Urs 10K/A 2002 Annual report (amended)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

(Amendment No. 1)


x		ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended October 31, 2002


o		TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from _____ to _____

Commission file number 1-7567

URS CORPORATION

(Exact name of registrant as specified in its charter)


Delaware		94-1381538
(State or other jurisdiction of incorporation)		(I.R.S. Employer Identification No.)

600 Montgomery Street, 25th Floor
San Francisco, California		94111-4529
(Address of principal executive offices)		(Zip Code)

(415) 774-2700
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


		Name of each exchange on
Title of each class:		which registered:

Common Shares, par value $.01 per share		New York Stock Exchange Pacific Exchange

8 5/8% Senior Subordinated Debentures due 2004		New York Stock Exchange

6 1/2% Convertible Subordinated Debentures due 2012		New York Stock Exchange Pacific Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

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 x No o

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. x

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes x No o

On January 3, 2003, there were 30,124,289 shares of the registrant’s Common Stock outstanding. The aggregate market value of the Common Stock of the registrant held by non-affiliates on January 3, 2003 and April 30, 2002 (the last business day of the registrant’s most recently completed second fiscal quarter) were $298.3 million and $563.3 million, respectively, based upon the closing sales price of the registrant’s Common Stock on such date as reported in the consolidated transaction reporting system. For purposes of this calculation, executive officers, directors and holders of 10% or more of the outstanding shares of Common Stock of the registrant are deemed to be affiliates of the registrant. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

Documents Incorporated by Reference

Items 10, 11, and 12 of Part III incorporate information by reference from the registrant’s definitive Proxy Statement for the Annual Meeting of Stockholders to be held on March 25, 2003.

TABLE OF CONTENTS


PART II
	ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
PART IV
	ITEM 15. EXHIBITS. FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
SIGNATURES
EXHIBIT INDEX
Exhibit 23.1
Exhibit 99.1
Exhibit 99.2

EXPLANATORY NOTE

This Amendment No. 1 on Form 10K/A (this “Amendment”) amends the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2002, originally filed on January 24, 2003 (the “Original Filing”). The Company is filing this Amendment at the request of the Company’s independent accountants in order to (i) refile Part II, Item 8 solely for the purpose of amending the Report of Independent Accountants to add a paragraph previously omitted by the independent accountants required by Generally Accepted Auditing Standards to draw the readers attention to the Company’s adoption, effective November 1, 2001, of Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” issued by the Financial Accounting Standards Board (“SFAS 142”) in July 2001, and (ii) refile Part IV, Item 15 to include a currently dated consent of the independent accountants to the incorporation by reference of their report included in this Amendment, in other filings as specified in the consent. Except for such additional paragraph, the Report of Independent Accountants has not changed in any respects from the Report included in the Original Filing. The Company’s adoption of SFAS 142 was fully disclosed in the footnotes to the financial statements included in the Original Filing. The Company’s financial statements and related disclosures included in this Amendment have not changed in any respects from the financial statements and related disclosures included in the Original Filing.

PART II

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

To the Board of Directors and Stockholders of URS Corporation:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations and comprehensive income, changes in stockholders equity and cash flows present fairly, in all material respects, the financial position of URS Corporation and its subsidiaries (the “Company”) at October 31, 2002 and 2001, and the results of their operations and their cash flows for each of the three years in the period ended October 31, 2002 in conformity with accounting principles generally accepted in the United States of America. 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 of these statements in accordance with auditing standards generally accepted in the United States of America which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Notes 1 and 4 to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets”, as of November 1, 2001.

/s/ PricewaterhouseCoopers LLP

PRICEWATERHOUSECOOPERS LLP

San Francisco, California
January 17, 2003

URS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)


					October 31,

					2002			2001

				ASSETS
Current assets:
		Cash and cash equivalents			$	9,972		$	23,398
		Accounts receivable, including retainage amounts of $50,552 and $43,751, respectively				596,275			484,107
		Costs and accrued earnings in excess of billings on contracts in process				374,651			289,644
		Less receivable allowances				(30,710	)		(28,572	)

				Net accounts receivable		940,216			745,179

		Deferred income taxes				17,895			10,296
		Prepaid expenses and other assets				20,248			24,769

				Total current assets		988,331			803,642
Property and equipment at cost, net						156,524			106,997
Goodwill, net						1,001,629			500,286
Purchased intangible assets, net						14,500			—
Other assets						68,108			52,451

					$	2,229,092		$	1,463,376

	LIABILITIES, MANDATORILY REDEEMABLE SECURITIES, AND STOCKHOLDERS’ EQUITY
Current liabilities:
		Current portion of long-term debt			$	30,298		$	54,425
		Accounts payable				204,389			135,066
		Accrued salaries and wages				101,287			69,982
		Accrued expenses and other				115,545			21,232
		Billings in excess of costs and accrued earnings on contracts in process				92,235			95,520

				Total current liabilities		543,754			376,225
Long-term debt						923,863			576,704
Deferred income taxes						40,629			34,700
Deferred compensation and other						40,261			33,146

				Total liabilities		1,548,507			1,020,775

Commitments and contingencies (Note 9)
Mandatorily redeemable Series B exchangeable convertible preferred stock, par value $1.00; authorized 150 shares; issued and outstanding 0 and 55, respectively; liquidation preference $0 and $120,099, respectively						—			120,099

Mandatorily redeemable Series D senior convertible participating preferred stock, par value $.01; authorized 100 shares; issued and outstanding 100 and 0, respectively; liquidation preference $46,733 and $0, respectively						46,733			—

Mandatorily redeemable Series E senior convertible participating preferred stock, par value $.01; authorized 100 shares; issued and outstanding 0 and 0, respectively; liquidation preference $0 and $0, respectively						—			—

Stockholders’ equity:
		Common stock, par value $.01; authorized 50,000 shares; issued
			And outstanding 30,084 and 18,198 shares, respectively			301			182
		Treasury stock, 51,900 shares at cost				(287	)		(287	)
		Additional paid-in capital				418,705			155,273
		Accumulated other comprehensive loss				(5,132	)		(3,962	)
		Retained earnings				220,265			171,296

				Total stockholders’ equity		633,852			322,502

					$	2,229,092		$	1,463,376

See Notes to Consolidated Financial Statements

URS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(In thousands, except per share data)


		Years Ended October 31,

		2002			2001			2000

Revenues		$	2,427,827		$	2,319,350		$	2,205,578

Expenses:
	Direct operating		1,489,386			1,393,818			1,345,068
	Indirect, general and administrative		791,625			755,791			697,051
	Interest expense, net		55,705			65,589			71,861

			2,336,716			2,215,198			2,113,980

Income before taxes			91,111			104,152			91,598
Income tax expense			35,940			46,300			41,700

Net income			55,171			57,852			49,898
Preferred stock dividend			5,939			9,229			8,337

Net income available for common stockholders			49,232			48,623			41,561
Other comprehensive loss:
	Foreign currency translation adjustments		(1,170	)		(1,550	)		(2,609	)

Comprehensive income		$	48,062		$	47,073		$	38,952

Net income per common share:
	Basic	$	2.18		$	2.79		$	2.55

	Diluted	$	2.03		$	2.41		$	2.27

Weighted average shares outstanding:
	Basic		22,554			17,444			16,272

	Diluted		27,138			23,962			22,020

See Notes to Consolidated Financial Statements

URS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(In thousands, except per share data)


												Accumulated
			Common Stock							Additional		Other						Total
							Treasury			Paid-in		Comprehensive			Retained			Stockholders'
			Shares		Amount		Stock			Capital		Income			Earnings			Equity

Balances, October 31, 1999				15,925	$	159	$	(287	)	$	125,462	$	197		$	81,638		$	207,169
Employee stock purchases				909		9		—			9,209		—			—			9,218
Tax benefit of stock options				—		—		—			2,455		—			—			2,455
Quasi-reorganization NOL carryforward				—		—		—			263		—			(263	)		—
Total comprehensive income:
		Foreign currency translation		—		—		—			—		(2,609	)		—			(2,609	)
Net income				—		—		—			—		—			49,898			49,898
In-kind preferred stock dividends				—		—		—			—		—			(8,337	)		(8,337	)

Balances, October 31, 2000				16,834		168		(287	)		137,389		(2,412	)		122,936			257,794
Employee stock purchases				1,364		14		—			13,722		—			—			13,736
Tax benefit of stock options				—		—		—			3,899		—			—			3,899
Quasi-reorganization NOL carryforward				—		—		—			263		—			(263	)		—
Total comprehensive income:
	Foreign currency translation			—		—		—			—		(1,550	)		—			(1,550	)
Net income				—		—		—			—		—			57,852			57,852
In-kind preferred stock dividends				—		—		—			—		—			(9,229	)		(9,229	)

Balances, October 31, 2001				18,198		182		(287	)		155,273		(3,962	)		171,296			322,502
Employee stock purchases				1,084		11		—			19,327		—			—			19,338
Tax benefit of stock options				—		—		—			3,745		—			—			3,745
Conversion of preferred stock to common stock				5,845		58		—			126,780		—			—			126,838
Issuance of common stock in connection with the EG&G acquisition				4,957		50		—			112,250		—			—			112,300
Issuance of preferred stock in connection with the EG&G acquisition				—		—		—			1,067		—			—			1,067
Quasi-reorganization NOL carryforward				—		—		—			263		—			(263	)		—
Total comprehensive income:
	Foreign currency translation			—		—		—			—		(1,170	)		—			(1,170	)
Net income				—		—		—			—		—			55,171			55,171
In-kind preferred stock dividends				—		—		—			—		—			(5,939	)		(5,939	)

Balances, October 31, 2002				30,084	$	301	$	(287	)	$	418,705	$	(5,132	)	$	220,265		$	633,852

See Notes to Consolidated Financial Statements

URS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)


							Years Ended October 31,

				2002			2001			2000

Cash flows from operating activities:
	Net income			$	55,171		$	57,852		$	49,898

	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization			32,799			42,143			41,829
		Amortization of financing fees			4,220			3,663			3,467
			Loss on extinguishment of debt		7,620			—			—
		Receivable allowances			1,694			(8,254	)		(3,785	)
		Deferred income taxes			2,373			(3,894	)		23,036
		Stock compensation			2,345			1,964			1,179
		Tax benefit of stock options			3,745			3,899			2,455
	Changes in current assets and liabilities, net of business acquired:
		Accounts receivable and costs and accrued earnings in excess of
		billings on contracts in process			(59,658	)		(27,920	)		(39,259	)
		Income taxes recoverable			—			4,997			(16,668	)
		Prepaid expenses and other assets			8,738			(5,544	)		(1,224	)
		Accounts payable, accrued salaries and wages and accrued expenses			21,514			(8,484	)		(27,620	)
		Billings in excess of costs and accrued earnings on contracts in process			(3,721	)		5,045			20,162
		Deferred compensation and other			4,893			(6,906	)		(36,032	)
		Other, net			5,839			(11,511	)		(6,414	)

		Total adjustments			32,401			(10,802	)		(38,874	)

		Net cash provided by operating activities			87,572			47,050			11,024

		Cash flows from investing activities:
		Payment for business acquisition, net of cash acquired			(340,540	)		—			—
		Proceeds from sale of subsidiaries and divisions			5,840			3,530			25,354
		Capital expenditures, less equipment purchased with capital leases of $23,419, $25,084 and $10,040, respectively			(52,458	)		(19,778	)		(15,885	)

		Net cash provided (used) by investing activities			(387,158	)		(16,248	)		9,469

		Cash flows from financing activities:
		Proceeds from issuance of debt			195,280			—			—
		Principal payments on long-term debt			(381,648	)		(33,522	)		(43,721	)
		Borrowings of long term debt			476,101			—			—
		Borrowings under the line of credit			122,835			105,849			—
		Repayments under the line of credit			(95,576	)		(105,849	)		—
		Repayments under capital lease obligations			(14,794	)		(7,530	)		(6,805	)
		Borrowings under short-term notes			278			5,830			—
		Repayments under short-term notes			(3,680	)		(7,647	)		—
		Proceeds from sale of common shares and exercise of stock options			17,003			11,772			8,039
		Payment of financing fees			(29,639	)		—			—

		Net cash provided (used) by financing activities			286,160			(31,097	)		(42,487	)

		Net decrease in cash			(13,426	)		(295	)		(21,994	)
		Cash and cash equivalents at beginning of year			23,398			23,693			45,687

		Cash and cash equivalents at end of year		$	9,972		$	23,398		$	23,693

		Supplemental information:
		Interest paid		$	50,084		$	75,434		$	66,774

		Taxes paid		$	30,513		$	33,882		$	34,726

		Equipment acquired with capital lease obligations		$	23,419		$	25,084		$	10,040

		Non-cash dividends paid in-kind		$	6,740		$	9,086		$	7,680

		Conversion of Series B preferred stock to common stock		$	126,839		$	—		$	—

		Net book value of business sold		$	5,840		$	3,530		$	25,354

See Notes to Consolidated Financial Statements

URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. ACCOUNTING POLICIES

Business

URS Corporation (the “Company”) offers a comprehensive range of professional planning, design, program and construction management services, and operations and maintenance services for transportation, hazardous waste management, industrial process and petrochemical refinement, general building and water/wastewater treatment projects. The Company is also a leading provider of operations and maintenance, logistics and technical services to the Department of Defense and other federal government agencies. Headquartered in San Francisco, the Company operates in more than 20 countries with approximately 25,000 employees providing services to state, local and federal government agencies, as well as to private clients in the chemical, pharmaceutical, manufacturing, forest product, energy, oil, gas, mining, healthcare, water supply, retail and commercial development, telecommunication and utility industries.

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned. All significant intercompany accounts and transactions have been eliminated in consolidation. The Company includes in current assets and liabilities amounts realizable and payable under engineering and construction contracts that extend beyond one year. The consolidated financial statements reflect the August 2002 acquisitions of Carlyle-EG&G Holdings Corp. and Lear Siegler Services, Inc. (collectively, “EG&G”), which were all accounted for under purchase accounting method. See Note 2, “Acquisition”.

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 amount of assets and liabilities and disclosures 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.

Revenue Recognition

The Company earns its revenues from cost-plus, fixed-price, and time-and-materials contracts. At October 31, 2002, the Company had approximately 5,000 major active jobs, none of which represented more than 5% of its total revenues for the year. If estimated total costs on any contract indicate a loss, the Company charges the entire estimated loss to operations in the period the loss first becomes known.

Cost-Plus Contracts. The Company has two major types of cost-plus contracts:

•

Cost-Plus Fixed Fee. Under cost-plus fixed fee contracts, the Company charges clients negotiated rates based on its direct and indirect costs. In negotiating a cost-plus contract, the Company estimates all recoverable direct and indirect costs and then adds a profit component, which is either a percentage of total recoverable costs or a fixed negotiated fee, to arrive at a total dollar estimate for the project. The Company receives payment and recognizes revenues based on the actual total number of labor hours the Company expends and total costs the Company incurs. If the actual total number of labor hours the Company expended is lower than the total number of labor hours the Company has estimated, its revenues from that project will be lower than the Company has estimated. If the actual labor hours the Company expended exceed the initial negotiated amount, the Company must obtain a contract modification to receive payment and to recognize revenues for such overage.

URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

•

Cost-Plus Award Fee. Certain cost-plus contracts provide for an award or penalty fee based on performance criteria in lieu of a fixed fee. The Company recognizes revenues to the extent of costs actually incurred plus a proportionate amount of the fee earned. The Company takes these award or penalty fees on contracts into consideration when estimating sales and profit rates, and the Company records revenues related to the award fees when there is sufficient information to assess anticipated contract performance. If revenues related to the award or penalty fees are based solely on a single significant event, the Company generally does not record these fees until the event actually occurs.

Labor costs and subcontractor services are the principal components of the Company’s direct costs on cost-plus contracts. Some of these contracts include a provision that the total actual costs plus the fee will not exceed a guaranteed price negotiated with the client. Federal Acquisition Regulations, which are applicable to all federal government contracts and which are partially incorporated in many local and state agency contracts, limit the recovery of certain specified indirect costs on contracts subject to such regulations. Cost-plus contracts covered by Federal Acquisition Regulations and certain state and local agencies also require an audit of actual costs and provide for upward or downward adjustments if actual recoverable costs differ from billed recoverable costs. In accordance with industry practice, most of the Company’s federal government contracts are subject to termination at the discretion of the client. Contracts typically provide for reimbursement of costs incurred and payment of fees earned through the date of such termination.

Fixed-Price Contracts.The Company has two major types of fixed-price contracts:

	•		Fixed-Price Per Unit (“FPPU”). Under FPPU contracts, clients pay a set fee for each service transaction that the Company completes. The Company is generally guaranteed a minimum number of service transactions at a fixed price, but actual profit margins on any FPPU contract depend on the number of service transactions the Company ultimately completes. The Company recognizes revenues under FPPU contracts as the Company completes and bills the related service transactions to its clients. If the costs per service transaction turn out to exceed the estimates, profit margins will decrease and the Company may realize a loss on the project.

	•		Firm Fixed-Price (“FFP”). FFP contracts have historically accounted for most of the Company’s fixed-price contracts. Under FFP contracts, clients agree to pay the Company an agreed sum negotiated in advance for the specified scope of work. The Company recognizes revenues on FFP contracts using the percentage-of-completion method and in performing its calculations the Company includes a proportion of the earnings that the Company expects to realize on a contract equal to the ratio that costs incurred bear to total estimated costs. The Company calculates percentage-of-completion on a contract-by-contract basis to arrive at the total estimated revenues recognized under fixed-price contracts. The Company does not adjust revenues downward if the Company incurs costs below its original estimated costs. Similarly, the Company does not recognize additional revenues if the Company incurs costs in excess of estimates required to complete the project, unless there is an approved change of scope in the work to be performed. Accordingly, the Company’s profit margins on any FFP contract depend on the accuracy of the Company’s estimates and will increase to the extent that actual costs are below the contracted amounts. If the costs exceed the estimates, on the other hand, profit margin will decrease, and the Company may realize a loss on a project.

Time-and-Materials Contracts. Under the time-and-materials contracts, management negotiates hourly billing rates and the Company charges the clients based on the actual time that the Company expends on a project. In addition, clients reimburse the Company for the actual out-of-pocket costs of materials and other direct incidental expenditures that the Company incurs in connection with its performance under the contract. The Company’s profit margins on time-and-materials contracts fluctuate based on actual labor and overhead costs that it directly charges or allocates to contracts compared with negotiated billing rates. The Company recognizes revenues under these contracts based on the actual number of hours the Company spends on the projects plus any actual out-of-pocket costs of materials and other direct incidental expenditures that it incurs on the projects.

URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Concentrations of Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of trade receivables. Concentrations of credit risk with respect to trade receivables are limited due to the large numbers of customers that comprise the Company’s customer base and their dispersion across different business and geographic areas. The Company’s cash balances and short-term investments are maintained in accounts held by major banks and financial institutions located primarily in the United States of America and Europe. The Company estimates and maintains an allowance for potential uncollectible accounts and such estimates have historically been within management’s expectations.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents.

Fair Value of Financial Instruments

Carrying amounts of certain of the Company’s financial instruments including cash, accounts receivable, accounts payable and other liabilities approximate fair value due to their short maturities. Based on borrowing rates currently available to the Company for loans with similar terms, the carrying values of long-term debt approximate fair value.

Property and Equipment

Property and equipment are stated at cost. In the year assets are retired or otherwise disposed of, the costs and related accumulated depreciation are removed from the accounts, and any gain or loss on disposal is reflected in income. Depreciation is provided on the straight-line and the double declining methods using estimated lives ranging from 3 to 10 years for property and equipment. Leasehold improvements are amortized over the length of the lease or estimated useful life, whichever is less.

Internal-Use Computer Software

AICPA Statement of Position No. 98-1 (“SOP 98-1”) summarizes the three stages of computer software development as the preliminary project stage application development stage and post-implementation/operation stage. The Company expenses or capitalizes charges associated with development of internal-use software in accordance with SOP No. 98-1 as follows:


	Preliminary project stage: Both internal and external costs incurred during this stage are expensed to operations as incurred.

Application development stage: Both internal and external costs incurred to develop the internal-use computer software begin to be capitalized when the preliminary project stage is completed and management with relevant authority permits and commits to fund a computer software project. However, training costs and the process of data conversion from the old system to the new system, which includes purging or cleansing of existing data, reconciliation or balancing of old data to the converted data in the new system, are expensed to operations as incurred.


	Post-Implementation/Operation Stage: All training costs and maintenance costs incurred during this stage are expensed as incurred.

Costs of upgrades and enhancements are capitalized if the expenditures will result in added functionality for the software. Capitalized software costs are depreciated using the straight-line method over the estimated useful life of the related software, which may be up to 10 years. Impairment is measured and recognized in accordance with the Statement of Financial Accounting Standards No. 144 issued by the Financial Accounting Standards Board (“FASB”), which the Company adopted on November 1, 2002.

URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Costs and Accrued Earnings in Excess of Billings on Contracts in Process and Billings in Excess of Costs and Accrued
Earnings on Contracts in Process

Included in costs and accrued earnings in excess of billings on contracts in process in the accompanying consolidated balance sheets at October 31, 2002 and 2001 were $374.7 million and $289.6 million, respectively, representing amounts earned and reimbursable under contracts in progress at the respective balance sheet dates. These amounts become billable according to the contract terms, which usually consider the passage of time, achievement of certain milestones or completion of the project. The Company anticipates that substantially all of such unbilled amounts will be billed and collected over the next 12 months.

Billings in excess of costs and accrued earnings on contracts in process in the accompanying consolidated balance sheets represent cash collected from clients on contracts in advance of revenues earned thereon, as well as advanced billings to clients in excess of costs and earnings on uncompleted contracts. As of October 31, 2002, and 2001, billings in excess of costs and accrued earnings on contracts in process were $92.2 million and $95.5 million, respectively. The Company anticipates that substantially all such amounts will be earned over the next 12 months.

Allowance for Uncollectible Accounts Receivable

The Company’s accounts receivable and costs and accrued earnings in excess of billings on contracts in process are reduced by an allowance for amounts that may become uncollectible in the future. The Company bases its estimated allowance for uncollectible amounts primarily on management’s evaluation of the financial condition of its clients. Management regularly evaluates the adequacy of the allowance for uncollectible amounts by taking into consideration factors such as the type of client: governmental agencies or private sector; trends in actual and forecasted credit quality of the client, including delinquency and late payment history; and current economic conditions that may affect a client’s ability to pay.

Income Taxes

The Company uses the asset and liability approach for financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized and based on expected future operating results, management believes that realization of deferred tax assets in excess of the valuation allowance is more likely than not. Income tax expense is the tax payable for the period plus or minus the change in deferred tax assets and liabilities during the period.

Income Per Common Share

Basic income per common share is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted income per share of common stock is computed giving effect to all dilutive potential shares of common stock that were outstanding during the period. Dilutive potential shares of common stock consist of the incremental shares of common stock issuable upon the exercise of stock options and convertible preferred stock. Diluted income per share is computed by dividing net income available to common stockholders plus the preferred stock dividend by the weighted average common share and dilutive potential common shares that were outstanding during the period. Due to the participation features of the Series D Cumulative Convertible Participating Preferred Stock (“Series D Preferred Stock”) shares issued in connection with the acquisition of EG&G and the fact that these shares were not convertible at October 31, 2002, these shares are assumed to be a separate class of common stock (equivalent to approximately an additional 416,000 weighted average common shares in the fiscal year ended October 31, 2002). Accordingly, income per common share for fiscal year 2002 has been calculated using the two-class method, which is an earnings allocation formula that determines income per common share for each class of common stock. Under the two-class method, approximately $907,000 of net income for the fiscal year ended October 31, 2002 is allocable to the Series D Preferred Stock and the remaining amount is allocable to common stockholders. While a proportionate amount of the income otherwise available to common shares is allocable, as described above, to the weighted average number of Series D Preferred Stock shares outstanding during the fiscal year ended October 31, 2002, the presentation below combines the two classes of common stock.

URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In accordance with the disclosure requirements of Statement of Financial Accounting Standards No. 128 (“SFAS 128”), “Earnings per Share,” a reconciliation of the numerator and denominator of basic and diluted income per common share is provided as follows:


		Years ended October 31,

		2002		2001		2000

		(in thousands, except per share amounts)
Numerator—Basic
	Net income available for common stockholders	$	49,232	$	48,623	$	41,561

Denominator—Basic
	Weighted-average common stock outstanding		22,554		17,444		16,272

	Basic income per share	$	2.18	$	2.79	$	2.55
Numerator—Diluted
	Net income available for common stockholders	$	49,232	$	48,623	$	41,561
	Preferred stock dividend		5,939		9,229		8,337

Net income		$	55,171	$	57,852	$	49,898

Denominator—Diluted
	Weighted-average common stock outstanding		22,554		17,444		16,272
Effect of dilutive securities:
	Stock options		1,194		1,212		943
	Convertible preferred stock		3,390		5,306		4,805

			27,138		23,962		22,020

Diluted income per share		$	2.03	$	2.41	$	2.27

Stock options to purchase 66,271 shares of common stock at prices ranging from $27.30 to $33.90 per share were outstanding at October 31, 2002, but were not included in the computation of diluted income per share because the exercise price was greater than the average market value of the shares of common stock. Convertible subordinated debt was not included in the computation of diluted income per share because it would be anti-dilutive.

Stock options to purchase 1,511,916 shares of common stock at prices ranging from $20.94 to $28.00 per share were outstanding at October 31, 2001, but were not included in the computation of diluted income per share because the exercise price was greater than the average market value of the shares of common stock. Convertible subordinated debt was not included in the computation of diluted income per share because it would be anti-dilutive.

Stock options to purchase 2,088,819 shares of common stock at prices ranging from $15.75 to $28.00 per share were outstanding at October 31, 2000, but were not included in the computation of diluted income per share because the exercise price was greater than the average market value of the shares of common stock. Convertible subordinated debt was not included in the computation of diluted income per share because it would be anti-dilutive.

Derivative Financial Instruments

The Company is exposed to risk of changes in interest rates as a result of borrowings under the senior collateralized credit facility. The Company periodically enters into interest rate derivatives to protect against the risk. During fiscal year 2002, the only derivative instrument the Company held was an interest rate cap agreement relating to $204.3 million of its LIBOR bank term loan borrowings. This agreement expired on July 31, 2002 and was not renewed. As such, at October 31, 2002, the Company did not hold any interest rate derivatives. From an economic standpoint, the cap agreement provided the Company with protection against LIBOR interest rate increases above 7%. For accounting purposes, the Company elected not to designate the cap agreement as a hedge, and in accordance with Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities,” which the Company adopted on November 1, 2000, changes in the fair market value of the cap agreement were included in other expenses in the Consolidated Statements of Operations. Since interest rates throughout the fiscal year ending October 31, 2002 were significantly below the 7% cap agreement, such agreement did not have any value during the year and accordingly there were no changes in the fair value to be included in other expenses. The value of the interest rate cap agreement at October 31, 2001 was zero.

URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Adoption of Statements of Financial Accounting Standards

In July 2001, the FASB issued Statement of Financial Accounting Standards No. 142 (“SFAS 142”), “Goodwill and Other Intangible Assets.” SFAS 142 supercedes Accounting Principles Board Opinion No. 17 and addresses the financial accounting and reporting standards for goodwill and intangible assets subsequent to their initial recognition. SFAS 142 requires that goodwill be separately disclosed from other intangible assets in the statement of financial position, and that it is no longer amortized. It also requires that goodwill and other intangible assets be tested for impairment at least annually. The provisions of SFAS 142 are effective for fiscal years beginning after December 15, 2001 and must be applied to all goodwill and other intangible assets that are recognized in an entity’s balance sheet at the beginning of that fiscal year. Early application of SFAS 142 is permitted for entities with fiscal years beginning after March 15, 2001, provided that the first interim period financial statements have not been issued previously. The Company adopted SFAS 142 on November 1, 2001 and ceased to amortize goodwill on that date. See Note 4, “Goodwill and Purchased Intangible Assets”.

In April 2002, the FASB issued Statement of Financial Accounting Standards No. 145 (“SFAS 145”) “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.” SFAS 145 rescinds FASB Statement No. 4, “Reporting Gains and Losses from Extinguishment of Debt”, which required all gains and losses from extinguishment of debt to be aggregated and, if material, classified as an extraordinary item, net of related income tax effect. SFAS 145 requires that gains or losses from extinguishment of debt be classified as extraordinary items only if they meet the criteria of ABP Opinion No. 30 and is effective beginning after May 15, 2002. As permitted, the Company elected to adopt SFAS 145 early on August 1, 2002; accordingly, the Company recorded a loss of $7.6 million from extinguishment of debt in indirect, general, and administrative expenses during fiscal year 2002.

Recently Issued Statements of Financial Accounting Standards

In October 2001, the FASB issued Statement of Financial Accounting Standards No. 144 (“SFAS 144”), “Accounting for the Impairment or Disposal of Long-Lived Assets.” SFAS 144 supersedes SFAS 121, and the accounting and reporting provisions of Accounting Principles Board Opinion No. 30, “Reporting the Results of Operations — Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions”, for the disposal of a segment of a business (as previously defined in that Opinion). SFAS 144 establishes a single accounting model, based on the framework established in SFAS 121, for long-lived assets to be disposed of by sale and to resolve significant implementation issues related to SFAS 121. The Company adopted SFAS 144 on November 1, 2002. SFAS 144 is not expected to significantly impact the assessment of impairment of long-lived assets by the Company, other than the fact that SFAS 144 removes goodwill from its scope and, therefore, eliminates the requirement of SFAS 121 to allocate goodwill to long-lived assets to be tested for impairment. As indicated above, assessment of impairment of goodwill is required in accordance with the provisions of SFAS 142, which the Company adopted on November 1, 2001.

In June 2002, the FASB issued Statement of Financial Accounting Standards No. 146 (“SFAS 146”), “Accounting for Costs Associated with Exit or Disposal Activities.” SFAS 146 replaces Emerging Issues Task Force (EITF) Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (Include Certain Costs Incurred in a Restructuring)” in its entirety and addresses the significant issues relating to recognition, measurement, and reporting costs associated with an exit or disposal activity, including restructuring activities. Pursuant to SFAS 146, a liability is recorded on the date on which the obligation is incurred and should be initially measured at fair value. Under EITF Issue No. 94-3, a liability for such costs is recognized as of the date of an entity’s commitment to an exit plan as well as its measurement and reporting. SFAS 146 is effective for exit or disposal activities initiated after December 31, 2002. As permitted, the Company adopted SFAS 146 early on November 1, 2002. Currently, SFAS 146 is not expected to significantly impact the assessment of such liability by the Company.

On November 25, 2002, the FASB issued Financial Accounting Standards Board Interpretation No. 45 (“FIN 45” or the “Interpretation”), “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, an interpretation of FASB Statements No. 5, 57, and 107 and Rescission of FASB Interpretation No. 34.” FIN 45 clarifies the requirements of FASB Statement No. 5, “Accounting for Contingencies,” relating to the guarantor’s accounting for, and disclosure of, the issuance of certain

URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

types of guarantees. FIN 45 requires that upon issuance of a guarantee, the entity (i.e., the guarantor) must recognize a liability for the fair value of the obligation it assumes under that guarantee. The disclosure provisions of the Interpretation are effective for financial statements of interim or annual periods that end after December 15, 2002. The Interpretation’s provisions for initial recognition and measurement should be applied on a prospective basis to guarantees issued or modified after December 31, 2002, irrespective of the guarantor’s fiscal year-end. The guarantor’s previous accounting for guarantees that were issued before the date of FIN 45’s initial application may not be revised or restated to reflect the effect of the recognition and measurement provisions of the Interpretation. The Company has guarantees that will be subject to the accounting and disclosure provisions of the Interpretation, and therefore, adoption of FIN 45 will impact disclosures in the first quarter of its next fiscal year. The Company is currently evaluating the recognition and measurement impacts of adoption.

In January 2003, the FASB issued Statement of Financial Accounting Standards No. 148 (“SFAS 148”), “Accounting for Stock-Based Compensation – Transition and Disclosure.” SFAS 148 amends FASB Statement No. 123 (“SFAS 123”), “Accounting for Stock-Based Compensation,” to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS 148 amends the disclosure requirements of SFAS 123 to require prominent disclosures in both annual and interim financial statements of the method of accounting for stock-based employee compensation and the effect of the method used on reported results. SFAS 148 is effective for fiscal years beginning after December 15, 2002. The Company intends to adopt SFAS 148 on November 1, 2003. The Company does not expect to change to using the fair value based method of accounting for stock-based employee compensation; and therefore, adoption of SFAS 148 is expected to impact only the future disclosures, not the financial results, of the Company.

Reclassifications

Certain reclassifications have been made to the 2001 and 2000 financial statements to conform to the 2002 presentation with no effect on consolidated net income, equity or cash flows as previously reported.

NOTE 2. ACQUISITION

In accordance with SFAS 141, the Company allocates the purchase price of its acquisition to the tangible assets, liabilities and intangible assets acquired based on their estimated fair values. The excess purchase price over those fair values is recorded as goodwill. The tax deductible goodwill resulting from the EG&G acquisition amounted to $269.3 million. As of October 31, 2002, $203.7 million of goodwill was unamortized for tax purposes. The fair values assigned to intangible assets acquired are based on valuations prepared by an independent third party appraisal firm using estimates and assumptions provided by management. In accordance with SFAS 142, which the Company adopted on November 1, 2001, goodwill and purchased intangibles with indefinite lives acquired after June 30, 2001 are not amortized, but will be reviewed periodically for impairment. Purchased intangibles with finite lives will be amortized on a straight-line basis over their respective useful lives.

On August 22, 2002, the Company acquired all of the outstanding common shares of EG&G, a leading provider of operations and maintenance, logistics and technical services to the Department of Defense and other federal government agencies, for an aggregate purchase price of $503.6 million. The aggregate purchase price included the issuance of 4,957,359 shares of the Company’s common stock, valued at $112.3 million (based on the price of its common stock on the closing date), issuance of 100,000 shares of the Company’s Series D Preferred Stock, valued at $47.8 million (based on the price of its common stock on the closing date), $176.1 million in cash, estimated direct transaction costs of $11.8 million and the assumption and retirement of $155.6 million of EG&G’s debt.

Simultaneously with the closing of the EG&G acquisition, the Company entered into a new senior secured credit facility, which provides for term loan facilities in the aggregate amount of $475.0 million and a revolving credit facility in the amount of $200.0 million. In addition, the Company issued $200.0 million in aggregate principal amount due at maturity of 11 1/2% senior notes due 2009. The Company used the proceeds of these new debt instruments to consummate the EG&G acquisition and to repay and terminate its old senior collateralized credit facility.

URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The operating results of EG&G have been included in the accompanying consolidated financial statements from the date of acquisition forward. Accordingly, EG&G’s results of operations for 2001 and 2000 were not included in the Company’s consolidated statements of operations for prior periods. Actual revenues, operating income and net income of EG&G for the period from August 22, 2002 to October 31, 2002 were $186.4 million, $7.5 million, and $7.4 million, respectively and total assets and net accounts receivable at October 31, 2002 were $195.8 million and $89.1 million, respectively.

The EG&G acquisition was intended to enhance the Company’s competitive position in key industries, while strengthening its position in strategic markets. The merger is intended to provide the Company with leverage in expanded service offerings, achieve cost synergies and economies of scale and improve the profitability of the combined company. The Company intends to increase its revenue per customer by marketing and delivering additional services to existing customers. The EG&G acquisition will also allow the Company to be well positioned to capitalize on the growth in the federal government sector.

Based on an independent valuation, the total purchase price paid for EG&G of approximately $503.6 million has been allocated as follows:


			Value
			(in thousands)

Current assets			$	147,665
Fixed assets				6,449
Other assets				8,509
Purchased intangible assets:
	Software			3,900
	Existing contracts			10,600
Goodwill				499,552
Current liabilities				(170,222	)
Non-current liabilities				(2,872	)

		Total purchase price	$	503,581

Purchased Intangible Assets

Of the total purchase price paid for the EG&G acquisition, approximately $14.5 million has been allocated to purchased intangible assets, which include acquired backlog and software. Based on an independent valuation, $10.6 million, which will be amortized on a straight line basis over the individual related contract terms, was allocated to the value of the backlog and $3.9 million was allocated to software, which will be amortized on a straight line basis over a useful life of three years.

Pro Forma Results

The following unaudited pro forma financial information presents the combined results of operations of the Company and EG&G as if the EG&G acquisition had occurred as of the beginning of the fiscal periods presented. An adjustment of $1.2 million, net of tax, has been made to the combined results of operations, reflecting amortization of purchased intangibles, as if the EG&G acquisition had occurred at the beginning of the periods presented. The unaudited pro forma financial information also excludes a non-recurring, pre-tax charge of $8.9 million and $10.6 million for fiscal years 2002 and 2001, respectively. This charge relates to early extinguishment of debt on a loan that would have been retired if the EG&G acquisition had occurred at the beginning of each of the fiscal years presented. The unaudited pro forma financial information is not intended to represent or be indicative of the consolidated results of operations of the Company that would have been reported had the EG&G acquisition been completed as of the dates presented, nor should it be taken as a representation of the future consolidated results of operations of the Company.

URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


	2002		2001
	(In thousands, except per share amounts)
	Unaudited

Revenues	$	3,185,383	$	3,177,614
Net income	$	48,920	$	56,981
Basic income per share	$	1.52	$	1.95
Diluted income per share	$	1.49	$	1.86

Acquisition Costs Related to the EG&G acquisition

In connection with the EG&G acquisition, the Company set up an accrual of $2.7 million for severance and relocation costs, of which $1.2 million was incurred during fiscal year 2002. The remaining accrual of $1.5 million is included in accrued expenses on the consolidated balance sheet as of October 31, 2002.

Finalization of Purchase Price

Certain information necessary to complete the purchase accounting is not yet available, including the completion of actuarial reports associated with the Company’s decision to freeze or terminate the defined benefit pension plan and analysis of the EG&G leases by a real estate valuation firm in order to determine whether there are favorable or unfavorable leases. Purchase accounting will be finalized upon receipt of actuarial studies and lease analysis.

NOTE 3. PROPERTY AND EQUIPMENT

Property and equipment consists of the following:


	October 31,

	2002			2001

	(In thousands)
Equipment	$	150,286		$	87,245
Capital leases		67,592			49,695
Furniture and fixtures		26,875			25,375
Leasehold improvements		26,221			19,872
Construction in progress		222			11,752
Building		295			301
Land		—			75

		271,491			194,315
Less: accumulated depreciation and amortization		(114,967	)		(87,318	)

Net property and equipment	$	156,524		$	106,997

As of October 31, 2002 and 2001, the Company capitalized development costs of internal-use software of $50.1 million and $6.9 million, respectively. The Company intends to amortize the capitalized software costs using the straight-line method over 10 years of estimated useful life.

Accumulated amortization of capital leases was $29.3 million and $17.2 million at October 31, 2002 and 2001, respectively. Depreciation and amortization expense of property and equipment for the fiscal years ended 2002, 2001 and 2000 was $32.8 million, $26.5 million, and $26.6 million, respectively.

NOTE 4. GOODWILL AND PURCHASED INTANGIBLE ASSETS

The Company adopted SFAS 142 on November 1, 2001 and ceased to amortize goodwill on that date. Goodwill represents the excess of the purchase price over the fair value of the net tangible assets of various operations acquired by the Company. Goodwill was amortized on the straight-line method over periods ranging from 30 to 40 years for the years ended before November 1, 2001. Accumulated amortization at October 31, 2002, 2001 and 2000 was $54.8 million, $54.8 million, and $39.2 million, respectively. Amortization expense for the fiscal years ended 2002, 2001 and 2000 was $0, $15.6 million, and $15.2 million, respectively.

URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As part of the adoption of SFAS 142, the Company completed the required initial impairment test. This test resulted in no impairment for fiscal year 2002. The adoption of SFAS 142 removed certain differences between book and tax income; therefore, the Company’s fiscal year 2002 effective tax rate has been reduced to approximately 39.5%.

The Company regularly evaluates whether events and circumstances have occurred that indicate a possible impairment of goodwill. In determining whether there is an impairment of goodwill, the Company calculates its estimated fair value based on the closing sales price of its common stock and projected discounted cash flows as of the date it performs the impairment tests. The Company allocates a portion of the total fair value to different reporting units based on discounted cash flows. The Company then compares the resulting fair values by reporting units to the respective net book values, including goodwill. If the net book value of a reporting unit exceeds its fair value, the Company measures the amount of the impairment loss by comparing the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill. To the extent that the carrying amount of a reporting unit’s goodwill exceeds its implied fair value, the Company recognizes a goodwill impairment loss. The Company performs this impairment test annually and whenever facts and circumstances indicate that there is a possible impairment of goodwill. The Company completed the required annual impairment test, which resulted in no impairment for fiscal year 2002. The Company believes the methodology it uses in testing impairment of goodwill provides a reasonable basis in determining whether an impairment charge should be taken.

The Company has recorded goodwill in the domestic segment, which includes the parent company. The changes in the carrying amount of goodwill as of October 31, 2002 and 2001 were as follows:


					Accumulated			Net
		Goodwill			Amortization			Goodwill

					(In thousands)
Balance at October 31, 2000		$	553,806		$	(39,195	)	$	514,611
	Contingent purchase price related to prior acquisitions		1,436			—			1,436
	Goodwill amortization		—			(15,617	)		(15,617	)
	Goodwill written off due to sale of subsidiary		(152	)		8			(144	)

Balance at October 31, 2001			555,090			(54,804	)		500,286
	Contingent purchase price related to prior acquisitions		1,791			—			1,791
	Goodwill related to the acquisition of EG&G		499,552			—			499,552

Balance at October 31, 2002		$	1,056,433		$	(54,804	)	$	1,001,629

The following table reflects the adjusted net income and net income per share as if SFAS 142 had been effective as of November 1, 2000 and assuming that the effective tax rates remained at 44.5% and 45.5%, for the two years ended October 31, 2001 and 2000, respectively:


		Years Ended October 31,

		2002		2001		2000

		(In thousands, except amounts)
Net Income
	Reported net income	$	55,171	$	57,852	$	49,898
	Add: goodwill amortization, net of tax		—		8,667		8,321

	Adjusted net income	$	55,171	$	66,519	$	58,219

Basic income per share
	Reported net income	$	2.18	$	2.79	$	2.55
	Goodwill amortization		—		.49		.51

	Adjusted net income	$	2.18	$	3.28	$	3.06

Diluted income per share
	Reported net income	$	2.03	$	2.41	$	2.27
	Goodwill amortization		—		.37		.38

	Adjusted net income	$	2.03	$	2.78	$	2.65

URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Purchased intangible assets is comprised of $10.6 million in market value of customer backlog and $3.9 million of software acquired as a result of the EG&G acquisition. Purchased intangible assets are amortized on the straight-line method. See Note 2, “Acquisition”. The following table presents the estimated future amortization expense of purchased intangible assets:


	Market Value
	Backlog		Software		Total

			(In thousands)
2003	$	1,991	$	1,300	$	3,291
2004		1,721		1,300		3,021
2005		1,546		1,300		2,846
2006		1,407		—		1,407
2007		903		—		903
Thereafter		3,032		—		3,032

	$	10,600	$	3,900	$	14,500

NOTE 5. INCOME TAXES

The components of income tax expense applicable to the operations each year are as follows:


							Years Ended October 31,

				2002			2001			2000

							(In thousands)
Current:
	Federal			$	19,832		$	33,242		$	18,550
	State and local				2,786			6,963			4,040
	Foreign				3,786			3,660			4,110

		Subtotal			26,404			43,865			26,700

Deferred:
	Federal				9,787			4,510			13,940
	State and local				1,375			945			1,550
	Foreign				(1,626	)		(3,020	)		(490	)

		Subtotal			9,536			2,435			15,000

			Total tax provision	$	35,940		$	46,300		$	41,700

As of October 31, 2002, the Company had available net operating loss (“NOL”) carryforwards for federal income tax and financial statement purposes of $21.4 million. Utilization of the NOL which arose from the Company’s October 1989 quasi-reorganization and the acquisition of EG&G in August 2002 is limited pursuant to Section 382 of the Internal Revenue Code (“382 limit”). Of the total NOL, $1.5 million is subject to a 382 limit of $750,000 per year and will expire in fiscal year 2004, $17.5 million is subject to a 382 limit of $13.0 million per year and will expire in fiscal years 2019 and 2021 and $2.4 million will be carried back for refund. The Company also has $14.8 million of foreign NOLs available to carry forward. These NOLs are available only to offset income earned in foreign jurisdictions and will expire at various dates.

While the Company has available NOL carryforwards, which partially offset otherwise taxable income for federal income tax purposes, for state tax purposes, such amounts are not necessarily available to offset income subject to tax.

URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

Deferred tax assets/(liabilities) due to:


							October 31,

				2002			2001			2000

							(In thousands)
Current:
	Allowance for doubtful accounts			$	5,115		$	5,392		$	4,686
	Net operating losses				7,934			—			—
	Inventory				124			—			—
	Investment in joint ventures				(11	)		—			—
	Payroll related and other accruals				15,392			11,193			9,211

	Current deferred tax asset				28,554			16,585			13,897

	Revenue retentions				(825	)		(1,402	)		(1,492	)
	Prepaid expenses				(467	)		—			—
	Contingent liabilities				3,571			—			—
	Unbilled fees				(12,938	)		(4,887	)		(7,546	)

	Current deferred tax liability				(10,659	)		(6,289	)		(9,038	)

		Net current deferred tax asset		$	17,895		$	10,296		$	4,859

Non-Current:
	Deferred compensation and pension			$	3,657		$	2,995		$	(931	)
	Self-insurance contingency accrual				245			2,082			2,184
	Depreciation and amortization				(1,503	)		(1,245	)		380
	Foreign tax credit				1,596			561			2,837
	Net operating loss				7,391			9,425			11,550

	Gross non-current deferred tax asset				11,386			13,818			16,020
	Valuation allowance				(572	)		(5,815	)		(7,406	)

		Net non-current deferred tax asset			10,814			8,003			8,614

	Cash to accrual				—			—			(1,256	)
	Acquisition liabilities				(20,023	)		(28,370	)		(28,229	)
	Other deferred gain and unamortized bond premium				(501	)		(725	)		(941	)
	Restructuring accrual				(1,889	)		(2,820	)		(2,985	)
	Mark to market				—			—			(154	)
	Depreciation and amortization				(32,040	)		(11,184	)		(8,556	)
	Other accruals				3,010			396			350

			Non-current deferred tax liability		(51,443	)		(42,703	)		(41,771	)

			Net non-current deferred tax liability	$	(40,629	)	$	(34,700	)	$	(33,157	)

The change in the total valuation allowance related to deferred tax assets for the fiscal year ended October 31, 2002, results from a decrease of $0.3 million due to the utilization of domestic net operating losses and a decrease of $4.9 million due to the analysis, use, and adjustment of foreign losses available for use. The net change in the total valuation allowance related to deferred tax assets for the fiscal year ended October 31, 2001, was a decrease of $0.3 million from fiscal year 2000 due to the utilization of domestic net operating losses and a decrease of $1.3 million from fiscal year 2000 due to current and prior year foreign losses utilized.

URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The difference between total tax expense and the amount computed by applying the statutory federal income tax rate to income before taxes is as follows:


	Years Ended October 31,

	2002			2001			2000

	(In thousands)
Federal income tax expense based upon federal statutory tax rate of 35%	$	31,889		$	36,453		$	32,059
Nondeductible goodwill amortization		—			4,592			4,388
Meals and entertainment		1,261			1,289			885
Non-deductible expenses		760			290			461
NOL carryforwards utilized		(263	)		(263	)		(269	)
Unbenefited foreign losses		—			305			939
EZ California Credit		(1,428	)		—			—
Foreign earnings taxed at rates higher (lower) than U.S. statutory rate		220			41			53
State taxes, net of federal benefit		3,996			5,218			4,158
Adjustment due to change in federal and state rates		—			206			52
Extraterritorial income exclusion		(484	)		(622	)		—
Reversal of valuation adjustment		—			(821	)		—
Utilization of deferred tax allowance and other adjustments		(11	)		(388	)		(1,026	)

Total taxes provided	$	35,940		$	46,300		$	41,700

NOTE 6. CURRENT AND LONG-TERM DEBT

Current and long-term debt consists of the following:


		October 31,

		2002		2001

		(In thousands)
Bank term loans, payable in quarterly installments		$	475,000	$	381,338
12 1/4% Senior subordinated notes due 2009			200,000		200,000
11 1/2% Senior notes due 2009 (net of discount and issue costs of $4,609)			195,391		—
Revolving line of credit			27,259		—
6 1/2% Convertible subordinated debentures due 2012 (net of bond issue costs of $24 and $26)			1,775		1,772
8 5/8% Senior subordinated debentures due 2004 (net of discount and bond issue costs of $1,109 and $1,817) (effective interest rate on date of restructuring was 25%)			5,346		4,638
Obligations under capital leases			47,842		39,219
Foreign collateralized borrowings and notes payable			1,548		4,162

			954,161		631,129
Less:
	Current maturities of long-term debt		16,000		39,704
	Current maturities of notes payable		439		3,841
	Current maturities of capital leases		13,859		10,880

		$	923,863	$	576,704

During fiscal year 2002, the Company incurred new borrowings through a new long term senior secured credit facility and issued $200 million in aggregate principal amount due at maturity of 11 1/2% senior notes in connection with the EG&G acquisition.

URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Senior Secured Credit Facility

Senior Secured Credit Facility.Simultaneously with the closing of the EG&G acquisition on August 22, 2002, the Company entered into a new senior secured credit facility, which provides for two term loan facilities in the aggregate amount of $475.0 million and a revolving credit facility in the amount of $200.0 million. The term loan facilities consist of term loan A, a $125.0 million tranche, and term loan B, a $350.0 million tranche. As of October 31, 2002, the Company had borrowed $475.0 million in principal amount under the term loan facilities, and the Company had outstanding letters of credit aggregating to $45.9 million and an outstanding balance drawn on the revolving line of credit of $27.3 million, which reduced the amount available to the Company under its revolving credit facility to $126.8 million.

Principal amounts under term loan A will become due and payable on a quarterly basis beginning January 31, 2003, and thereafter through August 22, 2007. Annual required principal payments under term loan A will range from $12.5 million to a maximum of $37.5 million with term loan A expiring and all remaining outstanding principal amounts becoming due and payable in full on August 22, 2007. Principal amounts under term loan B will become due and payable on a quarterly basis beginning January 31, 2003, in the amount of $3.5 million per year through October 31, 2007, with all remaining outstanding principal amounts becoming due and payable in equal quarterly installments with the final payment due on August 22, 2008. The revolving credit facility expires and is payable in full on August 22, 2007.

All loans outstanding under the new senior secured credit facility bear interest at a rate per annum equal to, at its option, either the base rate or LIBOR, in each case plus an applicable margin. The applicable margin will adjust according to a performance pricing grid based on the Company’s ratio of consolidated total funded debt to consolidated EBITDA. For the purposes of the new senior secured credit facility, consolidated EBITDA is defined as consolidated net income plus interest, depreciation and amortization expenses and amounts set aside for the payment of taxes, subject to adjustment for certain non-cash items and to pro forma adjustments related to permitted acquisitions, including the EG&G acquisition. For both the term loan A and the revolving credit facility, the applicable margin over LIBOR will range between 2.25% and 3.00%, depending on the ratio of the Company’s consolidated total funded debt to consolidated EBITDA. For the term loan B, the corresponding applicable margin over LIBOR will range between 3.25% and 3.50%. The terms “base rate” and “LIBOR” have meanings customary and appropriate for financings of this type. As of October 31, 2002, the LIBOR applicable margin was 3.0% for the term loan A and the revolving line of credit and 3.5% for the term loan B.

The Company is required to prepay the loans under the new senior secured credit facility with:

	•		100% of the net cash proceeds of all assets disposed of by the Company and its subsidiaries guaranteeing the new senior secured credit facility, net of selling expenses, taxes and prepayments of debt required in connection with the sale of such assets, subject to reinvestment rights within 270 days for asset dispositions in amounts less than $20 million and other limited exceptions;

	•		100% of the net cash proceeds from the issuance of debt by the Company, provided that such percentage shall be reduced to 50% for any fiscal year in which the Company’s leverage ratio, measured as of the end of the preceding fiscal year, is less than 2.5 to 1, subject to limited exceptions;

	•		50% of the net cash proceeds from the issuance of equity by the Company or its subsidiaries, subject to limited exceptions; and

	•		75% of excess cash flows commencing with fiscal year 2003, provided that such percentage shall be reduced to 50% for any fiscal year in which, measured as of the end of such fiscal year, the Company’s leverage ratio is less than 2.5 to 1.

URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company, at its option, may prepay the loans under the new senior secured credit facility without premium or penalty, subject to reimbursement of the lenders’ prepayment fees in the case of prepayment of LIBOR loans.

Substantially all of the Company’s domestic subsidiaries are guarantors of the new senior secured credit facility on a joint and several basis. The Company and the guaranteeing entities’ obligations are collateralized by an interest in substantially all of the Company’s and its subsidiaries’ existing and hereafter acquired personal property and material real property, including a pledge of the capital stock of the guaranteeing entities. The equity interests of non-U.S. subsidiaries are not required to be pledged as security; however, with limited exceptions, the terms of the facility restrict the foreign assets from being used as a pledge for future liens (“negative pledge”). See Note 15, “Supplemental Guarantor Information”.

The Company’s new senior secured credit facility contains financial covenants, including a minimum current ratio of 1.5:1, a minimum fixed charge coverage ratio (which will vary over the term of the facility between 1.05:1 and 1.20:1), and a maximum ratio of consolidated total funded debt to consolidated EBITDA (which will decrease over the term of the facility from a maximum of 4.25:1 to a minimum of 3:1). The Company is required to submit quarterly compliance certification to the lender under the facility. The Company was fully compliant with these covenants as of October 31, 2002.

The new senior secured credit facility also contains customary events of default and customary affirmative and negative covenants including, but not limited to, restrictions on mergers, consolidations, acquisitions, asset sales, dividend payments, stock redemptions or repurchases, transactions with stockholders and affiliates, liens, capital expenditures, capital leases, negative pledges, sale-leaseback transactions, indebtedness, contingent obligations, investments and joint ventures.

Old Senior Collateralized Credit Facility.The Company’s old senior collateralized credit facility was funded on June 9, 1999, and provided for three term loan facilities in the aggregate amount of $450.0 million and a revolving credit facility in the amount of $100.0 million. The term loan facilities consisted of Term Loan A, a $250.0 million tranche, Term Loan B, a $100.0 million tranche and Term Loan C, another $100.0 million tranche. As part of the EG&G acquisition, the Company repaid and terminated the old senior collateralized credit facility on August 22, 2002.

Principal amounts under Term Loan A became due, commencing on October 31, 1999, in the amount of $3.0 million per quarter for the subsequent three quarters. Commencing on October 31, 2000 and through August 22, 2002, the retirement date, annual principal payments under Term Loan A ranged from $25.0 million to a maximum of $34.8 million. Principal amounts under Term Loans B and C became due, commencing on October 31, 1999, in the amount of $1.0 million in each year through August 22, 2002 when these loans were retired.

The term loans and revolving credit facility were priced at an interest rate equal to, at the Company’s option, either the Base Rate or LIBOR, in each case plus an applicable margin. The applicable margin adjusted according to a performance-pricing grid based on the Company’s ratio of consolidated total funded debt to consolidated EBITDA. The “Base Rate” was defined as the higher of the lender’s Prime rate and the Federal Funds Rate plus 0.50%. “LIBOR” was defined as the offered quotation by first class banks in the London interbank market to the Bank for dollar deposits, as adjusted for reserve requirements.

At October 31, 2001 and 2000, the Company’s revolving credit facility with the Bank provided for advances up to $100.0 million. At October 31, 2001 and 2000, the Company had outstanding letters of credit in the aggregate amount of $25.0 million and $36.5 million, respectively, which reduced the amount available to the Company under the Company’s revolving credit facility to $75.0 million and $63.5 million, respectively.

The senior collateralized credit facility was governed by affirmative and negative covenants. These covenants included restrictions on incurring additional debt, paying dividends or making distributions to its stockholders, repurchasing or retiring capital stock and making subordinated junior debt payments, as well as other restrictions. The financial covenants included maintenance of a minimum current ratio of 1.20 to 1.00 and a minimum fixed charge coverage ratio of 1.10 to 1.00, an EBITDA minimum of $160.0 million and a maximum leverage ratio of 3.50 to 1.00 for fiscal year ended October 31, 2001. The Company was required to submit quarterly compliance

URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

certification to the Bank. The Company was fully compliant with these covenants as of October 31, 2001.

Notes

11 1/2% Senior Notes.Simultaneously with the closing of the EG&G acquisition on August 22, 2002, the Company issued $200.0 million in aggregate principal amount due at maturity of 11 1/2% Senior Notes due 2009 (the “11 1/2% notes”) for proceeds, net of $4.7 million of original issue discount, of approximately $195.3 million. Interest on the 11 1/2% notes is payable semi-annually in arrears on March 15 and September 15 of each year, commencing on March 15, 2003. The notes are effectively subordinate to the new senior secured credit facility and senior to the subordinated indebtedness, including the 12 1/4% notes, the 8 5/8% debentures, and the 6 1/2% debentures described below. As of October 31, 2002, all amounts remained outstanding under the 11 1/2% notes.

Substantially all of Company’s domestic subsidiaries fully and unconditionally guarantee the 11 1/2% notes on a joint and several basis. The Company may redeem any of the 11 1/2% notes beginning on September 15, 2006 at the following redemption prices (expressed as percentages of the principal amount of the 11 1/2% notes so redeemed), if the Company does so during the 12-month period commencing on September 15 of the years set forth below, plus, in each case, accrued and unpaid interest, if any, to the date of redemption:


Year	Redemption Price

2006		105.750	%
2007		102.875	%
2008		100.000	%

In addition, at any time prior to or on September 15, 2005, the Company may redeem up to 35% of the principal amount of the 11 1/2% notes then outstanding with the net cash proceeds from the sale of capital stock. The redemption price will be equal to 111.50% of the principal amount of the redeemed 11 1/2% notes.

If the Company undergoes a change of control, the Company may be required to repurchase the 11 1/2% notes at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of repurchase. If the Company sells certain of its assets, the Company may be required to use the net cash proceeds to repurchase the 11 1/2% notes at 100% of the principal amount plus accrued and unpaid interest to the date of purchase.

The indenture governing the 11 1/2% notes contains certain covenants that limit the Company’s ability to incur additional indebtedness, pay dividends or make distributions to the Company’s stockholders, repurchase or redeem capital stock, make investments or other restricted payments, incur subordinated indebtedness secured by a lien, enter into transactions with the Company’s stockholders and affiliates, sell assets and merge or consolidate with other companies. The indenture governing the 11 1/2% notes also contains customary events of default, including payment defaults, cross-defaults, breach of covenants, bankruptcy and insolvency defaults and judgment defaults.

12 1/4% Senior Subordinated Notes. In June 1999, the Company issued $200.0 million in aggregate principal amount of 12 1/4% Senior Subordinated Notes due 2009 (the “12 1/4% notes”), all of which remained outstanding at October 31, 2002. Interest on the 12 1/4% notes is payable semi-annually in arrears on May 1 and November 1 of each year. The 12 1/4% notes are effectively subordinate to the Company’s senior secured credit facility and its 11 1/2% notes.

Substantially all of the Company’s domestic subsidiaries fully and unconditionally guarantee the 12 1/4% notes on a joint and several basis. The Company may redeem the 12 1/4% notes, in whole or in part, at any time on or after May 1, 2004 at the following redemption prices (expressed as percentages of the principal amount of the 12 1/4% notes so redeemed), if the Company does so during the 12-month period commencing on May 1 of the years set forth below, plus, in each case, accrued and unpaid interest, if any, to the date of redemption:


Year	Redemption Price

2004		106.125	%
2005		104.083	%
2006		102.041	%
2007 and thereafter		100.000	%

URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

If the Company undergoes a change of control, the Company may be required to repurchase the 12 1/4% notes at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of repurchase. If the Company sells certain of its assets, the Company may be required to use the net cash proceeds to repurchase the 12 1/4% notes at 100% of the principal amount plus accrued and unpaid interest to the date of purchase.

The indenture governing the 12 1/4% notes contains certain covenants that limit the Company’s ability to incur additional indebtedness, pay dividends or make distributions to its stockholders, repurchase or redeem capital stock, make investments or other restricted payments, incur subordinated indebtedness secured by a lien, enter into transactions with its stockholders and affiliates, sell assets and merge or consolidate with other companies. The indenture governing the 12 1/4% notes also contains customary events of default, including payment defaults, cross-defaults, breach of covenants, bankruptcy and insolvency defaults and judgment defaults.

Debentures

8 5/8% Senior Subordinated Debentures (“8 5/8% debentures”). The Company’s 8 5/8% debentures are due in 2004. Interest is payable semi-annually in January and July of each year. The 8 5/8% debentures are subordinate to the new senior secured credit facility, and the 11 1/2% notes. As of October 31, 2002, the Company owed approximately $6.5 million on the 8 5/8% debentures.

6 1/2% Convertible Subordinated Debentures (“6 1/2% debentures”). The Company’s 6 1/2% debentures are due in 2012 and are convertible into shares of the Company’s common stock at the rate of $206.30 per share. Interest is payable semi-annually in February and August of each year. Annual sinking fund payments calculated to retire 70% of the 6 1/2% debentures prior to maturity began in February 1998. The 6 1/2% debentures are subordinate to the new senior secured credit facility, the 11 1/2% notes, and the 12 1/4% notes. As of October 31, 2002, the Company owed approximately $1.8 million on the 6 1/2% debentures.

Foreign Credit Lines

The Company maintains foreign lines of credit which are collateralized by assets of foreign subsidiaries at October 31, 2002. The average interest rate for the foreign lines of credit was 6.20% at October 31, 2002. At October 31, 2002 and 2001, amounts available under these foreign lines of credit were $12.5 million and $15.0 million, respectively. At October 31, 2002 and 2001, amounts outstanding under the foreign lines of credit were $0 million and $3.8 million, respectively. This reduced the amount available to the Company under these foreign lines of credit to $12.5 million and $11.2 million, respectively.

Maturities

The amounts of long-term debt outstanding (excluding capital leases) at October 31, 2002, maturing in the next five years are as follows:


	(In thousands)
2003	$	16,439
2004		29,229
2005		28,741
2006		35,007
2007		68,323
Thereafter		728,580

	$	906,319

URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 7. OBLIGATIONS UNDER LEASES

Total rental expense included in operations for operating leases for the fiscal years ended October 31, 2002, 2001 and 2000, totaled to $81.7 million, $76.5 million and $70.2 million, respectively. Certain of the lease rentals are subject to renewal options and escalation based upon property taxes and operating expenses. These operating lease agreements expire at varying dates through 2013. Obligations under operating leases include building, office, and other equipment rentals. Obligations under capital leases include leases on vehicles, office equipment and other equipment.

Obligations under non-cancelable lease agreements are as follows:


	Capital Leases		Operating Leases

	(In thousands)
2003	$	17,665	$	84,479
2004		15,015		73,206
2005		12,079		62,573
2006		7,894		47,090
2007		1,825		39,258
Thereafter		—		99,885

Total minimum lease payments	$	54,478	$	406,491

Less: amounts representing interest		6,636

Present value of net minimum lease payments	$	47,842

NOTE 8. SEGMENT AND RELATED INFORMATION

Management has organized the Company by geographic divisions, consisting of the Parent, Domestic and International divisions. The Parent division is the legal entity, which is comprised of the Parent Company alone. The Domestic division is comprised of all offices located in United States of America. The International division is comprised of all offices in the United Kingdom, Western Europe and the Middle East, the Asia/Pacific region (including Australia, New Zealand, Singapore and Indonesia) and the Americas excluding the U.S. (including Canada, Mexico, and Central and South America).

The Company provides services throughout the world. While services sold to companies in other countries may be performed and recognized within offices located in the United States of America, generally, revenues are classified within the geographic area where the services are performed.

All of the Company’s operations share similar economic characteristics, and all of the Company’s business units are managed according to a consistent set of principal metrics and benchmarks determined by management within the Parent division. For example, management plans and controls the rates at which it bills professional and technical staff. Management also sets billable goals for all the Company’s professional and technical staff, and management aggregates all the indirect costs, including the aforementioned indirect labor expenses, as well as labor fringe expenses, facilities costs, insurance and other miscellaneous expenses, which in total comprise the “overhead pools.”

All of the Company’s operations provide planning, design, program and construction management, and operations and maintenance services. These services are provided to federal governmental agencies by virtually all of the Company’s business units and approximately two-thirds of the Company’s operating units provide these services to local and state governmental agencies and to private sector clients. The Company’s services are provided to the Company’s clients through a combination of local office, client facilities and specific-job sites.

Services are provided in a similar manner. For example, the use of technology throughout the Company’s operating units is fairly consistent, as the Company employs computer-aided design (CAD) and project management systems, for both general use and web-based job-specific application.

URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Based on the above similarities, the Company has concluded that its United States operations should be aggregated as one reportable segment, and its international operations should be aggregated into another segment. Accounting policies for each of the reportable segments are the same as those of the Company.

The following table shows summarized financial information (in thousands) on the Company’s reportable segments. Included in the “Eliminations” column are elimination of inter-segment sales and elimination of investment in subsidiaries.

As of and for the fiscal year ended October 31, 2002:


			/			Segments			/

	Parent			Domestic			International		Eliminations			Total

Revenue	$	—		$	2,220,478		$	213,090	$	(5,741	)	$	2,427,827
Segment operating income (loss)	$	(30,003	)	$	172,175		$	4,644	$	—		$	146,816
Net accounts receivable	$	—		$	854,784		$	85,432	$	—		$	940,216
Total assets	$	1,697,938		$	1,183,429		$	98,128	$	(750,403	)	$	2,229,092

As of and for the fiscal year ended October 31, 2001:


			/			Segments			/

	Parent			Domestic			International		Eliminations			Total

Revenue	$	—		$	2,109,173		$	216,975	$	(6,798	)	$	2,319,350
Segment operating income (loss)	$	(23,787	)	$	184,985		$	8,543	$	—		$	169,741
Net accounts receivable	$	—		$	667,009		$	78,170	$	—		$	745,179
Total assets	$	1,078,067		$	943,762		$	102,242	$	(660,695	)	$	1,463,376

As of and for the fiscal year ended October 31, 2000:


			/			Segments			/

	Parent			Domestic			International		Eliminations			Total

Revenue	$	—		$	1,970,903		$	235,683	$	(1,008	)	$	2,205,578
Segment operating income (loss)	$	(18,810	)	$	173,048		$	9,221	$	—		$	163,459
Net accounts receivable	$	(7,814	)	$	634,350		$	82,469	$	—		$	709,005
Total assets	$	1,089,960		$	911,130		$	115,390	$	(689,346	)	$	1,427,134

Operating income is defined as income before income taxes and net interest expense.

The Company provides services to state, local and federal government, private businesses, and non-U.S. clients. For the three years ended October 31, 2002, revenues were attributed to the following categories:


		2002				2001				2000

						(Dollars in thousands)
Domestic:
	State and local government agencies	$	704,286	29	%	$	822,900	36	%	$	728,861	33	%
	Federal government agencies		600,194	25			380,454	16			354,581	16
	Private businesses		910,257	37			899,021	39			886,453	40
International			213,090	9			216,975	9			235,683	11

Total		$	2,427,827	100	%	$	2,319,350	100	%	$	2,205,578	100	%

URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

NOTE 9. COMMITMENTS AND CONTINGENCIES

Currently, the Company has limits of $125.0 million per loss and $125.0 million in the aggregate annually for general liability, professional errors and omissions liability, and contractor’s pollution liability insurance. These policies include self-insured claim retention amounts of $1.0 million, $3.0 million and $0.25 million, respectively. With respect to various claims against Dames and Moore that arose from professional errors and omissions prior to the acquisition, the Company has maintained a self-insured retention of $5.0 million per claim. Excess limits provided for these coverages are on a “claims made” basis, covering only claims actually made during the policy period currently in effect. Thus, if the Company does not continue to maintain these excess policies, the Company will have no coverage for claims made after the termination date even for claims based on events that occurred during the term of coverage. The Company intends to maintain these policies; however, the Company may be unable to maintain existing coverage levels and, even if the Company does, claims may exceed the available amount of insurance. The Company believes that any settlement of existing claims will not have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows. The Company has maintained insurance without lapse for many years with limits in excess of losses sustained.

On January 18, 2002, the Attorney General of the State of Michigan filed a civil action against Radian International, L.L.C. (“Radian”), one of the Company’s subsidiaries, under the titleJennifer M. Granholm, Attorney General of the State of Michigan, and the Michigan Department of Environmental Quality v. Radian, L.L.C.,(Ingham County Michigan Circuit Court). The complaint alleges violations by Radian of the Michigan Hazardous Waste Management Act and the Michigan Air Pollution Control Act and related regulations. The claimed violations arose out of an environmental remediation project undertaken by Radian in 1997 and 1998 (prior to the Company’s acquisition of Radian as part of the Dames & Moore acquisition in 1999) at the Midland, Michigan facility of Dow Chemical Co., during which minor amounts of pollutants may have been released into the air in the course of performing maintenance of a hazardous waste incinerator. The complaint seeks payment of civil penalties, costs, attorney’s fees and other relief against Radian. The Michigan Attorney General’s office has offered to settle the matter for $1.2 million.

Various other legal proceedings are pending against the Company and certain of its subsidiaries alleging, among other things, breaches of contract or negligence in connection with the performance of professional services. In some actions, parties are seeking damages, including punitive or treble damages that substantially exceed the Company’s insurance coverage. Based on the Company’s previous experience with claims settlement and the nature of the pending legal proceedings, however, the Company does not believe that any of the legal proceedings are likely to result in a settlement or judgment against the Company or its subsidiaries, that would materially exceed its insurance coverage or have a material adverse effect on its consolidated financial position, results of operations or cash flows.

NOTE 10. PREFERRED STOCK

The Company has authorized the issuance of 100,000 shares of $0.01 par value, Series D Senior Cumulative Convertible Participating Preferred Stock (the “Series D Preferred Stock”), 100,000 shares of $0.01 par value, Series E Senior Cumulative Convertible Participating Preferred Stock (the “Series E Preferred Stock”), and 3,000,000 shares of $1.00 par value, Series B Exchangeable Convertible Preferred Stock (the “Series B Preferred Stock”).

Series D and Series E Senior Cumulative Convertible Participating Preferred Stock

In connection with the EG&G acquisition, the Company issued 100,000 shares of its Series D Senior Preferred Stock. If approved by a majority of the Company’s stockholders at a special meeting anticipated to be held on or about January 28, 2003, the Series D Preferred Stock will automatically convert into an aggregate of 2,106,675 shares of the Company’s common stock, subject to possible anti-dilution adjustments between closing and the date on which the Series D Preferred Stock is actually converted into common stock. The aggregate liquidation preference of the Series D Preferred Stock is approximately $46.7 million. Holders of the Series D Preferred Stock have voting rights in respect of certain corporate actions, including, but not limited to, certain changes to the Company’s certificate of incorporation and bylaws, the creation of senior equity securities and certain transactions with respect to the common stock. The holders of the Series D Preferred Stock share on an as-converted basis in any dividends or distributions that the Company pays on the common stock.

URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

If the Company’s stockholders fail to approve the conversion of the Series D Preferred Stock by February 18, 2003, then at the election of the holders of a majority of the outstanding shares of Series D Preferred Stock, each share of Series D Preferred Stock will be convertible into one share of Series E Preferred Stock. The Series E Preferred Stock will be automatically converted into shares of the Company’s common stock at a conversion ratio equal to the conversion ratio of the original Series D Preferred Stock for which it was exchanged (subject to certain adjustments due to accrued but unpaid dividends) if the Company obtains approval from a majority of the stockholders by May 19, 2003. If the Company obtains such approval after May 19, 2003, then each share of Series E Preferred Stock will be convertible into common stock at the option of the holder and all shares of Series E Preferred Stock will automatically convert into common stock upon the affirmative vote of holders of a majority of the outstanding shares of Series E Preferred Stock. The holders of Series E Preferred Stock will have voting rights in respect of certain corporate actions, including, but not limited to, certain changes to the Company’s certificate of incorporation and bylaws, the creation of senior equity securities, certain transactions with respect to the Company’s common stock, the incurrence of certain indebtedness and certain purchases of assets. The aggregate liquidation preference of the Series E Preferred Stock will be equal to that of the Series D Preferred Stock (approximately $46.7 million), subject to adjustments due to accrued but unpaid dividends. The holders of the Series E Preferred Stock will be entitled to receive cumulative per share dividends at an initial rate of 12.5% per annum, payable on a quarterly basis, of the liquidation preference beginning on August 22, 2002 and until stockholder approval is obtained, increasing by 2% per quarter subject to a 22.5% cap. If the Company fails to pay six or more quarterly dividends, the holders of Series E Preferred Stock will have the right to elect two directors at the Company’s next annual meeting and at each subsequent annual meeting. Upon a change of control, each holder of Series E Preferred Stock will have the right to require the Company to repurchase the Series E Preferred Stock at a price per share equal to the greater of 120% of the liquidation preference for a share of Series E Preferred Stock and the current market price of all common stock issuable upon conversion of a share of Series E Preferred Stock. In addition, to the extent permitted by the senior debt, the Company will be required to use the proceeds from certain sales of the Company’s securities or assets to repurchase the Series E Preferred Stock. The Series E Preferred Stock will be subject to anti-dilution adjustments for certain issuance of the Company’s securities below the conversion price for the Series E Preferred Stock. The Series E Preferred Stock will be redeemable at the option of the holders on the earlier of August 2007 or the date on which all indebtedness under the new senior secured credit facility, the 11 1/2% senior notes, the 12 1/4% senior subordinated notes and certain other indebtedness, including any refinancing of such indebtedness, is repaid in full. The Company may redeem the Series E Preferred Stock, at the Company’s option, at a price per share equal to the liquidation preference, at any time after August 2010. At October 31, 2002 and 2001, the Company has 100,000 and 0 shares, respectively, of Series D Preferred Stock outstanding. The Company has issued no shares of Series E Preferred Stock to date.

Series B Preferred Stock

In June 1999, the Company issued 46,082.95 shares of its Series A Preferred Stock and 450,000 shares of its Series C Preferred Stock to RCBA Strategic Partners, L.P. for an aggregate consideration of $100.0 million. In October 1999, the Company issued 46,083 shares of its Series B Preferred Stock to RCBA Strategic Partners, L.P. in exchange for the shares of Series A and Series C Preferred Stock. The Series B Preferred Stock had a liquidation preference equal to its original purchase price plus certain formulaic adjustments calculated at the time of liquidation. The Series B Preferred Stock was senior to the common stock and had voting rights equal to that number of shares of common stock into which it could be converted. Cumulative dividends were payable in-kind in additional shares of Series B Preferred Stock each calendar quarter at a dividend rate of 8%.

Under the terms of the Series B Preferred Stock, the Company had the option, exercisable at any time on or after June 9, 2002 (the third anniversary of the financing for the Dames & Moore acquisition), to convert all of the outstanding Series B Preferred Stock to common stock if the share price of the Company’s common stock on the relevant stock exchanges was at least $29.30 per share for 30 out of the 45 trading days prior to the conversion date. This requirement was satisfied, and accordingly, the Board of Directors met on June 9, 2002 and approved the conversion. As a result, all outstanding shares of the Series B Preferred Stock were converted to 5,845,104 shares of voting common stock. At October 31, 2002 and 2001, the Company had 0 and 55,345 shares, respectively, of Series B Preferred Stock outstanding.

URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

NOTE 11. STOCKHOLDERS’ EQUITY

Declaration of dividends, except preferred stock dividends, is restricted by the senior secured credit facility and the indentures governing the 8 5/8% debentures, the 12 1/4% notes and the 11 1/2% notes. Declaration of dividends may be precluded by existing Delaware law.

On October 12, 1999, the stockholders approved the 1999 Equity Incentive Plan (“1999 Plan”). An aggregate of 1,500,000 shares of common stock initially has been reserved for issuance under the 1999 Plan. In July 2000, an additional 1,076,000 shares were reserved for issuance under the 1999 Plan. The 1999 Plan provides for an automatic reload of shares every July 1 equal to 5% of the outstanding common stock. As of October 31, 2002, the Company had reserved approximately 5,242,000 shares and had issued options and restricted stock in the aggregate amount of approximately 4,401,000 shares under the 1999 Plan.

On March 26, 1991, the stockholders approved the 1991 Stock Incentive Plan (“1991 Plan”). The 1991 Plan provides for the grant not to exceed 3,310,000 Restricted Shares, Stock Units and Options. When the 1999 Plan was approved, the remaining shares available for grant under the 1991 Plan was added to the 1999 Plan.

Stock options expire in ten years from the date of grant and vest over service periods that range from three to five years.

Under the Company’s Employee Stock Purchase Plan (“ESP Plan”) implemented in September 1985, employees may purchase shares of common stock through payroll deductions of up to 10% of the employee’s base pay. Contributions are credited to each participant’s account on the last day of each six-month participation period of the ESP Plan (which commences on January 1 and July 1 of each year). The purchase price for each share of common stock is the lower of 85% of the fair market value of such share on the last trading day before the participation period commences or 85% of the fair market value of such share on the last trading day in the participation period. Employees purchased 361,988 shares under the ESP Plan in fiscal 2002 and 602,522 shares in fiscal 2001.

Stock-Based Compensation

The Company accounts for stock issued to employees and outside directors in accordance with Accounting Principles Board Opinion No. 25 (“APB 25”), “Accounting for Stock Issued to Employees.” Accordingly, compensation cost is measured based on the excess, if any, of the market price of the Company’s common stock over the exercise price of a stock option, determined on the date the option is granted. With respect to the issuance of restricted stock, unearned compensation expense equivalent to the market value of the stock issued on the date of award is charged to stockholders’ equity and subsequently amortized against earnings over the periods during which the restrictions lapse. During fiscal years 2002, 2001 and 2000, the Company recognized compensation expense on restricted stock of $2.2 million, $1.8 million and $1.0 million, respectively.

The Company applies APB 25 and related interpretations in accounting for its 1991 Plan and 1999 Plan. Substantially all of the Company’s options are awarded with an exercise price that is equal to the market price of the Company’s stock on the date of the grant and accordingly, no compensation cost has been recognized in connection with options granted in the 1991 and 1999 Plans. Had compensation cost for the Company’s 1991 and 1999 Plans been determined consistent with Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation,” the Company’s net income and earnings per share would have been reduced to the pro forma amounts indicated below:

URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


		Years Ended October 31,

		2002		2001		2000

		(In thousands, except per share data)
Net income available for common stockholders:
	As reported	$	49,232	$	48,623	$	41,561
	Pro forma	$	39,236	$	45,496	$	38,171
Basic earnings per share:
	As reported	$	2.18	$	2.79	$	2.55
	Pro forma	$	1.74	$	2.61	$	2.35
Net income:
	As reported	$	55,171	$	57,852	$	49,898
	Pro forma	$	45,175	$	54,725	$	46,508
Dilutive earnings per share:
	As reported	$	2.03	$	2.41	$	2.27
	Pro forma	$	1.66	$	2.28	$	2.11

A summary of the status of the stock options granted under the Company’s 1991 and 1999 Plans for the fiscal years ended October 31, 2002, 2001, and 2000, is presented below:


		2002					2001					2000

					Weighted-					Weighted-					Weighted-
					Average					Average					Average
					Exercise					Exercise					Exercise
		Shares			Price		Shares			Price		Shares			Price

Outstanding at beginning of year			4,133,537		$	17.39		3,829,084		$	14.64		2,394,709		$	11.97
	Granted		1,388,471		$	21.13		1,234,272		$	20.33		1,613,017		$	18.51
	Exercised		(645,341	)	$	15.94		(812,142	)	$	8.78		(80,716	)	$	8.11
	Forfeited		(306,127	)	$	19.95		(117,677	)	$	17.02		(97,926	)	$	18.87

Outstanding at end of year			4,570,540		$	18.57		4,133,537		$	17.39		3,829,084		$	14.64

Options exercisable at year-end			1,944,034		$	16.00		1,585,242		$	14.52		1,554,426		$	10.04
Weighted-average fair value of Options granted during the year					$	13.38				$	8.48				$	5.30

The following table summarizes information about stock options outstanding at October 31, 2002, under the 1991 and 1999 Plans:


					Outstanding						Exercisable

							Weighted-Average
Range of					Number		Remaining		Weighted-Average		Number		Weighted-Average
Exercise Prices					Outstanding		Contractual Life		Exercise Price		Exercisable		Exercise Price

	$5.70	—	$	8.55		193,800		2.3	$	6.46		220,400	$	6.46
	$8.55	—	$	11.40		105,750		4.3	$	10.45		105,750	$	10.45
$11.40		—	$	14.25		216,902		6.8	$	13.84		145,730	$	13.87
$14.25		—	$	17.10		1,172,638		6.9	$	15.52		795,576	$	15.50
$17.10		—	$	19.95		494,240		8.3	$	17.71		147,047	$	17.78
$19.95		—	$	22.80		678,438		7.2	$	21.53		335,771	$	21.43
$22.80		—	$	25.65		1,652,501		9.4	$	23.74		174,818	$	23.03
$25.65		—	$	28.50		26,000		8.0	$	27.65		13,671	$	27.87
$28.50		—	$	33.90		30,271		9.4	$	32.93		5,271	$	33.20

						4,570,540						1,944,034

URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The fair value of each option grant was estimated on the date of the grant using the Black-Scholes option-pricing model with the following assumptions:


	2002	2001	2000

Risk-free interest rates	3.77%-5.44%	4.62%-5.28%	5.72%-6.36%
Expected life	7.60 years	4 years	4 years
Volatility	45.66%	44.58%	42.54%
Expected dividends	None	None	None

NOTE 12. EMPLOYEE RETIREMENT PLANS

The Company has defined contribution retirement plans under Internal Revenue Code Section 401(k). The plans cover all full-time employees who are at least 18 years of age. Contributions by the Company are made at the discretion of the Board of Directors. The Company made contributions in the amounts of $12.5 million, $12.0 million and $10.4 million to the plans in fiscal years 2002, 2001, and 2000, respectively.

In July 1999, the Company entered into a Supplemental Executive Retirement Agreement (the “Agreement”) with Martin M. Koffel, the Company’s Chief Executive Officer (the “Executive”). The Executive will be eligible to receive a benefit under this agreement following his termination of employment with the Company (the “Benefit”). The Benefit shall be an annual amount, payable for the life of the Executive with a guarantee of payments for at least ten years. The Benefit is equal to a percentage of the Executive’s final average compensation, reduced by the annual social security benefit to which the Executive is entitled based on his age at the termination of employment. The Benefits payable under this Agreement shall be “unfunded,” as that term is used in Sections 201(2), 301(a)(3), 401(a)(10) and 4021(a)(6) of the Employee Retirement Income Securities Act (“ERISA”).

Management’s estimate of accumulated benefits for the Executive’s Supplemental Executive Retirement Plan as of October 31, 2002 and 2001, was as follows:


			2002			2001

			(In thousands)
Actuarial present value of accumulated benefits:
	Vested		$	6,021		$	3,091
	Non-vested			—			—

		Total	$	6,201		$	3,091

Change in projected benefit obligation (PBO):
	PBO at beginning of the year		$	4,812		$	2,774
	Service cost			1,692			1,469
	Interest cost			265			166
	Actuarial loss			119			403

		PBO at the end of the year	$	6,888		$	4,812

The funded status reconciliation:
	Projected benefit obligation		$	6,888		$	4,812
	Unrecognized actuarial loss			(1,138	)		(1,378	)
	Charged to other comprehensive income			271			—

		Accrued pension liability	$	6,021		$	3,434

Weighted-average assumptions at year-end:
	Discount rate			5.0	%		5.5	%
	Rate of compensation increase			5.0	%		5.0	%

URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Certain of the Company’s foreign subsidiaries have trustee retirement plans covering substantially all of their employees. These pension plans are not required to be reported to government agencies pursuant to ERISA, and the Company is not required to determine the actuarial value of accumulated benefits or net assets available for benefits for these pension plans. The aggregate pension expense for these plans for the fiscal years ended October 31, 2002 and 2001 was $2.1 million and $1.8 million, respectively. As of October 31, 2002 and 2001, the accrued pension liability, which is included as Deferred Compensation and Other on Consolidated Balance Sheets, was $6.0 million and $3.4 million, respectively.

Components of net periodic pension costs for the three years ended October 31, 2002 are as follows:


		2002		2001		2000

		(In thousands)
Service cost		$	1,692	$	1,469	$	794
Interest cost			265		166		48
Recognized actuarial loss			359		288		—

	Net periodic cost	$	2,316	$	1,923	$	842

The Company, upon acquiring Dames & Moore, assumed certain of Radian International LLC’s defined benefit pension plans (“Radian pension plans”), and several post-retirement benefit plans. These plans cover a selected group of Radian employees and former employees who will continue to be eligible to participate in the plans.

The Radian pension plans include a Supplemental Executive Retirement Plan (“SERP”) and Salary Continuation Agreement (“SCA”) which are intended to supplement retirement benefits provided by other benefit plans upon the participant’s meeting minimum age and years of service requirements. The plans are unfunded; however, at October 31, 2002 and 2001, the Company had designated and deposited $4.8 million and $7.2 million, respectively, in a trust account for the SERP. Radian also has a post-retirement benefit program that provides certain medical insurance benefits to participants upon meeting minimum age and years of service requirements. This plan is also unfunded and the historical costs and accumulated benefit for this post-retirement benefit program are not significant.

Management’s estimate of accumulated benefits for the Radian SERP and SCA as of October 31, 2002 and 2001, was as follows:


			2002			2001

			(In thousands)
Actuarial present value of accumulated benefits:
	Vested		$	11,199		$	9,726
	Non-vested			262			789

		Total	$	11,461		$	10,515

Change in projected benefit obligation (PBO):
	PBO at the beginning of the year		$	10,515		$	10,952
	Service cost			7			12
	Interest cost			697			727
	Actuarial (gain) loss			363			(301	)
	Benefit payments			(875	)		(875	)

		PBO at the end of the year	$	10,707		$	10,515

The funded status reconciliation:
	Projected benefit obligation		$	10,707		$	10,515
	Unrecognized actuarial gain			533			904

		Accrued pension liability	$	11,240		$	11,419

	Weighted-average assumptions at year-end:
	Discount rate			6.75	%		7.25	%
	Rate of compensation increase			N/A			N/A

URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

As of October 31, 2002 and 2001, the accrued pension liabilities, which is included as deferred compensation and other on the consolidated balance sheets, were $11.3 million and $11.4 million, respectively.

Components of net periodic pension costs for the three years ended October 31, 2002 are as follows:


		2002			2001			2000

		(In thousands)
Service cost		$	7		$	12		$	63
Interest cost			697			727			784
Recognized actuarial (gain)			(8	)		(29	)		—

	Net periodic cost	$	696		$	710		$	847

The Company, upon acquiring EG&G, assumed certain of EG&G’s defined benefit pension plans (“EG&G pension plans”), and several post-retirement benefit plans. These plans cover substantially all of its hourly and salaried employees. The hourly pension plan benefits are based primarily on hours of service with the Company. The salaried pension plan benefits are based on years of participation and final average compensation.

The Company’s funding obligations to the plan are to contribute necessary amounts to satisfy the funding requirements of federal laws and regulations. The Company measures pension costs according to independent actuarial valuations and the projected unit credit cost method is used to determine pension cost for financial accounting purposes consistent with the provisions of SFAS No. 87, “Employees’ Accounting for Pensions”.

EG&G also has a post-retirement medical plan that provides certain medical benefits to employees that meet certain eligibility requirements. All of these benefits may be subject to deductibles, co-payment provisions, and other limitations. The following is a reconciliation of the benefit obligations, plan assets, and funded status of the Company’s pension and post-retirement plans at October 31, 2002.


								Other
					Pension			Post-retirement
					Benefits			Benefits

					(In thousands)
Change in benefit obligation:
		Benefit obligation at 9/1/2002			$	119,470		$	3,731
		Service cost				892			35
		Interest cost				1,340			42
		Benefits paid				(747	)		(25	)
		Actuarial loss (gain)				71			(2	)

				Benefit obligation at end of year	$	121,026		$	3,781

Change in plan assets:
		Fair value of plan assets at 9/1/2002			$	90,702		$	3,008
		Actual return of plan assets				(1,395	)		(46	)
		Benefits paid and expense				(822	)		—

				Fair value of plan assets at end of year	$	88,485		$	2,962

Funded status reconciliation:
		Funded status			$	(32,542	)	$	(818	)
		Unrecognized net prior service cost				—			—
		Unrecognized net actuarial (gain)/loss				2,821			61

		Accrued benefit cost			$	(29,721	)	$	(757	)

	Weighted-average assumptions at year end:
			Discount rate			6.75	%		6.75	%
			Expected return on assets			8.50	%		8.50	%
			Rate of compensation increase			4.50	%		N/A

URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Assumed health care costs trend rates have a significant effect on the health care plan. A one-percentage point change in assumed health care costs trend rates would have the following effects for the fiscal year ended October 31, 2002:


	1% - Point

	Increase		Decrease

	(In thousands)
Effect on total of service and interest cost components	$	342	$	(308	)
Effect on postretirement benefit obligation		30,435		(27,392	)

Net periodic pension and other post-retirement benefit costs include the following components for the year ended October 31, 2002.


		Pension			Other Post-retirement
		Benefits			Benefits

		(In thousands)
Service cost		$	892		$	35
Interest cost			1,340			42
Expected return on assets			(1,280	)		(43	)

	Net periodic cost	$	952		$	34

NOTE 13. VALUATION AND ALLOWANCE ACCOUNTS


		Beginning						Ending
		Balance		Additions		Deductions		Balance

				(In thousands)
October 31, 2002
	Allowances for losses and doubtful accounts	$	28,572	$	9,024	$	6,886	$	30,710
October 31, 2001
	Allowances for losses and doubtful accounts	$	36,826	$	6,091	$	14,345	$	28,572
October 31, 2000
	Allowances for losses and doubtful accounts	$	40,611	$	25,306	$	29,091	$	36,826

NOTE 14. SELECTED QUARTERLY FINANCIAL DATA (unaudited)

The following table sets forth selected quarterly financial data for the fiscal years ended October 31, 2002 and 2001 that is derived from audited consolidated financial statements including those included in the Consolidated Financial Statements. The selected quarterly financial data reflects the August 2002 acquisition of EG&G which was accounted for under the purchase accounting method and also reflects a $7.6 million of loss on extinguishment of debt recorded in the fourth quarter of the fiscal year ended October 31, 2002. The selected quarterly financial data presented below should be read in conjunction with the rest of the information in this report.

URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


			Fiscal 2002 Quarters Ended

			Jan. 31		Apr. 30		July 31		Oct. 31

			(In thousands, except per share data)
Revenues			$	542,998	$	564,410	$	583,937	$	736,482
Operating income			$	35,336	$	39,944	$	42,662	$	28,874
Net income available for common stockholders			$	10,872	$	14,446	$	17,307	$	6,607
Net income			$	13,290	$	16,912	$	18,362	$	6,607
Income per share:
		Basic	$	.60	$	.77	$	.78	$	.22

		Diluted	$	.52	$	.64	$	.70	$	.21

Weighted-average number of shares:
	Basic			18,264		18,701		22,587		30,711

	Diluted			25,570		26,353		26,121		31,211


			Fiscal 2001 Quarters Ended

			Jan. 31		Apr. 30		July 31		Oct. 31

			(In thousands, except per share data)
Revenues			$	515,624	$	545,996	$	591,198	$	666,532
Operating income			$	34,573	$	40,558	$	44,715	$	49,895
Net income available for common stockholders			$	7,241	$	10,646	$	13,352	$	17,384
Net income			$	9,455	$	12,881	$	15,674	$	19,842
Income per share:
		Basic	$	.43	$	.62	$	.76	$	.98

		Diluted	$	.42	$	.55	$	.64	$	.80

Weighted-average number of shares:
	Basic			16,889		17,202		17,695		17,953

	Diluted			22,673		23,621		24,696		24,870

Operating income is defined as income before income taxes and net interest expense.

NOTE 15. SUPPLEMENTAL GUARANTOR INFORMATION

Substantially all of the Company’s domestic subsidiaries have guaranteed the Company’s obligations under the Company’s senior secured credit facility, its 12 1/4% notes due 2009 and its 11 1/2% notes due 2009. Each of the subsidiary guarantors has fully and unconditionally guaranteed the Company’s obligations on a joint and several basis.

In June 1999, the Company issued $200 million in aggregate principal amount of its 12 1/4% notes and, in connection with the EG&G acquisition, the Company issued $200 million in aggregate principal amount due at maturity of its 11 1/2% notes in August 2002. At that time, the Company also replaced its existing senior collateralized credit facility with a new $675 million senior secured credit facility.

Substantially all of the Company’s income and cash flows is generated by its subsidiaries. The Company has no operating assets or operations other than its investments in its subsidiaries. As a result, funds necessary to meet the Company’s debt service obligations are provided in large part by distributions or advances from its subsidiaries. Financial conditions and operating requirements of the subsidiary guarantors may limit the Company’s ability to obtain cash from its subsidiaries for the purposes of meeting its debt service obligations, including the payment of principal and interest on the notes and the senior secured credit facility. In addition, although the terms of the notes and the senior secured credit facilities limit the Company’s and the subsidiary guarantors’ ability to place contractual restrictions on the flows of funds to the Company, legal restrictions, including local regulations, and contractual obligations associated with secured loans, such as equipment financings, at the subsidiary level may restrict the subsidiary guarantors’ ability to pay dividends, make loans or other distributions to the Company.

URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Other restrictions imposed by the notes and senior secured credit facilities include restrictions on the Company’s and the subsidiary guarantors’ ability to:

	•		incur additional indebtedness and contingent obligations;

	•		pay dividends and make distributions to the Company's stockholders;

	•		repurchase or redeem the Company’s stock;

	•		repay indebtedness that is junior to the senior secured credit facility or the outstanding notes;

	•		make investments and other restricted payments;

	•		create liens securing debt or other encumbrances on the Company’s assets;

	•		acquire the assets of, or merge or consolidate with, other companies;

	•		sell or exchange assets;

	•		make capital expenditures;

	•		enter into sale-leaseback transactions; and

	•		enter into transactions with the Company’s shareholders and affiliates.

In addition, if a change of control occurs, each holder of the notes will have the right to require the Company to repurchase all or part of the holder’s notes at a price equal to 101% of the principal amount of the notes, plus any accrued interest to the date of repurchase.

The following information sets forth the condensed consolidating balance sheets of the Company as of October 31, 2002 and 2001, and the condensed consolidating statements of operations and cash flows for the three fiscal years ended October 31, 2002, which includes the financial position and results of operations of EG&G, as a “subsidiary guarantor” from the date of acquisition forward. The EG&G acquisition was accounted for under the purchase accounting method. Entries necessary to consolidate the Company and all of its subsidiaries are reflected in the eliminations column. Separate complete financial statements of the Company and its subsidiaries that guarantee the notes would not provide additional material information that would be useful in assessing the financial composition of such subsidiaries.

URS CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEET
(In thousands)


						October 31, 2002

										Subsidiary
								Subsidiary		Non-
					Parent			Guarantors		Guarantors			Eliminations			Consolidated

	ASSETS
Current assets:
			Cash and cash equivalents		$	(4,000	)	$	11,240	$	2,732		$	—		$	9,972
			Accounts receivable, net			—			854,784		85,432			—			940,216
			Prepaid expenses and other assets			21,516			14,942		1,685			—			38,143

				Total current assets		17,516			880,966		89,849			—			988,331
Property and equipment at cost, net						1,802			142,109		12,613			—			156,524
Goodwill, net						886,649			114,980		—			—			1,001,629
Purchased intangible assets, net						14,500			—		—			—			14,500
Investment in subsidiaries						750,403			—		—			(750,403	)		—
Inter-company notes receivable						5,263			—		(5,263	)		—			—
Other assets						21,805			45,374		929			—			68,108

					$	1,697,938		$	1,183,429	$	98,128		$	(750,403	)	$	2,229,092

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
		Current portion of long-term debt			$	16,200		$	14,016	$	82		$	—		$	30,298
		Accounts payable				(783	)		189,923		15,249			—			204,389
		Accrued expenses and other				62,387			141,484		12,961			—			216,832
		Billings in excess of costs and accrued earnings on contracts in process				—			83,004		9,231			—			92,235

				Total current liabilities		77,804			428,427		37,523			—			543,754
Long-term debt						889,105			33,780		978			—			923,863
Other						50,445			30,292		153			—			80,890

				Total liabilities		1,017,354			492,499		38,654			—			1,548,507
Mandatorily redeemable Series D senior convertible participating preferred stock						46,733			—		—			—			46,733
Total stockholders’ equity						633,851			690,930		59,474			(750,403	)		633,852

					$	1,697,938		$	1,183,429	$	98,128		$	(750,403	)	$	2,229,092

URS CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEET
(In thousands)


						October 31, 2001

									Subsidiary
							Subsidiary		Non-
					Parent		Guarantors		Guarantors		Eliminations			Consolidated

	ASSETS
Current assets:
			Cash and cash equivalents		$	1,699	$	9,371	$	12,328	$	—		$	23,398
			Accounts receivable, net			—		667,009		78,170		—			745,179
			Prepaid expenses and other assets			16,615		17,416		1,034		—			35,065

				Total current assets		18,314		693,796		91,532		—			803,642
Property and equipment at cost, net						820		96,193		9,984		—			106,997
Goodwill, net						385,749		114,537		—		—			500,286
Investment in subsidiaries						660,695		—		—		(660,695	)		—
Other assets						12,489		39,236		726		—			52,451

					$	1,078,067	$	943,762	$	102,242	$	(660,695	)	$	1,463,376

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
		Current portion of long-term debt			$	39,794	$	10,803	$	3,828	$	—		$	54,425
		Accounts payable				1,012		120,414		13,640		—			135,066
		Accrued expenses and other				6,672		68,945		15,597		—			91,214
		Billings in excess of costs and accrued earnings on contracts in process				—		84,411		11,109		—			95,520

				Total current liabilities		47,478		284,573		44,174		—			376,225
Long-term debt						547,954		28,276		474		—			576,704
Other						40,035		27,286		525		—			67,846

				Total liabilities		635,467		340,135		45,173		—			1,020,775
Mandatorily redeemable Series B exchangeable convertible preferred stock						120,099		—		—		—			120,099
Total stockholders’ equity						322,501		603,627		57,069		(660,695	)		322,502

					$	1,078,067	$	943,762	$	102,242	$	(660,695	)	$	1,463,376

URS CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
(In thousands)


		Year Ended October 31, 2002

							Subsidiary
					Subsidiary		Non-
		Parent			Guarantors		Guarantors			Eliminations			Consolidated

Revenues		$	—		$	2,220,478	$	213,090		$	(5,741	)	$	2,427,827
Expenses:
	Direct operating		—			1,384,935		110,192			(5,741	)		1,489,386
	Indirect, general and administrative		30,003			663,368		98,254			—			791,625
	Interest expense, net		53,164			287		2,254			—			55,705

			83,167			2,048,590		210,700			(5,741	)		2,336,716

Income (loss) before taxes			(83,167	)		171,888		2,390			—			91,111
Income tax expense			32,340			229		3,371			—			35,940

Income (loss) before equity in net earnings of subsidiaries			(115,507	)		171,659		(981	)		—			55,171
Equity in net earnings of subsidiaries			170,678			—		—			(170,678	)		—

Net income (loss)			55,171			171,659		(981	)		(170,678	)		55,171
Preferred stock dividend			5,939			—		—			—			5,939

Net income (loss) available for common stockholders			49,232			171,659		(981	)		(170,678	)		49,232
Other comprehensive loss:
	Foreign currency translation adjustments		—			—		(1,170	)		—			(1,170	)

Comprehensive income (loss)		$	49,232		$	171,659	$	(2,151	)	$	(170,678	)	$	48,062


		Year Ended October 31, 2001

								Subsidiary
					Subsidiary			Non-
		Parent			Guarantors			Guarantors			Eliminations			Consolidated

Revenues		$	—		$	2,109,173		$	216,975		$	(6,798	)	$	2,319,350
Expenses:
	Direct operating		—			1,283,880			116,736			(6,798	)		1,393,818
	Indirect, general and administrative		23,787			640,308			91,696			—			755,791
	Interest expense, net		64,455			(3,227	)		4,361			—			65,589

			88,242			1,920,961			212,793			(6,798	)		2,215,198

Income (loss) before taxes			(88,242	)		188,212			4,182			—			104,152
Income tax expense			41,632			1,492			3,176			—			46,300

Income (loss) before equity in net earnings of subsidiaries			(129,874	)		186,720			1,006			—			57,852
Equity in net earnings of subsidiaries			187,726			—			—			(187,726	)		—

Net income (loss)			57,852			186,720			1,006			(187,726	)		57,852
Preferred stock dividend			9,229			—			—			—			9,229

Net income (loss) available for common stockholders			48,623			186,720			1,006			(187,726	)		48,623
Other comprehensive loss:
	Foreign currency translation adjustments		—			—			(1,550	)		—			(1,550	)

Comprehensive income (loss)		$	48,623		$	186,720		$	(544	)	$	(187,726	)	$	47,073

URS CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
(In thousands)


		Year Ended October 31, 2000

							Subsidiary
					Subsidiary		Non-
		Parent			Guarantors		Guarantors			Eliminations			Consolidated

Revenues		$	—		$	1,970,903	$	235,683		$	(1,008	)	$	2,205,578

Expenses:
	Direct operating		—			1,206,921		139,155			(1,008	)		1,345,068
	Indirect, general and administrative		18,810			590,934		87,307			—			697,051
	Interest expense, net		71,085			399		377			—			71,861

			89,895			1,798,254		226,839			(1,008	)		2,113,980

Income (loss) before taxes			(89,895	)		172,649		8,844			—			91,598
Income tax expense			40,246			1,201		253			—			41,700

Income (loss) before equity in net earnings of subsidiaries			(130,141	)		171,448		8,591			—			49,898
Equity in net earnings of subsidiaries			180,039			—		—			(180,039	)		—

Net income (loss)			49,898			171,448		8,591			(180,039	)		49,898
Preferred stock dividend			8,337			—		—			—			8,337

Net income (loss) available for common stockholders			41,561			171,448		8,591			(180,039	)		41,561
Other comprehensive income (loss):
	Foreign currency translation adjustments		—			—		(2,609	)		—			(2,609	)

Comprehensive income (loss)		$	41,561		$	171,448	$	5,982		$	(180,039	)	$	38,952

URS CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
(In thousands)


			Year Ended October 31, 2002

									Subsidiary
						Subsidiary			Non-
			Parent			Guarantors			Guarantors			Eliminations			Consolidated

Cash flows from operating activities:
	Net income (loss)		$	55,171		$	171,659		$	(981	)	$	(170,678	)	$	55,171

Adjustments to reconcile net income to net cash provided by operating activities:
	Depreciation and amortization			417			29,482			2,900			—			32,799
	Amortization of financing fees			4,220			—			—			—			4,220
	Loss on extinguishment of debt			7,620			—			—			—			7,620
	Receivable allowances			—			(185	)		1,879			—			1,694
	Deferred income taxes			2,373			—			—			—			2,373
	Stock compensation			2,345			—			—			—			2,345
	Tax benefit of stock options			3,745			—			—			—			3,745
	Equity in net earnings of subsidiaries			(170,678	)		—			—			170,678			—
Changes in current assets and liabilities, net of business acquired:
	Accounts receivable and costs and accrued earnings in excess of billings on contracts in process			—			(50,518	)		(9,140	)		—			(59,658	)
	Income taxes recoverable			—			—			—			—			—
	Prepaid expenses and other assets			2,167			7,226			(655	)		—			8,738
	Accounts payable, accrued salaries and wages and accrued expenses			114,487			(103,572	)		7,627			2,972			21,514
	Billings in excess of costs and accrued earnings on contracts in process			—			(1,843	)		(1,878	)		—			(3,721	)
	Deferred compensation and other, net			10,273			4,006			(575	)		(2,972	)		10,732

		Total adjustments		(23,031	)		(115,404	)		158			170,678			32,401

	Net cash provided (used) by operating activities			32,140			56,255			(823	)		—			87,572

Cash flows from investing activities:
	Payment for business acquisition, net of cash acquired			(340,540	)		—			—			—			(340,540	)
	Proceeds from sale of a division			—			5,840			—			—			5,840
	Capital expenditures			(1,262	)		(45,692	)		(5,504	)		—			(52,458	)

	Net cash used by investing activities			(341,802	)		(39,852	)		(5,504	)		—			(387,158	)

Cash flows from financing activities:
	Proceeds from issuance of debt			794,494			—			—			—			794,494
	Principal payments on long-term debt, bank borrowings and capital lease obligations			(477,895	)		(14,534	)		(3,269	)		—			(495,698	)
	Proceeds from sale of common shares and exercise of stock options			17,003			—			—			—			17,003
	Payment of financing fees			(29,639	)		—			—			—			(29,639	)

	Net cash provided (used) by financing activities			303,963			(14,534	)		(3,269	)		—			286,160

Net (decrease) increase in cash				(5,699	)		1,869			(9,596	)		—			(13,426	)
Cash and cash equivalents at beginning of year				1,699			9,371			12,328			—			23,398

Cash and cash equivalents at end of year			$	(4,000	)	$	11,240		$	2,732		$	—		$	9,972

URS CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
(In thousands)


		Year Ended October 31, 2001

								Subsidiary
					Subsidiary			Non-
		Parent			Guarantors			Guarantors			Eliminations			Consolidated

Cash flows from operating activities:
	Net income (loss)	$	57,852		$	186,720		$	1,006		$	(187,726	)	$	57,852

Adjustments to reconcile net income to net cash provided by operating activities:
	Depreciation and amortization		10,552			29,474			2,117			—			42,143
	Amortization of financing fees		3,663			—			—			—			3,663
	Receivable allowances		(7,814	)		(2,092	)		1,652			—			(8,254	)
	Deferred income taxes		(3,894	)		—			—			—			(3,894	)
	Stock compensation		1,964			—			—			—			1,964
	Tax benefit of stock options		3,899			—			—			—			3,899
	Equity in net earnings of subsidiaries		(187,726	)		—			—			187,726			—
Changes in current assets and liabilities:
	Accounts receivable and costs and accrued earnings in excess of billings on contracts in process		—			(30,566	)		2,646			—			(27,920	)
	Income taxes recoverable		4,997			—			—			—			4,997
	Prepaid expenses and other assets		(4,002	)		98			(1,640	)		—			(5,544	)
	Accounts payable, accrued salaries and wages and accrued expenses		128,275			(139,175	)		(96	)		2,512			(8,484	)
	Billings in excess of costs and accrued earnings on contracts in process		—			242			4,803			—			5,045
	Deferred compensation and other, net		619			(6,340	)		(10,184	)		(2,512	)		(18,417	)

	Total adjustments		(49,467	)		(148,359	)		(702	)		187,726			(10,802	)

	Net cash provided by operating activities		8,385			38,361			304			—			47,050

Cash flows from investing activities:
	Proceeds from sale of subsidiaries		—			3,530			—			—			3,530
	Capital expenditures		(528	)		(18,184	)		(1,066	)		—			(19,778	)

	Net cash used by investing activities		(528	)		(14,654	)		(1,066	)		—			(16,248	)

Cash flows from financing activities:
	Principal payments on long-term debt, bank borrowings and capital lease obligations		(28,831	)		(8,516	)		(5,522	)		—			(42,869	)
	Proceeds from sale of common shares and exercise of stock options		11,772			—			—			—			11,772

	Net cash used by financing activities		(17,059	)		(8,516	)		(5,522	)		—			(31,097	)

Net (decrease) increase in cash			(9,202	)		15,191			(6,284	)		—			(295	)
Cash and cash equivalents at beginning of year			10,901			(5,820	)		18,612			—			23,693

Cash and cash equivalents at end of year		$	1,699		$	9,371		$	12,328		$	—		$	23,398

URS CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
(In thousands)


				Year Ended October 31, 2000

										Subsidiary
							Subsidiary			Non-
				Parent			Guarantors			Guarantors			Eliminations			Consolidated

Cash flows from operating activities:
		Net income (loss)		$	49,898		$	171,448		$	8,591		$	(180,039	)	$	49,898

Adjustments to reconcile net income to net cash provided (used) by operating activities:
		Depreciation and amortization			10,130			28,908			2,791			—			41,829
		Amortization of financing fees			3,467			—			—			—			3,467
		Receivable allowances			(7,186	)		6,202			(2,801	)		—			(3,785	)
		Deferred income taxes			23,036			—			—			—			23,036
		Stock compensation			1,179			—			—			—			1,179
		Tax benefit of stock options			2,455			—			—			—			2,455
		Equity in net earnings of subsidiaries			(180,039	)		—			—			180,039			—
Changes in current assets and liabilities:
	Accounts receivable and costs and accrued earnings in excess of billings on contracts in process				—			(50,409	)		11,150			—			(39,259	)
	Income taxes recoverable				(16,668	)		—			—			—			(16,668	)
	Prepaid expenses and other assets				(3,788	)		1,111			1,453			—			(1,224	)
	Accounts payable, accrued salaries and wages and accrued expenses				162,130			(187,886	)		(29,691	)		27,827			(27,620	)
	Billings in excess of costs and accrued earnings on contracts in process				—			18,136			2,026			—			20,162
	Deferred compensation and other, net				(35,904	)		8,670			12,615			(27,827	)		(42,446	)

			Total adjustments		(41,188	)		(175,268	)		(2,457	)		180,039			(38,874	)

	Net cash provided (used) by operating activities				8,710			(3,820	)		6,134			—			11,024

Cash flows from investing activities:
	Proceeds from sale of subsidiaries				25,354			—			—			—			25,354
	Capital expenditures				(118	)		(14,404	)		(1,363	)		—			(15,885	)

	Net cash provided (used) by investing activities				25,236			(14,404	)		(1,363	)		—			9,469

Cash flows from financing activities:
	Principal payments on long-term debt, bank borrowings and capital lease obligations				(37,806	)		(4,624	)		(8,096	)		—			(50,526	)
	Proceeds from sale of common shares and exercise of stock options				8,039			—			—			—			8,039

	Net cash used by financing activities				(29,767	)		(4,624	)		(8,096	)		—			(42,487	)

Net (decrease) increase in cash					4,179			(22,848	)		(3,325	)		—			(21,994	)
Cash and cash equivalents at beginning of year					6,722			17,028			21,937			—			45,687

Cash and cash equivalents at end of year				$	10,901		$	(5,820	)	$	18,612		$	—		$	23,693

PART IV

ITEM 15. EXHIBITS. FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a)

Documents Filed as Part of this Report.

(1)

Item 8. Consolidated Financial Statements and Supplementary Data.

	•		Report of Independent Accountants.

	•		Consolidated Balance Sheets as of October 31, 2002 and October 31, 2001.

	•		Consolidated Statements of Operations and Comprehensive Income for the fiscal years ended October 31, 2002, 2001 and 2000.

	•		Consolidated Statements of Changes in Stockholders’ Equity for the fiscal years ended October 31, 2002, 2001 and 2000.

	•		Consolidated Statements of Cash Flows for the fiscal years ended October 31, 2002, 2001 and 2000.

	•		Notes to Consolidated Financial Statements.

			Schedules are omitted because they are not applicable, not required or because the required information is included in the Consolidated Financial Statements or Notes thereto.

	(2)		Exhibits.

	2.1		Agreement and Plan of Merger, dated May 5, 1999, by and among Dames & Moore Group, URS Corporation and Demeter Acquisition Corporation, filed as Exhibit 2.1 to our Current Report on Form 8-K, dated May 7, 1999, and incorporated herein by reference.

	2.2		Agreement and Plan of Merger, by and among URS Corporation, URS Holdings, Inc., URS-LSS Holdings, Inc., Carlyle-EGG Holdings Corp., Lear Siegler Services, Inc., and EGG Technical Services Holdings, LLC, filed as Exhibit 2.1 to our Current Report on Form 8-K, dated July 26, 2002, and incorporated herein by reference.

	3(i)		Certificate of Incorporation of URS Corporation, filed as Exhibit 3.1 to our Annual Report on Form 10-K for the fiscal year ended October 31, 1991 (the “1991 Form 10-K”), and incorporated herein by reference.

	3(ii)		Bylaws of URS Corporation, filed as Exhibit 3(ii) to the Form 10-Q for the quarter ended July 31, 1999, and incorporated herein by reference.

	4.1		Indenture, dated as of February 15, 1987, between URS Corporation and First Interstate Bank of California, Trustee, relating to $57.5 million of our 6 1/2% Convertible Subordinated Debentures Due 2012, filed as Exhibit 4.10 to our Registration Statement on Form S-2 (Commission File No. 33-11668), and incorporated herein by reference.

	4.2		Amendment Number 1 to Indenture governing 6 1/2% Convertible Subordinated Debentures due 2012, dated February 21, 1990, between URS Corporation and First Interstate Bank of California, Trustee, filed as Exhibit 4.9 to our Registration Statement on Form S-1 (Commission File No. 33-56296) (the “1990 Form S-1”), and incorporated herein by reference.

	4.3		Indenture, dated as of March 16, 1989, between URS Corporation and MTrust Corp., National Association, Trustee relating to our 8 5/8% Senior Subordinated Debentures due 2004, filed as Exhibit 13C to our Form T-3 under the Trust Indenture Act of 1939 (Commission File No. 22-19189), and incorporated herein by reference.

	4.4		Amendment Number 1 to Indenture governing 8 5/8% Senior Subordinated Debentures due 2004, dated as of April 7, 1989, filed as Exhibit 4.11 to the 1990 Form S-1, and incorporated herein by reference.

	4.5		Amendment Number 2 to Indenture governing 8 5/8% Senior Subordinated Debentures due 2004, dated February 21, 1990, between URS Corporation and MTrust Corp. National Association, Trustee, filed as Exhibit 4.12 to the 1990 Form S-1, and incorporated herein by reference.

	4.6		Credit Agreement, dated as of June 9, 1999, by and among URS Corporation, the lenders named therein, Wells Fargo Bank, N.A., as Co-Lead Arranger and Administrative Agent, and Morgan Stanley Senior Funding, Inc., as Co-Lead Arranger and Syndication Agent, filed as Exhibit 2.2 to our Current Report on Form 8-K, dated June 11, 1999, and incorporated herein by reference.

	4.7		Note Purchase Agreement, dated as of June 9, 1999, by and between Morgan Stanley Senior Funding, Inc. and URS Corporation, filed as Exhibit 2.3 to our Current Report on Form 8-K, dated June 11, 1999, and incorporated herein by reference.

	4.8		Securities Purchase Agreement, dated as of May 5, 1999, by and between RCBA Strategic Partners, L.P. and URS Corporation, filed as Exhibit 2.4 to our Current Report on Form 8-K, dated June 11, 1999, and incorporated herein by reference.

	4.9		Indenture, dated as of June 23, 1999, by and among Firststar Bank of Minnesota, N.A., URS Corporation and Subsidiary Guarantors defined therein relating to our 12 1/4% Senior Subordinated Notes due 2009, filed as Exhibit 2.5 to our Current Report on Form 8-K, dated July 1, 1999, and incorporated herein by reference.

	4.10		Registration Rights Agreement, dated June 23, 1999, by and among Morgan Stanley & Co. Incorporated, URS Corporation and the Guarantors listed therein, filed as Exhibit 2.6 to our Current Report on Form 8-K, dated July 1, 1999, and incorporated herein by reference.

	4.11		Placement Agreement, dated June 18, 1999, by and among Morgan Stanley & Co. Incorporated, URS Corporation and the Guarantors named therein, filed as Exhibit 2.7 to our Current Report on Form 8-K, dated July 1, 1999, and incorporated herein by reference.

	4.12		Form of URS Corporation 12 1/4% Senior Subordinated Notes due 2009, included as an exhibit to Exhibit 4.9, filed as Exhibit 2.5 to our Current Report on Form 8-K, dated July 1, 1999, and incorporated herein by reference.

	4.13		Form of URS Corporation 12 1/4% Senior Subordinated Exchange Notes due 2009, included as an exhibit to Exhibit 4.9, filed as Exhibit 2.5 to our Current Report on Form 8-K, dated July 1, 1999, and incorporated herein by reference.

	4.14		Certificate of Designation of Series A Preferred Stock of URS Corporation, included as an exhibit to Exhibit 4.8, filed as Exhibit 2.4 to our Current Report on Form 8-K, dated June 11, 1999, and incorporated herein by reference.

	4.15		Certificate of Designation of Series B Preferred Stock of URS Corporation, included as an exhibit to Exhibit 4.8, filed as Exhibit 2.4 to our Current Report on Form 8-K, dated June 11, 1999, and incorporated herein by reference.

	4.16		Certificate of Designation of Series C Preferred Stock of URS Corporation, included as an exhibit to Exhibit 4.8, filed as Exhibit 2.4 to our Current Report on Form 8-K, dated June 11, 1999, and incorporated herein by reference.

	4.17		Voting agreement, by and among URS Corporation, Carlyle-EGG, L.L.C., and EGG Technical Services Holdings, L.L.C., filed as Exhibit 2.2 to our Current Report on Form 8-K, dated July 26, 2002, and incorporated herein by reference.

	4.18		Voting Agreement, by and among URS Corporation, Blum Capital Partners, L.P., Blum Strategic Partners, L.P., BK Capital Partners IV, L.P., Stinson Capital Partners III, L.P., Stinson Capital Partners II, L.P., Stinson Capital Partners, L.P., and Stinson Capital Fund (CAYMAN), LTD. filed as Exhibit 2.3 to our Current Report on Form 8-K, dated July 26, 2002, and incorporated herein by reference.

	4.19		Voting Agreement, by and between URS Corporation and Martin M. Koffel, filed as Exhibit 2.4 to our Current Report on Form 8-K, dated July 26, 2002, and incorporated herein by reference.

	4.20		Voting Agreement, by and between URS Corporation and Kent P. Ainsworth, filed as Exhibit 2.5 to our Current Report on Form 8-K, dated July 26, 2002, and incorporated herein by reference.

	4.21		Certificate of Designation of Series D Senior Convertible Participating Preferred Stock, filed as Exhibit 99.4 to our Current Report on Form 8-K, dated September 5, 2002 and incorporated herein by reference.

	4.22		Certificate of Designation of Series E Senior Cumulative Convertible Participating Preferred Stock of URS Corporation, filed as Exhibit 99.5 to our Current Report on Form 8-K, dated September 5, 2002, and incorporated herein by reference.

	4.23		Indenture among URS Corporation, the issuer, and the Subsidiary Guarantors, as guarantors, and U.S. Bank, N.A., as trustee, on 11 1/2% Senior Notes due 2009, filed as Exhibit 99.7 to our Current Report on Form 8-K, dated September 5, 2002, and incorporated herein by reference.

	4.24		Second Supplemental Indenture, by and among URS Corporation, the Restricted Subsidiaries of the Company, and U.S. Bank, N.A., previously known as Firstar Bank of Minnesota, N.A., as trustee, on 11 1/2% Senior Notes due 2009, filed as Exhibit 99.8 to our Current Report on Form 8-K, dated September 5, 2002, and incorporated herein by reference.

	4.25		Registration Rights Agreement, by and among URS Corporation, Wells Fargo Securities, LLC, BNP Paribas Securities Corp., The Royal Bank of Scotland plc, BMO Nesbitt Burns Corp., ING Financial Markets LLC, and Credit Suisse First Boston Corporation on 11 1/2% Senior Notes due 2009, filed as Exhibit 99.9 to our Current Report on Form 8-K, dated September 5, 2002, and incorporated herein by reference.

	4.26		Credit Agreement, dated as of August 22, 2002, by and among URS Corporation, the lenders named therein, Credit Suisse First Boston Corporation, as co-lead Arranger and Administrative Agent, and Wells Fargo Bank, National Association, as co-lead Arranger and Syndication Agent, filed as Exhibit 99.10 to our Current Report on Form 8-K, dated September 5, 2002, and incorporated herein by reference.

	4.27		Escrow Agreement, entered into as of August 22, 2002, by and among URS Corporation, URS Holdings, Inc., URS-LSS Holdings, Inc, EG&G Technical Services Holdings, and State Street Bank and Trust Company of California, N.A., filed as Exhibit 99.3 to our Current Report on Form 8-K, dated September 5, 2002, and incorporated herein by reference.

	10.1*		1991 Stock Incentive Plan of URS Corporation, as amended effective December 17, 1996, filed as Appendix A to our definitive proxy statement for the 1997 Annual Meeting of Stockholders, filed with the SEC on February 13, 1997, and incorporated herein by reference.

	10.2*		Employee Stock Purchase Plan of URS Corporation, as amended effective October 12, 1999, filed as Exhibit A to our definitive proxy statement for the 1999 Special Meeting of Stockholders, filed with the SEC on September 7, 1999, and incorporated herein by reference.

	10.3*		1999 Equity Incentive Plan of URS Corporation, effective October 12, 1999, filed as Exhibit B to our definitive proxy statement for the 1999 Special Meeting of Stockholders, filed with the SEC on September 7, 1999, and incorporated herein by reference.

	10.4*		Non-Executive Directors Stock Grant Plan of URS Corporation, adopted December 17, 1996, filed as Exhibit 10.5 to our Annual Report on Form 10-K for the fiscal year ended October 31, 1996, and incorporated herein by reference.

	10.5*		Selected Executive Deferred Compensation Plan of URS Corporation, filed as Exhibit 10.3 to the 1990 Form S-1, and incorporated herein by reference.

	10.6*		1999 Incentive Compensation Plan of URS Corporation, filed as Appendix A to our definitive proxy statement for the 1999 Annual Meeting of Shareholders, filed with the SEC on February 17, 1999, and incorporated herein by reference.

	10.7*		Non-Executive Directors Stock Grant Plan, as amended, filed as Exhibit 10.1 to our Form 10-Q for the quarter ended January 31, 1998, and incorporated herein by reference.

	10.8*		Contingent Restricted Stock Award Agreement, dated as of December 16, 1997, between URS Corporation and Martin M. Koffel, filed as Exhibit 10.12 to our Annual Report on Form 10-K for the fiscal year ended October 31, 1998 (the “1998 Form 10-K”), and incorporated herein by reference.

	10.9*		Contingent Restricted Stock Award Agreement, dated as of December 16, 1997, between URS Corporation and Kent P. Ainsworth, filed as Exhibit 10.13 to the 1998 Form 10-K, and incorporated herein by reference.

	10.10*		Employment Agreement, dated December 16, 1991, between URS Corporation and Martin M. Koffel, filed as Exhibit 10.13 to the 1991 Form 10-K, and incorporated herein by reference.

	10.11*		Employment Agreement, dated September 8, 2000, between URS Corporation and Kent P. Ainsworth, filed as Exhibit 10.11 to our Annual Report on Form 10-K for the fiscal year ended October 31, 2000 (the “2000 Form 10-K”), and incorporated herein by reference.

	10.12*		Employment Agreement, dated October 12, 2000, between URS Corporation and Irwin L. Rosenstein, filed as Exhibit 10.12 to the 2000 Form 10-K, and incorporated herein by reference.

	10.13*		Employment Agreement, dated November 1, 1997, between Woodward-Clyde Group, Inc. and Jean-Yves Perez, filed as Exhibit 10.1 to our Form 10-Q for the quarter ended April 30, 1998, and incorporated herein by reference.

	10.14*		Employment Agreement, dated as of September 8, 2000, between URS Corporation and Joseph Masters, filed as Exhibit 10.26 to our Annual Report on Form 10-K for the fiscal year ended October 31, 1999 (the “1999 Form 10-K”), and incorporated herein by reference.

	10.15*		Amendment to Employment Agreement, dated as of October 13, 1998, between URS Corporation and Martin M. Koffel, filed as Exhibit 10.21 to the 1998 Form 10-K, and incorporated herein by reference.

	10.16*		Form of Amendment to Employment Agreement, dated as of October 13, 1998, between URS Corporation, URS Greiner Woodward-Clyde Consultants, Inc., or URS Greiner Woodward-Clyde, Inc. and each of Martin Tanzer, and Jean-Yves Perez, filed as Exhibit 10.22 to the 1998 Form 10-K, and incorporated herein by reference.

	10.17*		Employment Agreement, dated November 19, 1999, between URS Corporation and David C. Nelson, filed as Exhibit 10.1 to our Form 10-Q for the quarter ended July 31, 2000, and incorporated herein by reference.

	10.18*		Employment Agreement, dated December 17, 2001, between URS Corporation and Mark H. Perry, filed as Exhibit 10.18 to our Annual Report on Form 10-K for fiscal year ended October 31, 2001, and incorporated herein by reference.

	10.19		Registration Rights Agreement, dated February 21, 1990, by and among URS Corporation, Wells Fargo Bank, N.A. and the Purchaser Holders named therein, filed as Exhibit 10.33 to the 1990 Form S-1, and incorporated herein by reference.

	10.20		Form of Indemnification Agreement, filed as Exhibit 10.34 to our Annual Report on Form 10-K for the fiscal year ended October 31, 1992, and incorporated herein by reference; dated as of May 1, 1992, between URS Corporation and each of Messrs. Ainsworth, Blum, Koffel, Madden, Praeger, Rosenstein and Walsh; dated as of March 22, 1994, between URS Corporation and each of Admiral Foley and Mr. Der Marderosian; dated as of August 5, 1999, between URS Corporation and Marie L. Knowles; dated as of January 20, 1997, between URS Corporation and Mr. Masters; and dated as of November 17, 1997, between URS Corporation and Mr. Perez.

	10.21		Agreement and Plan of Merger, dated August 18, 1997, by and among URS Corporation, Woodward-Clyde Group, Inc. and W-C Acquisition Corporation, filed as Exhibit 2.1 to our Current Report on Form 8-K, filed on August 21, 1997, and incorporated herein by reference.

	10.22		Credit Agreement, dated as of November 14, 1997, between URS Corporation, the Financial Institutions listed therein as Lenders and Wells Fargo Bank, National Association, as Administrative Agent for the Lenders, filed as Exhibit 2.2 to our Current Report on Form 8-K, filed on November 26, 1997, and incorporated herein by reference.

	10.23*		URS Corporation Supplemental Executive Retirement Agreement, dated as of July 13, 1999, between Martin M. Koffel and URS Corporation, filed as Exhibit 10.1 to our Form 10-Q for the quarter ended July 31, 1999, and incorporated herein by reference.

	10.24*		URS Corporation 1991 Stock Incentive Plan Nonstatutory Stock Option Agreement, dated as of March 23, 1999, between URS Corporation and Martin M. Koffel, filed as Exhibit 10.2 to our Form 10-Q for the quarter ended July 31, 1999, and incorporated herein by reference.

	10.25*		Stock Option Agreement, dated as of November 5, 1999, between URS Corporation and Martin M. Koffel, filed as Exhibit 10.24 to the 1999 Form 10-K, and incorporated herein by reference.

	10.26*		Stock Option Agreement, dated as of November 5, 1999, between URS Corporation and Kent P. Ainsworth, filed as Exhibit 10.25 to the 1999 Form 10-K, and incorporated herein by reference.

	10.27*		Stock Option Agreement, dated as of November 5, 1999, between URS Corporation and Joseph Masters, filed as Exhibit 10.26 to the 1999 Form 10-K, and incorporated herein by reference.

	10.28*		URS Corporation 1999 Equity Incentive Plan Restricted Stock Award Agreement, dated as of April 25, 2001, between Martin M. Koffel and URS Corporation, filed as Exhibit 10.1 to our Form 10-Q for the quarter ended April 30, 2001, and incorporated herein by reference.

	10.29*		Form of URS Corporation 1999 Equity Incentive Plan Nonstatutory Stock Option Agreement, by and between URS Corporation and each of Martin M. Koffel, Kent P. Ainsworth, Joseph Masters and Irwin L. Rosenstein, reflecting grants dated as of April 25, 2001, filed as Exhibit 10.2 to our Form 10-Q for the quarter ended April 30, 2001, and incorporated herein by reference.

	10.30*		Employment Agreement, by and among George R. Melton and URS Corporation, dated August 23, 2002, filed as Exhibit 99.6 to our Current Report on Form 8-K, dated September 5, 2002, and incorporated herein by reference.

	21.1		Subsidiaries of URS Corporation. PREVIOUSLY FILED.

	23.1		Consent of Independent Accountants. FILED HEREWITH.

	24.1		Powers of Attorney of URS Corporation’s directors and officers. PREVIOUSLY FILED.

	99.1		Certification of the Company’s Chief Executive Officer, Martin M. Koffel, pursuant to Section 906 of the Sarbanes-Oxley act of 2002. 99.2 Certification of the Company’s Chief Financial Officer, Kent P. Ainsworth, pursuant to Section 906 of the Sarbanes-Oxley act of 2002.

			* Represents a management contract or compensatory plan or arrangement.

(b)

Reports on Form 8-K.

We filed the following reports on Form 8-K during the quarter ended October 31, 2002:

	•		Form 8-K, dated August 2, 2002, to furnish unaudited pro forma combined financial information of the Company, the Carlyle-EGG Holdings Corp. and Lear Siegler Services, Inc for the period ended April 30, 2002 pursuant to Item 9 of Form 8-K. Such information shall not be deemed to be “filed” for the purpose of Section 18 of the Act (or otherwise subject to the liabilities of that section) and shall not be deemed incorporated by reference into this report on Form 10-K.

	•		Form 8-K, dated August 5, 2002, to file a press release regarding the offering of senior notes in a private placement.

	•		Form 8-K, dated August 19, 2002, to furnish updated unaudited pro forma combined financial information of the Company, the Carlyle-EGG Holdings Corp. and Lear Siegler Services, Inc. pursuant to Item 9 of Form 8-K. Such information shall not be deemed to be “filed” for the purpose of Section 18 of the Act (or otherwise subject to the liabilities of that section) and shall not be deemed incorporated by reference into this report on Form 10-K.

	•		Form 8-K, dated September 5, 2002, to report the closing of the acquisition of Carlyle-EG&G Holdings Corp. and Lear Siegler Services, Inc.

	•		Form 8-K, dated September 9, 2002, to report the certifications of the financial statements by principal executive officer and financial officer pursuant to Item 9 of Form 8-K. Such information shall not be deemed to be “filed” for the purpose of Section 18 of the Act (or otherwise subject to the liabilities of that section) and shall not be deemed incorporated by reference into this report on Form 10-K.

We filed the following reports subsequent to the quarter ended October 31, 2002:

	•		Form 8-K/A, dated November 5, 2002, to amend the Form 8-K, dated September 5, 2002, and to furnish pro forma audited and unaudited consolidated financial information of EGG Technical Services, Inc. and Subsidiary, and Lear Siegler Services, Inc. and Subsidiaries and to furnish unaudited pro forma condensed combined financial information of URS Corporation and its subsidiaries giving effect to the EGG Acquisition and the related financing as if they had occurred on November 1, 2000.

	•		Form 8-K, dated November 15, 2002, to furnish financial information within the Consolidated Financial Statements as if the Company adopted Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (SFAS 142) at November 1, 1998.

	•		Form 8-K, dated December 23, 2002, to report the fourth-quarter and year-end results for the period and year ended October 31, 2002 pursuant to Item 9 of Form 8-K. Such information shall not be deemed to be “filed” for the purpose of Section 18 of the Act (or otherwise subject to the liabilities of that section) and shall not be deemed incorporated by reference into this report on Form 10-K.

SIGNATURES

Pursuant to the requirements of Section 13 or 19(d) of the Securities Exchange Act of 1934, URS Corporation, the Registrant, has duly caused this Amendment No. 1 to Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.


	URS Corporation
	(Registrant)

	By	/s/ Kent P. Ainsworth

		Kent P. Ainsworth
		Executive Vice President and
		Chief Financial Officer
		Dated: July 23, 2003

Pursuant to the requirements of the Securities Exchange Act of 1934, this Amendment No. 1 to Form 10-K has been signed below by the following persons on behalf of the Registrant in the capacities and on the date indicated.


Signature	Title	Date


/s/ MARTIN M. KOFFEL (Martin M. Koffel)	Chairman of the Board of Directors and Chief Executive Officer	July 23, 2003

/s/ KENT P. AINSWORTH (Kent P. Ainsworth)	Executive Vice President, Chief Financial Officer, Principal Accounting Officer and Secretary	July 23, 2003

/s/ RICHARD C. BLUM* (Richard C. Blum)	Director	July 23, 2003

/s/ ARMEN DER MARDEROSIAN* (Armen Der Marderosian)	Director	July 23, 2003

/s/ ADM. S. ROBERT FOLEY, JR., USN (RET)* (Adm. S. Robert Foley, Jr., USN (Ret.))	Director	July 23, 2003

(Mickey P. Foret)	Director	July 23, 2003


Signature	Title	Date


/s/ MARIE L. KNOWLES* (Marie L. Knowles)	Director	July 23, 2003

/s/ JOSEPH E. LIPSCOMB* (Joseph E. Lipscomb)	Director	July 23, 2003

/s/ RICHARD B. MADDEN* (Richard B. Madden)	Director	July 23, 2003

/s/ GEORGE R. MELTON* (George L. Melton)	Director	July 23, 2003

(John D. Roach)	Director	July 23, 2003

/s/ IRWIN L. ROSENSTEIN* (Irwin L. Rosenstein)	Director	July 23, 2003

/s/ WILLIAM D. WALSH* (William D. Walsh)	Director	July 23, 2003

*By /s/ Kent P. Ainsworth (Kent P. Ainsworth, Attorney-in-fact)

CERTIFICATIONS

I, Martin M. Koffel, certify that:

1)		I have reviewed this annual report on Form 10-K/A of URS Corporation;

2)		Based on my knowledge, this annual 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 annual report;

3)		Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual report;

4)		The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

	a)		designed such disclosure controls and procedures 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 annual report is being prepared;

	b)		evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

	c)		presented in the annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

	a)		all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

	b)		any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

The registrant’s other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.


Date: July 23, 2003	/s/ Martin M. Koffel

	Martin M. Koffel
	Chief Executive Officer

CERTIFICATIONS

I, Kent P. Ainsworth, certify that:

1)		I have reviewed this annual report on Form 10-K/A of URS Corporation;

2)		Based on my knowledge, this annual 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 annual report;

3)		Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual report;

4)		The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

	a.		designed such disclosure controls and procedures 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 annual report is being prepared;

	b.		evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

	c.		presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

	a.		all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

	b.		any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and


Date: July 23, 2003	/s/ Kent P. Ainsworth

	Kent P. Ainsworth
	Chief Financial Officer

EXHIBIT INDEX


Exhibit No.		Description

21.1		Subsidiaries of URS Corporation. PREVIOUSLY FILED.

23.1		Consent of Independent Accountants.

24.1		Powers of Attorney of URS Corporation’s directors and officers. PREVIOUSLY FILED.

99.1		Certification of the Company’s Chief Executive Officer, Martin M. Koffel, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99.2		Certification of the Company’s Chief Financial Officer, Kent P. Ainsworth, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Urs (URS) Inactive 10-K/A2002 FY Annual report (amended)