EXHIBIT 13.1
  SELECTED
    FINANCIAL DATA
  (In thousands, except per share information)

2008


2007


2006


2005


2004Results of OperationsRevenues

$
699,395


$
726,965


$
646,668


$
579,278


$
552,046Income from operations


43,440



31,375



16,206



16,882



18,868Net income


29,154



19,340



10,332



5,051



8,394Diluted earnings per share

$
3.28


$
2.18


$
1.19


$
0.58


$
0.98Return on average equity


22.6
%


18.5
%


11.9
%


6.5
%


12.1
%Financial ConditionTotal assets

$
292,062


$
276,350


$
263,916


$
225,461


$
215,013Working capital

$
114,209


$
84,629


$
67,227


$
49,264


$
43,624Current ratio


1.84



1.56



1.44



1.35



1.32Long-term debt

$



$



$
11,038


$



$
Shareholders Investment


142,644



115,057



93,621



79,824



74,781Book value per outstanding share


16.11



13.06



10.76



9.40



8.78Year-end closing share price

$
36.91


$
41.10


$
22.65


$
25.55


$
19.60Cash FlowNet cash provided by/(used in) operating activities

$
32,228


$
26,635


$
(9,343
)

$
12,440


$
28,477Net cash used in investing activities


(5,285
)


(1,560
)


(14,933
)


(7,078
)


(4,055
)Net cash provided by/(used in) financing activities


55



(16,205
)


18,417



(1,792
)


(18,077
)Increase/(decrease) in cash

$
26,998


$
8,870


$
(5,859
)

$
3,570


$
6,345Backlog

$
1,217,600


$
1,313,900


$
1,295,700


$
1,321,800


$
1,399,500Share InformationYear-end shares outstanding


8,855



8,810



8,698



8,490



8,519Diluted weighted average shares outstanding


8,891



8,874



8,718



8,715



8,554  -1-




---



##### 



MANAGEMENTS
    DISCUSSION AND ANALYSIS OF
    FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Form 10-K
  Business Overview
    and Environment
    Engineering
        
    A $3.5 million construction management and construction
    inspection contract by the Allegheny County Department of Public
    Works for the rehabilitation of the Rankin Bridge. -2-




---



##### 




    A two-part contract for an estimated $2.7 million to
    complete environmental investigations and preliminary and final
    design for the new Vrooman Road Bridge over the Grand River in
    Lake County, Ohio.
    A $3.4 million contract by the Kane County (Ill.) Division
    of Transportation for the final design of the Fox River Bridge,
    including 1.3 miles of new highway and a pedestrian bridge.
    A $2.8 million, four-year contract by the Pennsylvania
    Department of Transportation to provide construction inspection
    and documentation services for three major projects in
    Lackawanna and Luzerne counties.
    Two $3.0 million, three-year, statewide term agreements by
    the New Jersey Department of Transportation, one for
    transportation planning technical assistance and the other for
    project development related to a full range of transportation
    planning and engineering design services.      Energy
    $5.8 million-per-year
 -3-




---



##### 



Executive
    Overview
      Results of
    Operations
    2008


2007


2006(Dollars in millions)Revenues






(1
)






(1
)






(1
)Engineering

$
455.9



65.2
%

$
401.5



55.2
%

$
380.1



58.8
%Energy


243.5



34.8
%


325.5



44.8
%


266.6



41.2
%Total revenues

$
699.4



100.0
%

$
727.0



100.0
%

$
646.7



100.0
%     (1)

    
    Reflects percentage of total company revenues.  -4-




---



##### 



2008


2007


2006(Dollars in millions)Income from operations before Corporate overhead






(2
)






(2
)






(2
)Engineering

$
51.1



11.2
%

$
46.2



11.5
%

$
30.1



7.9
%Energy


10.3



4.2
%


6.2



1.9
%


10.2



3.8
%Total segment income from operations before Corporate
    overhead


61.4







52.4







40.3Less: Corporate overheadEngineering


(13.6
)


(3.0
)%


(14.0
)


(3.5
)%


(16.5
)


(4.3
)%Energy


(5.2
)


(2.1
)%


(5.3
)


(1.6
)%


(6.2
)


(2.3
)%Total Corporate overhead


(18.8
)






(19.3
)






(22.7
)Total income/(loss) from operationsEngineering


37.5



8.2
%


32.2



8.0
%


13.6



3.7
%Energy


5.1



2.1
%


0.9



0.3
%


4.0



1.5
%Other Corporate income/(expense)


0.8







(1.7
)






(1.4
)Total income from operations

$
43.4



6.2
%

$
31.4



4.3
%

$
16.2



2.5
%     (2)

    
    Reflects percentage of segment revenues for segment line items
    and percentage of total Company revenues for total line items.  Comparisons of
    the Years Ended December 31, 2008 and 2007
  Revenues
    Engineering.
  Revenues by Client Type

2008


2007(Dollars in millions)Federal government

$
238.8



52
%

$
196.5



49
%State and local government


173.2



38
%


160.7



40
%Domestic private industry


43.9



10
%


44.3



11
%Total Engineering revenues

$
455.9



100
%

$
401.5



100
%      -5-




---



##### 



Energy.
    Revenues by Market

2008


2007(Dollars in millions)Domestic

$
180.0



74
%

$
266.4



82
%Foreign


63.5



26
%


59.1



18
%Total Energy revenues

$
243.5



100
%

$
325.5



100
%     Gross
    Profit
        Engineering.
 -6-




---



##### 



Energy.
  Selling, General
    and Administrative Expenses (SG&A)
      Engineering.
  Energy.
  Other
    Income/(Expense)
     -7-




---



##### 



Income
    Taxes
    Comparisons of
    the Years Ended December 31, 2007 and 2006
  Revenues
    Engineering.
  Revenues by Client Type

2007


2006(Dollars in millions)Federal government

$
196.5



49
%

$
175.6



46
%State and local government


160.7



40
%


150.9



40
%Domestic private industry


44.3



11
%


53.6



14
%Total Engineering revenues

$
401.5



100
%

$
380.1



100
%    -8-




---



##### 



Energy.
    Revenues by Market

2007


2006(Dollars in millions)Domestic

$
266.4



82
%

$
196.3



74
%Foreign


59.1



18
%


70.3



26
%Total Energy revenues

$
325.5



100
%

$
266.6



100
%     Gross
    Profit
        Engineering.
  Energy.
 -9-




---



##### 



Selling, General
    and Administrative Expenses
      Engineering.
  Energy.
  Other
    Income/(Expense)
     -10-




---



##### 



Income
    Taxes
    Developments
    Regarding Foreign and Domestic Tax Liabilities from
    2005
    Penalties





Internationaland


Domestic





ValueTax-Related Liabilities Arising

Interest


Sales and


Payroll


Added


IncomeFrom 2005 Restatement

on Taxes


Use Taxes


Taxes


Taxes


Taxes


TotalBalance, December 31, 2005

$
6.4


$
3.2


$
5.7


$
1.4


$
4.7


$
21.4Paid


(0.5
)


(0.1
)


(1.7
)


(0.2
)


(2.9
)


(5.4
)Reversed


(2.1
)


(3.1
)


(1.6
)










(6.8
)Balance, December 31, 2006


3.8







2.4



1.2



1.8



9.2Paid


(0.1
)






(0.3
)










(0.4
)Reversed


(0.6
)






(1.5
)






(0.5
)


(2.6
)Balance, December 31, 2007


3.1







0.6



1.2



1.3



6.2Paid


















(0.1
)


(0.1
)Reversed


(2.7
)






(0.2
)


(1.1
)


(0.1
)


(4.1
)Balance, December 31, 2008

$
0.4


$



$
0.4


$
0.1


$
1.1


$
2.0    -11-




---



##### 



Contract
    Backlog
  As of December 31,(In millions)

2008


2007EngineeringFunded

$
449.5


$
425.6Unfunded


534.7



696.6Total Engineering


984.2



1,122.2Energy


233.4



191.7Total

$
1,217.6


$
1,313.9   Engineering
  and/or
      Energy
  ninety-day thirty-day
 -12-




---



##### 



Liquidity and
    Capital Resources
      Cash Provided
    by/Used in Operating Activities
       -13-




---



##### 



Cash Used in
    Investing Activities
    Cash Provided
    by/Used in Financing Activities
      Credit
    Agreement
     -14-




---



##### 



and/or
    Financial
    Condition & Liquidity
    and/or
    and/or
 -15-




---



##### 



Contractual
    Obligations and Off-Balance Sheet Arrangements
    Payments Due by Period(In millions)




Within 1


2-3


4-5


After 5Contractual Obligations

Total


Year


Years


Years


YearsOperating lease
    obligations(1)

$
57.6


$
17.2


$
21.0


$
10.6


$
8.8Purchase
    obligations(2)


6.2



2.1



4.1







Other long-term
    liabilities(3)


1.3







0.2







1.1Capital lease
    obligations(4)


0.7



0.3



0.4







Total contractual obligations

$
65.8


$
19.6


$
25.7


$
10.6


$
9.9     (1)

    
    We utilize operating leases to provide for use of certain assets
    in our daily business activities. This balance includes office
    space of $51.5 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 for obligations
    after five years represents deferred compensation for our Board
    of Directors while the $0.2 million obligation within two
    to three years represents our liability for stock appreciation
    rights.(4)

    
    Capital leases include computers, computer-related equipment and
    vehicles.    Amount of Commitment Expiration per Period(In millions)




Within 1


2-3


4-5


After 5Off-Balance Sheet Arrangements

Total


Year


Years


Years


YearsStandby letters of credit

$
9.0


$



$
9.0


$



$
Performance and payment bonds


13.4



1.7



5.3



0.7



5.7Total commercial commitments

$
22.4


$
1.7


$
14.3


$
0.7


$
5.7      -16-




---



##### 



Critical
    Accounting Estimates
    Project Cost Estimates to Complete. and/or
  Revenue Recognition. 81-1, and/or and/or
   -17-




---



##### 



Income and Other Taxes.
    Goodwill. and/or
  Contingencies. and/or
  Recent Accounting
    Pronouncements
  157-2
   -18-




---



##### 



-19-




---



##### 



MICHAEL BAKER
    CORPORATION



CONSOLIDATED
    STATEMENTS OF INCOME  For the Year Ended December 31,(In thousands, except per share amounts)

2008


2007


2006Revenues

$
699,395


$
726,965


$
646,668Cost of work performed


585,738



626,469



560,638Gross profit


113,657



100,496



86,030Selling, general and administrative expenses


70,217



69,121



69,824Income from operations


43,440



31,375



16,206Other income/(expense):Equity income from unconsolidated subsidiaries


3,359



2,669



1,253Interest income


765



454



467Interest expense


(71
)


(412
)


(978
)Reductions/(expense) for interest on unpaid taxes, net


1,611



(761
)


964Other, net


1,297



400



417Income before income taxes


50,401



33,725



18,329Provision for income taxes


21,247



14,385



7,997Net income


29,154



19,340



10,332Other comprehensive (loss)/income  Foreign currency
    translation adjustments, net of benefit of $225 for 2008 and tax
    of $51 for 2007 and $75 for 2006


(2,661
)


255



545Comprehensive income

$
26,493


$
19,595


$
10,877Basic earnings per share

$
3.31


$
2.21


$
1.21Diluted earnings per share

$
3.28


$
2.18


$
1.19    -20-




---



##### 



MICHAEL BAKER
    CORPORATION



CONSOLIDATED
    BALANCE SHEETS  As of December 31,(In thousands, except share amounts)

2008


2007ASSETSCurrent AssetsCash and cash equivalents

$
49,050


$
22,052Receivables, net of allowances of $2,765 and $1,463,
    respectively(1)


113,676



109,453Unbilled revenues on contracts in progress


70,455



88,214Prepaid expenses and other


16,756



14,718Total current assets


249,937



234,437Property, Plant and Equipment, net


16,671



16,776Other Long-term AssetsGoodwill


17,092



17,092Other intangible assets, net


162



275Deferred tax asset


1,209



471Other long-term assets


6,991



7,299Total other long-term assets


25,454



25,137Total assets

$
292,062


$
276,350LIABILITIES AND SHAREHOLDERS INVESTMENTCurrent LiabilitiesAccounts payable

$
42,421


$
55,940Accrued employee compensation


35,530



26,431Accrued insurance


11,632



15,543Billings in excess of revenues on contracts in progress


17,449



15,771Deferred income tax liability


9,923



15,738Income taxes payable


4,946



2,600Other accrued expenses


13,827



17,785Total current liabilities


135,728



149,808Long-term LiabilitiesDeferred income tax liability


7,121



5,285Other long-term liabilities


6,569



6,200Total liabilities


149,418



161,293Shareholders InvestmentCommon Stock, par value $1, authorized 44,000,000 shares,
    issued 9,350,835 and 9,305,778, respectively


9,351



9,306Additional paid-in capital


48,405



47,356Retained earnings


92,214



63,060Accumulated other comprehensive (loss)/income


(2,565
)


96Less  495,537 shares of Common Stock in
    treasury, at cost, for both periods presented


(4,761
)


(4,761
)Total shareholders investment


142,644



115,057Total liabilities and shareholders investment

$
292,062


$
276,350     (1)

    
    See the related disclosure under the Credit
    Risk caption in the Commitments and
    Contingencies note.   -21-




---



##### 



MICHAEL BAKER
    CORPORATION



CONSOLIDATED
    STATEMENTS OF CASH FLOWS  For the Year Ended December 31,(In thousands)

2008


2007


2006Cash Flows from Operating ActivitiesNet income

$
29,154


$
19,340


$
10,332Adjustments to reconcile net income to net cash provided
    by/(used in)
    operating activities:Depreciation and amortization


5,650



5,739



5,970Stock-based compensation expense


772



436



271Tax benefit of stock compensation


117



975



673Excess tax benefits from stock-based compensation


(17
)


(26
)


(48
)Deferred income tax (benefit)/expense


(4,680
)


3



6,566Equity affiliates earnings


(3,359
)


(2,664
)


(1,250
)Equity affiliates dividends received


2,700



2,328



598Loss on disposal of fixed assets


387



403



207Changes in assets and liabilities:Increase in receivables


(4,223
)


(11,638
)


(15,712
)Decrease/(increase) in unbilled revenues and billings in excess,
    net


19,437



2,856



(4,199
)(Increase)/decrease in other net assets


(3,766
)


282



(8,213
)(Decrease)/increase in accounts payable


(13,583
)


6,937



2,266Increase/(decrease) in accrued expenses


3,639



1,664



(6,804
)Total adjustments


3,074



7,295



(19,675
)Net cash provided by/(used in) operating activities


32,228



26,635



(9,343
)Cash Flows from Investing ActivitiesAdditions to property, plant and equipment


(5,285
)


(1,560
)


(3,763
)Acquisition of Buck Engineering, PC, net of cash acquired










(11,170
)Net cash used in investing activities


(5,285
)


(1,560
)


(14,933
)Cash Flows from Financing Activities(Payments on)/borrowings of long-term debt, net






(11,038
)


11,038(Decrease)/increase in book overdrafts






(5,989
)


5,989Proceeds from exercise of stock options


366



1,381



1,974Payments on capital lease obligations


(328
)


(585
)


(632
)Excess tax benefits from stock-based compensation


17



26



48Net cash provided by/(used in) financing activities


55



(16,205
)


18,417Net increase/(decrease) in cash and cash equivalents


26,998



8,870



(5,859
)Cash and cash equivalents, beginning of year


22,052



13,182



19,041Cash and cash equivalents, end of year

$
49,050


$
22,052


$
13,182Supplemental Disclosures of Cash Flow DataInterest paid

$
199


$
349


$
763Income taxes paid

$
21,098


$
14,490


$
12,225Supplemental Non-Cash Investing and Financing ActivitiesAssets acquired through capital lease obligations

$
562


$
7


$
554Assets acquired on credit

$
106


$
42


$
222    -22-




---



##### 



MICHAEL BAKER
    CORPORATION



CONSOLIDATED
    STATEMENTS OF SHAREHOLDERS INVESTMENT  AccumulatedCommon stock,








Additional





Other


TotalPar Value $1


Treasury


Paid-in


Retained


Comprehensive


Shareholders(In thousands)

Shares


Amount


Shares


Amount


Capital


Earnings


(Loss)/Income


InvestmentBalance, January 1, 2006


8,985


$
8,985



(496
)

$
(4,761
)

$
41,965


$
34,339


$
(704
)

$
79,824Net income






















10,332







10,332Stock options exercised


198



198











1,776











1,974Tax benefit of stock compensation


















673











673Restricted stock issued


11



11











(9
)










2Amortization of restricted stock


















141











141Options granted


















130











130Other comprehensive income, net of tax: Foreign currency
    translation adjustments


























545



545Balance, December 31, 2006


9,194



9,194



(496
)


(4,761
)


44,676



44,671



(159
)


93,621Net income






















19,340







19,340Impact of adopting FIN 48






















(951
)






(951
)Stock options exercised


101



101











1,280











1,381Tax benefit of stock compensation


















975











975Restricted stock issued


11



11











(11
)










Amortization of restricted stock


















252











252Options granted


















184











184Other comprehensive income, net of tax: Foreign currency
    translation adjustments


























255



255Balance, December 31, 2007


9,306



9,306



(496
)


(4,761
)


47,356



63,060



96



115,057Net income






















29,154







29,154Stock options exercised


33



33











333











366Tax benefit of stock compensation


















117











117Restricted stock issued


12



12











(12
)










Amortization of restricted stock


















324











324Options granted


















287











287Other comprehensive loss, net of benefit: Foreign currency
    translation adjustments


























(2,661
)


(2,661
)Balance, December 31, 2008


9,351


$
9,351



(496
)

$
(4,761
)

$
48,405


$
92,214


$
(2,565
)

$
142,644    -23-




---



##### 



MICHAEL BAKER
    CORPORATION



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  1.
    NATURE OF
    BUSINESS    2.
    SUMMARY OF
    SIGNIFICANT ACCOUNTING POLICIES  Principles of
    Consolidation
    Revenue
    Recognition and Accounting for Contracts
  Time-and-Materials
  81-1, catch-up and/or
   -24-




---



##### 



and/or
      
    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 it expended, in addition
    to other direct costs incurred in connection with the contract.
    Time-and-materials
    contracts typically have a stated contract value.        99-19, EITF 99-19
   -25-




---



##### 



Unbilled Revenues
    on Contracts in Progress and Billings in Excess of Revenues on
    Contracts in Progress
      Use of
    Estimates
  and/or
    Income
    Taxes
     -26-




---



##### 



Foreign Currency
    Translation
    Other
    Comprehensive (Loss)/Income
    Fair Value of
    Financial Instruments
    Cash and Cash
    Equivalents
    Concentrations of
    Credit Risk and Allowance for Doubtful Accounts
     -27-




---



##### 



Goodwill and
    Intangible Assets
    Property, Plant
    and Equipment
    SOP 98-1,
  Leases
     -28-




---



##### 



Impairment of
    Long-lived Assets
    Accounting for
    Stock Options
      Reclassifications
    3.
    RECENT ACCOUNTING
    PRONOUNCEMENTS  157-2
   -29-




---



##### 



4.
    INVESTMENTS IN
    UNCONSOLIDATED JOINT VENTURES      5.
    BUSINESS
    SEGMENTS    Engineering.
  Energy.
 -30-




---



##### 



For the Year Ended December 31,2008


2007


2006RevenuesEngineering

$
455.9


$
401.5


$
380.1Energy


243.5



325.5



266.6Total revenues

$
699.4


$
727.0


$
646.7Income from operations before Corporate overheadEngineering

$
51.1


$
46.2


$
30.1Energy


10.3



6.2



10.2Total segment income from operations before Corporate
    overhead


61.4



52.4



40.3Less: Corporate overheadEngineering


(13.6
)


(14.0
)


(16.5
)Energy


(5.2
)


(5.3
)


(6.2
)Total Corporate overhead


(18.8
)


(19.3
)


(22.7
)Total income/(loss) from operationsEngineering


37.5



32.2



13.6Energy


5.1



0.9



4.0Other Corporate income/(expense)


0.8



(1.7
)


(1.4
)Total income from operations

$
43.4


$
31.4


$
16.2Depreciation and amortization expense:Engineering

$
2.5


$
2.5


$
2.6Energy


0.7



0.7



1.1Corporate


2.5



2.5



2.3Total

$
5.7


$
5.7


$
6.0Capital expenditures:Engineering

$
3.5


$
0.9


$
3.3Energy


1.8



0.4



0.7Corporate


0.6



0.1



1.1Total

$
5.9


$
1.4


$
5.1   -31-




---



##### 



As of December 31,2008


2007Segment assets:Engineering

$
148.0


$
138.2Energy


94.5



112.7Corporate


49.6



25.5Total

$
292.1


$
276.4   As of December 31,2008


2007Equity investments in unconsolidated subsidiaries:Engineering

$
1.9


$
1.5Energy


1.4



1.0Total

$
3.3


$
2.5   For the Year Ended December 31,2008


2007


2006Income from unconsolidated subsidiaries:Engineering

$
3.1


$
2.2


$
1.0Energy


0.3



0.5



0.3Total

$
3.4


$
2.7


$
1.3       For the Year Ended December 31,2008


2007


2006Revenues by geographic origin:Domestic

$
597.0


$
649.3


$
561.0Foreign(1)


102.4



77.7



85.7Total

$
699.4


$
727.0


$
646.7     (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


34

%


27
%


27
%Various state governmental and quasi-government agencies


25

%


22
%


23
%Commercial, industrial and private clients


41

%


51
%


50
%    -32-




---



##### 



6.
    CONTRACTS    As of December 31,2008


2007Revenues

$
2,915


$
3,582Billings


(2,862
)


(3,510
)Net unbilled revenue

$
53


$
72       and/or
    7.
    INCOME
    TAXES    For the Year Ended December 31,2008


2007


2006Domestic

$
42,820


$
31,237


$
12,646Foreign


7,581



2,488



5,683Total

$
50,401


$
33,725


$
18,329  -33-




---



##### 



For the Year Ended December 31,2008


2007


2006Current income tax provision/(benefit):U.S. federal*

$
20,991


$
11,708


$
(3,144
)Foreign


2,367



1,954



3,419State


2,569



720



1,156Total current income tax provision


25,927



14,382



1,431Deferred income tax (benefit)/provision:U.S. federal*


(3,850
)


(195
)


7,126Foreign


(32
)


(445
)


(101
)State


(798
)


643



(459
)Total deferred income tax (benefit)/provision


(4,680
)


3



6,566Total income tax provision

$
21,247


$
14,385


$
7,997     *
    
    Includes U.S. taxes related to foreign income.    As of December 31,2008


2007Unrecognized tax benefits:Beginning of the year

$
1,909


$
1,656Additions based on tax positions related to the current year


224



197Additions for tax positions of prior years


352



511Reductions for tax positions of prior years


(6
)


(455
)Settlements with taxing authorities


(333
)


Lapses of statutes of limitations


(273
)


End of the year

$
1,873


$
1,909      -34-




---



##### 



For the Year Ended December 31,2008


2007


2006Computed income taxes at U.S. federal statutory rate

$
17,641


$
11,804


$
6,415Deferred tax on foreign earnings not indefinitely reinvested


2,956



1,093



545State income taxes, net of federal income tax benefit


1,041



782



365Taxes on foreign income and losses


365



574



77Tax (benefit)/expense on foreign deemed profits


(684
)


64



1,252Permanent differences


143



155



400Change in reserves


(49
)


(20
)


(177
)IRS refund claims, net










(801
)Other


(166
)


(67
)


(79
)Total income tax provision

$
21,247


$
14,385


$
7,997     As of December 31,2008


2007Deferred income tax assets:Accruals not currently deductible for tax purposes

$
8,578


$
7,608Billings in excess of revenues


6,624



6,107Tax loss carryforwards


6,495



7,089Fixed and intangible assets


91



285All other items


457



781Gross deferred tax assets


22,245



21,870Valuation allowance for deferred tax assets


(5,085
)


(6,245
)Net deferred tax assets


17,160



15,625Deferred income tax liabilities:Unbilled revenues


(23,877
)


(29,693
)Undistributed foreign earnings


(6,163
)


(3,275
)Fixed and intangible assets


(2,766
)


(2,793
)All other items


(14
)


(386
)Gross deferred tax liabilities


(32,820
)


(36,147
)Net deferred tax liabilities

$
(15,660
)

$
(20,522
)    -35-




---



##### 



non-U.S. subsidiaries non-U.S. subsidiaries. non-U.S. subsidiaries.
    8.
    GOODWILL AND
    OTHER INTANGIBLE ASSETS    As of December 31,2008


2007Goodwill:Engineering

$
9,627


$
9,627Energy


7,465



7,465Total goodwill


17,092



17,092Other intangible assets, net of accumulated amortization of
    $2,687 and $2,574, respectively


162



275Goodwill and other intangible assets, net

$
17,254


$
17,367      -36-




---



##### 



For the Year Ending December 31,2009

$
862010


402011


342012


2Total

$
162   9.
    PROPERTY, PLANT
    AND EQUIPMENT    As of December 31,2008


2007Land

$
486


$
486Buildings and improvements


5,892



5,608Furniture, fixtures, and office equipment


12,146



10,687Equipment and vehicles


2,818



2,226Computer hardware


3,754



4,614Computer software


19,265



17,769Leasehold improvements


5,766



5,601Equipment and vehicles under capital lease


1,460



1,712Total, at cost


51,587



48,703Less  Accumulated depreciation and amortization


(34,916
)


(31,927
)Net property, plant and equipment

$
16,671


$
16,776    -37-




---



##### 



10.
    COMMITMENTS &
    CONTINGENCIES  Commitments
    Maximum UndiscountedFuture PaymentsStandby letters of credit*:Insurance related

$
8.9Other


0.1Performance and payment bonds*

$
13.4     *
    
    These instruments require no associated liability on the
    Companys Consolidated Balance Sheet.      Contingencies
  Credit Risk.
   -38-




---



##### 



Services Agreement.
  Tax exposures. and/or
   -39-




---



##### 



Legal Proceedings.
    Self-Insurance.
        Reliance liquidation.
 -40-




---



##### 



11.
    LEASE
    COMMITMENTS    Capital Lease


Operating LeaseFor the Year Ending December 31,

Obligations


Obligations


Total2009

$
356


$
17,155


$
17,5112010


198



13,009



13,2072011


170



8,050



8,2202012






6,647



6,6472013






3,930



3,930Thereafter






8,801



8,801Total

$
724


$
57,592


$
58,316   12.
    LONG-TERM DEBT
    AND BORROWING AGREEMENTS    and/or
 -41-




---



##### 



13.
    EARNINGS PER
    SHARE    For the Year Ended December 31,2008

2007

2006Net income

$
29,154


$
19,340


$
10,332Basic:Weighted average shares outstanding


8,811



8,742



8,520Earnings per share

$
3.31


$
2.21


$
1.21Diluted:Effect of dilutive securities  Stock options and
    restricted shares


80



132



198Weighted average shares outstanding


8,891



8,874



8,718Earnings per share

$
3.28


$
2.18


$
1.19     14.
    CAPITAL
    STOCK          15.
    RIGHTS
    AGREEMENT   -42-




---



##### 



16.
    BAKER 401(k)
    PLAN      17.
    DEFERRED
    COMPENSATION PLAN    18.
    STOCK OPTION
    PLANS   -43-




---



##### 



WeightedWeighted





AverageShares


Average


Aggregate


Contractual LifeSubject


Exercise Price


Intrinsic


Remainingto Option


per Share


Value


in YearsBalance at January 1, 2006


419,130


$
11.57Options granted


14,000



20.28Options exercised


(198,037
)


9.97Balance at December 31, 2006


235,093


$
13.43


$
2,166,673



4.5Options granted


14,000



26.86Options exercised


(101,573
)


13.60Options forfeited or expired


(2,000
)


6.84Balance at December 31, 2007


145,520


$
14.70


$
3,841,521



4.8Options granted


16,000



37.53Options exercised


(33,057
)


11.06Balance at December 31, 2008


128,463


$
18.48


$
2,377,316



5.4       Options Outstanding


Options ExercisableWeighted





WeightedNumber





Average


Number


Averageof


Average


Exercise


of


ExerciseRange of Exercise Prices

Options


Life(1)


Price


Options


Price$6.25  $8.55


25,429



2.7


$
8.15



25,429


$
8.15$10.025  $15.625


45,034



3.5



13.86



45,034



13.86$20.16  $26.86


42,000



7.5



22.43



42,000



22.43$37.525


16,000



9.7



37.53







Total


128,463



5.4


$
18.48



112,463


$
15.77     (1)

    
    Average life remaining in years. -44-




---



##### 



As of December 31,2008


2007


2006Weighted average risk-free interest rate


1.9
%


3.7
%


5.4
%Weighted average expected volatility


43.4
%


34.1
%


44.1
%Expected option life


7.9 years



8.0 years



7.6 yearsExpected dividend yield


0.00
%


0.00
%


0.00
%         19.
    RELATED PARTY
    TRANSACTIONS     -45-




---



##### 



20.
    QUARTERLY RESULTS
    OF OPERATIONS (UNAUDITED)    2008  Three Months EndedMar. 31

June 30

Sept. 30

Dec.
    31(1)Revenues

$
174,874


$
170,878


$
181,237


$
172,406Gross profit


26,716



32,251



31,261



23,429Income before income taxes


10,583



14,401



21,057



4,360Net income


6,115



8,258



11,794



2,987Diluted earnings per common share

$
0.69


$
0.93


$
1.33


$
0.33     (1)

    
    During the fourth quarter, the Companys Board of Directors
    approved a discretionary increase in incentive compensation
    related to the Companys 2008 operating performance, which
    resulted in the recognition of $4.0 million of additional
    incentive compensation expense. The Companys Energy
    segment was unfavorably impacted in the fourth quarter of 2008
    by a $1.6 million bad debt reserve related to a portion of
    a bankrupt clients receivables and a $2.5 million
    reserve for a contract-related claim.  2007  Three Months EndedMar. 31

June 30

Sept. 30

Dec. 31Revenues

$
169,632


$
185,833


$
175,664


$
195,836Gross profit


20,675



27,673



23,700



28,448Income before income taxes


2,947



11,071



8,521



11,186Net income


1,550



6,086



4,513



7,191Diluted earnings per common share

$
0.18


$
0.69


$
0.51


$
0.80  -46-




---



##### 



MANAGEMENTS
    REPORT TO SHAREHOLDERS ON
    ITS RESPONSIBILITY FOR FINANCIAL STATEMENTS                  
       -47-




---



##### 



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  To the Board of
    Directors and Shareholders of
    Michael Baker Corporation:
        for Uncertainty
    in Income Taxes  an interpretation of FASB Statement
    No. 109
  Internal Control  Integrated Framework
         -48-




---



##### 



SUPPLEMENTAL
    FINANCIAL INFORMATION
  Market
    Information  Common Shares
    2008

2007Fourth

Third

Second

First

Fourth

Third

Second

FirstHigh

$
38.74


$
39.95


$
23.49


$
41.94


$
52.79


$
51.57


$
38.10


$
25.20Low


14.50



21.72



19.36



21.86



33.15



34.30



24.30



21.62  -49-