UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma combined financial information is derived
from the historical consolidated balance sheets and related consolidated
statements of Dames & Moore's and URS' operations adjusted to give effect to
the Dames & Moore acquisition and URS' plan for financing the acquisition of
Dames & Moore (the "Financing Plan"). References to the "Combined Company" refer
to URS and Dames & Moore after giving effect to the Dames & Moore acquisition.
In addition, the Dames & Moore financial information has been adjusted to give
effect to the acquisition of Radian International ("Radian") as of January 1,
1998. The unaudited pro forma combined balance sheet may not reflect the
Combined Company's actual financial position as of April 30, 1999. The unaudited
pro forma combined statements of operations may not reflect the actual results
of operations the Combined Company would have had for the six months ended
April 30, 1999 or the twelve months ended October 31, 1998. The unaudited pro
forma combined financial statements also do not reflect the future financial
position or results of operations for the Combined Company.
The unaudited pro forma combined balance sheet and statements of operations
are provided for illustrative purposes only and should be read in conjunction
with the accompanying notes.
URS has assumed for purposes of the unaudited pro forma combined balance
sheet as of April 30, 1999 that the Dames & Moore acquisition and the
Financing Plan occurred as of that date. URS has assumed for purposes of the
unaudited pro forma combined statements of operations for the six months ended
April 30, 1999 and the twelve months ended October 31, 1998 that the
Dames & Moore acquisition and the Financing Plan occurred as of November 1,
1997. URS' fiscal year ends on October 31 and Dames & Moore's fiscal year ends
on the last Friday of March. To present comparable data for Dames & Moore and
URS, the pro forma statements of operations include the historical data for
Dames & Moore for the six months ended March 26, 1999 and for the twelve
months ended December 25, 1998. Therefore, the results of operations for Dames
& Moore for the period September 26, 1998 through December 25, 1998 are
reflected both for the six months ended March 26, 1999 and for the twelve
months ended December 25, 1998. The total revenues and net earnings of Dames &
Moore for the three months ended December 25, 1998 that have been reflected in
both periods are approximately $287.4 million and $5.3 million, respectively.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
As of As of
April 30, 1999 March 26, 1999 As of April 30, 1999
--------------- -------------- -------------------------
URS Corporation Dames & Moore Adjustments Pro Forma
--------------- -------------- ----------- ----------
ASSETS (in thousands)
Current assets:
Cash, cash equivalents,
and short term
investments........... $ 10,036 $ 16,216 $ -- $ 26,252
Accounts receivable,
net................... 183,469 215,122 -- 398,591
Costs and accrued
earnings in excess of
billings on contracts
in process, net....... 112,820 98,256 -- 211,076
Prepaid expenses and
other................. 12,098 36,912 -- 49,010
-------- -------- --------- ----------
Total current
assets.............. 318,423 366,506 -- 684,929
Property and equipment,
at cost, net........... 32,508 57,518 -- 90,026
Goodwill, net........... 136,123 159,918 (159,918)(a) 472,932
336,809 (a)
Other assets............ 7,603 50,637 18,000 (b) 76,240
-------- -------- --------- ----------
Total assets......... $494,657 $634,579 $ 194,891 $1,324,127
======== ======== ========= ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Long-term debt, current
portion............... $ 23,001 $ 18,433 $ (16,401)(c) $ 25,800
(11,233)(c)
12,000 (d)
Accounts payable....... 40,714 57,842 -- 98,556
Other current
liabilities........... 16,495 67,127 -- 83,622
Accrued salaries and
benefits.............. 35,359 38,934 -- 74,293
Billings in excess of
costs and accrued
earnings on contracts
in process............ 43,724 -- -- 43,724
-------- -------- --------- ----------
Total current
liabilities......... 159,293 182,336 (15,634) 325,995
Long-term debt.......... 110,808 284,147 (94,408)(c) 654,400
(284,147)(c)
638,000 (d)
Deferred--compensation
and other.............. 41,607 21,176 62,783
-------- -------- --------- ----------
Total liabilities.... 311,708 487,659 243,811 1,043,178
-------- -------- --------- ----------
Mandatory redeemable
Series A Preferred
Stock.................. -- -- 98,000 (e) 98,000
Mandatory redeemable
Series C Preferred
Stock.................. -- -- -- --
Stockholders' equity:
Common stock........... 155 228 (228)(f) 155
Treasury stock......... (287) (59,373) 59,373 (f) (287)
Series B Exchangeable
Convertible Preferred
Stock................. -- -- -- --
Additional paid-in
capital............... 121,691 107,817 (107,817)(f) 121,691
Retained earnings...... 61,320 102,264 (102,264)(f) 61,320
Other stockholders'
equity................ 70 (4,016) 4,016 (f) 70
-------- -------- --------- ----------
Total stockholders'
equity.............. 182,949 146,920 (146,920) 182,949
-------- -------- --------- ----------
Total liabilities and
stockholders'
equity.............. $494,657 $634,579 $ 194,891 $1,324,127
======== ======== ========= ==========
See Notes to Unaudited Pro Forma Combined Balance Sheet
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(dollars in thousands)
(a) Reflects the elimination of Dames & Moore's historical goodwill and the
aggregate goodwill created by the Dames & Moore acquisition.
Purchase price (net of debt).................................. $ 303,811
Acquisition costs (net of financing fees)..................... 20,000
---------
323,811
Less:net assets acquired...................................... (146,920)
---------
Incremental additional purchase price over net assets
acquired..................................................... 176,891
Dames & Moore historical goodwill, net........................ 159,918
---------
Aggregate goodwill............................................ $ 336,809
=========
We believe that the amounts for tangible assets and liabilities reflected
on Dames & Moore's consolidated statement of financial position approximate
the fair market values of such assets and liabilities and, accordingly,
such amounts have not been adjusted in the accompanying pro forma financial
statements. The excess purchase price over net assets acquired resulting
from the Dames & Moore acquisition will be amortized on a straight-line
basis over 40 years.
(b) Reflects capitalized debt financing fees and expenses aggregating $18,000.
(c) Reflects the repayment of a portion of Dames & Moore's and our debt.
URS Corporation:
Current......................................................... $ 16,401
Non-current..................................................... 94,408
--------
$110,809
========
Dames & Moore:
Current......................................................... $ 11,233
Non-current..................................................... 284,147
--------
$295,380
========
(d) Reflects debt incurred as part of the Financing Plan.
Notes............................................................ $200,000
Senior Secured Credit Facility:
Revolving credit facility...................................... --
Term Loan A.................................................... 250,000
Term Loan B.................................................... 100,000
Term Loan C.................................................... 100,000
--------
Total new debt............................................... 650,000
Less: current portion............................................ 12,000
--------
Non-current portion.............................................. $638,000
========
(e) Reflects equity issued as part of the Financing Plan that consists of the
$100,000 RCBA Equity Investment, less $2,000 of fees and expenses.
(f) Reflects the elimination of Dames & Moore's historical equity.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
Six Months Six Months
Ended Ended Six Months Ended
April 30, 1999 March 26, 1999 April 30, 1999
--------------- -------------- -------------------------
URS Corporation Dames & Moore Adjustments Pro Forma
--------------- ------------- ----------- ---------
(dollars in thousands)
Revenue $ 415,069 $577,211 $ -- $ 992,280
---------- -------- --------- ----------
Expenses:
Direct operating....... 239,151 393,374 -- 632,525
Indirect, general and
administrative........ 141,006 145,757 -- 286,763
Depreciation and
amortization.......... 7,731 10,696 1,130 (a) 19,557
Interest expense....... 5,739 11,239 15,907 (b) 32,885
Interest income........ (1,025) (1,098) -- (2,123)
---------- -------- --------- ----------
Total expenses....... 392,602 559,968 17,037 969,607
---------- -------- --------- ----------
Income (loss) before
taxes and preferred
stock charges......... 22,467 17,243 (17,037) 22,673
Income tax expense
(benefit)............. 9,800 7,094 (7,258)(c) 9,636
Preferred stock
charges............... -- -- 9,500 (d) 9,500
---------- ------- --------- ----------
Earnings (loss)
available for common
stockholders......... $ 12,667 $ 10,149 $(19,279) $ 3,537
========== ======== ========= ==========
Earnings per Share:
Earnings available for
common stockholders
per Share - Basic $ .83 $ .23
========== ==========
Earnings available for
common stockholders
per Share - Diluted $ .77 $ .21
========== ==========
Weighted average common
Shares outstanding-Basic 15,325,000 15,325,000
========== ==========
Weighted average common
Shares outstanding-Diluted 16,542,000 16,542,000
========== ==========
See Notes to Unaudited Pro Forma Combined Statements of Operations
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
Twelve Months Ended Seven Months
----------------------------- Ended
October 31, December 25, July 31, Twelve Months Ended
1998 1998 1998 October 31, 1998
--------------- ------------- ------------ ---------------------------
URS Corporation Dames & Moore Radian Adjustments Pro Forma
--------------- ------------- ------------ ----------- ----------
(dollars in thousands)
Revenue................. $ 805,946 $921,133 $168,105 $ -- $1,895,184
---------- -------- -------- -------- ----------
Expenses:
Direct operating....... 478,640 629,803 112,172 -- 1,220,615
Indirect, general and
administrative........ 262,509 254,271 64,020 (28,276)(e) 552,524
Depreciation and
amortization.......... 14,556 16,328 6,267 2,915 (a) 40,066
Interest expense....... 10,931 15,544 1,448 37,847 (b) 65,770
Interest income........ (2,157) (888) -- -- (3,045)
---------- -------- -------- -------- ----------
Total expenses........ 764,479 915,058 183,907 12,486 1,875,930
---------- -------- -------- -------- ----------
Income (loss) before
taxes and preferred
stock charges......... 41,467 6,075 (15,802) (12,486) 19,254
Income tax expense
(benefit)............. 18,800 4,045 408 (15,070)(c) 8,183
Preferred stock
charges............... -- -- -- (19,000)(d) (19,000)
---------- -------- -------- -------- ----------
Earnings (loss)
available for common
stockholders......... $ 22,667 $ 2,030 $(16,210) $(16,416) $ (7,929)
========== ======== ======== ======== ==========
Earnings (loss) per Share:
Earnings (loss) available
for common stockholders
per Share - Basic $ 1.51 $ (.53)
========== ==========
Earnings (loss) available
for common stockholders
per Share - Diluted $ 1.43 $ (.50)
========== ==========
Weighted average common
Shares outstanding
- Basic 14,963,000 14,963,000
========== ==========
Weighted average common
Shares outstanding
- Diluted 15,805,000 15,805,000
========== ==========
See Notes to Unaudited Pro Forma Combined Statements of Operations
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
(dollars in thousands)
(a) Reflects the elimination of goodwill amortization previously recorded by
Dames & Moore and Radian and the amortization expense incurred as a result
of the Dames & Moore acquisition.
Six Months Twelve Months
Ended Ended
April 30, October 31,
1999 1998
---------- -------------
Elimination of Dames & Moore goodwill
amortization expense............................ $(3,070) $(4,988)
Elimination of Radian goodwill amortization
expense......................................... -- (497)
New goodwill amortization expense................ 4,200 8,400
------- -------
$ 1,130 $ 2,915
======= =======
(b) Reflects estimated interest expense associated with debt incurred as part
of the Financing Plan and estimated amortization of debt financing costs.
Six Months Twelve Months
Ended Ended
April 30, October 31,
1999 1998
---------- -------------
Increase in interest expense........................ $15,907 $37,847
======= =======
Variable Variable Variable
Interest Interest at Interest
Range Current/ Range
Anticipated 125 basis Anticipated 125 basis
Debt Instrument Rate Amount points below Rate points above
--------------- ----------- -------- ------------ ----------- ------------
Existing debt to remain
outstanding:
Interest expense....... -- -- $ 2,825 $ 2,825 $ 2,825
New debt:
Notes.................. 12.25% $200,000 24,500 24,500 24,550
Senior Secured Credit
Facility:
Revolving credit
facility............. 7.81% -- -- -- --
Term Loan A........... 7.81% 250,000 19,213 19,525 19,838
Term Loan B........... 8.31% 100,000 8,185 8,310 8,435
Term Loan C........... 8.81% 100,000 8,685 8,810 8,935
Amortization of debt
financing costs....... -- -- 1,800 1,800 1,800
------- ------- -------
Annual interest
expense............... -- -- $65,208 $65,770 $66,333
======= ======= =======
Semi-annual interest
expense............... -- -- $32,604 $32,885 $33,167
======= ======= =======
(c) Reflects the tax effect of all adjustments at an assumed effective tax
rate of 42.5%.
(d) Reflects preferred stock charges related to equity issued as part of the
Financing Plan consisting of the RCBA Equity Investment.
Six Months Twelve Months
Ended Ended
April 30, October 31,
1999 1998
---------- -------------
Series A Preferred Stock dividend................... $7,500 $15,000
Series C Preferred Stock accretion.................. 2,000 4,000
------ -------
$9,500 $19,000
====== =======
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS--(CONTINUED)
(dollars in thousands)
In connection with the RCBA Equity Investment, we will issue 46,083 shares
of Series A Preferred Stock and 450,000 shares of Series C Preferred Stock.
The Series A Preferred Stock carries a cumulative paid-in-kind dividend
rate of 8% for the first six months after its issuance and 15% thereafter.
If stockholder approval of the issuance of the Series B Exchangeable
Convertible Preferred Stock is not obtained within six months after the
issuance of the Series A Preferred Stock, the dividend rate for the Series
A Preferred Stock will be recalculated and paid as if the dividend rate was
15% from its issuance. However, we anticipate that the Series A Preferred
Stock together with the Series C Preferred Stock will be exchanged for
newly issued Series B Exchangeable Convertible Preferred Stock, subject to
stockholders' approval. The Series B Exchangeable Convertible Preferred
Stock will be convertible, voting preferred with a cumulative paid-in-kind
dividend rate of 8%.
The annual Series A Preferred Stock paid-in-kind dividend of $15,000 has
been reflected in the pro forma income statements as a reduction in income
available to common stockholders.
The Series C Preferred Stock does not pay a current dividend; however,
because it is mandatorily redeemable in six years, its value results in an
accretive charge of $4,000 annually.
(e) Reflects reversal of non-recurring acquisition-related restructuring costs
and other charges included in Dames & Moore's historical results of
operations.