Contacts:
URS Corporation Sard Verbinnen & Co
H. Thomas Hicks Hugh Burns/Jane Simmons
Vice President (212) 687-8080
& Chief Financial Officer
(415) 774-2700
URS CORPORATION REPORTS THIRD QUARTER 2008 RESULTS
Revenues Increase 104%, Net Income up 70% from Third Quarter 2007 Results
Full Year Guidance Raised
SAN FRANCISCO, CA – November 5, 2008 – URS Corporation (NYSE: URS) today reported its financial results for the third quarter of fiscal 2008, which ended on September 26, 2008. Revenues for the quarter were $2.59 billion, compared with revenues of $1.27 billion during the third quarter of 2007, a 104.1% increase. Net income for the third quarter of 2008 was $65.8 million, a 70.0% increase from the $38.7 million reported for the corresponding period in 2007, and earnings per share (“EPS”) for the third quarter of 2008 was $0.79, fully diluted, 8.2% higher than the fully diluted EPS of $0.73 for the same period last year. The results for the quarter ended September 26, 2008 include the operations obtained through the acquisition of Washington Group International, Inc. (“WGI”).
For the purpose of calculating diluted EPS, weighted-average shares outstanding were 82.8 million for the third quarter of 2008.
Commenting on the Company’s financial results, Martin M. Koffel, Chairman and Chief Executive Officer, stated: “We are very pleased with the Company’s third quarter results, which reflect continued solid performance across all of our markets, as well as our position as a premier E&C and technical services company and a leader in large, long-term growth markets.”
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Mr. Koffel continued, “URS’ third quarter results were positively affected by several items, including higher performance-based fees and incentives on various projects performed by the Washington Division, including $17.7 million of pre-tax earnings on a Department of Energy nuclear waste processing facility project, and performance-based incentive fee recognition on several EG&G projects. Although we do not expect these events to occur every quarter, the business continues to perform well and we have increased our EPS guidance for 2008.”
“We continue to pay close attention to current economic conditions. However, our strong position in markets that are resilient to economic downturns and the fact that more than 50% of our revenues are derived from government funding give us confidence in our ability to deliver revenue and profit growth next year. Our optimism is supported by our $18.0 billion backlog and $33.1 billion book of business, both of which are records for the Company.”
Business Segment Results
In addition to providing consolidated financial results, URS reports separate financial information for its three divisions: the URS Division, the EG&G Division and the Washington Division. The URS Division performs program management, planning, design and engineering, and construction management services in the federal, infrastructure, and industrial and commercial markets. The EG&G Division primarily serves the federal market, providing program management, systems engineering and technical assistance, and operations and maintenance services to the U.S. Departments of Defense, State, Homeland Security and Treasury, NASA and other agencies. The Washington Division provides program management, planning, design and engineering, construction, operations and maintenance, and decommissioning and closure services to customers in the power, infrastructure, industrial and commercial and federal markets.
Following the WGI acquisition, URS realigned several of its businesses among its three operating segments, effective for fiscal year 2008. Consequently, quarterly results for each division are not comparable to the third quarter of last year. For the third quarter of 2008:
URS Division reported revenues of $839.7 million and operating income of $59.7 million.
EG&G Division reported revenues of $606.8 million and operating income of $42.0 million.
Washington Division reported revenues of $1.15 billion and operating income of $62.0 million.
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Outlook for the Remainder of Fiscal 2008
URS announced that it has revised its outlook for fiscal 2008 based on the Company's continued positive outlook for its underlying businesses. URS continues to expect that fiscal 2008 revenues will be approximately $9.8 billion. Based upon our current expectations, URS now expects that 2008 net income will be between $215 and $223 million, compared to its prior estimate of $197 and $207 million, and EPS will be in the range of $2.60 to $2.70. Previously, URS expected EPS would be between $2.36 and $2.48.
In addition, the Company expects that its effective tax rate in 2008 will be approximately 42%. The Company reaffirmed its expectation that fully diluted weighted-average shares outstanding will be approximately 83 million. And finally, URS expects interest expense in 2008 to be approximately $90 million.
Webcast Information
URS will host a dial-in conference call on Thursday, November 6, 2008 at 11:00 a.m. (EST), to discuss its third quarter fiscal 2008 results. A live webcast of this call will be available on the investor relations portion of URS’ website at www.urscorp.com.
URS Corporation is a leading provider of engineering, construction and technical services for public agencies and private sector companies around the world. The Company offers a full range of program management; planning, design and engineering; systems engineering and technical assistance; construction and construction management; operations and maintenance; and decommissioning and closure services. URS provides services for power, infrastructure, industrial and commercial, and federal projects and programs. Headquartered in San Francisco, the Company operates through three divisions: the URS Division, the EG&G Division and the Washington Division. URS Corporation has more than 50,000 employees in a network of offices in more than 30 countries (www.urscorp.com).
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TABLES TO FOLLOW
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Statements contained in this earnings release that are not historical facts may constitute forward-looking statements, including statements relating to future revenues, future net income and earnings per share, future backlog and book of business, future tax rates, future outstanding shares, future interest expenses and other future business, economic and industry conditions. The Company believes that its expectations are reasonable and are based on reasonable assumptions. However, such forward-looking statements by their nature involve risks and uncertainties. We caution that a variety of factors could cause the Company’s business and financial results to differ materially from those expressed or implied in the Company’s forward-looking statements. These factors include, but are not limited to: an economic downturn; recent declines in the financial markets; changes in the Company’s book of business; the Company’s compliance with government contract procurement regulations; the Company’s leveraged position and the ability to service its debt; restrictive covenants in the Company’s 2007 Credit Facility; the Company’s integration of Washington Group International, Inc.; the Company’s ability to procure government contracts; the Company’s reliance on government appropriations; the ability of the government to unilaterally terminate the Company’s contracts; the Company’s ability to make accurate estimates and assumptions; the Company’s accounting methods; impairment of the Company’s goodwill; the Company’s and its partners’ ability to bid on, win, perform and renew contracts and projects; the Company’s dependence on partners, subcontractors and suppliers; customer payment defaults; the Company’s ability to recover on claims; availability of bonding and insurance; environmental liabilities; liabilities for pending and future litigation; the impact of changes in laws and regulations; nuclear energy indemnification; a decline in defense spending; industry competition; the Company’s ability to attract and retain key individuals; employee, agent or partner misconduct; risks associated with international operations; business activities in high security risk countries; third party software risks; terrorist and natural disaster risks; the Company’s relationships with its labor unions; the Company’s ability to protect its intellectual property rights; anti-takeover risks and other factors discussed more fully in the Company's Form 10-Q for the quarter ended September 26, 2008, as well as in other reports filed from time to time with the Securities and Exchange Commission. These forward-looking statements represent only the Company’s current intentions, beliefs or expectations, and any forward-looking statement speaks only as of the date on which it was made. The Company assumes no obligation to revise or update any forward-looking statements.
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URS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED
(In thousands, except per share data)
September 26, 2008 | December 28, 2007 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 221,630 | $ | 256,502 | ||||
| Accounts receivable, including retentions of $57,990 and $58,366, respectively | 1,013,708 | 1,015,052 | ||||||
| Costs and accrued earnings in excess of billings on contracts in process | 1,133,612 | 1,023,302 | ||||||
| Less receivable allowances | (47,143 | ) | (51,173 | ) | ||||
| Net accounts receivable | 2,100,177 | 1,987,181 | ||||||
| Deferred tax assets | 128,013 | 133,888 | ||||||
| Prepaid expenses and other assets | 179,342 | 210,807 | ||||||
| Total current assets | 2,629,162 | 2,588,378 | ||||||
| Investments in unconsolidated affiliates | 266,431 | 206,721 | ||||||
| Property and equipment at cost, net | 349,810 | 357,907 | ||||||
| Intangible assets, net | 526,774 | 572,974 | ||||||
| Goodwill | 3,150,834 | 3,139,618 | ||||||
| Other assets | 60,753 | 64,367 | ||||||
| Total assets | $ | 6,983,764 | $ | 6,929,965 | ||||
| LIABILITIES, MINORITY INTERESTS, AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Book overdrafts | $ | 26,314 | $ | 15,638 | ||||
| Current portion of long-term debt | 18,086 | 17,964 | ||||||
| Accounts payable and subcontractors payable, including retentions of $86,660 and $73,491, respectively | 786,675 | 693,614 | ||||||
| Accrued salaries and wages | 445,030 | 486,853 | ||||||
| Billings in excess of costs and accrued earnings on contracts in process | 228,196 | 296,752 | ||||||
| Accrued expenses and other | 157,593 | 170,782 | ||||||
| Total current liabilities | 1,661,894 | 1,681,603 | ||||||
| Long-term debt | 1,119,160 | 1,288,817 | ||||||
| Deferred tax liabilities | 222,630 | 137,058 | ||||||
| Self-insurance reserves | 102,379 | 73,253 | ||||||
| Pension, post-retirement, and other benefit obligations | 138,078 | 156,843 | ||||||
| Other long-term liabilities | 82,923 | 88,735 | ||||||
| Total liabilities | 3,327,064 | 3,426,309 | ||||||
| Commitments and contingencies | ||||||||
| Minority interests | 26,926 | 25,086 | ||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, authorized 3,000 shares; no shares outstanding | — | — | ||||||
| Common stock, par value $.01; authorized 200,000 shares; 84,557 and 83,355 shares issued, respectively; and 83,505 and 83,303 shares outstanding, respectively | 845 | 833 | ||||||
| Treasury stock, 1,052 and 52 shares at cost, respectively | (42,585 | ) | (287 | ) | ||||
| Additional paid-in capital | 2,825,728 | 2,797,238 | ||||||
| Accumulated other comprehensive income | 7,075 | 16,635 | ||||||
| Retained earnings | 838,711 | 664,151 | ||||||
| Total stockholders’ equity | 3,629,774 | 3,478,570 | ||||||
| Total liabilities, minority interests and stockholders’ equity | $ | 6,983,764 | $ | 6,929,965 | ||||
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URS CORPORATION AND SUBSIDIARIES
(In thousands, except per share data)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 26, 2008 | September 28, 2007 | September 26, 2008 | September 28, 2007 | |||||||||||||
| Revenues | $ | 2,588,091 | $ | 1,267,997 | $ | 7,378,062 | 3,643,634 | |||||||||
| Cost of revenues | (2,448,700 | ) | (1,189,647 | ) | (7,008,457 | ) | (3,418,286 | ) | ||||||||
| General and administrative expenses | (20,440 | ) | (12,963 | ) | (57,076 | ) | (40,571 | ) | ||||||||
| Equity in income of unconsolidated affiliates | 24,289 | 4,284 | 81,021 | 11,041 | ||||||||||||
| Operating income | 143,240 | 69,671 | 393,550 | 195,818 | ||||||||||||
| Interest expense | (21,401 | ) | (2,935 | ) | (70,146 | ) | (10,926 | ) | ||||||||
| Income before income taxes and minority interests | 121,839 | 66,736 | 323,404 | 184,892 | ||||||||||||
| Income tax expense | (51,028 | ) | (26,956 | ) | (136,013 | ) | (75,987 | ) | ||||||||
| Minority interests in income of consolidated subsidiaries, net of tax | (5,046 | ) | (1,087 | ) | (12,831 | ) | (3,049 | ) | ||||||||
| Net income | 65,765 | 38,693 | 174,560 | 105,856 | ||||||||||||
| Other comprehensive income (loss): | ||||||||||||||||
| Foreign currency translation adjustments, net of tax | (13,380 | ) | 682 | (7,962 | ) | 3,858 | ||||||||||
| Interest rate swaps, net of tax | 1,201 | — | (1,598 | ) | — | |||||||||||
| Comprehensive income | $ | 53,586 | $ | 39,375 | $ | 165,000 | $ | 109,714 | ||||||||
| Earnings per share: | ||||||||||||||||
| Basic | $ | .80 | $ | .74 | $ | 2.13 | $ | 2.05 | ||||||||
| Diluted | $ | .79 | $ | .73 | $ | 2.11 | $ | 2.01 | ||||||||
| Weighted-average shares outstanding | ||||||||||||||||
| Basic | 82,296 | 51,944 | 82,031 | 51,559 | ||||||||||||
| Diluted | 82,794 | 52,751 | 82,739 | 52,546 | ||||||||||||
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URS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
(In thousands)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 26, 2008 | September 28, 2007 | September 26, 2008 | September 28, 2007 | |||||||||||||
| Cash flows from operating activities: | ||||||||||||||||
| Net income | $ | 65,765 | $ | 38,693 | $ | 174,560 | $ | 105,856 | ||||||||
| Adjustments to reconcile net income to net cash from operating activities: | ||||||||||||||||
| Depreciation | 22,304 | 9,813 | 66,147 | 29,029 | ||||||||||||
| Amortization of intangible assets | 12,526 | 250 | 39,374 | 750 | ||||||||||||
| Amortization of debt issuance costs | 2,141 | 429 | 6,280 | 1,286 | ||||||||||||
| Normal profit | 2,662 | (386 | ) | (6,098 | ) | (1,450 | ) | |||||||||
| Provision for doubtful accounts | 1,851 | 578 | 3,324 | 2,305 | ||||||||||||
| Deferred income taxes | 26,142 | (229 | ) | 66,242 | (863 | ) | ||||||||||
| Stock-based compensation | 7,805 | 6,146 | 22,095 | 20,070 | ||||||||||||
| Excess tax benefits from stock-based compensation | (3,523 | ) | (2,467 | ) | (3,865 | ) | (6,489 | ) | ||||||||
| Minority interests in income of consolidated subsidiaries, net of tax | 5,046 | 1,087 | 12,831 | 3,049 | ||||||||||||
| Changes in operating assets, liabilities and other, net of effects of acquisitions: | ||||||||||||||||
| Accounts receivable and costs and accrued earnings in excess of billings on contracts in process | (19,113 | ) | 5,261 | (100,173 | ) | (52,878 | ) | |||||||||
| Prepaid expenses and other assets | (20,913 | ) | 3,641 | (12,339 | ) | (11,641 | ) | |||||||||
| Investments in unconsolidated affiliates | (5,460 | ) | 4,282 | (19,070 | ) | 12,706 | ||||||||||
| Accounts payable, accrued salaries and wages and accrued expenses | (16,551 | ) | 30,706 | 9,192 | 70,289 | |||||||||||
| Billings in excess of costs and accrued earnings on contracts in process | 261 | 24,722 | 6,673 | (14,593 | ) | |||||||||||
| Other long-term liabilities | (26,539 | ) | 7,792 | (11,831 | ) | 7,175 | ||||||||||
| Other assets, net | 9,709 | (6,083 | ) | 9,774 | (15,654 | ) | ||||||||||
| Total adjustments and changes | (1,652 | ) | 85,542 | 88,556 | 43,091 | |||||||||||
| Net cash from operating activities | 64,113 | 124,235 | 263,116 | 148,947 | ||||||||||||
| Cash flows from investing activities: | ||||||||||||||||
| Payments for business acquisitions, net of cash acquired | (24,468 | ) | (6,328 | ) | (26,784 | ) | (6,328 | ) | ||||||||
| Proceeds from disposal of property and equipment, and sale-leaseback transactions | 2,287 | — | 10,722 | — | ||||||||||||
| Investments in unconsolidated affiliates | (4,919 | ) | — | (28,035 | ) | — | ||||||||||
| Change in restricted cash | (2,071 | ) | — | (134 | ) | — | ||||||||||
| Capital expenditures, less equipment purchased through capital leases and equipment notes | (16,701 | ) | (9,152 | ) | (62,329 | ) | (22,354 | ) | ||||||||
| Net cash from investing activities | (45,872 | ) | (15,480 | ) | (106,560 | ) | (28,682 | ) | ||||||||
| Cash flows from financing activities: | ||||||||||||||||
| Long-term debt principal payments | (72,433 | ) | (41,457 | ) | (176,777 | ) | (77,226 | ) | ||||||||
| Net borrowings (payments) under lines of credit and short-term notes | (39 | ) | 1,039 | (259 | ) | (3,749 | ) | |||||||||
| Net change in book overdrafts | 25,210 | (707 | ) | 10,676 | (3,222 | ) | ||||||||||
| Capital lease obligation payments | (1,953 | ) | (2,602 | ) | (5,949 | ) | (9,491 | ) | ||||||||
| Excess tax benefits from stock-based compensation | 3,523 | 2,467 | 3,865 | 6,489 | ||||||||||||
| Proceeds from employee stock purchases and exercises of stock options | 13,456 | 10,282 | 19,314 | 18,720 | ||||||||||||
| Purchase of treasury stock | (42,298 | ) | — | (42,298 | ) | — | ||||||||||
| Net cash from financing activities | (74,534 | ) | (30,978 | ) | (191,428 | ) | (68,479 | ) | ||||||||
| Net increase (decrease) in cash and cash equivalents | (56,293 | ) | 77,777 | (34,872 | ) | 51,786 | ||||||||||
| Cash and cash equivalents at beginning of period | 277,923 | 63,511 | 256,502 | 89,502 | ||||||||||||
| Cash and cash equivalents at end of period | $ | 221,630 | $ | 141,288 | $ | 221,630 | $ | 141,288 | ||||||||
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URS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS – UNAUDITED (continued)
(In thousands)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 26, 2008 | September 28, 2007 | September 26, 2008 | September 28, 2007 | |||||||||||||
| Supplemental information: | ||||||||||||||||
| Interest paid | $ | 17,878 | $ | 1,990 | $ | 63,794 | $ | 10,272 | ||||||||
| Taxes paid | $ | 18,512 | $ | 6,282 | $ | 44,336 | $ | 53,176 | ||||||||
| Supplemental schedule of noncash investing and financing activities: | ||||||||||||||||
| Fair value of assets acquired (net of cash acquired) | $ | 9,747 | $ | — | $ | 9,747 | $ | 16,888 | ||||||||
| Liabilities assumed | (9,497 | ) | — | (9,497 | ) | (127 | ) | |||||||||
| Non cash business acquisitions | $ | 250 | $ | — | $ | 250 | $ | 16,761 | ||||||||
| Equipment acquired with capital lease obligations and equipment note obligations | $ | 2,224 | $ | 2,430 | $ | 8,895 | $ | 13,679 | ||||||||
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URS CORPORATION AND SUBSIDIARIES
BOOK OF BUSINESS
(In billions) As of September 26, 2008 | Total | |||
| Backlog: | ||||
| Power | $ | 1.9 | ||
| Infrastructure | 2.5 | |||
| Industrial and commercial | 3.3 | |||
| Federal | 10.3 | |||
| Total Backlog | $ | 18.0 | ||
(In billions) As of September 26, 2008 | URS Division | EG&G Division | Washington Division | Total | ||||||||||||
| Backlog | $ | 2.8 | $ | 8.1 | $ | 7.1 | $ | 18.0 | ||||||||
| Designations | 1.5 | — | 0.9 | 2.4 | ||||||||||||
| Option years | 0.5 | 2.2 | 1.1 | 3.8 | ||||||||||||
| Indefinite delivery contracts | 4.1 | 2.6 | 2.2 | 8.9 | ||||||||||||
| Total book of business | $ | 8.9 | $ | 12.9 | $ | 11.3 | $ | 33.1 | ||||||||
URS CORPORATION AND SUBSIDIARIES
REVENUES AND OPERATING INCOME BY SEGMENT
| (In millions) | Three Months Ended September 26, 2008 | Three Months Ended September 28, 2007 | Nine Months Ended September 26, 2008 | Nine Months Ended September 28, 2007 | ||||||||||||
| Revenues | ||||||||||||||||
| URS Division | $ | 839.7 | $ | 801.4 | $ | 2,546.4 | $ | 2,330.7 | ||||||||
| EG&G Division | 606.8 | 377.0 | 1,732.2 | 1,085.4 | ||||||||||||
| Washington Division | 1,154.8 | 102.5 | 3,137.6 | 270.6 | ||||||||||||
| Inter-segment, eliminations and other | (13.2 | ) | (12.9 | ) | (38.1 | ) | (43.1 | ) | ||||||||
| Total revenues | $ | 2,588.1 | $ | 1,268.0 | $ | 7,378.1 | $ | 3,643.6 | ||||||||
| Operating income | ||||||||||||||||
| URS Division | $ | 59.7 | $ | 57.6 | $ | 184.1 | $ | 165.9 | ||||||||
| EG&G Division | 42.0 | 20.1 | 101.0 | 57.2 | ||||||||||||
| Washington Division | 62.0 | 5.1 | 165.5 | 14.1 | ||||||||||||
| Inter-segment, eliminations and other | — | (0.1 | ) | — | (0.8 | ) | ||||||||||
| General and administrative expenses | (20.5 | ) | (13.0 | ) | (57.1 | ) | (40.6 | ) | ||||||||
| Total operating income | $ | 143.2 | $ | 69.7 | $ | 393.5 | $ | 195.8 | ||||||||
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URS CORPORATION AND SUBSIDIARIES
REVENUE BREAKDOWN BY DIVISION
Three months ended September 26, 2008 (In millions) | Power | Infrastructure | Federal | Industrial and Commercial | Total | |||||||||||||||
| URS Division | $ | 53 | $ | 361 | $ | 140 | $ | 280 | $ | 834 | ||||||||||
| EG&G Division | — | — | 606 | — | 606 | |||||||||||||||
| Washington Division | 403 | 83 | 166 | 496 | 1,148 | |||||||||||||||
| Total | $ | 456 | $ | 444 | $ | 912 | $ | 776 | $ | 2,588 | ||||||||||
Nine months ended September 26, 2008 (In millions) | Power | Infrastructure | Federal | Industrial and Commercial | Total | |||||||||||||||
| URS Division | $ | 202 | $ | 1,063 | $ | 444 | $ | 823 | $ | 2,532 | ||||||||||
| EG&G Division | — | — | 1,730 | — | 1,730 | |||||||||||||||
| Washington Division | 1,161 | 254 | 390 | 1,311 | 3,116 | |||||||||||||||
| Total | $ | 1,363 | $ | 1,317 | $ | 2,564 | $ | 2,134 | $ | 7,378 | ||||||||||
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