UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

For the fiscal year ended October 31, 2004
OR

For the Transition Period from _____ to _____

Commission file number 1-7567

URS CORPORATION

(415) 774-2700

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

None

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  þ No  o

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. o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes þ   No o

On January 3, 2005, there were 43,835,413 shares of the registrant’s Common Stock outstanding. The aggregate market value of the Common Stock of the registrant held by non-affiliates on January 3, 2005 and April 30, 2004 (the last business day of the registrant’s most recently completed second fiscal quarter) was $1,149.4 million and $917.4 million, respectively, based upon the closing sales price of the registrant’s Common Stock on such date as reported in the consolidated transaction reporting system. For purposes of this calculation, executive officers, directors and holders of 10% or more of the outstanding shares of Common Stock of the registrant are deemed to be affiliates of the registrant. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

Documents Incorporated by Reference

Items 10, 11, 12 and 14 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 22, 2005.

URS CORPORATION AND SUBSIDIARIES

     This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may be identified by words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “will,” and similar terms used in reference to our future revenue, future contributions to our retirement and health plans, our future real estate leasing, future maintenance of our insurance coverage, future outcomes of our legal proceedings, future guarantees and debt service obligations, future capital resources, future utilization of our net operating losses and deferred tax assets, future accounting and project management conversion and future economic and industry conditions. We believe that our expectations are reasonable and are based on reasonable assumptions. However, such forward-looking statements by their nature involve risks and uncertainties. We caution that a variety of factors, including but not limited to the following, could cause our business and financial results to differ materially from those expressed or implied in our forward-looking statements: the ongoing economic downturn; our ability to comply with government contract procurement regulations; changes in our book of business; our dependence on government appropriations and procurements; our ability to profitably execute our contracts and guarantees; our leveraged position; our ability to service our debt; liability for pending and future litigation; the impact of changes in the laws and regulations; our ability to maintain adequate insurance coverage; a decline in defense spending; industry competition; our ability to attract and retain key individuals; risks associated with international operations; our ability to successfully integrate our accounting and project management software; our relationship with our labor unions; and other factors discussed more fully in Management’s Discussion and Analysis of Financial Condition and Results of Operations beginning on page 19, Risk Factors That Could Affect Our Financial Condition and Results of Operations beginning on page 41, as well as in other reports subsequently filed from time to time with the United States Securities and Exchange Commission. We assume no obligation to revise or update any forward-looking statements.

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ITEM 1. BUSINESS

Summary

     We are one of the largest engineering design services firms worldwide and a major U.S. federal government contractor for systems engineering and technical assistance and operations and maintenance services. Our business focuses primarily on providing fee-based professional and technical services in the engineering and construction services and defense markets, although we perform some construction work. We operate through two divisions: the URS Division and the EG&G Division. Our URS Division provides a comprehensive range of professional planning and design, program and construction management, and operations and maintenance services to the U.S. federal government, state and local government agencies, and private industry clients in the United States and internationally. Our EG&G Division provides planning, systems engineering and technical assistance, operations and maintenance, and program management services to various U.S. federal government agencies, primarily the Departments of Defense and Homeland Security. For information on our business by segment and geographic regions, please refer to Note 7, “Segment and Related Information” to our “Consolidated Financial Statements and Supplementary Data” included under Item 8 of this report.

Clients, Services and Markets

     We market our services to federal government agencies, state and local government agencies, private industry, and international clients through our extensive network of approximately 300 offices and contract specific job sites across the U.S. and in more than 20 foreign countries. We currently have many active projects, with no single project accounting for more than 6% of our revenues for fiscal 2004.

     We focus our expertise on eight key markets: transportation, environmental, facilities, commercial/industrial, water/wastewater, homeland security, defense systems, and installations and logistics.

     The following table summarizes our revenues, representative services and representative markets by client type for our fiscal year ended October 31, 2004.

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Clients

     We provide our services to a broad range of domestic and international clients, including agencies of the U.S. federal government, state and local government agencies and private industry clients located both in the U.S. and abroad. The demand for our services comes from budgeting and capital spending decisions made by the U.S. federal government, state and local government agencies and public and private companies. The following table summarizes the primary client type serviced by our URS and EG&G Divisions for the fiscal year ended October 31, 2004.

	ü  a primary client type for the division.
	— not a primary client type for the division.

     U.S. Federal Government. We are a major government contractor for systems engineering and technical assistance, and operations and maintenance, providing services to the Departments of Defense, Homeland Security, Justice, Energy and Treasury, the Environmental Protection Agency, NASA, the United States Postal Service and the General Services Administration. Following a steady decline in uniformed and civilian personnel levels throughout the 1990s, the Department of Defense has used contractors for large, multi-service government outsourcing contracts in support of military operations. Our revenues from U.S. federal government agencies exclude revenues arising from federal grants or matching funds allocated to and passed through state and local government agencies. We serve U.S. federal government clients through both our URS and EG&G Divisions.

     State and Local Government. Our state and local government agency clients include various local municipalities, community planning boards, state and municipal departments of transportation and public works, transit authorities, water and wastewater authorities, environmental protection agencies, school boards and authorities, judiciary agencies, public hospitals and airport authorities. In the United States, substantially all spending for infrastructure – transportation facilities, public buildings and water and wastewater systems – is coordinated through these agencies. Our revenues from state and local governments include revenues arising from federal grants or matching funds provided to state and local government agencies. Our state and local government clients are primarily served by the URS Division.

     Private Industry. Our private industry clients include various Fortune 500 clients, many with international operations, from a broad range of industries, including chemical, pharmaceutical, oil and gas, power, manufacturing, mining and forest products. Over the past several years, many of these companies have reduced the number of service providers they use, selecting larger, multi-service contractors with international operations in order to control overhead costs. Our private industry clients are served primarily through the URS Division.

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     International Business. The focus of our international business is to provide a range of services to our multinational private industry clients and foreign governmental agencies in the Americas (outside the U.S.), Europe and Asia Pacific. Although both the URS and EG&G Divisions work outside of the United States, our clients based outside of the United States are served primarily by the URS Division.

Services

     We provide professional planning and design, systems engineering and technical assistance, program and construction management, and operations and maintenance services to the U.S. federal, state, and local government agencies, as well as private industry and international clients. These services are delivered through a network of offices and contract-specific job sites. Although we are typically the prime contractor, in some cases, we provide services as subcontractors or through joint ventures or partnership agreements with other service providers. The following table summarizes the services provided by our URS and EG&G Divisions for the fiscal year ended October 31, 2004.

	ü the Division provides the listed service.
	— the Division does not provide the listed service.

     Planning and Design. The planning process is typically used to develop a blueprint or overall scheme for a project. Based on the project requirements identified during the planning process, detailed plans are developed, which may include material specifications, construction cost estimates and schedules. Our planning and design services include the following:

	•	master planning;
	•	land-use planning;
	•	transportation planning;
	•	technical and economic feasibility studies;
	•	environmental impact assessments;
	•	permitting to ensure compliance with applicable regulations;
	•	the analysis of alternative designs; and
	•	the development of conceptual and final design documents.

     We provide planning and design services for the construction of new transportation projects and for the renovation and expansion of existing transportation infrastructure, including bridges, highways, roads, airports, mass transit systems and railroads. We also plan and design many types of facilities, such as schools, courthouses, hospitals, corporate offices and retail outlets, as well as water supply and conveyance systems and wastewater treatment plants. Our planning and design capabilities support homeland defense and global threat reduction programs, as well as for hazardous waste clean-up activities at military bases and environmental assessment, due diligence and permitting at commercial and industrial facilities. We also provide design support to military clients for major research and development projects.

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     Systems Engineering and Technical Assistance. We provide a broad range of systems engineering and technical assistance to all branches of the U.S. military for the design and development of new weapons systems and the modernization of aging weapons systems. We have the expertise to support a wide range of platforms including aircraft and helicopters, tracked and wheeled vehicles, ships and submarines, shelters and ground support equipment. Representative systems engineering and technical assistance services include:

	•	defining operational requirements and developing specifications for new weapons systems;
	•	reviewing hardware and software design data; and
	•	developing engineering documentation for these systems.

     We support a number of activities including technology insertion, system modification, installation of new systems/equipment, design of critical data packages, and configuration management.

     Construction Management. We serve as the client’s representative and monitor the progress, cost and quality of construction projects in process. As construction managers, we typically oversee and coordinate the activities of construction contractors, providing a variety of services, including:

	•	cost and schedule management;
	•	change management;
	•	document control;
	•	contract administration;
	•	inspection;
	•	quality control and quality assurance; and
	•	claims and dispute resolution.

     We provide construction management services for transportation, facilities, environmental and water/wastewater projects. Although we have acted as a general contractor or sub-contractor on some demolition and environmental contracts, we generally have not pursued “low bid” fixed-price construction contracts.

     Program Management. We provide the technical and administrative services required to manage, coordinate and integrate the multiple and concurrent assignments that comprise a large program – from concept through completion. For large military programs, which typically involve naval, ground, vessel and airborne platforms, our program management services include logistics planning, acquisition management, risk management of weapons systems, safety management and subcontractor management. We also provide program management services for large capital improvement programs, which include planning, coordination, schedule and cost control, and design, construction, and commissioning oversight.

     Operations and Maintenance. We provide operations and maintenance services in support of large military and other non-military installations and operations. Our services include:

	•	management of military base logistics, including overseeing the operation of government warehousing and distribution centers, as well as government property and asset management;
	•	maintenance, modification, overhaul and life service extension services for military vehicles, vessels and aircraft;
	•	operation and maintenance of chemical agent disposal systems;
	•	comprehensive military flight training services; and
	•	support of high security systems.

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Markets

     We focus our expertise on eight key markets: transportation, environmental, commercial/industrial, facilities, water/wastewater, homeland security, installations and logistics and defense systems. Our domestic and international network of offices allows us to perform business development and sales activities on a localized basis. In addition, for large-scale projects and multinational clients, we coordinate national and international marketing efforts on a company-wide basis. The following table summarizes the markets served by our URS and EG&G Divisions, as separate reporting segments, for our fiscal year ended October 31, 2004.

ü  the Division serves this market.

— the Division does not serve this market.

Transportation

     We provide a full range of planning and design, program management and construction management services for surface transportation, air transportation and rail transportation projects as described below.

     Surface Transportation. We provide services for all types of surface transportation systems and networks, including highways, bridges, tunnels and interchanges; toll road facilities; and port and marine structures. Our expertise also includes the planning and design, and operations and maintenance of intelligent transportation systems, such as traffic management centers. Historically, we have emphasized the design of new transportation systems, but in recent years we have focused on the rehabilitation and expansion of existing systems.

     Air Transportation. We provide comprehensive services for the development of new airports and the modernization and expansion of existing facilities, including airport terminals; hangars and air cargo buildings; air traffic control towers; runways and taxiways; and related airport infrastructure such as roadways, parking garages and people movers. We also specialize in baggage, communications and aircraft fueling systems. In the growing area of airport security, we assist airport authorities and owners, and airline carriers in all aspects of security-related projects. We have completed projects at both general aviation and large-hub international airports throughout the world. In the growing area of security systems at airports, we provide a full range of planning and design, program and construction management, and operations and maintenance services.

     Rail Transportation. We provide services to 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 systems. Our specialized expertise in transportation structures, including terminals, stations, parking facilities, bridges, tunnels and power, signals and communications systems, complements these capabilities.

Environmental

     We provide a variety of services related to protecting, preserving and restoring our air, water and soil quality for the U.S. federal, state and local government agencies, and public utilities. Our services include environmental impact assessments, permitting and regulatory compliance, remediation design, program and construction

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management, demolition and environmental clean-up. We provide air quality monitoring and modeling and design air emissions control systems. We also provide comprehensive services related to the identification, characterization and remediation of hazardous waste sites.

Commercial/Industrial

     We provide a broad range of engineering and environmental services to commercial and industrial clients in the private sector, most of which are Fortune 500 companies. Our work includes due diligence and compliance audits, facility site locating and permitting, environmental management and pollution control, waste management and remediation engineering, process engineering and design, and reporting. We also design new buildings and facilities, and assist in property redevelopment.

Facilities

     We provide planning, architectural and engineering design, and program and construction management for new facilities and the rehabilitation and expansion of existing facilities. Our work involves a broad range of building types, including education, judicial, correctional health care, retail, sports, recreational, industrial, research and office facilities. We also provide historic preservation, adaptive reuse and seismic upgrade services.

Water/Wastewater

     We provide services for the planning, design and construction of all types of water/wastewater treatment facilities and systems. Services are provided for new and expanded water supply, storage, distribution and treatment systems, municipal wastewater treatment and sewer systems, and watershed, storm water management and flood control systems. We also provide design and seismic retrofit of earth, rockfill and roller-compacted concrete dams, as well as the design of reservoirs and impoundments, including mine tailings disposal and large outfall structures.

Homeland Security

     We provide a variety of services to the Department of Homeland Security, the Department of Defense, and other federal and state and local government agencies in the support of Homeland Security activities. This work includes conducting threat assessments of public facilities, planning and conducting emergency preparedness exercises, and designing force protection systems and security systems.

     In addition, our related global threat reduction services focus on the elimination and dismantlement of nuclear, chemical and biological weapons of mass destruction or WMD. Our services include operating and maintaining chemical agent disposal facilities and providing advisory services for dismantling and eliminating WMD. We also develop emergency response strategies and conduct first responder training for the military and other federal agencies.

Defense Systems

     We provide a variety of services to the U.S. federal government in support of military activities. These services include Defense Systems & Services, Field Services and Flight Services & Training.

     Defense Systems & Services. We provide a variety of weapons system design and modernization services to Department of Defense weapons systems management offices, laboratories, technical centers, support centers, and maintenance activities. These clients acquire ships, aircraft and weapons systems; develop requirements, certify, test and validate; and repair, maintain, and upgrade system platforms. This includes acquisition support for new defense systems, engineering and technical assistance for the modernization of existing systems, and maintenance planning to help extend their service life.

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     Field Services. Under contract with the U.S. Army, U.S. Air Force, and the U.S. Coast Guard, we maintain, modify and overhaul aircraft, ground vehicles, such as Humvees, tanks, and armored personnel carriers, and associated support equipment. We provide these services for military operations both in the U.S. and abroad.

     Flight Services & Training. We provide a variety of services to the U.S. Army, U.S. Air Force, and the U.S. Coast Guard to support undergraduate and graduate-level training for pilots of military fixed wing and rotary wing aircraft. We also assist with the acquisition of military parts for these aircraft.

Installations and Logistics

     We assist the U.S. federal government by providing services to support the operations of complex government and military installations and the management of logistics activities for government supply and distribution networks.

     Installations Management. We provide comprehensive services for the operation and maintenance of complex government installations, including military bases and test ranges. Our services vary from managing basic base operations to the design, installation and maintenance of complex equipment for testing new weapons.

     Logistics. We provide a number of Department of Defense agencies and defense prime contractors with turn key logistics support services focused on developing and managing integrated supply and distribution networks. We oversee warehousing, packaging, delivery, and traffic management for the distribution of government equipment and materials. We also manage depot equipment maintenance, safety, security and contracting.

Major Customer

     Our largest customer is the U.S. Army. We had multiple contracts with the U.S. Army resulting in revenues of $587 million or 17% and $450 million or 14% of our consolidated revenues for fiscal years 2004 and 2003, respectively.

Competition

     Our industry is highly fragmented and intensely competitive. Our competitors are numerous, ranging from small private firms to multi-billion dollar public companies. The technical and professional aspects of our services generally do not require large upfront capital expenditures and therefore provide limited barriers against new competitors. Some of our competitors have achieved greater market penetration in some of the markets in which we compete and have substantially more financial resources and/or financial flexibility than we do. To our knowledge, no individual company currently dominates any significant portion of our markets. Competition in our industry is based on quality of performance, reputation, expertise, price, technology, customer relationships, range of service offerings, and domestic and international office networks.

     We believe that we are well positioned to compete in our markets because of our solid reputation, our long-term client relationships, our extensive network of offices and our broad range of services. We are one of the largest engineering design services firms worldwide and a major U.S. federal government contractor for operations and maintenance services. We provide a comprehensive portfolio of services ranging from engineering planning and design to operations and maintenance. In addition, as a result of our national and international presence of approximately 300 principal offices and contract-specific job sites, we can offer our governmental and private clients localized knowledge and expertise that is backed by the support of our worldwide professional staff.

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     The competitive environments in which each business segment operates are described below:

     URS Division. The URS Division’s business segment is highly competitive and characterized by competition primarily based on performance, reputation, expertise, price, technology, customer relationships, range of service offerings, and domestic and international office networks. Our competitors are numerous, ranging from small private firms to multi-billion dollar public companies, and our primary competitors include: AECOM Technology Corporation, Bechtel Group, Inc., CH2M HILL Companies, Ltd., Earth Tech Inc. (a subsidiary of Tyco International, Ltd.), Fluor Corporation, Jacobs Engineering Group Inc., Parsons Brinckerhoff Inc., the Shaw Group, Inc., Tetra Tech, Inc. and Washington Group International, Inc. We believe that we had a lower operating risk profile relative to our competitors since our contract mix was weighted toward providing professional engineering and operations and maintenance services via cost-plus, time-and-materials and negotiated fixed-price contracts, which were generally lower risk than lump-sum, low-bid fixed-price contracts.

     EG&G Division. The EG&G Division’s business segment is highly competitive and characterized by competition primarily based on quality of performance, reputation, expertise, price, technology, customer relationships and range of service offerings. Our competitors are numerous, ranging from small private firms to multi-billion dollar public companies, and our primary competitors include: Anteon International Corporation, CACI International, Inc., DynCorp (a subsidiary of Computer Sciences Corporation), Johnson Controls, Inc., L-3 Communications Corporation, ManTech International Corporation, Northrop Grumman Corporation, Raytheon Corporation and Science Application International Corporation (SAIC). We believe our competitive advantage in this segment include the factors cited above and also include our positive customer satisfaction and performance rating.

Backlog, Designations, Option Years and Indefinite Delivery Contracts

     We account for the value of all contract awards that may potentially be recognized as revenues over the life of the contracts. We categorize the value of our book of business into backlog, designations, option years and delivery contracts, or IDCs, based on the nature of the award and its current status. A discussion of our book of business is included below.

     Backlog. Our contract backlog consists of the amount billable at a particular point in time for future services under signed contracts, including task orders that are actually issued and funded under IDCs. Our consolidated contract backlog was $3,822.7 million and $3,661.8 million at October 31, 2004 and 2003, respectively.

     Designations. Our clients often designate us as the recipient of future contracts. These “designations” are projects that clients have awarded to us, but for which we do not yet have signed contracts. We estimate total consolidated designations to be $1,333.4 million at October 31, 2004, as compared to $1,150.2 million at October 31, 2003.

     Option Years. A significant portion of the EG&G Division’s contracts are multi-year contracts with a base period plus option years. The base periods of these contracts can vary from one to five years. The option years are exercised at the option of our clients without requiring us to go through an additional competitive bidding process and would only be canceled in a termination for default scenario or if a client decided to end the project. As of October 31, 2004 and 2003, the estimated values of the option years on our contracts were $1,367.2 million and $1,357.7 million, respectively.

     Indefinite Delivery Contracts. Indefinite delivery contracts are signed contracts under which we perform work only when the client issues specific task orders. Generally, the terms of these contracts exceed one year and often include a maximum term and potential value. Indefinite delivery contracts generally range from one to twenty years in length. When such task orders are signed and funded, we transfer their value into backlog. As of October 31, 2004 and 2003, the estimated remaining values of our consolidated indefinite delivery contracts were $3,549.7 million and $2,893.3 million, respectively.

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     While the value of our book of business is a predictor of future revenues, we have no assurance, nor can we provide assurance that we will ultimately realize the maximum potential values for backlog, designations, option years or indefinite delivery contracts. Based on our historical experience, our backlog has the highest likelihood of being converted into revenues since we have signed contracts with our clients. Although there is a high probability that our designations will eventually convert into revenues, they are not as certain as backlog since our clients have not yet signed a contract with us. Due to the nature of option years, which are exercisable at the option of our clients, the likelihood of their conversion into revenues is lower than that of backlog, but higher than that of designations since we have a signed contract with the client and do not need to go through a competitive bidding process to obtain the option on the contract. Because we do not perform work under IDCs until specific task orders are issued, the value of our IDCs are not as likely to convert into revenues as other categories of our book of business.

Acquisitions

     Over the past several years, we have made several strategic acquisitions in order to diversify our client base, increase the range of services we offer and expand the markets we serve. Our most recent acquisition occurred in August 2002 when we acquired EG&G. EG&G provided planning, operations and maintenance, systems engineering and technical assistance, and program management services to the U.S. federal government, particularly the Department of Defense. The EG&G acquisition expanded our federal client base and diversified the range of services we provide, particularly for Department of Defense agencies.

History

     We were originally incorporated in California on May 1, 1957 under the former name of Broadview Research Corporation. On March 28, 1974, we changed our name to URS Corporation. On May 18, 1976, we re-incorporated in Delaware. Since then, we have implemented several name changes as a result of mergers and acquisitions. On February 21, 1990, we changed our name back to URS Corporation.

Regulations

     We provide services for contracts that are subject to government oversight, including environmental laws and regulations, general government procurement laws and regulations, and other government regulations and requirements. For more information on risks associated with our government regulations, please refer to the section, “Risk Factors That Could Affect Our Financial Condition and Results of Operations,” included under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this report.

     Environmental. A portion of our business involves the planning, design, program and construction management and operation and maintenance of pollution control facilities, as well as the assessment, design and management of remediation activities at hazardous waste or Superfund sites and military bases. In addition, we contract with U.S. governmental entities to destroy hazardous materials, including chemical agents and weapons stockpiles. These activities require us to manage, handle, remove, treat, transport and dispose of toxic or hazardous substances.

     Some environmental laws including the Resource Conservation and Recovery Act of 1976, as amended, or RCRA, and the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended, or CERCLA, as well as other governmental laws can impose liability for the entire cost of the clean-up of contaminated facilities or sites upon present and former owners and operators as well as generators, transporters and persons arranging for the treatment or disposal of such substances. In addition, while we strive to handle hazardous and toxic substances with care and in accordance with safe methods, the possibility of accidents, leaks, spills and the events of force majeure always exist. Humans exposed to these materials, including workers or subcontractors engaged in the transportation and disposal of hazardous materials, and persons in affected areas may be injured or become ill, resulting in lawsuits that expose us to liability and may result in substantial damage awards against us. Liabilities for contamination or human exposure to hazardous or toxic materials or a failure to comply with applicable regulations could result in substantial costs to us, including clean-up costs, fines and civil or criminal sanctions, third party claims for property damage or personal injury, or cessation of remediation activities.

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     Some of our business operations are covered by Public Law 85-804, which provides for government indemnification against claims and damages arising out of unusually hazardous activities performed at the request of the government. Due to changes in public policies and law, however, government indemnification may not be available in the case of any future claims or liabilities relating to other hazardous activities that we undertake to perform.

     Government Procurement. The services we provide to the U.S. federal government are subject to the Federal Acquisition Regulation, the Truth in Negotiations Act, the Cost Accounting Standards, the Service Contract Act, Department of Defense security regulations and other rules and regulations applicable to government contracts. These laws and regulations affect how we transact business with our government clients and in some instances, impose added costs to our business operations. A violation of specific laws and regulations could lead to fines, contract termination or suspension of future contracts. Our government clients can also terminate or modify any of their contracts with us at their convenience, and many of our government contracts are subject to renewal or extension annually.

     Other regulations and requirements. We provide services to the U.S. Department of Defense and other defense-related entities, which require specialized professional qualifications and security clearances. In addition, as engineering design services professionals, we are subject to a variety of local, state and foreign licensing and permit requirements.

Sales and Marketing

     Our URS Division performs business development and sales activities primarily through our network of local offices around the world. For large, market-specific projects requiring diverse technical capabilities, we utilize the companywide resources of specific disciplines. This often involves coordinating marketing efforts on a regional, national or global level. Our EG&G Division performs business development and sales activities primarily through its Strategic Business Units, or SBUs, that addresses a specific market segment, such as flight services and training. In addition, our EG&G Division coordinates national marketing efforts on large projects and for multi-division or multi-SBU scope efforts. Over the past year, the URS Division and the EG&G Division have jointly pursued a number of homeland security projects, and have been successful in marketing EG&G’s technical capabilities to URS’ established state and local government clients.

Seasonality

     We experience seasonal trends in our business caused by the Independence Day, Thanksgiving, Christmas and New Year’s holidays. Our revenues are typically lower during these times of the year because many of our clients’ employees as well as our own employees take vacations during these holidays, resulting in fewer billable hours worked on projects and thus lesser revenues recognized. In addition to the holidays, our business is affected similarly by the seasonal weather when some of our offices have to close temporarily due to severe winter and/or tropical storms.

Fiscal Year Change

     Effective January 1, 2005, we will begin reporting our financial results on a 52/53 week fiscal year ending on the Friday closest to December 31^st, with interim quarters ending on the Fridays closest to March 31st, June 30th and September 30th. Our 2004 fiscal year began on November 1, 2003 and ended on October 31, 2004. The period from November 1, 2004 to December 31, 2004 will be treated as a transition period, for which we will file a transition report on Form 10-Q by February 9, 2005.

Raw Materials

     Our business is not heavily dependent on raw materials. Risks associated with the procurement of raw materials for our construction services projects are generally passed through to the clients. We do not foresee the lack of availability of raw materials as a factor that could have a material adverse effect on our business in the near term.

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Insurance

     Currently, we have limits of $125 million per loss and $125 million in the aggregate annually for general liability, professional errors and omissions liability and contractor’s pollution liability insurance (in addition to other policies for some specific projects). These policies include self-insured claim retention amounts of $4 million, $5 million and $5 million, respectively. In some actions, parties are seeking damages, including punitive or treble damages that substantially exceed our insurance coverage or are not insured.

     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 we do not continue to maintain these policies, we will have no coverage for claims made after the termination date – even for claims based on events that occurred during the term of coverage. We intend to maintain these policies; however, we may be unable to maintain existing coverage levels. We have maintained insurance without lapse for many years with limits in excess of losses sustained.

Employees

     As of October 31, 2004, we had approximately 24,100 full-time employees and 3,400 temporary or part-time workers. The URS Division and the EG&G Division employed approximately 15,900 and 11,600 persons (including temporary and part-time workers), respectively. At various times, we have employed up to several thousand workers on a temporary or part-time basis to meet our contractual obligations. Approximately 2,000 of our employees are covered by collective bargaining agreements. These agreements are subject to amendment on various dates ranging from January 2005 to October 2009.

Available Information

     Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge on our web site at www.urscorp.com. These reports, and any amendments to these reports, are made available on our web site as soon as reasonably practical after we electronically file or furnish the reports with the Securities and Exchange Commission (or “SEC”). The SEC also maintains a web site (www.sec.gov) containing reports, proxy and information statements, and other information that we filed with the SEC. In addition, our Corporate Governance Guidelines, the charters for our Audit, Board Affairs and Compensation Committees, and our Code of Business Conduct and Ethics are available on our web site at www.urscorp.com/corp_governance and a printed copy of this information is available without charge by sending a written request to: Corporate Secretary, URS Corporation, 600 Montgomery Street, 26^th Floor, San Francisco, CA 94111-2728.

ITEM 2. PROPERTIES

     As of October 31, 2004, we had approximately 350 facility leases in locations throughout the world. The lease terms range from a minimum of one year to a maximum of 25 years with options for renewal, expansions, contraction and termination, sublease rights and allowances for improvements. Our significant lease agreements expire at various dates through the year 2014. 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 and certain of our subsidiaries alleging, among other things, breach of contract or tort in connection with the performance of professional services, the outcome of which cannot be predicted with certainty. See Note 8, “Commitments and Contingencies” to our “Consolidated Financial Statements and Supplementary Data” included under Item 8 of this report for a discussion of some of these legal proceedings. In some actions, parties are seeking damages, including punitive or treble damages that substantially exceed our insurance coverage.

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     Currently, we have limits of $125 million per loss and $125 million in the aggregate annually for general liability, professional errors and omissions liability and contractor’s pollution liability insurance (in addition to other policies for some specific projects). These policies include self-insured claim retention amounts of $4 million, $5 million and $5 million, respectively.

     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 we do not continue to maintain these policies, we will have no coverage for claims made after the termination date – even for claims based on events that occurred during the term of coverage. We intend to maintain these policies; however, we may be unable to maintain existing coverage levels. We have maintained insurance without lapse for many years with limits in excess of losses sustained.

     Although the outcome of our legal proceedings cannot be predicted with certainty and no assurances can be provided, based on our previous experience in such matters, we do not believe that any of our legal proceedings, individually or collectively, are likely to exceed established reserves or our insurance coverage and, therefore, we do not believe that they are likely to have a material adverse effect on our consolidated financial position, results of operations or cash flows.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     None

ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES

   Market information

     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, 2005, we had approximately 4,855 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.

     We have not paid cash dividends since 1986, and at the present time, we do not anticipate paying dividends on our outstanding common stock in the near future. In addition, we are precluded from paying dividends on our outstanding common stock pursuant to our Senior Secured Credit Facility with our lender and the indentures governing our 12 1/4% Senior Subordinated Notes (“12 1/4%notes”) and our 11 1/2% Senior Notes (“11 1/2% notes’). Please refer to Note 5, “Current and Long-Term Debt” and Note 9, “Stockholders’ Equity” to our “Consolidated Financial Statements and Supplementary Data” included under Item 8 of this report.

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   Stock Purchases

     The following table sets forth all purchases made by us or any “affiliated purchaser,” as defined in Rule 10b-18(a)(3) of the Securities Exchange Act of 1934, as amended, of our common stock during each month within the fourth quarter of 2004. No purchases were made pursuant to a publicly announced repurchase plan or program.

(1)	Stock-for-stock exchanges for payments of exercise cost and withholding taxes upon exercises of stock options or vesting of restricted or deferred stock.

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ITEM 6. SUMMARY OF SELECTED FINANCIAL DATA

     The following selected financial data for the five fiscal years ended October 31, 2004 is derived from our audited consolidated financial statements and reflects our August 2002 acquisition of EG&G, which was accounted for under the purchase method of accounting. The selected financial data also reflects charges of $28.2 million and $7.6 million for costs incurred to extinguish our debt during fiscal years 2004 and 2002, respectively. We adopted Emerging Issues Task Force Consensus No. 03-06, “Participating Securities and the Two-class Method”(“EITF 03-06”), and restated prior years’ net income available for common stockholders and earnings per share (“EPS”) information pursuant to EITF 03-06. You should read the selected financial data presented below in conjunction with the information contained in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our consolidated financial statements and the notes thereto contained in Item 8, “Consolidated Financial Statements and Supplementary Data,” of this report.

SUMMARY OF SELECTED FINANCIAL DATA
(In thousands, except per share data)

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The following discussion contains, in addition to historical information, forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those described here. You should read this section in conjunction with the section, “Risk Factors That Could Affect Our Financial Condition and Results of Operations,” beginning on page 41 and the consolidated financial statements and notes thereto contained in Item 8, “Consolidated Financial Statements and Supplementary Data,” of this report.

Overview

Business Summary

     We are one of the world’s largest engineering design services firms and a major federal government contractor for systems engineering and technical assistance, and operations and maintenance services. Our business focuses primarily on providing fee-based professional and technical services in the engineering and construction services and defense markets, although we perform some construction work. As a service company, we are labor and not capital intensive. We derive income from our ability to generate revenues and collect cash from our clients through the billing of our employees’ time and our ability to manage our costs. We operate our business through two segments: the URS Division and the EG&G Division.

     Our revenues are driven by our ability to attract qualified and productive employees, identify business opportunities, allocate our labor resources to profitable markets, secure new contracts, renew existing client agreements and provide outstanding services. Moreover, as a professional services company, the quality of the work generated by our employees is integral to our revenue generation.

     Our costs are driven primarily by the compensation we pay to our employees, including fringe benefits, the cost of hiring subcontractors and other project-related expenses and administrative, marketing, sales, bid and proposal, rental and other overhead costs.

Fiscal Year 2004 Revenues

     Revenues from our federal government clients for fiscal year 2004 increased approximately 16% compared with the previous year. This increase reflects growth in the services we provided to the Department of Defense or DOD and the Department of Homeland Security or DHS, as we continued to benefit from additional military spending on engineering and technical services and operations and maintenance activities. As a result of the heightened military operations in the Middle East, our work to repair, maintain and upgrade military equipment increased. This work was primarily performed in the United States, under existing outsourcing contracts. We also saw an increase in our work to design and upgrade defense systems. Our services to the DHS grew, with an increased volume of work under contracts with the U.S. Customs Service, the Federal Emergency Management Agency, and a new contract with the U.S. Coast Guard. In addition, we continued to benefit from increased task orders issued under Indefinite Delivery Contracts, or IDCs, with the federal government for facilities and environmental projects.

     Revenues from our state and local government clients for fiscal year 2004 were flat compared with last year. This market continued to be affected by the budget deficits that state and local governments have faced over the past two years. However, the state and local government market stabilized during fiscal year 2004 and we began to see selected pockets of growth emerge in some parts of the country, particularly in the Southeast. However, the West, particularly California, and the Midwest remained weak, with spending or capital projects significantly below historic levels. In addition, the delays surrounding the passage of a replacement bill for the Transportation Equity Act for the 21^st Century, or TEA-21, caused the postponement of a number of projects. Our ability to shift resources to airport and educational facility projects helped us mitigate the downturn in other portions of the state and local government market.

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     Revenues from our domestic private industry clients for fiscal year 2004 decreased approximately 10% compared with fiscal year 2003. Market conditions continued to be challenging for many of our multinational clients, and capital spending was constrained. Some portions of the private industry market, including power and oil and gas, began to recover during 2004. However, other portions of the private industry market, such as manufacturing and the chemical and pharmaceutical industries, remained weak. The decline in revenues from our domestic private industry clients reflected that continuing weakness. Our revenues decline from our domestic private industry clients was partially offset by revenues generated through our Master Service Agreements contracts, or MSAs, with multinational companies. In addition, our revenues from the design and implementation of air pollution control systems on coal fired power plants increased as a result of stricter emissions control regulations.

     Revenues from our international clients for fiscal year 2004 increased approximately 19% compared with fiscal year 2003. Approximately 10% of the increase was due to foreign currency exchange fluctuations and approximately 9% was due to growth in our businesses, primarily surface and air transportation projects in Australia and New Zealand, and facilities and environmental projects in Europe.

Cash Flows, Debt and Equity

     We generated $109.3 million in net cash provided by operating activities for the fiscal year ended October 31, 2004. During fiscal year 2004, we completed a public stock offering by selling 8.1 million shares of our common stock at $26.50 per share, resulting in net proceeds of $204.3 million, after underwriting discounts and commissions. We used the proceeds from this public stock offering plus borrowings under our Senior Secured Credit Facility (“Credit Facility”) and cash on hand to redeem $260.0 million of our 11 1/2% notes and 12 1/4% notes and to pay $19.7 million in related call premiums. As a result of the redemptions, we recognized a pre-tax charge of $28.2 million during the fiscal year consisting of $19.7 million for call premiums and the write-off of $8.5 million in unamortized financing fees, issuance costs and debt discounts.

     By issuing common stock and redeeming a portion of our long-term debt, we reduced our ratio of debt to total capitalization (total debt divided by the sum of debt, preferred stock and total stockholders’ equity) from 52% at October 31, 2003 to 34% at October 31, 2004. (See “Consolidated Statements of Cash Flows” in our “Consolidated Financial Statements” included under Item 8 of this report.)

Fiscal Year 2005 Trends

     We expect revenue growth from our federal government clients to remain strong in fiscal year 2005, based on anticipated spending by the Departments of Defense and Homeland Security. Operations in the Middle East are expected to generate increased work related to the development of weapons systems, the training of military pilots, and the maintenance, upgrade and repair of military vehicles. Revenues from the homeland security market are also expected to increase, particularly from preparedness training exercises and the design of security improvements for federal buildings and key components of this country’s infrastructure. However, in fiscal year 2005 we do not expect to achieve the 16% revenue growth that we recorded during fiscal year 2004, since the expected growth for fiscal year 2005 is incremental to fiscal year 2004 revenues.

     We expect the state budget situation to continue to improve moderately during fiscal year 2005. All states achieved balanced budgets for their 2005 fiscal years, and most states have realized increased revenues from sales and income taxes. However, budgets for fiscal year 2006 will not be approved until June for most states. This, combined with the delays in passage of a successor bill to the Transportation Equity Act for the 21^st Century, or TEA-21, lead us to believe that growth in this market will not occur until the second half of fiscal year 2005. Some revenue growth may be achieved through transportation projects funded by bond and tax measures passed in the November, 2004 election. In addition, funding from the Vision-100 program (the successor bill to AIR-21) and from airport user fees are expected to lead to an increase in airport revenues.

     Revenues from the private industry market are expected to increase slightly during fiscal year 2005. Most of our private sector, multinational clients are not expected to significantly increase their domestic capital spending for environmental and engineering projects in 2005. In spite of continuing weakness in the private industry market, we

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expect revenue growth opportunities in fiscal year 2005 from the work we expect to perform under MSAs. In addition, in response to stricter emissions control regulations associated with the Clean Air Act, we expect to see increased activity in the design and implementation of air pollution control systems on coal-fired power plants. Overall, we expect revenues from our domestic private industry clients to be consistent with 2004 levels or grow modestly in fiscal year 2005.

     Excluding the effect of foreign currency fluctuations, we expect continued revenue growth in our international business due to growth in surface transportation, facilities and environmental projects in our Asia Pacific and European operations during fiscal year 2005.

Results of Operations

Fiscal 2004 Compared with Fiscal 2003

Consolidated

     Our consolidated revenues for the fiscal year ended October 31, 2004 increased by 6.1%, compared with the same period last year. The increase in our revenues was primarily due to a higher volume of work performed for our federal government and international clients. This increase was offset by a decrease in revenues from our domestic private industry clients. The following table presents our consolidated revenues by client type for the fiscal years ended October 31, 2004 and 2003.

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     Revenues from our federal government clients for the fiscal year ended October 31, 2004 increased by 16% compared with the same period last year. This increase was driven by a higher level of activity under contracts with the DOD and the DHS. Due to the heightened military operations tempo, our work under existing outsourcing contracts to repair and maintain military equipment increased. Our services with the DHS have grown, with an increased volume of work under contracts with the U.S. Customs Service, the Federal Emergency Management Agency, and a new contract with the U.S. Coast Guard. We also continued to benefit from increased task orders issued under federal government IDCs for facilities and environmental projects, and from increased spending on homeland security projects.

     The majority of our work in the state and local government, the domestic private industry and the international sectors is derived from our URS Division. Further discussion of the factors and activities that drove changes in operations on a segment basis for the fiscal year ended October 31, 2004 can be found beginning on page 23.

     Our consolidated direct operating expenses for the fiscal year ended October 31, 2004, which consisted of direct labor, subcontractor costs and other direct expenses, increased by 6.8% compared with the same period last year. Our increased revenues drove an increase in our direct operating expenses. In addition, volume increases in work on existing contracts with lower profit margins caused direct operating expenses to increase faster than revenues.

     Our consolidated gross profit for the fiscal year ended October 31, 2004 increased by 5.1% compared with the same period last year, primarily due to the increase of our revenue volume described previously. Our gross margin percentage, however, fell from 37.1% to 36.7%. The decrease in gross profit margin percentage was caused by a change in revenue mix with significant volume increases coming from contracts with profit margins that were lower than the average profit margin achieved through our historical portfolio of contracts.

     Our consolidated indirect, general and administrative (“IG&A”) expenses for the fiscal year ended October 31, 2004 increased by 7.9%, compared with the same period last year. We incurred $28.2 million of costs related to the extinguishment of debt during fiscal year 2004. Our employee benefits, including our healthcare, workers’ compensation and pension-related costs, increased by $40.8 million primarily because of the increased number of employees necessary to perform the services required by the overall increase in the volume of our revenue generating activities, and increase in healthcare costs, workers’ compensation expenses and pension-related benefits. Bad debt expense increased by $6.0 million because we provided allowances against receivables that have not yet been collected as the economy weakened. The increased volume of work also has increased other variable indirect, general and administrative expenses, such as office supplies and miscellaneous equipment rental and purchases, by $4.9 million. In addition, our travel expenses increased by $7.2 million due to increased travel related to sales and business development efforts and increased airfare costs.

     Our consolidated net interest expense for the fiscal year ended October 31, 2004 decreased due to the redemption of $260.0 million of our 11 1/2% notes and 12 1/4% notes and other repayments of our long-term debt.

     Our effective income tax rates for the fiscal year ended October 31, 2004 decreased to 39.1% from 40.0% in fiscal year 2003, primarily due to a one-time adjustment to the tax-basis of the purchase price of EG&G.

     Our consolidated operating income, net income and earnings per share resulted from the factors previously described.

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Reporting Segments

URS Division

     The URS Division’s revenues for the fiscal year ended October 31, 2004 decreased slightly compared with the same period last year. This decrease was due to a decline in revenues from domestic private industry clients. This decline was offset by revenue growth from our federal government clients, the effects of foreign currency exchange rates and revenue growth in our international business.

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     The following table presents the URS Division’s revenues by client type for the fiscal years ended October 31, 2004 and 2003.

     Revenues from our federal government clients in the URS Division for the fiscal year ended October 31, 2004 increased by 6% compared with the same period last year. This increase was driven by growth in environmental and facilities projects for federal clients as well as an increased volume of work providing program and construction management services for DOD agencies. Revenues from homeland security projects also contributed to this growth as we continued to provide a range of engineering services to the DHS.

     Revenues from our state and local government clients for the fiscal year ended October 31, 2004 were flat compared with the same period last year. Our revenues continued to be affected by the budget deficits that state and local government faced over the past two years. However, this market stabilized during fiscal year 2004 as we began to see pockets of strength emerge in some parts of the country. Spending in the Southeastern states has returned nearly to pre-2001 levels and Florida, Georgia, Texas and Maryland, have showed some signs of recovery. However, the West, particularly California, and the Midwest remained weak, with spending for capital projects significantly below historic levels. In addition, the continuing delay in the passage of the successor bill to TEA-21 contributed to the delay of several major transportation projects. We have mitigated some of these unfavorable conditions by our strategy to shift resources away from surface transportation projects to other portions of the state and local government market, such as water/wastewater, air transportation, and facilities, where funding is more stable or growing.

     Revenues from our domestic private industry clients for the fiscal year ended October 31, 2004 decreased by approximately 10% compared with the same period last year. Many of our private sector clients continued to struggle during fiscal year 2004, resulting in constrained spending on capital projects. Some portions of this market, including power and oil and gas, began to recover during 2004. However, other portions of the private sector, such as the chemical and pharmaceutical industries, remained weak. Our strategic focus of the past several years to win MSAs contracts with major domestic private industry clients in the oil and gas, manufacturing and power sectors helped to offset the decline in revenues in this part of the business. Stricter air pollution control regulations under the Clean Air Act, which has resulted in increased revenues from emissions control projects at power plants, has also helped to offset the decline in our private sector revenues.

     Revenues from our international clients for the fiscal year ended October 31, 2004 increased by 19% compared with the same period last year. Approximately 10% of the increase was due to foreign currency exchange fluctuations and 9% was due to growth in our Asia Pacific and European regions. The revenue growth in the Asia Pacific region was due to increases in surface and air transportation projects in Australia and New Zealand, driven in part by improvements in the respective country’s economies. The revenue growth in Europe was due to increases in facilities and environmental projects for the United Kingdom Ministry of Defense and the U.S. Department of Defense.

     The URS Division’s direct operating expenses for the fiscal year ended October 31, 2004 decreased by 2.0% compared with the same period last year. This was due to a decrease of $51.3 million in total subcontractor and other

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direct costs, which are comprised of travel, supplies and other incidental project costs, offset by an increase in direct labor of $23.6 million. The decrease in subcontractor costs and other direct costs was driven by the winding down of several large subcontracts and improved cost control on supplies and other incidental projects costs.

     The URS Division’s gross profit for the fiscal year ended October 31, 2004 increased by 2.6% compared with the same period last year. Our gross profit margin percentage increased to 41.2% from 40.1% for the fiscal years ended October 31, 2004 and 2003, respectively. Our gross profit margin percentage increased primarily because a greater percentage of our revenues were generated by direct labor, rather than subcontract or other direct costs during the fiscal year ended October 31, 2004 (46.0%), compared with the fiscal year ended October 31, 2003 (43.3%). The use of our direct labor on the performance of our contracts generally generates higher profit margins than the use of subcontractors.

     The URS Division’s IG&A expenses for the fiscal year ended October 31, 2004 increased by 3.0% compared with the same period last year. This increase was primarily due to increases of $22.0 million in employee benefits costs resulting primarily from healthcare costs, workers’ compensation expenses and pension-related benefits. Costs associated with employer taxes, employee recruitment and retention, and severance expenses also contributed to the increase in employee benefits costs.

   EG&G Division

     The EG&G Division’s revenues for the fiscal year ended October 31, 2004 grew by 21.8% compared with the same period last year. This increase was driven by an overall growth in defense-related work, including the services required to refurbish and upgrade military equipment and systems. This work involved improvements to communications equipment, weapons systems, and engines on aircraft and ground vehicles such as tanks, high-mobility multipurpose wheeled vehicles and various armored personnel carriers. Homeland security revenues remained strong, with increased work in the design, development and conduct of security preparedness exercises around the country.

     The EG&G Division’s direct operating expenses for the fiscal year ended October 31, 2004 increased by 25.5% compared with the same period last year. Direct operating expenses increased as revenues grew; however, there was more revenue growth from operations and maintenance contracts in fiscal year 2004 than fiscal year 2003. Since these contracts generated lower profit margins, direct operating expenses increased faster than revenues.

     The EG&G Division’s gross profit for the fiscal year ended October 31, 2004 increased $35.9 million over the previous year, reflecting the margins achieved through the revenue increases described above. The EG&G Division’s gross margin percentage decreased to 27.7% for the fiscal year ended October 31, 2004 from 29.8% for the fiscal year ended October 31, 2003. The decrease resulted from an increase in the volume of operations and maintenance and field-based services, which generally carry lower margins than the services typically provided by the EG&G Division. As a result, gross profit grew at a slower rate than revenues.

     The EG&G Division’s IG&A expenses for the fiscal year ended October 31, 2004 increased by 12.6% compared with the same period last year. The increase in indirect expenses was primarily due to a higher business volume. The EG&G Division’s indirect expenses generally vary in nature and as such, an increased business volume typically results in increased indirect expenses. Employee benefits costs increased by approximately $20.7 million and other employee-related expenses, such as travel and recruiting expenses, increased by $6.4 million due to a higher employee headcount as a result of the increased volume of work. In fiscal year 2004, there was also an increase of $4.5 million in indirect expenses not reimbursable under U.S. government contracts. These increases were offset by a $3.7 million decrease in pension costs, $2.8 million of which was the result of the EG&G pension plan amendment and $0.9 million of which was the result of a higher than expected return on pension plan assets for fiscal year 2004 compared with fiscal year 2003. Indirect expenses as a percentage of revenues decreased to 22.8% from 24.7% for the fiscal years ended October 31, 2004 and 2003, respectively, due to an increase in labor utilization as explained above.

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Fiscal 2003 Compared with Fiscal 2002

Consolidated

     Our consolidated revenues for the fiscal year ended October 31, 2003 increased by 31.3%, compared with fiscal year 2002. As discussed in more detail below, the increase in revenues was due to the inclusion of EG&G results for a full year in fiscal year 2003 compared to only 10 weeks for fiscal year 2002. The remaining increase was attributable to revenue growth from our federal government clients. This increase was offset by a decrease in revenues from our state and local government clients and private industry clients as a result of their significant reduction in spending. The following table presents our consolidated revenues by client type for the fiscal years ended October 31, 2003 and 2002.

     Revenues from our federal government clients for the fiscal year ended October 31, 2003 increased by 131% compared with fiscal year 2002. Of the $790.0 million increase in revenues from our federal government sources, approximately $741.2 million was due to the inclusion of a full year of EG&G results in fiscal year 2003 compared to only 10 weeks in fiscal year 2002. The remaining increase was driven by our growth in the defense, homeland security, operations and maintenance, environmental services and research, development, test and evaluation areas.

     The majority of our work in the state and local government, the domestic private industry and the international sectors is derived from our URS Division. Further discussion of the factors and activities that drove

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changes in operations on a segment basis for the fiscal year ended October 31, 2003 can be found beginning on pages 28.

     Our consolidated direct operating expenses for the fiscal year ended October 31, 2003, which consist of direct labor, subcontractor costs and other direct expenses, increased by 34.6% compared with fiscal year 2002. $507.1 million of the increase was due to the inclusion of a full year of EG&G direct operating expenses in fiscal year 2003 compared to only 10 weeks in fiscal year 2002. The remaining increase was attributable to increased costs associated with the increased revenues from our federal government clients, offset by decreased costs incurred from projects for our state and local government and private industry clients.

     Our consolidated gross profit for the fiscal year ended October 31, 2003 increased by 25.9% compared with fiscal year 2002. $234.1 million of the increase in gross profit was due to the inclusion of a full year of EG&G’s gross profit in fiscal year 2003 compared to only 10 weeks in fiscal year 2002. The remaining increase was mainly attributable to the increased gross profit from our federal government clients, offset by a decrease in gross profit from our state and local and private industry clients, as discussed below in the URS Division section. Gross margin percentage, however, fell from 38.7% to 37.1%. The primary cause of this margin percentage shrinkage was the change of revenue mix, which incorporated the generally lower profit margins on our EG&G Division’s contracts.

     Our consolidated IG&A expenses for the fiscal year ended October 31, 2003 increased by 26.5% compared with fiscal year 2002. $193.8 million of the increase in IG&A expenses was a result of the inclusion of a full year of EG&G’s IG&A expenses in fiscal year 2003 compared to only 10 weeks of expenses in fiscal year 2002. The remaining $15.6 million increase in IG&A expenses was due to increases of $30.9 million in benefits, legal, consulting fees and temporary labor, rental, bad debt, insurance expenses, amortization of purchased intangible assets, and depreciation and amortization expense as a result of the implementation of our new ERP (see “Enterprise Resource Program” discussed on page 35 of this report). These increases were offset by $15.3 million of decreases in indirect labor, sales and business development, utilities, loss on extinguishment of debt and travel expenses. The conversion of our Series D Preferred Stock into common stock constituted a change in control as defined under the terms of our employment arrangements with some executives resulting in the accelerated vesting of restricted common stock previously granted, which increased benefit expenses by $2.5 million.

     Our consolidated net interest expense for the fiscal year ended October 31, 2003 increased by 50.1% due to the additional indebtedness incurred with the EG&G acquisition.

     Our effective income tax rates for the fiscal years ended October 31, 2003 and 2002 were approximately 40.0% and 39.5%, respectively.

     Our consolidated operating income, net income and earnings per share resulted from the factors previously described.

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Reporting Segments

URS Division

     The URS Division’s revenues for the fiscal year ended October 31, 2003 increased by 0.8% compared with fiscal year 2002. This increase was mainly due to revenue growth from our federal government clients, the effect of foreign currency exchange fluctuations and minor revenue growth from our transportation business in the United Kingdom. The effect of revenue growth from the factors previously described was mostly offset by a decrease in revenues from our state and local government and private industry clients, as discussed below.

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     The following table presents the URS Division’s revenues by client type for the fiscal years ended October 31, 2003 and 2002.

     Revenues from our federal government clients for the fiscal year ended October 31, 2003 increased by 12%, compared with fiscal year 2002. The increase was driven by our growth in the defense, homeland security, operations and maintenance, environmental services and research, development, test and evaluation areas.

     Revenues from our state and local government clients for the fiscal year ended October 31, 2003 decreased by 2%, compared with fiscal year 2002. Although significant state and local budget deficits caused a reduction in revenues from our state and local government clients in fiscal year 2003 compared with fiscal year 2002, several factors mitigated the impact of this decrease on our results, including the gradual stabilization of state tax revenues, the use of alternate means to finance infrastructure projects, our ability to shift resources to growth areas where funding is stable or growing, such as schools, and increased activity in our aviation and water/wastewater businesses.

     Revenues from our domestic private industry clients for the fiscal year ended October 31, 2003 decreased by 6%, compared with fiscal year 2002. Revenues from our domestic private industry clients continue to be affected by reduced levels of capital spending and cost-cutting measures by these clients, as well as pressures exerted by them on our margins. These downward trends were partially offset by increases in revenues generated by the power sector and increased activity under our growing number of MSAs.

     Revenues from our international clients for the fiscal year ended October 31, 2003 increased by 17%, compared with fiscal year 2002. The increase was due to foreign currency exchange fluctuations and minor growth in our European region. The revenue growth in Europe was due to increases in transportation projects in the United Kingdom.

     The URS Division’s direct operating expenses for the fiscal year ended October 31, 2003 increased by 0.7%, compared with fiscal year 2002. This increase was mainly due to increases in our revenues as a result of the factors discussed above.

     The URS Division’s gross profit for the fiscal year ended October 31, 2003 increased by 1.0%, compared with fiscal year 2002. The increase was attributable to the factors that drove net revenue growth, as previously described.

     The URS Division’s IG&A expenses for the fiscal year ended October 31, 2003 increased by 1.7%, compared with fiscal year 2002. A total of $23.1 million was mainly attributed to increases in depreciation and amortization expense as a result of the implementation of our new ERP, as well as increases in benefits, consulting fees, temporary labor, rent, legal, insurance, and bad debt expenses. These increases were offset by $10.8 million of decreases in indirect labor, sales and business development, utilities and travel expenses. Net interest expense for the fiscal year ended October 31, 2003 increased by $1.0 million due to the additional capital lease obligations and indebtedness incurred with the implementation of our new ERP.

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EG&G Division

     The overall increases in revenues and expenses for the EG&G Division for fiscal year 2003, compared with fiscal year 2002, was due to the inclusion of a full year of the EG&G Division’s results in fiscal 2003, compared to only 10 weeks in fiscal year 2002.

Liquidity and Capital Resources

     Our primary sources of liquidity are cash flows from operations, borrowings under the credit line from our Credit Facility and, during the fiscal year ended October 31, 2004, a public common stock offering. Our primary uses of cash are to fund our working capital and capital expenditures and to service and redeem our debt. We believe that we have sufficient resources to fund our operating and capital expenditure requirements, as well as service and redeem our debt, for the next 12 months and beyond. If we were to experience a significant change in our business such as the consummation of an acquisition, we would likely need to acquire additional sources of financing. We believe that we would be able to obtain adequate resources to address significant changes in our business at reasonable rates and terms, as necessary, based on our past experience with business acquisitions.

     We are dependent, however, on the cash flows generated by our subsidiaries and, consequently, on their ability to collect on their respective accounts receivables. Specifically:

	•	Substantially all of our cash flows are generated by our subsidiaries. As a result, the funds necessary to meet our debt service obligations are provided in large part by distributions or advances from our subsidiaries. The financial condition and operational requirements of our subsidiaries may limit our ability to obtain cash from them. See further discussion at Note 14, “Supplemental Guarantor Information” to our “Consolidated Financial Statements and Supplementary Data” included under Item 8 of this report.
	•	Billings and collections on accounts receivable can impact our operating cash flows. Management places significant emphasis on collection efforts, has assessed the allowance accounts for receivables as of October 31, 2004 and has deemed them to be adequate; however, future economic conditions may adversely impact some of our clients’ ability to pay our bills or the timeliness of their payments. Consequently, it may also impact our ability to consistently collect cash from them to meet our operating needs.

Operating Activities

     The reduction in cash flows from operations for the fiscal year ended October 31, 2004, compared with the same period last year, was primarily due to the following factors:

•

During the fourth quarter of fiscal year 2002, we converted a legacy accounting system to a new ERP system. The conversion caused a delay in project billings and as a result, our accounts receivable

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		increased at the end of fiscal year 2002. During fiscal year 2003, we collected a higher than normal amount of cash compared to previous operating periods by catching up on the collection of those delayed billings.
	•	Increases in employee benefit costs.
	•	The timing and increased amounts of our income tax payments resulted in a higher level of payment during the fiscal year ended October 31, 2004 compared with the same period last year.

Investing Activities

     As a professional services organization, we are not capital intensive. Our capital expenditures have historically been primarily for computer-aided design, accounting and project management information systems, and general purpose computer equipment to accommodate our growth. Capital expenditures, excluding purchases financed through capital leases, during fiscal years 2004, 2003 and 2002 were $19.0 million, $18.2 million and $53.4 million, respectively.

Financing Activities

     Net cash used by financing activities decreased by $68.8 million for fiscal year 2004 compared with the same period last year due to the following major factors:

	•	net proceeds generated from our public common stock offering of $204.3 million;
	•	an increase of $8.8 million in proceeds from the sale of our common stock from the employee stock purchase plan and the exercise of employee stock options, resulting from the increase in our common stock price; offset by
	•	payments of $19.7 million in call premiums and payments of $2.9 million in financing fees; and
	•	an increase in net debt payments and redemptions of $121.7 million.

     Fiscal 2004 Compared with Fiscal 2003. During fiscal year 2004, we repaid approximately $29.0 million on our Credit Facility, $70.0 million on our 11 1/2% notes, $190.0 million on our 12 1/4% notes, $5.1 million on note payables, and $14.6 million on capital lease obligations. We also retired the $6.5 million outstanding balance of our 8 5/8 % senior subordinated debentures (“8 5/8 % debentures”). During the same period, we borrowed an additional $25.0 million on our Term Loan B under our Credit Facility and drew $5.2 million on our revolving line of credit. In addition, we borrowed $11.1 million under capital lease obligations for equipment purchases and $3.1 million from notes payable and paid $2.9 million for financing fees as a result of amending our Credit Facility.

     During fiscal year 2004, we sold an aggregate of 8.1 million shares of our common stock through an underwritten public offering. The offering price of our common stock was $26.50 per share and we received total offering proceeds of $204.3 million, net of $10.5 million in underwriting discounts and commissions and other offering-related expenses. We used the net proceeds from this common stock offering plus the borrowings under our Credit Facility and cash available on hand to redeem $70.0 million of our 11 1/2% notes and $190.0 million of our 12 1/4% notes. As a result of these redemptions, we recognized a pre-tax charge of $28.2 million during our fiscal year 2004 consisting of the write-off of $8.5 million in unamortized financing fees, debt issuance costs and debt discounts and payments of $19.7 million for call premiums.

     Fiscal 2003 Compared with Fiscal 2002. The decrease in cash flows from financing activities for fiscal year 2003 compared to fiscal year 2002 was primarily due to the issuance of long-term debt and net borrowings on the line of credit in fiscal year 2002, offset by the increase in long-term debt payments, resulting from the retirement of the old credit facility. In fiscal year 2003, we repaid $27.3 million on our revolving line of credit, $16.0 million in scheduled debt payments and $101.2 million of discretionary debt payments on our Credit Facility and $14.6 million in payments on capital lease obligations. In addition, we borrowed $15.7 million under capital lease obligations for equipment purchases.

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     The table below contains information about our contractual obligations and commercial commitments followed by narrative descriptions as of October 31, 2004:

     Off-balance Sheet Arrangements. The following is a list of our off-balance sheet arrangements:

	•	As of October 31, 2004, we had a total available balance of $56.1 million in standby letters of credit under our Credit Facility. Letters of credit are used primarily to support insurance programs, bonding arrangements, and real estate leases. We are required to reimburse the issuers of letters of credit for any payments they make under the outstanding letters of credit. The Credit Facility covers the issuance of our standby letters of credit and is critical for our normal operations. If we default on this Credit Facility, our ability to issue or renew standby letters of credit would impair our ability to maintain normal operations.
	•	We have guaranteed the credit facility of one of our joint ventures, in the event of a default by the joint venture. This joint venture was formed in the ordinary course of business to perform a contract for the federal government. The term of the guarantee is equal to the remaining term of the underlying debt, which is 16 months. The maximum potential amount of future payments, which we could have been required to make under this guarantee at October 31, 2004, was $6.5 million.
	•	From time to time, we have provided guarantees related to our services or work. If our services under a guaranteed project are later determined to have resulted in a material defect or other material deficiency, then we may be responsible for monetary damages or other legal remedies. When sufficient information about claims on guaranteed projects is available and monetary

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		damages or other costs or losses are determined to be probable, we recognize such guarantee losses. Currently, we have no guarantee claims for which losses have been recognized.
	•	We have an agreement to indemnify one of our joint venture lenders up to $25.0 million for any potential losses and damages, and liabilities associated with lawsuits in relation to general and administrative services we provide to the joint venture.

     Our Senior Secured Credit Facility (“Credit Facility”) consists of two term loans, Term Loan A and Term Loan B, and a revolving line of credit. Borrowings under our Credit Facility bear interest at either a base rate or a Eurodollar rate plus, in each case, an interest rate margin that varies with our financial performance. As of October 31, 2004 and 2003, we had $353.8 million and $357.8 million in principal amounts outstanding, respectively, under the term loan facilities. As of October 31, 2004, we had drawn $5.3 million on our revolving line of credit and had outstanding standby letters of credit aggregating to $56.1 million, reducing the amount available to us under our revolving credit facility to $163.6 million.

     Principal amounts under Term Loan A and Term Loan B became due and payable on a quarterly basis beginning January 31, 2003, with final payment due on August 22, 2007 and 2008, respectively. Our revolving credit facility will expire and be payable in full on August 22, 2007.

     We have amended our Credit Facility on six separate occasions. The first amendment, dated January 30, 2003, increased our maximum leverage ratios through January 31, 2004, and increased the interest rate margins by 0.25% on our Credit Facility, but also provided that if we achieved the original leverage ratio of 3.90:1 or less at October 31, 2003, the original interest rate margins would be restored. Because we achieved this ratio, the original interest rate margins were restored in January 2004. The second amendment, dated November 6, 2003, enabled us to repurchase and redeem our 11 1/2% notes, 12 1/4% notes and/or our 6 1/2% debentures with the entire proceeds of an equity issuance up to $220.0 million. The third amendment, dated December 16, 2003, reduced the interest rate margins on Term Loan B. The fourth amendment, dated March 29, 2004, increased the equity offering proceeds that could be used to repurchase or redeem our outstanding notes and debentures to $300.0 million and permitted us to borrow unsecured debt and/or use our revolving line of credit for this purpose if our leverage ratio was less than 2.50 after giving effect to the transaction. The fifth amendment, dated June 4, 2004, reduced the interest rate margins on our Credit Facility, upon attaining credit ratings of BB from Standard & Poor and Ba2 from Moody’s, to 1.0% for base rate borrowings and to 2.0% for Eurodollar borrowings. We also increased the credit limit on our revolving line of credit to $225.0 million and increased the outstanding amount of our Term Loan B by $25.0 million. The sixth amendment, dated November 29, 2004, permitted us to change our fiscal year to a calendar year.

     As of October 31, 2004, we were in compliance with all of our Credit Facility covenants.

     See further discussion at Note 5, “Current and Long-Term Debt” to our “Consolidated Financial Statements and Supplementary Data” included under Item 8 of this report.

     Revolving Line of Credit. As a part of our Credit Facility, we maintain a revolving line of credit to fund daily operating cash needs and to support standby letters of credit. During the ordinary course of business, the use of the revolving line of credit is determined by collection and disbursement activities. Our daily cash needs follow a predictable pattern that typically parallels our payroll cycles, which drive, as necessary, our short-term borrowing requirements.

     Our average daily revolving line of credit balances for the fiscal year ended October 31, 2004 and 2003 were $22.7 million and $20.5 million, respectively. The maximum amounts outstanding at any one point in time during the fiscal year ended October 31, 2004 and 2003 were $74.6 million and $70.0 million, respectively.

     As of October 31, 2004, we had an outstanding balance of $5.3 million under our revolving line of credit. On October 31, 2003, we had no outstanding balance. The effective average interest rates paid on the revolving line of credit during the fiscal year ended October 31, 2004 and 2003 were approximately 5.3% and 6.1%, respectively.

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     11 1/2% Senior Notes. In August 2002, we issued $200.0 million in aggregate principal amount due at maturity of our 11 1/2% notes due 2009 for proceeds, net of $4.7 million of original issue discount, of approximately $195.3 million. Interest on our 11 1/2% notes is payable semi-annually in arrears on March 15 and September 15 of each year, commencing on March 15, 2003. These notes are effectively subordinate to our Credit Facility, capital leases, notes payable and senior to our subordinated indebtedness, including our 12 1/4% notes and our 6 1/2% debentures described below. As of October 31, 2004 and 2003, $130.0 million and $200.0 million of the notes were outstanding, respectively.

     See further discussion at Note 5, “Current and Long-Term Debt” to our “Consolidated Financial Statements and Supplementary Data” included under Item 8 of this report.

     12 1/4% Senior Subordinated Notes. As of October 31, 2004 and 2003, we had outstanding amounts of $10.0 million and $200.0 million, respectively, of our 12 1/4% notes due 2009. Interest is payable semi-annually in arrears on May 1 and November 1 of each year. Our 12 1/4% notes are effectively subordinate to our Credit Facility, our 11 1/2% notes, capital leases and notes payable.

     See further discussion at Note 5, “Current and Long-Term Debt” to our “Consolidated Financial Statements and Supplementary Data” included under Item 8 of this report.

     8 5/8% Senior Subordinated Debentures.Our 8 5/8% debentures were retired on January 15, 2004. As of October 31, 2003, we owed $6.5 million on our 8 5/8% debentures.

     6 1/2% Convertible Subordinated Debentures. Our 6 1/2% debentures are due in 2012 and are convertible into shares of our common stock at the rate of $206.30 per share. Interest on these debentures is payable semi-annually in February and August of each year. Sinking fund payments calculated to retire 70% of our 6 1/2% debentures prior to maturity began in February 1998. Our 6 1/2% debentures are subordinate to our Credit Facility, our 11 1/2% notes, capital leases and notes payable. As of October 31, 2004 and 2003, we owed $1.8 million on our 6 1/2% debentures.

     Notes Payable, Foreign Credit Lines and other indebtedness. As of October 31, 2004 and 2003, we had outstanding amounts of $8.8 million and $10.9 million in notes payable, respectively. Notes payable primarily include notes used to finance the purchase of office equipment, computer equipment and furniture. These notes typically have three-year to five-year initial terms with interest rates ranging from approximately 5% to 11%. The year-end weighted average interest rate was approximately 6.2% at October 31, 2004.

     We maintain foreign lines of credit, which are collateralized by the assets of our foreign subsidiaries. As of October 31, 2004 and 2003, we had no outstanding balance and had $3.0 million and $2.8 million, respectively, available under these foreign lines of credit.

     Capital Leases. As of October 31, 2004 and 2003, we had $36.3 million and $39.8 million in obligations under our capital leases, respectively, consisting primarily of leases for office equipment, computer equipment and furniture.

     Operating Leases. As of October 31, 2004 and 2003, we had approximately $450.1 million and $389.7 million, respectively, in obligations under our operating leases, consisting primarily of real estate leases.

Other Activities