FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1997
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
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(Exact name of registrant as specified in its charter)
Delaware 94-1381538
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(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
100 California Street, Suite 500
San Francisco, California 94111-4529
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 415-774-2700
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
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Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at September 5, 1997
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Common stock, $.01 par value 10,594,025
URS CORPORATION AND SUBSIDIARIES
This Form 10-Q for the third quarter ended July 31, 1997 contains
forward-looking statements that involve risks and uncertainties. The Company's
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 Form 10-Q and those incorporated by reference from the
Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1996
and Form S-8 Registration Statement, as amended (File No. 33-61230), filed with
the Securities and Exchange Commission.
PART I. FINANCIAL INFORMATION:
In the opinion of management, the information furnished reflects all
adjustments, consisting only of normal recurring adjustments, which are
necessary for a fair statement of the interim financial information. Net
earnings per share computations are based upon the weighted average number of
common shares outstanding during the period plus shares issuable under warrants
and stock options that have a dilutive effect.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted. These condensed financial statements should be
read in conjunction with the financial statements and notes thereto included in
the Company's Annual Report on Form 10-K for the fiscal year ended October 31,
1996. The results of operations for the three and nine month periods ended July
31, 1997 are not necessarily indicative of the operating results for the full
year.
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets
July 31, 1997 and October 31, 1996..........................3
Consolidated Statements of Operations
Three and nine months ended July 31,
1997 and 1996..............................................4
Consolidated Statements of Cash Flows
Nine months ended July 31, 1997 and 1996....................5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................................6
PART II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K.............................9
2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
URS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
July 31, October 31,
ASSETS 1997 1996
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(unaudited)
Current assets:
Cash $ 14,368 $ 22,370
Accounts receivable, less allowance for
doubtful accounts of $1,647 and $2,447 80,815 75,159
Costs and accrued earnings in excess of
billings on contracts in process, less
allowances for losses of $1,792 and $2,419 25,399 20,855
Deferred income taxes 7,233 7,077
Prepaid expenses and other 3,157 2,426
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Total current assets 130,972 127,887
Property and equipment at cost, net 16,131 15,815
Goodwill, net 43,065 40,261
Other assets 1,746 1,644
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$ 191,914 $ 185,607
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 19,680 $ 21,684
Accrued salaries and wages 14,052 12,131
Accrued expenses and other 17,849 20,063
Billings in excess of costs and accrued earnings on
contracts in process 11,060 8,849
Deferred income taxes 2,867 2,913
Long-term debt, current portion 6,200 4,675
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Total current liabilities 71,708 70,315
Long-term debt 39,613 52,390
Long-term debt, related parties -- 2,979
Deferred compensation and other accruals 8,239 3,227
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Total liabilities 119,560 128,911
Stockholders' equity:
Common shares, par value $.01; authorized
20,000 shares; issued 10,579 and 8,640 shares 106 88
Treasury stock (287) (287)
Additional paid-in capital 49,700 41,894
Retained earnings since February 21, 1990, date of
quasi-reorganization 22,835 15,001
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Total stockholders' equity 72,354 56,696
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$ 191,914 $ 185,607
========= =========
3
URS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Three months ended Nine months ended
July 31, July 31,
-------------------- --------------------
1997 1996 1997 1996
-------- -------- -------- --------
(unaudited) (unaudited)
Revenues $100,196 $ 89,734 $295,496 $203,101
-------- -------- -------- --------
Expenses:
Direct operating 58,813 53,027 174,887 122,552
Indirect, general and
administrative 35,103 31,844 103,789 70,782
Interest expense, net 989 1,431 3,806 2,434
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94,905 86,302 282,482 195,768
-------- -------- -------- --------
Income before taxes 5,291 3,432 13,014 7,333
Income tax expense 2,110 1,360 5,180 2,930
-------- -------- -------- --------
Net income $ 3,181 $ 2,072 $ 7,834 $ 4,403
======== ======== ======== ========
Net income per share:
Primary and fully diluted $ .28 $ .22 $ .74 $ .51
======== ======== ======== ========
4
URS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Nine Months Ended
July 31,
---------------------
1997 1996
-------- --------
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 7,834 $ 4,403
-------- --------
Adjustment to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization 5,791 4,060
Allowance for doubtful accounts and losses (1,427) 3,684
Changes in current assets and liabilities, net of
effect of business acquisitions:
Accounts receivable and costs and accrued earnings
in excess of billings on contracts in process (8,773) (2,377)
Prepaid expenses and other assets (832) (2,094)
Accounts payable, accrued salaries and wages
and accrued expenses (1,740) 2,307
Billing in excess of costs and accrued earnings on
contracts in process 2,211 8,685
Deferred taxes (202) (2,035)
Other, net (44) 120
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Total adjustments (5,016) 12,350
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Net cash provided by operating activities 2,818 16,753
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CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquisition, net of cash acquired -- (54,556)
Capital expenditures (3,010) (2,280)
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Net cash (used) by investing activities (3,010) (56,836)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt -- 50,000
Principal payments on long-term debt (12,508) (127)
Proceeds from sale of common shares 444 163
Proceeds from exercise of stock options 402 8
Proceeds from exercise of warrants 3,895 --
Other (43) (16)
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Net cash provided by financing activities (7,810) 50,028
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Net (decrease) increase in cash (8,002) 9,945
Cash at beginning of period 22,370 8,836
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Cash at end of period $ 14,368 $ 18,781
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SUPPLEMENTAL INFORMATION:
Interest paid $ 4,107 $ 1,682
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Taxes paid $ 6,777 $ 2,132
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Equipment purchased through capital lease obligations $ 2,429 $ --
======== ========
Noncash purchase allocation adjustment $ 3,000 $ --
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Retirement of debt, related parties $ 3,028 $ --
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Issuance of common stock in business acquisition $ -- $ 9,463
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URS CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company reports the results of its operations on a fiscal year which
ends on October 31. This Management Discussion and Analysis (MD&A) should be
read in conjunction with the MD&A and the footnotes to the Consolidated
Financial Statements included in the Annual Report on Form 10-K for the fiscal
year ended October 31, 1996 which was previously filed with the Securities and
Exchange Commission.
Results of Operations
Third quarter ended July 31, 1997 vs. July 31, 1996.
The Company's revenues were $100,196,000 for the third quarter ended July
31, 1997, an increase of $10,462,000 or 12% over the amount reported for the
same period last year. The growth in revenue is attributable to an increase in
demand for the Company's services on infrastructure projects. The revenues
generated from the Company's three largest indefinite delivery contracts, the
Navy CLEAN, EPA ARCS 9 & 10, and EPA ARCS 6,7 & 8 contracts, were $5,261,000 for
the quarter ended July 31, 1997, compared to $7,159,000 for the same period last
year.
Direct operating expenses for the quarter ended July 31, 1997, which
consist of direct labor and other direct expenses, including subcontractor
costs, increased $5,786,000 an 11% increase over the amount reported for the
same period last year. This increase is due to the increases in subcontractor
costs and direct labor costs associated with revenues.
Indirect, general and administrative expenses for the quarter ended July
31, 1997 increased $3,259,000, or 10% over the amount reported for the same
period last year as a result of an increase in business activity.
The Company earned $5,291,000 before income taxes for the third quarter
ended July 31, 1997 compared to $3,432,000 for the same period last year. The
Company's effective income tax rate for the quarters ended July 31, 1997 and
1996 was approximately 40%.
The Company reported net income of $3,181,000, or $.28 per share for the
third quarter ended July 31, 1997, compared with $2,072,000 or $.22 per share
for the same period last year.
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 to the Bank for $1.9 million. On February 14,
1997, various partnerships managed by Richard C. Blum & Associates, Inc.
("RCBA") 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 RCBA entities. The exercise
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resulted in the issuance of an additional 1,383,586 shares to the RCBA entities.
These equity transactions are reflected in the Company's financial statements.
Nine months ended July 31, 1997 vs. July 31, 1996.
The Company's revenues were $295,496,000 for the nine months ended July 31,
1997, an increase of $92,395,000, or 45% over the amount reported for the same
period last year. The growth in revenues is attributable to all areas of the
Company's business including infrastructure projects involving transportation
systems, institutional and commercial facilities and environmental projects as
well as the Greiner acquisition. Revenues generated from the Company's three
largest indefinite delivery contracts (Navy CLEAN, EPA ARCS 9 & 10 and EPA ARCS
6, 7 & 8) were $21,671,000 for the nine months ended July 31, 1997, compared to
$21,314,000 for the same period last year.
Direct operating expenses for the nine months ended July 31, 1997, which
consist of direct labor and other direct expenses including subcontractor costs,
increased $52,335,000, or 43% over the amount reported in the same period last
year. This increase is attributable to the overall increase in the Company's
business as compared to the same period last year as well as the Greiner
acquisition. Indirect, general and administrative expenses were $103,789,000 for
the nine months ended July 31, 1997, an increase of $33,007,000, or 47% over the
amount reported for the same period last year. The increase in indirect, general
and administrative expenses is due to an increase in business activity in
addition to the addition of the Greiner overhead.
The Company earned $13,014,000 before income taxes for the nine months
ended July 31, 1997 compared to $7,333,000 for the same period last year. The
Company's effective income tax rate for the nine months ended July 31, 1997 and
1996 was approximately 40%.
The Company reported net income of $7,834,000 or $.74 per share, for the
nine months ended July 31, 1997, compared with $4,403,000, or $.51 per share for
the same period last year.
The Company's backlog at July 31, 1997 was $470,072,000, as compared to
$399,200,000 at October 31, 1996.
Liquidity and Capital Resources
At July 31, 1997, the Company had working capital of $59,264,000, an
increase of $1,692,000 from October 31, 1996.
The Company's current revolving line of credit is $20,000,000, of which
$19,000,000 was available at July 31, 1997.
The Company's credit agreement requires compliance with certain financial
and other covenants. The Company was in compliance with such covenants at July
31, 1997.
7
On August 18, 1997, the Company and Woodward-Clyde Group, Inc. ("W-C")
executed an agreement whereby W-C will be merged with and into a wholly-owned
subsidiary of the Company. W-C is a professional services firm operating in the
engineering services industry and is headquartered in Denver, Colorado. The
acquisition price will consist of $35,000,000 in cash plus $65,000,000 of the
Company's common stock, subject to certain adjustments. Completion of this
transaction is subject to approval by the Company's and W-C's stockholders and
other approvals. The transaction is expected to close by November 1997. To
finance the cash portion of the proposed transaction, the Company is negotiating
with its lenders to obtain a $40,000,000 revolving credit facility with a term
of five years and a $110,000,000 term loan maturing six years from the closing
of the loan, which facilities would be secured by guarantees from and pledges of
the stock of the Company's major subsidiaries. The new revolving credit facility
and term loan would replace the Company's current senior secured revolving
credit facility and term loan.
The Company believes that its existing financial resources, together with
its planned cash flow from operations and its proposed line of credit, will
provide sufficient capital to fund the acquisition of W-C and to fund its
combined operations and capital expenditure needs for the foreseeable future.
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PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Form 8-K filed on August 21, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated September 15, 1997
URS CORPORATION
/s/ Kent P. Ainsworth
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Kent P. Ainsworth
Executive Vice President and
Chief Financial Officer
(Principal Accounting Officer)
9