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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

For the fiscal year ended October 31, 2003

For the Transition Period from          to         
Commission file number 1-7567

URS CORPORATION

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 x 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. x

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

On January 2, 2004, there were 33,788,476 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 2, 2004 and April 30, 2003 (the last business day of the registrant’s most recently completed second fiscal quarter) was $652.1 million and $242.0 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

A portion of Item 5 of Part II and 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 23, 2004.

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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 include statements relating to our operating performance, our claims and legal proceedings, our capital resources and our future growth opportunities. 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 forward-looking statements: the continuation of the recent economic downturn; our continued dependence on federal, state and local government appropriations for multi-year contracts; changes in regulations applicable to us; our ability to manage our contracts; our highly leveraged position; our ability to service our debt; outcomes of pending and future litigation; industry competition; our ability to attract and retain qualified professionals; risks associated with international operations; our ability to successfully integrate our accounting and management information systems; our ability to integrate future acquisitions successfully; 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 36, 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 one of the nation’s leading federal government contractors for operations and maintenance services. We execute large and complex engineering projects and provide a comprehensive range of professional planning and design, systems engineering and technical assistance, program and construction management, and operations and maintenance services. Over the past several years, we have grown our business through internal initiatives and strategic acquisitions, thus diversifying our client base, increasing the range of services we offer and expanding the markets we serve.

     Prior to fiscal 2003, we were organized geographically into reporting segments, consisting of the Domestic Division and the International Division. Our Domestic Division was comprised of all offices located in the United States of America. The International Division was comprised of all offices in the United Kingdom, Western Europe, the Middle East, the Asia/Pacific region (including Australia, China, Indonesia, New Zealand, and Singapore) and the Americas (including Canada, Mexico, and Central and South America, but excluding the U.S.).

     During the fourth quarter of fiscal 2003, we organized our operations into two business divisions: the URS Division and the EG&G Division. These two divisions operate under separate management groups and produce discrete financial information. Their operating results also are reviewed separately by management. The information disclosed in our consolidated financial statements is based on the two divisions, which comprise our organizational structure as of October 31, 2003. For information on our business by segment, please refer to Note 8, “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, primarily the Departments of Defense and Homeland Security, 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 more than 12,000 active projects, with no single project accounting for more than 4% of our revenues for fiscal 2003.

     Our expertise is focused on eight key markets: surface transportation, air transportation, rail transportation, industrial process, facilities and logistics support, water/wastewater treatment, hazardous waste management and military platforms support.

     The following table summarizes our revenues, representative services and representative markets by client type for our fiscal year ended October 31, 2003. We believe that while most of our business projects are accurately classified in this table, some may not fit precisely within any of these classifications.

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Clients

     We provide our services to a broad range of domestic and international clients, including federal, state and local government agencies and multinational private industry clients located both in the U.S. and abroad. The following table summarizes the primary client type serviced by our URS and EG&G Divisions, as separate reporting segments, for the fiscal year ended October 31, 2003. While we believe that the information is accurately classified in the following table, some client types may not fit precisely within any of these classifications.

     Federal Government. We derived approximately 43% of our revenues from federal government agencies during fiscal 2003, excluding revenues arising from federal grants or matching funds allocated to and passed through state and local government agencies. We are a large government contractor, 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. We provide federal government

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clients with the capabilities required to take a project from conception through post-completion operations and maintenance. 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. Through our EG&G Division, we specialize in the operations and maintenance of military and federal installations, flight training, emergency preparedness and homeland security, weapons systems engineering and modernization and aircraft, tracked, wheeled vehicle, and ground support equipment maintenance. Our capabilities also include the planning and design of government facilities and infrastructure, including security-related upgrades for government buildings, the remediation of contaminated sites and the support of disaster relief efforts.

     State and Local Government. We derived approximately 22% of our revenues from state and local government agencies during fiscal 2003. 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. Over the past decade, public sector infrastructure projects have become larger and more complex, requiring extensive resources and diverse technical capabilities. Our scale, geographic reach and technical expertise allow us to provide a range of services from planning and design through management of construction for these larger and increasingly complex public sector infrastructure projects. Our transportation capabilities encompass highways, bridges and interchanges, mass transit systems and airports; our facilities projects range from public schools and universities, to health care, criminal justice and correctional facilities; and our expertise in water resources includes water supply, treatment and distribution systems, dams and reservoirs and wastewater treatment facilities. Our revenues from federal grants or matching funds provided to state and local government agencies are classified as revenues from state and local government agencies.

     Private Industry. We derived approximately 27% of our revenues from private industry clients during fiscal 2003. Our private industry clients include various Fortune 500 clients, many with international operations, from a broad range of industries, including petrochemical, pharmaceutical, telecommunications, oil and gas, power, semiconductor, mining and forestry. 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. In fiscal 2003, we have established new and renewed preferred provider relationships with some key clients such as, Ashland, Chevron Texaco, Rohm and Haas, and Tennessee Valley Authority (TVA), thereby benefiting from the trend toward consolidation of outsourced service providers, particularly in the areas of environmental engineering and compliance and support services. For many of our clients, our professionals serve as an extension of the client’s staff, providing planning, design, remediation and implementation services at multiple sites. In addition to supporting ongoing industrial operations, we provide environmental services for mergers and acquisitions, property transfers and land redevelopment and re-use projects. We also provide architectural design for new or expanded facilities and engineer process improvements that optimize operating efficiency.

     International Business. We derived approximately 8% of our revenues from international operations for the fiscal year ended October 31, 2003. The focus of our international business is to provide a range of services to multinational and local private industry clients and governmental agencies.

Services

     We provide professional planning and design, systems engineering and technical assistance, program and construction management, and operations and maintenance services to local, state and federal government agencies, as well as private industry and foreign clients. We provide our services through a network of offices and contract-specific job sites. In addition, we provide some of our services as subcontractors or through joint ventures or other partnerships with other service providers. The following table summarizes the services provided by our URS and EG&G Divisions, as separate reporting segments, for the fiscal year ended October 31, 2003. We believe

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that while most of our business projects are accurately classified in the following table, some may not fit precisely within any of these classifications.

     Planning and Design. Our planning and design services include technical and economic feasibility studies, the analysis of alternative designs and environmental impacts, and the development of conceptual and final design documents, specifications and estimates. The planning process is typically used to develop a blueprint, or overall scheme for a project. Our planning services include master planning, land use planning, transportation planning, permitting and ensuring compliance with applicable regulations.

     Based on the project requirements identified in the planning phase, we integrate and coordinate the various design elements. The product that results from our design services is a set of contract documents that may include detailed plans, material specifications and construction cost estimates and schedules, all of which are then used by our clients in the construction of a project.

     We provide planning and design services for new facilities and for the renovation and expansion of existing facilities, including bridges, highways, roads, airports, mass transit systems, railroads, schools, courthouses, hospitals, and water and wastewater treatment facilities. We also use our planning and design capabilities to support homeland defense and global threat reduction programs, as well as for remediation activities at military bases and environmental assessment, due diligence and permitting at commercial and industrial facilities.

     Systems Engineering and Technical Assistance. We provide a broad range of systems engineering and technical assistance services to all branches of the U.S. military, from supporting new weapons systems design and development activities to providing modernization solutions for 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:

	•		operational requirements definition;
	•		specification development;
	•		interface control;
	•		requirements control and traceability;
	•		open system architecture development;
	•		review of hardware and software design data; and
	•		development of engineering documentation.

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     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. Our construction management services involve serving as the client’s representative and monitoring a project’s schedule, cost and quality. As construction managers, we typically oversee and coordinate the activities of construction contractors, providing on-site supervision and inspection of the contractors’ work. Our services include:

	•		scheduling of both the design and construction phases of a project;
	•		construction and life-cycle cost estimation;
	•		cash flow analyses;
	•		value engineering;
	•		constructability reviews;
	•		environmental and specialized engineering;
	•		bid evaluation; and
	•		construction or demolition of buildings.

     Although we may act as a general contractor or sub-contractor on some demolition and environmental contracts, we generally do not pursue “low bid” fixed-price construction contracts.

     Program Management. We provide comprehensive services for the management of large military programs for naval, ground, vessel and airborne platforms. These services include logistics planning, acquisition management, risk management of weapons systems, safety management and subcontractor management. We also provide program management for large capital improvement programs, which includes 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 installations and operations. Our services include:

	•		management of base logistics, including oversight of construction, testing and operation of base systems and processes;
	•		operation and maintenance of chemical agent disposal systems;
	•		comprehensive military flight training services; and
	•		support of high security systems.

     The management of military base logistics involves overseeing the operation of government warehousing and distribution centers, as well as government property and asset management. We also provide a range of maintenance, modification, overhaul and life service extension services for vehicles, vessels and aircraft. In addition, we provide comprehensive military flight training services for fixed wing and rotary wing aircraft.

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Markets

     Our expertise is focused on eight key markets: surface transportation, air transportation, rail transportation, industrial process, facilities and logistics support services, water/wastewater treatment, hazardous waste management and military platforms support. 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, 2003. We believe that while most of our business projects are accurately classified in this table, some may not fit precisely within any of these classifications.

     Surface Transportation. We provide a full range of planning and design services for all types of surface transportation systems and networks, including:

	•		highways, bridges, tunnels and interchanges;
	•		toll facilities;
	•		intelligent transportation systems; and
	•		port and marine structures.

     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;
	•		baggage, communications, and fueling systems; and
	•		infrastructure systems such as people movers, roadways, parking garages and utilities.

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     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.

     Industrial Process. We provide a broad range of industrial process services, including facility site locating and permitting, environmental management and pollution control, waste management and remediation engineering, process engineering and design and property redevelopment. Our clients in this market are primarily Fortune 500 companies.

     Facilities and Logistics Support Services. We provide design services for new facilities and the rehabilitation and expansion of existing facilities. We design a broad range of building types, including facilities used for education, criminal justice, healthcare, transportation and sports and recreation purposes. We provide historic preservation, adaptive reuse and seismic upgrade services. We also provide comprehensive services for the operation and maintenance of complex government installations, including military bases and ranges. Logistics support services, which focus on the development of integrated logistics chains to ensure readiness and rapid response, are provided to a number of Department of Defense agencies. In addition, we provide logistics support services for the management and operation of warehousing and distribution centers, and government property and asset management.

     Water/Wastewater Treatment. 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.

     Hazardous Waste Management. We provide a variety of services relating to hazardous waste management, air pollution management and global threat reduction. Our hazardous waste management services include planning and conducting initial site investigations, designing remedial actions for site clean-up and providing construction management services during the site clean-up process. Our air pollution management services include air quality monitoring and design modifications required to meet national and local air quality standards. Our specialized global threat reduction services focus on the elimination and dismantlement of nuclear, chemical and biological weapons of mass destruction (“WMD”). These services include providing technical WMD advisory services and training client personnel who are responsible for the operation and maintenance of chemical agent disposal facilities.

     Military Platforms Support. We provide a variety of services to the Department of Defense in the support of military operations, including:

	•		weapons system design and modernization;
	•		maintenance, modification and overhaul services for aircraft, tracked and wheeled vehicles and ground support equipment;
	•		development of emergency response strategies and first responder training for the military and other federal agencies;

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	•		technical advisory services and training for the elimination and dismantlement of weapons of mass destruction;
	•		undergraduate and graduate-level instruction for pilots of military fixed wing and rotary wing aircraft; and
	•		specialized and classified technology analysis, and management, technical consulting and advisory services.

Backlog, Designations, Option Years and Indefinite Delivery Contracts

     We account for the value of all contract awards that potentially will be recognized as revenues over the life of the contracts. We categorize the value of our book of business into backlog, designations, option years or indefinite delivery contracts, according to the nature of the award and its current status. 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.

     Backlog. Our contract backlog consists of the amount billable at a particular point in time for future services under signed contracts. We include indefinite delivery contracts, which are executed contracts requiring the issuance of task orders, in contract backlog only to the extent that the task orders are actually issued and funded. Our consolidated contract backlog was $3,661.8 million and $2,828.4 million at October 31, 2003 and 2002, respectively. Historically, a significant portion of our backlog is converted into revenues, but we cannot provide any assurance that our historical rates of conversion will remain unchanged in the future.

     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 $1,150.2 million at October 31, 2003, as compared to $1,100.2 million at October 31, 2002. Historically, a significant portion of our designations is converted into backlog, but we cannot provide any assurance that our historical rates of conversion will remain unchanged in the future.

     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 a need for us to go through another competitive bidding process and would only be canceled in a termination for default scenario or if our client decides to end the project. As of October 31, 2003 and 2002, the estimated values of the option years on our contracts were $1,357.7 million and $1,496.6 million, respectively. Historically, a significant portion of our option years is converted into backlog, but we cannot provide any assurance that our historical rate of conversion will remain unchanged in the future.

     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 20 years in length. When such task orders are signed and funded, we transfer their value into backlog. As of October 31, 2003 and 2002, the estimated remaining values on our consolidated indefinite delivery contracts were $2,893.3 million and $2,531.1 million, respectively. Historically, a significant portion of our indefinite delivery contracts is converted into backlog, but we cannot provide any assurance that our historical rate of conversion will remain unchanged in the future.

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Acquisitions

     Over the past several years, we have made a number of strategic acquisitions in order to diversify our client base, increase the range of services we offer and expand the markets we serve. The following is a discussion of some of our significant acquisitions.

     In August 2002, we acquired Carlyle-EG&G Holdings Corp. and Lear Siegler Services, Inc. (collectively, “EG&G”). EG&G provided systems engineering and technical assistance, and operations and maintenance services to the federal government, particularly the Department of Defense. With the trend toward outsourcing by the federal government, EG&G provided: operations and maintenance services for complex government installations, including military bases and ranges; logistics support services; global threat reduction services; and military platform support services. The EG&G acquisition expanded our federal client base and diversified the range of services we provide, particularly for Department of Defense agencies.

     In June 1999, we acquired the Dames & Moore Group (“Dames & Moore”), which provided consulting, planning, engineering, and program and construction management services to a diversified group of local, state and federal government agencies, domestic and multinational companies, and foreign clients. Historically, Dames & Moore had pursued an acquisition growth strategy and acquired a number of professional services firms, including Radian International, Walk-Haydel, O’Brien Kreitzberg and BRW. The Dames & Moore acquisition provided us with additional capabilities in process engineering, transportation, and program and construction management, and expanded our presence both domestically and internationally.

     In February 1999, we acquired Thorburn Colquhoun Holdings plc, a civil and structural engineering consulting firm based in the United Kingdom. This acquisition strengthened our capabilities in the transportation market and expanded our presence in the United Kingdom.

     In November 1997, we acquired the Woodward-Clyde Group, Inc. (“Woodward Clyde”). Woodward Clyde specialized in geotechnical and environmental engineering services for projects involving hazardous waste, air pollution, water pollution, facility permitting and regulatory compliance. The Woodward Clyde acquisition enabled us to provide services in a broader geographic area, both domestically and internationally, and in markets that we did not previously serve.

     In March 1996, we acquired Greiner Engineering, Inc. (“Greiner”), an engineering and architectural design services firm which provided a broad range of planning, engineering and architectural design, and program management services. The Greiner acquisition strengthened our position in the surface transportation market and provided entry into the air transportation market in the United States and abroad.

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 and re-incorporated in Delaware on May 18, 1976. Since then, we have undergone several name changes, mergers and acquisitions. On February 21, 1990, we changed our name back to URS Corporation.

Competition

     Our industry is highly fragmented and very competitive. As a result, in our specific market areas, we compete with a wide range of other engineering and consulting firms. Some of our competitors have achieved substantially more market penetration in some of the markets in which we compete, and have substantially more financial resources and/or financial flexibility than we do. In addition, the federal government market is evolving with an increasing number of federal clients insisting on large “omnibus” contracts that require competitors to have diverse capabilities. Federal agencies also have increased their emphasis on past performance as a key factor in selecting contractors. To our knowledge, no individual firm currently dominates any significant portion of our

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market areas. Competition in our industry is based on quality of service, reputation, expertise, price, local presence and the ability to provide services globally. We believe we have an exemplary reputation based on the high quality of our performance on current and past contracts. Accordingly, we believe that we are well positioned to compete in our market areas. Our key competitors are major public and private companies engaged in comparable services and in related markets, including: Anteon International Corporation, AECOM Technology Corporation, Bechtel Group, Inc., CH2M HILL Companies, Ltd, DynCorp (a subsidiary of CSC), Earth Tech Inc. (a subsidiary of Tyco International), Fluor Corporation, Foster Wheeler Ltd, Jacobs Engineering Group Inc., Johnson Controls, Inc., Northrop Grumman Corporation, Parsons Brinckerhoff Inc., Raytheon Corporation, Science Application International Corporation (SAIC), The Shaw Group, Inc., Tetra Tech, Inc., TRW, Inc. and Washington Group International, Inc.

Regulation

     We provide services for projects that are subject to government oversight, including environmental laws and regulations, general government procurement laws and regulations, and other regulations and requirements imposed by specific government agencies.

     Environmental. A portion of our business involves the planning, design and program and construction management 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, such as the federal Superfund law and similar state statutes, 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. We have been named as a potentially responsible party at several Superfund sites. 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, which expose us to liability that 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.

     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 federal government are subject to the Federal Acquisition Regulation and other rules and regulations applicable to government contracts. These rules and regulations, among other things:

	•		require certification and disclosure of all cost and pricing data in connection with the contract negotiations under certain contract types;
	•		impose accounting rules that define allowable and unallowable costs and allocation of indirect costs and otherwise govern our right to reimbursement under certain cost-based government contracts; and
	•		restrict the use and dissemination of information classified for national security purposes and the

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exportation of some products and technical data.

     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. For more information on risks associated with our government-related business, please refer to the section entitled “Risk Factors That Could Affect Our Financial Condition and Results of Operations” included under Item 7 of this report.

     Other regulations and requirements. We provide services, such as the maintenance, modification, overhaul and service life-extension of military aircraft and ground vehicles, which require specialized professional qualifications and are subject to military specifications and standards. In addition, in the ordinary course of business, we and members of our professional staff are subject to a variety of state, local and foreign licensing and permit requirements.

Seasonality

     We experience seasonal trends in our business caused by holidays that fall in the first quarter of our fiscal year. Our revenues are typically lowest in the first quarter of our fiscal year primarily due to the Thanksgiving, Christmas and New Year’s holidays that fall within the first quarter. 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 less revenues recognized. Our revenues are typically higher in the second half of the fiscal year, due to construction activities.

Raw Materials

     Our business is not heavily dependent on raw materials, and the raw materials we require for the conduct of our business are generally available from numerous sources. 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.

Insurance

     Currently, we have limits of $125.0 million per loss and $125.0 million in the aggregate annually for general liability, professional errors and omissions liability and contractor’s pollution liability insurance. These policies include self-insured claim retention amounts of $4.0 million, $5.0 million and $5.0 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 excess 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. While we intend to maintain these policies, we may be unable to maintain existing coverage levels. In addition, claims may exceed the available amount of insurance. We believe that the settlement of existing claims will not have a material adverse effect on our consolidated financial position, results of operations or cash flows. We have maintained insurance without lapse for many years with limits in excess of losses sustained.

Employees

     As of October 31, 2003, we had approximately 23,000 full-time employees and 3,000 temporary or part-time workers. At various times, we may employ 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 2004 to September 2007.

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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 website as soon as reasonably practical after we electronically file or furnish the reports with the Securities and Exchange Commission. 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 free of charge on our web site at www.urscorp.com/corp_governance. A printed copy of our Corporate Governance Guidelines and our Code of Business Conduct and Ethics is available without charge by sending a written request to: Corporate Secretary, URS Corporation, 600 Montgomery Street, 26th Floor, San Francisco, CA 94111-2727.

ITEM 2. PROPERTIES

     As of October 31, 2003, 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 11 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, breaches of contract or negligence in connection with the performance of professional services, the outcome of which cannot be predicted with certainty. In some actions, parties are seeking damages, including punitive or treble damages that substantially exceed our insurance coverage. Based on our previous experience with claim settlements and the nature of the pending legal proceedings, however, we do not believe that any of the legal proceedings are likely to result in a settlement or judgment against us or our subsidiaries that would materially exceed our insurance coverage or otherwise 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

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ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     The shares of our common stock are listed on the New York Stock Exchange and the Pacific Exchange (under the symbol URS). At January 2, 2004, we had approximately 5,300 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 8 5/8% Senior Subordinated Debentures, our 12 ¼% Senior Subordinated Notes and our 11 ½% Senior Notes. Please refer to Note 6, “Current and Long-Term Debt” and Note 11, “Stockholders’ Equity” to our “Consolidated Financial Statements and Supplementary Data” included under Item 8 of this report.

     Information about our equity compensation plans required by this item is incorporated by reference from the information under the caption “Equity Compensation Plan Information” in our definitive proxy statement for the Annual Meeting of Stockholders to be held on March 23, 2004.

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ITEM 6. SUMMARY OF SELECTED FINANCIAL DATA

     The following selected financial data for the five fiscal years ended October 31, 2003 is derived from our audited consolidated financial statements and reflects our August 2002 acquisition of EG&G and our June 1999 acquisition of Dames & Moore, both of which were accounted for under the purchase method of accounting. The selected financial data also reflects a $7.6 million loss on early retirement of debt, which we recorded in the fourth quarter of the fiscal year ended October 31, 2002. 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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     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 36 and the consolidated financial statements and notes thereto contained in Item 8, “Consolidated Financial Statements and Supplementary Data,” of this report.

Overview

     We are one of the world’s largest engineering design services firms and a leading federal government contractor for operations and maintenance services. Our business focuses primarily on providing fee-based professional and technical services in the engineering and construction services market, rather than general construction work. As a service company, we are labor and not capital intensive. Our income derives from our ability to generate revenues and collect cash for our employees’ time in excess of our direct operating costs and indirect, general and administrative (“IG&A”) expenses.

     Our business operations are affected by general economic conditions, government budget appropriations, competition and our ability to identify and capture opportunities in the markets we serve. Over the past several years, we have grown our business through acquisitions and internal initiatives, which has enabled us to expand and diversify our client base and service offerings and the markets we serve.

     On a macroeconomic level, the economic and industry-wide factors that affect our revenues positively include: population growth, an aging federal work force, the outsourcing of non-military functions by the Department of Defense, an emphasis on greater national security, an emphasis on protecting the environment, an emphasis on improving and building the nation’s infrastructure and a trend towards the use of Master Service Agreements by our private industry clients. The primary factor affecting our revenues negatively is the continued effects of the economic downturn, including government budget shortfalls, excess industrial capacity and pricing pressure from our private industry clients. Economic and industry factors specifically affecting our costs include increases in: benefits expenditures due to economy-wide increases in health care costs, rental expenses, insurance costs driven by losses incurred by insurers, and regulatory compliance costs and legal expenses primarily due to the Sarbanes-Oxley Act of 2002 and other government regulations.

     On a company-specific level, our revenues are driven by our ability to identify growth opportunities, reallocate 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 our employees is integral to our revenue generation.

     Our direct operating costs are driven primarily by the compensation and benefits we pay to our employees who work directly on our projects, the cost of hiring subcontractors and other expenses associated with specific projects, such as materials and incidental expenditures. IG&A expenses are driven by salaries and benefits for management, administrative, and marketing and sales personnel, bid and proposal costs, occupancy and related overhead costs.

     We strive to anticipate changes in the demand for our services and aggressively manage our labor force appropriately. Through our intense budgeting process, all levels of management participate in the planning, reviewing and managing of our business plans. This process allows us to adjust our cost structures to changing market needs, competitive landscapes and economic factors. Our emphasis on cost control helps us manage our margins even if revenues do not grow at the rate we anticipate.

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     As discussed below in the “Results of Operations” subsection of this Item 7, our consolidated revenues for fiscal 2003 were $3,186.7 million for fiscal year 2003, an increase of $758.9 million, or 31.3%, over the amount we reported for fiscal year 2002, primarily due to the inclusion of the results of our EG&G Division that we acquired in August 2002 for the full fiscal year 2003 compared to only 10 weeks of fiscal year 2002.

     Revenues from our federal government clients were approximately $1,369.0 million for fiscal year 2003, compared with approximately $600.2 million for fiscal year 2002. Of the $768.8 million increase in revenues from our federal government sources, approximately $723.0 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. We expect modest revenue growth of approximately 5%-7% from our federal government clients in fiscal year 2004 based on growth trends in defense spending, the homeland security market, and federal environmental and facilities projects. In particular, we believe that our strong relationships with the agencies under the Department of Homeland Security and our expanded defense-related capabilities resulting from the acquisition of EG&G will allow us to capitalize on growth trends in those markets.

     Revenues from our state and local government clients were approximately $691.3 million for fiscal year 2003, compared with approximately $704.3 million for 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. We expect flat to modest revenue growth of up to approximately 5% from our state and local government clients in fiscal year 2004 based on gradual improvements in state budgets, the availability of federal matching funds and the use of alternate funding measures.

     Revenues from our domestic private industry clients were approximately $872.2 million for fiscal year 2003, compared with approximately $910.3 million for 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 Master Service Agreements. We expect flat revenue growth from our private domestic industry clients in fiscal year 2004 based on a continuation of the trends identified for fiscal year 2003.

     Revenues from our international clients were approximately $254.3 million for fiscal year 2003, compared with approximately $213.1 million for fiscal year 2002. This increase was primarily due to the effect of foreign currency exchange fluctuations and to a lesser extent, the growth in our transportation business in the United Kingdom. We expect flat revenue growth from our international clients in fiscal year 2004.

     As discussed below in the “Liquidity and Capital Resources” subsection of this Item 7, during fiscal year 2003, management emphasized generating positive cash flows from operations, repaying portions of our debt and de-leveraging our balance sheet. The improved management of our accounts receivable contributed significantly to the generation of $164.5 million in positive cash flows from operating activities during the fiscal year 2003 (See “Consolidated Statements of Cash Flows” to our “Consolidated Financial Statements and Supplementary Data” included under Item 8) and we used approximately $144.5 million of this cash flow to pay down our debt, reducing our total debt to capitalization (total debt plus preferred stock and total stockholders’ equity) ratio from 58% at October 31, 2002 to 52% at October 31, 2003. We believe continued cash generation will enable us to pay down additional debt in excess of scheduled amounts during the next 12 months.

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Critical Accounting Policies

     The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions in certain circumstances that affect amounts reported in our consolidated financial statements and related footnotes included in Item 8 of this report. In preparing these financial statements, we have made our best estimates and judgments of certain amounts included in our financial statements, giving consideration to materiality. Historically, our estimates have not materially differed from actual results. Application of these accounting policies, however, involves the exercise of judgment and the use of assumptions as to future uncertainties. Consequently, actual results could differ from our estimates. See Note 1, “Accounting Policies” to our “Consolidated Financial Statements and Supplementary Data” included under Item 8 of this report.

     The accounting policies that we believe are the most critical to understanding our financial results and condition and require complex management judgment are discussed below. Information regarding our other accounting policies is included under Item 8, “Consolidated Financial Statements and Supplementary Data,” of this report.

Revenue Recognition

     Our revenues arise primarily from the professional and technical services performed by our employees or, in certain cases, by subcontractors we engage to perform on our behalf under contracts we enter into with our clients. The revenues we recognize, therefore, is derived from our ability to charge our clients for those services under our contracts. Our charges are based on the work performed either by individual employees or by employee categories, or on a total project (fixed-price) basis, depending on the types of contracts under which we have been engaged by our clients.

     We enter into three major types of contracts: “cost-plus contracts,” “fixed-price contracts” and “time-and-materials contracts.” Within each of the major contract types are variations on the basic contract mechanism. Fixed-price contracts generally present us with the highest level of financial and performance risk, but often also provide the highest potential financial returns. Cost-plus contracts present us with lower risk, but generally provide lower returns and often include more onerous terms and conditions. Time-and-materials contracts generally represent the time spent by our professional staff at stated or negotiated billing rates. A more detailed discussion of our revenue recognition on contract types is included in Note 1, “Accounting Policies” to our “Consolidated Financial Statements and Supplementary Data” included under Item 8 of this report.

     We earn our revenues from performance on cost-plus, fixed-price and time-and-materials contracts. At October 31, 2003, we had over 12,000 active projects, none of which represented more than 4% of our total revenues for fiscal year ended October 31, 2003. If our estimate of costs at completion on any contract indicates that a loss will be incurred, we charge the entire estimated loss to operations in the period the loss becomes known.

     The majority of our contracts are for professional planning, design and various other types of engineering projects, including systems engineering and program and construction management. We account for such contracts on the “percentage-of-completion” method, wherein revenue is recognized as project progress occurs. Most of our percentage-of-completion projects follow the “cost-to-cost” method of determining the percentage of completion. Under the cost-to-cost method, we make periodic estimates of our progress towards project completion by analyzing costs incurred to date, plus an estimate of the amount of costs that we expect to incur until the completion of the project. Revenue is then calculated on a cumulative basis (project-to-date) as the total contract value multiplied by the current percentage-of-completion. The revenue for the current period is calculated as cumulative revenues less project revenues already recognized. The process of estimating costs on engineering and construction projects combines professional engineering, cost estimating, pricing and accounting skills. The recognition of revenues and profit is dependent upon the accuracy of a variety of estimates, including engineering progress, materials quantities, achievement of milestones and other incentives, penalty provisions, labor

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productivity and cost estimates. Such estimates are based on various judgments we make with respect to those factors and are difficult to accurately determine until the project is significantly underway.

     For some contracts, using the cost-to-cost method in estimating percentage-of-completion may overstate the progress on the project. For instance, in a project where a large amount of permanent materials are purchased, including the costs of these materials in calculating the percentage-of-completion, may overstate the actual progress on the project. For these types of projects, actual labor hours spent on the project may be a more appropriate measure of the progress on the project. For projects where the cost-to-cost method does not appropriately reflect the progress on the projects, we use alternative methods such as actual labor hours for measuring progress on the project and recognize revenue accordingly.

     We have a history of making reasonably dependable estimates of the extent of progress towards completion, contract revenue and contract completion costs on our long-term engineering and construction contracts. However, due to uncertainties inherent in the estimation process, it is possible that our completion costs may vary from our estimates.

     Once contract performance is underway, we may experience changes in conditions, client requirements, specifications, designs, materials and expectations regarding the period of performance. Such changes may be initiated by us or by our clients. The majority of such changes presents little or no financial risk to us. Generally, a “change order” will be negotiated between our client and ourselves to reflect how the change is to be resolved and who is responsible for the financial impact of the change. Occasionally, however, disagreements can arise regarding changes, their nature, measurement, timing and other characteristics that impact costs and, therefore, revenues. When the change becomes a point of dispute between our client and us, we then consider it as a claim.

     Costs related to change orders and claims are recognized when they are incurred. Change orders are included in total estimated contract revenue when it is probable that the change order will result in a bona fide addition to contract value and can be reliably estimated. Claims are included in total estimated contract revenues, only to the extent that contract costs related to the claims have been incurred when it is probable that the claim will result in a bona fide addition to contract value and can be reliably estimated. No profit is recognized on claims until final settlement occurs. This can lead to a situation where costs are recognized in one period and revenues are recognized when client agreement is obtained or claims resolution occurs, which can be in subsequent periods. A more detailed discussion of change orders and claims is included in Note 1, “Accounting Policies” to our “Consolidated Financial Statements and Supplementary Data” included under Item 8 of this report.

     Service-related contracts, including operations and maintenance services and a variety of technical assistance services, are accounted for over the period of performance, in proportion to the costs of performance, evenly over the period or over units of production.

Goodwill

     Since our adoption of Statement of Financial Accounting Standards No. 142 (“SFAS 142”) on November 1, 2001, we no longer amortize goodwill. SFAS 142 requires goodwill and other intangible assets to be tested for impairment at least annually. Accordingly, we have completed our annual review of the recoverability of goodwill as of October 31, 2003, which indicated that we had no impairment of goodwill. We believe the following methodology we use in testing impairment of goodwill, which includes significant judgments and estimates, provides us with a reasonable basis in determining whether an impairment charge should be taken.

     We regularly evaluate whether events and circumstances have occurred which may indicate a possible impairment of goodwill. In evaluating whether there is an impairment of goodwill, we calculate the estimated fair value of our company considering the average closing sales price of our common stock, interest-bearing obligations and projected discounted cash flows as of the date we perform the impairment tests. We allocate a portion of the total fair value to different reporting units based on discounted cash flows. We then compare the resulting fair values by reporting units to the respective net book values, including goodwill. If the net book value of a reporting unit exceeds its fair value, we measure the amount of the impairment loss by comparing the implied

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fair value (which is a reasonable estimate of the value of goodwill for the purpose of measuring an impairment loss) of the reporting unit’s goodwill to the carrying amount of that goodwill. To the extent that the carrying amount of a reporting unit’s goodwill exceeds its implied fair value, we recognize a goodwill impairment loss at that time. In evaluating whether there was an impairment of goodwill, we also take into consideration changes in our business mix and changes in our discounted cash flows, in addition to our average closing stock price. Based on our review of goodwill by using the above described methodology, we concluded that we did not have any impairment of goodwill as of October 31, 2003.

Allowance for Uncollectible Accounts Receivable

     We reduce our accounts receivable and accrued earnings in excess of billings on contracts in process by estimating an allowance for amounts that may become uncollectible in the future. We determine our estimated allowance for uncollectible amounts based on management’s evaluation of the financial condition of our clients. We regularly evaluate the adequacy of the allowance for uncollectible amounts by taking into consideration factors such as:

	•		the type of client: governmental agency or private sector client;
	•		trends in actual and forecasted credit quality of the client, including delinquency and late payment history; and
	•		current economic conditions that may affect a client’s ability to pay.

     In addition to the above factors, we also evaluate the collectibility of accounts receivable in dispute with clients regarding the adequacy of services performed or products delivered.

Adopted and Recently Issued Statements of Financial Accounting Standards

     In June 2002, the Financial Accounting Standards Board (the “FASB”) issued Statement of Financial Accounting Standard No. 146 (“SFAS 146”), “Accounting for Costs Associated with Exit or Disposal Activities.” SFAS 146 replaces Emerging Issues Task Force (“EITF”) Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (Including Certain Costs Incurred in a Restructuring)” in its entirety and addresses significant issues relating to recognition, measurement and reporting costs associated with an exit or disposal activity, including restructuring activities. Under EITF Issue No. 94-3, a liability is recognized, measured and reported as of the date of an entity’s commitment to an exit plan. Pursuant to SFAS 146, a liability is recorded on the date on which the obligation is incurred and should be initially measured at fair value. SFAS 146 is effective for exit or disposal activities initiated after December 31, 2002. As permitted, we adopted SFAS 146 early on November 1, 2002 and adoption of SFAS 146 does not significantly impact our financial statements.

     In November 2002, the FASB issued Financial Accounting Standards Board Interpretation No. 45 (“FIN 45”), “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, an interpretation of FASB Statements No. 5, 57, and 107 and Rescission of FASB Interpretation No. 34.” FIN 45 clarifies the requirements of FASB Statement No. 5, “Accounting for Contingencies,” relating to a guarantor’s accounting for, and disclosure of, the issuance of certain types of guarantees. FIN 45 requires that upon issuance of a guarantee, the guarantor must recognize a liability for the fair value of the obligation it assumes under that guarantee. The disclosure provisions of FIN 45 are effective for financial statements of interim or annual periods that end after December 15, 2002. FIN 45’s provisions for initial recognition and measurement are required to be applied on a prospective basis to guarantees issued or modified after December 31, 2002, irrespective of the guarantor’s fiscal year-end. Under the provisions of FIN 45, accounting for guarantees that were issued before the date of FIN 45’s initial application may not be revised or restated to reflect the effect of the recognition and measurement provisions of FIN 45. Adoption of FIN 45 does not significantly impact our financial statements.

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     In January 2003, the FASB issued FIN No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”) which is an interpretation of Accounting Research Bulletin No. 51, “Consolidated Financial Statements.” FIN 46 requires a variable interest entity (VIE) to be consolidated by a company that is considered to be the primary beneficiary of that VIE. In December 2003, the FASB issued FIN No. 46 (revised December 2003), “Consolidation of Variable Interest Entities” (“FIN 46-R”) to address certain FIN 46 implementation issues. The effective dates and impact of FIN 46 and FIN 46-R for our consolidated financial statements are as follows:

	1)		Special purpose entities (“SPEs”) created prior to February 1, 2003. We must apply either the provisions of FIN 46 or early adopt the provisions of FIN 46-R at the end of the first interim or annual reporting period ending after December 15, 2003. We have completed our assessment and determined that we have no SPE’s.
	2)		Non-SPEs created prior to February 1, 2003. We are required to adopt FIN 46-R at the end of the first interim or annual reporting period ending after March 15, 2004. While not required, we could elect to adopt FIN 46 or FIN 46-R for these non-SPEs as of the end of the first interim or annual reporting period ending after December 15, 2003. As is common to the industry, we have executed contracts jointly with third parties through partnerships and joint ventures. In general, we account for these investments in accordance with Emerging Issues Task Force Issue 00-01, “Investor Balance Sheet and Income Statement Display under the Equity Method for Investments in Certain Partnerships and Other Ventures.” We are currently evaluating three significant joint ventures in accordance with FIN 46-R to determine whether any of the joint ventures qualify as a VIE and whether we are the primary beneficiary; however, our analysis is not yet complete. If we determine that any of these joint ventures require consolidation under FIN 46-R, it could have a material impact on revenue and costs in, but not net income in our consolidated financial statements for interim or annual periods in filings subsequent to January 31, 2004.
	3)		All entities, regardless of whether a SPE, that were created subsequent to January 31, 2003. We are required to apply the provisions of FIN 46 unless we elect to early adopt the provisions of FIN 46-R as of the first interim or annual reporting period ending after December 15, 2003. If we do not elect to early adopt FIN 46-R, then we are required to apply FIN 46-R to these entities as of the end of the first interim or annual reporting period ending after March 15, 2004. We have not entered into any material joint venture or partnership agreements subsequent to January 31, 2003 and we do not expect to enter into any such material agreements during our first interim period ended January 31, 2004. If we enter into any significant joint venture and partnership agreements in the future that would require consolidation under FIN 46 or FIN 46-R, it could have a material impact on our consolidated financial statements in future filings.

     In January 2003, the FASB issued Statement of Financial Accounting Standards No. 148 (“SFAS 148”), “Accounting for Stock-Based Compensation – Transition and Disclosure.” SFAS 148 amends FASB Statement No. 123 (“SFAS 123”), “Accounting for Stock-Based Compensation,” to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS 148 amends the disclosure requirements of SFAS 123 to require prominent disclosures in both annual and interim financial statements of the method of accounting for stock-based employee compensation and the effect of the method used on reported results. SFAS 148 is effective for fiscal years, including interim periods, beginning after December 15, 2002. SFAS 148 also requires disclosure of pro forma results on a quarterly basis as if we had applied the fair value recognition provisions of SFAS 123. We do not currently expect to adopt the fair value based method of accounting for stock-based employee compensation and therefore, adoption of SFAS 148 is not expected to impact our financial results. See Note 1, “Accounting Policies” Stock-Based Compensation, of Notes to our “Consolidated Financial Statements and Supplementary Data” included Item 8 of this report.

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     EITF 00-21, “Revenue Arrangements with Multiple Deliverables", was first discussed at the July 2000 EITF meeting and was issued in February 2002. Certain revisions to the scope language were made and finalized in May 2003. It addresses the accounting for multiple element revenue arrangements, which involve more than one deliverable or unit of accounting in circumstances where the delivery of those units takes place in different accounting periods. EITF 00-21 requires disclosures of the accounting policy for revenue recognition of multiple element revenue arrangements and the nature and description of such arrangements. The accounting and reporting requirements are effective for revenue arrangements entered into in fiscal periods beginning after June 15, 2003. Adoption of EITF 00-21 does not have a significant impact on our financial statements.

     In April 2003, the FASB issued Statement of Financial Accounting Standards No. 149 (“SFAS 149”), “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” SFAS 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities. The accounting and reporting requirements will be effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. Currently, we do not have any derivative instruments and do not anticipate entering into any derivative contracts. Accordingly, adoption of SFAS 149 does not have a significant impact on our financial statements.

     In May 2003, the FASB issued Statement of Financial Accounting Standards No. 150 (“SFAS 150”), “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” SFAS 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). SFAS 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. Adoption of SFAS 150 does not have a significant impact on our financial statements.

     In December of 2003, the FASB issued Statement of Financial Accounting Standards No. 132 (Revised) (“Revised SFAS 132”), “Employer’s Disclosure about Pensions and Other Postretirement Benefits.” Revised SFAS 132 retains disclosure requirements in the original SFAS 132 and requires additional disclosures relating to assets, obligations, cash flows and net periodic benefit cost. Revised SFAS 132 is effective for fiscal years ending after December 15, 2003, except that certain disclosures are effective for fiscal years ending after June 15, 2004. Interim period disclosures are effective for interim periods beginning after December 15, 2003. Revised SFAS 132 will impact the disclosures in financial statements beginning in the second quarter of our fiscal year 2004, which will end on April 30, 2004.

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Results of Operations

Consolidated

Fiscal 2003 Compared with Fiscal 2002

     Our consolidated revenues were $3,186.7 million for the fiscal year ended October 31, 2003, an increase of $758.9 million, or 31.3%, over the amount we reported for the same period last year. $741.2 million of the increase in our 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 discussed in the “Overview” section above.

     Consolidated direct operating expenses for the fiscal year ended October 31, 2003, which consisted of direct labor, subcontractor costs and other direct expenses, increased by $515.9 million, or 34.6% over the amount we reported for the same period last year. $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, as discussed in the “Overview” section above.

     Our consolidated gross profit was $1,181.4 million for the fiscal year ended October 31, 2003, an increase of $243.0 million or 25.9%, over the amount we reported for the same period last year. $234.1 million of the increase in gross profit was due to the inclusion of a full year of EG&G 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 in the “Overview” section above. Gross margin percentage, however, fell from 38.7% to 37.1%. The primary cause of this margin percentage shrinkage is the change of revenue mix, which incorporates the generally lower profit margins on our EG&G Division’s contracts.

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     Consolidated IG&A expenses for the fiscal year ended October 31, 2003 increased by $209.4 million, or 26.5%, over the amount we reported for the same period last year. $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 and 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 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 $27.9 million due to the additional indebtedness incurred with the EG&G acquisition.

     Our consolidated earnings before income taxes were $96.8 million for the fiscal year ended October 31, 2003 compared to $91.1 million for the same period last year. Our effective income tax rates for the fiscal years ended October 31, 2003 and 2002 were approximately 40.0% and 39.5%, respectively.

Fiscal 2002 Compared with Fiscal 2001

     Our consolidated revenues were $2,427.8 million for the fiscal year ended October 31, 2002, an increase of $108.5 million, or 4.7%, over the amount we reported in fiscal 2001. The increase in revenues was due to the acquisition of EG&G, which provided an additional $186.4 million in revenues. This increase was offset by a decrease in revenues from our state and local government clients as a result of their significant reduction in spending.

     Consolidated direct operating expenses for the fiscal year ended October 31, 2002 increased by $95.6 million, or 6.9% over the amount we reported in fiscal 2001, primarily as a result of the acquisition of EG&G, which increased direct operating expenses by $144.0 million, and as a result of the recognition of $4.0 million in cost overruns on a highway transportation project. This increase was offset by a decrease in direct operating expenses resulting from a decreased level of services provided to our state and local government clients.

     Our consolidated gross profit was $938.4 million for the fiscal year ended October 31, 2002, an increase of $12.9 million, or 1.4%, over the amount we reported in fiscal 2001. $42.4 million of the increase in gross profit was primarily due to the acquisition of EG&G. This increase was offset by a decrease in revenues from our state and local government clients as a result of their significant reduction in current spending.

     Consolidated IG&A expenses for the fiscal year ended October 31, 2002 increased by $35.8 million, or 4.7%, over the amount we reported in fiscal 2001. The increase in IG&A expenses was primarily due to the addition of $34.9 million of expenses attributable to EG&G. The remaining $0.9 million of the total increase in IG&A expenses was due to increases in marketing and business development expenses, indirect labor, benefits, rental expense and $7.6 million of loss on extinguishment of debt, offset by a decrease in amortization expense of $8.7 million as a result of our adoption of SFAS 142 and a decrease in external services and travel expenses. Our consolidated net interest expense for the fiscal year ended October 31, 2002 decreased by $9.9 million due to repayments of our long-term debt and decreases in interest rates.

     Our consolidated earnings before income taxes were $91.1 million for the fiscal year ended October 31, 2002, compared to $104.2 million for the same period in fiscal 2001. Our effective income tax rates for the fiscal years ended October 31, 2002 and 2001 were approximately 39.5% and 44.5%, respectively. The decrease in effective income tax rates was primarily due to the implementation of SFAS 142, which eliminated the requirement to amortize goodwill, and to the recognition of certain state income tax credits.

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Reporting Segments

Fiscal 2003 Compared with Fiscal 2002

URS Division

     URS Division’s revenues were $2,259.1 million for the fiscal year ended October 31, 2003, an increase of $17.7 million, or 0.8%, over the amount we reported in fiscal 2002. This increase was mainly due to revenue growth from our federal government clients, the effect of foreign currency exchange fluctuations and small 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 in the “Overview” section above.

     URS Division’s direct operating expenses for the fiscal year ended October 31, 2003 increased by $8.8 million over the amount we reported in fiscal 2002. This increase was mainly due to increases in our revenues as a result of the factors discussed above.

     URS Division’s gross profit was $904.9 million for the fiscal year ended October 31, 2003, an increase of $8.9 million over the amount we reported in fiscal 2002. The increase was attributable to the factors that drove net revenue growth, as previously described.

     URS Division’s IG&A expenses for the fiscal year ended October 31, 2003 increased by $12.3 million, or 1.7% over the amount we reported in fiscal 2002. An increase 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

     EG&G Division’s revenues were $927.6 million for the fiscal year ended October 31, 2003, an increase of $741.2 million, or 397.6%, over the amount we reported in fiscal 2002. This increase was due to the inclusion of a full year of EG&G results in fiscal 2003, compared to only 10 weeks in the prior fiscal year.

     EG&G Division’s direct operating expenses for the fiscal year ended October 31, 2003 increased by $507.1 million, or 352.2% over the amount we reported in fiscal 2002. The increase was due to the inclusion of a full year of EG&G direct operating expenses in fiscal 2003 compared to only 10 weeks of expenses in fiscal 2002.

     EG&G Division’s gross profit was $276.5 million for the fiscal year ended October 31, 2003, an increase of $234.1 million or 552.1%, over the amount we reported in fiscal 2002. The increase in gross profit was due to the inclusion of a full year of EG&G gross profit in fiscal year 2003 compared to only 10 weeks in fiscal 2002.

     EG&G Division’s IG&A expenses for the fiscal year ended October 31, 2003 increased by $193.8 million, or 555.3%, from the amount we reported in fiscal 2002. The increase in IG&A expenses was primarily attributable to the inclusion of a full year of EG&G expenses in fiscal year 2003 compared to only 10 weeks of expenses in fiscal 2002.

Fiscal 2002 Compared with Fiscal 2001

URS Division

     URS Division’s revenues were $2,241.4 million for the fiscal year ended October 31, 2002, a decrease of $77.9 million, or 3.4%, from the amount we reported in fiscal 2001. The decrease in revenues was primarily due to a decrease of $121.0 million in revenues from our state and local government clients as a result of their significant reduction in spending, offset by increases of $48.7 million in our revenues from federal and private industry clients. In addition, we also experienced a decrease in our international business, offset by the effect of foreign currency exchange fluctuations.

     URS Division’s direct operating expenses for the fiscal year ended October 31, 2002 decreased by $48.4 million, or 3.5%, from the amount we reported in fiscal 2001. This decrease in direct operating expenses was primarily due to a decreased level of services provided to our state and local government and international clients, offset by the recognition of $4.0 million in cost overruns on a highway transportation project and the effect of foreign currency exchange fluctuations.

     URS Division’s gross profit was $896.0 million for the fiscal year ended October 31, 2002, a decrease of $29.5 million, or 3.2%, from the amount we reported in fiscal 2001. This decrease was primarily due to a decrease in revenues from our state and local government clients as a result of their significant reduction in spending. This decrease was offset by the effect of foreign currency exchange fluctuations.

     URS Division’s IG&A expenses for the fiscal year ended October 31, 2002 decreased by $5.3 million, or 0.7%, from the amount we reported in fiscal 2001. The decrease was mainly due to a decrease in amortization expense of $8.7 million as a result of our adoption of SFAS 142 and decreases in external services and travel expenses. This decrease was offset by increases in marketing and business development expenses, indirect labor, benefits, and rental expense. Net interest expense, which included intercompany interest recorded in the fiscal year ended October 31, 2002, increased by $1.4 million primarily due to the additional indebtedness incurred with the implementation of our new ERP.

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EG&G Division

     We acquired our EG&G Division in August 2002. As a result, we included 10 weeks of our EG&G Division’s results of operations for the fiscal year ended October 31, 2002 and none for the fiscal year ended October 31, 2001.

Income Taxes

     As of October 31, 2003, we had available net operating loss (“NOL”) carryforwards for federal income tax and financial statement purposes of $14.1 million. Utilization of the NOL, which arose from our October 1989 quasi-reorganization and the acquisition of EG&G in August 2002, is limited pursuant to Section 382 of the Internal Revenue Code (“382 limit”). Of the total NOL, $0.8 million is subject to the 382 limit and will expire entirely in fiscal year 2004, $9.1 million is subject to the 382 limit of $13.0 million per year and will expire in fiscal years 2019 and 2021 and $4.2 million will be carried back for refund. We also have $12.8 million of foreign NOLs available to carry forward. These foreign NOLs are available only to offset income earned in foreign jurisdictions and will expire at various dates.

     We have recorded deferred tax assets and liabilities. Valuation allowances for deferred tax assets are established when necessary to reduce deferred tax assets to the amount expected to be realized. Our current deferred tax assets at October 31, 2003 decreased from the balance at October 31, 2002 primarily due to the utilization of net operating losses, and our non-current deferred tax liabilities increased primarily due to the continued amortization of tax goodwill. Total tax deductible goodwill resulting from the Dames & Moore and EG&G acquisitions amounted to $352.1 million. As of October 31, 2003, $234.9 million of goodwill was unamortized for tax purposes. Based on expected future operating results, we believe that realization of deferred tax assets in excess of the valuation allowance is more likely than not. The deferred tax asset valuation allowance at October 31, 2003 decreased $0.3 million due to utilization of domestic net operating losses from the balance at October 31, 2002.

Liquidity and Capital Resources

     Our primary sources of liquidity are cash flows from operations and borrowings under the credit line from our Senior Secured Credit Facility, if necessary. Our primary uses of cash are to fund our working capital and capital expenditures and to service our debt. We believe that our primary sources of liquidity will provide sufficient resources to fund our operating and capital expenditure needs, as well as service our debt, for the next 12 months and beyond. If we experience a significant change in our business such as the execution of a significant acquisition, we would likely need to acquire additional sources of financing. Although we have no current acquisition plans, 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:

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	•		Substantially all of our cash flows are generated by our subsidiaries. As a result, funds necessary to meet our debt service obligations are provided in large part by distributions or advances from our subsidiaries. Legal and contractual restrictions as well as the financial condition and operational requirements of our subsidiaries may limit our ability to obtain cash from them.
	•		Collections on accounts receivable can impact our operating cash flows. Management places significant emphasis on collection efforts and has assessed the allowance accounts for receivables as of October 31, 2003 and has deemed them to be adequate; however, the current economic downturn may adversely impact our clients’ credit-worthiness and our ability to collect cash from them to meet our operating needs and impact our allowance for uncollectible accounts receivable.

     Consistent with our strategic priority to repay debt and de-leverage our balance sheet, we used a majority of our cash generated from operating activities for fiscal year 2003 to pay down debt. We expect to continue to repay debt and de-leverage our balance sheet in the future.

Operating Activities

     The increase in cash flows from operations for 2003 was attributable to the following key factors:

	•		Improvements in the billing and collection of accounts receivable; and
	•		Increased revenues and profits resulting from the inclusion of a full year of EG&G results, and growth particularly in the federal government market.

Investing Activities

     As a professional services organization, we are not capital intensive. Capital expenditures historically have 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 2003, 2002, and 2001 were $16.6 million, $52.5 million and $19.8 million, respectively. The decrease in capital expenditures during fiscal year 2003 compared to fiscal year 2002 was due to the implementation of our new ERP, a majority of the costs of which were incurred in fiscal year 2002, and due to our control over capital expenditures in fiscal year 2003.

Financing Activities

     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 senior secured credit facility. In fiscal year 2003, we repaid $27.3 million on our revolving line of credit, $16.0 million in scheduled debt payments for our Senior Secured Credit Facility, $101.2 million of discretionary debt payments on our Senior Secured 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.

     Fiscal 2002 Compared with Fiscal 2001. The increase in cash flows from financing activities for fiscal 2002 compared to fiscal 2001 was primarily due to proceeds from the issuance of long-term debt and net borrowings of long-term debt and under our line of credit, partially offset by the payment of financing fees. During fiscal 2002, we entered into the $675.0 million Senior Secured Credit Facility, which included a $200.0 million revolving line of credit, and the issuance of the 11 ½% notes due 2009 with an aggregate principal of $200.0 million due at maturity. The proceeds of our Senior Secured Credit Facility and the 11 ½% notes were used to replace our old senior collateralized credit facility. In addition, we used $340.5 million to partially finance our acquisition of EG&G and $29.6 million for payment of financing fees.

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     The table below contains information about our contractual obligations and commercial commitments followed by narrative descriptions as of October 31, 2003: