exv99w1
Contacts:
URS Corporation | Citigate Sard Verbinnen |
H. Thomas Hicks | Hugh Burns/Jamie Tully |
Vice President | (212) 687-8080 |
& Chief Financial Officer | |
(415) 774-2700 |
URS CORPORATION REPORTS THIRD QUARTER
RESULTS FOR FISCAL 2006
Revenues Up 13%; EPS In Line With Guidance
SAN FRANCISCO, CA - November 8, 2006 - URS Corporation (NYSE: URS) today reported its financial results for the third quarter of fiscal 2006, which ended on September 29, 2006. Revenues for the quarter were $1,085.6 million, an increase of 13% compared with revenues of $962.9 million during the comparable period in 2005. Net income for the quarter was $29.9 million, a 4% increase from net income of $28.8 million in the third quarter of fiscal 2005.
Diluted earnings per share (“EPS”) for the third quarter of fiscal year 2006 were $0.58. This compares to diluted EPS of $0.58 per share for the same period in 2005. Weighted-average shares outstanding for the third quarter of 2006 for purposes of calculating diluted EPS were 51.8 million compared to 50.1 million weighted-average shares outstanding for the comparable period of 2005. The increase in weighted-average shares outstanding is the result of additional shares issued pursuant to the Company’s 1999 Equity Incentive Plan and Employee Stock Purchase Plan.
The Company’s net income and EPS for the third quarter of 2006 include an after tax impact of $2.6 million, or $0.05 per share, related to stock-based compensation expense under Statement of Financial Accounting Standards 123 (Revised) (“SFAS 123(R)”), which requires that the costs of stock-based compensation be recognized as an expense in the financial statements.
During the third quarter of fiscal 2006, the Company reduced debt by $56 million, lowering its debt to total capitalization ratio to 13%. As of September 29, 2006, the Company’s backlog was $4.4 billion, compared to $3.8 billion as of December 30, 2005.
Commenting on the Company’s financial results, Martin M. Koffel, Chairman and Chief Executive Officer, stated: “Our results for the third quarter demonstrate the strength of our diverse portfolio of businesses and leading position in the markets we serve. During the quarter, revenue grew in each of our key market sectors. We had strong growth in our domestic private sector business, as we continued to benefit from our Master Service Agreements and increasing capital investment by our clients in the energy sector. We also saw strong growth in engineering, facilities and environmental work for the federal government.”
Mr. Koffel continued: “Our outlook for the business remains positive based on favorable long-term trends and our position as a partner of choice for government agencies and major multinational corporations.”
Results for Nine Months Ending September 29, 2006
For the nine months ended September 29, 2006, revenues increased by 11% to $3.2 billion, from $2.8 billion for the first nine months of 2005. Net income for the nine months ended September 29, 2006 was $86.7 million, or $1.68 per diluted share. Net income for the comparable period in 2005 was $56.5 million, or $1.20 per diluted share, including a pre-tax charge of $33.1 million, or $0.42 per share, net of tax, related to the Company’s $127.2 million note redemption, the retirement of $10.0 million of 12¼% notes and restructuring of its senior credit facility, and the retirement of $1.8 million of 6½% debentures, all of which took place during the second and third quarters of fiscal 2005.
Weighted-average shares outstanding for the nine months of 2006 for purposes of calculating diluted EPS were 51.5 million compared to 46.9 million weighted-average shares outstanding for the comparable period of 2005. The increase in weighted-average shares outstanding for the nine-month period in 2006 is the result of the Company’s common stock offering in the second quarter of fiscal 2005 and additional shares issued pursuant to the Company’s 1999 Equity Incentive Plan and Employee Stock Purchase Plan.
The Company’s net income and EPS for the first nine months of 2006 include an after tax impact of $7.2 million, or $0.14 per share, related to stock-based compensation expense under SFAS 123(R).
Business Segments
In addition to providing consolidated financial results, URS reports separate financial information for its two segments: the URS Division and the EG&G Division. The URS Division’s revenues include the Company’s work in the state and local government market, the private sector and the international business. In addition, the URS Division provides engineering services to federal government agencies, primarily for facilities and environmental projects. The EG&G Division primarily serves the federal government market, providing a range of operations and maintenance and technical support services to the Departments of Defense, Homeland Security, Energy, Treasury and NASA, among others.
URS Division. For the third quarter of fiscal 2006, the URS Division reported revenues of $730.1 million and operating income of $50.1 million, compared to revenues of $625.0 million and operating income of $46.7 million for the corresponding period in 2005.
For the nine months ended September 29, 2006, the URS Division reported revenues of $2.1 billion and operating income of $142.9 million, compared to revenues of $1.9 billion and operating income of $137.6 million for the same period last year.
EG&G Division. For the third quarter of fiscal 2006, the EG&G Division reported revenues of $358.2 million and operating income of $19.3 million, compared to revenues of $339.8 million and operating income of $16.8 million for the corresponding period in 2005.
For the nine months ended September 29, 2006, the EG&G Division reported revenues of $1.1 billion and operating income of $57.4 million, compared to revenues of $996.2 million and operating income of $47.5 million for the same period last year.
Outlook for the Remainder of Fiscal 2006
The Company reaffirmed its expectation that fiscal 2006 revenues will be approximately $4.2 billion. Assuming this revenue expectation is met, the Company continues to expect that net income will be approximately $113 million. The Company now expects earnings per share for the year to be between $2.14 and $2.17 compared to its prior guidance of between $2.12 and $2.17. URS’ net income and EPS guidance for 2006 include an expected after tax impact of between $10 million and $12 million ($0.19 and $0.23, respectively, on a per share basis) related to stock-based compensation expense to be recognized under SFAS 123(R).
Based on the Company’s strong cash flow and debt repayment through the first nine months of 2006, and expected cash flows in the fourth quarter, URS now expects that the Company will repay approximately $120 to $130 million of debt during fiscal 2006, compared to its prior expectation of $100 million.
URS Corporation offers a comprehensive range of professional planning and design, systems engineering and technical assistance, program and construction management, and operations and maintenance services for transportation, commercial/industrial, facilities, environmental, water/wastewater, homeland security, installations and logistics, and defense systems. Headquartered in San Francisco, the Company operates in more than 20 countries with approximately 28,900 employees providing engineering and technical services to federal, state and local governmental agencies as well as private clients in the chemical, pharmaceutical, oil and gas, power, manufacturing, mining and forest products industries (www.urscorp.com).
Web Cast Information
URS will host a dial-in conference call on Thursday, November 9 at 11:00 a.m. (ET) to discuss its results for the third quarter of fiscal year 2006. A live web cast of this call will be available on the investor relations portion of URS’ website at www.urscorp.com.
TABLES TO FOLLOW
# # #
Statements contained in this earnings release that are not historical facts may constitute forward-looking statements, including statements relating to future revenues, future earnings, future debt repayment, future tax rates, future stock-based compensation expenses and future economic and industry conditions. The Company believes that its expectations are reasonable and are based on reasonable assumptions. However, such forward-looking statements by their nature involve risks and uncertainties that could cause actual results to differ materially from the results predicted. The potential risks and uncertainties include, but are not limited to: an economic downturn; changes in the Company’s book of business; the Company’s compliance with government contract procurement regulations; the Company’s ability to procure government contracts; the Company’s reliance on government appropriations; the ability of the government to unilaterally terminate Company contracts; the Company’s ability to make accurate estimates and control costs; the Company’s and its partners’ ability to bid on, win, perform and renew contracts and projects; environmental issues and liabilities; liabilities for pending and future litigation; the impact of changes in laws and regulations; the Company’s ability to maintain adequate insurance coverage; a decline in defense spending; industry competition; the Company’s ability to attract and retain key individuals; employee, agent or partner misconduct; risks associated with changes in equity compensation requirements; the ability to service the Company’s debt; risks associated with international operations; business activities in high security risk countries; project management and accounting software risks; terrorist and natural disaster risks; the Company’s relationships with its labor unions; the Company’s ability to protect its intellectual property rights; anti-takeover risks and other factors discussed more fully in the Company's Form 10-Q for the third quarter of fiscal 2006, as well as in other reports subsequently filed from time to time with the Securities and Exchange Commission. The Company assumes no obligation to update any forward-looking statements.
URS CORPORATION AND SUBSIDIARIES
(In thousands, except per share data)
September 29, 2006 | December 30, 2005 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents, including $27,460 and $61,319 of short-term money market funds, respectively | $ | 112,547 | $ | 101,545 | |||
Accounts receivable, including retainage of $34,421 and $37,280, respectively | 624,983 | 630,340 | |||||
Costs and accrued earnings in excess of billings on contracts in process | 559,077 | 513,943 | |||||
Less receivable allowances | (47,865 | ) | (44,293 | ) | |||
Net accounts receivable | 1,136,195 | 1,099,990 | |||||
Deferred tax assets | 23,564 | 18,676 | |||||
Prepaid expenses and other assets | 79,957 | 52,849 | |||||
Total current assets | 1,352,263 | 1,273,060 | |||||
Property and equipment at cost, net | 160,482 | 146,470 | |||||
Goodwill | 993,934 | 986,631 | |||||
Purchased intangible assets, net | 4,131 | 5,379 | |||||
Other assets | 48,638 | 57,908 | |||||
$ | 2,559,448 | $ | 2,469,448 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Book overdrafts | $ | 17,137 | $ | 1,547 | |||
Notes payable and current portion of long-term debt | 20,122 | 20,647 | |||||
Accounts payable and subcontractors payable, including retainage of $17,038 and $13,323, respectively | 301,495 | 288,561 | |||||
Accrued salaries and wages | 184,765 | 196,825 | |||||
Accrued expenses and other | 80,666 | 82,404 | |||||
Billings in excess of costs and accrued earnings on contracts in process | 149,742 | 108,637 | |||||
Total current liabilities | 753,927 | 698,621 | |||||
Long-term debt | 189,604 | 297,913 | |||||
Deferred tax liabilities | 24,013 | 19,785 | |||||
Other long-term liabilities | 117,127 | 108,625 | |||||
Total liabilities | 1,084,671 | 1,124,944 | |||||
Commitments and contingencies | |||||||
Minority interest | 2,077 | — | |||||
Stockholders’ equity: | |||||||
Preferred stock, authorized 3,000 shares; no shares outstanding | — | — | |||||
Common shares, par value $.01; authorized 100,000 shares; 51,937 and 50,432 shares issued, respectively; and 51,885 and 50,380 shares outstanding, respectively | 519 | 504 | |||||
Treasury stock, 52 shares at cost | (287 | ) | (287 | ) | |||
Additional paid-in capital | 965,300 | 925,087 | |||||
Accumulated other comprehensive loss | (2,745 | ) | (3,985 | ) | |||
Retained earnings | 509,913 | 423,185 | |||||
Total stockholders’ equity | 1,472,700 | 1,344,504 | |||||
$ | 2,559,448 | $ | 2,469,448 | ||||
URS CORPORATION AND SUBSIDIARIES
(In thousands, except per share data)
Three Months Ended | Nine Months Ended | ||||||||||||
September 29, 2006 | September 30, 2005 | September 29, 2006 | September 30, 2005 | ||||||||||
Revenues | $ | 1,085,604 | $ | 962,940 | $ | 3,153,744 | $ | 2,846,556 | |||||
Direct operating expenses | 708,924 | 627,199 | 2,031,159 | 1,836,655 | |||||||||
Gross profit | 376,680 | 335,741 | 1,122,585 | 1,009,901 | |||||||||
Indirect, general and administrative expenses | 317,718 | 282,002 | 953,763 | 888,605 | |||||||||
Operating income | 58,962 | 53,739 | 168,822 | 121,296 | |||||||||
Interest expense | 4,761 | 5,282 | 15,746 | 26,115 | |||||||||
Income before income taxes and minority interest | 54,201 | 48,457 | 153,076 | 95,181 | |||||||||
Income tax expense | 24,318 | 19,620 | 65,910 | 38,640 | |||||||||
Minority interest in income of consolidated subsidiaries, net of tax | (20 | ) | — | 437 | — | ||||||||
Net income | 29,903 | 28,837 | 86,729 | 56,541 | |||||||||
Other comprehensive income (loss): | |||||||||||||
Minimum pension liability adjustments, net of tax (benefit) | — | — | (2,366 | ) | (270 | ) | |||||||
Foreign currency translation adjustments | 1,024 | (229 | ) | 3,606 | (4,010 | ) | |||||||
Comprehensive income | $ | 30,927 | $ | 28,608 | $ | 87,969 | $ | 52,261 | |||||
Earnings per share: | |||||||||||||
Basic | $ | .59 | $ | .59 | $ | 1.71 | $ | 1.23 | |||||
Diluted | $ | .58 | $ | .58 | $ | 1.68 | $ | 1.20 | |||||
Weighted-average shares outstanding: | |||||||||||||
Basic | 50,945 | 48,934 | 50,627 | 45,836 | |||||||||
Diluted | 51,773 | 50,116 | 51,538 | 46,946 |
URS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
(In thousands)
Three Months Ended | Nine Months Ended | ||||||||||||
September 29, 2006 | September 30, 2005 | September 29, 2006 | September 30, 2005 | ||||||||||
Cash flows from operating activities: | |||||||||||||
Net income | $ | 29,903 | $ | 28,837 | $ | 86,729 | $ | 56,541 | |||||
Adjustments to reconcile net income to net cash from operating activities: | |||||||||||||
Depreciation and amortization | 8,929 | 9,356 | 28,208 | 29,225 | |||||||||
Amortization of financing fees | 453 | 442 | 1,382 | 3,315 | |||||||||
Costs incurred for extinguishment of debt | 162 | 18 | 162 | 33,125 | |||||||||
Provision for doubtful accounts | 2,786 | 2,808 | 5,734 | 7,865 | |||||||||
Deferred income taxes | (2,086 | ) | 4,080 | (1,011 | ) | 7,216 | |||||||
Stock-based compensation | 4,802 | 1,016 | 12,711 | 4,508 | |||||||||
Excess tax benefits from stock-based compensation | (533 | ) | — | (3,142 | ) | — | |||||||
Tax benefit of stock compensation | 298 | 4,667 | 5,051 | 9,269 | |||||||||
Minority interest in net income of consolidated subsidiaries | (20 | ) | — | 437 | — | ||||||||
Changes in assets and liabilities: | |||||||||||||
Accounts receivable and costs and accrued earnings in excess of billings on contracts in process | (1,676 | ) | (31,713 | ) | (40,599 | ) | (85,829 | ) | |||||
Prepaid expenses and other assets | (1,884 | ) | (7,902 | ) | (26,929 | ) | (25,532 | ) | |||||
Accounts payable, accrued salaries and wages and accrued expenses | 36,370 | 20,703 | (2,140 | ) | 70,779 | ||||||||
Billings in excess of costs and accrued earnings on contracts in process | 28,954 | 10,317 | 41,086 | 25,077 | |||||||||
Distributions from unconsolidated affiliates, net | 6,167 | 1,388 | 23,807 | 8,527 | |||||||||
Other long-term liabilities | 6,004 | 3,394 | 7,660 | 7,317 | |||||||||
Other assets, net | (4,911 | ) | (1,462 | ) | (14,296 | ) | (17,449 | ) | |||||
Total adjustments and changes | 83,815 | 17,112 | 38,121 | 77,413 | |||||||||
Net cash from operating activities | 113,718 | 45,949 | 124,850 | 133,954 | |||||||||
Cash flows from investing activities: | |||||||||||||
Net payment for business acquisitions, net of cash acquired | (5,028 | ) | (1,353 | ) | (5,028 | ) | (1,353 | ) | |||||
Proceeds from disposal of property and equipment | — | 282 | — | 2,182 | |||||||||
Capital expenditures, less equipment purchased through capital leases | (11,039 | ) | (7,802 | ) | (20,833 | ) | (16,897 | ) | |||||
Net cash from investing activities | (16,067 | ) | (8,873 | ) | (25,861 | ) | (16,068 | ) | |||||
Cash flows from financing activities: | |||||||||||||
Long-term debt principal payments | (54,531 | ) | (32,393 | ) | (123,012 | ) | (535,919 | ) | |||||
Long-term debt borrowings | — | 105 | 552 | 351,376 | |||||||||
Net borrowings (payments) under the lines of credit and short-term notes | (1,946 | ) | (1,470 | ) | 3,072 | (16,646 | ) | ||||||
Net change in book overdraft | (5,830 | ) | 6,251 | 15,590 | (63,591 | ) | |||||||
Capital lease obligations payments | (801 | ) | (4,313 | ) | (9,635 | ) | (11,184 | ) | |||||
Excess tax benefits from stock-based compensation | 533 | — | 3,142 | — | |||||||||
Proceeds from common stock offering, net of related expenses | — | (3 | ) | — | 130,257 | ||||||||
Proceeds from sale of common stock from employee stock purchase plan and exercise of stock options | 377 | 5,061 | 22,466 | 30,687 | |||||||||
Tender and call premiums paid for debt extinguishment | (162 | ) | (2 | ) | (162 | ) | (19,421 | ) | |||||
Payments of financing fees | — | (213 | ) | — | (4,629 | ) | |||||||
Net cash from financing activities | (62,360 | ) | (26,977 | ) | (87,987 | ) | (139,070 | ) | |||||
Net increase (decrease) in cash and cash equivalents | 35,291 | 10,099 | 11,002 | (21,184 | ) |
URS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED (Continued)
(In thousands)
Three Months Ended | Nine Months Ended | ||||||||||||
September 29, 2006 | September 30, 2005 | September 29, 2006 | September 30, 2005 | ||||||||||
Cash and cash equivalents at beginning of period | 77,256 | 76,724 | 101,545 | 108,007 | |||||||||
Cash and cash equivalents at end of period | $ | 112,547 | $ | 86,823 | $ | 112,547 | $ | 86,823 | |||||
Supplemental information: | |||||||||||||
Interest paid | $ | 4,318 | $ | 4,732 | $ | 13,726 | $ | 25,611 | |||||
Taxes paid | $ | 5,714 | $ | 6,925 | $ | 38,757 | $ | 28,285 | |||||
Equipment acquired through capital lease obligations | $ | 853 | $ | 2,328 | $ | 19,504 | $ | 14,891 | |||||
Supplemental schedule of noncash investing and financing activities: | |||||||||||||
Fair value of assets acquired | $ | 8,846 | $ | — | $ | 8,846 | $ | — | |||||
Cash paid for capital stock | (6,191 | ) | — | (6,191 | ) | — | |||||||
Liabilities assumed | $ | 2,655 | $ | — | $ | 2,655 | $ | — | |||||