Exhibit 99.1
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Contacts: | | |
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URS Corporation | | Citigate Sard Verbinnen |
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Kent P. Ainsworth | | Hugh Burns/Jamie Tully |
Executive Vice President | | (212) 687-8080 |
& Chief Financial Officer | | |
OR | | |
David C. Nelson | | |
Vice President & Corporate Treasurer | | |
(415) 774-2700 | | |
URS CORPORATION REPORTS SECOND QUARTER
RESULTS FOR FISCAL 2004
Quarterly EPS In Line With Guidance
Proceeds from Stock Offering will Lower Interest Costs
and Reduce Debt-to-Capitalization Ratio to Approximately 35%
SAN FRANCISCO, CA – June 14, 2004– URS Corporation (NYSE: URS) today reported revenues of $864.7 million for the second quarter of fiscal 2004, an increase of 6% from $812.6 million in revenues reported for the second quarter of fiscal 2003. Net income was $19.7 million, an increase of 27% from $15.6 million reported for the corresponding second quarter of fiscal 2003. Earnings per share (“EPS”) of $0.54, fully diluted, were up 13% as compared with EPS of $0.48 per share, fully diluted, for the year-ago period. During the second quarter of fiscal 2004, the Company generated operating cash flow of $34 million and paid down debt by $22 million.
For the six months ended April 30, 2004, revenues increased 4% to $1.636 billion, from $1.571 billion for the first six months of fiscal 2003. Net income for the six months ended April 30, 2004 was $28.3 million, or $0.78 per share fully diluted, compared to $21.5 million, or $0.66 per share fully diluted, for the same period last year.
As of April 30, 2004, the Company’s backlog was $3.935 billion, compared to $3.662 billion as of October 31, 2003.
Commenting on the Company’s financial results, Martin M. Koffel, Chairman and Chief Executive Officer, stated: “Our business is performing very well, and our second quarter results
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were squarely in line with our guidance. Our federal sector business continues to generate strong growth, primarily as a result of increasing operations and maintenance work for the Department of Defense. At the same time, the diversity of our business portfolio and strong relationships with key clients across the country have allowed us to benefit from pockets of strength in the state and local government and private sectors. We remain strongly positioned to benefit from recoveries in those sectors.”
Commenting on the Company’s stock offering and related note redemptions, Mr. Koffel said: “Our successful stock offering and planned note redemptions represent a major milestone in the strengthening of our balance sheet. Since August of 2002, when we acquired EG&G and significantly increased our presence in the growing federal market, URS has been steadily making progress toward our long-term goal of reducing debt-to-capitalization to below 40%. When these transactions are complete, we will further reduce our debt-to-capitalization ratio to approximately 35%, meeting our debt reduction goal well ahead of schedule.”
“In addition to strengthening our balance sheet, the note redemptions will enhance URS’ profitability by reducing our interest expense by approximately $14.5 million during the remainder of fiscal 2004 and $30 million annually.”
Business Segments
In addition to providing consolidated financial results, URS provides separate financial information for its two segments: the URS Division and the EG&G Division. The URS Division includes the Company’s work in the state and local government market, the private sector and the international business. In addition, the URS Division includes the Company’s federal business that existed prior to the acquisition of EG&G, which consists primarily of facilities and environmental work. The EG&G Division primarily serves the federal government market, providing a range of operations and maintenance, and systems engineering and technical support services to the Departments of Defense, Homeland Security, Justice, Energy and Treasury, among others.
URS Division.For the second quarter of fiscal 2004, the URS Division reported revenues of $581.1 million and operating income of $45.7 million, compared to revenues of $579.1 million and operating income of $42.9 million for the corresponding second quarter of the 2003 fiscal year.
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For the six months ended April 30, 2004, the URS Division reported revenues of $1,108.6 million and operating income of $76.7 million, compared to revenues of $1,115.2 million and operating income of $75.6 million for the same period last year.
EG&G Division.For the second quarter of 2004, the EG&G Division reported revenues of $284.4 million and operating income of $14.4 million, compared to revenues of $233.5 million and operating income of $12.2 million for the 2003 second quarter.
For the six months ended April 30, 2004, the EG&G Division reported revenues of $528.8 million and operating income of $25.0 million, compared to revenues of $455.4 million and operating income of $20.8 million for the same period last year.
Equity Offering and Subsequent Note Redemptions
As previously disclosed, during the second quarter, URS completed a public offering of 8.1 million shares of its Common Stock at a price of $26.50 per share, including 601,900 shares sold upon partial exercise of the underwriters’ over-allotment option, for total net proceeds of $204.3 million, net of underwriting discounts, commissions and other expenses. Because the additional shares will only be issued and outstanding for a portion of fiscal 2004, the increase in outstanding shares for the purpose of calculating 2004 earnings per share will be approximately four million.
The Company is using the proceeds from the equity offering, along with $60 million in borrowings under its existing Senior Secured Credit Agreement to redeem $70 million of its 11 1/2% Senior Notes due 2009 and $180 million of its 12 1/4% Senior Subordinated Notes due 2009. These note redemptions are in three phases. The first two phases were completed on May 14, 2004 and June 2, 2004, with the third to be completed on July 14, 2004.
Once these note redemptions have been completed, URS will have reduced total debt outstanding by $190 million during the third quarter of fiscal 2004, decreasing the Company’s debt-to-capitalization ratio to approximately 35%, and effectively replacing $60 million of high yield debt with lower cost borrowings under its Senior Secured Credit Agreement.
In connection with the note redemptions, URS expects in the fiscal third quarter ending July 31 to include a pre-tax charge of $27 million, or $ 0.38 per share, consisting of $19 million in cash for call premiums and a non-cash charge of $8 million for unamortized financing fees, issuance costs and debt discounts.
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Outlook for Fiscal 2004
URS reaffirmed its expectation that fiscal 2004 revenues will be approximately $3.3 billion. The Company also expects that its fiscal 2004 earnings per share would be $1.90, excluding the $0.38 per share charge related to the costs of the Company’s note redemptions. On an after tax basis, the interest savings are expected to offset the effect of the additional shares issued in the equity offering.
On a GAAP basis, which includes these items, the Company expects net income of approximately $60.3 million, or $1.52 per share, for fiscal 2004. A reconciliation between the $1.90 per share and the $1.52 per share showing the effects of the stock offering and note redemptions is attached to this release.
In addition, the Company expects fiscal 2004 third quarter EPS to be between 10% and 13% of the Company’s revised full year 2004 EPS guidance.
URS Corporation offers a comprehensive range of professional planning and design, systems engineering and technical assistance, program and construction management, and operations and maintenance services for surface transportation, air transportation, rail transportation, industrial process, facilities and logistics support, water/wastewater treatment, hazardous waste management and military platforms support. Headquartered in San Francisco, the Company operates in over 20 countries with approximately 26,000 employees providing engineering and technical services to federal, state and local governmental agencies as well as private clients in the chemical, manufacturing, pharmaceutical, forest products, mining, oil and gas, and utilities industries (www.urscorp.com).
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Web cast Information
URS will host a dial-in conference call on Tuesday, June 15, 2004 at 11:00 a.m. (EDT), to discuss its second quarter fiscal 2004 results. A live web cast of this call will be available on URS’ website at www.urscorp.com.
TABLES TO FOLLOW
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Statements contained in this press release that are not historical facts may constitute forward-looking statements, including statements relating to the Company’s revenue and earnings projections. The Company’s quarterly financial results as discussed in this press release are unaudited and may be subject to adjustment. The Company believes that its expectations are reasonable and are based on reasonable assumptions. However, such forward-looking statements by their nature involve risks and uncertainties that could cause actual results to differ materially from the results predicted. The potential risks and uncertainties include, but are not limited to: the recent economic downturn; the Company’s dependence on government appropriations; changes in regulations; the Company’s ability to manage its contracts; the Company’s leveraged position; the Company’s ability to service its debt; pending and future litigation; industry competition; the Company’s ability to attract and retain key individuals; risks associated with international operations; the Company’s ability to successfully integrate its accounting and management information systems; and other factors discussed more fully in the Company’s reports filed from time to time with the Securities and Exchange Commission. The Company assumes no obligation to update any forward-looking statements.
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URS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
| | | | | | | | |
| | April 30, 2004
| | October 31, 2003
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| | (unaudited) | | | | |
ASSETS | | | | | | |
Current assets: | | | | | | | | |
Cash and cash equivalents | | $ | 221,980 | | | $ | 15,508 | |
Accounts receivable, including retainage of $42,076 and $42,617, respectively | | | 508,149 | | | | 525,603 | |
Costs and accrued earnings in excess of billings on contracts in process | | | 411,392 | | | | 393,670 | |
Less receivable allowances | | | (34,872 | ) | | | (33,106 | ) |
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Net accounts receivable | | | 884,669 | | | | 886,167 | |
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Deferred income taxes | | | 14,237 | | | | 13,315 | |
Prepaid expenses and other assets | | | 26,645 | | | | 24,675 | |
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Total current assets | | | 1,147,531 | | | | 939,665 | |
Property and equipment at cost, net | | | 146,684 | | | | 150,553 | |
Goodwill, net | | | 1,004,680 | | | | 1,004,680 | |
Purchased intangible assets, net | | | 9,817 | | | | 11,391 | |
Other assets | | | 59,700 | | | | 61,323 | |
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| | $ | 2,368,412 | | | $ | 2,167,612 | |
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LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | |
Current liabilities: | | | | | | | | |
Current portion of long-term debt | | $ | 23,739 | | | $ | 23,885 | |
Accounts payable and subcontractor payables, including retainage of $10,142 and $7,409, respectively | | | 166,962 | | | | 172,500 | |
Accrued salaries and wages | | | 121,237 | | | | 125,774 | |
Accrued expenses and other | | | 83,116 | | | | 86,874 | |
Billings in excess of costs and accrued earnings on contracts in process | | | 74,506 | | | | 83,002 | |
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Total current liabilities | | | 469,560 | | | | 492,035 | |
Long-term debt | | | 752,285 | | | | 788,708 | |
Deferred income taxes | | | 55,452 | | | | 55,411 | |
Deferred compensation and other | | | 68,871 | | | | 66,385 | |
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Total liabilities | | | 1,346,168 | | | | 1,402,539 | |
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Commitments and contingencies | | | | | | | | |
Stockholders’ equity: | | | | | | | | |
Common shares, par value $.01; authorized 100,000 shares; 42,948 and 33,668 shares issued, respectively; and 42,896 and 33,616 shares outstanding, respectively | | | 429 | | | | 336 | |
Treasury stock, 52 shares at cost | | | (287 | ) | | | (287 | ) |
Additional paid-in capital | | | 715,324 | | | | 487,824 | |
Accumulated other comprehensive income (loss) | | | 357 | | | | (906 | ) |
Retained earnings | | | 306,421 | | | | 278,106 | |
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Total stockholders’ equity | | | 1,022,244 | | | | 765,073 | |
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| | $ | 2,368,412 | | | $ | 2,167,612 | |
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URS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME — UNAUDITED
(In thousands, except per share data)
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| | Three Months Ended | | Six Months Ended |
| | April 30,
| | April 30,
|
| | 2004
| | 2003
| | 2004
| | 2003
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Revenues | | $ | 864,651 | | | $ | 812,555 | | | $ | 1,636,378 | | | $ | 1,570,588 | |
Direct operating expenses | | | 542,665 | | | | 512,566 | | | | 1,030,178 | | | | 996,163 | |
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Gross profit | | | 321,986 | | | | 299,989 | | | | 606,200 | | | | 574,425 | |
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Indirect, general and administrative expenses | | | 270,646 | | | | 252,744 | | | | 521,500 | | | | 495,990 | |
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Operating income | | | 51,340 | | | | 47,245 | | | | 84,700 | | | | 78,435 | |
Interest expense, net | | | 18,452 | | | | 21,301 | | | | 37,515 | | | | 42,581 | |
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Income before taxes | | | 32,888 | | | | 25,944 | | | | 47,185 | | | | 35,854 | |
Income tax expense | | | 13,150 | | | | 10,380 | | | | 18,870 | | | | 14,340 | |
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Net income | | | 19,738 | | | | 15,564 | | | | 28,315 | | | | 21,514 | |
Other comprehensive income (loss): | | | | | | | | | | | | | | | | |
Foreign currency translation adjustments | | | (1,646 | ) | | | 581 | | | | 1,263 | | | | 2,906 | |
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Comprehensive income | | $ | 18,092 | | | $ | 16,145 | | | $ | 29,578 | | | $ | 24,420 | |
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Net income per common share: | | | | | | | | | | | | | | | | |
Basic | | $ | .56 | | | $ | .48 | | | $ | .81 | | | $ | .66 | |
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Diluted | | $ | .54 | | | $ | .48 | | | $ | .78 | | | $ | .66 | |
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Weighted-average shares outstanding: | | | | | | | | | | | | | | | | |
Basic | | | 35,200 | | | | 32,498 | | | | 34,962 | | | | 32,411 | |
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Diluted | | | 36,731 | | | | 32,584 | | | | 36,258 | | | | 32,562 | |
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URS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS — UNAUDITED
(In thousands)
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| | Three Months Ended | | Six Months Ended |
| | April 30,
| | April 30,
|
| | 2004
| | 2003
| | 2004
| | 2003
|
Cash flows from operating activities: | | | | | | | | | | | | | | | | |
Net income | | $ | 19,738 | | | $ | 15,564 | | | $ | 28,315 | | | $ | 21,514 | |
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Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | | | | | | | | | |
Depreciation and amortization | | | 11,167 | | | | 10,940 | | | | 21,620 | | | | 22,437 | |
Amortization of financing fees | | | 1,794 | | | | 1,887 | | | | 3,775 | | | | 3,638 | |
Provision for doubtful accounts | | | 5,915 | | | | 3,093 | | | | 9,462 | | | | 3,833 | |
Deferred income taxes | | | (1,844 | ) | | | (300 | ) | | | (881 | ) | | | (2,000 | ) |
Stock compensation | | | 661 | | | | 445 | | | | 1,332 | | | | 3,401 | |
Tax benefit of stock options | | | 2,368 | | | | — | | | | 3,860 | | | | — | |
Changes in current assets and liabilities: | | | | | | | | | | | | | | | | |
Accounts receivable and costs and accrued earnings in excess of billings on contracts in process | | | (12,088 | ) | | | 30,147 | | | | (7,964 | ) | | | 46,796 | |
Prepaid expenses and other assets | | | 9,562 | | | | 4,092 | | | | (1,970 | ) | | | (1,106 | ) |
Accounts payable, accrued salaries and wages and accrued expenses | | | 2,693 | | | | (4,595 | ) | | | (13,837 | ) | | | (30,025 | ) |
Billings in excess of costs and accrued earnings on contracts in process | | | (7,456 | ) | | | (1,111 | ) | | | (8,496 | ) | | | 1,661 | |
Deferred compensation and other | | | 2,815 | | | | 2,761 | | | | 2,486 | | | | 152 | |
Other, net | | | (1,537 | ) | | | (576 | ) | | | 1,014 | | | | 2,519 | |
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Total adjustments and changes | | | 14,050 | | | | 46,783 | | | | 10,401 | | | | 51,306 | |
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Net cash provided by operating activities | | | 33,788 | | | | 62,347 | | | | 38,716 | | | | 72,820 | |
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Cash flows from investing activities: | | | | | | | | | | | | | | | | |
Capital expenditures, less equipment purchased through capital leases | | | (5,668 | ) | | | (6,364 | ) | | | (10,152 | ) | | | (9,533 | ) |
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Net cash used by investing activities | | | (5,668 | ) | | | (6,364 | ) | | | (10,152 | ) | | | (9,533 | ) |
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Cash flows from financing activities: | | | | | | | | | | | | | | | | |
Long-term debt principal payments | | | (16,661 | ) | | | (18,827 | ) | | | (37,111 | ) | | | (23,117 | ) |
Long-term debt borrowings | | | 32 | | | | (196 | ) | | | 377 | | | | 104 | |
Net payments under the line of credit | | | (6,157 | ) | | | (24,356 | ) | | | — | | | | (27,259 | ) |
Capital lease obligations payments | | | (2,642 | ) | | | (3,447 | ) | | | (7,297 | ) | | | (7,627 | ) |
Short-term note borrowings | | | 1,540 | | | | 1,124 | | | | 1,540 | | | | 1,211 | |
Short-term note payments | | | (39 | ) | | | 62 | | | | (85 | ) | | | (56 | ) |
Proceeds from common stock offering, net of related expenses | | | 204,286 | | | | — | | | | 204,286 | | | | — | |
Proceeds from sale of common shares from employee stock purchase plan and exercise of stock options | | | 8,158 | | | | 8 | | | | 18,108 | | | | 3,680 | |
Payments of financing fees | | | (303 | ) | | | — | | | | (1,910 | ) | | | — | |
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Net cash provided (used) by financing activities | | | 188,214 | | | | (45,632 | ) | | | 177,908 | | | | (53,064 | ) |
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Net increase in cash | | | 216,334 | | | | 10,351 | | | | 206,472 | | | | 10,223 | |
Cash and cash equivalents at beginning of period | | | 5,646 | | | | 9,844 | | | | 15,508 | | | | 9,972 | |
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Cash and cash equivalents at end of period | | $ | 221,980 | | | $ | 20,195 | | | $ | 221,980 | | | $ | 20,195 | |
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Supplemental information: | | | | | | | | | | | | | | | | |
Interest paid | | $ | 16,260 | | | $ | 29,506 | | | $ | 34,238 | | | $ | 37,608 | |
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Taxes paid | | $ | 9,987 | | | $ | 1,544 | | | $ | 21,434 | | | $ | 3,328 | |
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Equipment acquired through capital lease obligations | | $ | 2,357 | | | $ | 2,401 | | | $ | 5,549 | | | $ | 8,605 | |
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Conversion of Series D preferred stock to common stock | | $ | — | | | $ | — | | | $ | — | | | $ | 46,733 | |
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URS CORPORATION AND SUBSIDIARIES
RECONCILIATION SCHEDULE OF PROJECTED NET INCOME AND EARNINGS PER
SHARE BEFORE ACCOUNTING FOR CERTAIN TRANSACTIONS
In this earnings release for the second quarter ended April 30, 2004, we presented projected net income and earnings per share (“EPS”) for fiscal year 2004, excluding the effects of (1) the additional 4 million shares that will be used for calculating fiscal 2004 EPS, as a result of the Company’s stock offering; (2) a charge related to the costs of the Company’s note redemptions as described above; and (3) the $14.5 million in interest savings the Company expects to realize during the remainder of fiscal 2004. Projected net income and EPS amounts, excluding the effects of these items are not computed in accordance with generally accepted accounting principles (“GAAP”). We are providing these non-GAAP measures to demonstrate the effects of our recently completed stock offering and related changes in our capital structure. Projected net income and EPS excluding the effects of these items should not be used as a substitute for net income and earnings per share prepared in conformity with GAAP, or as a GAAP measure of profitability.
Projected net income and EPS excluding the effects of the items mentioned above are calculated as follows:
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| | | | Income | | | | Weighted Average | | |
| | Income before | | Tax | | | | Shares | | Earnings |
| | Taxes
| | Expense
| | Net Income
| | Outstanding
| | per Share
|
| | (In thousands, except per share data) |
Amounts excluding the effects below | | $ | 113,000 | | | $ | 45,200 | | | $ | 67,800 | | | | 35,700 | | | $ | 1.90 | |
Effect of public stock offering | | | — | | | | — | | | | — | | | | 39,700 | | | | (0.20 | ) |
Effect of a charge related to note redemptions | | | (27,000 | ) | | | (10,800 | ) | | | (16,200 | ) | | | 43,700 | | | | (0.38 | ) |
Effect of interest savings due to note redemptions | | | 14,500 | | | | 5,800 | | | | 8,700 | | | | 43,700 | | | | 0.20 | |
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Amounts reported under GAAP | | $ | 100,500 | | | $ | 40,200 | | | $ | 60,300 | | | | 39,700 | | | $ | 1.52 | |
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