FORM 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES [ ]
EXCHANGE ACT OF 1934
For the Fiscal Year Ended October 31, 1999
or
[ ] 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 ) (I.R.S. Employer Identification No.)
of incorporation
100 California Street, Suite 500, 94111-4529
San Francisco, California (Zip Code)
(Address of principal executive offices)
(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 New York Stock Exchange
due 2004
6 1/2% Convertible Subordinated Debentures New York Stock Exchange
due 2012 Pacific Exchange
Securities registered pursuant to Section 12(g) of the Act:
12 1/4% Senior Subordinated Notes due 2009.
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
--- ---
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. [ ]
On January 3, 2000, there were 15,930,855 Common Shares outstanding, and
the aggregate market value of the shares of Common Stock of URS Corporation
held by nonaffiliates was approximately $285.5 million based on the closing
sales price as reported in the consolidated transaction reporting system.
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 21, 2000.
This Annual Report on Form 10-K contains forward-looking statements that
involve risks and uncertainties. Our actual results could differ materially
from those discussed here. Factors that might cause such a difference include,
but are not limited to, those discussed elsewhere in this Annual Report on Form
10-K. We do not intend, and undertake no obligation, to update any
forward-looking statements.
ITEM 1. BUSINESS
We are an engineering services firm that provides a broad range of
planning, design and program and construction management services. We provide
these services in seven markets: surface transportation, air transportation,
railroads/mass transit, industrial process/petrochemical, general building and
facilities, water/wastewater and hazardous waste. We provide services to state,
local and Federal government agencies, as well as private clients in the
chemical, pharmaceutical, manufacturing, forest products, energy, oil, gas,
mining, healthcare, water supply, retail and commercial development,
telecommunications and utilities industries. We conduct business through
approximately 185 principal offices and have approximately 15,700 employees
located throughout the world, including the United States, Europe and the
Asia/Pacific region.
Acquisitions
Woodward-Clyde Group, Inc. In November 1997, we acquired privately-held
Woodward-Clyde Group, Inc. of Denver, Colorado, a firm specializing in
geotechnical and environmental engineering ("W-C"). For a discussion of the
effect of the W-C acquisition upon our operations, see Management's Discussion
and Analysis of Results of Operations and Financial Condition.
Thorburn Colquhoun Holdings plc. In February 1999, we acquired
privately-held Thorburn Colquhoun Holdings plc, a civil and structural
engineering consulting firm based in the United Kingdom ("T-C"). For a
discussion of the effect of the T-C acquisition upon our operations see
Management's Discussion and Analysis of Results of Operations and Financial
Condition.
Dames and Moore Group. In June 1999, we acquired publicly-held Dames and
Moore Group, an engineering and construction services firm ("D-M"). For a
discussion of the effect of the D-M acquisition upon our operations, see
Management's Discussion and Analysis of Results of Operations and Financial
Condition.
Services
We provide professional services in planning, design and program and
construction management. Each of our offices is responsible for obtaining local
or regional contracts, and multiple offices often work together to pursue large
national or multi-national contracts. Because we can draw from our large and
diverse network of professional and technical resources, we have the capability
to market and perform large multi-disciplinary projects throughout the world.
Planning. Planning covers a broad range of assignments ranging from
conceptual design and technical and economic feasibility studies to community
involvement programs and archaeological investigations. In many instances, we
use the planning process to develop the blueprint, or overall scheme, for the
project. We use planning analyses and reports to identify and evaluate
alternatives, estimate usage levels, determine financial feasibility, assess
available technology, ascertain economic and environmental impacts and
recommend optimal courses of action. Projects can include master planning, land
use planning, feasibility studies, transportation planning, zoning, permitting
and compliance with applicable regulations.
Design. Our professionals provide a broad range of design and
design-related services. Representative services include architectural and
interior design and civil, structural, mechanical, electrical, sanitary,
environmental, water resources, geotechnical/underground, dam, mining and
seismic engineering design. For each project, we identify the project
requirements and then integrate and coordinate the various design elements. The
result is a set of contract documents that may include plans, specifications
and cost estimates that are used to build a project. These documents detail
design characteristics and set
1
forth for the contractor the material it should use and the schedule for
construction. Other critical tasks in the design process may include value
analysis and the assessment of construction and maintenance requirements.
Program and Construction Management. Our program and construction
management services include master scheduling of both the design and
construction phases, construction and life-cycle cost estimating, cash flow
analysis, value engineering, constructability reviews, environmental and
specialized engineering and construction and bid management. Once construction
has begun, we oversee and coordinate the activities of construction
contractors. This frequently involves acting as the owner's representative for
on-site supervision and inspection of the contractor's work. In this role, our
objective is to monitor a project's schedule, cost and quality. In addition, we
act as the general contractor or sub-contractor on demolition and environmental
contracts wherein we take responsibility for contractor's risk and methods.
These construction projects account for approximately 10% of our revenues.
Markets
Our strategy is to focus on the infrastructure market which includes
surface, air and rail transportation systems, industrial process/petrochemical
and facilities projects and environmental programs involving water/wastewater
and hazardous waste management. We perform our business development and sales
activities primarily at our network of offices around the world. In addition,
we coordinate national and global marketing efforts on large projects and for
multi-national clients on a company-wide basis.
Surface Transportation. We provide a full range of services for all types
of surface transportation systems and networks, including highways,
interchanges, bridges, tunnels, toll facilities, intelligent transportation
systems, parking facilities and ports and marine structures. Historically, we
have emphasized the design of new transportation systems, but in recent years
we have focused on the rehabilitation of existing systems.
Air Transportation. We provide comprehensive services for the development
of new airports and the modernization and expansion of existing facilities.
Assignments have included terminals, hangars, air cargo buildings, runways,
taxiways, aprons, air traffic control towers and baggage, communications,
security and fueling systems, as well as supporting infrastructure such as
people mover systems, roadways, parking garages and utilities. We have
completed projects at both general aviation and large-hub international
airports. We have played a major role in the expansion and modernization of
existing airports as well as the development of new facilities worldwide. We
have completed assignments at more than 250 airports worldwide.
Rail. In this market, we serve freight and passenger railroads and urban
mass transit agencies. We have planned, designed and managed the construction
of commuter rail systems, freight rail systems, heavy and light rail transit
systems and high speed rail. Our specialized expertise in transportation
structures, including terminals, stations, parking facilities, bridges,
tunnels, power, signals and communications systems complements these
capabilities.
Industrial Process. We provide full-service capabilities for industrial
process markets. We provide expertise in facility siting and permitting,
environmental management and pollution control, waste management and
remediation engineering, process engineering and design and property
redevelopment.
Facilities. Our architects and engineers specialize in the design of new
buildings and the rehabilitation and expansion of existing facilities. The
facility design practice covers a broad range of building types, including
facilities for education, criminal justice, healthcare, commerce, industry,
government, the military, transportation, sports and recreation. With the
increased interest in historic preservation, adaptive reuse and seismic safety,
a significant portion of our practice focuses on facility assessments, code and
structural evaluations and renovation projects to maintain aging building
infrastructure.
Water/Wastewater. We provide services for the planning, design and
construction of all types of water and wastewater facilities to ensure that the
quality and quantity of the world's water supply is maintained. Services
include water quality studies, new and expanded water supply, storage,
distribution,
2
and treatment systems, municipal wastewater treatment plants and sewer systems,
watershed and stormwater management and flood control. We also respond to this
market with specialized expertise in the design and seismic retrofit of earth,
rockfill and roller-compacted concrete dams, as well as the design of
reservoirs, impoundments, including mine tailings disposal, and large outfall
structures.
Hazardous Waste Management. In this market, we conduct initial site
investigations, design remedial actions for site clean-up and provide
construction management services during site clean-up. This market involves
identifying and developing measures to dispose of hazardous and toxic waste
effectively at contaminated sites. We also provide air quality monitoring and
design modifications required to meet national and local air quality standards.
This work requires specialized knowledge of, and compliance with, complex
applicable regulations, as well as the permitting and approval processes.
Clients
We provide our services to a broad range of clients, including state,
local and municipal agencies, the Federal government and private sector
businesses. Our state and local government clients include approximately 40
state departments of transportation, water utilities, local power generators,
waste water treatment agencies, environmental protection agencies, schools and
colleges, law enforcement, judiciary, hospitals and healthcare providers. We
provide services to Federal agencies, including the Army, Environmental
Protection Agency, Navy, Air Force, Coast Guard, United States Postal Service
and Department of Energy. Our private sector clients include retail and
commercial, petro-chemical, food, telecommunications, oil and gas, power,
semi-conductor, transportation, technology, public utility, mining and forest
products entities.
For the five years ended October 31, 1999, our revenues were attributed to
the following categories:
1999 1998 1997 1996 1995
--------------------- ------------------- ------------------- ------------------- --------------------
(Dollars in
thousands)
Domestic:
Local and state
agencies ......... $ 480,922 34% $346,072 43% $255,423 63% $198,472 65% $ 99,871 56%
Federal agencies .... 235,039 17 116,340 14 67,042 17 64,226 21 58,751 33
Private businesses 558,314 39 288,067 36 83,986 20 42,772 14 21,147 11
International ...... 144,247 10 55,467 7 -- -- -- -- -- --
---------- --- -------- --- -------- --- -------- --- -------- ---
Total ............ $1,418,522 100% $805,946 100% $406,451 100% $305,470 100% $179,769 100%
========== === ======== === ======== === ======== === ======== ===
International Business
We currently derive approximately 10% of our revenues from international
operations. Our focus is to provide a range of services to local and national
governmental units and private sector businesses, both domestic and
multi-national. The markets we serve are primarily industrial
process/petrochemical, facilities, hazardous waste and surface transportation.
Our international business is primarily located in the United Kingdom, Western
Europe and the Asia/Pacific region, including Australia, New Zealand, Singapore
and the Philippines.
Contract Pricing and Terms of Engagement
We earn our revenues from cost-plus, fixed price and time-and-materials
contracts.
Cost-Plus Contracts. Under our cost-plus contracts, we charge clients
negotiated rates based on our direct and indirect costs. Labor costs and
subcontractor services are the principal components of our direct costs.
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. In negotiating a cost-plus contract, we estimate
all recoverable direct and indirect costs and then add 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. We receive payment
based on the total actual number of labor hours expended. If the actual total
number of labor hours is lower than estimated, the revenues from that project
will be lower than estimated. If the actual labor hours expended exceed the
initial negotiated amount, we must obtain a
3
contract modification to receive payment for such overage. Our profit margin
will increase to the extent we are able to reduce actual costs below the
estimates used to produce the negotiated fixed prices on contracts not covered
by Federal Acquisition Regulations. Conversely, our profit margin will decrease
and we may realize a loss on the project if we do not control costs and exceed
the overall estimates used to produce the negotiated fixed price.
Cost-plus contracts covered by Federal Acquisition Regulations and certain
state and local agencies require an audit of actual costs and provide for
upward or downward adjustments if actual recoverable costs differ from billed
recoverable costs.
Fixed-Price Contracts. Under our fixed-price contracts, clients pay us an
agreed sum negotiated in advance for the specified scope of work. Under
fixed-price contracts, we make no payment adjustments if we over-estimate or
under-estimate the number of labor hours required to complete the project,
unless there is a change of scope in the work to be performed. Accordingly, our
profit margin will increase to the extent the number of labor hours and other
costs are below the contracted amounts. The profit margin will decrease and we
may realize a loss on the project if the number of labor hours required and
other costs exceed the estimates.
Time-and-Materials Contracts. Under our time-and-materials contracts, we
negotiate hourly billing rates and charge our clients based on actual time
expended. In addition, clients reimburse us for the actual out-of-pocket costs
of materials and other direct incidental expenditures incurred in connection
with performing the contract. Our profit margins on time-and-materials
contracts fluctuate based on actual labor and overhead costs directly charged
or allocated to contracts compared with negotiated billing rates.
Backlog, Project Designations and Indefinite Delivery Contracts
Our contract backlog was $1,260 million at October 31, 1999, compared to
$675 million at October 31, 1998. Our contract backlog consists of the amount
billable at a particular point in time for future services under signed and
funded contracts. We include indefinite delivery contracts, which are executed
contracts requiring the issuance of task orders, in contract backlog only to
the extent the task orders are actually issued and funded. Of the contract
backlog of $1,260 million at October 31, 1999, we expect to fill approximately
70%, or approximately $880 million, within the next fiscal year ending October
31, 2000.
Customers also have designated us as the recipient of future contracts.
These "designations" are projects that customers have awarded to us but for
which we do not have signed contracts. We include in designations task orders
under executed indefinite delivery contracts which we expect clients to issue
in the immediate future. We estimated total contract designations to be $775
million at October 31, 1999, as compared to $504 million at October 31, 1998.
Typically, a significant portion of designations are converted into signed
contracts. However, we cannot provide any assurance that this experience will
continue to occur in the future.
4
Indefinite delivery contracts are signed contracts pursuant to which we
perform work only when the client issues specific task orders. Generally these
contracts exceed one year and often indicate a maximum term and potential
value. Certain indefinite delivery contracts are for a definite time period
with renewal option periods at the client's discretion. While we believe that
we will continue to get work under these contracts over their entire term,
because of renewals and the necessity for issuance of individual task orders,
we cannot assure you of continued work by us and the realization of the
potential maximum values under these contracts. However, because of the
increasing frequency with which our government and private sector clients use
this contracting method, we believe the potential value should be disclosed
along with backlog and designations as an indicator of our future business.
When the client notifies us of the scope and pricing of task orders, we add the
estimated value of such task orders to designations. When such task orders are
signed and funded, we put their value into backlog. As of October 31, 1999, the
potential values of our five largest indefinite delivery contracts were as
follows:
Total Estimated
Potential Estimated Remaining
Contract Term Values Revenue Backlog Designations Values
- ---------------------- ----------- ---------- -------------- --------- -------------- ---------
(In millions)
USAF-AFCEE(1) ...... 1997-2002 $ 200.0 $ 23.9 $ 16.2 $ -- $ 159.9
MRS OAMS(2) ......... 1997-2003 150.0 1.0 6.5 -- 142.5
METRIC(3) ......... 1997-2004 190.0 5.6 4.3 -- 180.1
METRIC(4) ......... 1996-2003 190.0 6.1 5.9 -- 178.0
EPA RAC 9(5) ...... 1998-2008 140.0 2.5 1.7 2.7 133.1
------- ------ ------ ---- -------
Total ............ $ 870.0 $ 39.1 $ 34.6 $2.7 $ 793.6
======= ====== ====== ==== =======
- ------------
<FN>
The names of the clients and the complete titles of the contracts listed in the table above are:
(1) Department of the Air Force, Remedial Design.
(2) Department of the Air Force, McClellan Remedial Systems Operations and Maintenance Services.
(3) Department of the Air Force, McClellan Environmental Remedial Implementation Contract.
(4) Department of the Air Force, Environmental Technology Remediation Contract.
(5) United States Environmental Protection Agency, Response Action Contract, Region 9.
</FN>
Competition
Our industry is highly fragmented and very competitive. As a result, in
each specific market area, we compete with many engineering and consulting
firms, some of which are substantially larger than us and possess greater
financial resources. No firm currently dominates any significant portion of our
market areas. Competition is based on quality of service, expertise, price,
reputation, and local presence, or the ability to provide services globally. We
believe that we compete favorably with respect to each of these factors in the
market areas we serve.
Regulation
Our professional services include the planning, design, program and
construction management and, under limited circumstances, construction of waste
management and pollution control facilities. Federal laws, such as CERCLA, the
Clean Water Act, the Toxic Substances Control Act, and various state and local
laws strictly regulate the handling, removal, storage, treatment,
transportation and disposal of toxic and hazardous substances and impose
liability for environmental contamination caused by these substances. These
laws and regulations are directly related to the demand for many of the
services we offer. While generally we do not directly handle, remove, store,
treat, transport or dispose of toxic or hazardous substances, some of our
contracts require us to design systems for those functions or to subcontract
for or supervise this type of work. Consequently, we may be exposed to claims
for damages or penalties caused by environmental contamination arising from
projects on which we have worked.
In the ordinary course of business, we and members of our professional
staff are subject to a variety of state, local and foreign licensing and permit
requirements. We believe that we are in substantial compliance with these
regulations.
5
Insurance
Currently, we have limits of $100 million per loss and $100 million in the
annual aggregate for general liability, professional errors and omissions
liability, and contractor's pollution liability insurance. These programs each
have a self-insured claim retention of $0.1 million, $1.0 million, and $0.25
million, respectively. In respect of D-M claims arising from professional
errors and omissions prior to acquisition, we have maintained a self insured
retention of $5 million per claim. We believe that our claim reserves combined
with our insurance coverage will be adequate for our present and reasonable
foreseeable operations. We have no reason to believe that adequate coverage
will not continue to be available, but we cannot assure that it will be. We
also cannot assure that our liabilities will not exceed the policy limits.
However we have maintained insurance without lapse for many years with limits
in excess of losses sustained.
Employees
As of October 31, 1999, we had approximately 15,700 employees in total. We
employ, at various times on a temporary or part-time basis, up to several
thousand persons to meet contractual requirements. Approximately three hundred
sixty of our employees are covered by collective bargaining agreements. We have
never experienced a strike or work stoppage. We believe that employee relations
are good.
ITEM 2. PROPERTIES
We lease office space in 185 principal locations throughout the world.
Most of the leases are written for a minimum term of three years with options
for renewal, sublease rights and allowances for improvements. Our significant
lease agreements expire at various dates through the year 2007. We believe that
our current facilities are sufficient for the operation of our business and
that suitable additional space in various local markets is available to
accommodate any needs that may arise.
ITEM 3. LEGAL PROCEEDINGS
Various legal proceedings are pending against us or our subsidiaries
alleging, among other things, breaches of contract or negligence in connection
with our performance of professional services. In some actions, parties are
seeking damages, including punitive or treble damages, which substantially
exceed our insurance coverage. As our experience is that most legal proceedings
settle for less than any claimed damages, we do not believe that any of these
proceedings are likely to result in a judgment against, or settlement by, us
materially exceeding our insurance coverage or to have a material adverse
effect on our consolidated financial position and operations.
6
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
We held a special meeting of stockholders on October 12, 1999. Our
stockholders voted on the following matters:
The approval of an amendment to our Certificate of Incorporation to
increase the authorized number of shares of Common Stock from 20,000,000 shares
to 50,000,000 shares and to increase the authorized number of shares of
preferred stock from 1,000,000 shares to 3,000,000 shares. 9,738,302 votes were
cast in favor of the amendment, 3,422,340 votes were cast against. There were
16,111 abstentions, and -0- broker non votes.
The approval of an amendment to and restatement of our Employee Stock
Purchase Plan. 8,889,793 votes were cast in favor of the amendment and
restatement, 4,268,004 votes were cast against. There were 18,956 abstentions,
and -0- broker non votes.
The approval of the 1999 Equity Incentive Plan. 8,079,498 votes were cast
in favor of the 1999 Equity Incentive Plan, 5,051,692 votes were cast against.
There were 45,563 abstentions, and -0- broker non votes.
The approval of the issuance of Series B Exchangeable Convertible
Preferred Stock to RCBA Strategic Partners, L.P. ("RCBA Strategic Partners") in
exchange for the shares of Series A and Series C Preferred Stock issued to RCBA
Strategic Partners in connection with the acquisition of D-M. 12,429,789 votes
were cast in favor of the exchange, 665,559 votes were cast against. There were
81,405 abstentions, and -0- broker non votes.
7
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
Name Position Held Age
- --------------------------- ------------------------------------------------------------ -----
Martin M. Koffel ......... Chief Executive Officer, President and Director of the 60
Company from May 1989; Chairman of the Board from June
1989.
Kent P. Ainsworth ......... Executive Vice President from April 1996; Vice 53
President and Chief Financial Officer of the Company
from January 1991; Secretary of the Company from May
1994.
Joseph Masters ............ Vice President and General Counsel of the Company since 43
July 1997; Vice President, Legal, from April 1994 to
June 1997; Vice President and Associate General Counsel
of URS Consultants, Inc. from May 1992 to April 1994;
outside counsel to the Company from January 1990 to May
1992.
Irwin L. Rosenstein ....... President of General Engineering Group ("GEG"), a 63
principal operating group of the Company since November
1999; President of URS Greiner Woodward Clyde Group,
Inc. ("URSGWC"), the Company's former principal
operating division, from November 1998 to October 1999;
President of URS Greiner ("URSG"), the Company's former
principal operating division, from November 1997 to
October 1998; President of URS Consultants, Inc.
("URSC"), the Company's former principal operating
division, from February 1989 to November 1997;
Director of the Company since February 1989; Vice
President of the Company since 1987.
Jean-Yves Perez ........... Director of the Company and Executive Vice President of 54
GEG since November 1999; Executive Vice President of
URSGWC, the Company's former principal operating
division, from November 1998 to October 1999; President
of Woodward-Clyde Group, Inc. ("W-C"), a division of
the Company from November 1997 to October 1998;
Director of the Company since November 1997; President
and Chief Executive Officer of W-C from 1987 to October
1997.
Susan B. Kilgannon ........ Vice President, Communications, of the Company since 40
October 1999; Vice President of URSGWC, the Company's
former principal operating division, from November 1998
to October 1999; Vice President of URSG, the Company's
former principal operating division, from November 1997
to October 1998; Vice President of URSC, the Company's
former principal operating division, from March 1992 to
November 1997.
Wayne P. Somrak ........... Vice President and Corporate Controller of the Company 54
since November 1999; Vice President and Corporate
Controller of Varian, Inc. from 1991 to 1999.
David C. Nelson ........... Vice President and Treasurer of the Company since 46
December 1999; Assistant Treasurer of Seagate
Technology, Inc. from February 1996 to December 1999;
Assistant Treasurer of Conner Peripherals, Inc. from
May 1995 to February 1996; Director of International
Finance of Conner Peripherals, Inc. from October 1994
to May 1995.
8
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The shares of our Common Stock are listed on the New York Stock Exchange
and the Pacific Exchange (under the symbol "URS"). At January 3, 2000, we had
approximately 3,340 stockholders of record. The following table sets forth the
high and low closing sale prices of our Common Stock, as reported by The Wall
Street Journal for the periods indicated.
Market Price
---------------------
Low High
--------- ---------
Fiscal Period:
1998:
First Quarter .............................. $ 12.13 $ 16.38
Second Quarter .............................. $ 13.00 $ 16.50
Third Quarter .............................. $ 16.00 $ 18.81
Fourth Quarter .............................. $ 14.06 $ 17.94
1999:
First Quarter .............................. $ 17.94 $ 24.00
Second Quarter .............................. $ 15.75 $ 23.44
Third Quarter .............................. $ 22.06 $ 29.31
Fourth Quarter .............................. $ 18.00 $ 25.88
2000:
First Quarter .............................. $ 17.25 $ 21.75
(through January 3, 2000)
We have not paid cash dividends since 1986 and, at the present time, our
management does not anticipate paying dividends on our outstanding Common Stock
in the near future. Further, we are precluded from paying dividends on our
outstanding Common Stock pursuant to our senior collateralized credit facility
with our lender and the indentures governing the 8 5/8% senior subordinated
debentures and the 12 1/4% senior subordinated notes. See Item 8, Consolidated
Financial Statements and Supplementary Data, Note 8, Notes Payable and
Long-Term Debt and Note 13, Stockholders' Equity.
9
ITEM 6. SUMMARY OF SELECTED FINANCIAL INFORMATION
The following table sets forth our selected financial data for the five
years ended October 31, 1999. The data presented below should be read in
conjunction with our Consolidated Financial Statements including the Notes
thereto.
SUMMARY OF SELECTED FINANCIAL INFORMATION
(In thousands, except per share data)
Years Ended October 31,
----------------------------------------------------------------
1999 1998 1997 1996 1995
------------ ---------- ---------- ---------- ----------
Income Statement Data:
Revenues ..................... $1,418,522 $805,946 $406,451 $305,470 $179,769
----------- --------- --------- --------- --------
Expenses:
Direct operating ............ 854,520 478,640 241,002 187,129 108,845
Indirect, general and
administrative ............ 463,132 277,065 141,442 102,389 63,217
Interest expense, net ......... 34,589 8,774 4,802 3,897 1,351
---------- -------- -------- -------- --------
1,352,241 764,479 387,246 293,415 173,413
---------- -------- -------- -------- --------
Income before taxes ............ 66,281 41,467 19,205 12,055 6,356
Income tax expense ............ 29,700 18,800 7,700 4,700 1,300
---------- -------- -------- -------- --------
Net income ..................... 36,581 22,667 11,505 7,355 5,056
Preferred stock dividend ...... 3,333 -- -- -- --
---------- ------- - -------- -------- --------
Net income available for
common stockholders ......... 33,248 22,667 11,505 7,355 5,056
Other comprehensive income,
net of tax:
Foreign currency translation
adjustments .................. 197 -- -- -- --
---------- -------- -------- -------- --------
Comprehensive income ......... $ 33,445 $ 22,667 $ 11,505 $ 7,355 $ 5,056
========== ======== ======= = ======== ========
Net income per common share:
Basic ........................ $ 2.14 $ 1.51 $ 1.15 $ .92 $ .72
========== ======== ======== ======== ========
Diluted ..................... $ 1.98 $ 1.43 $ 1.08 $ .81 $ .66
========== ======== ======== ======== ========
As of October 31,
--------------------------------------------------------------
1999 1998 1997 1996 1995
------------ ---------- ---------- ---------- --------
Balance Sheet Data:
Working capital ......... $ 359,087 $130,969 $ 63,236 $ 57,570 $ 36,307
Total assets ............... $1,437,487 $451,704 $210,091 $194,932 $ 75,935
Total debt ............... $ 688,380 $116,016 $ 48,049 $ 61,263 $ 9,999
Stockholders' equity ...... $ 310,502 $166,360 $ 77,151 $ 56,694 $ 39,478
10
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Overview
We are an engineering services firm, with domestic and international
clients that include local, state and Federal government agencies and private
clients in a broad array of industries. Revenues are earned from fixed-price,
cost-plus and time-and-materials contracts. We recognize revenues by the
percentage completion method, based primarily on contract costs incurred to
date compared with total estimated contract costs. The principal components of
our direct operating costs are labor costs for employees who are directly
involved in providing services to clients and subcontractor costs. Other direct
operating expenses also include those expenses associated with a specific
design project including materials and incidental expenditures. Indirect,
general and administrative expenses include salaries and benefits for
management, administrative, marketing and sales personnel, bid and proposal
costs and occupancy and related overhead costs.
Substantially all of our cash flow is generated by our subsidiaries. As a
result, funds necessary to meet our debt service obligations are provided in
large part by distributions to or advances from our subsidiaries. Under certain
circumstances, legal and contractual restrictions as well as the financial
condition and operating requirements of the subsidiaries may limit our ability
to obtain cash from the subsidiaries.
Results of Operations
Fiscal 1999 Compared with Fiscal 1998
Revenues in fiscal 1999 were $1,418.5 million, or 76% over the amount
reported in fiscal 1998. The growth in revenues is primarily attributable to
the acquisition and integration of D-M, the results of which are included
commencing June 1999. Accordingly, in fiscal 1999, the results of operations of
D-M were included for only five months.
Direct operating expenses increased $375.9 million, or 79%, over the
amount reported in fiscal 1998. The increase is due to the addition of the
direct operating expenses of D-M and to increases in subcontractor costs and
direct labor costs as well. Indirect, general and administrative expenses
("IG&A") increased to $463.1 million in fiscal 1999 from $277.1 million in
fiscal 1998 as a result of the addition of the D-M overhead as well as an
increase in business activity. IG&A expenses in 1999 also include $6.0 million
in fees incurred in connection with the acquisition of D-M. Finally, IG&A
included a $4.0 million reversal of a previously established reserve related to
a settlement of a lawsuit. Expressed as a percentage of revenues, IG&A expenses
decreased slightly from 34% in fiscal 1998 to 33% in fiscal 1999. We attribute
this stability to cost control. Net interest expense increased to $34.6 million
in fiscal 1999 from $8.8 million in fiscal 1998 as a result of increased
borrowings incurred in connection with the acquisition of D-M.
With an effective income tax rate of 45% in 1999, we earned net income
available for common stockholders of $33.2 million while in 1998 net income
available for common stockholders was $22.7 million after an effective income
tax rate of 45%. We earned $1.98 per share on a diluted basis in fiscal 1999
compared to $1.43 per share in fiscal 1998.
Our backlog of signed and funded contracts at October 31, 1999, was $1,260
million as compared to $675 million at October 31, 1998. The value of our
designations was $775 million at October 31, 1999, as compared to $504 million
at October 31, 1998.
Fiscal 1998 Compared with Fiscal 1997
Revenues in fiscal 1998 were $805.9 million, or 98% over the amount
reported in fiscal 1997. The growth in revenues is primarily attributable to
the acquisition of W-C, the results of which are included commencing November
1, 1997.
Direct operating expenses increased $237.6 million, or 99%, over the
amount reported in fiscal 1997. The increase is due to the addition of the
direct operating expenses of W-C and to increases in subcontractor costs and
direct labor costs as well. IG&A expenses increased to $277.1 million in fiscal
1998 from
11
$141.4 million in fiscal 1997 as a result of the addition of the W-C overhead
as well as an increase in business activity. Expressed as a percentage of
revenues, IG&A expenses decreased slightly from 35% in fiscal 1997 to 34% in
fiscal 1998. We attribute this stability to cost control. Net interest expense
increased to $8.8 million in fiscal 1998 from $4.8 million in fiscal 1997 as a
result of increased borrowings incurred in connection with the acquisition of
W-C.
With an effective income tax rate of 45% in 1998, we earned net income of
$22.7 million while in 1997 net income was $11.5 million after an effective
income tax rate of 40%. The increase in the effective tax rate was primarily
due to the consolidation of W-C and to nondeductible goodwill, state taxes, and
operating in countries outside the United States with higher tax rates. We
earned $1.43 per share on a diluted basis in fiscal 1998 compared to $1.08 per
share in fiscal 1997.
Our backlog of signed and funded contracts at October 31, 1998, was $675
million as compared to $470.4 million at October 31, 1997. The value of our
designations was $504 million at October 31, 1998, as compared to $446 million
at October 31, 1997.
Income Taxes
We currently have $3.8 million net operating loss ("NOL") carryforwards
which are limited to $750,000 per year, pursuant to Section 382 of the Internal
Revenue Code, related to our October 1989 quasi-reorganization. This NOL
expires fiscal year beginning 2004. We also have available $17.3 million of
foreign NOLs. These NOLs are available only to offset income earned in foreign
jurisdictions and expire at various dates.
We have recorded deferred tax assets and liabilities. The deferred tax
liability increased primarily because of nondeductible goodwill and other
liabilities related to the acquisition of D-M. The valuation allowance related
to deferred tax assets was increased by $1.7 million resulting from the D-M and
T-C acquisitions and by $1.2 million for current year foreign losses not
benefited. In addition, the valuation allowance was decreased by $260,000 due
to the utilization of net operating losses.
Liquidity and Capital Resources
At October 31, 1999, we had working capital of $359.1 million, an increase
of $228.1 million from October 31, 1998, due primarily to the D-M acquisition.
Our operating cash flow and working capital requirements have grown
substantially due to our acquisition growth strategy. As a professional
services organization, we are not capital intensive. Capital expenditures
historically have been for computer-aided design and general purpose computer
equipment to accommodate our growth. Capital expenditures during fiscal years
1999, 1998 and 1997 were $20.2 million, $12.2 million and $5.1 million,
respectively. We expect to continue to have capital outlays consistent with the
resulting relative growth of the Company.
Substantially all of our cash flow is generated by our subsidiaries. As a
result, funds necessary to meet our debt service obligations are provided in
large part by distributions to or advances from our subsidiaries. Under certain
circumstances, legal and contractual restrictions as well as the financial
condition and reporting requirements of the subsidiaries may limit our ability
to obtain cash from the subsidiaries.
Our liquidity and capital measurements are set forth below:
Years Ended October 31,
--------------------------------------
1999 1998 1997
---------- ---------- ----------
(Dollars in thousands)
Working capital ..................... $359,087 $130,969 $63,236
Working capital ratio ............... 1.9 to 1 1.8 to 1 1.7 to 1
Average days to convert billed accounts
receivable to cash .................. 75 72 71
Percentage of debt to equity ......... 220.3% 69.7% 62.2%
Our cash and cash equivalents amounted to $36.5 million at October 31,
1998, an increase of $14.4 million from the prior fiscal year-end, principally
as a result of the increase in cash generated by domestic operations. During
fiscal year 1998, we repaid debt of $83.2 million, including scheduled
principal payments on long-term debt of $12.3 million and loan payoffs of $65.2
million. We also funded other operating requirements.
12
Cash and cash equivalents amounted to $45.7 million at October 31, 1999,
an increase of $9.2 million from the prior fiscal year-end, principally as a
result of the increase in cash generated by domestic operations. During fiscal
1999, cash flow provided by operating activities totaled $8.8 million. This
represented a decrease of $32.0 million from 1998, primarily due to funding
working capital required to support the expansion of our business as well as an
increase in accounts receivable due to the installation of a new accounting
system. This caused a delay in billings which resulted in a corresponding
decrease in cash provided by operating activities. The majority of the
operating cash flow was generated by domestic operations. Our working capital
has increased primarily due to the acquisitions of D-M and W-C. We intend to
satisfy our working capital needs primarily through internal cash generation.
Our primary sources of liquidity will be cash flow from operations and
borrowings under the senior collateralized credit facility. Our primary uses of
cash will be to fund our working capital and capital expenditures and to
service our debt.
During fiscal 1999, we paid $376.2 million for the purchase of D-M, and
incurred new borrowings of $650 million from establishing a long-term senior
collateralized credit facility with a syndicate of banks led by Wells Fargo
Bank, N.A. ("the Bank") and from the issuance of the 12 1/4% senior
subordinated notes ("Notes"). We also issued 46,082.95 shares of our Series A
Preferred Stock and 450,000 shares of our Series C Preferred Stock to RCBA
Strategic Partners, L.P. for an aggregate consideration of $100 million. The
net proceeds of the debt were incurred to fund a portion of the D-M acquisition
and refinance bank debt previously incurred in the acquisition of W-C.
Senior collateralized credit facility. The senior collateralized credit
facility was funded June 9, 1999 ("Funding Date") and provides for three term
loan facilities in the aggregate amount of $450 million and a revolving credit
facility in the amount of $100 million. The term loan facilities consist of
Term Loan A, a $250 million tranche, Term Loan B, a $100 million tranche and
Term Loan C, another $100 million tranche.
Principal amounts under Term Loan A became due, commencing on October 31,
1999, in the amount of approximately $3.0 million per quarter for the following
four quarters. Thereafter and through the sixth anniversary of the Funding
Date, annual principal payments under Term Loan A range from $25.0 million to a
maximum of $62.5 million with Term Loan A expiring and the then-outstanding
principal amount becoming due and repayable in full on the sixth anniversary of
the Funding Date. Principal amounts under Term Loan B become due, commencing on
October 31, 1999, in the amount of $1.0 million in each year through July 31,
2005, with Term Loan B expiring and the then-outstanding principal amount
becoming due and repayable in full in four equal quarterly installments in year
seven. Principal amounts under Term Loan C become due, commencing on October
31, 1999, in the amount of $1.0 million in each year through July 31, 2006,
with Term Loan C expiring and the then-outstanding principal amount becoming
due and repayable in full in equal quarterly installments in year eight. The
revolving credit facility expires, and is repayable in full, on the sixth
anniversary of the Funding Date.
The term loans each bear interest at a rate per annum equal to, at our
option, either the Base Rate or LIBOR, in each case plus an applicable margin.
The revolving credit facility bears interest at a rate per annum equal to, at
our option, either the Base Rate, LIBOR or the Adjusted Sterling Rate, in each
case plus an applicable margin. The applicable margin adjusts according to a
performance pricing grid based on our ratio of Consolidated Total Funded Debt
to Consolidated Earnings Before Income Taxes, Depreciation and Amortization
("EBITDA"). The "Base Rate" is defined as the higher of the Bank's Prime Rate
and the Federal Funds Rate plus 0.50%. "LIBOR" is 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. The "Adjusted Sterling
Rate" is defined as the rate per annum displayed by Reuters at which Sterling
is offered to the Bank in the London interbank market as determined by the
British Bankers' Association. We may determine which interest rate options to
use and interest periods will apply for such periods for both term loans and
the revolving credit facility.
At October 31, 1999, our revolving credit facility with the Bank provides
for advances up to $100 million. Also at October 31, 1999, we had outstanding
letters of credit aggregating $40.0 million, which reduced the amount available
to us under our revolving credit facility to $60.0 million.
13
The senior collateralized credit facility is governed by affirmative and
negative covenants. These covenants include restrictions upon incurring
additional debt, paying dividends, or making distributions to our stockholders,
repurchasing or retiring capital stock, making subordinated junior debt
payments and submitting quarterly compliance certification. The financial
covenants include maintenance of a minimum current ratio of 1.20 to 1.00, a
minimum fixed charge coverage ratio of 1.10 to 1.00, a proforma EBITDA minimum
of $142 million and a maximum leverage ratio of 4.75 to 1.00 for the year ended
October 31, 1999. We were fully compliant with these covenants as of October
31, 1999.
We believe that our existing financial resources, together with our
planned cash flow from operations and its existing credit facilities, will
provide sufficient resources to fund its combined operations and capital
expenditure needs for the foreseeable future.
12 1/4% senior subordinated notes. Our Notes are due in 2009. Each note
will initially bear interest at 12 1/4% per annum. Interest on the Notes will
be payable semiannually on May 1 and November 1 of each year, commencing
November 1, 1999. The Notes are subordinate to the senior collateralized credit
facility. As of October 31, 1999, we owed $200 million on our Notes.
The Notes are fully and unconditionally guaranteed on a joint and several
basis by certain of our wholly owned subsidiaries. We may redeem any of the
Notes beginning May 1, 2004. The initial redemption price is 106.125% of their
principal amount, plus accrued and unpaid interest. The redemption price will
decline each year after 2004 and will be 100% of their principal amount, plus
accrued and unpaid interest beginning on May 1, 2007. In addition, at any time
prior to May 1, 2002, we may redeem up to 35% of the principal amount of the
Notes with net cash proceeds from the sale of capital stock. The redemption
price will be equal to 112.25% of the principal amount of the redeemed Notes.
Interest Rate Swaps. We have entered into an interest rate swap agreement
with the Bank. This interest rate swap effectively fixes the interest rate on
$8.5 million of our LIBOR based borrowings at 6.92% plus the applicable margin
through April 30, 2000. The actual borrowing cost to us with respect to
indebtedness covered by the interest rate swap will depend upon the applicable
margin over LIBOR for such indebtedness, which will be determined by the terms
of the relevant debt instruments. Currently, it is expected that the
contractual margin will range from 2.75% to 3.50%, which will provide for an
all-in annual interest rate range from 9.67% to 10.42%.
We have entered into an additional interest rate swap agreement with the
Bank. This interest rate swap effectively fixes the interest rate on $45.8
million of our LIBOR based borrowings at 5.97% plus the applicable margin
through January 31, 2001. The actual borrowing cost to us with respect to
indebtedness covered by the interest rate swap will depend upon the applicable
margin over LIBOR for such indebtedness, which will be determined by the terms
of the relevant debt instruments. Currently, it is expected that the
contractual margin will range from 2.75% to 3.50%, which will provide for an
all-in annual interest rate range from 8.72% to 9.47%.
Interest Rate Cap Agreements. We entered into two interest rate cap
agreements with the Bank. These agreements cap our interest rate at 7% for
$161.5 million and $9.2 million of our LIBOR based borrowings through July 31,
2002, and April 30, 2000, respectively.
The following table represents cash paid during the period for:
Years Ended October 31,
--------------------------------
1999 1998 1997
--------- --------- --------
(In thousands)
Interest ......... $24,903 $ 7,857 $5,181
Income taxes ...... $22,562 $18,398 $8,780
Other related party transactions. On February 12, 1997, the Bank exercised
the 435,562 warrants held by the Bank at $4.34 per share, resulting in the
issuance of an additional 435,562 shares to the Bank and additional paid-in
capital of approximately $1.9 million. On February 14, 1997, various
partnerships managed by BLUM Capital Partners, L.P. ("BLUM") (formerly Richard
C. Blum & Associates, L.P.) exercised the 1,383,586 warrants held by such
entities at $4.34 per share. The exercise price of these warrants was paid by a
combination of cash and the cancellation of the $3.0 million face amount of
debt
14
drawn under our then line of credit with certain BLUM entities. The line of
credit with certain BLUM entities was then cancelled. The exercise resulted in
the issuance of an additional 1,383,586 shares to the BLUM entities and
additional paid-in capital of approximately $5.0 million.
Mr. Koffel and Mr. Ainsworth have disposed of shares of our Common Stock
in connection with cashless exercises of stock options and payment of
withholding taxes due on such exercises and on the grant and vesting of
restricted stock, and we have accepted this stock as payment therefor. The
cashless exercise of stock options resulted in a charge of $1.7 million which
is included in IG&A for the year ended October 31, 1999. Mr. Koffel, Mr.
Ainsworth and other executives may continue to dispose of shares of our Common
Stock in such manner and for such purposes.
Acquisitions
In November 1997, we acquired W-C for Common Stock, cash and debt of
$132.4 million.
(In thousands)
Purchase price of W-C (net of prepaid loan fees of
$4.0 million) ....................................... $ 128,366
Fair value of assets acquired ........................ (36,194)
---------
Excess purchase price over net assets acquired ...... $ 92,172
=========
On February 1, 1999, we acquired privately-held T-C, for an aggregate
purchase price of $13.6 million including assumption of its debt.
In June 1999, we acquired D-M for cash and debt of $376.2 million.
(In thousands)
Purchase price of D-M (net of debt) ............... $ 357,429
Acquisition costs (net of financing fees) ......... 18,738
Fair value of assets acquired ..................... (148,154)
----------
Incremental additional excess purchase price over net
assets acquired .................................... 228,013
----------
D-M historical goodwill, net ........................ 160,378
----------
Aggregate goodwill ................................. $ 388,391
==========
During the year ended October 31, 1999, the Company provided for $37.0
million of costs in connection with the acquisition of D-M and the Company's
reorganization plans to integrate D-M's operations into the Company. This
consists of project claims and cost over-runs, lease fees, severance and
miscellaneous items. This estimate might increase due to additional expenses
directly related to the transaction not identified as of October 31, 1999.
The following table summarizes the activity in the 1999 D-M merger-related
accruals during the year ended October 31, 1999. The balance of the accrual at
October 31, 1999, is included in Accrued Expenses on the consolidated balance
sheet.
Merger- Balance
Related October 31,
Accruals Payments 1999
---------- ---------- -------------
(In millions)
Project claims .................. $ 10.0 $ -- $ 10.0
Severance and related costs ...... 7.0 (2.1) 4.9
Lease termination fees and project
cost over-runs .................. 15.0 (0.5) 14.5
Miscellaneous expenses ............ 5.0 (1.4) 3.6
------- ------ -------
Total ........................... $ 37.0 $ (4.0) $ 33.0
======= ====== =======
15
During the year ended October 31, 1998, the Company provided for $10.8
million of costs related to the acquisition of W-C and the Company's
reorganization plans to integrate W-C's operations into the Company. This
consisted of project claims, lease fees, severance and miscellaneous items.
The following table summarizes the activity in the W-C merger-related
accruals during the year ended October 31, 1999. The balance of the accrual at
October 31, 1999, is included in Accrued Expenses on the consolidated balance
sheet.
Merger- Balance
Related October 31,
Accruals Payments 1999
---------- -------------- -----------
(In millions)
Project claims .................. $ 2.2 $ -- $ 2.2
Severance and related costs ...... 3.9 (3.9) --
Lease termination fees ............ 1.5 (0.6) 0.9
Miscellaneous expenses ............ 3.2 (3.2) --
------ ------ ------
Total ........................... $10.8 $ (7.7) $ 3.1
====== ====== ======
Risk Factors That Could Affect Our Financial Condition and Results of Operations
In addition to the other information included or incorporated by reference
in this Form 10-K, the following factors could affect our actual results:
We may not be able to integrate D-M successfully and achieve anticipated cost
savings and other benefits from the D-M acquisition.
We will achieve the efficiencies, cost reductions and other benefits that
we expect to result from the D-M acquisition only if we can successfully
integrate each company's administrative, finance, technical and marketing
organizations, and implement appropriate operations, financial and management
systems and controls.
The integration of D-M into our operations will involve a number of risks,
including:
* the possible diversion of our management's attention from other business
concerns;
* the potential inability to successfully pursue some or all of the
anticipated revenue opportunities associated with the D-M acquisition;
* the possible loss of D-M's or our key professional employees;
* the potential inability to successfully replicate our operating
efficiencies in D-M's operations;
* insufficient management resources to accomplish the integration;
* our increased complexity and diversity compared to our operations prior
to the D-M acquisition;
* the possible negative reaction of clients to the D-M acquisition; and
* unanticipated problems or legal liabilities.
The occurrence of any of the above events, as well as any other
difficulties which may be encountered in the transition and integration
process, could have a material adverse effect on our business, financial
condition and results of operations.
Our substantial indebtedness could adversely affect our financial condition.
We are a highly leveraged company. As of October 31, 1999, we had
approximately $688 million of outstanding indebtedness following consummation
of the D-M acquisition and the related financing plan. This level of
indebtedness could have important consequences, including the following:
* it may limit our ability to borrow money or sell stock for working
capital, capital expenditures, debt service requirements or other
purposes;
16
* it may limit our flexibility in planning for, or reacting to, changes in
our business;
* we could be more highly leveraged than some of our competitors, which may
place us at a competitive disadvantage;
* it may make us more vulnerable to a downturn in our business or the
economy; and
* a substantial portion of our cash flow from operations could be dedicated
to the repayment of our indebtedness and would not be available for other
purposes.
To service our indebtedness we will require a significant amount of cash. The
ability to generate cash depends on many factors beyond our control.
Our ability to make payments on our indebtedness depends on our ability to
generate cash in the future. If we do not generate sufficient cash flow to meet
our debt service and working capital requirements, we may need to seek
additional financing or sell assets. This need may make it more difficult for us
to obtain financing on terms that are acceptable to us, or at all. Without this
financing, we could be forced to sell assets to make up for any shortfall in our
payment obligations under unfavorable circumstances.
Our senior collateralized credit facility and our obligations under the
Notes limit our ability to sell assets and also restrict the use of proceeds
from any such sale. Moreover, the senior collateralized credit facility is
secured by substantially all of our assets. Furthermore, a substantial portion
of our assets are, and may continue to be, intangible assets. Therefore, we
cannot assure you that our assets could be sold quickly enough or for
sufficient amounts to enable us to meet our debt obligations.
Restrictive covenants in our senior collateralized credit facility and the
indenture relating to the Notes may restrict our ability to pursue business
strategies.
Our senior collateralized credit facility and indenture relating to the
Notes restrict our ability, among other things, to:
* incur additional indebtedness or contingent obligations;
* pay dividends or make distributions to our stockholders;
* repurchase or redeem our stock;
* make investments;
* grant liens;
* make capital expenditures;
* enter into transactions with our stockholders and affiliates;
* sell assets; and
* acquire the assets of, or merge or consolidate with, other companies.
In addition, our senior collateralized credit facility requires us to
maintain certain financial ratios. We may not be able to maintain these ratios.
Additionally, covenants in the senior collateralized credit facility and the
indenture relating to the Notes may impair our ability to finance future
operations or capital needs or to engage in other favorable business
activities.
If we default under our various debt obligations, the lenders could
require immediate repayment of the entire principal. If the lenders require
immediate repayment, we will not be able to repay them, and our inability to
meet our debt obligations could have a material adverse effect on our business,
financial condition and results of operations.
We derive approximately half of our revenues from contracts with government
agencies. Any disruption in government funding or in our relationship with
those agencies could adversely affect our business and our ability to meet our
debt obligations.
We derive approximately half of our revenues from local, state and Federal
government agencies. The demand for our services will be directly related to
the level of government program funding that is
17
allocated to rebuild and expand the nation's infrastructure. We believe that
the success and further development of our business depend upon the continued
funding of these government programs and upon our ability to participate in
these government programs. We cannot assure you that governments will have the
available resources to fund these programs, that these programs will continue
to be funded even if governments have available financial resources, or that we
will continue to win government contracts under these or other programs.
Some of these government contracts are subject to renewal or extension
annually, so we cannot assure you of our continued work under these contracts
in the future. Unsuccessful bidders may protest or challenge the award of these
contracts. In addition, government agencies can terminate these contracts at
their convenience. Consequently, we may incur costs in connection with the
termination of these contracts. Also, contracts with government agencies are
subject to substantial regulation and an audit of actual costs incurred.
Consequently, there may be a downward adjustment in our revenues if actual
recoverable costs exceed billed recoverable costs.
We must maintain our present responsibility to be eligible to perform
government contracts. From time to time allegations of improper conduct in
connection with government contracting have been made against us and these
could be the subject of suspension or debarment consideration. We investigate
all such allegations thoroughly and believe that appropriate actions have been
taken in all cases. Additionally, we maintain a compliance program in an effort
to assure that no improper conduct occurs in connection with government
contracting.
We may be unable to estimate accurately our cost in performing services for our
clients. This may cause us to have low profit margins or incur losses.
We submit proposals on projects with an estimate of the costs we will
likely incur. To the extent we cannot control overhead, general and
administrative and other costs, or underestimate such costs, we may have low
profit margins or may incur losses.
We are subject to risks from changes in environmental legislation, regulation
and governmental policies.
Federal laws, such as the Resource Conservation and Recovery Act of 1976,
as amended, and the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, ("CERCLA"), and various state and local laws,
strictly regulate the handling, removal, treatment and transportation of toxic
and hazardous substances and impose liability for environmental contamination
caused by such substances. Moreover, so-called "toxic tort" litigation has
increased markedly in recent years as people injured by hazardous substances
seek recovery for personal injuries or property damage. We directly handle,
remove, treat and transport toxic or hazardous substances. Consequently, we may
be exposed to claims for damages caused by environmental contamination.
Federal and state laws, regulations, and programs related to environmental
issues will generate, either directly or indirectly, much of our environmental
business. Accordingly, a reduction of these laws and regulations, or changes in
governmental policies regarding the funding, implementation or enforcement of
these programs, could have a material effect on our business. Environmental
laws, regulations and enforcement policies remained essentially unchanged
during fiscal year 1999, including further deferral of congressional
reauthorization of CERCLA. The outlook for congressional action on CERCLA
legislation in fiscal year 2000 remains unclear.
Our liability for damages due to legal proceedings may be significant. Our
insurance may not be adequate to cover this risk.
Various legal proceedings are pending against us alleging, among other
things, breaches of contract or negligence in connection with our performance
of professional services. In some actions punitive or treble damages are sought
which substantially exceed our insurance coverage. If we sustain damages
greater than our insurance coverage, there could be a material adverse effect
on our business, financial condition and results of operations.
Our engineering practices, including general engineering and civil
engineering services, involve professional judgments about the nature of soil
conditions and other physical conditions, including the
18
extent to which toxic and hazardous materials are present, and about the
probable effect of procedures to mitigate problems or otherwise affect those
conditions. If the judgments and the recommendations based upon those judgments
are incorrect, we may be liable for resulting damages that our clients incur.
The failure to attract and retain key professional personnel could adversely
affect our business.
The ability to attract, retain and expand our staff of qualified technical
professionals will be an important factor in determining our future success. A
shortage of qualified technical professionals currently exists in the
engineering and design industry. The market for these professionals is
competitive, and we cannot assure you that we will be successful in our efforts
to continue to attract and retain such professionals. In addition, we will rely
heavily upon the experience and ability of our senior executive staff and the
loss of a significant number of such individuals could have a material adverse
effect on our business, financial condition and results of operations.
We may be unable to compete successfully in our industry. This could adversely
affect our business.
We are engaged in highly fragmented and very competitive markets in our
service areas. We will compete with firms of various sizes, several of which
are substantially larger than us and which possess greater technical resources.
Furthermore, the engineering and design industry is undergoing consolidation,
particularly in the United States. As a result, we will compete against several
larger companies which have the ability to offer more diverse services to a
wider client base. These competitive forces could have a material adverse
effect on our business, financial condition and results of operations.
Our international operations are subject to a number of risks that could
adversely affect the results from these operations and our overall business.
As a worldwide provider of engineering services, we have operations in
over 40 countries and derive approximately 10% of our revenues from
international operations. International business is subject to the customary
risks associated with international transactions, including political risks,
local laws and taxes, the potential imposition of trade or currency exchange
restrictions, tariff increases and difficulties or delays in collecting
accounts receivable. Weak foreign economies and/or a weakening of foreign
currencies against the U.S. dollar could have a material adverse effect on our
business, financial condition and results of operations.
Additional acquisitions may adversely affect our ability to manage our
business.
Historically, we have completed numerous acquisitions and, in implementing
our business strategy, we may continue to do so in the future. We cannot assure
you that we will identify, finance and complete additional suitable
acquisitions on acceptable terms. We may not successfully integrate future
acquisitions. Any acquisitions may require substantial attention from our
management, which may limit the amount of time that management can devote to
day-to-day operations. Also, future acquisitions could have an adverse effect
on us. Our inability to find additional attractive acquisition candidates or to
effectively manage the integration of any businesses acquired in the future
could adversely affect our business, financial condition and results of
operations.
Year 2000 computer problems may adversely affect our business.
Many installed computer systems and software products were programmed to
accept only two digits in the date code field. As of January 1, 2000, these
date code fields needed to accept four digit entries to distinguish years
beginning with "19" from those beginning with "20". Otherwise computer systems
using time-sensitive software could shut down or perform incorrect
computations.
We undertook a project (the "Year 2000 Project") to identify and assess
the readiness of our computer systems, programs and other infrastructure that
could be affected by the Year 2000 issue and to remedy the problems identified.
Our Year 2000 Project also included an assessment of the Year 2000 readiness of
key third parties on whom our operations depend. We also developed contingency
plans to permit us to continue operations, consistent with the highest quality
standards, in the event Year 2000 problems arose.
19
To date, we have not experienced any material Year 2000 problems. However,
monitoring will continue at least through the first quarter of 2000. Corrective
action will be taken if we encounter any previously unidentified Year 2000
problems internally or in interfacing with third parties, and our contingency
plans remain available. We have not incurred any material costs to date related
to our Year 2000 Project, but if we encounter problems in the future related to
our own systems or to those of key third parties, it is possible that we would
incur costs that could adversely affect our financial condition.
20
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Stockholders of URS Corporation:
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows present fairly, in all material respects, the financial position
of URS Corporation and its subsidiaries at October 31, 1999 and 1998, and the
results of their operations and their cash flows for each of the three years in
the period ended October 31, 1999 in conformity with accounting principles
generally accepted in the United States. 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 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 the opinion expressed
above.
/s/ PricewaterhouseCoopers LLP
---------------------------------
PRICEWATERHOUSECOOPERS LLP
San Francisco, California
December 17, 1999
F-1
URS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
October 31,
----------------------------
1999 1998
------------ -------------
ASSETS
Current assets:
Cash and cash equivalents .................................................... $ 45,687 $ 36,529
Accounts receivable, including retainage amounts of $41,724 and $16,101,
less allowance for doubtful accounts of $23,771 and $7,206 ................... 453,960 161,742
Costs and accrued earnings in excess of billings on contracts in process, less
allowance for losses of $16,840 and $6,896 .................................. 212,001 77,881
Deferred income taxes ....................................................... 10,005 --
Prepaid expenses and other assets ........................................... 24,111 10,033
---------- --------
Total current assets ....................................................... 745,764 286,185
Property and equipment at cost, net ........................................... 93,165 29,517
Goodwill, net ................................................................... 529,697 129,748
Other assets ................................................................... 68,861 6,254
---------- --------
$1,437,487 $451,704
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Long-term debt, current portion .............................................. $ 17,625 $ 16,400
Notes payable ................................................................ 17,040 1,943
Obligations under capital leases .............................................. 4,758 2,717
Accounts payable ............................................................. 130,045 34,519
Accrued salaries and wages ................................................. 89,023 34,797
Accrued expenses and other ................................................. 57,873 29,385
Billings in excess of costs and accrued earnings on contracts
in process ................................................................ 70,313 35,455
---------- --------
Total current liabilities ................................................. 386,677 155,216
Long-term debt ................................................................ 635,286 87,925
Obligations under capital leases ................................................. 13,671 7,032
Deferred income taxes .......................................................... 15,267 5,377
Deferred compensation and other ................................................. 76,084 29,794
---------- --------
Total liabilities .......................................................... 1,126,985 285,344
---------- --------
Commitments and contingencies (Note 11)
Mandatorily redeemable Series B exchangeable convertible preferred stock, par
value $1.00, authorized 150 shares, issued 48 and 0, respectively, liquidation
preference $103,333 103,333 --
---------- --------
Stockholders' equity:
Common stock, par value $.01; authorized 50,000 shares; issued 15,925 and
15,206 shares, respectively ................................................. 159 152
Treasury stock ............................................................. (287) (287)
Additional paid-in capital ................................................. 125,462 117,842
Foreign currency translation adjustment ..................................... 197 --
Retained earnings since February 21, 1990, date of quasi-reorganization ....... 81,638 48,653
---------- --------
Total stockholders' equity ................................................. 207,169 166,360
---------- --------
$1,437,487 $451,704
========== ========
<FN>
See Notes to Consolidated Financial Statements
</FN>
F-2
URS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Years Ended October 31,
----------------------------------
1999 1998 1997
----------- -------- --------
Revenues .......................................... $1,418,522 $805,946 $406,451
---------- -------- --------
Expenses:
Direct operating .............................. 854,520 478,640 241,002
Indirect, general and administrative ............ 463,132 277,065 141,442
Interest expense, net ........................... 34,589 8,774 4,802
---------- -------- --------
1,352,241 764,479 387,246
---------- -------- --------
Income before taxes .............................. 66,281 41,467 19,205
Income tax expense ................................. 29,700 18,800 7,700
---------- -------- --------
Net income ....................................... 36,581 22,667 11,505
Preferred stock dividend ........................... 3,333 -- --
---------- -------- --------
Net income available for common stockholders ...... 33,248 22,667 11,505
Other comprehensive income, net of tax:
Foreign currency translation adjustments ...... 197 -- --
---------- -------- --------
Comprehensive income .............................. $ 33,445 $ 22,667 $ 11,505
========== ======== ========
Net income per common share:
Basic .......................................... $ 2.14 $ 1.51 $ 1.15
========== ======== ========
Diluted ....................................... $ 1.98 $ 1.43 $ 1.08
========== ======== ========
<FN>
See Notes to Consolidated Financial Statements
</FN>
F-3
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'
Number Amount Stock Capital Income Earnings Equity
------- -------- ---------- ------------ --------------- ---------- ---------------
Balances, October 31, 1996 ......... 8,640 $ 86 $ (287) $ 41,894 $ -- $ 15,001 $ 56,694
Employee stock purchases ............ 282 3 -- 2,026 -- -- 2,029
Issuance of 1,819,148 shares in
connection with the exercise of
warrants ........................... 1,819 18 -- 6,905 -- -- 6,923
Quasi-reorganization NOL
carryforward ..................... -- -- -- 260 -- (260) --
Net income ........................ -- -- -- -- -- 11,505 11,505
------ ------ ------- -------- --- -------- --------
Balances, October 31, 1997 ......... 10,741 107 (287) 51,085 -- 26,246 77,151
Employee stock purchases ............ 420 4 -- 4,601 -- -- 4,605
Issuance of 4,044,804 shares in
connection with the
Woodward-Clyde Group, Inc.
acquisition ........................ 4,045 41 -- 61,896 -- -- 61,937
Quasi-reorganization NOL
carryforward ..................... -- -- -- 260 -- (260) --
Net income ........................ -- -- -- -- -- 22,667 22,667
------ ------ ------- -------- --- -------- --------
Balances, October 31, 1998 ......... 15,206 152 (287) 117,842 -- 48,653 166,360
Employee stock purchases ............ 719 7 -- 8,857 -- -- 8,864
Preferred stock issuance costs ...... -- -- -- (1,500) -- -- (1,500)
Quasi-reorganization NOL
carryforward ..................... -- -- -- 263 -- (263) --
Total comprehensive income:
Foreign currency translation, net
of tax of $273 ..................... -- -- -- -- 197 -- 197
Net income ........................ -- -- -- -- -- 36,581 36,581
Preferred stock dividends ............ -- -- -- -- -- (3,333) (3,333)
------ ------ ------- -------- ---- -------- --------
Balances, October 31, 1999 ......... 15,925 $ 159 $ (287) $125,462 $197 $ 81,638 $207,169
====== ====== ======= ======== ==== ======== ========
<FN>
See Notes to Consolidated Financial Statements
</FN>
F-4
URS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Years Ended October 31,
---------------------------------------
1999 1998 1997
---------- --------- ---------
Cash flows from operating activities:
Net income .......................................... $ 36,581 $ 22,667 $ 11,505
---------- --------- ---------
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization ........................ 33,764 18,556 7,927
Allowance for doubtful accounts and losses ......... (285) (2,351) 1,540
Stock compensation ................................. 1,726 -- --
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 ...... (86,266) (12,961) (14,193)
Prepaid expenses and other assets .................. (1,737) (25) 461
Accounts payable, accrued salaries and wages and
accrued expenses .................................... (15,215) 2,186 3,426
Billings in excess of costs and accrued earnings on
contracts in process .............................. 33,307 23 4,839
Deferred income taxes .............................. 5,831 12,695 322
Other, net .......................................... 1,047 -- (3,292)
---------- --------- ---------
Total adjustments ................................. (27,828) 18,123 1,030
---------- --------- ---------
Net cash provided by operating activities ............ 8,753 40,790 12,535
---------- --------- ---------
Cash flows from investing activities:
Payment for business acquisition, net of cash
acquired .......................................... (316,167) (36,937) --
Capital expenditures ................................. (20,248) (12,201) (5,127)
---------- --------- ---------
Net cash (used) by investing activities ............ (336,415) (49,138) (5,127)
---------- --------- ---------
Cash flows from financing activities:
Payments of merger fees ................................. (18,738) (4,705) --
Proceeds from issuance of debt ........................ 854,739 110,000 --
Principal payments on long-term debt .................. (593,222) (83,157) (13,568)
Proceeds from sale of common shares ..................... 4,775 2,622 1,028
Proceeds from exercise of stock options ............... 2,363 1,983 1,001
Proceeds from exercise of warrants ..................... -- -- 3,895
Proceeds from issuance of preferred stock ............... 100,000 -- --
Payment of financing fees .............................. (11,597) (4,000) --
Payment of financing fees related to issuance of
preferred stock ....................................... (1,500) -- --
---------- --------- ---------
Net cash provided (used) by financing activities ...... 336,820 22,743 (7,644)
---------- --------- ---------
Net increase (decrease) in cash ........................ 9,158 14,395 (236)
Cash at beginning of year .............................. 36,529 22,134 22,370
---------- --------- ---------
Cash at end of year .................................... $ 45,687 $ 36,529 $ 22,134
========== ========= =========
<FN>
See Notes to Consolidated Financial Statements
</FN>
F-5
URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ACCOUNTING POLICIES
Business
URS Corporation offers a broad range of planning, design, and program and
construction management services for transportation, hazardous waste,
industrial processing and petrochemical, general building and water/wastewater
projects. Headquartered in San Francisco, the Company operates in 40 countries
with approximately 15,700 employees providing engineering services to Federal,
state and local governmental agencies as well as to private clients in the
chemical, manufacturing, pharmaceutical, forest products, mining, oil and gas,
and utilities industries.
Principles of Consolidation and Basis of Presentation
The consolidated financial statements include the accounts of URS
Corporation and its subsidiaries (the "Company"), 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
account for the acquisitions of Woodward-Clyde Group, Inc. ("W-C") in November
1997, Thorburn Colquhoun Holdings, plc ("T-C") in February 1999, and Dames &
Moore Group ("D-M") in June 1999, respectively, as purchases. See Note 3,
Acquisitions.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect 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
Revenue from contract services is recognized by the
percentage-of-completion method and includes a proportion of the earnings
expected to be realized on a contract in the ratio that costs incurred bear to
estimated total costs. Revenue on cost reimbursable contracts is recorded as
related contract costs are incurred and includes estimated earned fees in the
proportion that costs incurred to date bear to total estimated costs. The fees
under certain government contracts may be increased or decreased in accordance
with cost or performance incentive provisions which measure actual performance
against established targets or other criteria. Such incentive fee awards or
penalties are included in revenue at the time the amounts can be reasonably
determined. Revenue for additional contract compensation related to unpriced
change orders is recorded when realization is probable. Revenue from claims by
the Company for additional contract compensation is recorded when agreed to by
the customer. If estimated total costs on any contract indicate a loss, the
Company provides currently for the total loss anticipated on the contract.
Costs under contracts with the United States Government are subject to
government audit upon contract completion. Therefore, all contract costs,
including direct and indirect, general and administrative expenses, are
potentially subject to adjustment prior to final reimbursement. Management
believes that adequate provision for such adjustments, if any, has been made in
the accompanying consolidated financial statements. All overhead and general
and administrative expense recovery rates for fiscal 1997 through fiscal 1999
are subject to review by the United States Government.
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
F-6
URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)
due to the large numbers of customers comprising the Company's customer base
and their dispersion across different business and geographic areas. As of
October 31, 1999 and 1998, the Company had no significant concentrations of
credit risk. The Company maintains reserves for potential credit losses and
such losses have been within management's expectations. Cash balances are held
in financial institutions in concentrations that may exceed insured limits.
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.
Income Taxes
The Company uses an 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. Income tax expense is the tax payable for the
period plus or minus the change in deferred tax assets and liabilities during
the period.
Interest Rate Risk Management
The Company has entered into various interest rate protection agreements
(swap and cap) on $225 million of the Company's London Interbank Offered Rate
("LIBOR") bank term loan borrowings. The related cost of these agreements is
amortized over the life of the bank term loan borrowings and such amortization
is recorded to interest expense. The Company enters into interest rate risk
management arrangements with financial institutions meeting certain minimum
financial criteria, and the related credit risk of non-performance by
counter-parties is not deemed to be significant.
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 included in
income. Depreciation is provided on the straight-line method using estimated
lives ranging from 5 to 10 years for property and equipment. Leasehold
improvements are amortized over the length of the lease or estimated useful
life, whichever is less.
Income Per Common Share
The Company has adopted the provisions of Statement of Financial
Accounting Standards No. 128 ("SFAS 128"), Earnings Per Share, effective
November 1, 1997. SFAS 128 requires the presentation of basic and diluted
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 common share is
computed giving effect to all dilutive potential common shares that were
outstanding during the period. Dilutive potential common shares consist of the
incremental common shares issuable upon the exercise of stock options and
warrants for all periods and convertible preferred stock for the year ended
October 31, 1999.
F-7
URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)
In accordance with the disclosure requirement of SFAS 128, a
reconciliation of the numerator and denominator of basic and diluted income per
common share is provided as follows (in thousands, except per share data):
Years ended October 31,
-----------------------------
1999 1998 1997
------- ------- -------
Numerator--Basic
Net income available for common stockholders ...... $33,248 $22,667 $11,505
======= ======= =======
Denominator--Basic
Weighted-average common stock outstanding ......... 15,499 14,963 10,018
======= ======= =======
Basic income per share $ 2.14 $ 1.51 $ 1.15
======= ======= =======
Numerator--Diluted
Net income available for common stockholders ...... $33,248 $22,667 $11,505
Preferred stock dividend ........................... 3,333 -- --
------- ------- -------
Net income .......................................... $36,581 $22,667 $11,505
======= ======= =======
Denominator--Diluted
Weighted-average common stock outstanding ......... 15,499 14,963 10,018
Effect of dilutive securities:
Stock options .................................... 1,180 845 647
Convertible preferred stock ........................ 1,805 -- --
------- ------- -------
18,484 15,808 10,665
======= ======= =======
Diluted income per share .............................. $ 1.98 $ 1.43 $ 1.08
======= ======= =======
Stock options to purchase 13,525 shares of Common Stock at prices ranging
from $13.63 to $31.25 per share were outstanding at October 31, 1997, 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 common shares.
Convertible subordinated debt was not included in the computation of diluted
income per share because it would be anti-dilutive.
Stock options to purchase 7,000 shares of Common Stock at prices ranging
from $16.13 to $31.25 per share were outstanding at October 31, 1998, 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 common shares.
Convertible subordinated debt was not included in the computation of diluted
income per share because it would be anti-dilutive.
Stock options to purchase 60,000 shares of Common Stock at $28.00 were
outstanding at October 31, 1999, 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 common shares. Convertible subordinated debt was
not included in the computation of diluted income per share because it would be
anti-dilutive.
Segment and Related Information
In fiscal 1999, the Company adopted Statement of Financial Accounting
Standards No. 131 ("SFAS 131"), "Disclosures about Segments of an Enterprise
and Related Information." SFAS No. 131 establishes standards for reporting
information about operating segments and related disclosures about products,
geographic information and major customers.
F-8
URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)
Reporting Comprehensive Income
The Company adopted Statement of Financial Accounting Standards No. 130
"Reporting of Comprehensive Income" ("SFAS 130"), in fiscal 1999. SFAS 130
establishes new standards for reporting and display of comprehensive income and
its components. Other comprehensive income refers to revenues, expenses, gains,
and losses that under generally accepted accounting principles are included in
comprehensive income but are excluded from net earnings as these amounts are
recorded directly as an adjustment to stockholders' equity. The Company's
comprehensive income is primarily comprised of foreign currency translation
adjustments.
Adoption of Statements of Financial Accounting Standards
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 establishes
accounting and reporting standards for derivative instruments, including
derivative instruments that are embedded in other contracts, and for hedging
activities. However, SFAS 133 was effective for all fiscal quarters of all
fiscal years beginning after June 15, 1999; however, in July 1999, the FASB
issued Statement of Financial Accounting Standards No. 137 "Accounting for
Derivative Instruments and Hedging Activities--Deferral of the Effective Date
of SFAS Statement No. 133" ("SFAS 137"). SFAS 137 deferred the effective date
until the first quarter ending June 30, 2000. The Company will adopt SFAS 133
in its quarter ending July 31, 2000 and does not expect such adoption to have a
material adverse effect on its financial position or results of operations.
Reclassifications
Certain reclassifications have been made to the 1997 and 1998 financial
statements to conform to the 1999 presentation with no effect on net income as
previously reported.
NOTE 2. QUASI-REORGANIZATION
In conjunction with a restructuring completed in fiscal year 1990, the
Company, with the approval of its Board of Directors, implemented a
quasi-reorganization effective February 21, 1990 and revalued certain assets
and liabilities to fair value as of that date.
The fair values of the Company's assets and liabilities at the date of the
quasi-reorganization were determined by management to approximate their
carrying value and no further adjustment of historical bases was required. No
assets were written-up in conjunction with the revaluation. As part of the
quasi-reorganization, the deficit in retained earnings of $92.5 million was
eliminated against additional paid-in capital. The balance in retained earnings
at October 31, 1999, represents the accumulated net earnings subsequent to the
date of the quasi-reorganization.
NOTE 3. ACQUISITIONS
During the year ended October 31, 1999, the Company acquired publicly-held
D-M for cash in the amount of $376.2 million. The acquisition has been
accounted for by the purchase method of accounting and the excess of the fair
value of the net assets acquired over the purchase price in the amount of
$388.3 million has been allocated to goodwill and is being amortized over 40
years. The operating results of D-M are included in the Company's results of
operations from the date of purchase.
F-9
URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)
The following unaudited proforma summary presents the consolidated results
of operations as if the D-M acquisition had occurred at the beginning of
periods presented and does not purport to indicate what would have occurred had
the acquisition been made as of that date or of results which may occur in the
future.
Years Ended October 31:
1999 1998
------------ ------------
(In thousands, except per share amounts)
unaudited
Revenues .................. $2,089,701 $1,895,184
Net income ............... $ 31,101 $ 11,071
Net income per share ...... $ 1.46 $ .70
During the year ended October 31, 1999, the Company acquired
privately-held T-C for an aggregate purchase price of $13.6 million including
assumption of its debt. The total purchase price was paid in cash. The
acquisition has been accounted for by the purchase method of accounting and the
excess of the fair value of the net assets acquired over the purchase price in
the amount of $10.0 million has been allocated to goodwill and is being
amortized over 30 years. The operating results of T-C are included in the
Company's results of operations from the date of purchase. Pro forma operating
results for the twelve months ended October 31, 1999 and 1998, as if the
acquisition had been made on November 1, 1997, are not presented because they
would not be materially different from the Company's reported results.
During the year ended October 31, 1998, the Company acquired W-C for an
aggregate purchase price of $132.4 million, comprising cash of $39.2 million,
assumption of debt of $31.1 million, and 4 million shares of the Company's
Common Stock valued at $61.9 million. The acquisition has been accounted for by
the purchase method of accounting and the excess of the fair value of the net
assets acquired over the purchase price in the amount of $92.1 million has been
allocated to goodwill and is being amortized over 30 years. The operating
results of W-C are included in the Company's results of operations from the
date of purchase.
The following unaudited proforma summary presents the consolidated results
of operations as if the W-C acquisition had occurred at the beginning of fiscal
year end October 31, 1997, and does not purport to indicate what would have
occurred had the acquisition been made as of that date or of results which may
occur in the future.
Fiscal Year Ended October 31:
1997
---------------------------------------
(In thousands, except per share data)
unaudited
Revenues .................. $753,430
Net income ............... $ 16,211
Net income per share ...... $ 1.09
During the year ended October 31, 1999, the Company provided for $37.0
million of costs in connection with the acquisition of D-M and the Company's
reorganization plans to integrate D-M's operations into the Company. This
consists of project claims and cost over-runs, lease fees, severance and
miscellaneous items. This estimate might increase due to additional expenses
directly related to the transaction not identified as of October 31, 1999.
F-10
URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)
The following table summarizes the activity in the 1999 D-M merger-related
accruals during the year ended October 31, 1999. The balance of the accrual at
October 31, 1999, is included in Accrued Expenses on the consolidated balance
sheet.
Merger- Balance
Related October 31,
Accruals Payments 1999
---------- ---------- -------------
(In millions)
Project claims .................. $ 10.0 $ -- $ 10.0
Severance and related costs ...... 7.0 (2.1) 4.9
Lease termination fees and project
cost over-runs .................. 15.0 (0.5) 14.5
Miscellaneous expenses ............ 5.0 (1.4) 3.6
------ ------ ------
Total ........................... $ 37.0 $ (4.0) $ 33.0
====== ====== ======
During the year ended October 31, 1998, the Company provided for $10.8
million of costs related to the acquisition of W-C and the Company's
reorganization plans to integrate W-C's operations into the Company. This
consisted of project claims, lease fees, severance and miscellaneous items.
The following table summarizes the activity in the W-C merger-related
accruals during the year ended October 31, 1999. The balance of the accrual at
October 31, 1999 is included in Accrued Expenses on the consolidated balance
sheet.
Merger Balance
Related October 31,
Accruals Payments 1999
---------- ---------- -------------
(In millions)
Project claims .................. $ 2.2 $ -- $ 2.2
Severance and related costs ...... 3.9 (3.9) --
Lease termination fees ............ 1.5 (0.6) 0.9
Miscellaneous expenses ............ 3.2 (3.2) --
----- ------ -----
Total ........................... $10.8 $ (7.7) $ 3.1
===== ====== =====
NOTE 4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
October 31,
------------------------
1999 1998
-------- ---------
(In thousands)
Equipment ....................................... $124,061 $ 55,628
Furniture and fixtures ........................... 22,581 17,417
Leasehold improvements ........................... 14,400 7,773
Building .......................................... 487 --
Land ............................................. 117 --
-------- ---------
161,646 80,818
Less: accumulated depreciation and amortization (68,481) (51,301)
-------- ---------
Net property and equipment ..................... $ 93,165 $ 29,517
======== =========
Depreciation expense for the years ended 1999, 1998 and 1997 was $17.3
million, $9.7 million and $5.7 million, respectively.
F-11
URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)
NOTE 5. GOODWILL
Goodwill represents the excess of the purchase price over the fair value
of the net tangible assets of various operations acquired by the Company.
Accumulated amortization at October 31, 1999 and 1998, was $26.9 million and
$14.8 million, respectively. Goodwill is amortized on the straight-line method
over periods ranging from 30 to 40 years.
NOTE 6. INCOME TAXES
The components of income tax expense applicable to the operations each
year are as follows:
Years Ended October 31,
------------------------------------
1999 1998 1997
--------- --------- ------------
(In thousands)
Current:
Federal ........................... $17,820 $ 11,170 $ 7,580
State and local .................. 3,380 1,920 1,860
Foreign ........................... 450 220 --
------ ------- --------
Subtotal ........................... 21,650 13,310 9,440
------ ------- --------
Deferred:
Federal ........................... 7,687 5,320 (1,450)
State and local .................. 583 170 (290)
Foreign ........................... (220) -- --
------ ------- --------
Subtotal ........................... 8,050 5,490 (1,740)
------ ------- --------
Total tax provision ...... $29,700 $ 18,800 $ 7,700
====== ======= ========
As of October 31, 1999, the Company has available net operating loss
("NOL") carryforwards for Federal income tax and financial statement purposes
of $3.8 million which expires fiscal year beginning 2004. The Company's NOL
utilization is limited to $750,000 per year pursuant to Section 382 of the
Internal Revenue Code, related to the Company's October 1989
quasi-reorganization. The Company also has available $17.3 million of foreign
NOLs. These NOLs are available only to offset income earned in foreign
jurisdictions and these NOLs expire at various dates.
While the Company had 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.
F-12
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,
--------------------------
1999 1998
----------- ------------
(In thousands)
Current:
Allowance for doubtful accounts ............ $ 3,645 $ 861
Payroll related accruals .................. 9,956 2,286
Restructuring contingency accrual ......... 2,827 764
Other accruals .............................. 4.990 1,296
-------- --------
Current deferred tax asset .................. 21,418 5,207
-------- --------
Revenue retentions ........................ (1,548) (3,614)
Acquisition liabilities ..................... (9,865) (1,593)
-------- --------
Current deferred tax liability ............ (11,413) (5,207)
------- - --------
Net current deferred tax asset ............ $ 10,005 $ --
======== ========
Non-Current:
Deferred compensation and pension ......... $ 1,725 $ 609
Self-insurance contingency accrual ......... 1,971 2,244
Depreciation and amortization ............... 1,251 --
Foreign tax credit ........................ 1,583 --
Net operating loss ........................ 6,888 4,330
-------- --------
Gross non-current deferred tax asset ...... 13,418 7,183
Valuation allowance ........................ (6,888) (4,330)
-------- --------
Net non-current deferred tax asset ......... 6,530 2,853
-------- --------
Cash to accrual ........................... (3,252) --
Acquisition liabilities ..................... (5,950) (3,097)
Other deferred gain and unamortized
bond premium .............................. (1,099) (1,269)
Mark to market .............................. (1,731) (2,645)
Depreciation and amortization ............... (5,802) (218)
Other accruals .............................. (3,963) (1,001)
------- - --------
Non-current deferred tax liability ......... (21,797) (8,230)
-------- --------
Net non-current deferred tax liability ...... $(15,267) $ (5,377)
======== ========
The net change in the total valuation allowance related to deferred tax
assets for the year ended October 31, 1999, was a decrease of $260,000 due to
the utilization of net operating losses, an increase of $1.2 million for
current year foreign losses not benefited, and an increase of $1.7 million
resulting from the D-M and T-C acquisitions.
F-13
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,
------------------------------------
1999 1998 1997
---------- --------- -----------
(In thousands)
Federal income tax expense based upon Federal statutory
tax rate of 35% ................................................ $23,140 $14,520 $ 6,720
Nondeductible goodwill amortization ........................... 3,080 1,460 620
Meals and entertainment ....................................... 988 777 346
Non-deductible expenses ....................................... 925 53 134
NOL carryforwards utilized .................................... (263) (260) (260)
Unbenefited foreign losses ....................................... 900 -- --
Foreign tax credit utilized .................................... (250) -- --
Foreign earnings taxed at rates lower than U.S. statutory rate ... (410) -- --
State taxes, net of Federal benefit ........................... 2,700 1,890 1,120
Adjustment due to change in Federal and state rates ............ -- (420) (610)
Utilization of deferred tax allowance and other adjustments ...... (1,110) 780 (370)
------- ------- ------
Total taxes provided .......................................... $29,700 $18,800 $ 7,700
======= ======= ======
NOTE 7. RELATED PARTY TRANSACTIONS
The Company had agreements for business consulting services to be provided
by BLUM Capital Partners, L.P. ("BLUM"), (formerly Richard C. Blum & Associates
L.P.) and Richard C. Blum, a Director of the Company. Under these agreements,
the Company paid $60,000, $90,000 and $90,000; $40,000, $60,000 and $60,000 to
BLUM and Richard C. Blum, respectively, during each of fiscal 1999, 1998 and
1997. However, these agreements were terminated effective June 1999. Richard C.
Blum also received an additional cash amount of $21,000, $21,500 and $15,000
for his services as a Director of the Company in fiscal 1999, 1998 and 1997,
respectively.
On February 12, 1997, Wells Fargo Bank, N.A. ("the Bank") exercised the
435,562 warrants held by the Bank at $4.34 per share, resulting in the issuance
of an additional 435,562 shares of Common Stock to the Bank and an additional
paid-in capital of approximately $1.9 million.
On February 14, 1997, various partnerships managed by BLUM exercised
1,383,586 warrants held by such entities at $4.34 per share. The exercise price
of these warrants was paid by a combination $2.0 million of cash and the
cancellation of the $3.0 million amount of debt drawn under the Company's line
of credit with certain BLUM entities That line of credit was then cancelled.
The exercise resulted in the issuance of an additional 1,383,586 shares of
Common Stock to the BLUM entities. These equity transactions are reflected in
the Company's financial statements.
See Note 12, Preferred Stock, for a discussion of preferred stock issued
to RCBA Strategic Partners, L.P. ("RCBA Strategic Partners").
F-14
URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)
NOTE 8. NOTES PAYABLE AND LONG-TERM DEBT
Notes payable and long-term debt consists of the following:
October 31,
-----------------------
1999 1998
---------- ----------
(In thousands)
Third party:
Bank term loans, payable in quarterly installments ............... $446,756 $ 97,778
12 1/4% Senior Subordinated Notes due 2009 ...................... 200,000 --
6 1/2% Convertible Subordinated Debentures due 2012
(net of bond issue costs of $31 and $34) ........................ 1,904 2,003
8 5/8% Senior Subordinated Debentures due 2004
(net of discount and bond issue costs of $2,815 and $3,162)
(effective interest rate on date of restructuring was 25%) ...... 3,640 3,293
10.95% note payable, due in annual installments through 2001
(net of issue costs of $26 and $52) .............................. 1,377 1,951
Obligations under capital leases ................................. 18,429 10,071
Foreign collateralized lines of credit ........................... 16,274 920
-------- --------
688,380 116,016
Less:
Current maturities of long-term debt ........................... 17,625 16,501
Current maturities of notes payable ........................... 17,040 1,519
Current maturities of capital leases ........................... 4,758 3,039
-------- --------
$648,957 $ 94,957
======== ========
During fiscal 1999, the Company incurred new borrowings from establishing
a long-term senior collateralized credit facility with a syndicate of banks led
by the Bank.
Senior collateralized credit facility. The senior collateralized credit
facility was funded June 9, 1999, ("Funding Date") and provides for three term
loan facilities in the aggregate amount of $450 million and a revolving credit
facility in the amount of $100 million. The term loan facilities consist of
Term Loan A, a $250 million tranche, Term Loan B, a $100 million tranche and
Term Loan C, another $100 million tranche.
Principal amounts under Term Loan A became due, commencing on October 31,
1999, in the amount of approximately $3.0 million per quarter for the following
four quarters. Thereafter and through the sixth anniversary of the Funding
Date, annual principal payments under Term Loan A range from $25.0 million to a
maximum of $62.5 million with Term Loan A expiring and the then-outstanding
principal amount becoming due and repayable in full on the sixth anniversary of
the Funding Date. Principal amounts under Term Loan B become due, commencing on
October 31, 1999, in the amount of $1.0 million in each year through July 31,
2005, with Term Loan B expiring and the then-outstanding principal amount
becoming due and repayable in full in four equal quarterly installments in year
seven. Principal amounts under Term Loan C become due, commencing on October
31, 1999, in the amount of $1.0 million in each year through July 31, 2006,
with Term Loan C expiring and the then-outstanding principal amount becoming
due and repayable in full in equal quarterly installments in year eight. The
revolving credit facility expires, and is repayable in full, on the sixth
anniversary of the Funding Date.
The term loans each bear interest at a rate per annum equal to, at the
Company's option, either the Base Rate or LIBOR, in each case plus an
applicable margin. The revolving credit facility bears interest at a rate per
annum equal to, at the Company's option, either the Base Rate, LIBOR or the
Adjusted
F-15
URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)
Sterling Rate, in each case plus an applicable margin. The applicable margin
adjusts according to a performance pricing grid based on the Company's ratio of
Consolidated Total Funded Debt to Consolidated Earnings Before Income Taxes,
Depreciation and Amortization ("EBITDA"). The "Base Rate" is defined as the
higher of the Bank's Prime Rate and the Federal Funds Rate plus 0.50%. "LIBOR"
is 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. The "Adjusted Sterling Rate" is defined as the rate per annum
displayed by Reuters at which Sterling is offered to the Bank in the London
interbank market as determined by the British Bankers' Association. The Company
may determine which interest rate options to use and interest periods will
apply for such periods for both term loans and the revolving credit facility.
The revolving credit facility is governed by affirmative and negative
covenants. These covenants include restrictions upon incurring additional debt,
paying dividends, or making distributions to its stockholders, repurchasing or
retiring capital stock, making subordinated junior debt payments and submitting
quarterly compliance certification. The financial covenants include maintenance
of a minimum current ratio of 1.20 to 1.00, a minimum fixed charge coverage
ratio of 1.10 to 1.00, a proforma EBITDA minimum of $142 million and a maximum
leverage ratio of 4.75 to 1.00 for the year ended October 31, 1999. The Company
was fully compliant with these covenants as of October 31, 1999.
Notes
12 1/4% senior subordinated notes ("Notes"). The Company's Notes are due
in 2009. Each note will initially bear interest at 12 1/4% per annum. Interest
on the Notes will be payable semiannually on May 1 and November 1 of each year,
commencing November 1, 1999. The Notes are subordinate to the senior
collateralized credit facility. As of October 31, 1999, the Company owed $200
million on its Notes.
The Notes are fully and unconditionally guaranteed on a joint and several
basis by certain of the Company's wholly owned subsidiaries. The Company may
redeem any of the Notes beginning May 1, 2004. The initial redemption price is
106.125% of their principal amount, plus accrued and unpaid interest. The
redemption price will decline each year after 2004 and will be 100% of their
principal amount, plus accrued and unpaid interest beginning on May 1, 2007. In
addition, at any time prior to May 1, 2002, the Company may redeem up to 35% of
the principal amount of the Notes with net cash proceeds from the sale of
capital stock. The redemption price will be equal to 112.25% of the principal
amount of the redeemed Notes.
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 semiannually in January
and July. The 8 5/8% Debentures are subordinate to the senior collateralized
credit facility. As of October 31, 1999, the Company owed approximately $6.6
million on its 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 its common
shares at the rate of $206.30 per share. Interest is payable semiannually in
February and August. 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 senior collateralized credit facility. As of October 31,
1999, the Company owed approximately $1.9 million on its 6 1/2% Debentures.
Promissory Note
As part of the W-C acquisition, the Company assumed the responsibility for
a 10.95% promissory note payable to Weyerhaeuser Company. The note is paid in
annual installments of $.8 million each January 31, 1998, 1999, 2000 and 2001.
F-16
URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)
The Company maintains foreign lines of credit which are collateralized by
assets of foreign subsidiaries having a carrying value of approximately $21.3
million at October 31, 1999. The interest rates for the foreign lines of credit
were 7.21% plus applicable margins consistent with market conditions in the
respective countries at October 31, 1999. The approximate weighted average
interest rates on the foreign lines of credit ranged from 5.44% to 9.50% at
October 31, 1999.
Interest Rate Swaps
The Company has entered into an interest rate swap agreement with the
Bank. This interest rate swap effectively fixes the interest rate on $8.5
million of the Company's LIBOR based borrowings at 6.92% plus the applicable
margin through April 30, 2000. The actual borrowing cost to the Company with
respect to indebtedness covered by the interest rate swap will depend upon the
applicable margin over LIBOR for such indebtedness, which will be determined by
the terms of the relevant debt instruments. Currently, it is expected that the
contractual margin will range from 2.75% to 3.50%, which will provide for an
all-in annual interest rate range from 9.67% to 10.42%.
The Company has entered into an additional interest rate swap agreement
with the Bank. This interest rate swap effectively fixes the interest rate on
$45.8 million of the Company's LIBOR based borrowings at 5.97% plus the
applicable margin through January 31, 2001. The actual borrowing cost to the
Company with respect to indebtedness covered by the interest rate swap will
depend upon the applicable margin over LIBOR for such indebtedness, which will
be determined by the terms of the relevant debt instruments. Currently, it is
expected that the contractual margin will range from 2.75% to 3.50%, which will
provide for an all-in annual interest rate range from 8.72% to 9.47%.
Interest Rate Cap Agreements
The Company entered into two interest rate cap agreements with the Bank.
These agreements cap the Company's interest rate at 7% for $161.5 million and
$9.2 million of the Company's LIBOR based borrowings through July 31, 2002, and
April 30, 2000, respectively.
Maturities
The amounts of long-term debt outstanding (excluding foreign
collateralized lines of credit and capital leases) at October 31, 1999,
maturing in the next five years are as follows:
(In thousands)
2000 ................................... $ 18,393
2001 ................................... 30,955
2002 ................................... 42,712
2003 ................................... 55,208
2004 ................................... 71,034
Thereafter ............................. 435,375
--------
$653,677
========
<
NOTE 9. OBLIGATIONS UNDER LEASES
Total rental expense included in operations for operating leases for the
fiscal years ended October 31, 1999, 1998 and 1997, amounted to $50.1 million,
$30.6 million and $14.9 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.
F-17
URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)
Obligations under non-cancelable lease agreements are as follows:
Capital Operating
Leases Leases
-------- --------
(In thousands)
2000 ............................................. $ 6,039 $ 52,930
2001 ............................................. 5,905 46,483
2002 ............................................. 4,476 35,365
2003 ............................................. 3,148 26,282
2004 ............................................. 1,448 18,464
Thereafter ....................................... 552 42,774
------- --------
Total minimum lease payments ..................... 21,568 $222,298
========
Less: amounts representing interest ............ 3,139
-------
Present value of net minimum lease payments ...... $18,429
=======
NOTE 10. SEGMENT AND RELATED INFORMATION
In fiscal 1999, we adopted SFAS No. 131. SFAS No. 131 establishes
standards for reporting information about operating segments and related
disclosures about products, geographic information and major customers.
Management has organized the Company by geographic divisions. The
geographic divisions are Domestic and International. The Domestic division
comprises all offices located in North America. The International division is
comprised of all offices in Europe and Asia/Pacific (Australia, Indonesia,
Singapore, New Zealand and the Philippines).
Accounting policies for each of the reportable segments are the same as
those described in Note 1, Accounting Policies. The Company provides services
throughout the world. Services to other countries may be performed within the
United States, generally revenues are classified within the geographic area
where the services were performed.
The following table shows summarized financial information on the
Company's reportable segments. Included in the "Other" column are corporate
related items and the elimination of inter-segment sales which are not
significant.
As of and for the year ended October 31, 1999:
Domestic International Other Total
---------- --------------- ------------ ----------
Revenue ..................... $1,270,517 $154,211 $ (6,206) $1,418,522
Segment operating income ...... $ 101,293 $ 778 $ (1,201) $ 100,870
Total accounts receivable ... $ 389,488 $ 66,169 $ (1,697) $ 453,960
Total assets ............... $2,142,028 $130,779 $(834,120) $1,437,487
As of and for the year ended October 31, 1998:
Domestic International Other Total
---------- --------------- ------------ ----------
Revenue ..................... $ 752,196 $55,467 $ (1,717) $ 805,946
Segment operating income ... $ 48,269 $ 1,972 $ -- $ 50,241
Total accounts receivable ... $ 150,190 $11,552 $ -- $ 161,742
Total assets ............... $ 565,910 $32,117 $(146,323) $ 451,704
F-18
URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)
As of and for the year ended October 31, 1997:
Domestic International Other Total
---------- --------------- ------- ----------
Revenue ........................ $406,451 $ -- $ -- $406,451
Segment operating income ...... $ 24,007 $ -- $ -- $ 24,007
Total accounts receivable ...... $ 80,251 $ -- $ -- $ 80,251
Total assets .................. $210,091 $ -- $ -- $210,091
The Company's reportable segments are measured based upon segment
operating income.
The next table provides a reconciliation of operating income to
consolidated income before income taxes.
October 31,
--------------------------------
1999 1998 1997
-------- ------- -------
Segment operating income ...... $100,870 $50,241 $24,007
Interest expense, net ......... 34,589 8,774 4,802
-------- ------- -------
Income before taxes ............ $ 66,281 $41,467 $19,205
======== ======= =======
The Company provides services to local, state and Federal government
agencies, private businesses and internationally. For the three years ended
October 31, 1999, our revenues were attributed to the following categories:
October 31,
------------------------------------------------------------------------
1999 1998 1997
----------------------- --------------------- ----------------------
(Dollars in thousands)
Domestic:
Local and state agencies $ 480,922 34% $346,072 43% $255,423 63%
Federal agencies ......... 235,039 17 116,340 14 67,042 17
Private businesses ...... 558,314 39 288,067 36 83,986 20
International ............... 144,247 10 55,467 7 -- --
---------- --- -------- --- -------- ---
Total .................. $1,418,522 100% $805,946 100% $406,451 100%
========== === ======== === ======== ===
NOTE 11. COMMITMENTS AND CONTINGENCIES
Currently, the Company has limits of $100 million per loss and $100
million in the annual aggregate for general liability, professional errors and
omissions liability, and contractor's pollution liability insurance. 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, it will have no
coverage for claims made after its termination date even if the occurrence was
during the term of coverage. It is the Company's intent to maintain these
policies, but there can be no assurance that the Company can maintain existing
coverages or that claims will not exceed the available amount of insurance.
Various legal proceedings are pending against the Company or its
subsidiaries alleging among other things breaches of contract or negligence in
connection with the performance of professional services. In some actions
punitive or treble damages are sought which substantially exceed the Company's
insurance coverage. The Company's management does not believe that any of such
proceedings will have a material adverse effect on the consolidated financial
position and operations of the Company.
NOTE 12. 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 for an aggregate consideration of $100
F-19
URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)
million. The proceeds of this issuance were used in connection with the D-M
acquisition. The Company paid a transaction fee of $1.5 million to RCBA
Strategic Partners in connection with this placement. In October 1999, the
Company issued 46,083 shares of its Series B Exchangeable Convertible Preferred
Stock ("Series B Stock") to RCBA Strategic Partners in exchange for the shares
of Series A and Series C Preferred Stock.
The Company has authorized for issuance 3,000,000 shares of Preferred
Stock with a $1.00 par value. Of these 3,000,000 shares, 150,000 shares have
been designated Series B Stock. At October 31, 1999, the Company had 47,618
shares of Series B Stock outstanding. The Series B Stock has a liquidation
preference equal to its original purchase price plus certain formulaic
adjustments calculated at the time of liquidation. The Series B Stock is senior
to the Common Stock and has voting rights equal to that number of shares of
Common Stock into which it can be converted. Cumulative dividends are payable
in-kind in additional shares of Series B Stock each calendar quarter at a
dividend rate of 8%. Each share of the Series B Stock may be converted into
shares of Common Stock at the option of the holder at any time (approximately
4,600,000 shares in the aggregate as of October 31, 1999). In addition, the
Company will have the right, on or after June 2002, to convert all, but not
less than all, of the outstanding shares of Series B Stock into Common Stock if
the price of the Company's Common Stock on the relevant exchange reaches
certain levels for certain minimum periods of time. In June 2011, the Company
is obligated to redeem any outstanding shares of Series B Stock for cash. If
the Company fails to repurchase all of the outstanding shares of Series B
Stock, the dividend rate will increase to 12% and three months after that the
rate will increase to 15%.
NOTE 13. STOCKHOLDERS' EQUITY
Declaration of dividends, except Preferred Stock dividends, is restricted
by the senior collateralized credit facility with the Bank and the indentures
governing the 8 5/8% Debentures and the Notes. Further, declaration of
dividends may be precluded by existing Delaware law.
During fiscal year 1995, the Company repurchased a total of 42,000 shares
of its Common Stock at an average repurchase price of $5.43, pursuant to a
systematic repurchase plan approved by the Company's Board of Directors on
September 13, 1994. The systematic repurchase plan expired on September 13,
1995. The Company, as of that date, had repurchased a total of 52,000 shares of
its Common Stock at an average repurchase price of $5.49.
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
have been reserved for issuance under the 1999 Plan. As of October 31, 1999,
the Company has not issued any restricted 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. As of October 31, 1999, the Company
had issued 206,200 shares of Restricted Stock under the 1991 Plan.
Stock options expire in ten years from the date granted and vest over
service periods that range from three to five years.
Under the 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 shall be 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 282,505
shares under the ESP Plan in fiscal 1999 and 209,482 shares in fiscal 1998.
F-20
URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)
The Company applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations in accounting for its 1991 Plan and
1999 Plan. Accordingly, no compensation cost has been recognized for its 1991
and 1999 Plans. Had compensation cost for the Company's 1991 Plan 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 proforma amounts indicated
below:
Years Ended October 31,
--------------------------------
1999 1998 1997
--------- --------- ---------
(In thousands, except per share data)
Net income available for common stockholders:
As reported. .............................. $ 33,248 $22,667 $11,505
Proforma .................................... $ 32,367 $22,343 $11,237
Basic earnings per share:
As reported ................................. $ 2.14 $ 1.51 $ 1.15
Proforma .................................... $ 2.09 $ 1.49 $ 1.04
Dilutive earnings per share:
As reported ................................. $ 1.98 $ 1.43 $ 1.08
Proforma ................................. $ 1.93 $ 1.41 $ 1.04
A summary of the status of the stock options granted under the Company's
1991 Plan for the years ended October 31, 1999, 1998, and 1997, is presented
below:
1999 1998 1997
------------------------- ------------------------- --------------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------------ ----------- ------------ ----------- ------------- -----------
Outstanding at beginning of year 2,031,094 $1.12 1,508,280 $ 7.70 1,382,434 $ 6.64
Granted. ........................ 835,500 $6.81 644,500 $14.63 280,000 $10.63
Exercised ........................ (350,099) $6.67 (98,356) $ 7.07 (138,287) $ 7.52
Forfeited ........................ (121,786) $5.22 (23,330) $14.40 (15,867) $ 7.68
--------- --------- ----------
Outstanding at end of year ...... 2,394,709 $1.97 2,031,094 $11.12 $1,508,280 $ 7.70
========= ========= ==========
Options exercisable at year-end ... 1,133,788 $7.72 1,154,388 $ 6.96 1,064,683 $ 6.50
Weighted-average fair value of
options granted during the year 6.53 3.55 3.30
F-21
URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)
The following table summarizes information about stock options outstanding at October 31, 1999, 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
- ----------------- ------------- ------------------ ------------------ ------------- ------------------
$ 2.85 - $ 5.70 251,000 1.3 $ 3.19 251,000 $ 3.19
$ 5.70 - $ 8.55 534,800 4.2 $ 6.85 533,800 $ 6.05
$ 8.55 - $11.40 269,758 6.5 $10.33 185,471 $10.25
$11.40 - $14.25 50,000 8.0 $13.98 20,001 $13.92
$14.25 - $17.10 1,205,151 9.0 $15.35 143,516 $14.72
$19.96 - $22.80 24,000 9.3 $21.91 -- $ --
$25.65 - $28.50 60,000 8.1 $28.08 -- $ --
--------- ---------
2,394,709 1,133,788
========= =========
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:
1999 1998 1997
------------- ------------- -------------
Risk-free interest rates ...... 4.70%-5.97% 4.43%-5.79% 5.81%-6.53%
Expected life .................. 4 years 4 years 4 years
Volatility ..................... 41.06% 28.30% 24.73%
Expected dividends ............ None None None
NOTE 14. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Years Ended October 31,
--------------------------------
1999 1998 1997
--------- --------- --------
(In thousands)
Interest ............................... $24,903 $ 7,857 $5,181
Income taxes ............................ $22,562 $18,398 $8,780
In February 1997, BLUM exercised certain warrants. The exercise price of
these warrants was paid by a combination of $2.0 million of cash and the
cancellation of $3.0 million of debt drawn under the Company's line of credit
with certain BLUM entities.
The Company's operating cash flow and working capital requirements have
grown substantially due to its acquisition growth strategy. The Company intends
to satisfy its working capital needs primarily through internal cash
generation. As a professional services organization, the Company is not capital
intensive. Capital expenditures, historically, have been for computer-aided
design and general purpose computer equipment to accommodate its growth.
Capital expenditures during fiscal years 1999, 1998 and 1997 were $20.2
million, $12.2 million and $5.1 million, respectively. The Company expects to
continue to have capital outlays consistent with the resulting relative growth
of the Company.
NOTE 15. 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
$7.7 million, $4.9 million and $2.0 million to the plans in fiscal 1999, 1998
and 1997, respectively.
F-22
URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)
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 ERISA. For the year
ended October 31, 1999, the Company expensed $669,000 for this Agreement.
Due to the acquisition of D-M, certain of the Company's foreign
subsidiaries have trusteed retirement plans covering substantially all of their
employees. These pension plans are not required to report to government
agencies pursuant to ERISA and do not otherwise determine the actuarial value
of accumulated benefits or net assets available for benefits. The aggregate
pension expense for these plans for the fiscal year ending October 31, 1999 was
$963,000.
The Company, upon acquiring D-M, assumed certain of Radian International
LLC defined benefit pension plans ("Radian pension plans"), and several
post-retirement benefit plans. These plans cover a select 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, 1999, the Company had designated and
deposited $7.2 million 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.
Management's estimate of accumulated benefits for the Radian SERP and SCA
as of October 31, 1999, were as follows:
Actuarial present value of accumulated benefits:
(In thousands)
Vested ............................................. $10,674
Non-vested .......................................... 868
-------
Total ................................................ $11,542
=======
The weighted-average discount rate used for the period was 7.0%.
Change in benefit obligation:
Benefit obligation June 1999, D-M acquisition ...... $11,196
Service cost ....................................... 28
Interest cost ....................................... 326
Amortization of unrecognized service cost ......... --
-------
Net period cost ..................................... 354
-------
Actuarial loss .................................... --
Benefit payments .................................... (8)
-------
Benefit obligation at October 31, 1999 ............ $11,542
=======
F-23
URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)
The funded status of the plans at October 31, 1999:
Projected benefit obligation ............................. $11,542
Plan assets available for benefits ....................... --
-------
Deficiency of assets over projected benefit obligations .. 11,542
Unrecognized actuarial loss ............................. --
Unrecognized prior service costs ....................... --
-------
Accrued pension liability ................................ $11,542
=======
Management's estimate of the funded status of the Radian post-retirement
program at October 31, 1999, is as follows:
Accumulated post-retirement benefit obligation ("APBO"):
Retirees .................................................... $204
Active plan participants, fully eligible ................... 139
Active plan participants, not yet fully eligible ............. 558
-----
Total APBO .................................................... 901
Unrecognized net loss from past experience different from that
assumed and from changes in assumptions ...................... --
-----
Accrued post-retirement benefits ............................ $901
=====
The weighted-average discount rate used in determining the APBO was 6.75%.
NOTE 16. VALUATION AND ALLOWANCE ACCOUNTS
Additions
Charged to Deductions
Beginning Costs and from Ending
Balance Expenses Reserves Balance
----------- ------------ ----------- ---------
(In thousands)
October 31, 1999
Allowances for losses and doubtful accounts ... $ 14,102 $ 40,772 $14,263 $40,611
October 31, 1998
Allowances for losses and doubtful accounts ... $ 3,326 $ 11,721 $ 945 $14,102
October 31, 1997
Allowances for losses and doubtful accounts ... $ 4,866 $ 995 $ 2,535 $ 3,326
The allowances for losses and doubtful accounts increased significantly in
fiscal 1999 and 1998 due to the acquisitions of D-M and W-C.
F-24
URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)
NOTE 17. SELECTED QUARTERLY FINANCIAL DATA (unaudited)
Selected quarterly financial data for fiscal 1999 and 1998 is summarized
as follows:
Fiscal 1999 Quarters Ended
-----------------------------------------------
Jan. 31 Apr. 30 July 31 Oct. 31
-------- -------- -------- --------
(In thousands, except per share data)
Revenues .......................................... $199,057 $222,219 $428,482 $568,764
Operating income ................................. $ 11,992 $ 15,189 $ 29,565 $ 44,124
Net income available for common stockholders ...... $ 5,672 $ 6,995 $ 9,051 $ 11,530
Income per share:
Basic .......................................... $ .37 $ .46 $ .58 $ .73
======== ======== ======== ========
Diluted ....................................... $ .35 $ .42 $ .53 $ .68
======== ======== ======== ========
Weighted-average number of shares .................. 16,371 16,532 19,578 21,513
Fiscal 1998 Quarters Ended
-----------------------------------------------
Jan. 31 Apr. 30 July 31 Oct. 31
-------- -------- -------- --------
(In thousands, except per share data)
Revenues .......................................... $186,156 $195,182 $207,484 $217,124
Operating income ................................. $ 9,578 $ 11,416 $ 14,271 $ 14,976
Net income available for common stockholders ...... $ 4,169 $ 4,943 $ 6,389 $ 7,166
Income per share:
Basic .......................................... $ .28 $ .33 $ .43 $ .47
======== ======== ======== ========
Diluted ....................................... $ .27 $ .31 $ .40 $ .45
======== ======== ======== ========
Weighted-average number of shares .................. 15,632 15,723 15,970 15,961
Operating income represents income from operations before interest income
and expense.
NOTE 18. SUPPLEMENTAL GUARANTOR INFORMATION
In June 1999, the Company completed a private placement of $200 million
principal amount of its Senior Subordinated Notes due 2009, which Notes were
exchanged in August 1999 for 12 1/4% Senior Subordinated Notes due 2009. The
Notes are fully and unconditionally guaranteed on a joint and several basis by
certain of the Company's wholly-owned subsidiaries. Substantially all of the
Company's income and cash flow 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 to or advances from its
subsidiaries. Under certain circumstances, contractural and legal restrictions,
as well as the financial condition and operating requirements of the Company's
subsidiaries, could limit the Company's ability to obtain cash from its
subsidiaries for the purpose of meeting its debt service obligations, including
the payment of principal and interest on the Notes.
The following information sets forth the condensed consolidating balance
sheet of the Company as of October 31, 1999 and 1998, and the condensed
consolidating statements of operations and cash flows for the years ended
October 31, 1999 and 1998. As of and for the year ended October 31, 1997, the
Company did not have material foreign operations; therefore, the subsidiary
guarantor information would not be relevant and no consolidating financial
statements as of and for the year then ended have been presented. Investments
in subsidiaries are accounted for on the equity method; accordingly, 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.
F-25
URS CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEET
(In thousands)
October 31, 1999
----------------------------------------------------------------------------
Subsidiary
Subsidiary Non-
Parent Guarantors Guarantors Eliminations Consolidated
------------ ------------ ------------ -------------- --------------
ASSETS
Current assets:
Cash ................................. $ 6,722 $ 17,028 $ 21,937 $ -- $ 45,687
Accounts receivable, net ............ -- 389,488 66,169 (1,697) 453,960
Costs and accrued earnings in
excess of billings on contracts in
process, net ........................ (15,000) 202,671 24,649 (319) 212,001
Deferred income taxes ............... -- 8,681 1,324 -- 10,005
Prepaid expenses and other assets ..... 4,640 18,624 847 -- 24,111
--------- ---------- -------- ---------- ----------
Total current assets ............... (3,638) 636,492 114,926 (2,016) 745,764
Property and equipment, net ............ 445 81,526 11,194 -- 93,165
Goodwill, net ........................ 233,081 322,363 3,633 (29,380) 529,697
Investment in unconsolidated
subsidiaries ........................ 252,025 554,834 3,231 (810,090) --
Accounts receivable, intercompany ...... -- 5,460 (4,207) (1,253) --
Other assets ........................... 12,025 46,215 2,002 8,619 68,861
--------- ---------- -------- ---------- ----------
Total assets ........................ $ 493,938 $1,646,890 $130,779 $ (834,120) $1,437,487
========= ========== ======== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Long-term debt, current portion ...... $ 17,625 $ 11,733 $ -- $ (11,733) $ 17,625
Notes payable ........................ 767 119 16,154 -- 17,040
Obligations under capital leases ...... -- 4,662 96 -- 4,758
Trade payables ........................ 27,381 95,277 13,686 (6,299) 130,045
Intercompany payable .................. (471,007) 452,321 54,447 (35,761) --
Billings in excess of costs and
accrued earnings on contracts in
process .............................. -- 70,369 4,280 (4,336) 70,313
Accruals .............................. -- 68,613 28,185 50,098 146,896
--------- ---------- -------- ---------- ----------
Total current liabilities ............ (425,234) 703,094 116,848 (8,031) 386,677
Long-term debt ........................ 635,016 168 102 -- 635,286
Obligations under capital leases ...... -- 13,372 299 -- 13,671
Other ................................. 72,041 75,400 694 (56,784) 91,351
--------- ---------- -------- ---------- ----------
Total liabilities .................. 281,823 792,034 117,943 (64,815) 1,126,985
Total stockholders' equity ............ 212,115 854,856 12,836 (769,305) 310,502
--------- ---------- -------- ---------- ----------
Total liabilities and stockholders'
equity ........................... $ 493,938 $1,646,890 $130,779 $ (834,120) $1,437,487
========= ========== ======== ========== ==========
F-26
URS CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
(In thousands)
Year Ended October 31, 1999
------------------------------------------------------------------------
Subsidiary
Subsidiary Non-
Parent Guarantors Guarantors Eliminations Consolidated
------------ ------------ ------------ -------------- --------------
Revenues ........................ $ -- $1,270,517 $154,211 $ (6,206) $1,418,522
--------- ----------- -------- -------- ----------
Expenses:
Direct operating ............... -- 765,527 93,607 (4,614) 854,520
Indirect, general and
administrative ............... 14,541 389,156 59,826 (391) 463,132
Interest expense, net ............ 34,069 -- 520 -- 34,589
--------- ----------- -------- -------- ----------
48,610 1,154,683 153,953 (5,005) 1,352,241
--------- ----------- -------- -------- ----------
Income (loss) before taxes ...... (48,610) 115,834 258 (1,201) 66,281
Income tax expense ............... 29,130 -- 562 8 29,700
--------- ----------- -------- -------- ----------
Net income ..................... (77,740) 115,834 (304) (1,209) 36,581
Preferred stock dividend ......... 3,333 -- -- -- 3,333
--------- ----------- -------- -------- ----------
Net income (loss) available for
common stockholders ............ (81,073) 115,834 (304) (1,209) 33,248
Other comprehensive income, net of
tax:
Foreign currency translation
adjustments .................. -- -- 197 -- 197
--------- ----------- -------- -------- ----------
Comprehensive income (loss) ...... $ (81,073) $ 115,834 $ (107) $ (1,209) $ 33,445
========= =========== ======== ======== ==========
F-27
URS CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
(In thousands)
Year Ended October 31, 1999
-------------------------------------------------------------------------
Subsidiary
Subsidiary Non-
Parent Guarantors Guarantors Eliminations Consolidated
------------- ------------ ------------ -------------- --------------
Cash flows from operating activities:
Net income (loss) ........................ $ (77,740) $ 115,834 $ (304) $ (1,209) $ 36,581
---------- --------- --------- ---------- ----------
Adjustments to reconcile net income to
net cash provided (used) by operating
activities:
Depreciation and amortization ............ 8,662 23,162 1,940 -- 33,764
Allowance for doubtful accounts and
losses ................................. -- (231) (51) (3) (285)
Stock compensation ........................ 1,726 -- -- -- 1,726
Changes in current assets and liabilities:
Accounts receivable and costs and
accrued earnings in excess of billings
on contracts in process .................. -- (221,410) (30,211) 165,355 (86,266)
Prepaid expenses and other assets ......... (3,376) (6,768) 1,236 7,171 (1,737)
Accounts payable, accrued salaries and
wages and accrued expenses ............... 63,181 120,758 38,084 (237,238) (15,215)
Billings in excess of costs and accrued
earnings on contracts in process ......... -- 35,931 3,263 (5,887) 33,307
Deferrals and other, net .................. (10,033) (30,015) (1,875) 48,801 6,878
---------- --------- --------- ---------- ----------
Total adjustments ........................ 60,160 (78,573) 12,386 (21,801) (27,828)
---------- --------- --------- ---------- ----------
Net cash provided (used) by operating
activities .............................. (17,580) 37,261 12,082 (23,010) 8,753
---------- --------- --------- ---------- ----------
Cash flows from investing activities:
Payment for business acquisition,
net of cash acquired ..................... (316,167) -- -- -- (316,167)
Capital expenditures ..................... (41) (39,770) (3,447) 23,010 (20,248)
---------- --------- --------- ---------- ----------
Net cash (used) by investing activities . (316,208) (39,770) (3,447) 23,010 (336,415)
---------- --------- --------- ---------- ----------
Cash flows from financing activities:
Payments on merger fees ..................... (18,738) -- -- -- (18,738)
Proceeds from issuance of debt ............ 817,162 24,335 13,242 -- 854,739
Principal payments on long-term debt ...... (578,904) (11,336) (2,982) -- (593,222)
Proceeds from sale of common shares ......... 4,775 -- -- -- 4,775
Proceeds from exercise of stock
options ................................. 2,363 -- -- -- 2,363
Proceeds from issuance of preferred
stock .................................... 100,000 -- -- -- 100,000
Payments on financing fees ............... (11,597) -- -- -- (11,597)
Payments on financing fees related to
issuance of preferred stock ............... (1,500) -- -- -- (1,500)
---------- --------- --------- ---------- ----------
Net cash provided by financing
activities .............................. 313,561 12,999 10,260 -- 336,820
---------- --------- --------- ---------- ----------
Net increase (decrease) in cash ............ (20,227) 10,490 18,895 -- 9,158
Cash at beginning of year .................. 26,949 6,538 3,042 -- 36,529
---------- --------- --------- ---------- ----------
Cash at end of year ........................ $ 6,722 $ 17,028 $ 21,937 $ -- $ 45,687
========== ========= ========= ========== ==========
F-28
URS CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEET
(In thousands)
October 31, 1998
--------------------------------------------------------------------------
Subsidiary
Subsidiary Non-
Parent Guarantors Guarantors Eliminations Consolidated
---------- ------------ ------------ -------------- --------------
ASSETS
Current assets:
Cash .......................................... $ 26,949 $ 6,538 $ 3,042 $ -- $ 36,529
Accounts receivable, net ..................... -- 150,190 11,552 -- 161,742
Costs and accrued earnings in excess of
billings on contracts in process, net ...... -- 73,557 4,324 -- 77,881
Prepaid expenses and other assets ............ 1,264 8,538 231 -- 10,033
-------- -------- -------- ---------- --------
Total current assets ........................ 28,213 238,823 19,149 -- 286,185
Property and equipment, net .................. 404 26,084 3,041 (12) 29,517
Goodwill, net ................................. 89,100 40,648 (12) 12 129,748
Investment in unconsolidated subsidiaries ...... 101,251 -- -- (101,251) --
Accounts receivable, intercompany ............ 16,396 18,864 9,812 (45,072) --
Other assets ................................. 1,692 4,435 127 -- 6,254
-------- -------- -------- ---------- --------
Total assets .............................. $237,056 $328,854 $ 32,117 $ (146,323) $451,704
======== ======== ======== ========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Long-term debt, current portion ............... $ 17,101 $ 331 $ 920 $ (9) $ 18,343
Trade payables .............................. 911 34,695 1,630 -- 37,236
Intercompany payable ........................ -- 23,941 26,713 (50,654) --
Billings in excess of costs and accrued
earnings on contracts in process ............ -- 34,438 1,017 -- 35,455
Accruals .................................... 9,975 49,356 4,851 -- 64,182
-------- -------- -------- ---------- --------
Total current liabilities .................. 27,987 142,761 35,131 (50,663) 155,216
Obligations under capital leases ............... -- 7,033 1 -- 7,034
Long-term debt ................................. 87,923 -- -- -- 87,923
Other .......................................... 4,786 30,091 294 -- 35,171
-------- -------- -------- ---------- --------
Total liabilities ........................... 120,696 179,885 35,426 (50,663) 285,344
Total stockholders' equity (deficit) ......... 116,360 148,969 (3,309) (95,660) 166,360
-------- -------- -------- ---------- --------
Total liabilities and stockholders'
equity .................................... $237,056 $328,854 $ 32,117 $ (146,323) $451,704
======== ======== ======== ========== ========
F-29
URS CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
(In thousands)
Year Ended October 31, 1998
------------------------------------------------------------------------
Subsidiary
Subsidiary Non-
Parent Guarantors Guarantors Eliminations Consolidated
------------ ------------ ------------ -------------- --------------
Revenues .............................. $ -- $752,196 $55,467 $ (1,717) $805,946
-------- -------- ------- -------- --------
Expenses:
Direct operating ..................... -- 446,963 33,394 (1,717) 478,640
Indirect, general and administrative 7,137 249,827 20,101 -- 277,065
Interest expense, net ............... 8,274 -- 500 -- 8,774
-------- -------- ------- -------- --------
15,411 696,790 53,995 (1,717) 764,479
-------- -------- ------- -------- --------
Income (loss) before taxes ............ (15,411) 55,406 1,472 -- 41,467
Income tax expense ..................... 18,447 -- 353 -- 18,800
-------- -------- ------- -------- --------
Net income (loss) ..................... $ (33,858) $ 55,406 $ 1,119 $ -- $ 22,667
========= ======== ======= ======== ========
F-30
URS CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
(In thousands)
Year Ended October 31, 1998
-------------------------------------------------------------------------
Subsidiary
Subsidiary Non-
Parent Guarantors Guarantors Eliminations Consolidated
------------- ------------ ------------ -------------- --------------
Cash flows from operating activities:
Net income (loss) .................. $ (33,858) $ 55,406 $ 1,119 $ -- $ 22,667
--------- --------- -------- -------- ---------
Adjustments to reconcile net income
to net cash provided (used) by
operating activities:
Depreciation and amortization ...... 6,606 11,041 909 -- 18,556
Allowance for doubtful accounts
and losses ........................ -- (2,259) (92) -- (2,351)
Changes in current assets and
liabilities:
Accounts receivable and costs and
accrued earnings in excess of
billings on contracts in process ... -- (16,528) (1,314) 4,881 (12,961)
Prepaid expenses and other assets . 4,043 (4,597) 600 (71) (25)
Accounts payable, accrued salaries
and wages and accrued expenses 1,117 8,625 (362) (7,194) 2,186
Billings in excess of costs and
accrued earnings on contracts in
process ........................... -- (994) 1,017 -- 23
Deferred income taxes and other,
net .............................. 9,272 -- 133 3,290 12,695
--------- --------- -------- -------- ---------
Total adjustments .................. 21,038 (4,712) 891 906 18,123
--------- --------- -------- -------- ---------
Net cash provided (used) by
operating activities ............... (12,820) 50,694 2,010 906 40,790
--------- --------- -------- -------- ---------
Cash flows from investing activities:
Payment for business acquisition,
net of cash acquired ............... (36,937) -- -- -- (36,937)
Capital expenditures ............... (180) (11,516) (505) -- (12,201)
--------- --------- -------- -------- ---------
Net cash (used) by investing
activities ........................ (37,117) (11,516) (505) -- (49,138)
--------- --------- -------- -------- ---------
Cash flows from financing activities:
Payments of merger fees ............... (4,705) -- -- -- (4,705)
Proceeds from issuance of debt ...... 110,000 -- 920 (920) 110,000
Principal payments on long-term
debt .............................. (83,149) -- (22) 14 (83,157)
Proceeds from sale of common
shares ........................... 2,622 -- -- -- 2,622
Proceeds from exercise of stock
options ........................... 1,983 -- -- -- 1,983
Payment on financing fees ............ (4,000) -- -- -- (4,000)
--------- --------- -------- -------- ---------
Net cash provided by financing
activities ........................ 22,751 -- 898 (906) 22,743
--------- --------- -------- -------- ---------
Net increase (decrease) in cash ...... (27,186) 39,178 2,403 -- 14,395
Cash at beginning of year ............ 54,135 (32,640) 639 -- 22,134
--------- --------- -------- -------- ---------
Cash at end of year .................. $ 26,949 $ 6,538 $ 3,042 $ -- $ 36,529
========= ========= ======== ======== =========
F-31
ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. EXECUTIVE OFFICERS AND DIRECTORS
Incorporated by reference from the information under the captions
"Election of Directors" and "Compliance with Section 16(a) of Securities
Exchange Act" in our definitive proxy statement for the Annual Meeting of
Stockholders to be held on March 21, 2000 and from Item 4A--"Executive Officers
of the Registrant" in Part I.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference from the information under the caption
"Executive Compensation" in our definitive proxy statement for the Annual
Meeting of Stockholders to be held on March 21, 2000.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Incorporated by reference from the information under the caption "Security
Ownership of Certain Beneficial Owners and Management" in our definitive proxy
statement for the Annual Meeting of Stockholders to be held on March 21, 2000.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference from Item 8, Consolidated Financial Statements
and Supplementary Data, Note 8, Notes Payable and Long-Term Debt and Note 7,
Related Party Transactions.
F-32
PART IV
ITEM 14. EXHIBITS. FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) Item 8. Consolidated Financial Statements and Supplementary Data
Report of Independent Accountants
Consolidated Balance Sheets October 31, 1999 and October 31, 1998
Consolidated Statements of Operations For the years ended October 31, 1999,
1998 and 1997
Consolidated Statements of Changes in Stockholders' Equity For the years ended
October 31, 1999, 1998 and 1997
Consolidated Statements of Cash Flows For the years ended October 31, 1999,
1998 and 1997
Notes to Consolidated Financial Statements
(a)(2) Financial Statement Schedules
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.
(a)(3) 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.
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.
33
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.
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.
34
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 1996 Form 10-K filed
with the SEC on January 14, 1997, 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 the 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"), filed with the SEC on
January 29, 1999, 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 our 1998 Form 10-K filed with the SEC on January 29, 1999,
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 our 1991 Form 10-K
and incorporated herein by reference.
10.11 Employment Agreement, dated May 7, 1991, between URS Corporation and
Kent P. Ainsworth, filed as Exhibit 10.16 to our 1991 Form 10-K and
incorporated herein by reference.
10.12 Employment Agreement, dated August 1, 1991, between URS Consultants,
Inc. and Irwin L. Rosenstein, filed as Exhibit 10.12 to our 1991 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 March 20, 1998, between URS
Corporation and Joseph Masters filed as Exhibit 10.19 to our 1998
Form 10-K and incorporated herein by reference.
10.15 Amendment to Employment Agreement, dated October 11, 1994, between URS
Consultants, Inc., and Irwin L. Rosenstein, filed as Exhibit 10.12(a)
to the Company's Annual Report on Form 10-K for the fiscal year ended
October 31, 1994, and incorporated herein by reference.
10.16 Amendment to Employment Agreement dated as of October 13, 1998 between
URS Corporation and Martin M. Koffel filed as Exibit 10.21 to our
1998 Form 10-K and incorporated herein by reference.
10.17 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 Kent P.
Ainsworth, Joseph Masters, Martin Tanzer, Irwin L. Rosenstein, and
Jean-Yves Perez filed as Exhibit 10.22 to our 1998 Form 10-K and
incorporated herein by reference.
35
10.18 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 our 1990 Form S-1 and incorporated
herein by reference.
10.19 Form of Indemnification Agreement filed as Exhibit 10.34 to URS
Corporation's 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; and 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.
10.20 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 URS Corporation's Current Report
on Form 8-K filed on August 21, 1997 and incorporated herein by
reference.
10.21 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 URS Corporation's Current Report
on Form 8-K filed on November 26, 1997, and incorporated herein by
reference.
10.22 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.
10.23 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.
10.24 Stock Option Agreement, dated as of November 5, 1999, by and between URS
Corporation and Martin M. Koffel. FILED HEREWITH.
10.25 Stock Option Agreement, dated as of November 5, 1999, by and between URS
Corporation and Kent P. Ainsworth. FILED HEREWITH.
10.26 Stock Option Agreement, dated as of November 5, 1999, by and between URS
Corporation and Joseph Masters. FILED HEREWITH.
21.1 Subsidiaries of URS Corporation. FILED HEREWITH.
23.1 Consent of PricewaterhouseCoopers LLP FILED HEREWITH.
24.1 Powers of Attorney of URS Corporation's directors and officers. FILED
HEREWITH.
27 Financial Data Schedule (filed with electronic version only).
(b) Reports on Form 8-K. We filed the following reports on Form 8-K during
the quarter ended October 31, 1999:
* Form 8-K/A dated August 4, 1999 to file financial statements of Dames
& Moore Group.
36
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
report 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: January 31, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report 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 Chairman of the Board of Directors January 31, 2000
- ----------------------------- and Chief Executive Officer
(Martin M. Koffel)
/s/ KENT P. AINSWORTH Executive Vice President, Chief January 31, 2000
- ----------------------------- Financial Officer, Principal
(Kent P. Ainsworth) Accounting Officer and Secretary
/s/ IRWIN L. ROSENSTEIN* Director January 31, 2000
- -----------------------------
(Irwin L. Rosenstein)
/s/ RICHARD C. BLUM* Director January 31, 2000
- -----------------------------
(Richard C. Blum)
/s/ RICHARD Q. PRAEGER* Director January 31, 2000
- -----------------------------
(Richard Q. Praeger)
/s/ WILLIAM D. WALSH * Director January 31, 2000
- -----------------------------
(William D. Walsh)
/s/ RICHARD B. MADDEN* Director January 31, 2000
- -----------------------------
(Richard B. Madden)
/s/ ARMEN DER MARDEROSIAN* Director January 31, 2000
- -----------------------------
(Armen Der Marderosian)
37
Signature Title Date
--------- ----- ----
Signature Title Date
--------- ----- ----
/s/ ADM. S. ROBERT FOLEY, JR., Director January 31, 2000
USN (RET.)*
- -----------------------------
(Adm. S. Robert Foley, Jr., USN (Ret.))
/s/ JEAN-YVES PEREZ* Director January 31, 2000
- -----------------------------
(Jean-Yves Perez)
/s/ MARIE L. KNOWLES* Director January 31, 2000
- -----------------------------
(Marie L. Knowles)
*By /s/ KENT P. AINSWORTH
- -----------------------------
(Kent P. Ainsworth, Attorney-in-fact)
39