transportation segment provides services for Transportation, Aviation and Rail & Transit markets and the Federal segment provides services for Defense, Environmental, Architecture, Geospatial Information Technology, Homeland Security, Municipal & Civil, Pipelines & Utilities and Water markets. Among the services the Company provides to clients in these markets are program management, design-build (for which the Company provides only the design portion of services), construction management, consulting, planning, surveying, mapping, geographic information systems, architectural and interior design, construction inspection, constructability reviews, site assessment and restoration, strategic regulatory analysis and regulatory compliance.

2.   BASIS OF PRESENTATION

On May 3, 2010, the Company entered into a Stock Purchase Agreement (“SPA”) to acquire 100% of the outstanding shares of The LPA Group Incorporated and substantially all of its subsidiaries and affiliates (“LPA”) for $59.5 million. This transaction was funded with approximately $51.4 million of cash on hand and approximately $8.1 million of the Company’s stock. The transaction was subject to a working capital adjustment provision resulting in an additional payment of approximately $1.1 million to the former shareholders in June 2010. As a result of this transaction, the results of operations for LPA for the period from May 3, 2010 through December 31, 2010 are included in the Company’s Consolidated Statement of Income and Consolidated Statement of Cash Flows for the year ended December 31, 2010. This transaction is also reflected in the Company’s Consolidated Balance Sheet as of December 31, 2010. See further discussion in the “LPA Acquisition” note.

On September 30, 2009, the Company divested substantially all of its subsidiaries that pertained to its former Energy segment (the “Energy sale”). Additionally, the Company sold its interest in B.E.S. Energy Resources Company, Ltd. (“B.E.S.”), an Energy company, on December 18, 2009 to J.S. Technical Services Co., LTD., which is owned by the Company’s former minority partner in B.E.S. As a result of the dispositions, the results of the Company’s former Energy segment, (“Baker Energy”), have been reclassified as discontinued operations for all periods presented in the Consolidated Statements of Income and Consolidated Statements of Cash Flows. See further discussion in the “Discontinued Operations” note.

3.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries, jointly-owned subsidiaries over which it exercises control and variable interest entities for which it has been determined to be the primary beneficiary. Noncontrolling interest amounts relating to the Company’s less-than-wholly-owned consolidated subsidiaries are included within the “Income attributable to noncontrolling interests” captions in its Consolidated Statements of Income and within the “Noncontrolling interests” caption in its Consolidated Balance Sheets. Investments in unconsolidated affiliates, including joint ventures, over which the Company exercises significant influence, are accounted for under the equity method. The Company may render services to certain of its joint ventures. The Company records revenue in the period in which such services are provided. Investments in unconsolidated affiliates in which the Company owns less than 20% are accounted for under the cost method. All intercompany balances and transactions have been eliminated in consolidation.

Revenue Recognition and Accounting for Contracts

The Company earns revenue by providing services, typically through Cost-Plus, Fixed-Price, and Time-and-Materials contracts. In providing these services, the Company typically incurs direct labor costs, subcontractor costs and certain other direct costs (“ODCs”) which include “out-of-pocket” expenses.

21

Revenue is recognized under the percentage-of-completion method of accounting. Revenues for the current period are determined by multiplying the estimated margin at completion for each contract by the project’s percentage of completion to date, adding labor costs, subcontractor costs and ODCs incurred to date, and subtracting revenues recognized in prior periods. In applying the percentage-of-completion method to these contracts, the Company measures the extent of progress toward completion as the ratio of labor costs incurred to date over total estimated labor costs at completion. As work is performed under contracts, estimates of the costs to complete are regularly reviewed and updated. As changes in estimates of total costs at completion on projects are identified, appropriate earnings adjustments are recorded using the cumulative catch-up method. Provisions for estimated losses on uncompleted contracts are recorded during the period in which such losses become evident. Profit incentives and/or award fees are recorded as revenues when the amounts are both probable and reasonably estimable.

Change orders are modifications of an original contract that effectively change the provisions of the contract without adding new provisions. Either the Company or its customer may initiate change orders, which may include changes in specifications or design, manner of performance, facilities, equipment, materials, sites and/or the period of completion of the work.

In certain circumstances, the Company may agree to provide new or additional services to a client without a fully executed contract or change order. In these instances, although the costs of providing these services are expensed as incurred, the recognition of related contract revenues is delayed until the contracts and/or change orders have been fully executed by the clients, other suitable written project approvals are received from the clients, or until management determines that revenue recognition is appropriate based on the probability of client acceptance. The probability of client acceptance is assessed based on such factors as the Company’s historical relationship with the client, the nature and scope of the services to be provided, and management’s ability to accurately estimate the realizable value of the services to be provided.

Claims are amounts in excess of agreed contract price that the Company seeks to collect from its clients or others for customer-caused delays, errors in specifications and designs, contract terminations, change orders that are either in dispute or are unapproved as to both scope and price, or other causes of unanticipated additional contract costs. Revenues related to claims are recorded only when the amounts have been agreed with the client.

The majority of the Company’s contracts fall under the following types:

•  Cost-Plus.  Tasks under these contracts can have various cost-plus features. Under cost-plus fixed fee contracts, clients are billed for the Company’s costs, including both direct and indirect costs, plus a fixed negotiated fee. Under cost-plus fixed rate contracts, clients are billed for the Company’s costs plus negotiated fees or rates based on its indirect costs. Some cost-plus contracts provide for award fees or penalties based on performance criteria in lieu of a fixed fee or fixed rate. Contracts may also include performance-based award fees or incentive fees.

•  Fixed-Price.  Under fixed-price contracts, the Company’s clients are billed at defined milestones for an agreed amount negotiated in advance for a specified scope of work.

•  Time-and-Materials.  Under the Company’s time-and-materials contracts, the Company negotiates hourly billing rates and charges based on the actual time that is expended, in addition to other direct costs incurred in connection with the contract. Time-and-materials contracts typically have a stated contract value.

Under certain cost-type contracts with governmental agencies, the Company is not contractually permitted to earn a margin on subcontractor costs and ODCs. The majority of all other contracts are also structured such that margin is earned on direct labor costs, but not on subcontractor costs and ODCs.

The Company assesses the terms of its contracts and determines whether it will report its revenues and related costs on a gross or net basis. For at-risk relationships where the Company acts as the principal to the transaction, the revenue and the costs of materials, services, payroll, benefits, and other costs are recognized at gross amounts. For agency relationships, where the Company acts as an agent for its clients, only the fee revenue is recognized, meaning that direct project costs and the related reimbursement from the client are netted. Revenues from agency contracts and collaborative arrangements were not material for all periods presented.

The Company’s policy for the income statement presentation of any tax assessed by a governmental authority that is directly imposed on a revenue-producing transaction between the Company and one of its customers is to present such taxes on a net basis in its consolidated financial statements.

22

Unbilled Revenues on Contracts in Progress and Billings in Excess of Revenues on Contracts in Progress

Unbilled revenues on contracts in progress in the accompanying Consolidated Balance Sheets represent unbilled amounts earned and reimbursable under contracts in progress. These amounts become billable according to the contract terms, which consider the passage of time, achievement of certain milestones or completion of the project. The majority of contracts contain provisions that permit these unbilled amounts to be invoiced in the month after the related costs are incurred. Generally, unbilled amounts will be billed and collected within one year.

Billings in excess of revenues on contracts in progress in the accompanying Consolidated Balance Sheets represent accumulated billings to clients in excess of the related revenue recognized to date. The Company anticipates that the majority of such amounts will be earned as revenue within one year.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S.”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements, and also affect the amounts of revenues and expenses reported for each period. Actual results could differ from those which result from using such estimates. The use of estimates is an integral part of determining cost estimates to complete under the percentage-of-completion method of accounting for contracts. Management also utilizes various other estimates, including but not limited to recording profit incentives and/or award fee revenues under its contracts, assessment of its exposure to insurance claims that fall below policy deductibles, determination of its liabilities for incurred-but-not-reported insurance claims, incentive compensation and income tax expense, and to assess its litigation, other legal claims and contingencies. The results of any changes in accounting estimates are reflected in the consolidated financial statements of the period in which the changes become evident.

Income Taxes

The Company records its annual current tax provision based upon its book income, plus or minus any permanent and temporary differences, multiplied by the statutory rate in the majority of the jurisdictions where it operates. The calculation of the Company’s annual tax provision may require interpreting tax laws and regulations and from time to time results in the use of judgments or estimates which could cause its recorded tax liability to differ from the actual amount due. In certain foreign jurisdictions where Baker Energy operated, income tax was based on a deemed profit methodology.

The Company recognizes current tax assets and liabilities for estimated taxes refundable or payable on tax returns for the current year. It also recognizes deferred tax assets or liabilities for the estimated future tax effects attributable to temporary differences, net operating losses, undistributed foreign earnings, and various credits and carryforwards. The Company’s current and deferred tax assets and liabilities are measured based on provisions in enacted tax laws in each jurisdiction where it operates. The Company does not consider the effects of future changes in tax laws or rates in the current period. The Company analyzes its deferred tax assets and places valuation allowances on those assets if it does not expect the realization of these assets to be more likely than not.

Penalties estimated for underpaid income taxes are included in selling, general and administrative expenses in the Company’s Consolidated Statements of Income. Interest associated with underpaid income taxes and related adjustments are included in the “Interest expense” caption in the Company’s Consolidated Statements of Income.

Foreign Currency Translation

With the sale of Baker Energy and B.E.S., the majority of the Company’s foreign subsidiaries were divested by December 31, 2009. Most of those foreign subsidiaries utilized the local currencies as the functional currency. Accordingly, assets and liabilities of these subsidiaries were translated to U.S. Dollars at exchange rates in effect at the balance sheet date, whereas income and expense accounts are translated at average exchange rates during the year. The resulting translation adjustments were recorded as a separate component of shareholders’ investment. In addition to certain Baker Energy foreign subsidiaries that were divested by December 31, 2009, the Company also has a foreign subsidiary that performed engineering services for which the functional currency is the U.S. Dollar. The resulting translation gains or losses for this subsidiary is included in the Company’s Consolidated Statements of Income.

23

Other Comprehensive (Loss)/Income

The components of the Company’s accumulated other comprehensive (loss)/income balance related to foreign currency translation adjustments and net unrealized losses on investments.

Noncontrolling interests

Noncontrolling Interests represent the income and equity investments of the minority owners in the Company’s joint ventures and other subsidiary entities that the Company consolidates in its financial statements. Amounts attributable to Noncontrolling Interests are included in “Income Attributable to Noncontrolling Interests” in the Company’s Consolidated Statements of Income and in “Noncontrolling Interest” in the Company’s Consolidated Balance Sheets. The guidance that establishes new accounting and reporting standards for noncontrolling interests was effective and applied by the Company in its financial statement and disclosures on January 1, 2009. The provisions of the standard have been applied to all periods presented in the accompanying consolidated financial statements.

Fair Value of Financial Instruments

The fair value of financial instruments classified as cash and cash equivalents, short-term investments, receivables, unbilled revenues, accounts payable, capital lease obligations and other liabilities approximates carrying value due to the short-term nature or the relative liquidity of the instruments. Available-for-sale securities are stated at publicly-traded market closing values as of the balance sheet date. The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the exit price).

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand or deposit or other similar highly liquid investments with remaining maturities of less than 90 days at the time of purchase. As of December 31, 2010, the majority of the Company’s funds were held in highly rated financial institutions with a portion of those amounts held in money market funds comprised primarily of short-term, high-quality fixed-income securities.

Short-term Investments

Short-term investments as of December 31, 2009 were comprised of certificates of deposit with remaining maturities of greater than 90 days but less than one year at the time of purchase and are recorded at fair value. The short-term investments matured in 2010 with no short-term investments remaining as of December 31, 2010. Interest related to the certificates of deposit is included in “Interest income” in the Company’s Consolidated Statements of Income.

Available-for-Sale Securities

Available-for-sale securities are primarily comprised of highly rated U.S. Treasury, Corporate, and U.S. Federal Agency bonds as of December 31, 2010 and highly rated municipal bonds as of December 31, 2009 and are recorded at fair value. Interest related to the available-for-sale securities is included in “Interest income” in the Company’s Consolidated Statements of Income. Realized gains and losses on investments are a component of the “Other, net” balance in the Consolidated Statement of Income. Net unrealized losses on investments are a component of the “Other comprehensive (loss)/income” balance in the Consolidated Statement of Income.

Concentrations of Credit Risk and Allowance for Doubtful Accounts

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, short-term investments, available-for-sale securities, trade receivables and related unbilled revenues. The risk associated with the investments and securities is a default by the underlying issuer. The Company’s cash and cash equivalents are deposited in various high-credit-quality financial institutions. The majority of such deposits are not covered by or are in excess of the Federal Deposit Insurance Corporation limits.

The Company reduces its accounts receivable by estimating an allowance for amounts that are expected to become uncollectible in the future. Management determines the estimated allowance for doubtful accounts based on its evaluation of collection efforts, the financial condition of the Company’s clients, which may be dependent on the type of client and current economic conditions to which the client may be subject, and other considerations. Although the Company has a diversified client base, a substantial portion of the Company’s receivables and unbilled revenues on contracts in progress reflected in its Consolidated Balance Sheets are due from U.S. federal and state governments.

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Contracts and subcontracts with the U.S. federal and state governments usually contain standard provisions for permitting the government to modify, curtail or terminate the contract for convenience of the government if program requirements or budgetary constraints change. Upon such a termination, the Company is generally entitled to recover costs incurred, settlement expenses and profit on work completed prior to termination, which significantly reduces the Company’s credit risk with these types of clients.

Business Combinations

The Company accounts for business combinations under the acquisition method of accounting. The cost of an acquired company is assigned to the tangible and intangible assets purchased and the liabilities assumed on the basis of their fair values at the date of acquisition. The determination of fair values of assets and liabilities acquired requires the Company to make estimates and use valuation techniques when market values are not readily available. Any excess of purchase price over the fair value of net tangible and intangible assets acquired is allocated to goodwill. The transaction costs associated with business combinations are expensed as they are incurred.

Goodwill and Intangible Assets

The Company may record goodwill and other intangible assets in connection with business combinations. Goodwill, which represents the excess of acquisition cost over the fair value of the net tangible and intangible assets of acquired companies, is not amortized. Goodwill typically represents the value paid for the assembled workforce and enhancement of the Company’s service offerings. The Company’s goodwill balance is evaluated for potential impairment during the second quarter of each year and in certain other circumstances. The evaluation of impairment involves comparing the current fair value of the business to the recorded value, including goodwill. To determine the fair value of the business, the Company utilizes both the “Income Approach,” which is based on estimates of future net cash flows and the “Market Approach,” which observes transactional evidence involving similar businesses. Intangible assets are stated at fair value as of the date acquired in a business combination. Finite-lived intangible assets are amortized on a basis approximating the economic value derived from those assets.

Property, Plant and Equipment

All additions, including improvements to existing facilities, are recorded at cost. Maintenance and repairs are charged to expense as incurred. Depreciation on property, plant and equipment is principally recorded using the straight-line method over the estimated useful lives of the assets. The estimated useful lives typically are 40 years on buildings, 3 to 10 years on furniture, fixtures and office equipment, 3 years on field equipment and vehicles, and 3 to 7 years on computer hardware and software. Assets held under capital leases and leasehold improvements are amortized on a straight-line basis over the shorter of the lease term or the estimated useful life of the asset. Upon the disposal of property, the asset and related accumulated depreciation accounts are relieved of the amounts recorded therein for such items, and any resulting gain or loss is reflected in the Company’s Consolidated Statement of Income in the year of disposition.

The Company capitalizes certain costs incurred in connection with developing or obtaining internal use software. During the software application development stage, capitalized costs include the cost of the software, external consulting costs and internal payroll costs for employees who are directly associated with a software project. Similar costs related to software upgrades and enhancements are capitalized if they result in added functionality which enables the software to perform tasks it was previously incapable of performing. These capitalized software costs are included in “Property, Plant and Equipment, net” in the Company’s Consolidated Balance Sheets. Software maintenance, data conversion and training costs are expensed in the period in which they are incurred.

Accrued Insurance

The Company self-insures certain risks, including certain employee health benefits, professional liability and automobile liability. The accrual for self-insured liabilities includes estimates of the costs of reported and unreported claims and is based on estimates of loss using assumptions made by management, including the consideration of actuarial projections. These estimates of loss are derived from computations which combine loss history and actuarial methods in the determination of the liability. Actual losses may vary from the amounts estimated via actuarial or management’s projections. Any increases or decreases in loss amounts estimated are recognized in the period in which the estimate is revised or when the actual loss is determined.

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Leases

The Company leases office space with lease terms ranging from 1 to 11 years. These lease agreements typically contain tenant improvement allowances and rent holidays. In instances where one or more of these items are included in a lease agreement, the Company records allowances as a deferred rent liability in its Consolidated Balance Sheets. These amounts are amortized on a straight-line basis over the term of the lease as a reduction to rent expense. Lease agreements sometimes contain rent escalation clauses, which are recognized on a straight-line basis over the life of the lease. For leases with renewal options, the Company records rent expense and amortizes the leasehold improvements on a straight-line basis over the shorter of the useful life or original lease term, exclusive of the renewal period, unless the renewal period is reasonably assured. When a renewal occurs, the Company records rent expense over the new term. The Company expenses any rent costs incurred during the period of time it performs construction activities on newly leased property.

The Company leases computer hardware and software, office equipment and vehicles with lease terms ranging from 1 to 7 years. Before entering into a lease, an analysis is performed to determine whether a lease should be classified as a capital or an operating lease.

Impairment of Long-lived Assets

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Assets which are held and used in operations are considered impaired if the carrying value of the asset exceeds the undiscounted future cash flows from the asset. If impaired, an appropriate charge is recorded to adjust the carrying value of the long-lived asset to its estimated fair value. The Company generally measures fair value by considering sale prices for similar assets or by discounting estimated future cash flows from the asset using an appropriate discount rate.

Accounting for Stock-Based Compensation

The Company grants stock options to non-employee directors, issues restricted stock to both non-employee directors and employees, and stock appreciation rights (“SARs”) to the Chief Executive Officer at the fair market value of the Company’s stock on the date of the grant. Proceeds from the exercise of common stock options are credited to shareholders’ investment at the date the options are exercised.

All stock-based compensation is measured at the grant-date fair value of the award and is recognized as an expense in the Company’s Consolidated Statements of Income. These expenses are recognized as a component of the Company’s selling, general and administrative costs, as these costs relate to stock-based compensation issued to non-employee directors and executive management of the Company. The excess tax expense/benefits related to stock-based compensation is reflected in the Company’s Consolidated Statement of Cash Flows as financing cash outflow/inflows, respectively, instead of operating cash outflow/inflows.

Recent accounting pronouncements

In June 2009, the FASB issued authoritative guidance amending the timing and considerations of analyses performed to determine if the Company’s variable interests give it a controlling financial interest in a variable interest entity, as well as requiring additional disclosures. The Company adopted the provisions of this guidance on January 1, 2010. The adoption of this authoritative guidance did not have a material impact on the consolidated financial statements.

4.   LPA ACQUISITION

On May 3, 2010, the Company entered into the SPA to acquire 100% of the outstanding shares of LPA for $59.5 million, subject to a net working capital adjustment. The Company paid approximately $51.4 million from existing cash and cash equivalents and issued 226,447 shares of the Company’s common stock. The fair market value of the stock on the acquisition date approximated $8.1 million based on the closing price of $35.60 per share on May 3, 2010. The net working capital adjustment was subsequently settled in June 2010 resulting in approximately $1.1 million in additional funds paid to the former shareholders of LPA. Of the total purchase price, approximately $6.0 million of the Michael Baker Corporation common shares were placed in escrow at closing in order to secure potential indemnification obligations of former owners of LPA to the Company for a period of 18 months subsequent to the closing. Approximately $1.8 million of costs related to this acquisition are included in the results of operations as selling, general and administrative expenses (“SG&A”) for the year ended December 31, 2010.

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LPA is an engineering, architectural and planning firm specializing primarily in the planning and design of airports, highways, bridges and other transportation infrastructure primarily in the southeastern U.S. with revenues of approximately $92 million for the year ended December 31, 2009. The majority of its clients are state and local governments as well as construction companies that serve those markets. Founded in 1981, LPA has a national reputation in the transportation consulting industry. The acquisition was consummated because it contributes to the Company’s long-term strategic plan by enabling the Company to expand geographically into the southeastern United States. Additionally, this transaction strengthens the Company’s expertise in aviation, design-build and construction management services in state and local transportation markets.

Goodwill primarily represented the value paid for LPA’s assembled workforce, the enhancement of the company’s service offerings and geographic expansion into the Southwestern U.S. markets. The following table summarizes the final allocation of the fair value of the purchase price for the acquisition as of May 3, 2010:

(in thousands)	Fair Value
Receivables	$	12,046
Unbilled revenues on contracts in progress		12,105
Prepaid expenses and other		2,348
Property, Plant and Equipment		3,359
Goodwill		43,815
Other intangible assets		19,260
Accounts payable		(7,872	)
Billings in excess of revenues on contracts in progress		(5,250	)
Other accrued expenses		(8,528	)
Deferred income tax liability		(10,840	)

The following table summarizes the final estimates of the fair values and amortizable lives of the identifiable intangible assets acquired in conjunction with the acquisition of LPA on May 3, 2010:

			Weighted
			Average
			Amortizable
(in thousands)	Fair Value		Life
Project backlog	$	9,640		1.9
Customer contracts and related relationships		6,720		3.6
Non-competition agreements		2,500		1.5
Trademark/trade name		400		1.3
Total intangible assets	$	19,260		2.4

Project backlog, customer contracts and related relationships represent the underlying relationships and agreements with LPA’s existing customers. Non-compete agreements represent the amount of lost business that could occur if the sellers, in the absence of non-compete agreements, were to compete with the Company. The trade name represents the value of the “LPA” brand. The identifiable intangible assets will be amortized on a basis approximating the economic value derived from those assets. Based upon the structure of the transaction, the Company has concluded that any intangible assets or goodwill that resulted from this transaction will not be deductible for tax purposes.

The results of operations for LPA from May 3, 2010 to December 31, 2010 are included in the Company’s Consolidated Statement of Income for the year ended December 31, 2010, with LPA contributing revenues of $58.5 million and a net loss of $0.3 million (including $4.7 million in acquisition related amortization of intangible assets). The unaudited pro-

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forma financial information summarized in the following table gives effect to the LPA acquisition and assumes that it occurred on January 1st of each period presented:

	For the year ended December 31,
(in thousands, except per share data)	2010		2009
Continuing operations
Revenues	$	535,202	$	538,317
Net income		16,569		21,694
Diluted earnings per share	$	1.79	$	2.37

The pro-forma financial information does not include any costs related to the acquisition. In addition, the pro-forma financial information does not assume any impacts from revenue, cost or other operating synergies that are expected as a result of the acquisition. Pro-forma adjustments have been made to reflect amortization of the identifiable intangible assets for the related periods. Identifiable intangible assets are being amortized on a basis approximating the economic value derived from those assets. The unaudited pro-forma financial information is not necessarily indicative of what the Company’s results would have been had the acquisition been consummated on such dates or project results of operations for any future period.

5.   BUSINESS SEGMENTS

Beginning with the first quarter of 2010, the Company changed its segment disclosure to align with how the business is now being managed. The Company’s Transportation and Federal business segments reflect how executive management makes resource decisions and assesses its performance. Each segment operates under a separate management group and produces discrete financial information which is reviewed by management. The accounting policies of the business segments are the same as those described in the summary of significant accounting policies. The Company is retrospectively reflecting its Federal and Transportation segments in its financial statements for the years ended December 31, 2009 and 2008. The Company’s segment reporting presentation through the second quarter of 2009 consisted of an Energy segment and an Engineering segment. The Company divested substantially all of its subsidiaries that pertained to its former Energy segment on September 30, 2009. As such, the results of the former Energy segment is presented as discontinued operations for the three years ended December 31, 2010 and the former Engineering segment’s results are bifurcated and presented as the Company’s continuing operations as the Transportation and Federal business segments.

The Transportation segment provides services for Transportation, Aviation, and Rail & Transit markets, and the Federal segment provides services for Defense, Environmental, Architecture, Geospatial Information Technology, Homeland Security, Municipal & Civil, Pipelines & Utilities and Water markets. Among the services the Company provides to clients in these markets are program management, design-build (for which the Company provides only the design portion of services), construction management, consulting, planning, surveying, mapping, geographic information systems, architectural and interior design, construction inspection, constructability reviews, site assessment and restoration, strategic regulatory analysis and regulatory compliance. LPA’s results are reflected in the Company’s Transportation segment.

The Company evaluates the performance of its segments primarily based on income from operations. Corporate overhead includes functional unit costs related to finance, legal, human resources, information technology, communications and other Corporate functions. Corporate overhead is allocated between the Transportation and Federal segments based on that segment’s percentage of total direct labor. A portion of Corporate income and expense is not allocated to the segments.

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The following tables reflect disclosures for the Company’s business segments:

	For the year ended December 31,
(in millions)	2010			2009			2008
Revenues
Transportation	$	276.1		$	196.3		$	180.8
Federal		223.3			248.9			275.1
Total revenues	$	499.4		$	445.2		$	455.9
	For the year ended December 31,
(in millions)	2010			2009			2008
Gross profit
Transportation	$	53.5		$	36.3		$	28.7
Federal		47.2			52.8			54.7
Corporate		(1.6	)		(1.1	)		1.1
Total gross profit		99.1			88.0			84.5
Less: SG&A
Transportation		(45.1	)		(28.3	)		(24.8	)
Federal		(31.6	)		(28.8	)		(26.3	)
Corporate		(0.1	)		(0.3	)		(0.1	)
Total SG&A		(76.8	)		(57.4	)		(51.2	)
Total operating income
Transportation		8.4			8.0			3.9
Federal		15.6			24.0			28.4
Corporate		(1.7	)		(1.4	)		1.0
Total operating income	$	22.3		$	30.6		$	33.3
	For the year ended December 31,
(in millions)	2010			2009			2008
Depreciation and amortization expense:
Transportation	$	6.5		$	1.4		$	1.0
Federal		1.8			1.7			1.5
Corporate		1.2			2.5			2.5
Total	$	9.5		$	5.6		$	5.0
Capital expenditures:
Transportation	$	2.4		$	2.0		$	2.1
Federal		2.6			2.9			1.4
Corporate		1.3			0.4			0.6
Total	$	6.3		$	5.3		$	4.1

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	As of December 31,
(in millions)	2010		2009
Segment assets:
Transportation	$	159.1	$	81.3
Federal		59.6		64.4
Corporate		102.4		133.1
Total	$	321.1	$	278.8
	As of December 31,
(in millions)	2010		2009
Equity investments in unconsolidated subsidiaries:
Transportation	$	0.1	$	0.1
Federal		0.6		2.0
Total	$	0.7	$	2.1
	For the year ended December 31,
(in millions)	2010		2009
Income from unconsolidated subsidiaries:
Transportation	$	1.4	$	—
Federal		1.2		7.1
Total	$	2.6	$	7.1

The Company has determined that interest expense, interest income and intersegment revenues, by segment, are immaterial for further disclosure in these consolidated financial statements.

The Company’s enterprise-wide disclosures are as follows:

	For the year ended December 31,
(in millions)	2010		2009		2008
Revenues by geographic origin:
Domestic	$	472.1	$	401.0	$	417.2
Foreign(1)		27.3		44.2		38.7
Total	$	499.4	$	445.2	$	455.9

⁽¹⁾ The Company defines foreign contract revenue as work performed outside the U.S. irrespective of the client’s U.S. or non-U.S. ownership.

Revenues by principal markets:
United States government	37	%	49	%	52	%
Various state governmental and quasi-government agencies	48	%	41	%	38	%
Commercial, industrial and private clients	15	%	10	%	10	%

One of the Company’s clients, the Federal Emergency Agency (“FEMA”), accounted for approximately 11%, 15%, and 20% of the Company’s revenues in 2010, 2009 and 2008, respectively. Revenues from FEMA are reflected in the Company’s Federal segment’s results. The Company’s long-lived assets are principally held in the U.S.

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6.   DISCONTINUED OPERATIONS

On September 30, 2009, the Company entered into a definitive agreement with Wood Group E.&P.F. Holdings, Inc., Wood Group Holdings (International) Limited and Wood Group Engineering and Operations Support Limited, subsidiaries of international energy services company John Wood Group PLC (each a “Buyer” and, collectively, the “Buyers”) to sell Baker Energy. Baker Energy provided a full range of services for operating third-party oil and gas production facilities worldwide. Additionally, the Company sold its interest in B.E.S. on December 18, 2009 to J.S. Technical Services Co., LTD., which is owned by the Company’s former minority partner in B.E.S.

The results of operations of the Company’s former Energy business have been classified as discontinued operations in the accompanying consolidated financial statements for all periods presented. The results of Baker Energy and B.E.S. are representative of their results through their respective sale dates. Corporate overhead costs were not allocated to the Energy business for the discontinued operations presentation. For the year ended December 31, 2010, the loss from discontinued operations included selling, general and administrative expenses of $2.5 million related to adjustments resulting from changes in the underlying estimates of the ultimate cost for insurance claims related to the period the Company owned the business and adjustments of foreign tax accruals related to our former Energy business.

The operating results of the former Energy business for the years ended December 31, 2010, 2009 and 2008 were as follows:

	For the year ended December 31,
(in thousands)	2010			2009			2008
Revenues	$	—		$	160,418		$	243,466
Cost of work performed		—			144,734			214,341
Gross profit		—			15,684			29,125
Selling, general and administrative expenses		2,469			13,204			18,984
(Loss)/Income from discontinued operations		(2,469	)		2,480			10,141
Other (expense)/income		(221	)		(185	)		3,356
(Loss)/Income from discontinued operations before income taxes and loss on sale		(2,690	)		2,295			13,497
(Benefit)/provision for income taxes		(178	)		(4,913	)		6,825
(Loss)/income from discontinued operations before loss on sale		(2,512	)		7,208			6,672
Loss on sale of discontinued operations, net of tax		—			(4,724	)		—
(Loss)/income from discontinued operations		(2,512	)		2,484			6,672
Less: Net income attributable to noncontrolling interests		—			(135	)		(76	)
Net (loss)/income from discontinued operations attributable to Michael Baker Corporation	$	(2,512	)	$	2,349		$	6,596

On September 30, 2009, the stock of Baker Energy was sold for gross proceeds of $47.9 million, consisting of $37.9 million received at closing and $10.0 million received in February 2010 under the net asset adjustment provision of the stock purchase agreement. Included in the net assets conveyed to the buyer was approximately $7.8 million in cash utilized by Baker Energy’s international operations for working capital needs. This cash was reimbursed to the Company through the net asset adjustment. The net asset adjustment is presented under the heading “Proceeds receivable — Energy sale” in the Company’s consolidated balance sheet as of December 31, 2009. Net proceeds are based on the cash received at closing and the receivable derived from the net asset adjustment, net of the Company’s costs associated with the transaction. Transaction costs consist of investment banker fees related to the marketing and sale of Baker Energy, legal fees and management retention payments due to certain employees of Baker Energy that were contingent upon the sale of Baker Energy.

On December 18, 2009, the stock of B.E.S. was sold for gross proceeds of $1.1 million. Net proceeds are based on the cash received at closing, net of the Company’s costs associated with the transaction. Transaction costs consist of investment banker fees related to the marketing and sale of B.E.S., legal fees and Thailand tax withholdings and fees.

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The Company incurred a loss of $4.5 million on the Baker Energy sale and $0.2 million on the B.E.S. sale, which is presented as a loss on sale of discontinued operations in the Company’s consolidated statement of income.

The Baker Energy and B.E.S. sale net proceeds and the loss on sale were as follows:

Baker Energy Sale Proceeds

(in thousands)
Gross sale proceeds received at closing	$	37,944
Net asset adjustment receivable		9,965
Gross proceeds		47,909
Less:
Investment banker and legal fees		(907	)
Management retention payments		(1,304	)
Net proceeds from sale of Baker Energy	$	45,698

Baker Energy Loss on Sale

(in thousands)
Net proceeds from sale	$	45,698
Net assets of Baker Energy as of September 30, 2009		(48,469	)
Realization of cumulative translation adjustments		(2,174	)
Non-controlling interest in Baker Energy		(127	)
Tax benefit related to transaction costs		563
Loss on sale of Baker Energy, net of tax benefit	$	(4,509	)

B.E.S. Sale Proceeds

(in thousands)
Gross sale proceeds	$	1,056
Less:
Investment banker and legal fees		(16	)
Thailand withholdings and fees		(149	)
Net proceeds from sale of B.E.S.	$	891

B.E.S. Loss on Sale

(in thousands)
Net proceeds from B.E.S. sale	$	891
Net assets of B.E.S. as of December 18, 2009		(1,514	)
Realization of cumulative translation adjustments		105
Non-controlling interest in B.E.S.		303
Loss on sale of B.E.S., net of tax	$	(215	)

Reflected in the December 31, 2010 and 2009 consolidated balance sheets are both liabilities and assets related to Baker Energy’s workers’ compensation, automobile and health insurances through September 30, 2009. As part of the sale of Baker Energy, the buyer agreed to assume the liabilities associated with those insurances, subject to certain indemnifications, as of September 30, 2009. However, corresponding liabilities representing the reserves associated with these insurances, including reserves for “incurred but not reported” claims, are included in the Company’s consolidated balance sheet as those insurances are written to the Company, rather than to a Baker Energy entity. As

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such, the Company is required to maintain its reserves for these insurances in its consolidated balance sheet. As the buyer assumed the liabilities associated with these insurances, the Company has also recorded a corresponding receivable from the buyer. As of December 31, 2010, there were approximately $4.6 million of Baker Energy insurance liabilities related to Baker Energy’s workers’ compensation, automobile and health insurances recorded on the Company’s Consolidated Balance Sheet, with a corresponding receivable of approximately $3.3 million also recorded.

7.   EQUITY INCOME FROM UNCONSOLIDATED SUBSIDIARIES

The Company’s unconsolidated joint ventures provide engineering, program management, and construction management services. Joint ventures, the combination of two or more partners, are generally formed for a specific project. Management of the joint venture is typically controlled by a joint venture executive committee, usually comprising a representative from each joint venture partner with equal voting rights. The executive committee provides management oversight and assigns work efforts to the joint venture partners.

The majority of the Company’s unconsolidated joint ventures have no employees and minimal operating expenses. For these joint ventures, the Company’s own employees render services that are billed to the joint venture, which are then billed to a third-party customer by the joint venture. These joint ventures function as pass-through entities to bill the third-party customer. The Company includes revenues related to the services performed for these joint ventures and the costs associated with these services in its results of operations. The Company also has unconsolidated joint ventures that have their own employees and operating expenses and to which the Company generally makes a capital contribution. The Company accounts for its investments in unconsolidated joint ventures using the equity method. The Company includes equity income from unconsolidated joint ventures as a component of non-operating income in its Consolidated Statements of Income as this equity income is derived from entities taxed as partnerships.

Equity income from unconsolidated subsidiaries reflects the Company’s ownership of 33.33% of the members’ equity of Stanley Baker Hill, LLC (“SBH”) and ownership of 33.33% of LPA’s joint venture, Louisiana TIMED Managers (“LTM”), a joint venture formed to manage a Louisiana Department of Transportation and Development transportation construction contract. Equity income from LTM for the period from May 3, 2010 through December 31, 2010 was $1.4 million. For the period from May 3, 2010 through December 31, 2010, LTM had revenue of $14.8 million, gross profit of $4.2 million and net income of $4.2 million and as of December 31, 2010 had current assets of $4.3 million, noncurrent assets of $3.7 million and current liabilities of $7.9 million. SBH is a joint venture formed in February 2004 between Stanley Consultants, Inc., Hill International, Inc., and Michael Baker, Jr. Inc., a subsidiary of the Company. Equity income from SBH for the years ended December 31, 2010, 2009 and 2008 was $1.2 million, $7.1 million and $3.1 million, respectively. SBH has a contract for an Indefinite Delivery and Indefinite Quantity (“IDIQ”) for construction management and general architect-engineer services for facilities in Iraq with the U.S. Army Corps of Engineers. The Company’s unconsolidated joint venture’s current Iraq IDIQ contract ended in September 2009, and it is not anticipated that further contract funding will be added to this contract vehicle. A modest amount of currently funded task order work was extended beyond September 30, 2010 but the contract was materially complete by September 2010.

The following table presents summarized financial information for the Company’s unconsolidated subsidiary, SBH:

	For the year ended December 31,
(in thousands)	2010		2009		2008
Contract revenue earned	$	47,544	$	154,140	$	130,408
Gross profit		3,966		21,763		9,693
Net Income	$	3,511	$	21,161	$	9,195

	As of December 31,
(in thousands)	2010		2009
Current assets	$	929	$	17,377
Noncurrent assets		—		20
Current liabilities	$	416	$	12,594

As of December 31, 2009, the Company reported receivables and unbilled revenues on contracts in progress totaling $3.8 million from SBH for work performed by the Company as a subcontractor to SBH and there was no balance as of

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December 31, 2010. Such amounts were payable in accordance with the subcontract agreement between the Company and SBH. Revenue from SBH pursuant to such subcontract agreement was $14.1 million, $34.5 million and $32.1 million for the years ended December 31, 2010, 2009 and 2008, respectively.

8.   CONTRACTS

Revenues and billings to date on contracts in progress were as follows:

	As of December 31,
(in millions)	2010			2009
Revenues	$	2,093		$	1,702
Billings		(2,053	)		(1,671	)
Net unbilled revenue	$	40		$	31

A portion of the trade receivable balances totaling $5,230,000 and $5,890,000 as of December 31, 2010 and 2009, respectively, relates to retainage provisions under long-term contracts which will be due upon completion of the contracts. Based on management’s estimates, $3,173,000 and $4,634,000 of these retention balances as of December 31, 2010 and 2009, respectively, were expected to be collected within one year of the balance sheet dates, and were therefore included in the “Receivables, net” balances. The remaining retention balances are reflected as “Other long-term assets” in the Company’s Consolidated Balance Sheets.

Under certain circumstances, the Company may agree to provide new or additional services to a client without a fully executed contract or change order. In these instances, although the costs of providing these services are expensed as incurred, the recognition of related contract revenues are delayed until the contracts and/or change orders have been fully executed by the clients, other suitable written project approvals are received from the clients, or until management determines that revenue recognition is appropriate based on the probability of client acceptance. Under this policy, the Company had not recognized potential future revenues estimated at $4.2 million and $3.5 million as of December 31, 2010 and 2009, respectively, for which the related costs had already been expensed as of these dates.

Federal government contracts are subject to the U.S. Federal Acquisition Regulations (“FAR”). These contracts and certain contracts with state and local agencies are subject to periodic routine audits, which generally are performed by the Defense Contract Audit Agency or applicable state agencies. These agencies’ audits typically apply to the Company’s overhead rates, cost proposals, incurred government contract costs and internal control systems. During the course of its audits, the auditors may question incurred costs if it believes the Company has accounted for such costs in a manner inconsistent with the requirements of the FAR or the U.S. Cost Accounting Standards, and may recommend that certain costs be disallowed. Historically, the Company has not experienced significant disallowed costs as a result of these audits; however, management cannot provide assurance that future audits will not result in material disallowances of incurred costs.

9.   INCOME TAXES

The following table presents the components of the Company’s provision for income taxes:

	For the year ended December 31,
(in thousands)	2010			2009			2008
Provision/(benefit) for income taxes:
Continuing operations	$	9,246		$	13,234		$	14,422
Discontinued operations		(178	)		(4,913	)		6,825
Loss on sale of discontinued operations		—			(563	)		—
Provision for income taxes	$	9,068		$	7,758		$	21,247

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The components of income before income taxes for continuing operations are as follows:

	For the year ended December 31,
(In thousands)	2010			2009		2008
Domestic	$	24,085		$	37,559	$	37,337
Foreign		(162	)		247		(357	)
Total	$	23,923		$	37,806	$	36,980

The income tax provision for continuing operations consists of the following:

	For the year ended December 31,
(in thousands)	2010		2009		2008
Current income tax provision:
U.S. federal*	$	7,441	$	15,807	$	14,404
Foreign		42		164		305
State		1,619		2,415		2,507
Total current income tax provision	$	9,102		18,386		17,216

	For the year ended December 31,
(in thousands)	2010			2009			2008
Deferred income tax provision/(benefit):
U.S. federal*		348			(4,473	)		(2,044	)
Foreign		—			—			90
State		(204	)		(679	)		(840	)
Total deferred income tax provision/(benefit)		144			(5,152	)		(2,794	)
Total income tax provision	$	9,246		$	13,234		$	14,422

* Includes U.S. taxes related to foreign income.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	As of December 31,
(in thousands)	2010			2009			2008
Unrecognized tax benefits:
Beginning of the year	$	3,034		$	1,873		$	1,909
Additions based on tax positions related to the current year		242			1,230			224
Additions for tax positions of prior years		317			—			352
Reductions for tax positions of prior years		(466	)		—			(6	)
Settlements with taxing authorities		(20	)		—			(333	)
Lapses of statutes of limitations		(508	)		(69	)		(273	)
End of the year	$	2,599		$	3,034		$	1,873

As of December 31, 2010 and 2009, the Company’s reserve for uncertain tax positions totaled approximately $2.6 million and $3.0 million, respectively, of which the amount of unrecognized tax benefits that, if recognized, would affect the effective income tax rate totaled $2.0 million and $2.5 million, respectively. The Company recognizes interest and penalties related to uncertain income tax positions in interest expense and selling, general, and administrative expenses, respectively, in its consolidated statements of income. During 2010, 2009 and 2008, the Company recognized immaterial amounts of interest and penalty adjustments relating to uncertain tax positions. The Company had approximately $0.7 million, $1.3 million and $1.2 million accrued for potential payment of interest and penalties as of December 31, 2010, 2009 and 2008, respectively. The Company does not expect the reserve for unrecognized tax benefits to change significantly within the next twelve months.

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As a result of additional tax deductions related to vested restricted stock awards and stock option exercises, tax benefits have been recognized as contributed capital for the years ended December 31, 2009 and 2008 in the amounts of $0.2 million and $0.1 million, respectively. The impact of such tax benefits in 2010 was nominal.

The following is a reconciliation of income taxes computed at the federal statutory rate to income tax expense recorded for continuing operations:

	For the year ended December 31,
(in thousands)	2010			2009			2008
Computed income taxes at U.S. federal statutory rate	$	8,642		$	13,287		$	12,943
Income passed through to non-controlling interest holders(1)		(269	)		(53	)		—
Foreign tax credits		(500	)		(1,421	)		—
State income taxes, net of federal income tax benefit		807			856			958
Tax expense on foreign income		99			78			520
Permanent differences		590			704			78
Change in reserves		168			143			(55	)
Deferred tax on foreign earnings not indefinitely reinvested		—			(253	)		163
Other		(291	)		(107	)		(185	)
Total income tax provision	$	9,246		$	13,234		$	14,422

⁽¹⁾ Includes income that is not taxable to the Company. Such income is directly taxable to the Company’s non-controlling interest partners.

The components of the Company’s deferred income tax assets and liabilities are as:

	As of December 31,
(in thousands)	2010			2009
Deferred income tax assets:
Accruals not currently deductible for tax purposes	$	9,474		$	8,221
Billings in excess of revenues		7,060			7,325
Tax loss carryforwards		10,315			11,048
Foreign tax credits		1,281			1,961
Fixed and intangible assets		220			62
All other items		734			605
Gross deferred tax assets		29,084			29,222
Valuation allowance for deferred tax assets		(11,441	)		(11,458	)
Net deferred tax assets		17,643			17,764
Deferred income tax liabilities:
Unbilled revenues		(21,583	)		(18,366	)
Change in method of accounting		(540	)		—
Fixed and intangible assets		(9,633	)		(2,841	)
All other items		(1,308	)		(861	)
Gross deferred tax liabilities		(33,064	)		(22,068	)
Net deferred tax liabilities	$	(15,421	)	$	(4,304	)

In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company considers the scheduled reversal of deferred tax liabilities and projected future taxable income in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, the Company believes it is more likely than not that the Company will ultimately realize the benefits of these deductible differences as of December 31, 2010. The

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Company has provided valuation allowances against gross deferred tax assets related primarily to capital loss carryforwards, and foreign tax credits related to the sale of its energy business, as discussed within the following caption “Discontinued Operations,” and state net operating losses as it has concluded that it is not more likely than not that this benefit will be realized. The amount of the deferred tax asset considered realizable could be reduced in the future if estimates of future taxable income during the carryforward period are reduced. There are net long-term deferred tax assets totaling $0.9 million and no net current deferred tax assets in the Company’s Consolidated Balance Sheets as of December 31, 2010. There were no net current or net long-term deferred tax assets as of December 31, 2009 in the Company’s Consolidated Balance Sheet.

The Company has gross state net operating loss (“NOL”) carryforwards totaling $38.8 million resulting in net state tax effected NOL’s of $3.3 million, which expire from 2011 to 2030. A net state valuation allowance of $1.1 million has been established for these deferred tax assets.

The Company is subject to federal and state income tax audits for the 2007 through 2010. The Company has been notified by the Internal Revenue Service that they will be performing an audit of the Company’s 2009 consolidated income tax return starting in the first quarter of 2011. The Company is also subject to audits in various foreign jurisdictions for tax years ranging from 2005 to the present. Management believes that adequate provisions have been made for income taxes as of December 31, 2010.

As discussed in the following caption, “Discontinued Operations”, the company has deferred tax assets related to capital loss carryforwards that expire in 2014 and 2015 and foreign tax credit carryforwards that expire between 2015 and 2017.

Discontinued Operations

In certain foreign jurisdictions, the Company’s former Baker Energy subsidiaries were subject to a deemed profits tax that was assessed based on revenue. In other foreign jurisdictions or situations, the Company’s former Baker Energy subsidiaries were subject to income taxes based on taxable income.

Prior to 2009, the Company was in an overall foreign loss position for U.S. Federal income tax purposes, which precluded the Company from utilizing credits for taxes paid in foreign jurisdictions. However, as a result of generating sufficient foreign source income to offset the Company’s overall foreign loss, the Company was able to utilize a portion of those tax credits in 2009, resulting in the reversal of deferred tax liabilities for a net impact of $5.9 million, related to unremitted foreign source earnings which are taxable for U.S. federal tax purposes, but can be offset if there are sufficient foreign tax credits that can be utilized.

As a result of the sale of Energy, the company realized certain tax gains and losses. The sale of certain of these foreign entities resulted in U.S. taxable gains for which foreign tax credits became available. In 2009, the Company recorded a deferred tax asset of $2.0 million related to these credits along with a $1.5 million valuation allowance. Also included in discontinued operations in 2009 was foreign tax expense of approximately $2.0 million related to operations of the Energy business. The sale also resulted in approximately $19.0 million of capital losses for which a deferred tax asset and related valuation allowance totaling $6.7 million was recorded as it was not more likely than not that such capital losses could be utilized within the five-year carryforward period. The Company also recorded a full valuation allowance against $2.0 million in net deferred tax assets related to Legacy Baker Energy insurance liabilities. These liabilities are reimbursable from the buyer but the related accounts receivable was already included within the previously mentioned capital loss. Payment of such liabilities will result in tax deductions that will increase the net capital loss carryforward.

During 2010, the Company incurred additional non-deductible expenses related to its discontinued operations totaling $2.5 million and paid insurance liabilities totaling $1.8 million. This had the effect of increasing the capital loss carryforward and related valuation allowance to $23.3 million and $8.2 million, respectively. Additionally, the Company’s valuation allowance against its deferred tax asset for insurance liabilities was reduced from $2.0 million to $1.4 million.

10.   SHORT-TERM INVESTMENTS

As of December 31, 2009, the Company’s short-term investments were comprised of certificates of deposit with remaining maturities of greater than 90 days but less than one year at the time of purchase and are recorded at fair value. As of December 31, 2009, the Company held $2,500,000 of short-term investments that matured in 2010 with

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no short-term investments remaining as of December 31, 2010. Interest income from the short-term investments was nominal for 2010 and 2009.

11.   AVAILABLE-FOR-SALE SECURITIES

The Company’s available-for-sale securities are primarily comprised of highly-rated corporate, U.S. Treasury and U.S. federally-sponsored agency bonds and are recorded at fair value. As of December 31, 2010 the Company held available-for-sale securities of $9,795,000. The Company held available-for-sale securities of $2,155,000 in highly rated municipal bonds as of December 31, 2009. The available-for-sale securities held as of December 31, 2009 were purchased late in December 2009 and had no unrealized gains or losses. Interest income from the available-for-sale securities was $178,000 for 2010 and was nominal for 2009.

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
(in thousands)	Cost		Gains		Losses			Value
December 31, 2010
Debt securities	$	9,812	$	23	$	(40	)	$	9,795

The following table presents the Company’s maturities of debt securities at fair value as of December 31, 2010:

(in thousands)
Mature within one year	$	3,044
Mature in one to five years		6,751
Total	$	9,795

12.   FAIR VALUE MEASUREMENTS

The FASB’s guidance defines fair value as the exit price associated with the sale of an asset or transfer of a liability in an orderly transaction between market participants at the measurement date. Under this guidance, valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. In addition, this guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:

•  Level 1 — Quoted prices in active markets for identical assets or liabilities.

•  Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

•  Level 3 — Unobservable inputs (i.e. projections, estimates, interpretations, etc.) that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

As of December 31, 2010, the Company held cash equivalents as investments in money market funds totaling $30.3 million and available-for-sale securities in highly-rated corporate, U.S. Treasury and U.S. federally-sponsored agency bonds totaling $9.8 million in accounts held by major financial institutions.

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The following table represents the Company’s fair value hierarchy for its financial assets measured at fair value on a recurring basis as of December 31, 2010 and 2009:

				Quoted Market			Significant
				Prices in Active			Other			Significant
				Markets for			Observable			Unobservable
				Identical Assets			Inputs			Inputs
(in thousands)	Total			(Level 1)			(Level 2)			(Level 3)
December 31, 2010
Cash equivalents	$	30,279		$	30,279		$	—		$	—
Available-for-sale securities		9,795			9,795			—			—
Total cash equivalents and investments	$	40,074		$	40,074		$	—		$	—
Percent to total		100	%		100	%		—			—
December 31, 2009
Cash equivalents	$	58,000		$	58,000		$	—		$	—
Short-term investments		2,500			2,500			—			—
Available-for-sale securities		2,155			—			2,155			—
Total cash equivalents and investments	$	62,655		$	60,500		$	2,155		$	—
Percent to total		100	%		97	%		3	%		—

As of December 31, 2009, the Company’s available-for-sale securities were classified within level 2 of the hierarchy as readily observable market parameters were available from the financial institution that managed these securities. These observable market parameters were used as the basis of the fair value measurement.

13.   GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill and other intangible assets consist of the following:

(in thousands)
Other intangible asset, net	Transportation			Federal			Total
Balance, January 1, 2009	$	—		$	162		$	162
Less: Amortization					(86	)		(86	)
Balance, December 31, 2009		—			76			76
Purchase of LPA		19,260			—			19,260
Less: Amortization		(4,728	)		(39	)		(4,767	)
Balance, December 31, 2010	$	14,532		$	37		$	14,569

(in thousands)
Goodwill	Transportation		Federal		Total
Balance, December 31, 2009	$	8,916	$	710	$	9,626
Purchase of LPA		43,815		—		43,815
Balance, December 31, 2010	$	52,731	$	710	$	53,441

The Company’s goodwill balance is not being amortized and goodwill impairment tests are being performed at least annually. The Company performs its annual evaluation of the carrying value of its goodwill during the second quarter. No goodwill impairment charge was required in connection with this evaluation in 2010 and 2009.

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The following table summarizes the Company’s other intangible assets balance as of December 31, 2010:

	Acquisition Date		Accumulated		Carrying
(in thousands)	Fair Value		Amortization		Value
Project backlog	$	10,489	$	3,824	$	6,665
Customer contracts and related relationships		6,720		734		5,986
Non-competition agreements		2,500		833		1,667
Trademark / trade name		400		149		251
Total	$	20,109	$	5,540	$	14,569

These identifiable intangible assets with finite lives are being amortized on a basis approximating the economic value derived from these assets and will be fully amortized over the next four years. Amortization expense recorded on the other intangible assets balance was $4,767,000, $86,000 and $113,000 for the years ended December 31, 2010, 2009 and 2008, respectively.

Estimated future amortization expense for other intangible assets as of December 31, 2010 is as follows:

(in thousands)
For the year ending December 31,
2011	$	6,950
2012		4,002
2013		1,794
2014		1,823
Total	$	14,569

14.   PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of the following:

	As of December 31,
(in thousands)	2010			2009
Land	$	486		$	486
Buildings and improvements		5,403			4,992
Furniture, fixtures, and office equipment		15,766			12,738
Equipment and vehicles		273			221
Computer hardware		2,092			1,271
Computer software		21,172			19,015
Leasehold improvements		4,855			4,923
Equipment and vehicles under capital lease		1,283			1,283
Total, at cost		51,330			44,929
Less — Accumulated depreciation and amortization		(34,483	)		(32,351	)
Net property, plant and equipment	$	16,847		$	12,578

Depreciation expense for continuing operations was $4,548,000, $5,179,000 and $4,609,000 for the years ended December 31, 2010, 2009 and 2008, respectively. Depreciation expense for discontinued operations was $660,000 and $656,000 for the years ended December 31, 2009 and 2008, respectively. The majority of the Company’s vehicles are leased and are accounted for as operating leases; however, certain of these vehicle leases are accounted for as capital leases. Assets under capital lease in the above table primarily represent vehicles and computer equipment leased by the Company. These assets are being amortized over the shorter of the lease term or the estimated useful life of the assets. Amortization expense for continuing operations related to capital leases was $186,000, $327,000 and $230,000 for the years 2010, 2009 and 2008, respectively. Amortization expense for discontinued operations related to capital leases was $10,000 and $42,000 for the years 2009 and 2008, respectively. As of December 31, 2010

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and 2009, the Company had recorded $1,119,000 and $933,000, respectively, in accumulated amortization for assets under capital lease.

15.   COMMITMENTS & CONTINGENCIES

Commitments

The Company had certain guarantees and indemnifications outstanding which could result in future payments to third parties. These guarantees generally result from the conduct of the Company’s business in the normal course. The Company’s outstanding guarantees as of December 31, 2010 were as follows:

	Maximum undiscounted
(in millions)	future payments
Standby letters of credit*:
Insurance related	$	7.3
Other		0.4
Performance and payment bonds*		14.3

* These instruments require no associated liability on the Company’s Consolidated Balance Sheet.

The Company’s banks issue standby letters of credit (“LOCs”) on the Company’s behalf under the Unsecured Credit Agreement (the “Credit Agreement”) as discussed more fully in the “Long-Term Debt and Borrowing Agreements” note. As of December 31, 2010, the majority of the balance of the Company’s outstanding LOCs was issued to insurance companies to serve as collateral for payments the insurers are required to make under certain of the Company’s self-insurance programs. These LOCs may be drawn upon in the event that the Company does not reimburse the insurance companies for claims payments made on its behalf. These LOCs renew automatically on an annual basis unless either the LOCs are returned to the bank by the beneficiaries or the banks elect not to renew them.

Bonds are provided on the Company’s behalf by certain insurance carriers. The beneficiaries under these performance and payment bonds may request payment from the Company’s insurance carriers in the event that the Company does not perform under the project or if subcontractors are not paid. The Company does not expect any amounts to be paid under its outstanding bonds as of December 31, 2010. In addition, the Company believes that its bonding lines will be sufficient to meet its bid and performance bonding needs for at least the next year.

The Company indemnified the buyer of Baker Energy for certain legacy costs related to its former Energy segment in excess of amounts accrued as of the transaction date. These costs include but are not limited to insurance and taxes. Reflected in the Consolidated Balance Sheet as of December 31, 2010 are both liabilities and assets related to Baker Energy’s workers’ compensation, automobile and health insurances through September 30, 2009. As part of the sale of Baker Energy, the buyer agreed to assume the liabilities associated with those insurances, subject to certain indemnifications, as of September 30, 2009. However, corresponding liabilities representing the reserves associated with these insurances, including reserves for incurred but not reported claims, are included in the Consolidated Balance Sheet as those insurances are written to the Company, rather than to a Baker Energy entity. As such, the Company is required to maintain reserves for these insurances in its Consolidated Balance Sheet. As the buyer assumed the liabilities associated with these insurances as of the closing balance sheet, the Company has also recorded a corresponding receivable from the buyer representing the amount of the aggregate insurance liabilities as of September 30, 2009 for the Energy Business, less reimbursements made to the Company through December 31, 2010.

Contingencies

Camp Bonneville Project.  In 2006, Michael Baker Jr., Inc. (“MB Jr.”), a subsidiary of the Company, entered into a contract whereby it agreed to perform certain services (the “Services”) in connection with a military base realignment and closure (“BRAC”) conservation conveyance of the Camp Bonneville property (the “Property”) located in Clark County, Washington. The Property was formerly owned by the United States Army (the “Army”). MB Jr’s. contract for the performance of the Services is with the Bonneville Conservation Restoration and Renewal Team (“BCRRT”), a not-for-profit corporation which holds title to the Property. BCRRT, in turn, has a contract with Clark County, Washington (the “County”) to perform services in connection with the Property and is signatory to a prospective purchaser consent decree (“PPCD”) with the Washington Department of Ecology (“WDOE”) regarding cleanup on the Property. The County is funding the services via an Environmental Services Cooperative Agreement (“ESCA”) grant

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from the Army and ultimately intends to use the Property as a park when cleanup is complete. As part of the Services, MB Jr., through a subcontractor, MKM Engineers (“MKM”), was performing remediation of hazardous waste and military munitions including Munitions and Explosives of Concern (“MEC”) on the Property.

Based upon the discovery of additional MEC to be remediated at the site, the WDOE has significantly increased the cleanup required to achieve site closure. WDOE put a Cleanup Action Plan (“CAP”) containing these increased requirements out for public comment on June 8, 2009 at which point BCRRT, with the assistance of MB Jr. and MKM, entered into dispute resolution with WDOE regarding the CAP. Dispute resolution concluded without the parties reaching agreement. MB Jr. is in the process of analyzing its next steps.

MB Jr.’s contract with BCRRT is fixed price, as is MKM’s contract with MB Jr. These contracts provide for two avenues of financial relief from the fixed price. First, the Army has agreed to provide Army Contingent Funding (“ACF”) to cover cost overruns associated with military munitions remediation. Under the ESCA, ACF is available once the County and its contractors have expended 120% of the $10.7 million originally estimated for military munitions remediation costs. Once this threshold has been reached, the ACF would cover ninety percent (90%) of actual costs up to a total of $7.7 million.

On June 1, 2009, at the urging of BCRRT, MB Jr. and MKM (hereinafter the “BCRRT Team”), the County sent a letter to the Army requesting that it begin the process of releasing ACF to cover additional costs of munitions response, and on June 26, 2009 the Army responded by requesting documentation of the costs incurred to date. On September 1, 2009, the BCRRT Team submitted this additional documentation to the County, and the County promptly sent this information to the Army. On October 20, 2009 the Army responded to the County’s request for ACF denying payment. The BCRRT Team strenuously disagrees with the Army’s reasons for doing so. In December of 2009, the BCRRT Team met with the Army and the Army requested that the BCRRT Team provide more information regarding cost documentation already submitted and additional cost documentation in order to update the ACF claim through December of 2009. This information and cost documentation was provided in January of 2010. In April of 2010, the Army indicated that it would respond regarding the ACF claim within the next one-hundred and twenty (120) days. Following the contingent settlement discussed below, in November 2010, the Army made an initial payment of ACF to the BCRRT Team, including a payment to Baker of $243,000 for work performed. An additional payment of ACF to Baker of $282,000 for retention is pending review and approval by the Army of supporting paperwork.

On September 4, 2009, MKM suspended munitions response work on the site due to lack of funding. On September 11, 2009, the County notified BCRRT, MB Jr. and MKM that the County believed BCRRT, MB Jr. and MKM were in breach of their obligations under their agreements, based on MKM’s anticipated failure to complete work in the central impact target area (“CITA”) portion of the Property by October 1, 2009 in accordance with an interim schedule set by WDOE. BCRRT requested and received an extension of the completion date for the CITA work to November 4, 2009, but the CITA work was not completed by that date. MB Jr’s. current position is that the CITA work completion date set by WDOE is not required by its contract. In late November of 2009, the BCRRT Team suspended work on the Bonneville site due to onset of winter weather.

In addition to the availability of ACF as a possible avenue of financial relief, the Army has retained responsibility for certain conditions which are unknown and not reasonably expected based on the information the Army provided to the County and its contractors during the negotiation of the ESCA. The BCRRT Team finalized and submitted a claim to the Army based upon Army Retained Conditions in January of 2010. This claim has not been addressed and the parties focus has been on the contingent settlement agreement discussed below.

MB Jr. has engaged outside counsel to assist in this matter. Counsel, on behalf of MB Jr., has been in discussions with the County, the Army, WDOE, BCRRT, and MKM, and on July 13, 2010 a contingent settlement agreement was reached between the County, BCRRT and MKM regarding the project. This agreement contemplates the resolution of the issues regarding the work on the project to date and is contingent upon, among other matters, an agreement being reached between the Army and the County regarding the remaining work. At this time it is too early to determine if the contingencies in the settlement agreement will be satisfied and hence the matter’s outcome and ultimate financial impact on MB Jr., although to date all parties appear focused on resolving the matter. For these reasons, the probability of loss and range of estimated loss cannot be determined at this time.

Legal Proceedings.  The Company has been named as a defendant or co-defendant in certain other legal proceedings wherein damages are claimed. Such proceedings are not uncommon to the Company’s business. After consultations with counsel, management believes that it has recognized adequate provisions for probable and reasonably estimable liabilities associated with these proceedings, and that their ultimate resolutions will not have a material impact on its consolidated financial statements.

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Self-Insurance.  Insurance coverage is obtained for catastrophic exposures, as well as those risks required to be insured by law or contract. The Company requires its insurers to meet certain minimum financial ratings at the time the coverages are placed; however, insurance recoveries remain subject to the risk that the insurer will be financially able to pay the claims as they arise. The Company is insured with respect to its workers’ compensation and general liability exposures subject to certain deductibles or self-insured retentions. Loss provisions for these exposures are recorded based upon the Company’s estimates of the total liability for claims incurred. Such estimates utilize certain actuarial assumptions followed in the insurance industry.

The Company is self-insured for its primary layer of professional liability insurance through a wholly-owned captive insurance subsidiary. The secondary layer of the professional liability insurance continues to be provided, consistent with industry practice, under a “claims-made” insurance policy placed with an independent insurance company. Under claims-made policies, coverage must be in effect when a claim is made. This insurance is subject to standard exclusions.

The Company establishes reserves for both insurance-related claims that are known and have been asserted against the Company, as well as for insurance-related claims that are believed to have been incurred but have not yet been reported to the Company’s claims administrators as of the respective balance sheet dates. The Company includes any adjustments to such insurance reserves in its consolidated results of operations.

The Company is self-insured with respect to its primary medical benefits program subject to individual retention limits. As part of the medical benefits program, the Company contracts with national service providers to provide benefits to its employees for medical and prescription drug services. The Company reimburses these service providers as claims related to the Company’s employees are paid by the service providers.

Reliance Liquidation.  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. In 2001, the Pennsylvania Insurance Commissioner placed Reliance into liquidation. Due to the subsequent liquidation of Reliance, the Company is currently uncertain what amounts paid by the Company to settle certain claims totaling in excess of $2.5 million will be recoverable under the insurance policy with Reliance. The Company is pursuing a claim in the Reliance liquidation and believes that some recovery will result from the liquidation, but the amount of such recovery cannot currently be estimated. The Company was notified in December 2009 that it would be receiving a $140,000 distribution from Reliance, which was subsequently received in January 2010. This amount was recognized in 2009 and was recorded as a receivable as of December 31, 2009. This distribution was not the final settlement and the Company may recover additional amounts in future periods. The Company had no other related receivables recorded from Reliance as of both December 31, 2010 and 2009.

16.   LEASE COMMITMENTS

The Company’s non-cancelable leases relate to office space, computer hardware and software, office equipment and vehicles with lease terms ranging from 1 to 11 years. Rent expense under non-cancelable operating leases for continuing operations was $18,713,000, $15,701,000 and $15,815,000 for the years ended December 31, 2010, 2009 and 2008, respectively. Rent expense under non-cancelable operating leases for discontinued operations was $1,716,000 and $2,660,000 for the years ended December 31, 2009 and 2008, respectively.

Future annual minimum lease payments under non-cancelable capital and operating leases as of December 31, 2010 were as follows:

(in thousands)	Capital lease		Operating lease
For the year ending December 31,	obligations		obligations		Total
2011	$	161	$	19,002	$	19,163
2012		—		15,002		15,002
2013		—		11,543		11,543
2014		—		10,226		10,226
2015		—		8,697		8,697
Thereafter		—		21,484		21,484
Total	$	161	$	85,954	$	86,115

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17.   LONG-TERM DEBT AND BORROWING AGREEMENTS

On September 30, 2010, the Company entered into a new Credit Agreement. The Company’s new Credit Agreement is with a consortium of financial institutions and provides for an aggregate commitment of $125.0 million revolving credit facility with a $50 million accordion option through September 30, 2015. The new arrangement increases the Company’s credit capacity by $65 million. The Credit Agreement includes a $5.0 million swing line facility and $20.0 million sub-facility for the issuance of LOCs. As of December 31, 2010 and 2009, there were no borrowings outstanding under the Company’s respective credit agreements and outstanding LOCs were $7.7 million and $9.4 million, respectively.

Under the Credit Agreement, the Company pays bank commitment fees on the unused portion of the commitment, ranging from 0.20% to 0.35% per year based on the Company’s leverage ratio. There were no borrowings during both the years ended December 31, 2010 and 2009.

The Credit Agreement provides pricing options for the Company to borrow at the bank’s prime interest rate or at LIBOR plus an applicable margin determined by the Company’s leverage ratio based on a measure of indebtedness to earnings before interest, taxes, depreciation, and amortization (“EBITDA”). The Credit Agreement also contains usual and customary negative covenants for a credit facility, requires the Company to meet minimum leverage and interest and rent coverage ratio covenants, and places certain limitations on dividend payments. The Agreement also contains usual and customary provisions regarding acceleration. In the event of certain defaults by the Company under the credit facility, the lenders will have no further obligation to extend credit and, in some cases, any amounts owed by the Company under the credit facility will automatically become immediately due and payable. As of December 31, 2010, the Company was in compliance with the covenants under the Credit Agreement.

18.   EARNINGS PER SHARE

The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations:

	For the year ended December 31,
(in thousands)	2010			2009			2008
Net income from continuing operations	$	15,446		$	24,728		$	22,558
Less: Net income attributable to noncontrolling
interests — continuing operations		(768	)		(156	)		—
Net income from continuing operations attributable
to Michael Baker Corporation		14,678			24,572			22,558
Net (loss)/income from discontinued operations attributable to Michael Baker Corporation		(2,512	)		2,349			6,596
Net income attributable to Michael Baker Corporation	$	12,166		$	26,921		$	29,154

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	For the year ended December 31,
(in thousands, except per share data)	2010			2009		2008
Basic:
Weighted average shares outstanding		8,929			8,855		8,811
Earnings/(loss) per share:
Continuing operations	$	1.64		$	2.77	$	2.56
Discontinued operations		(0.28	)		0.27		0.75
Total	$	1.36		$	3.04	$	3.31
Diluted:
Effect of dilutive securities -
Contingently issuable shares and stock based compensation		224			78		80
Weighted average shares outstanding		9,153			8,933		8,891
Earnings/(loss) per share:
Continuing operations	$	1.60		$	2.75	$	2.54
Discontinued operations		(0.27	)		0.26		0.74
Total	$	1.33		$	3.01	$	3.28

As of December 31, 2010, 2009 and 2008, there were 48,000, 32,000 and 16,000, respectively, of the Company’s stock options that were excluded from the computations of diluted shares outstanding because the option exercise prices were more than the average market price of the Company’s common shares.

19.   CAPITAL STOCK

In 1996, the Board of Directors authorized the repurchase of up to 500,000 shares of the Company’s Common Stock in the open market. In 2003, the Board of Directors authorized an additional repurchase of up to 500,000 shares for a total authorization of 1,000,000 shares. As of December 31, 2010, 520,319 treasury shares had been repurchased under the Board’s authorizations. The Company made no treasury share repurchases during 2010 or 2009.

As of December 31, 2010 and 2009, the difference between the number of treasury shares repurchased under these authorizations and the number of treasury shares listed on the consolidated balance sheets relates to an exchange of Series B Common Stock for 23,452 Common shares which occurred in 2002. The remaining difference relates to 1,330 shares issued to employees as bonus share awards in the late 1990s.

Under the Credit Agreement, the Company’s treasury share repurchases cannot exceed $10.0 million during any rolling twelve-month period.

The Articles of Incorporation authorize the issuance of 6,000,000 shares of Series B Common Stock, par value $1 per share, which would entitle the holders thereof to ten votes per share on all matters submitted for shareholder votes. As of December 31, 2010 and 2009, there were no shares of such Series B Stock outstanding. The Company has no plans of issuing any Series B Common Stock in the near future. The Articles of Incorporation also authorize the issuance of 300,000 shares of Cumulative Preferred Stock, par value $1 per share. As of December 31, 2010 and 2009, there were no shares of such Preferred Stock outstanding.

20.   RIGHTS AGREEMENT

In 1999, the Board of Directors adopted a Rights Agreement (the “Rights Agreement”). In connection with the Rights Agreement, the Company declared a distribution of one Right (a “Right”) for each outstanding share of Common Stock to shareholders of record at the close of business on November 30, 1999. The Rights will become exercisable after a person or group, excluding the Company’s Baker 401(k) Plan, (“401(k) Plan”) has acquired 25% or more of the Company’s outstanding Common Stock or has announced a tender offer that would result in the acquisition of 25% or more of the Company’s outstanding Common Stock. The Board of Directors has the option to redeem the Rights for $0.001 per Right prior to their becoming exercisable. On November 5, 2009, the Company extended the term of the Rights Agreement by three years. The Rights will now expire on November 16, 2012, unless they are earlier exchanged or redeemed.

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Assuming the Rights have not been redeemed, after a person or group has acquired 25% or more of the Company’s outstanding Common Stock, each Right (other than those owned by a holder of 25% or more of the Common Stock) will entitle its holder to purchase, at the Right’s then current exercise price, a number of shares of the Company’s Common Stock having a value equal to two times the exercise price of the Rights. In addition, at any time after the Rights become exercisable and prior to the acquisition by the acquiring party of 50% or more of the outstanding Common Stock, the Board of Directors may exchange the Rights (other than those owned by the acquiring person or its affiliates) for the Company’s Common Stock at an exchange ratio of one share of Common Stock per Right.

21.   BAKER 401(k) PLAN

The Company maintains a defined contribution retirement program through its 401(k) Plan, in which substantially all employees are eligible to participate. The 401(k) Plan offers participants several investment options, including a variety of mutual funds and Company stock. Contributions to the 401(k) Plan are derived from a 401(k) Salary Redirection Program with a Company matching contribution, and a discretionary contribution as determined by the Board of Directors. Under the 401(k) Salary Redirection Program, the Company matches up to 100% of the first 3% and 50% of the next 3% of eligible salary contributed, thereby providing the opportunity for a Company match of as much as 4.5% of eligible salary contributed. The Company’s matching contributions are invested not less than 25% in its Common Stock (purchased through open market transactions), with the remaining 75% being available to invest in mutual funds or its Common Stock, as directed by the participants. The Company’s required cash contributions under this program amounted to $5,999,000, $6,065,000 and $5,424,000 in 2010, 2009 and 2008, respectively, for continuing operations. The Company’s required cash contributions under this program amounted to $1,010,000 and $1,283,000 in 2009 and 2008, respectively, for discontinued operations.

As of December 31, 2010, the market value of all 401(k) Plan investments was $256 million, of which 11% represented the market value of the 401(k) Plan’s investment in the Company’s Common Stock. The Company’s 401(k) Plan held 10% of both the shares and voting power of its outstanding Common Stock as of December 31, 2010. Each participant who has shares of Common Stock allocated to their account will have the authority to direct the Trustee with respect to the vote and all non-directed shares will be voted in the same proportion as the directed shares.

The employees of LPA remained on the legacy LPA 401(k) plan until December 31, 2010 and were transitioned to the Company’s 401(k) Plan effective January 1, 2011. As of December 31, 2010, the Company had an accrual related to the LPA 401(k) plan of $0.5 million.

22.   DEFERRED COMPENSATION PLAN

The Company has a nonqualified deferred compensation plan that provides benefits payable to non-employee directors at specified future dates, upon retirement, or death. Under the plan, participants may elect to defer their compensation received for their services as directors. This deferred compensation plan is unfunded; therefore, benefits are paid from the general assets of the Company. Participant cash deferrals earn a return based on the Company’s long-term borrowing rate as of the beginning of the plan year. The total of participant deferrals, which is primarily reflected as “Other long-term liabilities” in the Company’s consolidated balance sheets, was approximately $984,000 and $960,000 as of December 31, 2010 and 2009, respectively.

23.   STOCK BASED COMPENSATION

As of December 31, 2010, the Company has two active equity incentive plans under which stock awards can be issued as well as an expired plan under which stock options previously granted remain outstanding and exercisable. Under the 2010 Michael Baker Corporation Long-Term Incentive Plan (the “Long-Term Plan”), the Company is authorized to grant stock options, SARs, restricted stock, restricted stock units, performance share units, and other stock-based awards, for an aggregate of 500,000 shares of Common Stock to employees through April 8, 2020. Under the Long-Term Plan, restricted stock awards vest in equal annual increments over three years. Under the amended 1996 Non-employee Directors’ Stock Incentive Plan (the “Directors’ Plan”), the Company is authorized to grant options and restricted shares for an aggregate of 400,000 shares of Common Stock to non-employee board members through February 18, 2014. The options under the Directors’ Plan become fully vested on the date of grant and become exercisable six months after the date of grant. The restrictions on the restricted shares under the Directors’ Plan lapse after two years. Under the 1995 Stock Incentive Plan (the “1995 Plan”), the Company was authorized to grant options for an aggregate of 1,500,000 shares of Common Stock to key employees through its expiration on December 14, 2004. Unless otherwise established under the 1995 Plan, one-fourth of the options granted to key employees became

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immediately vested and the remaining three-fourths vested in equal annual increments over three years under the now expired Plan. Under these plans, the exercise price of each option equals the average market price of the Company’s stock on the date of grant. Vested options remain exercisable for a period of ten years from the grant date under the plans. From the date a restricted share award is effective, the awardee will be a shareholder and have all the rights of a shareholder, including the right to vote such shares and to receive all dividends and other distributions. Restricted shares may not be sold or assigned during the restriction period commencing on the date of the award.

As of December 31, 2010 and, 2009, the restrictions had not lapsed on 24,000 and 36,000, shares, respectively, of the Company’s restricted stock awarded under the Directors’ Plan. As of December 31, 2010, the restrictions had not lapsed on 70,907 shares of the Company’s restricted stock awarded under the Long-Term Plan. As of both December 31, 2010 and, 2009, all outstanding options were fully vested under the Directors’ Plan and the expired 1995 Plan. There were 114,301 and 104,463 exercisable options as of December 31, 2010 and 2009, respectively, under the Directors’ Plan and the expired 1995 Plan. Unearned compensation related to restricted stock awards was approximately $2,352,000 and $474,000 as of December 31, 2010 and 2009, respectively.

The following table summarizes all restricted stock issued for the Directors’ Plan and the Long-Term Plan:

				Weighted
				average
	Restricted			issuance price
	shares			per share
Balance at January 1, 2008		21,000		$	23.57
Restricted shares granted		12,000			37.53
Restricted shares vested		(13,500	)		21.74
Balance at December 31, 2008		19,500			33.42
Restricted shares granted		12,000			40.46
Restricted shares vested		(7,500	)		26.86
Balance at December 31, 2009		24,000			38.99
Restricted shares granted		82,907			34.94
Restricted shares vested		(12,000	)		37.53
Balance at December 31, 2010		94,907		$	35.63

The following table summarizes all stock options outstanding for the Directors’ Plan and the expired 1995 Plan:

								Weighted
				Weighted				average
	Shares			average		Aggregate		contractual life
	subject			exercise price		intrinsic		remaining
	to option			per share		value		in years
Balance at January 1, 2008		145,520		$	14.70	$	3,841,521		4.8
Options granted		16,000			37.53
Options exercised		(33,057	)		11.06
Balance at December 31, 2008		128,463			18.48		2,377,316		5.4
Options granted		16,000			40.46
Options exercised		(40,000	)		15.81
Balance at December 31, 2009		104,463			22.87		1,935,885		5.3
Options granted		16,000			37.23
Options exercised		(6,162	)		8.16
Balance at December 31, 2010		114,301		$	25.67	$	971,014		5.3

The weighted average fair value of options granted during 2010, 2009 and 2008 was $19.70, $22.46 and $17.91, respectively. The total intrinsic value of stock options exercised during the years ended December 31, 2010, 2009 and 2008 was $196,000, $880,000 and $460,000, respectively. As of December 31, 2010, no shares of the Company’s

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Common Stock remained available for future grants under the expired Plan, while 429,093 shares were available for future grants under the Long-Term Plan and 103,000 shares were available for future grants under the Directors’ Plan.

The following table summarizes information about stock options outstanding for the Directors’ Plan and the expired 1995 Plan as of December 31, 2010:

	Options outstanding						Options exercisable
					Weighted				Weighted
	Number				average		Number		average
	of		Average		exercise		of		exercise
Range of exercise prices	options		life(1)		price		options		price
$6.25 — $8.55		9,267		1.6	$	8.54		9,267	$	8.54
$10.025 — $15.625		33,034		1.5		14.33		33,034		14.33
$20.16 — $26.86		24,000		5.5		22.43		24,000		22.43
$37.225 — $40.455		48,000		8.5		38.40		48,000		38.40
Total		114,301		5.3	$	25.67		114,301	$	25.67

⁽¹⁾ Average life remaining in years.

The fair value of options on the respective grant dates was estimated using a Black-Scholes option pricing model, based on the following assumptions:

	2010		2009		2008
Weighted average risk-free interest rate		2.3%		3.2%		3.4%
Weighted average expected volatility		48.3%		47.1%		36.2%
Expected option life		7.4 years		7.9 years		8.1 years
Expected dividend yield		0.00%		0.00%		0.00%

The average risk-free interest rate is based on the U.S. Treasury yield with a term to maturity that approximates the option’s expected life as of the grant date. Expected volatility is determined using historical volatilities of the underlying market value of the Company’s stock obtained from public data sources. The expected life of the stock options is determined using historical data.

During the second quarter of 2008, the Company issued 40,000 SARs, which vest at varying intervals over a three-year period, in connection with the Company’s Chief Executive Officer’s employment agreement. Future payments for the SARs will be made in cash, subject to the Company’s discretion to make such payments in shares of the Company’s common stock under the terms of a shareholder-approved employee equity incentive plan. The fair value of the SARs was estimated using a Black-Scholes option pricing model. Based on the fair value of these SARs, the Company anticipates recording additional expense ratably through the second quarter of 2011 of approximately $87,000.

The Company recognized total stock based compensation expense related to its restricted stock, options and SARs of $1,384,000, $1,063,000 and $772,000 for the years ended December 31, 2010, 2009 and 2008, respectively.

In April 2010, the Company’s Board of Directors adopted the Michael Baker Corporation Employee Stock Purchase Plan (the “ESPP”). The first day of each quarter is an offering date and the last day of each quarter is a purchase date. The first purchase period will begin on January 1, 2011. Employees will be able to purchase shares of Common Stock under the ESPP at 90% of the fair market value of the Common Stock on the purchase date. The maximum number of shares of Common Stock which may be issued pursuant to the ESPP is 750,000 shares.

24.   RELATED PARTY TRANSACTIONS

Effective April 25, 2001, the Company entered into a consulting agreement with Richard L. Shaw when he retired from his position as Chief Executive Officer. Through subsequent amendments, this agreement has been extended through April 26, 2011. The consulting agreement provides an annual compensation amount for consulting services in addition to the Company covering the costs of health insurance and maintaining life insurance for the executive. The consulting agreement also provides for a supplemental retirement benefit of $5,000 per month as well as the continuation of the life and health insurance benefits commencing at the expiration of the consulting term.

Effective September 14, 2006, Mr. Shaw’s compensation for the consulting services under the agreement was temporarily suspended due to his re-employment by the Company as its Chief Executive Officer. Effective March 1,

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2008, compensation under the consulting agreement resumed upon Mr. Shaw’s retirement from the Company. Mr. Shaw’s total consulting fees for both the years ended December 31, 2010 and 2009 were $106,000 and $89,000 for 2008.

As part of the LPA transaction, the Company agreed to continue two leases (Columbia, South Carolina and Norcross, Georgia) for one year at above market rates with the former primary owners of The LPA Group Incorporated. The Columbia, South Carolina lease was renegotiated and extended at current market rates in September 2010 and the Norcross, Georgia lease was renegotiated and extended at current market rates in November 2010. The total rent expenses were $755,000 and $203,000 for the year ended December 31, 2010 for the Columbia, South Carolina and Norcross, Georgia leases, respectively.

25.   SUPPLEMENTAL DISCLOSURES OF CASH FLOW DATA

The following table is provided as a supplement to the Company’s indirect-method statement of cash flows:

	For the Year Ended December 31,
(In thousands)	2010		2009		2008
Common stock issued in the LPA acquisition, 226,447 shares	$	8,062	$	—	$	—
Income taxes paid		14,241		18,925		21,098
Interest paid	$	23	$	14	$	199

Assets acquired on credit or through capital lease obligations were nominal for the years ended December 31, 2010, 2009 and 2008.

26.   QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following is a summary of the unaudited quarterly results of operations for the two years ended December 31, 2010 and gives effect to the disposition of the Company’s Energy business, which is presented as discontinued operations:

	2010 — Three Months Ended
(In thousands, except per share information)	Mar. 31			June 30			Sept. 30			Dec. 31
Revenues	$	111,660		$	131,757		$	135,573		$	120,363
Gross profit		21,519			28,599			30,262			18,677
Income/(loss) before income taxes and noncontrolling interests		7,665			9,292			8,390			(655	)
Net income/(loss) attributable to Michael Baker Corporation
Continuing operations		4,613			5,554			5,031			(520	)
Discontinued operations		(628	)		(164	)		(682	)		(1,038	)
Total		3,985			5,390			4,349			(1,558	)
Diluted earnings/(loss) per common share
Continuing operations		0.52			0.61			0.54			(0.07	)
Discontinued operations		(0.07	)		(0.02	)		(0.07	)		(0.11	)
Total	$	0.45		$	0.59		$	0.47		$	(0.18	)

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	2009 — Three Months Ended
	Mar. 31		June 30		Sept. 30		Dec. 31
Revenues	$	115,084	$	113,323	$	110,153	$	106,617
Gross profit		22,683		22,683		22,239		20,375
Income/(loss) before income taxes and noncontrolling interests		10,289		8,921		10,919		7,833
Net income/(loss) attributable to Michael Baker Corporation
Continuing operations		6,276		5,481		6,956		5,859
Discontinued operations		1,563		1,569		322		(1,105	)
Total		7,839		7,050		7,278		4,754
Diluted earnings/(loss) per common share
Continuing operations		0.70		0.62		0.78		0.65
Discontinued operations		0.18		0.17		0.03		(0.12	)
Total	$	0.88	$	0.79	$	0.81	$	0.53

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MANAGEMENT’S REPORT TO SHAREHOLDERS ON
ITS RESPONSIBILITY FOR FINANCIAL STATEMENTS

Management of Michael Baker Corporation is responsible for preparing the accompanying consolidated financial statements and for ensuring their integrity and objectivity. These financial statements were prepared in accordance with accounting principles generally accepted in the United States of America and fairly represent the transactions and financial position of the Company. The financial statements include amounts that are based on management’s best estimates and judgments.

The Company’s 2010, 2009 and 2008 financial statements have been audited by Deloitte & Touche LLP, independent registered public accounting firm, as selected by the Audit Committee. Management has made available to Deloitte & Touche LLP all the Company’s financial records and related data, as well as the minutes of shareholders’ and directors’ meetings.

The Audit Committee is composed of directors who are not officers or employees of the Company. It meets regularly with members of management, the internal auditors and the independent registered public accounting firm to discuss the adequacy of the Company’s internal control over financial reporting, its financial statements, and the nature, extent and results of the audit effort. Both the Company’s internal auditors and its independent registered public accounting firm have free and direct access to the Audit Committee without the presence of management.

/s/ Bradley L. Mallory

Bradley L. Mallory

President and Chief Executive Officer

/s/ Michael J. Zugay

Michael J. Zugay

Executive Vice President
and Chief Financial Officer

/s/ James M. Kempton

James M. Kempton

Vice President and Corporate Controller

51

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Michael Baker Corporation:

We have audited the accompanying consolidated balance sheets of Michael Baker Corporation and subsidiaries (the “Company”) as of December 31, 2010 and 2009, and the related consolidated statements of income, shareholders’ investment, and cash flows for each of the three years in the period ended December 31, 2010. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits 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. 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, such consolidated financial statements present fairly, in all material respects, the financial position of Michael Baker Corporation and subsidiaries as of December 31, 2010 and 2009, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2010, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 3 to the consolidated financial statements, the Company changed its method of accounting for noncontrolling interests in 2009.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2010, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 3, 2011 expressed an unqualified opinion on the Company’s internal control over financial reporting.

/s/ Deloitte & Touche LLP

Pittsburgh, Pennsylvania

March 3, 2011

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SUPPLEMENTAL FINANCIAL INFORMATION

Market Information — Common Shares

The principal market on which the Company’s Common Stock is traded is the NYSE Amex under the ticker symbol “BKR.” High and low closing prices of the Company’s Common Stock for each quarter for the years ended December 31, 2010 and 2009 were as follows:

	2010								2009
	Fourth		Third		Second		First		Fourth		Third		Second		First
High	$	34.96	$	39.49	$	40.49	$	41.37	$	41.40	$	42.96	$	43.69	$	42.60
Low		30.38		31.50		33.38		33.37		34.95		33.48		25.44		24.70

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EX-21.1

EXHIBIT 21.1

SUBSIDIARIES OF THE REGISTRANT

The following entities, unless otherwise indicated, are wholly-owned direct or indirect subsidiaries of the Registrant as of December 31, 2010:

		State or Country
	Name	of Organization
1.	Baker Holding Corporation	Delaware
2.	Baker/OTS, Inc.	Delaware
3.	Michael Baker International, Inc.	Delaware
4.	Michael Baker Engineering, Inc.	New York
5.	Baker Vessels, Inc.	Pennsylvania
6.	Michael Baker Jr., Inc.	Pennsylvania
7.	LPACIFIC Group Incorporated	South Carolina
8.	The LPA Design Group, Inc.	South Carolina
9.	The LPA Group Incorporated	South Carolina
10.	Vermont General Insurance Company	Vermont
11.	Baker Engineering International, Ltd.	Cayman Islands
12.	Overseas Technical Services (Middle East) Ltd.	Cayman Islands
13.	Michael Baker de Mexico S.A. de C.V.	Mexico
14.	The LPA Group of Canada, Inc.	New Brunswick, Canada

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement Nos. 333-05987, 333-59941, 033-62887, 333-69306, 333-123232, 333-167587, 333-167588 on Forms S-8 and Registration No. 333-172055 on Form S-3 of our reports dated March 3, 2011 relating to the financial statements (which report expresses an unqualified opinion and includes an explanatory paragraph relating to the change in accounting for noncontrolling interests in 2009) and financial statement schedule of Michael Baker Corporation and subsidiaries (the “Company”), and the effectiveness of the Company’s internal control over financial reporting, appearing in this Annual Report in Form 10-K of the Company for the year ended December 31, 2010.

/s/ Deloitte & Touche LLP Pittsburgh, Pennsylvania

March 3, 2011

EX-23.2

Exhibit 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in this Prospectus constituting part of the Registration Statement on Form S-3, of our report dated February 12, 2010, related to the financial statements of Stanley Baker Hill, LLC as of December 31, 2009 and for the year then ended, appearing in the Annual Report on Form 10-K of Michael Baker Corporation for the year ended December 31, 2009 filed with the Securities and Exchange Commission on March 15, 2010, which report expressed an unqualified opinion.

We also consent to the reference to us under the heading “Experts” in such Prospectus.

/s/ Schneider Downs & Co., Inc.
Pittsburgh, Pennsylvania

March 1, 2011

EX-31.1

EXHIBIT 31.1

I, Bradley L. Mallory, certify that:

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

2. Based on my knowledge, this 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 report;

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

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Bradley L. Mallory

Bradley L. Mallory

President, Chief Executive Officer and Director

Date: March 3, 2011

EX-31.2

EXHIBIT 31.2

I, Michael J. Zugay, certify that:

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

2. Based on my knowledge, this 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 report;

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

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Michael J. Zugay

Michael J. Zugay

Executive Vice President and Chief Financial Officer

Date: March 3, 2011

EX-32.1

EXHIBIT 32.1

ADDITIONAL CERTIFICATIONS

Pursuant to 18 U.S.C. Section 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, 2010 (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/ Bradley L. Mallory	Date: March 3, 2011
Bradley L. Mallory President, Chief Executive Officer and Director

Pursuant to 18 U.S.C. Section 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, 2010 (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/ Michael J. Zugay	Date: March 3, 2011
Michael J. Zugay
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.

EX-99.1

Exhibit 99.1

STANLEY BAKER HILL, LLC
Beaver, Pennsylvania

Unaudited Financial Statements
For the year ended December 31, 2010

C O N T E N T S

	PAGE
FINANCIAL STATEMENTS
Statement of Net Assets in Liquidation (Liquidation Basis), December 31, 2010		1
Statements for the year ended December 31, 2010:
Statement of Operations and Changes in Net Assets in Liquidation (Liquidation Basis)		2
Statement of Cash Flows		3
Notes to Financial Statements		4

STANLEY BAKER HILL, LLC

STATEMENT OF NET ASSETS IN LIQUIDATION (LIQUIDATION BASIS)
DECEMBER 31, 2010

ASSETS
Cash and cash equivalents	$	766,082
Receivables		163,126
TOTAL ASSETS	$	929,208
LIABILITIES AND NET ASSETS IN LIQUIDATION
LIABILITIES
Accounts payable	$	311,268
Other liabilities		104,570
Total Liabilities		415,838
NET ASSETS IN LIQUIDATION		513,370
TOTAL LIABILITIES AND NET ASSETS IN LIQUIDATION	$	929,208

See notes to financial statements.

STANLEY BAKER HILL, LLC

STATEMENT OF OPERATIONS AND CHANGES IN
NET ASSETS IN LIQUIDATION (LIQUIDATION BASIS)
FOR THE YEAR ENDED DECEMBER 31, 2010

CONTRACT REVENUE EARNED	$	47,543,789
COST OF REVENUE EARNED
Direct costs		24,372,712
Indirect costs		19,204,912
Gross Profit		3,966,165
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		468,927
Income From Operations		3,497,238
INTEREST INCOME		16,027
LOSS ON SALE OF FIXED ASSETS		(2,548	)
Net Income		3,510,717
NET ASSETS IN LIQUIDATION
Beginning of year		4,802,653
Distributions		(7,800,000	)
End of year	$	513,370

See notes to financial statements.

STANLEY BAKER HILL, LLC

STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2010

CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	3,510,717
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		9,892
Net loss on sale of fixed assets		2,548
Changes in assets and liabilities:
Receivables		14,436,739
Costs and estimated earnings in excess of billings on uncompleted contracts		173,480
Prepaid expenses		834,036
Accounts payable		(12,107,713	)
Other current liabilities		(70,475	)
Net Cash Provided By Operating Activities		6,789,224
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of equipment and software		(5,171	)
Proceeds from sale of equipment and software		13,029
Net Cash Provided By Investing Activities		7,858
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions		(7,800,000	)
Net Decrease In Cash And Cash Equivalents		(1,002,918	)
CASH AND CASH EQUIVALENTS
Beginning of year		1,769,000
End of year	$	766,082

See notes to financial statements.

NOTE 1 — ORGANIZATION

     Stanley Baker Hill, LLC (Company) was a joint venture formed in February 2004 between Stanley Consultants, Inc. (Stanley), Michael Baker, Jr., Inc. (Baker) and Hill International, Inc. (Hill). The Company provided various architect-engineer services in Iraq for the U.S. Army Corps of Engineers Transatlantic Program Center (U.S. Corps). The Company had a contract for an indefinite delivery and indefinite quantity for construction management and general architect-engineer services for facilities in Iraq with U.S. Corps.

     Completion of open task orders occurred as of December 31, 2010 with no further intentions to obtain any more task orders. As such, the Board of Directors has voted to dissolve the Company during the fiscal year 2011 and distribute any remaining assets to its members.

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     A summary of significant accounting policies consistently applied by management in the preparation of the accompanying financial statements follows:

     Basis of Accounting — In previous years, the Company prepared its financial statements on the accrual basis of accounting, in conformity with generally accepted accounting principles. In 2010, the financial statements have been prepared on the liquidation basis of accounting, also in conformity with generally accepted accounting principles, due to the Board of Directors voting to dissolve the Company (see Note 1). Under the liquidation basis of accounting, the Company’s assets are stated at their estimated net realizable value, which is the non-discounted amount of cash, or its equivalent, into which an asset is expected to be converted in the due course of business less direct costs, while the Company’s liabilities are reported at their estimated settlement amount, which is the non-discounted amounts of cash, or its equivalent, expected to be paid to liquidate an obligation in the due course of business including direct costs. There was no effect for this change in basis of accounting due to the fair value of all assets equaling their net realizable value and the fair value of all liabilities equaling their estimated settlement amount.

     Use of Estimates — The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

     Cash and Cash Equivalents — The Company maintains, at various financial institutions, cash and certificates of deposit that might exceed federally insured amounts at times. For purposes of the statements of cash flows, the Company considers all interest-bearing money market funds and noninterest-bearing accounts to be cash and cash equivalents.

     Revenue Recognition and Contract Accounting — The Company typically incurs direct labor costs, subcontractor costs and certain other indirect costs (ODCs) in connection with architect-engineer services. Contracts are structured such that margin is earned on labor costs and not on ODCs. The Company includes revenues related to its direct labor, subcontractors and ODCs in its total contract revenues as long as the Company remains responsible to the client for the acceptability of the services provided.

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     The Company recognizes revenues under the percentage-of-completion method of accounting. Revenues on fixed-price contracts with a predetermined scope of work are determined by multiplying the estimated margin at completion for each contract by the project’s percentage of completion to date, adding labor costs, subcontractor costs and ODCs incurred to date, and subtracting revenues recognized in prior periods. In applying the percentage-of-completion method to these contracts, the Company measures the extent of progress toward completion as the ratio of labor costs incurred to date over total estimated labor costs at completion. As work is performed under contracts, estimates of the costs to complete are regularly reviewed and updated. As changes in estimates of total costs at completion on projects are identified, appropriate earnings adjustments are recorded during the period that the change is identified.

     For contracts with predetermined time period of service, revenue is recognized on a ratio of time elapsed as compared to the total length of the contract.

     For time-and-materials task orders, revenue is recognized and billed by multiplying the number of hours expended by our professionals in the performance of the contract by the established billing rates.

     Provisions for estimated losses on uncompleted contracts are recorded during the period in which such losses are determined. Revenues related to contractual claims that arise from customer-caused delays or change orders unapproved as to both scope and price are recorded only when the amounts have been agreed with the client. Profit incentives and/or award fees are recorded as revenues when the amounts are both probable and reasonably estimable.

     Equipment and Software — All equipment and software were either sold or disposed of during the fiscal year 2010. Depreciation and amortization were provided on the straight-line method over the estimated useful lives of the assets. Repairs and maintenance that do not extend the lives of the applicable assets were charged to expense as incurred. Gain or loss resulting from the retirement or other disposition of assets is included in income.

     Other Current Liabilities — The Company has recorded accruals for estimated expenses associated with the dissolving of the Company. These include audit and tax services, as well as any unforeseen future expenses. Additionally, the Company is currently undergoing an audit from the Defense Contract Audit Agency, the division of the Department of Defense charged with performing all necessary contract audits. Management does not expect any audit findings to be discovered during this audit, but decided that it would be prudent to record an estimated reserve for any liabilities associated with that audit.

     Income Taxes — The Company is organized as an LLC and is not subject to federal or state income taxes. Accordingly, no provision has been made for current or deferred income taxes in these financial statements. The taxable income of the Company is included in the tax returns of the individual members. The Company has considered any uncertain tax positions that might exist as of December 31, 2010, and has determined that no liability for unrecognized tax positions is required to be recorded.

     Subsequent Events — Subsequent events are defined as events or transactions that occur after the balance sheet date, but before the financial statements are issued or are available to be issued. Management has evaluated subsequent events through February 9, 2011, the date on which the financial statements were available to be issued. On January 4, 2011, the Company paid, in equal amounts, a total of $525,000 in distributions to the three joint venture partners.

NOTE 3 — RECEIVABLES

     Receivables at December 31, 2010 consist of the following:

Outstanding Contract Receivable	$	157,081
Other		6,045
	$	163,126

NOTE 4 — RELATED-PARTY TRANSACTIONS

     The Company engages in significant related-party transactions as a result of the three partners providing a majority of the contract services. In accordance with the Operating Agreement of the Company, the members also charge the Company for time incurred for management and administrative services at agreed-upon rates. A summary of the related-party transactions included in the financial statements at December 31, 2010 is as follows:

			Costs of
	Accounts		Services
	Payable		Incurred
Stanley	$	13,192	$	12,002,232
Baker		25,178		13,714,329
Hill		270,895		11,620,703
	$	309,265	$	37,337,264

NOTE 5 — COMMITMENTS AND CONTINGENCIES

     The Company is a defendant in one legal proceeding encountered in the normal course of its business. Additionally, the Company has received a letter threatening lawsuit over a separate matter. In the opinion of management, based upon discussion with counsel, the ultimate outcome of these matters will not have a materially adverse effect on the financial position, results of operations or cash flow of the Company.

EX-99.2

EXHIBIT 99.2

STANLEY BAKER HILL, LLC
Beaver, Pennsylvania

Financial Statements
For the year ended December 31, 2009

and Report of Independent Registered Public
Accounting Firm Thereon

CONTENTS

	Page
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM		1
FINANCIAL STATEMENTS
Balance Sheet, December 31, 2009		2
Statements for the years ended December 31, 2009:
Operations and Changes in Members’ Equity		3
Cash Flows		4
Notes to Financial Statements		5

STANLEY BAKER HILL, LLC

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2009

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors

Stanley Baker Hill, LLC

Beaver, Pennsylvania

We have audited the accompanying balance sheet of Stanley Baker Hill, LLC (Company) as of December 31, 2009, and the related statements of operations and changes in members’ equity and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

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 Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit 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 Company’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 audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Stanley Baker Hill, LLC as of December 31, 2009, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ Schneider Downs & Co., Inc.

Pittsburgh, Pennsylvania

February 12, 2010

1

STANLEY BAKER HILL, LLC

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009
STANLEY BAKER HILL, LLC

BALANCE SHEET
DECEMBER 31, 2009

ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	1,769,000
Receivables		14,599,865
Costs and estimated earnings in excess of billings on uncompleted contracts		173,480
Prepaid expenses		834,036
Total Current Assets		17,376,381
EQUIPMENT AND SOFTWARE, net		20,298
TOTAL ASSETS	$	17,396,679
LIABILITIES
CURRENT LIABILITIES
Accounts payable	$	12,418,981
Other current liabilities		175,045
Total Current Liabilities		12,594,026
MEMBERS’ EQUITY
MEMBERS’ EQUITY		4,802,653
TOTAL LIABILITIES AND MEMBERS’ EQUITY	$	17,396,679

See notes to financial statements.

2

STANLEY BAKER HILL, LLC

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009
STANLEY BAKER HILL, LLC

STATEMENT OF OPERATIONS AND CHANGES IN MEMBERS’ EQUITY
FOR THE YEAR ENDED DECEMBER 31, 2009

CONTRACT REVENUE EARNED	$	154,140,155
COST OF REVENUE EARNED
Direct costs		79,373,556
Indirect costs		53,003,192
Gross Profit		21,763,407
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		638,845
Income From Operations		21,124,562
INTEREST INCOME		36,757
Net Income		21,161,319
MEMBERS’ EQUITY
Beginning of year		5,541,334
Distributions		(21,900,000	)
End of year	$	4,802,653

See notes to financial statements.

3

STANLEY BAKER HILL, LLC

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009
STANLEY BAKER HILL, LLC

STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2009

CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	21,161,319
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		10,335
Changes in assets and liabilities:
Receivables		8,027,568
Costs and estimated earnings in excess of billings on uncompleted contracts		(638,932	)
Prepaid expenses		(354,191	)
Accounts payable		(9,014,549	)
Other current liabilities		114,575
Net Cash Provided By Operating Activities		19,306,125
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of equipment and software		(23,132	)
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions		(21,900,000	)
Net Decrease In Cash And Cash Equivalents		(2,617,007	)
CASH AND CASH EQUIVALENTS
Beginning of year		4,386,007
End of year	$	1,769,000

See notes to financial statements.

4

STANLEY BAKER HILL, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009

NOTE 1 — ORGANIZATION

Stanley Baker Hill, LLC (Company) is a joint venture formed in February 2004 between Stanley Consultants, Inc. (Stanley), Michael Baker, Jr., Inc. (Baker) and Hill International, Inc. (Hill). The Company provides various architect-engineer services in Iraq for the U.S. Army Corps of Engineers Transatlantic Program Center (U.S. Corps). The Company has a contract for an indefinite delivery and indefinite quantity for construction management and general architect-engineer services for facilities in Iraq with U.S. Corps. Anticipated completion of open contracts is likely to occur in September 2010, barring any additional new contracts or modification to existing contracts obtained in 2010.

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of significant accounting policies consistently applied by management in the preparation of the accompanying financial statements follows:

The Financial Accounting Standards Board (FASB) issued the FASB Accounting Standards Codification (Codification). The Codification became the single source of authoritative nongovernmental United States generally accepted accounting principles (GAAP), superseding existing FASB, American Institute of Certified Public Accountants, Emerging Issues Task Force and related literature. The Codification eliminates the previous GAAP hierarchy and establishes one level of authoritative GAAP. All other literature is considered nonauthoritative. The Codification was effective for fiscal years ending after September 15, 2009.

Use of Estimates — The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Operating Cycle — The Company’s work is performed under cost-plus-fee contracts and fixed-price contracts. The length of the Company’s contracts varies, but is typically less than a year. Assets and liabilities related to long-term contracts are included in current assets and current liabilities in the accompanying balance sheets, since they will be satisfied in the normal course of contract completion, although that might require more than one year at times.

Cash and Cash Equivalents — The Company maintains, at various financial institutions, cash and certificates of deposit that might exceed federally insured amounts at times. For purposes of the statements of cash flows, the Company considers all interest-bearing money market funds and noninterest-bearing accounts to be cash and cash equivalents.

Revenue Recognition and Contract Accounting — The Company typically incurs direct labor costs, subcontractor costs and certain other indirect costs (ODCs) in connection with architect-engineer services. Contracts are structured such that margin is earned on labor costs and not on ODCs. The Company includes revenues related to its direct labor, subcontractors and ODCs in its total contract revenues as long as the Company remains responsible to the client for the acceptability of the services provided.

The Company recognizes revenues under the percentage-of-completion method of accounting. Revenues on fixed-price contracts with a predetermined scope of work are determined by multiplying the estimated margin at completion for each contract by the project’s percentage of completion to date, adding labor costs, subcontractor costs and ODCs incurred to date, and subtracting revenues recognized in prior periods. In applying the percentage-of-completion method to these contracts, the Company measures the extent of progress toward completion as the ratio of labor costs incurred to date over total estimated labor costs at completion. As work is performed under contracts, estimates of the costs to complete are regularly reviewed and updated. As changes in estimates of total costs at completion on projects are identified, appropriate earnings adjustments are recorded during the period that the change is identified.

For contracts with predetermined time period of service, revenue is recognized on a ratio of time elapsed as compared to the total length of the contract.

5

The majority of new task orders in 2009 were fixed-price contracts, and the remaining new task orders were time-and-materials arrangements. For time-and-materials task orders, revenue is recognized and billed by multiplying the number of hours expended by our professionals in the performance of the contract by the established billing rates.

Provisions for estimated losses on uncompleted contracts are recorded during the period in which such losses are determined. Revenues related to contractual claims that arise from customer-caused delays or change orders unapproved as to both scope and price are recorded only when the amounts have been agreed with the client. Profit incentives and/or award fees are recorded as revenues when the amounts are both probable and reasonably estimable.

The current asset, “Costs and estimated earnings in excess of billings on uncompleted contracts,” represents revenue recognized in excess of amounts billed. The current liability, “Billings in excess of costs and estimated earnings on uncompleted contracts,” represents amounts billed in excess of revenue recognized.

Equipment and Leasehold Improvements — Equipment and leasehold improvements are stated at the lower of cost or fair value. Depreciation and amortization are provided on the straight-line method over the estimated useful lives of the assets. Repairs and maintenance that do not extend the lives of the applicable assets are charged to expense as incurred. Gain or loss resulting from the retirement or other disposition of assets is included in income.

Income Taxes — The Company is organized as an LLC and is not subject to federal or state income taxes. Accordingly, no provision has been made for current or deferred income taxes in these financial statements. The taxable income of the Company is included in the tax returns of the individual members.

Effective January 1, 2009, the Company adopted the Codification Topic for Income Taxes, which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This topic also provides guidance on de-recognition, classification, interest and penalties, disclosure and transition. The adoption of this topic did not have a material impact on the Company’s consolidated financial statements. As of December 31, 2009, no liability for unrecognized tax positions was required to be recorded.

Subsequent Events — Subsequent events are defined as events or transactions that occur after the balance sheet date, but before the financial statements are issued or are available to be issued. Management has evaluated subsequent events through February 12, 2010, the date on which the financial statements were available to be issued.

NOTE 3 — RECEIVABLES

Receivables at December 31, 2009 consist of the following:

Contract receivables:
Contracts in progress	$	14,582,865
Other		17,000
	$	14,599,865

NOTE 4 — COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS

Costs incurred to date, estimated earnings and the related progress billings to date on contracts in progress at December 31, 2009 are as follows:

Costs incurred on uncompleted contracts	$	87,768,654
Estimated earnings		15,938,361
Revenue recognized		103,707,015
Less — Billings to date		103,533,535
Costs and estimated earnings in excess of billings on uncompleted contracts	$	173,480

6

This amount is reflected in the accompanying balance sheet under the caption “Costs and estimated earnings in excess of billings on uncompleted contracts.”

NOTE 5 — EQUIPMENT AND SOFTWARE

Equipment and software at December 31, 2009 consist of the following:

Computer hardware	$	67,203
Furniture and fixtures		2,153
		69,356
Less — Accumulated depreciation		49,058
	$	20,298

NOTE 6 — RELATED PARTY TRANSACTIONS

The Company engages in significant related-party transactions as a result of the three partners providing a majority of the costs of contract services. In accordance with the Operating Agreement of the Company, the members also charge the Company for time incurred for management and administrative services at agreed-upon rates. A summary of the related party transactions included in the financial statements at December 31, 2009 is as follows:

			Costs of
	Accounts		Services
	Payable		Incurred
Stanley	$	3,437,835	$	33,904,272
Baker		3,963,195		33,946,307
Hill		3,534,291		34,539,795
	$	10,935,321	$	102,390,374

NOTE 7 — COMMITMENTS AND CONTINGENCIES

The Company is a defendant in one legal proceeding encountered in the normal course of its business. Additionally, the Company has received a letter threatening lawsuit over a separate matter. In the opinion of management, based upon discussion with counsel, the ultimate outcome of these matters will not have a material adverse effect on the financial position, results of operations or cash flow of the Company.

NOTE 8 — FAIR VALUE MEASUREMENTS

The Company’s financial instruments consist primarily of cash, receivables, accounts payable and other current liabilities. The carrying amount of these assets and liabilities approximate fair value due to the short-term nature of such instruments.

7

EX-99.3

EXHIBIT 99.3

STANLEY BAKER HILL, LLC

Beaver, Pennsylvania

Unaudited Financial Statements

For the years ended December 31, 2008 and 2007

CONTENTS

	Page
FINANCIAL STATEMENTS
Balance Sheets, December 31, 2008 and 2007		1
Statements for the years ended December 31, 2008 and 2007:
Operations and Changes in Members’ Equity		2
Cash Flows		3
Notes to Financial Statements		4

STANLEY BAKER HILL, LLC

BALANCE SHEETS

	December 31,
	2008		2007
ASSETS
Current Assets
Cash and cash equivalents	$	4,386,007	$	3,434,247
Receivables		22,627,433		14,357,702
Costs and estimated earnings in excess of billings on uncompleted contracts		476,702		551,923
Prepaid expenses		479,845		633,565
Total Current Assets		27,969,987		18,977,437
EQUIPMENT AND SOFTWARE, net		7,501		18,843
TOTAL ASSETS	$	27,977,488	$	18,996,280
LIABILITIES
Current Liabilities
Accounts payable	$	21,433,530	$	13,130,359
Billings in excess of costs and estimated earnings on uncompleted contracts		942,154		—
Other current liabilities, including accrued distributions		60,470		1,419,830
Total Current Liabilities		22,436,154		14,550,189
MEMBERS’ EQUITY
MEMBERS’ EQUITY		5,541,334		4,446,091
TOTAL LIABILITIES AND MEMBERS’ EQUITY	$	27,977,488	$	18,996,280

1

STANLEY BAKER HILL, LLC

STATEMENTS OF OPERATIONS AND CHANGES IN MEMBERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

	2008						2007
				Percent of						Percent of
				Contract						Contract
				Revenue						Revenue
	Amount			Earned			Amount			Earned
CONTRACT REVENUE EARNED	$	130,408,583			100.0	%	$	77,226,356			100.0	%
COST OF REVENUE EARNED
Direct costs		70,734,042			54.2			45,261,638			58.6
Indirect costs		49,981,006			38.3			24,971,364			32.3
Gross Profit		9,693,535			7.5			6,993,354			9.1
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		577,912			0.4			464,886			0.6
Income From Operations		9,115,623			7.1			6,528,468			8.5
INTEREST INCOME		79,620			0.1			134,685			0.2
Net Income		9,195,243			7.2	%		6,663,153			8.7	%
MEMBERS’ EQUITY
Beginning of year		4,446,091						2,366,651
Distributions		(8,100,000	)					(4,583,713	)
End of year	$	5,541,334					$	4,446,091

2

STANLEY BAKER HILL, LLC

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

	2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	9,195,243		$	6,663,153
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		19,082			11,944
Changes in assets and liabilities:
Receivables		(8,269,731	)		(10,904,519	)
Costs and estimated earnings in excess of billings on uncompleted contracts		75,221			502,525
Prepaid expenses		153,720			(525,688	)
Accounts payable		8,303,171			10,105,075
Billings in excess of costs and estimated earnings on uncompleted contracts		942,154			—
Other current liabilities		(1,359,360	)		1,328,593
Net Cash Provided By Operating Activities		9,059,500			7,181,083
Cash Flows from Investing Activities
Purchases of equipment and software		(7,740	)		(12,850	)
Cash Flows from Financing Activities
Distributions		(8,100,000	)		(4,911,737	)
Net Increase In Cash And Cash Equivalents		951,760			2,256,496
Cash And cash equivalents
Beginning of year		3,434,247			1,177,751
End of year	$	4,386,007		$	3,434,247
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES
At December 31, 2006, the Company accrued $328,025 in distributions that were paid in 2007.

See notes to financial statements.

3

STANLEY BAKER HILL, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2008 AND 2007

NOTE 1 — ORGANIZATION

Stanley Baker Hill, LLC (Company) is a joint venture formed in February 2004 between Stanley Consultants, Inc. (Stanley), Michael Baker, Jr., Inc. (Baker) and Hill International, Inc. (Hill). The Company provides various architect-engineer services in Iraq for the U.S. Army Corps of Engineers Transatlantic Program Center (U.S. Corps). The Company has a contract for an indefinite delivery and indefinite quantity for construction management and general architect-engineer services for facilities in Iraq with U.S. Corps. Anticipated completion of open contracts is likely to occur in September 2009, barring any additional new or modification to existing contracts obtained in 2009.

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of significant accounting policies consistently applied by management in the preparation of the accompanying financial statements follows:

Use of Estimates — The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Operating Cycle — The Company’s work is performed under cost-plus-fee contracts and fixed-price contracts. The length of the Company’s contracts varies but is typically less than a year. Assets and liabilities related to long-term contracts are included in current assets and current liabilities in the accompanying balance sheets as they will be satisfied in the normal course of contract completion, although that might require more than one year at times.

Cash and Cash Equivalents — The Company maintains, at various financial institutions, cash and certificates of deposit that might exceed federally insured amounts at times. For purposes of the statements of cash flows, the Company considers all interest-bearing money market funds and noninterest-bearing accounts to be cash and cash equivalents.

Revenue Recognition and Contract Accounting — The Company typically incurs direct labor costs, subcontractor costs and certain other indirect costs (ODCs) in connection with architect-engineer services. Contracts are structured such that margin is earned on labor costs and not on ODCs. The Company includes revenues related to its direct labor, subcontractors and ODCs in its total contract revenues as long as the Company remains responsible to the client for the acceptability of the services provided.

The Company recognizes revenues under the percentage-of-completion method of accounting. Revenues for the current period on fixed-price contracts are determined by multiplying the estimated margin at completion for each contract by the project’s percentage of completion to date, adding labor costs, subcontractor costs and ODCs incurred to date, and subtracting revenues recognized in prior periods. In applying the percentage-of-completion method to these contracts, the Company measures the extent of progress toward completion as the ratio of labor costs incurred to date over total estimated labor costs at completion. As work is performed under contracts, estimates of the costs to complete are regularly reviewed and updated. As changes in estimates of total costs at completion on projects are identified, appropriate earnings adjustments are recorded during the period that the change is identified.

The majority of new task orders in 2008 and 2007 were fixed-price contracts, and the remaining new task orders were time and materials arrangements. For time and materials task orders, revenue is recognized and billed by multiplying the number of hours expended by our professionals in the performance of the contract by the established billing rates.

Provisions for estimated losses on uncompleted contracts are recorded during the period in which such losses are determined. Revenues related to contractual claims that arise from customer-caused delays or change orders unapproved as to both scope and price are recorded only when the amounts have been agreed with the client. Profit incentives and/or award fees are recorded as revenues when the amounts are both probable and reasonably estimable.

4

The current asset, “Costs and estimated earnings in excess of billings on uncompleted contracts,” represents revenue recognized in excess of amounts billed. The current liability, “Billings in excess of costs and estimated earnings on uncompleted contracts,” represents amounts billed in excess of revenue recognized.

Equipment and Leasehold Improvements — Equipment and leasehold improvements are stated at the lower of cost or fair value. Depreciation and amortization are provided on the straight-line method over the estimated useful lives of the assets. Repairs and maintenance that do not extend the lives of the applicable assets are charged to expense as incurred. Gain or loss resulting from the retirement or other disposition of assets is included in income.

Income Taxes — The Company is organized as an LLC and is not subject to federal or state income taxes. Accordingly, no provision has been made for current or deferred income taxes in these financial statements. The taxable income of the Company is included in the tax returns of the individual members.

Fair Value — During 2008, the Company adopted the provisions of Statement No. 157, “Fair Value Measurement” (FAS 157) and Statement No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (FAS 159) issued by the Financial Accounting Standards Board (FASB). The adoption of FAS 157 and FAS 159 had no impact on its financial statements.

Recent Accounting Pronouncements — The FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes: an Interpretation of FASB Statement No. 109” (FIN 48), which clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes.” FIN 48 prescribes a recognition threshold and measurement principles for financial statement disclosure of tax positions taken or expected to be taken on a tax return. FIN 48 is effective for the Company for fiscal years beginning after December 15, 2008. The Company is assessing the impact that the adoption of FIN 48 will have on its financial statements.

NOTE 3 — RECEIVABLES

Receivables at December 31, 2008 and 2007 consist of the following:

	2008		2007
Contract receivables:
Contracts in progress	$	22,621,058	$	14,350,557
Other receivables		6,375		7,145
	$	22,627,433	$	14,357,702

NOTE 4 — COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS

Costs incurred to date, estimated earnings and the related progress billings to date on contracts in progress at December 31 are as follows:

	2008			2007
Costs incurred on uncompleted contracts	$	89,520,628		$	40,752,084
Estimated earnings		74,381,259			27,881,450
Revenue recognized		163,901,887			68,633,534
Less — Billings to date		164,367,339			68,081,611
Costs and estimated earnings in excess of billings on uncompleted contracts	$	(465,452	)	$	551,923

	2008			2007
This information is included in the accompanying balance sheets under the following captions:
Costs and estimated earnings in excess billings on uncompleted contracts	$	476,702		$	551,923
Billings in excess of costs and estimated earnings on uncompleted contracts		(942,154	)		—
	$	(465,452	)	$	551,923

5

NOTE 5 — EQUIPMENT AND SOFTWARE

Equipment and software at December 31, 2008 and 2007 consist of the following:

	2008		2007
Computer hardware	$	44,071	$	36,331
Furniture and fixtures		2,153		2,153
				38,484
Less — Accumulated depreciation		38,723		19,641
	$	7,501	$	18,843

NOTE 6 — RELATED PARTY TRANSACTIONS

The Company engages in significant related-party transactions as a result of the three partners providing a majority of the costs of contract services. In accordance with the Operating Agreement of the Company, the members also charge the Company for time incurred for management and administrative services at agreed-upon rates. A summary of the related party transactions included in the financial statements at December 31, 2008 and 2007 is as follows:

	2008				2007
			Costs of				Costs of
	Accounts		Services		Accounts		Services
	Payable		Incurred		Payable		Incurred
Stanley	$	6,352,232	$	32,843,163	$	3,512,189	$	16,899,473
Baker		6,076,186		33,182,914		2,901,519		15,418,896
Hill		6,378,192		32,772,740		3,392,107		15,361,446
	$	18,806,610	$	98,798,817	$	9,805,815	$	47,679,815

NOTE 7 — BACKLOG

The Company had signed contracts to complete approximately $115,394,990 of work in 2009.

NOTE 8 — COMMITMENTS AND CONTINGENCIES

The Company is a defendant in one legal proceeding encountered in the normal course of its business. Additionally, the Company has received a letter threatening lawsuit over a separate matter. In the opinion of management, based upon discussion with counsel, the ultimate outcome of these matters will not have a material adverse effect on the financial position or results of operations of the Company.

6

EX-99.4

EXHIBIT 99.4

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of
Michael Baker Corporation

We have audited the consolidated financial statements of Michael Baker Corporation and subsidiaries (the “Company”) as of December 31, 2010 and 2009, and for each of the three years in the period ended December 31, 2010 (which report expresses an unqualified opinion and includes an explanatory paragraph relating to the change in accounting for noncontrolling interests in 2009), and the Company’s internal control over financial reporting as of December 31, 2010, and have issued our reports thereon dated March 3, 2011, such consolidated financial statements and reports are included elsewhere in this Form 10-K. Our audits also included the consolidated financial statement schedule of the Company listed in Item 15. This consolidated financial statement schedule is the responsibility of the Company’s management. Our responsibility is to express an opinion based on our audits. In our opinion, such consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

/s/ Deloitte & Touche LLP

Pittsburgh, Pennsylvania

March 3, 2011