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Baker Corp Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: August 5, 2010 07:26AM

Baker Corp (BKR) filed Quarterly Report for the period ended 2010-06-30. Baker Corp has a market cap of $332 million; its shares were traded at around $37.27 with a P/E ratio of 13.6 and P/S ratio of 0.8. Baker Corp had an annual average earning growth of 12.4% over the past 10 years.

BKR is in the portfolios of Chuck Royce of Royce& Associates, Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

Our earnings per diluted common share for continuing operations were $1.13 for the six months ended June 30, 2010, compared to $1.27 per diluted common share reported for the corresponding period in 2009. Our total Company earnings per diluted common share were $1.04 for the six months ended June 30, 2010, compared to $1.67 per diluted common share reported for the same period in 2009. Income from continuing operations for the six months ended June 30, 2010 was $10.2 million, compared to $11.3 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, a decrease in work performed for our unconsolidated joint venture in Iraq and overall lower revenue and margins in our Federal Segment. In addition, equity income from our unconsolidated subsidiary, Stanley Baker Hill, LLC (“SBH”), decreased by $1.8 million period-over-period. These decreases were offset by an increase in margins in our Transportation segment, which includes the results of LPA, and a period-over-period decrease in our incentive compensation accruals, 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 $0.8 million for 2010, as compared to income from discontinued operations of $3.5 million for 2009. The 2010 loss from discontinued operations was primarily attributable to the unfavorable development of legacy insurance claims related to the Energy business.

Our gross profit totaled $28.6 million for 2010 compared to $22.7 million for 2009, reflecting an increase of $5.9 million or 26%. Gross profit expressed as a percentage of revenues was 21.7% for 2010 compared to 20.0% for 2009. The increase in gross profit for 2010 is primarily attributable to a decrease in incentive compensation costs of $2.5 million, the addition of LPA’s margin and our Transportation segment’s increased revenue volume and utilization compared to 2009, partially offset by amortization expense of $0.9 million for intangible assets related to the LPA acquisition and a decrease in our Federal segment, which included a $0.7 million decrease in project incentive awards. Included in total gross profit for 2010 and 2009 were Corporate-related costs of $0.5 million and $0.4 million, respectively, which were not allocated to our segments.

Our SG&A expenses totaled $20.3 million for 2010 compared to $16.3 million for 2009, reflecting an increase of $4.0 million or 24%. SG&A expenses increased period-over-period due to additional SG&A expenses of $3.1 million from LPA and an increase in overhead costs primarily attributable to acquisition-related fees. SG&A expenses expressed as a percentage of revenues increased to 15.4% for 2010 from 14.3% for 2009. This overall increase in SG&A expenses expressed as a percentage of revenues is primarily driven by the aforementioned increased acquisition-related fees of $1.2 million and an increase related to LPA’s SG&A. This was offset by a reduction of incentive compensation accruals of $0.8 million. SG&A expenses for the Transportation segment were $11.5 million for 2010 compared to $8.5 million for 2009, reflecting an increase of $3.0 million or 35%. SG&A expenses for the Transportation segment expressed as a percentage of revenues decreased to 15.7% for 2010 from 17.2% for 2009. SG&A expenses for the Federal segment were $8.7 million for 2010 compared to $7.2 million for 2009, reflecting an increase of $1.5 million or 20%. SG&A expenses for the Federal segment expressed as a percentage of revenues increased to 14.7% for 2010 from 11.4% for 2009.

“Other income/(expense)” aggregated to income of $1.0 million for 2010 compared to income of $1.9 million for 2009. “Other income/(expense)” primarily included equity income from our unconsolidated subsidiaries of $0.9 million for 2010 compared to $1.8 million for 2009. The decrease in equity income from our unconsolidated subsidiaries was primarily due to SBH current Iraq IDIQ contract ending in September 2009 and the associated decrease in work performed as existing task orders are completed. It is not anticipated that further contract funding will be added to this contract vehicle. Current funded task order work may be extended but we anticipate that it will be materially completed by September 2010. The decrease in SBH to $0.2 million for 2010 was partially offset by an increase of $0.7 million related to the addition of LPA’s joint venture, Louisiana TIMED Managers (“LTM”) during the quarter. We do not anticipate LTM to maintain this level of income going forward. Also included in “Other income/(expense)” is interest income, interest expense and other income and expense, net.

Our gross profit totaled $50.1 million for 2010 compared to $45.4 million for 2009, reflecting an increase of $4.7 million or 10%. Gross profit expressed as a percentage of revenues was 20.6% for 2010 compared to 19.9% for 2009. The increase in gross profit for 2010 is primarily attributable to a decrease in incentive compensation of $2.5 million, the addition of LPA’s margin and the increased revenue volume and margin improvement in our Transportation segment, partially offset by amortization expense of $0.9 million for intangible assets related to the LPA acquisition and a decrease in our Federal segment’s revenue volume and margin. Included in total gross profit for 2010 and 2009 were Corporate-related costs of $0.4 million and $0.5 million, respectively, which were not allocated to our segments.

Our SG&A expenses totaled $34.9 million for 2010 compared to $29.8 million for 2009, reflecting an increase of $5.1 million or 17%. SG&A expenses increased period-over-period due to additional SG&A expenses of $3.1 million from LPA and an increase in corporate overhead costs primarily attributable to acquisition-related fees. SG&A expenses expressed as a percentage of revenues increased to 14.3% for 2010 from 13.1% for 2009. This overall increase in SG&A expenses expressed as a percentage of revenues is primarily driven by the aforementioned increased acquisition-related fees of $1.6 million. This was offset by a reduction of incentive compensation accruals of $1.4 million. SG&A expenses for the Transportation segment were $18.6 million for 2010 compared to $14.2 million for 2009, reflecting an increase of $4.4 million or 31%. SG&A expenses for the Transportation segment expressed as a percentage of revenues increased to 15.0% for 2010 from 14.7% for 2009. SG&A expenses for the Federal segment were $16.2 million for 2010 compared to $15.0 million for 2009, reflecting an increase of $1.2 million or 9%. SG&A expenses for the Federal segment expressed as a percentage of revenues increased to 13.5% for 2010 from 11.4% for 2009 driven in part by the Federal segment’s decreased revenue volume. Included in total SG&A for 2010 and 2009 were Corporate-related costs of less than $0.1 million and $0.6 million, respectively, which were not allocated to our segments.

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