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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Year Ended October 31, 2000
or
/ / TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period from _____ to _____
Commission file number 1-7567
URS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 94-1381538
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
100 California Street, Suite 500, 94111-4529
San Francisco, California (Zip Code)
(Address of principal executive offices)
(415) 774-2700
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class: which registered:
-------------------- -----------------
Common Shares, par value $.01 per share New York Stock Exchange
Pacific Exchange
8 5/8% Senior Subordinated Debentures due 2004 New York Stock Exchange
6 1/2% Convertible Subordinated Debentures due 2012 New York Stock Exchange
Pacific Exchange
Securities registered pursuant to Section 12(g) of the Act:
12 1/4% Senior Subordinated Notes due 2009.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K, or any
amendment to this Form 10-K. /X/
On January 2, 2001, there were 16,879,336 shares of Common Stock
outstanding, and the aggregate market value of the shares of Common Stock of URS
Corporation held by non-affiliates was approximately $222.2 million based on the
closing sales price as reported in the consolidated transaction reporting
system.
Documents Incorporated by Reference
Items 10, 11, and 12 of Part III incorporate information by reference from the
Registrant's definitive Proxy Statement for the Annual Meeting of Stockholders
to be held on March 20, 2001.
This Annual Report on Form 10-K contains forward-looking statements that
involve risks and uncertainties. Our actual results could differ materially from
those discussed here. Factors that might cause such a difference include, but
are not limited to, those discussed elsewhere in this Annual Report on Form
10-K. We do not intend, and undertake no obligation, to update any
forward-looking statements.
ITEM 1. BUSINESS
We are an engineering services firm that provides a broad range of
planning, design and program and construction management services. We provide
these services in seven markets: surface transportation, air transportation,
railroads/mass transit, industrial process/petrochemical, general building and
facilities, water/wastewater and hazardous waste. We provide services to state,
local and Federal government agencies, as well as to private clients in the
chemical, pharmaceutical, manufacturing, forest products, energy, oil, gas,
mining, healthcare, water supply, retail and commercial development,
telecommunications and utilities industries. We conduct business through
approximately 319 principal offices and have approximately 15,900 employees
located throughout the world, including the United States, Europe and the
Asia/Pacific region.
Acquisitions
In November 1997, we acquired privately held Woodward-Clyde Group, Inc. of
Denver, Colorado, a firm specializing in geotechnical and environmental
engineering ("W-C"). For a discussion of the effect of the W-C acquisition upon
our operations, see Management's Discussion and Analysis of Results of
Operations and Financial Condition.
In February 1999, we acquired privately held Thorburn Colquhoun Holdings
plc, a civil and structural engineering consulting firm based in the United
Kingdom ("T-C"). For a discussion of the effect of the T-C acquisition upon our
operations see Management's Discussion and Analysis of Results of Operations and
Financial Condition.
In June 1999, we acquired publicly held Dames and Moore Group, an
engineering and construction services firm ("D-M"). For a discussion of the
effect of the D-M acquisition upon our operations, see Management's Discussion
and Analysis of Results of Operations and Financial Condition.
Services
We provide professional services in planning, design and program and
construction management. Each of our offices is responsible for obtaining local
or regional contracts, and multiple offices often work together to pursue large
national or multi-national contracts. Because we can draw from our large and
diverse network of professional and technical resources, we have the capability
to market and perform large multi-disciplinary projects throughout the world.
Planning. Planning covers a broad range of assignments from conceptual
design and technical and economic feasibility studies to community involvement
programs and archaeological investigations. In many instances, we use the
planning process to develop the blueprint, or overall scheme, for the project.
We use planning analyses and reports to identify and evaluate alternatives,
estimate usage levels, determine financial feasibility, assess available
technology, ascertain economic and environmental impacts and recommend optimal
courses of action. Projects can include master planning, land use planning,
feasibility studies, transportation planning, zoning, permitting and compliance
with applicable regulations.
Design. Our professionals provide a broad range of design and
design-related services. Representative services include architectural and
interior design and civil, structural, mechanical, electrical, sanitary,
environmental, water resources, geotechnical/underground, dam, mining and
seismic engineering design. For each project, we identify the project
requirements and then integrate and coordinate the various design elements. The
result is a set of contract documents that may include plans, specifications and
cost estimates that are used to build a project. These documents detail design
characteristics and set forth for the contractor the material it should use and
the schedule for construction. Other critical tasks in the design process may
include value analysis and the assessment of construction and maintenance
requirements.
1
Program and Construction Management. Our program and construction
management services include master scheduling of both the design and
construction phases, construction and life-cycle cost estimating, cash flow
analyses, value engineering, constructability reviews, environmental and
specialized engineering and construction and bid management. Once construction
has begun, we oversee and coordinate the activities of construction contractors.
This frequently involves acting as the owner's representative for on-site
supervision and inspection of the contractor's work. In this role, our objective
is to monitor a project's schedule, cost and quality. In addition, we act as the
general contractor or sub-contractor on demolition and environmental contracts
wherein we take responsibility for contractor's risk and methods. These
construction projects account for approximately 10% of our revenues.
Markets
Our strategy is to focus on the infrastructure market, including surface,
air and rail transportation systems, industrial process/petrochemical and
facilities projects and environmental programs involving water/wastewater and
hazardous waste management. We perform our business development and sales
activities primarily at our network of offices around the world. In addition, we
coordinate national and global marketing efforts on large projects and for
multi-national clients on a company-wide basis. For financial information about
our segment reporting, see Note 9 to the Financial Statements.
Surface Transportation. We provide a full range of services for all types
of surface transportation systems and networks, including highways,
interchanges, bridges, tunnels, toll facilities, intelligent transportation
systems, parking facilities and ports and marine structures. Historically, we
have emphasized the design of new transportation systems, but in recent years we
have focused on the rehabilitation of existing systems.
Air Transportation. We provide comprehensive services for the development
of new airports and the modernization and expansion of existing facilities.
Assignments have included terminals, hangars, air cargo buildings, runways,
taxiways, aprons, air traffic control towers and baggage, communications,
security and fueling systems, as well as supporting infrastructure such as
people mover systems, roadways, parking garages and utilities. We have completed
projects at both general aviation and large-hub international airports. We have
played a major role in the expansion and modernization of existing airports as
well as the development of new facilities worldwide. We have completed
assignments at more than 250 airports worldwide.
Rail. In this market, we serve freight and passenger railroads and urban
mass transit agencies. We have planned, designed and managed the construction of
commuter rail systems, freight rail systems, heavy and light rail transit
systems and high speed rail. Our specialized expertise in transportation
structures, including terminals, stations, parking facilities, bridges, tunnels,
power, signals and communications systems complements these capabilities.
Industrial Process. We provide full-service capabilities for industrial
process markets. We provide expertise in facility siting and permitting,
environmental management and pollution control, waste management and remediation
engineering, process engineering and design and property redevelopment.
Facilities. Our architects and engineers specialize in the design of new
buildings and the rehabilitation and expansion of existing facilities. The
facility design practice covers a broad range of building types, including
facilities for education, criminal justice, healthcare, commerce, industry,
government, military, transportation, sports and recreation. With the increased
interest in historic preservation, adaptive reuse and seismic safety, a
significant portion of our practice focuses on facility assessments, code and
structural evaluations and renovation projects to maintain aging building
infrastructure.
Water/Wastewater. We provide services for the planning, design and
construction of all types of water and wastewater facilities to ensure that the
quality and quantity of the world's water supply is maintained. Services include
water quality studies, new and expanded water supply, storage, distribution, and
treatment systems, municipal wastewater treatment plants and sewer systems,
watershed and stormwater management and flood control. We also respond to this
market with specialized expertise in the design and seismic retrofit of earth,
rockfill and roller-compacted concrete dams, as well as the design of
reservoirs, impoundments, including mine tailings disposal and large outfall
structures.
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Hazardous Waste Management. In this market, we conduct initial site
investigations, design remedial actions for site clean-up and provide
construction management services during site clean-up. This market involves
identifying and developing measures to dispose of hazardous and toxic waste
effectively at contaminated sites. We also provide air quality monitoring and
design modifications required to meet national and local air quality standards.
This work requires specialized knowledge of, and compliance with, complex
applicable regulations, as well as the permitting and approval processes.
Clients
We provide our services to a broad range of clients, including state, local
and municipal agencies, the Federal government and private sector businesses.
Our state and local government clients include approximately 40 state
departments of transportation, water utilities, local power generators,
wastewater treatment agencies, environmental protection agencies, schools and
colleges, law enforcement, judiciary, hospitals and healthcare providers. We
provide services to Federal agencies, including the Army, Environmental
Protection Agency, Navy, Air Force, Coast Guard, United States Postal Service
and Department of Energy. Our private sector clients include retail and
commercial, petro-chemical, food, telecommunications, oil and gas, power,
semi-conductor, transportation, technology, public utility, mining and forest
products entities.
For the five years ended October 31, 2000, our revenues were attributed to
the following categories:
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
(Dollars in thousands)
Domestic:
Local and state
agencies.............. $ 728,861 33% $ 470,958 33% $346,072 43% $ 255,423 63% $ 198,472 65%
Federal agencies........ 354,581 16 235,039 17 116,340 14 67,042 17 64,226 21
Private businesses...... 886,453 40 558,314 39 288,067 36 83,986 20 42,772 14
International............. 235,683 11 154,211 11 55,467 7 -- -- -- --
---------- ---- ---------- --- -------- ---- --------- --- --------- ----
Total................... $2,205,578 100% $1,418,522 100% $805,946 100% $ 406,451 100% $ 305,470 100%
========== === ========== === ======== === ========= === ========= ====
International Business
We currently derive approximately 11% of our revenues from international
operations. Our focus is to provide a range of services to local and national
governmental units and private sector businesses, both domestic and
multi-national. The markets we serve are primarily industrial
process/petrochemical, facilities, hazardous waste and surface transportation.
Our international business is located in the United Kingdom and Western Europe,
the Asia/Pacific region, including Australia, New Zealand, Singapore and the
Philippines, and the Americas, including Canada, Mexico and Central and South
America.
Contract Pricing and Terms of Engagement
We earn our revenues from cost-plus, fixed price and time-and-materials
contracts.
Cost-Plus Contracts. Under our cost-plus contracts, we charge clients
negotiated rates based on our direct and indirect costs. Labor costs and
subcontractor services are the principal components of our direct costs. Federal
Acquisition Regulations, which are applicable to all Federal government
contracts and which are partially incorporated in many local and state agency
contracts, limit the recovery of certain specified indirect costs on contracts
subject to such regulations. In negotiating a cost-plus contract, we estimate
all recoverable direct and indirect costs and then add a profit component, which
is either a percentage of total recoverable costs or a fixed negotiated fee, to
arrive at a total dollar estimate for the project. We receive payment based on
the total actual number of labor hours expended. If the total actual number of
labor hours is lower than estimated, the revenues from that project will be
lower than estimated. If the actual labor hours expended exceed the initial
negotiated amount, we must obtain a contract modification to receive payment for
such overage. Cost-plus contracts covered by Federal Acquisition Regulations and
certain state and local agencies require an audit of actual costs and
3
provide for upward or downward adjustments if actual recoverable costs differ
from billed recoverable costs.
Fixed-Price Contracts. Under our fixed-price contracts, clients pay us an
agreed sum negotiated in advance for the specified scope of work. Under
fixed-price contracts, we make no revenue adjustments if we over-estimate or
under-estimate the costs required to complete the project, unless there is a
change of scope in the work to be performed. Accordingly, our profit margin will
increase to the extent that costs are below the contracted amounts. The profit
margin will decrease and we may realize a loss on the project if the costs
exceed the estimates.
Time-and-Materials Contracts. Under our time-and-materials contracts, we
negotiate hourly billing rates and charge our clients based on actual time
expended. In addition, clients reimburse us for the actual out-of-pocket costs
of materials and other direct incidental expenditures incurred in connection
with performing the contract. Our profit margins on time-and-materials contracts
fluctuate based on actual labor and overhead costs directly charged or allocated
to contracts compared with negotiated billing rates.
Backlog, Project Designations and Indefinite Delivery Contracts
Our contract backlog was $1.7 billion at October 31, 2000, compared to $1.3
billion at October 31, 1999. Our contract backlog consists of the amount
billable at a particular point in time for future services under signed and
funded contracts. We include indefinite delivery contracts, which are executed
contracts requiring the issuance of task orders, in contract backlog only to the
extent the task orders are actually issued and funded. Of the contract backlog
of $1.7 billion at October 31, 2000, we expect to fill approximately 70%, or
approximately $1.2 billion, within the next fiscal year ending October 31, 2001.
Customers also have designated us as the recipient of future contracts.
These "designations" are projects that customers have awarded to us but for
which we do not have signed contracts. We include in designations task orders
under executed indefinite delivery contracts that we expect clients to issue
over the next twelve months. We estimate total contract designations to be $817
million at October 31, 2000, as compared to $775 million at October 31, 1999.
Typically, a significant portion of designations are converted into signed
contracts. However, we cannot provide any assurance that this experience will
continue to occur in the future.
Indefinite delivery contracts are signed contracts pursuant to which we
perform work only when the client issues specific task orders. Generally these
contracts exceed one year and often indicate a maximum term and potential value.
Certain indefinite delivery contracts are for a definite time period with
renewal option periods at the client's discretion. While we believe that we will
continue to get work under these contracts over their entire term, because of
renewals and the necessity for issuance of individual task orders, we cannot be
assured of continued work by us and the realization of the potential maximum
values under these contracts. However, because of the increasing frequency with
which our government and private sector clients use this contracting method, we
believe the potential value should be disclosed along with backlog and
designations as an indicator of our future business. When the client notifies us
of the scope and pricing of task orders, we add the estimated value of such task
orders to designations. When such task orders are signed and funded, we put
their value into backlog. As of October 31, 2000, our five largest indefinite
delivery contracts were as follows:
Total Estimated
Potential Estimated Remaining
Contract Term Values Revenue Backlog Designations Values
-------- ---- ------ ------- ------- ------------ ----
(In millions)
USAF-AFCEE(1)............ 1997-2005 $ 190.0 $ 62.4 $ 32.6 $ 15.8 $ 79.2
MRS OAMS(2).............. 1997-2003 150.0 1.0 7.9 -- 141.1
METRIC(3)................ 1997-2004 190.0 6.8 9.3 -- 173.9
EPA RAC 9(4)............. 1998-2008 140.0 4.6 3.0 17.7 114.7
EPA RAC 10(5)............ 1998-2008 101.0 21.8 4.7 8.6 65.9
------- ------- ------- ------ -------
Total................ $ 771.0 $ 96.6 $ 57.5 $ 42.1 $ 574.8
======= ======= ======= ====== =======
4
The names of the clients and the complete titles of the contracts listed in the
table above are:
(1) Department of the Air Force, Remedial Design.
(2) Department of the Air Force, McClellan Remedial Systems Operations and
Maintenance Services.
(3) Department of the Air Force, McClellan Environmental Remedial
Implementation Contract.
(4) United States Environmental Protection Agency, Response Action Contract,
Region 9.
(5) United States Environmental Protection Agency, Response Action Contract,
Region 10.
Competition
Our industry is highly fragmented and very competitive. As a result, in
each specific market area, we compete with many engineering and consulting
firms, some of which are substantially larger than us and possess greater
financial resources. No firm currently dominates any significant portion of our
market areas. Competition is based on quality of service, expertise, price,
reputation and local presence, or the ability to provide services globally. We
believe that we compete favorably with respect to each of these factors in the
market areas we serve.
Regulation
Our professional services include the planning, design, program and
construction management and, under limited circumstances, construction of waste
management and pollution control facilities. Federal laws, such as CERCLA, the
Clean Water Act, the Toxic Substances Control Act, and various state and local
laws strictly regulate the handling, removal, storage, treatment, transportation
and disposal of toxic and hazardous substances and impose liability for
environmental contamination caused by these substances. These laws and
regulations are directly related to the demand for many of the services we
offer. While generally we do not directly handle, remove, store, treat,
transport or dispose of toxic or hazardous substances, some of our contracts
require us to design systems for those functions or to subcontract for or
supervise this type of work. Consequently, we may be exposed to claims for
damages or penalties caused by environmental contamination arising from projects
on which we have worked.
In the ordinary course of business, we and members of our professional
staff are subject to a variety of state, local and foreign licensing and permit
requirements. We believe that we are in substantial compliance with these
regulations.
Insurance
Currently, we have limits of $125.0 million per loss and $125.0 million in
the annual aggregate for general liability, professional errors and omissions
liability and contractor's pollution liability insurance. These programs each
have a self-insured claim retention of $0.1 million, $1.0 million, and $0.25
million, respectively. With respect to D-M claims arising from professional
errors and omissions prior to the acquisition, we have maintained a self-insured
retention of $5.0 million per claim. 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 its termination
date even if the occurrence was during the term of coverage. It is our intent to
maintain these policies, but there can be no assurance that we can maintain
existing coverage or that claims will not exceed the available amount of
insurance. We believe that our claim reserves combined with our insurance
coverage will be adequate for our present and reasonably foreseeable future
operations. We have maintained insurance without lapse for many years with
limits in excess of losses sustained.
Employees
As of October 31, 2000, we had approximately 15,900 employees in total. We
employ, at various times on a temporary or part-time basis, up to several
thousand persons to meet contractual requirements. Approximately 320 of our
employees are covered by collective bargaining agreements. We have never
experienced a strike or work stoppage. We believe that employee relations are
good.
5
ITEM 2. PROPERTIES
We lease office space in 319 principal locations throughout the world. Most
of the leases are written for a minimum term of three years with options for
renewal, sublease rights and allowances for improvements. Our significant lease
agreements expire at various dates through the year 2010. We believe that our
current facilities are sufficient for the operation of our business and that
suitable additional space in various local markets is available to accommodate
any needs that may arise.
ITEM 3. LEGAL PROCEEDINGS
Various legal proceedings are pending against us or our subsidiaries
alleging, among other things, breaches of contract or negligence in connection
with our performance of professional services. In some actions, parties are
seeking damages, including punitive or treble damages that substantially exceed
our insurance coverage. Based on our previous experience with claims settlement
and the nature of the pending legal proceedings, we do not believe that any of
the legal proceedings are likely to result in a judgment against, or settlement
by, us that would materially exceed our insurance coverage or have a material
adverse effect on our consolidated financial position and operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
6
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
Name Position Held Age
---- ------------- ---
Martin M. Koffel.................... Chief Executive Officer, President and Director from May 1989; Chairman 61
of the Board from June 1989; Director of McKesson HBOC, Inc.
Kent P. Ainsworth................... Executive Vice President from April 1996; Vice President and Chief 54
Financial Officer from January 1991; Secretary from May 1994.
Joseph Masters...................... Vice President and General Counsel since July 1997; Vice President, 44
Legal, from April 1994 to June 1997; Vice President and Associate
General Counsel of URS Consultants, Inc. from May 1992 to April 1994;
outside counsel to URS from January 1990 to May 1992.
Irwin L. Rosenstein................. President of General Engineering Group ("GEG"), a principal operating 64
group of URS since November 1999; President of URS Greiner Woodward
Clyde Group, Inc. ("URSGWC"), the Company's former principal operating
division, from November 1998 to October 1999; President of URS Greiner
("URSG"), URS's former principal operating division, from November 1997
to October 1998; President of URS Consultants, Inc. ("URSC"), URS's
former principal operating division, from February 1989 to November
1997; Director since February 1989; Vice President since 1987.
Jean-Yves Perez..................... Director and Executive Vice President of GEG since November 1999; 55
Executive Vice President of URSGWC, URS's former principal operating
division, from November 1998 to October 1999; President of
Woodward-Clyde Group, Inc. ("W-C"), a division of URS from November
1997 to October 1998; Director of URS since November 1997; President
and Chief Executive Officer of W-C from 1987 to October 1997.
Susan B. Kilgannon.................. Vice President, Communications, of the Company since October 1999; Vice 41
President of URSGWC, URS's former principal operating division, from
November 1998 to October 1999; Vice President of URSG, URS's former
principal operating division, from November 1997 to October 1998; Vice
President of URSC, URS's former principal operating division, from
March 1992 to November 1997.
David C. Nelson..................... Vice President and Treasurer since December 1999; Assistant Treasurer 47
of Seagate Technology, Inc. from February 1996 to December 1999;
Assistant Treasurer of Conner Peripherals, Inc. from May 1995 to
February 1996; Director of International Finance of Conner Peripherals,
Inc. from October 1994 to May 1995.
7
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The shares of our Common Stock are listed on the New York Stock Exchange
and the Pacific Exchange (under the symbol "URS"). At January 2, 2001, we had
approximately 4,591 stockholders of record. The following table sets forth the
high and low closing sale prices of our Common Stock, as reported by The Wall
Street Journal for the periods indicated.
Market Price
------------------------------------
Low High
-------------- --------------
Fiscal Period:
1999:
First Quarter....................... $ 17.94 $ 24.00
Second Quarter...................... $ 15.75 $ 23.44
Third Quarter....................... $ 22.06 $ 29.31
Fourth Quarter...................... $ 18.00 $ 25.88
2000:
First Quarter....................... $ 17.25 $ 21.75
Second Quarter...................... $ 11.13 $ 17.38
Third Quarter....................... $ 12.69 $ 15.94
Fourth Quarter...................... $ 11.38 $ 15.50
2001:
First Quarter....................... $ 12.19 $ 14.88
(through January 2, 2001)
We have not paid cash dividends since 1986 and, at the present time, our
management does not anticipate paying dividends on our outstanding Common Stock
in the near future. Further, we are precluded from paying dividends on our
outstanding Common Stock pursuant to our senior collateralized credit facility
with our lender and the indentures governing the 8 5/8% senior subordinated
debentures and the 12 1/4% senior subordinated notes. See Item 8, Consolidated
Financial Statements and Supplementary Data, Note 7, Notes Payable and Long-Term
Debt and Note 12, Stockholders' Equity.
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ITEM 6. SUMMARY OF SELECTED FINANCIAL INFORMATION
The following table sets forth our selected financial data for the five
years ended October 31, 2000. The data presented below should be read in
conjunction with our Consolidated Financial Statements including the Notes
thereto.
SUMMARY OF SELECTED FINANCIAL INFORMATION
(In thousands, except per share data)
Years Ended October 31,
-----------------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Income Statement Data:
Revenues........................................... $ 2,205,578 $ 1,418,522 $ 805,946 $ 406,451 $ 305,470
----------- ----------- ---------- ---------- ----------
Expenses:
Direct operating................................ 1,345,068 854,520 478,640 241,002 187,129
Indirect, general and administrative........... 697,051 463,132 277,065 141,442 102,389
Interest expense, net........................... 71,861 34,589 8,774 4,802 3,897
----------- ------------ ----------- ----------- -----------
2,113,980 1,352,241 764,479 387,246 293,415
----------- ------------ ----------- ----------- -----------
Income before taxes................................ 91,598 66,281 41,467 19,205 12,055
Income tax expense................................. 41,700 29,700 18,800 7,700 4,700
----------- ------------ ----------- ----------- -----------
Net income......................................... 49,898 36,581 22,667 11,505 7,355
Preferred stock dividend........................... 8,337 3,333 -- -- --
----------- ------------ ----------- ----------- -----------
Net income available for common stockholders....... 41,561 33,248 22,667 11,505 7,355
Other comprehensive income, net of tax:
Foreign currency translation adjustments........... (2,609) 197 -- -- --
------------ ------------ ----------- ----------- -----------
Comprehensive income............................... $ 38,952 $ 33,445 $ 22,667 $ 11,505 $ 7,355
=========== =========== ========== ========== ==========
Net income per common share:
Basic........................................... $ 2.55 $ 2.14 $ 1.51 $ 1.15 $ .92
============ =========== =========== =========== ===========
Diluted......................................... $ 2.27 $ 1.98 $ 1.43 $ 1.08 $ .81
============ =========== =========== =========== ===========
As of October 31,
-----------------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Balance Sheet Data:
Working capital.................................... $ 394,560 $ 366,125 $ 130,969 $ 63,236 $ 57,570
Total assets....................................... $ 1,427,134 $ 1,444,525 $ 451,704 $ 210,091 $ 194,932
Total debt......................................... $ 648,351 $ 688,380 $ 116,016 $ 48,049 $ 61,263
Mandatorily redeemable Series B exchangeable
convertible preferred stock..................... $ 111,013 $ 103,333 $ -- $ -- $ --
Stockholders' equity............................... $ 257,794 $ 207,169 $ 166,360 $ 77,151 $ 56,694
9
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Overview
We are an engineering services firm with domestic and international clients
that include local, state and Federal government agencies and private clients in
a broad array of industries. Revenues are earned from fixed-price, cost-plus and
time-and-materials contracts. We recognize revenues by the percentage completion
method, based primarily on contract costs incurred to date compared with total
estimated contract costs. The principal components of our direct operating costs
are labor costs for employees who are directly involved in providing services to
clients and subcontractor costs. Other direct operating expenses include those
expenses associated with specific projects including materials and incidental
expenditures. Indirect, general and administrative expenses include salaries and
benefits for management, administrative, marketing and sales personnel, bid and
proposal cost, occupancy and related overhead costs.
Substantially all of our cash flow is generated by our subsidiaries. As a
result, funds necessary to meet our debt service obligations are provided in
large part by distributions to or advances from our subsidiaries. Under certain
circumstances, legal and contractual restrictions as well as the financial
condition and operating requirements of the subsidiaries may limit our ability
to obtain cash from the subsidiaries.
Results of Operations
Fiscal 2000 Compared with Fiscal 1999
Revenues in fiscal 2000 were $2.2 billion, or 55% over the amount reported
in fiscal 1999. The growth in revenues is primarily attributable to the
acquisition of D-M in June 1999. In fiscal 1999, the results of operations of
D-M were included for only five months versus a full year in fiscal 2000. Our
internal growth rate in fiscal 2000 was approximately 5%.
Direct operating expenses increased $490.5 million, or 57% over the amount
reported in fiscal 1999. The increase is due to full year rather than five
months of direct operating expenses of D-M in fiscal 2000 and, to a lesser
extent, to increases in subcontractor costs and direct labor costs. Indirect,
general and administrative ("IG&A") expenses increased to $697.1 million in
fiscal 2000 from $463.1 million in fiscal 1999 as a result of the addition of
the D-M overhead as well as an increase in business activity. Included in
indirect expenses in fiscal 1999 was a $6.0 million fee incurred in connection
with the acquisition of D-M. In addition, there was a $4.0 million reversal of a
previously established reserve related to the settlement of a lawsuit in 1999.
Expressed as a percentage of revenues, IG&A expenses decreased slightly from 33%
in fiscal 1999 to 32% in fiscal 2000. We attribute this stability to cost
control. Net interest expense increased to $71.9 million in fiscal 2000 from
$34.6 million in fiscal 1999 as a result of increased borrowings incurred in
connection with the acquisition of D-M in June 1999.
With an effective income tax rate of 45.5% in 2000, we earned net income
available for common stockholders of $41.6 million compared to $33.2 million in
1999. The effective income tax rate in fiscal 1999 was 45.0%. We earned $2.27
per share on a diluted basis in fiscal 2000 compared to $1.98 per share in
fiscal 1999.
Our backlog of signed and funded contracts at October 31, 2000, was $1.7
billion as compared to $1.3 billion at October 31, 1999. The value of our
designations was $817 million at October 31, 2000, as compared to $775 million
at October 31, 1999.
10
Fiscal 1999 Compared with Fiscal 1998
Revenues in fiscal 1999 were $1.4 billion, or 76% over the amount reported
in fiscal 1998. The growth in revenues is primarily attributable to the
acquisition of D-M, the results of which are included commencing June 1999.
Accordingly, in fiscal 1999, the results of operations of D-M were included for
only five months.
Direct operating expenses increased $375.9 million to $854.5 million, or
79% over the amount reported in fiscal 1998. The increase is due to the addition
of the direct operating expenses of D-M and to increases in subcontractor costs
and direct labor costs. IG&A expenses increased to $463.1 million in fiscal 1999
from $277.1 million in fiscal 1998 as a result of the addition of the D-M
overhead as well as an increase in business activity. IG&A expenses in 1999 also
include $6.0 million in fees incurred in connection with the acquisition of D-M.
Finally, IG&A included a $4.0 million reversal of a previously established
reserve related to a settlement of a lawsuit. Expressed as a percentage of
revenues, IG&A expenses decreased slightly from 34% in fiscal 1998 to 33% in
fiscal 1999. We attribute this stability to cost control. Net interest expense
increased to $34.6 million in fiscal 1999 from $8.8 million in fiscal 1998 as a
result of increased borrowings incurred in connection with the acquisition of
D-M.
With an effective income tax rate of 45% in 1999, we earned net income
available for common stockholders of $33.2 million while in 1998 net income
available for common stockholders was $22.7 million after an effective income
tax rate of 45%. We earned $1.98 per share on a diluted basis in fiscal 1999
compared to $1.43 per share in fiscal 1998.
Our backlog of signed and funded contracts at October 31, 1999, was $1.3
billion as compared to $675 million at October 31, 1998. The value of our
designations was $775 million at October 31, 1999, as compared to $504 million
at October 31, 1998.
Income Taxes
We currently have $3.1 million net operating loss ("NOL") carryforwards,
the utilization of which is limited to $750,000 per year, pursuant to Section
382 of the Internal Revenue Code, related to our October 1989
quasi-reorganization. This NOL will expire in the fiscal year beginning 2004. We
also have available $11.4 million of foreign NOLs. These NOLs are available only
to offset income earned in foreign jurisdictions and expire at various dates.
We have recorded deferred tax assets and liabilities. The deferred tax
liability increased primarily because of the tax deductibility of
post-acquisition charges to the acquisition reserves related to the acquisition
of D-M. The net change in the total valuation allowance related to deferred tax
assets for the year ended October 31, 2000, was a decrease of $0.3 million due
to the utilization of domestic net operating losses, and an increase of $0.8
million due to current year foreign losses not benefited.
Liquidity and Capital Resources
At October 31, 2000, we had working capital of $394.6 million, an increase
of $28.4 million from October 31, 1999. As a professional services organization,
we are not capital intensive. Capital expenditures historically have been for
computer-aided design and general-purpose computer equipment to accommodate our
growth. Capital expenditures during fiscal years 2000, 1999, and 1998 were $15.9
million, $20.2 million and $12.2 million, respectively. We expect to continue to
have capital outlays consistent with our resulting relative growth.
Substantially all of our cash flow is generated by our subsidiaries. As a
result, funds necessary to meet our debt service obligations are provided in
large part by distributions to or advances from our subsidiaries. Under certain
circumstances, legal and contractual restrictions as well as the financial
condition and reporting requirements of the subsidiaries may limit our ability
to obtain cash from the subsidiaries.
11
Our liquidity and capital measurements are set forth below:
Years Ended October 31,
----------------------------------------------
2000 1999 1998
---- ---- ----
(Dollars in thousands)
Working capital..................................................... $ 394,560 $ 366,125 $ 130,969
Working capital ratio............................................... 2 to 1 1.9 to 1 1.8 to 1
Average days to convert billed accounts receivable to cash.......... 68 75 72
Percentage of debt to equity........................................ 175.8% 221.7% 69.7%
During fiscal year 2000, cash flow provided by operating activities totaled
$11.0 million. We intend to satisfy our working capital needs primarily through
internal cash generation. Our primary sources of liquidity are cash flow from
operations and borrowings under the senior collateralized credit facility, if
necessary. Our primary uses of cash are to fund our working capital needs and
capital expenditures and to service our debt. We believe that our existing
financial resources, together with our planned cash flow from operations and
existing credit facilities, will provide sufficient resources to fund our
operations and capital expenditure needs for the foreseeable future.
During fiscal 1999, we paid $376.2 million for the purchase of D-M. To fund
this transaction and to refinance outstanding bank debt, we incurred new
borrowings of $650.0 million from establishing a long-term senior collateralized
credit facility with a syndicate of banks led by Wells Fargo Bank, N.A. ("the
Bank") and from the issuance of the 12 1/4% Senior Subordinated Exchange Notes.
We also issued 46,083 shares of our Series B Exchangeable, Convertible Preferred
Stock to RCBA Strategic Partners, L.P. for an aggregate consideration of $100.0
million. The net proceeds of the debt were incurred to fund a portion of the D-M
acquisition and to refinance bank debt previously incurred in the acquisition of
W-C.
Senior Collateralized Credit Facility. The senior collateralized credit
facility was funded on June 9, 1999 ("Funding Date") and provides for three term
loan facilities in the aggregate amount of $450.0 million and a revolving credit
facility in the amount of $100.0 million. The term loan facilities consist of
Term Loan A, a $250.0 million tranche, Term Loan B, a $100.0 million tranche and
Term Loan C, another $100.0 million tranche.
Principal amounts under Term Loan A became due, commencing on October 31,
1999, in the amount of approximately $3.0 million per quarter for the subsequent
four quarters. Thereafter and through the sixth anniversary of the Funding Date,
annual principal payments under Term Loan A range from $23.0 million to a
maximum of $58.0 million with Term Loan A expiring and the then-outstanding
principal amount becoming due and repayable in full on June 9, 2005. Principal
amounts under Term Loan B became due, commencing on October 31, 1999, in the
amount of $1.0 million in each year through July 31, 2005, with Term Loan B
expiring and the then-outstanding principal amount becoming due and repayable in
full in equal quarterly installments in year seven. Principal amounts under Term
Loan C became due, commencing on October 31, 1999, in the amount of $1.0 million
in each year through July 31, 2006, with Term Loan C expiring and the
then-outstanding principal amount becoming due and repayable in full in equal
quarterly installments in year eight. The revolving credit facility expires and
is repayable in full on June 9, 2005.
The term loans each bear interest at a rate per annum equal to, at our
option, either the Base Rate or LIBOR, in each case plus an applicable margin.
The revolving credit facility bears interest at a rate per annum equal to, at
our option, the Base Rate, LIBOR or the Adjusted Sterling Rate, in each
case plus an applicable margin. The applicable margin adjusts according to a
performance-pricing grid based on our ratio of Consolidated Total Funded Debt to
Consolidated Earnings Before Income Taxes, Depreciation and Amortization
("EBITDA"). The "Base Rate" is defined as the higher of the Bank's Prime Rate
and the Federal Funds Rate plus 0.50%.
12
"LIBOR" is defined as the offered quotation by first class banks in the London
interbank market to the Bank for dollar deposits, as adjusted for reserve
requirements. The "Adjusted Sterling Rate" is defined as the rate per annum
displayed by Reuters at which Sterling is offered to the Bank in the London
interbank market as determined by the British Bankers' Association. We may
determine which interest rate options to use and interest periods will apply for
such periods for both term loans and the revolving credit facility.
At October 31, 2000, our revolving credit facility with the Bank provided
for advances up to $100.0 million. Also at October 31, 2000, we had outstanding
letters of credit in the aggregate amount of $36.5 million, which reduced the
amount available to us under our revolving credit facility to $63.5 million.
The senior collateralized credit facility is governed by affirmative and
negative covenants. These covenants include a requirement to submit quarterly
compliance certifications and restrictions upon incurring additional debt,
paying dividends, or making distributions to our stockholders, repurchasing or
retiring capital stock, and making subordinated junior debt payments. The
financial covenants include maintenance of a minimum current ratio of 1.20 to
1.00, a minimum fixed charge coverage ratio of 1.10 to 1.00, a four-quarter
EBITDA (as defined) minimum of $142.0 million and a maximum leverage ratio of
4.25 to 1.00 for the year ended October 31, 2000. We were fully compliant with
these covenants as of October 31, 2000.
12 1/4% Senior Subordinated Notes. Our notes were originally issued as
exchange notes and were exchanged in August 1999 for 12 1/4% Senior Subordinated
Notes due 2009. Each note bears interest at 12 1/4% per annum. Interest on the
notes will be payable semi-annually on May 1 and November 1 of each year,
commencing November 1, 1999. The notes are subordinate to the senior
collateralized credit facility. As of October 31, 2000, we owed $200.0 million
on our notes.
Certain of our wholly owned subsidiaries fully and unconditionally
guarantee the notes on joint and several bases. We may redeem any of the notes
beginning May 1, 2004. The initial redemption price is 106.125% of their
principal amount, plus accrued and unpaid interest. The redemption price will
decline each year after 2004 and will be 100% of their principal amount, plus
accrued and unpaid interest beginning on May 1, 2007. In addition, at any time
prior to May 1, 2002, we may redeem up to 35% of the principal amount of the
notes with net cash proceeds from the sale of capital stock. The redemption
price will be equal to 112.25% of the principal amount of the redeemed notes.
Interest Rate Swap Agreement. We have entered into an interest rate swap
agreement with the Bank. This agreement effectively fixes the interest rate on
$48.8 million of our LIBOR-based borrowings at 5.97% plus the applicable margin
through November 30, 2000. The actual borrowing cost to us with respect to
indebtedness covered by the interest rate swap will depend upon the applicable
margin over LIBOR for such indebtedness, which will be determined by the terms
of the relevant debt instruments. Currently, it is expected that the contractual
margin will range from 2.25% to 3.50%, which will provide for an all-in annual
interest rate range from 8.22% to 9.47%.
Interest Rate Cap Agreement. We entered into an interest rate cap agreement
with the Bank. This agreement caps our interest rate at 7% for $165.5 million of
our LIBOR-based borrowings through July 31, 2002, and is in addition to the
interest rate swap agreement stated above.
Other Related Party Transaction. Mr. Koffel, Mr. Ainsworth and Mr.
Rosenstein have disposed of shares of our Common Stock, both in cashless
transactions with the Company and in market transactions, in connection with
exercises of stock options, the vesting of restricted stock and the payment of
withholding taxes due with respect to such exercises and vesting. Mr. Koffel,
Mr. Ainsworth, Mr. Rosenstein, other Named Executives and other officers of the
Company may continue to dispose of shares of our Common Stock in this manner and
for similar purposes.
13
Acquisitions
In November 1997, we acquired W-C for Common Stock, cash and debt of $132.4
million.
(In thousands)
Purchase price of W-C (net of prepaid loan fees of $4.0 million).................. $ 128,366
Fair value of assets acquired..................................................... (36,194)
------------
Excess purchase price over net assets acquired.................................... $ 92,172
===========
On February 1, 1999, we acquired privately held T-C, for an aggregate
purchase price of $13.6 million including assumption of its debt.
In June 1999, we acquired D-M for cash and debt of $376.2 million.
(In thousands)
Purchase price of D-M (net of debt)............................................... $ 357,429
Acquisition costs (net of financing fees)......................................... 18,738
Fair value of assets acquired..................................................... (148,154)
--------
Incremental additional excess purchase price over net assets acquired............. 228,013
-------
D-M historical goodwill, net...................................................... 160,378
-------
Aggregate goodwill................................................................ $ 388,391
==========
During the year ended October 31, 1999, we provided for $37.0 million of
costs in connection with the acquisition of D-M and our reorganization plans to
integrate D-M's operations. These costs consist of project claims and cost
over-runs, lease fees, severance and miscellaneous items.
The following table summarizes the activity in the merger-related accruals
during the year ended October 31, 2000 relating to the D-M acquisition.
Balance Balance
October 31, 1999 Payments October 31, 2000
----------------- ---------- -----------------
(In millions)
Project claims.............................................. $ 10.0 $ (10.0) $ --
Severance and related costs................................. 4.9 (4.9) --
Lease termination fees and project cost over-runs........... 14.5 (14.5) --
Miscellaneous expenses...................................... 3.6 (3.6) --
------ -------- ------
Total....................................................... $ 33.0 $ (33.0) $ --
====== ======== ======
During the year ended October 31, 1998, we provided for $10.8 million of
costs related to the acquisition of W-C and our reorganization plans to
integrate W-C's operations. These costs consist of project claims, lease fees,
severance and miscellaneous items.
The following table summarizes the activity in the merger-related accruals
during the year ended October 31, 2000 relating to the W-C acquisition.
Balance Balance
October 31, 1999 Payments October 31, 2000
----------------- ---------- -----------------
(In millions)
Project claims.............................................. $ 2.2 $ (2.2) $ --
Lease termination fees...................................... 0.9 (0.9) --
----- -------- -----
Total....................................................... $ 3.1 $ (3.1) $ --
==== ======== =====
14
Risk Factors That Could Affect Our Financial Condition and Results of Operations
In addition to the other information included or incorporated by reference
in this Form 10-K, the following factors could affect our actual results:
Our substantial indebtedness could adversely affect our financial condition.
We are a highly leveraged company. As of October 31, 2000, we had
approximately $648.4 million of outstanding indebtedness following consummation
of the D-M acquisition and the related financing plan. This level of
indebtedness could have important consequences, including the following:
o it may limit our ability to borrow money or sell stock for working
capital, capital expenditures, debt service requirements or other
purposes;
o it may limit our flexibility in planning for, or reacting to, changes
in our business;
o we could be more highly leveraged than some of our competitors, which
may place us at a competitive disadvantage;
o it may make us more vulnerable to a downturn in our business or the
economy; and
o a substantial portion of our cash flow from operations could be
dedicated to the repayment of our indebtedness and would not be
available for other purposes.
To service our indebtedness we will require a significant amount of cash. The
ability to generate cash depends on many factors beyond our control.
Our ability to make payments on our indebtedness depends on our ability to
generate cash in the future. If we do not generate sufficient cash flow to meet
our debt service and working capital requirements, we may need to seek
additional financing or sell assets. This need may make it more difficult for us
to obtain financing on terms that are acceptable to us, or at all. Without this
financing, we could be forced to sell assets to make up for any shortfall in our
payment obligations under unfavorable circumstances.
Our senior collateralized credit facility and our obligations under the
notes limit our ability to sell assets and also restrict the use of proceeds
from any such sale. Moreover, the senior collateralized credit facility is
secured by substantially all of our assets. Furthermore, substantial portions of
our assets are, and may continue to be, intangible assets. Therefore, we cannot
assure you that our assets could be sold quickly enough or for sufficient
amounts to enable us to meet our debt obligations.
Restrictive covenants in our senior collateralized credit facility and the
indenture relating to the notes may restrict our ability to pursue business
strategies.
Our senior collateralized credit facility and indenture relating to the
notes restrict our ability, among other things, to:
o incur additional indebtedness or contingent obligations;
o pay dividends or make distributions to our stockholders;
o repurchase or redeem our stock;
o make investments;
o grant liens;
o make capital expenditures;
o enter into transactions with our stockholders and affiliates;
o sell assets; and
o acquire the assets of, or merge or consolidate with, other companies.
15
In addition, our senior collateralized credit facility requires us to
maintain certain financial ratios. We may not be able to maintain these ratios.
Additionally, covenants in the senior collateralized credit facility and the
indenture relating to the notes may impair our ability to finance future
operations or capital needs or to engage in other favorable business activities.
If we default under our various debt obligations, the lenders could require
immediate repayment of the entire principal. If the lenders require immediate
repayment, we will not be able to repay them, and our inability to meet our debt
obligations could have a material adverse effect on our business, financial
condition and results of operations.
We derive approximately 55% of our revenues from contracts with government
agencies. Any disruption in government funding or in our relationship with those
agencies could adversely affect our business and our ability to meet our debt
obligations.
We derive approximately 55% of our revenues from local, state and Federal
government agencies. The demand for our services will be directly related to the
level of government program funding that is allocated to rebuild and expand the
nation's infrastructure. We believe that the success and further development of
our business depend upon the continued funding of these government programs and
upon our ability to participate in these government programs. We cannot assure
you that governments will have the available resources to fund these programs,
that these programs will continue to be funded even if governments have
available financial resources, or that we will continue to win government
contracts under these or other programs.
Some of these government contracts are subject to renewal or extension
annually, so we cannot assure you of our continued work under these contracts in
the future. Unsuccessful bidders may protest or challenge the award of these
contracts. In addition, government agencies can terminate these contracts at
their convenience. Consequently, we may incur costs in connection with the
termination of these contracts. Also, contracts with government agencies are
subject to substantial regulation and an audit of actual costs incurred.
Consequently, there may be a downward adjustment in our revenues if actual
recoverable costs exceed billed recoverable costs.
We must maintain our present responsibility to be eligible to perform
government contracts. From time to time allegations of improper conduct in
connection with government contracting have been made against us and these could
be the subject of suspension or debarment consideration. We investigate all such
allegations thoroughly and believe that appropriate actions have been taken in
all cases. Additionally, we maintain a compliance program in an effort to assure
that no improper conduct occurs in connection with government contracting.
We may be unable to estimate accurately our cost in performing services for our
clients. This may cause us to have low profit margins or incur losses.
We submit proposals on projects with an estimate of the costs that we will
likely incur. To the extent we cannot control overhead, general and
administrative and other costs, or if we underestimate such costs, we may have
low profit margins or may incur losses.
We are subject to risks from changes in environmental legislation, regulation
and governmental policies.
Federal laws, such as the Resource Conservation and Recovery Act of 1976,
as amended, and the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, ("CERCLA"), and various state and local laws
strictly regulate the handling, removal, treatment and transportation of toxic
and hazardous substances and impose liability for environmental contamination
caused by such substances. Moreover, so-called "toxic tort" litigation has
increased markedly in recent years as people injured by hazardous substances
seek recovery for personal injuries or property damage. We handle, remove, treat
and transport toxic or hazardous substances. Consequently, we may be exposed to
claims for damages caused by environmental contamination.
Federal and state laws, regulations, and programs related to environmental
issues will generate, either directly or indirectly, much of our environmental
business. Accordingly, a reduction of these laws and
16
regulations, or changes in governmental policies regarding the funding,
implementation or enforcement of these programs, could have a material effect on
our business. Environmental laws, regulations and enforcement policies remained
essentially unchanged during fiscal year 2000, including further deferral of
congressional reauthorization of CERCLA. The outlook for congressional action on
CERCLA legislation in fiscal year 2001 remains unclear.
Our liability for damages due to legal proceedings may be significant. Our
insurance may not be adequate to cover this risk.
Various legal proceedings are pending against us alleging, among other
things, breaches of contract or negligence in connection with our performance of
professional services. In some actions punitive or treble damages are sought
that substantially exceed our insurance coverage. If we sustain damages greater
than our insurance coverage, there could be a material adverse effect on our
business, financial condition and results of operations.
Our engineering practices, including general engineering and civil
engineering services, involve professional judgments about the nature of soil
conditions and other physical conditions, including the extent to which toxic
and hazardous materials are present and the probable effect of procedures to
mitigate problems or otherwise affect those conditions. If the judgments and the
recommendations based upon those judgments are incorrect, we may be liable for
resulting damages that our clients incur.
The failure to attract and retain key professional personnel could adversely
affect our business.
The ability to attract, retain and expand our staff of qualified technical
professionals will be an important factor in determining our future success. A
shortage of qualified technical professionals currently exists in the
engineering and design industry. The market for these professionals is
competitive, and we cannot assure you that we will be successful in our efforts
to continue to attract and retain such professionals. In addition, we will rely
heavily upon the experience and ability of our senior executive staff and the
loss of a significant number of these individuals could have a material adverse
effect on our business, financial condition and results of operations.
We may be unable to compete successfully in our industry.
We are engaged in highly fragmented and very competitive markets in our
service areas. We will compete with firms of various sizes, several of which are
substantially larger than us and possess greater technical resources.
Furthermore, the engineering and design industry is undergoing consolidation,
particularly in the United States. As a result, we will compete against several
larger companies that have the ability to offer more diverse services to a wider
client base. These competitive forces could have a material adverse effect on
our business, financial condition and results of operations.
Our international operations are subject to a number of risks that could
adversely affect the results from these operations and our overall business.
As a worldwide provider of engineering services, we have operations in over
30 countries and derive approximately 11% of our revenues from international
operations. International business is subject to the customary risks associated
with international transactions, including political risks, local laws and
taxes, the potential imposition of trade or currency exchange restrictions,
tariff increases and difficulties or delays in collecting accounts receivable.
Weak foreign economies and/or a weakening of foreign currencies against the U.S.
dollar could have a material adverse effect on our business, financial condition
and results of operations.
Additional acquisitions may adversely affect our ability to manage our business.
Historically, we have completed numerous acquisitions and, in implementing
our business strategy, we may continue to do so in the future. We cannot assure
you that we will identify, finance and complete additional suitable acquisitions
on acceptable terms. We may not successfully integrate future acquisitions. Any
acquisitions may require substantial attention from our management, which may
limit the amount of time that management can devote to daily operations. Our
inability to find additional attractive acquisition candidates or to effectively
manage the integration of any businesses acquired in the future could adversely
affect our business, financial condition and results of operations.
17
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to changes in interest rates as a result of our borrowings
under our senior collateralized credit facility. If market rates average 1% more
in fiscal year 2001 than in fiscal year 2000, our net of tax interest expense,
after considering the effect of the interest rate cap agreement, would increase
by approximately $1.6 million. Conversely, if market rates average 1% less in
fiscal year 2001 than in fiscal year 2000, our net of tax interest expense would
decrease by approximately $2.2 million.
The final interest rate settlement for our interest rate swap agreement had
been determined prior to the close of fiscal year 2000. Therefore, changes in
interest rates will not be impacted by our then-existing interest rate swap
agreement, which expired on November 30, 2000.
18
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Stockholders of URS Corporation:
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows present fairly, in all material respects, the financial position
of URS Corporation and its subsidiaries at October 31, 2000 and 1999, and the
results of their operations and their cash flows for each of the three years in
the period ended October 31, 2000 in conformity with accounting principles
generally accepted in the United States. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
---------------------------------
PRICEWATERHOUSECOOPERS LLP
San Francisco, California
December 20, 2000
19
URS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
October 31,
-----------------------------------
2000 1999
-------------- --------------
ASSETS
Current assets:
Cash and cash equivalents................................................ $ 23,693 $ 45,687
Accounts receivable, including retainage amounts of $43,029 and $41,724.. 464,074 477,731
Costs and accrued earnings in excess of billings on contracts in process. 281,757 228,841
Less receivable allowances............................................... (36,826) (40,611)
-------------- --------------
Net accounts receivable.............................................. 709,005 665,961
------------- -------------
Income taxes recoverable................................................. 16,668 --
Deferred income taxes.................................................... 4,859 17,043
Prepaid expenses and other assets........................................ 22,325 24,111
------------- -------------
Total current assets................................................. 776,550 752,802
Property and equipment at cost, net......................................... 88,661 93,165
Goodwill, net............................................................... 514,611 529,697
Other assets................................................................ 47,312 68,861
------------- -------------
$ 1,427,134 $ 1,444,525
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt....................................... $ 45,223 $ 39,423
Accounts payable......................................................... 125,165 130,045
Accrued salaries and wages............................................... 92,212 89,023
Accrued expenses and other............................................... 28,915 57,873
Billings in excess of costs and accrued earnings on contracts in process. 90,475 70,313
------------- -------------
Total current liabilities............................................ 381,990 386,677
Long-term debt.............................................................. 603,128 648,957
Deferred income taxes....................................................... 33,157 22,305
Deferred compensation and other............................................. 40,052 76,084
------------- -------------
Total liabilities.................................................... 1,058,327 1,134,023
------------- -------------
Commitments and contingencies (Note 10)
Mandatorily redeemable Series B exchangeable convertible preferred stock, par
value $1.00, authorized 150 shares, issued 51 and 48, respectively;
liquidation preference $111,013 and $103,333, respectively 111,013 103,333
------------- -------------
Stockholders' equity:
Common stock, par value $.01; authorized 50,000 shares; issued 16,834 and
15,925 shares, respectively............................................. 168 159
Treasury stock........................................................... (287) (287)
Additional paid-in capital............................................... 137,389 125,462
Foreign currency translation adjustment.................................. (2,412) 197
Retained earnings........................................................ 122,936 81,638
------------- -------------
Total stockholders' equity........................................... 257,794 207,169
------------- -------------
$ 1,427,134 $ 1,444,525
============= =============
See Notes to Consolidated Financial Statements
20
URS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Years Ended October 31,
----------------------------------------------
2000 1999 1998
---- ---- ----
Revenues............................................................. $ 2,205,578 $ 1,418,522 $ 805,946
------------- ------------- -------------
Expenses:
Direct operating.................................................. 1,345,068 854,520 478,640
Indirect, general and administrative.............................. 697,051 463,132 277,065
Interest expense, net............................................. 71,861 34,589 8,774
------------- ------------- -------------
2,113,980 1,352,241 764,479
------------- ------------- -------------
Income before taxes.................................................. 91,598 66,281 41,467
Income tax expense................................................... 41,700 29,700 18,800
------------- ------------- -------------
Net income........................................................... 49,898 36,581 22,667
Preferred stock dividend............................................. 8,337 3,333 --
------------- ------------- -------------
Net income available for common stockholders......................... 41,561 33,248 22,667
Other comprehensive income, net of tax:
Foreign currency translation adjustments............................. (2,609) 197 --
-------------- ------------- -------------
Comprehensive income................................................. $ 38,952 $ 33,445 $ 22,667
============= ============= =============
Net income per common share:
Basic............................................................. $ 2.55 $ 2.14 $ 1.51
============= ============= =============
Diluted........................................................... $ 2.27 $ 1.98 $ 1.43
============= ============= =============
See Notes to Consolidated Financial Statements
21
URS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In thousands, except per share data)
Common Stock Accumulated
--------------------- Additional Other Total
Treasury Paid-in Comprehensive Retained Stockholders'
Shares Amount Stock Capital Income Earnings Equity
------- ------- ---------- ---------- ------------ -------- ------------
Balances, October 31, 1997..................... 10,741 $ 107 $ (287) $ 51,085 $ -- $ 26,246 $ 77,151
Employee stock purchases....................... 420 4 -- 4,601 -- -- 4,605
Issuance of 4,044,804 shares in connection
with the Woodward-Clyde Group, Inc
acquisition.................................. 4,045 41 -- 61,896 -- -- 61,937
Quasi-reorganization NOL carryforward.......... -- -- -- 260 -- (260) --
Net income..................................... -- -- -- -- -- 22,667 22,667
-------- -------- --------- --------- ----------- --------- -----------
Balances, October 31, 1998..................... 15,206 152 (287) 117,842 -- 48,653 166,360
Employee stock purchases....................... 719 7 -- 8,857 -- -- 8,864
Preferred stock issuance costs................. -- -- -- (1,500) -- -- (1,500)
Quasi-reorganization NOL carryforward.......... -- -- -- 263 -- (263) --
Total comprehensive income:
Foreign currency translation before and
after tax.................................... -- -- -- -- 197 -- 197
Net income..................................... -- -- -- -- -- 36,581 36,581
Preferred stock dividends...................... -- -- -- -- -- (3,333) (3,333)
-------- -------- --------- --------- ----------- ---------- ------------
Balances, October 31, 1999..................... 15,925 159 (287) 125,462 197 81,638 207,169
Employee stock purchases....................... 909 9 -- 9,209 -- -- 9,218
Tax benefit of stock options................... -- -- -- 2,455 -- -- 2,455
Quasi-reorganization NOL carryforward.......... -- -- -- 263 -- (263) --
Total comprehensive income:
Foreign currency translation before and
after tax.................................... -- -- -- -- (2,609) -- (2,609)
Net income..................................... -- -- -- -- -- 49,898 49,898
Preferred stock dividends...................... -- -- -- -- -- (8,337) (8,337)
-------- -------- --------- --------- ----------- ---------- ------------
Balances, October 31, 2000..................... 16,834 $ 168 $ (287) $ 137,389 $ (2,412) $ 122,936 $ 257,794
======== ======== ========== ========= ============ ========= ==========
See Notes to Consolidated Financial Statements
22
URS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Years Ended October 31,
-----------------------------------------------
2000 1999 1998
---- ---- ----
Cash flows from operating activities:
Net income......................................................... $ 49,898 $ 36,581 $ 22,667
----------- --------- ---------
Adjustments to reconcile net income to net cash provided (used) by
operating activities:
Depreciation and amortization..................................... 41,829 32,177 17,914
Amortization of financing fees.................................... 3,467 1,587 642
Receivable allowances............................................. (3,785) (285) (2,351)
Stock compensation................................................ 1,179 1,726 --
Tax benefit of stock options...................................... 2,455 -- --
Changes in current assets and liabilities, net of business acquired:
Accounts receivable and costs and accrued earnings in excess
of billings on contracts in process.............................. (39,259) (86,266) (12,961)
Income taxes recoverable.......................................... (16,668) -- --
Prepaid expenses and other assets................................. (1,224) (1,737) (25)
Accounts payable, accrued salaries and wages and accrued
expenses......................................................... (27,620) (15,215) 2,186
Billings in excess of costs and accrued earnings on
contracts in process............................................. 20,162 33,307 23
Deferred income taxes............................................. 23,036 5,831 12,695
Deferred compensation and other................................... (36,032) -- --
Other, net........................................................ (6,414) 1,047 --
------------- ------------ ------------
Total adjustments................................................. (38,874) (27,828) 18,123
------------ ------------- ------------
Net cash provided by operating activities..................... 11,024 8,753 40,790
------------ ------------ ------------
Cash flows from investing activities:
Payment for business acquisition, net of cash acquired............. -- (316,167) (36,937)
Proceeds from sale of subsidiaries................................. 25,354 -- --
Capital expenditures, less equipment purchased through capital
leases of $10,040, $11,651 and $12,200, respectively............. (15,885) (20,248) (12,201)
------------- ------------- -------------
Net cash provided (used) by investing activities.............. 9,469 (336,415) (49,138)
------------ ------------ ------------
Cash flows from financing activities:
Payments of merger fees............................................ -- (18,738) (4,705)
Proceeds from issuance of debt..................................... -- 854,739 110,000
Principal payments on long-term debt, bank borrowings and capital
lease obligations, excluding capital lease obligations to purchase
equipment of $10,040, $11,651 and $12,200, respectively.......... (50,526) (593,222) (83,157)
Proceeds from sale of common shares and exercise of stock options.. 8,039 7,138 4,605
Proceeds from issuance of preferred stock.......................... -- 100,000 --
Payment of financing fees.......................................... -- (11,597) (4,000)
Payment of financing fees related to issuance of preferred stock... -- (1,500) --
------------ ------------- ------------
Net cash (used) provided by financing activities.............. (42,487) 336,820 22,743
------------- ------------ ------------
Net (decrease) increase in cash............................... (21,994) 9,158 14,395
Cash at beginning of year............................................ 45,687 36,529 22,134
------------ ------------ ------------
Cash at end of year.................................................. $ 23,693 $ 45,687 $ 36,529
=========== ========= =========
Supplemental information:
Interest paid................................................. $ 66,774 $ 24,903 $ 7,857
=========== =========== ===========
Taxes paid.................................................... $ 34,726 $ 22,562 $ 18,398
=========== =========== ===========
Equipment subject to capital lease obligations................ $ 10,040 $ 11,651 $ 12,200
=========== =========== ===========
Non-cash dividends paid in-kind............................... $ 7,680 $ 3,333 $ --
=========== =========== ===========
Net book value of business sold............................... $ 25,354 $ -- $ --
=========== =========== ===========
See Notes to Consolidated Financial Statements
23
URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ACCOUNTING POLICIES
Business
URS Corporation (the "Company") offers a broad range of planning, design,
and program and construction management services for transportation, hazardous
waste, industrial processing and petrochemical, general building and
water/wastewater projects. Headquartered in San Francisco, the Company operates
in more than 30 countries with approximately 15,900 employees providing
engineering services to Federal, state and local governmental agencies as well
as to private clients in the chemical, manufacturing, pharmaceutical, forest
products, mining, oil and gas, and utilities industries.
Principles of Consolidation and Basis of Presentation
The consolidated financial statements include the accounts of URS
Corporation and its subsidiaries, all of which are wholly owned. All significant
intercompany accounts and transactions have been eliminated in consolidation.
The Company includes in current assets and liabilities amounts realizable and
payable under engineering and construction contracts that extend beyond one
year. The consolidated financial statements account for the acquisitions of
Woodward-Clyde Group, Inc. ("W-C") in November 1997, Thorburn Colquhoun
Holdings, plc ("T-C") in February 1999, and Dames & Moore Group ("D-M") in June
1999, as purchases. See Note 2, Acquisitions.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amount of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Revenue Recognition
Revenue from contract services is recognized by the
percentage-of-completion method and includes a proportion of the earnings
expected to be realized on a contract in the ratio that costs incurred bear to
estimated total costs. Revenue on cost reimbursable contracts is recorded as
related contract costs are incurred and includes estimated earned fees in the
proportion that costs incurred to date bear to total estimated costs. The fees
under certain government contracts may be increased or decreased in accordance
with cost or performance incentive provisions which measure actual performance
against established targets or other criteria. Such incentive fee awards or
penalties are included in revenue at the time the amounts can be reasonably
determined. Revenue for additional contract compensation related to unpriced
change orders is recorded when realization is probable. Revenue from claims by
the Company for additional contract compensation is recorded when agreed to by
the customer. If estimated total costs on any contract indicate a loss, the
Company provides currently for the total loss anticipated on the contract.
Costs under contracts with the Federal, state and local government agencies
are subject to government audit upon contract completion. Therefore, all
contract costs, including direct and indirect, general and administrative
expenses, are potentially subject to adjustment prior to final reimbursement.
Management believes that adequate provision for such adjustments, if any, has
been made in the accompanying consolidated financial statements. All overhead
and general and administrative expense recovery rates for fiscal 1997 through
fiscal 2000 are subject to review by the Federal, state and local government
agencies.
24
URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)
Concentrations of Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of trade receivables.
Concentrations of credit risk with respect to trade receivables are limited due
to the large numbers of customers comprising the Company's customer base and
their dispersion across different business and geographic areas. As of October
31, 2000 and 1999, the Company had no significant concentrations of credit risk.
The Company maintains reserves for potential credit losses and such losses have
been within management's expectations. Cash balances are held in financial
institutions in concentrations that may exceed insured limits.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents.
Fair Value of Financial Instruments
Carrying amounts of certain of the Company's financial instruments
including cash, accounts receivable, accounts payable and other liabilities
approximate fair value due to their short maturities. Based on borrowing rates
currently available to the Company for loans with similar terms, the carrying
values of long-term debt approximate fair value.
Income Taxes
The Company uses an asset and liability approach for financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
computed annually for differences between the financial statement and tax bases
of assets and liabilities that will result in taxable or deductible amounts in
the future based on enacted tax laws and rates applicable to the periods in
which the differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amount expected to be realized. Income tax expense is the tax payable for the
period plus or minus the change in deferred tax assets and liabilities during
the period.
Interest Rate Risk Management
The Company has entered into various interest rate protection agreements
(swap and cap) on $214.3 million of the Company's London Interbank Offered Rate
("LIBOR") bank term loan borrowings. The related cost of these agreements is
amortized over the life of the bank term loan borrowings and such amortization
is recorded to interest expense. The Company enters into interest rate risk
management arrangements with financial institutions meeting certain minimum
financial criteria, and the related credit risk of non-performance by
counter-parties is not deemed to be significant.
Property and Equipment
Property and equipment are stated at cost. In the year assets are retired
or otherwise disposed of, the costs and related accumulated depreciation are
removed from the accounts and any gain or loss on disposal is included in
income. Depreciation is provided on the straight-line method using estimated
lives ranging from 5 to 10 years for property and equipment. Leasehold
improvements are amortized over the length of the lease or estimated useful
life, whichever is less.
25
URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)
Income Per Common Share
The Company has adopted the provisions of Statement of Financial Accounting
Standards No. 128 ("SFAS 128"), Earnings Per Share, effective November 1, 1997.
SFAS 128 requires the presentation of basic and diluted income per common share.
Basic income per common share is computed by dividing net income available to
common stockholders by the weighted-average number of common shares outstanding
for the period. Diluted income per common share is computed giving effect to all
dilutive potential common shares that were outstanding during the period.
Dilutive potential common shares consist of the incremental common shares
issuable upon the exercise of stock options for all periods and convertible
preferred stock for the years ended October 31, 1999 and 2000.
In accordance with the disclosure requirement of SFAS 128, a reconciliation
of the numerator and denominator of basic and diluted income per common share is
provided as follows (in thousands, except per share data):
Years ended October 31,
-----------------------------------------
2000 1999 1998
------------- ------------- -------------
(in thousands, except per share amounts)
Numerator--Basic
Net income available for common stockholders........... $ 41,561 $ 33,248 $ 22,667
========= ========= =========
Denominator--Basic
Weighted-average common stock outstanding............ 16,272 15,499 14,963
========== ========== ==========
Basic income per share............................... $ 2.55 $ 2.14 $ 1.51
========= ========= =========
Numerator--Diluted
Net income available for common stockholders......... $ 41,561 $ 33,248 $ 22,667
Preferred stock dividend............................. 8,337 3,333 --
---------- ---------- ----------
Net income............................................. $ 49,898 $ 36,581 $ 22,667
========= ========= =========
Denominator--Diluted
Weighted-average common stock outstanding.............. 16,272 15,499 14,963
Effect of dilutive securities:
Stock options.......................................... 943 1,180 845
Convertible preferred stock............................ 4,805 1,805 --
---------- ---------- ----------
22,020 18,484 15,808
========== ========== ==========
Diluted income per share............................... $ 2.27 $ 1.98 $ 1.43
========= ========= =========
Stock options to purchase 2,088,819 shares of Common Stock at prices
ranging from $15.75 to $28.00 per share were outstanding at October 31, 2000,
but were not included in the computation of diluted income per share because the
exercise price was greater than the average market value of the common shares.
Convertible subordinated debt was not included in the computation of diluted
income per share because it would be anti-dilutive.
Stock options to purchase 60,000 shares of Common Stock at $28.00 were
outstanding at October 31, 1999, but were not included in the computation of
diluted income per share because the exercise price was greater than the average
market value of the common shares. Convertible subordinated debt was not
included in the computation of diluted income per share because it would be
anti-dilutive.
Stock options to purchase 7,000 shares of Common Stock at prices ranging
from $16.13 to $31.25 per share were outstanding at October 31, 1998, but were
not included in the computation of diluted income per share because the exercise
price was greater than the average market value of the common shares.
Convertible subordinated debt was not included in the computation of diluted
income per share because it would be anti-dilutive.
26
URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)
Segment and Related Information
In fiscal 1999, the Company adopted Statement of Financial Accounting
Standards No. 131 ("SFAS 131"), "Disclosures about Segments of an Enterprise and
Related Information." SFAS No. 131 establishes standards for reporting
information about operating segments and related disclosures about products,
geographic information and major customers.
Reporting Comprehensive Income
The Company adopted Statement of Financial Accounting Standards No. 130
"Reporting of Comprehensive Income" ("SFAS 130"), in fiscal 1999. SFAS 130
establishes new standards for reporting and displaying comprehensive income and
its components. Other comprehensive income refers to revenues, expenses, gains,
and losses that under generally accepted accounting principles are included in
comprehensive income but are excluded from net earnings as these amounts are
recorded directly as an adjustment to stockholders' equity. The Company's
comprehensive income primarily comprises foreign currency translation
adjustments.
Adoption of Statements of Financial Accounting Standards
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 establishes
accounting and reporting standards for derivative instruments, including
derivative instruments that are embedded in other contracts, and for hedging
activities. SFAS 133 was effective for all fiscal quarters of all fiscal years
beginning after June 15, 1999; however, in June 1999, the FASB issued Statement
of Financial Accounting Standards No. 137 "Accounting for Derivative Instruments
and Hedging Activities--Deferral of the Effective Date of SFAS Statement No.
133" ("SFAS 137"). SFAS 137 deferred the effective date until fiscal years
beginning after June 15, 2000. The Company adopted SFAS 133 on November 1, 2000.
As of this date, contracts held by the Company that would meet the definition of
a derivative contained in SFAS 133 include the interest rate cap, and interest
rate swap agreements. The Company intends to elect in accordance with SFAS 133
to account for both of these derivatives at fair market value. As of October 31,
2000, the fair market values of these derivatives are immaterial. The interest
rate swap agreement expired on November 30, 2000. The Company does not expect
the adoption of SFAS 133 will have a material impact on the financial statements
taken as a whole.
Reclassifications
Certain reclassifications have been made to the 1998 and 1999 financial
statements to conform to the 2000 presentation with no effect on net income as
previously reported.
NOTE 2. ACQUISITIONS
During the year ended October 31, 1999, the Company acquired publicly held
D-M for cash in the amount of $376.2 million. The acquisition has been accounted
for by the purchase method of accounting and the excess of the fair value of the
net assets acquired over the purchase price in the amount of $388.3 million has
been allocated to goodwill and is being amortized over 40 years. The operating
results of D-M are included in the Company's results of operations from the date
of purchase.
The following unaudited proforma summary presents the consolidated results
of operations as if the D-M acquisition had occurred at the beginning of periods
presented and does not purport to indicate what would have occurred had the
acquisition been made as of that date or of results which may occur in the
future.
27
URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)
Fiscal Years Ended October 31:
1999 1998
---- ----
(In thousands, except per share amounts)
Unaudited
Revenues......................... $ 2,089,701 $ 1,895,184
Net income....................... $ 31,101 $ 11,071
Net income per share............. $ 1.46 $ .70
During the year ended October 31, 1999, the Company acquired privately held
T-C for an aggregate purchase price of $13.6 million including assumption of its
debt. The total purchase price was paid in cash. The acquisition has been
accounted for by the purchase method of accounting and the excess of the fair
value of the net assets acquired over the purchase price in the amount of $10.0
million has been allocated to goodwill and is being amortized over 30 years. The
operating results of T-C are included in the Company's results of operations
from the date of purchase. Pro forma operating results for the twelve months
ended October 31, 1999 and 1998, as if the acquisition had been made on November
1, 1997, are not presented because they would not be materially different from
the Company's reported results.
During the year ended October 31, 1998, the Company acquired W-C for an
aggregate purchase price of $132.4 million, comprising cash of $39.2 million,
assumption of debt of $31.3 million, and 4.0 million shares of the Company's
Common Stock valued at $61.9 million. The acquisition has been accounted for by
the purchase method of accounting and the excess of the fair value of the net
assets acquired over the purchase price in the amount of $92.1 million has been
allocated to goodwill and is being amortized over 30 years. The operating
results of W-C are included in the Company's results of operations from the date
of purchase.
During the year ended October 31, 1999, the Company provided for $37.0
million of costs in connection with the acquisition of D-M and the Company's
reorganization plans to integrate D-M's operations into the Company. These costs
consist of project claims and cost over-runs, lease fees, severance and
miscellaneous items.
The following table summarizes the activity in the merger-related accruals
during the year ended October 31, 2000 relating to the D-M acquisition.
Balance Balance
October 31, 1999 Payments October 31, 2000
---------------- -------- ----------------
(In millions)
Project claims................ $ 10.0 $ (10.0) $ --
Severance and related costs... 4.9 (4.9) --
Lease termination fees and
project cost over-runs........ 14.5 (14.5) --
Miscellaneous expenses........ 3.6 (3.6) --
------- -------- -------
Total......................... $ 33.0 $ (33.0) $ --
======= ======== =======
During the year ended October 31, 1998, the Company provided for $10.8
million of costs related to the acquisition of W-C and the Company's
reorganization plans to integrate W-C's operations into the Company. These costs
consist of project claims, lease fees, severance and miscellaneous items.
28
URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)
The following table summarizes the activity in the merger-related
accruals during the year ended October 31, 2000 relating to the W-C acquisition.
Balance Balance
October 31, 1999 Payments October 31, 2000
---------------- -------- ----------------
(In millions)
Project claims................ $ 2.2 $ (2.2) $ --
Lease termination fees........ 0.9 (0.9) --
------- -------- -------
Total......................... $ 3.1 $ (3.1) $ --
======= ======== =======
NOTE 3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
October 31,
----------------------------
2000 1999
---- ----
(In thousands)
Equipment.................................... $ 124,557 $ 124,061
Furniture and fixtures....................... 24,926 22,581
Leasehold improvements....................... 13,710 14,400
Building..................................... 487 487
Land......................................... 117 117
----------- -----------
163,797 161,646
Less: accumulated depreciation and
amortization............................... (75,136) (68,481)
----------- -----------
Net property and equipment................... $ 88,661 $ 93,165
=========== ===========
Depreciation expense for the years ended 2000, 1999 and 1998 was $26.6
million, $17.3 million and $9.7 million, respectively.
NOTE 4. GOODWILL
Goodwill represents the excess of the purchase price over the fair
value of the net tangible assets of various operations acquired by the Company.
Accumulated amortization at October 31, 2000 and 1999, was $39.2 million and
$26.9 million, respectively. Goodwill is amortized on the straight-line method
over periods ranging from 30 to 40 years.
NOTE 5. INCOME TAXES
The components of income tax expense applicable to the operations each
year are as follows:
Years Ended October 31,
-----------------------
2000 1999 1998
---- ---- ----
(In thousands)
Current:
Federal....................... $ 18,550 $ 17,820 $ 11,170
State and local............... 4,040 3,380 1,920
Foreign....................... 4,110 450 220
--------- --------- ---------
Subtotal.................. 26,700 21,650 13,310
--------- --------- ---------
Deferred:
Federal....................... 13,940 7,687 5,320
State and local............... 1,550 583 170
Foreign....................... (490) (220) --
--------- ---------- ---------
Subtotal.................. 15,000 8,050 5,490
--------- --------- ---------
Total tax provision...... $ 41,700 $ 29,700 $ 18,800
========= ========= =========
29
URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)
As of October 31, 2000, the Company has available net operating loss
("NOL") carryforwards for Federal income tax and financial statement purposes of
$3.1 million, which will expire in fiscal year beginning 2004. The Company's NOL
utilization is limited to $750,000 per year pursuant to Section 382 of the
Internal Revenue Code, related to the Company's October 1989
quasi-reorganization. The Company also has available $11.4 million of foreign
NOLs. These NOLs are available only to offset income earned in foreign
jurisdictions and these NOLs expire at various dates.
While the Company had available NOL carryforwards which partially offset
otherwise taxable income for Federal income tax purposes, for state tax purposes
such amounts are not necessarily available to offset income subject to tax.
The significant components of the Company's deferred tax assets and
liabilities are as follows:
Deferred tax assets/(liabilities)--due to:
October 31,
---------------------------------
2000 1999
----- ----
(In thousands)
Current:
Allowance for doubtful accounts....................... $ 4,686 $ 3,645
Payroll related accruals.............................. 9,164 9,956
Other accruals........................................ 47 7,228
----------- -----------
Current deferred tax asset............................ 13,897 20,829
----------- -----------
Revenue retentions.................................... (1,492) (1,548)
Unbilled fees......................................... (7,546) (2,238)
----------- -----------
Current deferred tax liability........................... (9,038) (3,786)
----------- -----------
Net current deferred tax asset.................... $ 4,859 $ 17,043
=========== ===========
Non-Current:
Deferred compensation and pension..................... $ (931) $ 1,725
Self-insurance contingency accrual.................... 2,184 1,971
Depreciation and amortization......................... 380 1,251
Foreign tax credit.................................... 2,837 1,583
Net operating loss.................................... 11,550 6,888
----------- -----------
Gross non-current deferred tax asset.................. 16,020 13,418
Valuation allowance................................... (7,406) (6,888)
------------ ------------
Net non-current deferred tax asset................ 8,614 6,530
----------- -----------
Cash to accrual....................................... (1,256) (3,252)
Acquisition liabilities............................... (31,214) (12,988)
Other deferred gain and unamortized bond premium...... (941) (1,099)
Mark to market........................................ (154) (1,731)
Depreciation and amortization......................... (8,556) (5,802)
Other accruals........................................ 350 (3,963)
----------- ------------
Non-current deferred tax liability...................... (41,771) (28,835)
------------ ------------
Net non-current deferred tax liability............ $ (33,157) $ (22,305)
============ ============
The net change in the total valuation allowance related to deferred tax
assets for the year ended October 31, 2000, was a decrease of $0.3 million due
to the utilization of domestic net operating losses, and an increase of $0.8
million due to current year foreign losses not benefited.
30
URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)
The difference between total tax expense and the amount computed by
applying the statutory Federal income tax rate to income before taxes is as
follows:
Years Ended October 31,
--------------------------------------------
2000 1999 1998
---- ---- ----
(In thousands)
Federal income tax expense based upon Federal statutory tax
rate of 35%................................................ $ 32,059 $ 23,140 $ 14,520
Nondeductible goodwill amortization............................ 4,388 3,080 1,460
Meals and entertainment........................................ 885 988 777
Non-deductible expenses........................................ 461 925 53
NOL carryforwards utilized..................................... (269) (263) (260)
Unbenefited foreign losses..................................... 939 900 --
Foreign tax credit utilized.................................... -- (250) --
Foreign earnings taxed at rates higher (lower) than U S
statutory rate................................................. 53 (410) --
State taxes, net of Federal benefit............................ 4,158 2,700 1,890
Adjustment due to change in Federal and state rates............ 52 -- (420)
Utilization of deferred tax allowance and other adjustments.... (1,026) (1,110) 780
----------- ----------- ----------
Total taxes provided........................................... $ 41,700 $ 29,700 $ 18,800
========== ========== ==========
NOTE 6. RELATED PARTY TRANSACTIONS
The Company had agreements for business consulting services to be provided
by BLUM Capital Partners, L.P. ("BLUM"), (formerly Richard C. Blum & Associates
L.P.) and Richard C. Blum, a Director of the Company. Under these agreements,
the Company paid $60,000 and $90,000; $40,000 and $60,000 to BLUM and Richard C.
Blum, respectively, during each of fiscal 1999 and 1998. These agreements were
terminated effective June 1999. Richard C. Blum also received an additional cash
amount of $19,000, $21,000 and $21,500 for his services as a Director of the
Company in fiscal 2000, 1999 and 1998, respectively.
See Note 11, Preferred Stock, for a discussion of preferred stock issued to
RCBA Strategic Partners, L.P. ("RCBA Strategic Partners").
31
URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)
NOTE 7. NOTES PAYABLE AND LONG-TERM DEBT
Notes payable and long-term debt consists of the following:
October 31,
---------------------------
2000 1999
---- ----
(In thousands)
Bank term loans, payable in quarterly installments.................. $ 415,925 $ 446,756
12 1/4% Senior Subordinated Notes due 2009........................... 200,000 200,000
6 1/2% Convertible Subordinated Debentures due 2012 (net of bond
issue costs of $29 and $31)...................................... 1,810 1,904
8 5/8% Senior Subordinated Debentures due 2004 (net of discount and
bond issue costs of $2,375 and $2,815) (effective interest rate
on date of restructuring was 25%)................................ 4,080 3,640
10.95% note payable, due in annual installments through 2001 (net of
issue costs of $0 and $26)....................................... 738 1,377
Obligations under capital leases.................................... 21,664 18,429
Foreign collateralized lines of credit.............................. 4,134 16,274
------------ ------------
648,351 688,380
Less:
Current maturities of long-term debt............................. 28,094 17,625
Current maturities of notes payable.............................. 10,658 17,040
Current maturities of capital leases............................. 6,471 4,758
------------ ------------
$ 603,128 $ 648,957
============ ==========
During fiscal 1999, the Company incurred new borrowings by establishing a
long-term senior collateralized credit facility with a syndicate of banks led by
the Bank.
Senior collateralized credit facility. The senior collateralized credit
facility was funded on June 9, 1999, ("Funding Date") and provides for three
term loan facilities in the aggregate amount of $450.0 million and a revolving
credit facility in the amount of $100.0 million. The term loan facilities
consist of Term Loan A, a $250.0 million tranche, Term Loan B, a $100.0 million
tranche and Term Loan C, another $100.0 million tranche.
Principal amounts under Term Loan A became due, commencing on October
31, 1999, in the amount of approximately $3.0 million per quarter for the
following four quarters. Thereafter and through June 9, 2005, annual principal
payments under Term Loan A range from $23.0 million to a maximum of $58.0
million with Term Loan A expiring and the then-outstanding principal amount
becoming due and repayable in full on June 9, 2005. Principal amounts under Term
Loan B became due, commencing on October 31, 1999, in the amount of $1.0 million
in each year through July 31, 2005, with Term Loan B expiring and the
then-outstanding principal amount becoming due and repayable in full in equal
quarterly installments in year seven. Principal amounts under Term Loan C became
due, commencing on October 31, 1999, in the amount of $1.0 million in each year
through July 31, 2006, with Term Loan C expiring and the then-outstanding
principal amount becoming due and repayable in full in equal quarterly
installments in year eight. The revolving credit facility expires, and is
repayable in full, on June 9, 2005.
32
URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)
The term loans each bear interest at a rate per annum equal to, at the
Company's option, either the Base Rate or LIBOR, in each case plus an applicable
margin. The revolving credit facility bears interest at a rate per annum equal
to, at the Company's option, the Base Rate, LIBOR or the Adjusted Sterling Rate,
in each case plus an applicable margin. The applicable margin adjusts according
to a performance pricing grid based on the Company's ratio of Consolidated Total
Funded Debt to Consolidated Earnings Before Income Taxes, Depreciation and
Amortization ("EBITDA"). The "Base Rate" is defined as the higher of the Bank's
Prime Rate and the Federal Funds Rate plus 0.50%. "LIBOR" is defined as the
offered quotation by first class banks in the London interbank market to the
Bank for dollar deposits, as adjusted for reserve requirements. The "Adjusted
Sterling Rate" is defined as the rate per annum displayed by Reuters at which
Sterling is offered to the Bank in the London interbank market as determined by
the British Bankers' Association. The Company may determine which interest rate
options to use and interest periods will apply for such periods for both term
loans and the revolving credit facility.
At October 31, 2000, our revolving credit facility with the Bank provided
for advances up to $100.0 million. Also at October 31, 2000, we had outstanding
letters of credit aggregating $36.5 million, which reduced the amount available
to us under our revolving credit facility to $63.5 million.
The senior collateralized credit facility is governed by affirmative and
negative covenants. These covenants include a requirement to submit quarterly
compliance certifications and restrictions upon incurring additional debt,
paying dividends, or making distributions to its stockholders, repurchasing or
retiring capital stock, and making subordinated junior debt payments. The
financial covenants include maintenance of a minimum current ratio of 1.20 to
1.00, a minimum fixed charge coverage ratio of 1.10 to 1.00, a four-quarter
EBITDA (as defined) minimum of $142.0 million and a maximum leverage ratio of
4.25 to 1.00 for the year ended October 31, 2000. The Company was fully
compliant with these covenants as of October 31, 2000.
Notes
12 1/4% senior subordinated notes. The Company's notes are due in 2009.
Each note will initially bear interest at 12 1/4% per annum. Interest on the
notes will be payable semiannually on May 1 and November 1 of each year,
commencing November 1, 1999. The notes are subordinate to the senior
collateralized credit facility. As of October 31, 2000, the Company owed $200.0
million on its notes.
Certain of the Company's wholly owned subsidiaries fully and
unconditionally guarantee the notes on joint and several bases. The Company may
redeem any of the notes beginning May 1, 2004. The initial redemption price is
106.125% of their principal amount, plus accrued and unpaid interest. The
redemption price will decline each year after 2004 and will be 100% of their
principal amount, plus accrued and unpaid interest beginning on May 1, 2007. In
addition, at any time prior to May 1, 2002, the Company may redeem up to 35% of
the principal amount of the notes with net cash proceeds from the sale of
capital stock. The redemption price will be equal to 112.25% of the principal
amount of the redeemed notes.
Debentures
8 5/8% senior subordinated debentures ("8 5/8% Debentures"). The Company's
8 5/8% Debentures are due in 2004. Interest is payable semiannually in January
and July. The 8 5/8% Debentures are subordinate to the senior collateralized
credit facility. As of October 31, 2000, the Company owed approximately $6.5
million on its 8 5/8% Debentures.
33
URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)
6 1/2% convertible subordinated debentures ("6 1/2% Debentures"). The
Company's 6 1/2% Debentures are due in 2012 and are convertible into its common
shares at the rate of $206.30 per share. Interest is payable semiannually in
February and August. Sinking fund payments calculated to retire 70% of the 6
1/2% Debentures prior to maturity began in February 1998. The 6 1/2% Debentures
are subordinate to the senior collateralized credit facility. As of October 31,
2000, the Company owed approximately $1.8 million on its 6 1/2% Debentures.
Promissory Note
As part of the W-C acquisition, the Company assumed the responsibility
for a 10.95% promissory note payable to Weyerhaeuser Company. The note is paid
in four annual installments of $0.8 million each January 31 beginning in 1998
and ending in 2001.
Foreign Credit Lines
The Company maintains foreign lines of credit which are collateralized
by assets of foreign subsidiaries at October 31, 2000. The interest rates for
the foreign lines of credit were 7.25% plus applicable margins consistent with
market conditions in the respective countries at October 31, 2000. At October
31, 2000 these foreign lines of credit provided for advances up to $19.0
million. Also at October 31, 2000, we had $12.7 million of outstanding foreign
lines of credit, which reduced the amount available to the Company under these
foreign lines of credit to $6.3 million.
Interest Rate Swap
The Company entered into an interest rate swap agreement with the Bank.
This interest rate swap effectively fixes the interest rate on $48.8 million of
the Company's LIBOR-based borrowings at 5.97% plus the applicable margin through
November 30, 2000. The actual borrowing cost to the Company with respect to
indebtedness covered by the interest rate swap will depend upon the applicable
margin over LIBOR for such indebtedness, which will be determined by the terms
of the relevant debt instruments. Currently, it is expected that the contractual
margin will range from 2.25% to 3.50%, which will provide for an all-in annual
interest rate range from 8.22% to 9.47%.
Interest Rate Cap Agreement
The Company entered into an interest rate cap agreement with the Bank.
This agreement caps the Company's interest rate at 7% for $165.5 million of the
Company's LIBOR-based borrowings through July 31, 2002 and is in addition to the
interest rate swap agreement stated above.
34
URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Maturities
The amounts of long-term debt outstanding (excluding foreign
collateralized lines of credit and capital leases) at October 31, 2000, maturing
in the next five years are as follows:
(In thousands)
2001.................................. $ 34,618
2002.................................. 40,048
2003.................................. 51,452
2004.................................. 66,611
2005.................................. 68,553
Thereafter............................ 361,271
-------------
$ 622,553
NOTE 8. OBLIGATIONS UNDER LEASES
Total rental expense included in operations for operating leases for the
fiscal years ended October 31, 2000, 1999 and 1998, amounted to $70.2 million,
$50.1 million and $30.6 million, respectively. Certain of the lease rentals are
subject to renewal options and escalation based upon property taxes and
operating expenses. These operating lease agreements expire at varying dates
through 2013. Obligations under capital leases include leases on vehicles,
office equipment and other equipment. Obligations under operating leases include
building, office, and other equipment rentals.
Obligations under non-cancelable lease agreements are as follows:
Capital Operating
Leases Leases
-------- ----------
(In thousands)
2001.......................................... $ 7,867 $ 48,580
2002.......................................... 7,018 39,808
2003.......................................... 5,389 31,107
2004.......................................... 3,479 24,829
2005.......................................... 1,332 17,892
Thereafter.................................... -- 39,252
---------- -----------
Total minimum lease payments.................. 25,085 $ 201,468
===========
Less: amounts representing interest........... 3,421
--------
Present value of net minimum lease payments... $ 21,664
==========
NOTE 9. SEGMENT AND RELATED INFORMATION
In fiscal 1999, we adopted SFAS No. 131. SFAS No. 131 establishes standards
for reporting information about operating segments and related disclosures about
products, geographic information and major customers.
Management has organized the Company by geographic divisions. The
geographic divisions are Parent, Domestic and International. The Parent division
comprises the Parent Company. The Domestic division comprises all offices
located in United States. The International division comprises all offices in
the Americas and in Europe and Asia/Pacific (e.g., Australia, Indonesia,
Singapore, New Zealand and the Philippines).
35
URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)
Accounting policies for each of the reportable segments are the same as
those described in Note 1, Accounting Policies. The Company provides services
throughout the world. Services to other countries may be performed within the
United States, and generally, revenues are classified within the geographic area
where the services were performed.
The following table shows summarized financial information on the
Company's reportable segments. Included in the "Eliminations" column are
elimination of inter-segment sales and elimination of investment in
subsidiaries.
As of and for the year ended October 31, 2000:
Parent Domestic International Eliminations Total
---------- ------------ ------------- ------------ ------------
Revenue........................... $ 800 $ 1,989,259 $ 235,683 $ (20,164) $ 2,205,578
Segment operating income.......... $ 39,160 $ 116,630 $ 7,669 $ -- $ 163,459
Total accounts receivable......... $ (7,814) $ 637,564 $ 82,469 $ (3,214) $ 709,005
Total assets...................... $ 664,156 $ 1,310,171 $ 112,105 $ (659,298) $ 1,427,134
As of and for the year ended October 31, 1999:
Parent Domestic International Eliminations Total
---------- ------------ ------------ ------------ ------------
Revenue........................... $ -- $ 1,270,517 $ 154,211 $ (6,206) $ 1,418,522
Segment operating income (loss)... $ (14,541) $ 115,834 $ 778 $ (1,201) $ 100,870
Total accounts receivable......... $ (15,000) $ 592,159 $ 90,818 $ (2,016) $ 665,961
Total assets...................... $ 493,938 $ 1,653,928 $ 130,779 $ (834,120) $ 1,444,525
As of and for the year ended October 31, 1998:
Parent Domestic International Eliminations Total
---------- ------------ ------------ ------------ ------------
Revenue........................... $ -- $ 752,196 $ 55,467 $ (1,717) $ 805,946
Segment operating income (loss)... $ (7,137) $ 55,406 $ 1,972 $ -- $ 50,241
Total accounts receivable......... $ -- $ 223,747 $ 15,876 $ -- $ 239,623
Total assets...................... $ 237,056 $ 328,854 $ 32,117 $ (146,323) $ 451,704
The Company's reportable segments are measured based upon segment operating
income.
The next table provides a reconciliation of operating income to
consolidated income before income taxes.
October 31,
---------------------------------------------
2000 1999 1998
---- ---- ----
Segment operating income........ $ 163,459 $ 100,870 $ 50,241
Interest expense, net........... 71,861 34,589 8,774
---------- ------------ ----------
Income before taxes............. $ 91,598 $ 66,281 $ 41,467
========== ========== ==========
36
URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)
The Company provides services to local, state and Federal government
agencies, private businesses and internationally. For the three years ended
October 31, 2000, our revenues were attributed to the following categories:
October 31,
-------------------------------------------------------------------------------------
2000 1999 1998
---- ---- ----
(Dollars in thousands)
Domestic:
Local and state agencies..... $ 728,861 33% $ 470,958 33% $ 346,072 43%
Federal agencies............. 354,581 16 235,039 17 116,340 14
Private businesses........... 886,453 40 558,314 39 288,067 36
International................ 235,683 11 154,211 11 55,467 7
------------ --- ---------- --- ------------ ---
Total.................. $ 2,205,578 100% $1,418,522 100% $ 805,946 100%
============ === ========== === ============ ===
NOTE 10. COMMITMENTS AND CONTINGENCIES
Currently, the Company has limits of $125.0 million per loss and $125.0
million in the annual aggregate for general liability, professional errors and
omissions liability, and contractor's pollution liability insurance. These
programs each have a self-insured claim retention of $0.1 million, $1.0 million,
and $0.25 million, respectively. With respect to D-M claims arising from
professional errors and omissions prior to acquisition, the Company has
maintained a self-insured retention of $5.0 million per claim. Excess limits
provided for these coverages are on a "claims made" basis, covering only claims
actually made during the policy period currently in effect. Thus, if the Company
does not continue to maintain these excess policies, it will have no coverage
for claims made after its termination date even if the occurrence was during the
term of coverage. It is the Company's intent to maintain these policies, but
there can be no assurance that the Company can maintain existing coverages or
that claims will not exceed the available amount of insurance.
Various legal proceedings are pending against the Company or its
subsidiaries alleging, among other things, breaches of contract or negligence in
connection with the performance of professional services. In some actions,
parties are seeking damages, including punitive or treble damages that
substantially exceed the Company's insurance coverage. Based on the Company's
previous experience with claims settlement and the nature of the pending legal
proceedings, the Company does not believe that any of the legal proceedings are
likely to result in a judgment against, or settlement by, it that would
materially exceed its insurance coverage or have a material adverse effect on
its consolidated financial position and operations.
NOTE 11. PREFERRED STOCK
In June 1999, the Company issued 46,082.95 shares of its Series A Preferred
Stock and 450,000 shares of its Series C Preferred Stock to RCBA Strategic
Partners, L.P. for an aggregate consideration of $100.0 million. The proceeds of
this issuance were used in connection with the D-M acquisition. The Company paid
a transaction fee of $1.5 million to RCBA Strategic Partners, L.P. in connection
with this placement. In October 1999, the Company issued 46,083 shares of its
Series B Exchangeable Convertible Preferred Stock ("Series B Stock") to RCBA
Strategic Partners, L.P. in exchange for the shares of Series A and Series C
Preferred Stock.
The Company has authorized for issuance 3,000,000 shares of Preferred Stock
with a $1.00 par value. Of these 3,000,000 shares, 150,000 shares have been
designated Series B Stock. At October 31, 2000 and 1999, the Company had 51,159
and 47,618 shares, respectively, of Series B Stock outstanding. The Series B
Stock has a liquidation preference equal to its original purchase price plus
certain formulaic adjustments calculated at the time of liquidation. The Series
B Stock is senior to the Common Stock and has voting rights equal to that number
of shares of Common Stock into which it can be converted. Cumulative dividends
are payable in-kind in additional shares of Series B Stock each calendar quarter
at a dividend rate of 8%. Each share of the Series B Stock may be
37
URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)
converted into shares of Common Stock at the option of the holder at any time
(approximately 5,116,000 shares in the aggregate as of October 31, 2000). In
addition, the Company will have the right, on or after June 2002, to convert
all, but not less than all, of the outstanding shares of Series B Stock into
Common Stock if the price of the Company's Common Stock on the relevant stock
exchanges reaches certain levels for certain minimum periods of time. In June
2011, the Company is obligated to redeem any outstanding shares of Series B
Stock for cash. If the Company fails to repurchase all of the outstanding shares
of Series B Stock, the dividend rate will increase to 12%, and three months
after that the rate will increase to 15%.
NOTE 12. STOCKHOLDERS' EQUITY
Declaration of dividends, except Preferred Stock dividends, is restricted
by the senior collateralized credit facility with the Bank and the indentures
governing the 8 5/8% Debentures and the Notes. Further, declaration of dividends
may be precluded by existing Delaware law.
During fiscal year 1995, the Company repurchased a total of 42,000 shares
of its Common Stock at an average repurchase price of $5.43, pursuant to a
systematic repurchase plan approved by the Company's Board of Directors on
September 13, 1994. The systematic repurchase plan expired on September 13,
1995. The Company, as of that date, had repurchased a total of 52,000 shares of
its Common Stock at an average repurchase price of $5.49.
On October 12, 1999, the stockholders approved the 1999 Equity Incentive
Plan ("1999 Plan"). An aggregate of 1,500,000 shares of Common Stock initially
has been reserved for issuance under the 1999 Plan. In July 2000, an additional
1,076,000 shares were reserved for issuance under the 1999 Plan. As of October
31, 2000, the Company issued options and restricted stock in the aggregate
amount of 1,933,017 shares under the 1999 Plan.
On March 26, 1991, the stockholders approved the 1991 Stock Incentive Plan
("1991 Plan"). The 1991 Plan provides for the grant not to exceed 3,310,000
Restricted Shares, Stock Units and Options. As of October 31, 1999, the Company
issued options and restricted stock in the aggregate amount of 1,041,700 shares
under the 1991 Plan.
Stock options expire in ten years from the date granted and vest over
service periods that range from three to five years.
Under the Employee Stock Purchase Plan ("ESP Plan") implemented in
September 1985, employees may purchase shares of Common Stock through payroll
deductions of up to 10% of the employee's base pay. Contributions are credited
to each participant's account on the last day of each six-month participation
period of the ESP Plan (which commences on January 1 and July 1 of each year).
The purchase price for each share of Common Stock shall be the lower of 85% of
the fair market value of such share on the last trading day before the
participation period commences or 85% of the fair market value of such share on
the last trading day in the participation period. Employees purchased 495,017
shares under the ESP Plan in fiscal 2000 and 282,505 shares in fiscal 1999.
The Company applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations in accounting for its 1991 Plan and 1999
Plan. Accordingly, no compensation cost has been recognized for its 1991 and
1999 Plans. Had compensation cost for the Company's 1991 and 1999 Plans been
determined consistent with Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based
38
URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)
Compensation," the Company's net income and earnings per share would have been
reduced to the proforma amounts indicated below:
Years Ended October 31,
---------------------------------------------------------
2000 1999 1998
---- ---- ----
(In thousands, except per share data)
Net income available for common stockholders:
As reported...................................... $ 41,561 $ 33,248 $ 22,667
Proforma......................................... $ 38,171 $ 32,367 $ 22,343
Basic earnings per share:
As reported...................................... $ 2.55 $ 2.14 $ 1.51
Proforma......................................... $ 2.35 $ 2.09 $ 1.49
Dilutive earnings per share:
As reported...................................... $ 2.27 $ 1.98 $ 1.43
Proforma......................................... $ 2.11 $ 1.93 $ 1.41
A summary of the status of the stock options granted under the Company's
1991 and 1999 Plans for the years ended October 31, 2000, 1999, and 1998, is
presented below:
2000 1999 1998
--------------------------- ------------------------- -------------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
--------- ---------- ---------- --------- ------- -----------
Outstanding at beginning of year.... 2,394,709 $ 11.97 2,031,094 $ 11.12 1,508,280 $ 7.70
Granted........................... 1,613,017 $ 18.51 835,500 $ 16.81 644,500 $ 14.63
Exercised......................... (80,716) $ 8.11 (350,099) $ 6.67 (98,356) $ 7.07
Forfeited......................... (97,926) $ 18.87 (121,786) $ 15.22 (23,330) $ 14.40
----------- --------- ---------
Outstanding at end of year.......... 3,829,084 $ 14.64 2,394,709 $ 11.97 2,031,094 $ 11.12
=========== ========= =========
Options exercisable at year-end..... 1,554,426 $ 10.04 1,133,788 $ 7.72 1,154,388 $ 6.96
Weighted-average fair value of
options granted during the year.... $ 5.30 $ 6.53 $ 3.55
39
URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)
The following table summarizes information about stock options outstanding
at October 31, 2000, under the 1991 and 1999 Plans:
Outstanding Exercisable
--------------------------------------------------- ----------------------------------
Weighted-Average
Range of Number Remaining Weighted-Average Number Weighted-Average
Exercise Prices Outstanding Contractual Life Exercise Price Exercisable Exercise Price
--------------- ----------- ---------------- -------------- ----------- --------------
$ 2.85 - $ 5.70 246,000 0.2 $ 3.15 246,000 $ 3.15
$ 5.70 - $ 8.55 473,500 3.4 $ 6.80 473,500 $ 6.80
$ 8.55 - $11.40 261,673 5.4 $ 10.32 261,673 $ 10.32
$11.40 - $14.25 352,100 9.1 $ 13.81 36,666 $ 13.95
$14.25 - $17.10 1,568,811 8.4 $ 15.47 511,917 $ 15.15
$19.95 - $22.80 877,000 9.0 $ 21.44 8,000 $ 21.81
$25.65 - $28.50 50,000 8.6 $ 28.10 16,670 $ 28.10
----------- ----------
3,829,084 1,554,426
=========== ==========
The fair value of each option grant was estimated on the date of the
grant using the Black-Scholes option-pricing model with the following
assumptions:
2000 1999 1998
---- ---- ----
Risk-free interest rates................... 5.72%-6.36% 4.70%-5.97% 4.43%-5.79%
Expected life.............................. 4 years 4 years 4 years
Volatility................................. 42.54% 41.06% 28.30%
Expected dividends......................... None None None
NOTE 13. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Years Ended October 31,
---------------------------------------------------
2000 1999 1998
---- ---- ----
(In thousands)
Interest.......................... $ 66,774 $ 24,903 $ 7,857
Income taxes...................... $ 34,726 $ 22,562 $ 18,398
The Company's operating cash flow and working capital requirements have
grown substantially due to its acquisition growth strategy. The Company intends
to satisfy its working capital needs primarily through internal cash generation.
As a professional services organization, the Company is not capital intensive.
Capital expenditures, historically, have been for computer-aided design and
general purpose computer equipment to accommodate its growth. Capital
expenditures during fiscal years 2000, 1999 and 1998 were $15.4 million, $20.2
million and $12.2 million, respectively. The Company expects to continue to have
capital outlays consistent with the resulting relative growth of the Company.
40
URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)
NOTE 14. EMPLOYEE RETIREMENT PLANS
The Company has defined contribution retirement plans under Internal
Revenue Code Section 401(k). The plans cover all full-time employees who are at
least 18 years of age. Contributions by the Company are made at the discretion
of the Board of Directors. The Company made contributions in the amounts of
$10.4 million, $7.7 million and $4.9 million to the plans in fiscal 2000, 1999
and 1998, respectively.
In July 1999, the Company entered into a Supplemental Executive Retirement
Agreement (the "Agreement") with Martin M. Koffel, the Company's Chief Executive
Officer (the "Executive"). The Executive will be eligible to receive a benefit
under this agreement following his termination of employment with the Company
(the "Benefit"). The Benefit shall be an annual amount, payable for the life of
the Executive with a guarantee of payments for at least ten years. The Benefit
is equal to a percentage of the Executive's final average compensation, reduced
by the annual social security benefit to which the Executive is entitled based
on his age at the termination of employment. The Benefits payable under this
Agreement shall be "unfunded," as that term is used in Sections 201(2),
301(a)(3), 401(a)(10) and 4021(a)(6) of ERISA.
Management's estimate of accumulated benefits for the Executive SERP as of
October 31, 2000, was as follows:
Actuarial present value of accumulated benefits:
(In thousands)
Vested................................................. $ 1,319
Non-vested............................................. --
---------
Total.................................................. $ 1,319
=========
The weighted-average discount rate used to determine the above amounts for the
period was 6.0%.
Change in projected benefit obligation (PBO):
PBO as of October 31, 1999............................. $ 745
Service cost........................................... 794
Interest cost.......................................... 48
Amortization of unrecognized service cost.............. --
---------
Net period cost.................................. 842
---------
Actuarial loss......................................... 1,187
Benefit payments....................................... --
---------
Benefit obligation at October 31, 2000................. $ 2,774
=========
The weighted-average discount rate used to determine the above amounts for the
period was 6.5%.
The funded status of the plans at October 31, 2000:
Projected benefit obligation........................... $ 2,774
Plan assets available for benefits..................... --
---------
Deficiency of assets over projected benefit
obligations......................................... 2,774
Unrecognized actuarial loss............................ (1,263)
Unrecognized prior service costs....................... --
---------
Accrued pension liability.............................. $ 1,511
=========
The weighted-average discount rate used in determining the above amounts for the
period was 6.0%.
41
URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)
Certain of the Company's foreign subsidiaries have trustee retirement plans
covering substantially all of their employees. These pension plans are not
required to report to government agencies pursuant to ERISA and do not otherwise
determine the actuarial value of accumulated benefits or net assets available
for benefits. The aggregate pension expense for these plans for the fiscal years
ended October 31, 2000 and 1999 were $825,972 and $963,000, respectively.
The Company, upon acquiring D-M, assumed certain of Radian International
LLC defined benefit pension plans ("Radian pension plans"), and several
post-retirement benefit plans. These plans cover a select group of Radian
employees and former employees who will continue to be eligible to participate
in the plans.
The Radian pension plans include a Supplemental Executive Retirement Plan
("SERP") and Salary Continuation Agreement ("SCA") which are intended to
supplement retirement benefits provided by other benefit plans upon the
participant's meeting minimum age and years of service requirements. The plans
are unfunded. However, at October 31, 2000 and 1999, the Company had designated
and deposited $7.2 million in a trust account for the SERP. Radian also has a
post-retirement benefit program that provides certain medical insurance benefits
to participants upon meeting minimum age and years of service requirements. This
plan is also unfunded.
Management's estimate of accumulated benefits for the Radian SERP and SCA as of
October 31, 2000, was as follows:
Actuarial present value of accumulated benefits:
(In thousands)
Vested....................................................... $ 10,295
Non-vested................................................... 657
----------
Total........................................................ $ 10,952
=========
Change in projected benefit obligation (PBO):
PBO as of October 31, 1999................................... $ 11,542
Service cost................................................. 62
Interest cost................................................ 784
Amortization of unrecognized service cost.................... --
---------
Net period cost........................................ 12,388
---------
Actuarial loss............................................... (631)
Benefit payments............................................. (805)
----------
Benefit obligation at October 31, 2000....................... $ 10,952
=========
The funded status of the plans at October 31, 2000:
Projected benefit obligation................................. $ 10,952
Plan assets available for benefits........................... --
---------
Deficiency of assets over projected benefit obligations...... 10,952
Unrecognized actuarial gain.................................. 631
Unrecognized prior service costs............................. --
---------
Accrued pension liability.................................... $ 11,583
=========
The weighted-average discount rate used in determining the above amounts for the
period was 7.75%.
42
URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)
Management's estimate of the funded status of the Radian post-retirement
program at October 31, 2000, was as follows:
Accumulated post-retirement benefit obligation ("APBO"):
Retirees............................................... $ 191
Active plan participants, fully eligible............... 131
Active plan participants, not yet fully eligible....... 608
---------
Total APBO................................................... 930
Unrecognized net loss from past experience different
from that assumed and from changes in assumptions....... --
---------
Accrued post-retirement benefits............................ $ 930
=========
The weighted-average discount rate used in determining the APBO was 7.75%.
NOTE 15. VALUATION AND ALLOWANCE ACCOUNTS
Additions
Charged to Deductions
Beginning Costs and from Ending
Balance Expenses Reserves Balance
--------- ---------- ----------- --------
(In thousands)
October 31, 2000
Allowances for losses and doubtful accounts $ 40,611 $ 25,306 $ 29,091 $ 36,826
October 31, 1999
Allowances for losses and doubtful accounts $ 14,102 $ 40,772 $ 14,263 $ 40,611
October 31, 1998
Allowances for losses and doubtful accounts $ 3,326 $ 11,721 $ 945 $ 14,102
The allowances for losses and doubtful accounts increased significantly in
fiscal 1999 and 1998 due to the acquisitions of D-M and W-C.
43
URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)
NOTE 16. SELECTED QUARTERLY FINANCIAL DATA (unaudited)
Selected quarterly financial data for fiscal 2000 and 1999 is summarized as
follows:
Fiscal 2000 Quarters Ended
--------------------------------------------------------------
Jan. 31 Apr. 30 July 31 Oct. 31
------- ------- ------- -------
(In thousands, except per share data)
Revenues $ 512,877 $ 535,401 $ 558,534 $ 598,766
Operating income $ 33,667 $ 39,761 $ 43,944 $ 46,087
Net income available for common stockholders $ 6,582 $ 9,022 $ 12,038 $ 13,919
Income per share:
Basic $ .41 $ .56 $ .73 $ .85
========= ========= ========= =========
Diluted $ .40 $ .51 $ .64 $ .72
========= ========= ========= =========
Weighted-average number of shares 21,784 21,549 22,328 22,492
Fiscal 1999 Quarters Ended
--------------------------------------------------------------
Jan. 31 Apr. 30 July 31 Oct. 31
------- ------- ------- -------
(In thousands, except per share data)
Revenues $ 199,057 $ 222,219 $ 428,482 $ 568,764
Operating income $ 11,992 $ 15,189 $ 29,565 $ 44,124
Net income available for common stockholders $ 5,672 $ 6,995 $ 9,051 $ 11,530
Income per share:
Basic $ .37 $ .46 $ .58 $ .73
========= ========= ========= =========
Diluted $ .35 $ .42 $ .53 $ .68
========= ========= ========= =========
Weighted-average number of shares 16,371 16,532 19,578 21,513
Operating income represents income from operations before interest
income and expense.
NOTE 17. SUPPLEMENTAL GUARANTOR INFORMATION
In June 1999, the Company completed a private placement of $200.0 million
principal amount of its Senior Subordinated Exchange Notes due 2009, which notes
were exchanged in August 1999 for 12 1/4% Senior Subordinated Notes due 2009.
The notes are fully and unconditionally guaranteed on a joint and several basis
by certain of the Company's wholly-owned subsidiaries. Substantially all of the
Company's income and cash flow is generated by its subsidiaries. The Company has
no operating assets or operations other than its investments in its
subsidiaries. As a result, funds necessary to meet the Company's debt service
obligations are provided in large part by distributions to or advances from its
subsidiaries. Under certain circumstances, contractural and legal restrictions,
as well as the financial condition and operating requirements of the Company's
subsidiaries, could limit the Company's ability to obtain cash from its
subsidiaries for the purpose of meeting its debt service obligations, including
the payment of principal and interest on the notes.
The following information sets forth the condensed consolidating balance
sheets of the Company as of October 31, 2000 and 1999, and the condensed
consolidating statements of operations and cash flows for the three years ended
October 31, 2000. Investments in subsidiaries are accounted for on the equity
method; accordingly, entries necessary to consolidate the Company and all of its
subsidiaries are reflected in the eliminations column. Separate complete
financial statements of the Company and its subsidiaries that guarantee the
notes would not provide additional material information that would be useful in
assessing the financial composition of such subsidiaries.
44
URS CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEET
(In thousands)
October 31, 2000
Subsidiary
Subsidiary Non-
Parent Guarantors Guarantors Eliminations Consolidated
------ ---------- ---------------- ------------ -------------
ASSETS
Current assets:
Cash................................... $ 10,901 $ (5,820) $ 18,612 $ -- $ 23,693
Accounts receivable, net............... (7,814) 637,564 82,469 (3,214) 709,005
Prepaid expenses and other assets...... 5,418 37,971 463 -- 43,852
------------- ------------- ------------- ----------- -------------
Total current assets................ 8,505 669,715 101,544 (3,214) 776,550
Property and equipment, net................. 442 77,184 11,035 -- 88,661
Goodwill, net............................... 395,063 154,631 -- (35,083) 514,611
Investment in unconsolidated subsidiaries...
245,127 361,210 920 (607,257) --
Inter-company receivable.................... -- 5,458 (4,205) (1,253) --
Other assets................................ 15,019 41,973 2,811 (12,491) 47,312
------------- ------------- ------------- ------------ -------------
$ 664,156 $ 1,310,171 $ 112,105 $ (659,298) $ 1,427,134
============= ============= ============ =========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt....... $ 28,924 $ 18,824 $ 9,723 $ (12,248) $ 45,223
Accounts payable........................ (1,061) 119,776 10,345 (3,895) 125,165
Inter-company payable................... (173,328) 150,096 31,895 (8,663) --
Accrued expenses and other.............. 33,291 59,875 32,358 (4,397) 121,127
Billings in excess of costs and
accrued earnings on contracts in
process............................... -- 84,169 6,306 -- 90,475
------------- ------------- ------------- ----------- -------------
Total current liabilities........... (112,174) 432,740 90,627 (29,203) 381,990
Long-term debt............................... 587,135 15,892 101 -- 603,128
Other........................................ 19,902 51,562 1,594 151 73,209
------------- ------------- ------------- ----------- -------------
Total liabilities................... 494,863 500,194 92,322 (29,052) 1,058,327
Mandatorily redeemable Series B exchangeable
convertible preferred stock...............
111,013 -- -- -- 111,013
Total stockholders' equity................... 58,280 809,977 19,783 (630,246) 257,794
------------- ------------- ------------- ----------- -------------
$ 664,156 $ 1,310,171 $ 112,105 $ (659,298) $ 1,427,134
============= ============= ============ =========== ============
45
URS CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
(In thousands)
Year Ended October 31, 2000
Subsidiary
Subsidiary Non-
Parent Guarantors Guarantors Eliminations Consolidated
------ ---------- ---------- ------------ -------------
Revenues...................................... $ 800 $ 1,989,259 $ 235,683 $ (20,164) $ 2,205,578
---------- ----------- --------- ---------- -----------
Expenses:
Direct operating........................... -- 1,226,077 139,155 (20,164) 1,345,068
Indirect, general and administrative....... (38,360) 646,552 88,859 -- 697,051
Interest expense, net...................... 71,800 (316) 377 -- 71,861
---------- ----------- --------- ---------- -----------
33,440 1,872,313 228,391 (20,164) 2,113,980
---------- ----------- --------- ---------- -----------
Income (loss) before taxes.................... (32,640) 116,946 7,292 -- 91,598
Income tax expense............................ 40,246 1,201 253 -- 41,700
---------- ----------- --------- ---------- -----------
Net income.................................... (72,886) 115,745 7,039 -- 49,898
Preferred stock dividend...................... 8,337 -- -- -- 8,337
---------- ----------- --------- ---------- -----------
Net income (loss) available for common
stockholders............................... (81,223) 115,745 7,039 -- 41,561
Other comprehensive income, net of tax:
Foreign currency translation adjustments... -- -- (2,609) -- (2,609)
---------- ----------- --------- ---------- -----------
Comprehensive income (loss)................... $ (81,223) $ 115,745 $ 4,430 $ -- $ 38,952
=========== =========== ========= ========== ===========
46
URS CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
(In thousands)
Year Ended October 31, 2000
----------------------------
Subsidiary
Subsidiary Non-
Parent Guarantors Guarantors Eliminations Consolidated
-------- ------------ ----------- ------------ ------------
Cash flows from operating activities:
Net income (loss)........................................ $(72,886) $ 115,745 $ 7,039 $ -- $ 49,898
-------- ------------ ---------- -------- ------------
Adjustments to reconcile net income to net cash provided
(used) by operating activities:
Depreciation and amortization............................ 10,130 28,908 2,791 -- 41,829
Amortization of financing fees........................... 3,467 -- -- -- 3,467
Receivable allowances.................................... (7,186) 6,097 (2,801) 105 (3,785)
Stock compensation....................................... 1,179 -- -- -- 1,179
Tax benefit of stock options............................. 2,455 -- -- -- 2,455
Changes in current assets and liabilities:
Accounts receivable and costs and accrued earnings
in excess of billings on contracts in process......... -- (51,502) 11,150 1,093 (39,259)
Income taxes recoverable................................. -- (16,668) -- -- (16,668)
Prepaid expenses and other assets........................ (3,788) 1,111 1,453 -- (1,224)
Accounts payable, accrued salaries and wages and accrued
expenses.............................................. 88,206 (59,584) (28,139) (28,103) (27,620)
Billings in excess of costs and accrued earnings on
contracts in process.................................. -- 13,800 2,026 4,336 20,162
Deferrals and other, net................................. (12,868) (42,242) 12,615 23,085 (19,410)
--------- ------------ ---------- -------- ------------
Total adjustments..................................... 81,595 (120,080) (905) 516 (38,874)
-------- ------------ ---------- -------- ------------
Net cash provided (used) by operating activities......... 8,709 (4,335) 6,134 516 11,024
-------- ------------ ---------- -------- ------------
Cash flows from investing activities:
Proceeds from sale of subsidiaries....................... 25,354 -- -- -- 25,354
Capital expenditures..................................... (118) (14,404) (1,363) -- (15,885)
-------- ------------ ---------- -------- ------------
Net cash provided (used) by investing activities......... 25,236 (14,404) (1,363) -- 9,469
-------- ------------ ---------- -------- ------------
Cash flows from financing activities:
Principal payments on long-term debt, bank borrowings
and capital lease obligations......................... (37,805) (4,109) (8,096) (516) (50,526)
Proceeds from sale of common shares and exercise of
stock options......................................... 8,039 -- -- -- 8,039
-------- ------------ ---------- -------- ------------
Net cash used by financing activities.................... (29,766) (4,109) (8,096) (516) (42,487)
--------- ------------ ---------- -------- ------------
Net increase (decrease) in cash............................... 4,179 (22,848) (3,325) -- (21,994)
Cash at beginning of year..................................... 6,722 17,028 21,937 -- 45,687
-------- ------------ ---------- -------- ------------
Cash at end of year........................................... $ 10,901 $ (5,820) $ 18,612 $ -- $ 23,693
======== ============ ========== ======== ============
47
URS CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEET
(In thousands)
October 31, 1999
Subsidiary
Subsidiary Non-
Parent Guarantors Guarantors Eliminations Consolidated
------------- ------------- ------------- ------------- -------------
ASSETS
Current assets:
Cash.................................... $ 6,722 $ 17,028 $ 21,937 $ -- $ 45,687
Accounts receivable, net................ (15,000) 592,159 90,818 (2,016) 665,961
Deferred income taxes................... -- 15,719 1,324 -- 17,043
Prepaid expenses and other assets....... 4,640 18,624 847 -- 24,111
------------- ------------- ------------- ------------- -------------
Total current assets................ (3,638) 643,530 114,926 (2,016) 752,802
Property and equipment, net............. 445 81,526 11,194 -- 93,165
Goodwill, net........................... 233,081 322,363 3,633 (29,380) 529,697
Investment in unconsolidated
subsidiaries.......................... 252,025 554,834 3,231 (810,090) --
Inter-company receivable................ -- 5,460 (4,207) (1,253) --
Other assets............................ 12,025 46,215 2,002 8,619 68,861
------------- ------------- ------------- ------------- -------------
$ 493,938 $ 1,653,928 $ 130,779 $ (834,120) $ 1,444,525
============= ============= ============= ============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt....... $ 18,392 $ 16,514 $ 16,250 $ (11,733) $ 39,423
Accounts payable........................ 27,381 95,277 13,686 (6,299) 130,045
Inter-company payable................... (471,007) 452,321 54,447 (35,761) --
Accrued expenses and other.............. -- 68,613 28,185 50,098 146,896
Billings in excess of costs and
accrued earnings on contracts in
process............................... -- 70,369 4,280 (4,336) 70,313
------------- ------------- ------------- -------------- ------------
Total current liabilities........... (425,234) 703,094 116,848 (8,031) 386,677
Long-term debt............................... 635,016 13,540 401 -- 648,957
Other........................................ 72,041 82,438 694 (56,784) 98,389
------------- ------------- ------------- -------------- -------------
Total liabilities................... 281,823 799,072 117,943 (64,815) 1,134,023
Mandatorily redeemable Series B exchangeable
convertible preferred stock................ 103,333 -- -- -- 103,333
Total stockholders' equity................ 108,782 854,856 12,836 (769,305) 207,169
------------- ------------- ------------- -------------- -------------
$ 493,938 $ 1,653,928 $ 130,779 $ (834,120) $ 1,444,525
============= ============= ============= ============= =============
48
URS CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
(In thousands)
Year Ended October 31, 1999
---------------------------
Subsidiary
Subsidiary Non-
Parent Guarantors Guarantors Eliminations Consolidated
----------- ----------- --------- ------------ ------------
Revenues...................................... $ -- $ 1,270,517 $ 154,211 $ (6,206) $ 1,418,522
----------- ----------- --------- ---------- ------------
Expenses:
Direct operating.......................... -- 765,527 93,607 (4,614) 854,520
Indirect, general and administrative...... 14,541 389,156 59,826 (391) 463,132
Interest expense, net..................... 34,069 -- 520 -- 34,589
----------- ----------- --------- --------- ------------
48,610 1,154,683 153,953 (5,005) 1,352,241
----------- ----------- --------- --------- ------------
Income (loss) before taxes.................... (48,610) 115,834 258 (1,201) 66,281
Income tax expense............................ 29,130 -- 562 8 29,700
----------- ----------- --------- --------- ------------
Net income.................................... (77,740) 115,834 (304) (1,209) 36,581
Preferred stock dividend...................... 3,333 -- -- -- 3,333
----------- ----------- --------- --------- ------------
Net income (loss) available for common
stockholders.............................. (81,073) 115,834 (304) (1,209) 33,248
Other comprehensive income, net of tax:
Foreign currency translation adjustments.. -- -- 197 -- 197
----------- ----------- --------- --------- ------------
Comprehensive income (loss)................... $ (81,073) $ 115,834 $ (107) $ (1,209) $ 33,445
=========== =========== ========= ========= ============
49
URS CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
(In thousands)
Year Ended October 31, 1999
---------------------------
Subsidiary
Subsidiary Non-
Parent Guarantors Guarantors Eliminations Consolidated
------ ---------- ---------- ------------ ------------
Cash flows from operating activities:
Net income (loss)........................................... $ (77,740) $ 115,834 $ (304) $ (1,209) $ 36,581
---------- ---------- --------- ---------- ----------
Adjustments to reconcile net income to net cash provided
(used) by operating activities:
Depreciation and amortization............................... 7,075 23,162 1,940 -- 32,177
Amortization of financing fees.............................. 1,587 -- -- -- 1,587
Receivable allowances....................................... -- (231) (51) (3) (285)
Stock compensation.......................................... 1,726 -- -- -- 1,726
Changes in current assets and liabilities:
Accounts receivable and costs and accrued earnings in
excess of billings on contracts in process................. -- (221,410) (30,211) 165,355 (86,266)
Prepaid expenses and other assets............................ (3,376) (6,768) 1,236 7,171 (1,737)
Accounts payable, accrued salaries and wages and accrued
expenses................................................... 63,181 120,758 38,084 (237,238) (15,215)
Billings in excess of costs and accrued earnings on
contracts in process....................................... -- 35,931 3,263 (5,887) 33,307
Deferrals and other, net..................................... (10,033) (30,015) (1,875) 48,801 6,878
--------- ---------- --------- ---------- --------
Total adjustments................................... 60,160 (78,573) 12,386 (21,801) (27,828)
--------- ---------- --------- ---------- --------
Net cash provided (used) by operating activities............. (17,580) 37,261 12,082 (23,010) 8,753
--------- ---------- --------- ---------- --------
Cash flows from investing activities:
Payment for business acquisition, net of cash acquired....... (316,167) -- -- -- (316,167)
Capital expenditures......................................... (41) (39,770) (3,447) 23,010 (20,248)
--------- ---------- --------- ---------- --------
Net cash (used) by investing activities...................... (316,208) (39,770) (3,447) 23,010 (336,415)
--------- ---------- --------- ---------- --------
Cash flows from financing activities:
Payments on merger fees...................................... (18,738) -- -- -- (18,738)
Proceeds from issuance of debt............................... 817,162 24,335 13,242 -- 854,739
Principal payments on long-term debt, bank borrowings and
capital lease obligations.................................. (578,904) (11,336) (2,982) -- (593,222)
Proceeds from sale of common shares and exercise of stock
options.................................................... 7,138 -- -- -- 7,138
Proceeds from issuance of preferred stock.................... 100,000 -- -- -- 100,000
Payments on financing fees................................... (11,597) -- -- -- (11,597)
Payments on financing fees related to issuance of
preferred stock............................................ (1,500) -- -- -- (1,500)
--------- ---------- --------- ---------- --------
Net cash provided by financing activities.................... 313,561 12,999 10,260 -- 336,820
--------- ---------- --------- ---------- --------
Net increase (decrease) in cash................................. (20,227) 10,490 18,895 -- 9,158
Cash at beginning of year....................................... 26,949 6,538 3,042 -- 36,529
--------- ---------- --------- ---------- --------
Cash at end of year........................................... $ 6,722 $ 17,028 $ 21,937 $ -- $ 45,687
========= ========== ========= ========== ========
50
URS CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
(In thousands)
Year Ended October 31, 1998
---------------------------
Subsidiary
Subsidiary Non-
Parent Guarantors Guarantors Eliminations Consolidated
----------- ----------- ---------- ------------ -----------
Revenues........................ $ -- $ 752,196 $ 55,467 $ (1,717) $ 805,946
----------- ----------- ---------- ------------ -----------
Expenses:
Direct operating.......... -- 446,963 33,394 (1,717) 478,640
Indirect, general and
administrative.......... 7,137 249,827 20,101 -- 277,065
Interest expense, net..... 8,274 -- 500 -- 8,774
----------- ----------- ---------- ----------- -----------
15,411 696,790 53,995 (1,717) 764,479
----------- ----------- ---------- ----------- -----------
Income (loss) before taxes...... (15,411) 55,406 1,472 -- 41,467
Income tax expense.............. 18,447 -- 353 -- 18,800
----------- ----------- ---------- ----------- -----------
Net income (loss)............... $ (33,858) $ 55,406 $ 1,119 $ -- $ 22,667
============ =========== ========== =========== ===========
51
URS CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
(In thousands)
Year Ended October 31, 1998
---------------------------
Subsidiary
Subsidiary Non-
Parent Guarantors Guarantors Eliminations Consolidated
------ ---------- ---------- ------------ ------------
Cash flows from operating activities:
Net income (loss)....................................... $ (33,858) $ 55,406 $ 1,119 $ -- $ 22,667
----------- ----------- ---------- ---------- -----------
Adjustments to reconcile net income to net cash provided
(used) by operating activities:
Depreciation and amortization........................... 5,964 11,041 909 -- 17,914
Amortization of financing fees.......................... 642 -- -- -- 642
Receivable allowances................................... -- (2,259) (92) -- (2,351)
Changes in current assets and liabilities:
Accounts receivable and costs and accrued earnings in
excess of billings on contracts in process.......... -- (16,528) (1,314) 4,881 (12,961)
Prepaid expenses and other assets....................... 4,043 (4,597) 600 (71) (25)
Accounts payable, accrued salaries and wages and
accrued expenses.................................... 1,117 8,625 (362) (7,194) 2,186
Billings in excess of costs and accrued earnings on
contracts in process................................ -- (994) 1,017 -- 23
Deferrals and other, net................................ 9,272 -- 133 3,290 12,695
--------- ----------- ---------- ---------- -----------
Total adjustments................................... 21,038 (4,712) 891 906 18,123
--------- ------------ ---------- ---------- -----------
Net cash provided (used) by operating activities........ (12,820) 50,694 2,010 906 40,790
--------- ----------- ---------- ---------- -----------
Cash flows from investing activities:
Payment for business acquisition, net of cash acquired..
(36,937) -- -- -- (36,937)
Capital expenditures.................................... (180) (11,516) (505) -- (12,201)
--------- ----------- ----------- ---------- -----------
Net cash (used) by investing activities................. (37,117) (11,516) (505) -- (49,138)
--------- ----------- ----------- ---------- -----------
Cash flows from financing activities:
Payments of merger fees................................. (4,705) -- -- -- (4,705)
Proceeds from issuance of debt.......................... 110,000 -- 920 (920) 110,000
Principal payments on long-term debt, bank borrowings
and capital lease obligations....................... (83,149) -- (22) 14 (83,157)
Proceeds from sale of common shares and exercise of
stock options....................................... 4,605 -- -- -- 4,605
Payment on financing fees............................... (4,000) -- -- -- (4,000)
--------- ----------- ---------- ---------- -----------
Net cash provided by financing activities............... 22,751 -- 898 (906) 22,743
--------- ----------- ---------- ----------- -----------
Net increase (decrease) in cash.............................. (27,186) 39,178 2,403 -- 14,395
Cash at beginning of year.................................... 54,135 (32,640) 639 -- 22,134
--------- ------------ ---------- ---------- -----------
Cash at end of year.......................................... $. 26,949 $ 6,538 $ 3,042 $ -- $ 36,529
========== =========== ========== ========== ===========
52
ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
PART III
ITEM 10. EXECUTIVE OFFICERS AND DIRECTORS
Incorporated by reference from the information under the captions "Election of
Directors" and "Compliance with Section 16(a) of Securities Exchange Act" in our
definitive proxy statement for the Annual Meeting of Stockholders to be held on
March 20, 2001 and from Item 4A--"Executive Officers of the Registrant" in Part
I.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference from the information under the caption "Executive
Compensation" in our definitive proxy statement for the Annual Meeting of
Stockholders to be held on March 20, 2001.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference from the information under the caption "Security
Ownership of Certain Beneficial Owners and Management" in our definitive proxy
statement for the Annual Meeting of Stockholders to be held on March 20, 2001.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference from Item 8, Consolidated Financial Statements and
Supplementary Data, Note 7, Notes Payable and Long-Term Debt and Note 6, Related
Party Transactions.
53
PART IV
ITEM 14. EXHIBITS. FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) Item 8. Consolidated Financial Statements and Supplementary Data
Report of Independent Accountants
Consolidated Balance Sheets October 31, 2000 and October 31, 1999
Consolidated Statements of Operations For the years ended October 31, 2000,
1999 and 1998
Consolidated Statements of Changes in Stockholders' Equity For the years ended
October 31, 2000, 1999 and 1998
Consolidated Statements of Cash Flows For the years ended October 31, 2000,
1999 and 1998
Notes to Consolidated Financial Statements
(a)(2) Financial Statement Schedules
Schedules are omitted because they are not applicable, not required or because
the required information is included in the Consolidated Financial Statements or
Notes thereto.
(a)(3) Exhibits
2.1 Agreement and Plan of Merger, dated May 5, 1999, by and among Dames
& Moore Group, URS Corporation and Demeter Acquisition Corporation,
filed as Exhibit 2.1 to our Current Report on Form 8-K, dated May
7, 1999, and incorporated herein by reference.
3(i) Certificate of Incorporation of URS Corporation, filed as Exhibit
3.1 to our Annual Report on Form 10-K for the fiscal year ended
October 31, 1991 (the "1991 Form 10-K"), and incorporated herein by
reference.
3(ii) Bylaws of URS Corporation, filed as Exhibit 3(ii) to the Form 10-Q
for the quarter ended July 31, 1999, and incorporated herein by
reference.
4.1 Indenture, dated as of February 15, 1987, between URS Corporation
and First Interstate Bank of California, Trustee, relating to $57.5
million of our 6 1/2% Convertible Subordinated Debentures Due 2012,
filed as Exhibit 4.10 to our Registration Statement on Form S-2
(Commission File No. 33-11668), and incorporated herein by
reference.
4.2 Amendment Number 1 to Indenture governing 6 1/2% Convertible
Subordinated Debentures due 2012, dated February 21, 1990, between
URS Corporation and First Interstate Bank of California, Trustee,
filed as Exhibit 4.9 to our Registration Statement on Form S-1
(Commission File No. 33-56296) (the "1990 Form S-1"), and
incorporated herein by reference.
4.3 Indenture, dated as of March 16, 1989, between URS Corporation
and MTrust Corp., National Association, Trustee relating to our 8
5/8% Senior Subordinated Debentures due 2004, filed as Exhibit 13C
to our Form T-3 under the Trust Indenture Act of 1939 (Commission
File No. 22-19189), and incorporated herein by reference.
4.4 Amendment Number 1 to Indenture governing 8 5/8% Senior
Subordinated Debentures due 2004, dated as of April 7, 1989, filed
as Exhibit 4.11 to the 1990 Form S-1 and incorporated herein by
reference.
4.5 Amendment Number 2 to Indenture governing 8 5/8% Senior
Subordinated Debentures due 2004, dated February 21, 1990, between
URS Corporation and MTrust Corp. National Association, Trustee,
filed as Exhibit 4.12 to the 1990 Form S-1 and incorporated herein
by reference.
54
4.6 Credit Agreement, dated as of June 9, 1999, by and among URS
Corporation, the lenders named therein, Wells Fargo Bank, N.A., as
Co-Lead Arranger and Administrative Agent, and Morgan Stanley
Senior Funding, Inc. as Co-Lead Arranger and Syndication Agent,
filed as Exhibit 2.2 to our Current Report on Form 8-K, dated June
11, 1999, and incorporated herein by reference.
4.7 Note Purchase Agreement, dated as of June 9, 1999, by and between
Morgan Stanley Senior Funding, Inc. and URS Corporation, filed as
Exhibit 2.3 to our Current Report on Form 8-K, dated June 11, 1999,
and incorporated herein by reference.
4.8 Securities Purchase Agreement, dated as of May 5, 1999, by and
between RCBA Strategic Partners, L.P. and URS Corporation, filed as
Exhibit 2.4 to our Current Report on Form 8-K, dated June 11, 1999,
and incorporated herein by reference.
4.9 Indenture, dated as of June 23, 1999, by and among Firststar Bank
of Minnesota, N.A., URS Corporation and Subsidiary Guarantors
defined therein relating to our 12 1/4% Senior Subordinated Notes
due 2009, filed as Exhibit 2.5 to our Current Report on Form 8-K,
dated July 1, 1999, and incorporated herein by reference.
4.10 Registration Rights Agreement, dated June 23, 1999 by and among
Morgan Stanley & Co. Incorporated, URS Corporation and the
Guarantors listed therein, filed as Exhibit 2.6 to our Current
Report on Form 8-K, dated July 1, 1999, and incorporated herein by
reference.
4.11 Placement Agreement, dated June 18, 1999, by and among Morgan
Stanley & Co. Incorporated, URS Corporation and the Guarantors
named therein, filed as Exhibit 2.7 to our Current Report on Form
8-K, dated July 1, 1999, and incorporated herein by reference.
4.12 Form of URS Corporation 12 1/4% Senior Subordinated Notes due 2009,
included as an exhibit to Exhibit 4.9, filed as Exhibit 2.5 to our
Current Report on Form 8-K, dated July 1, 1999, and incorporated
herein by reference.
4.13 Form of URS Corporation 12 1/4% Senior Subordinated Exchange Notes
due 2009, included as an exhibit to Exhibit 4.9, filed as Exhibit
2.5 to our Current Report on Form 8-K, dated July 1, 1999, and
incorporated herein by reference.
4.14 Certificate of Designation of Series A Preferred Stock of URS
Corporation, included as an exhibit to Exhibit 4.8, filed as
Exhibit 2.4 to our Current Report on Form 8-K, dated June 11, 1999,
and incorporated herein by reference.
4.15 Certificate of Designation of Series B Preferred Stock of URS
Corporation, included as an exhibit to Exhibit 4.8, filed as
Exhibit 2.4 to our Current Report on Form 8-K, dated June 11, 1999,
and incorporated herein by reference.
4.16 Certificate of Designation of Series C Preferred Stock of URS
Corporation, included as an exhibit to Exhibit 4.8, filed as
Exhibit 2.4 to our Current Report on Form 8-K, dated June 11, 1999,
and incorporated herein by reference.
10.1 1991 Stock Incentive Plan of URS Corporation, as amended effective
December 17, 1996, filed as Appendix A to our definitive proxy
statement for the 1997 Annual Meeting of Stockholders, filed with
the SEC on February 13, 1997, and incorporated herein by reference.
10.2 Employee Stock Purchase Plan of URS Corporation, as amended
effective October 12, 1999, filed as Exhibit A to our definitive
proxy statement for the 1999 Special Meeting of Stockholders, filed
with the SEC on September 7, 1999, and incorporated herein by
reference.
10.3 1999 Equity Incentive Plan of URS Corporation, effective October
12, 1999, filed as Exhibit B to our definitive proxy statement for
the 1999 Special Meeting of Stockholders, filed with the SEC on
September 7, 1999, and incorporated herein by reference.
10.4 Non-Executive Directors Stock Grant Plan of URS Corporation,
adopted December 17, 1996, filed as Exhibit 10.5 to our 1996 Form
10-K filed with the SEC on January 14, 1997, and incorporated
herein by reference.
10.5 Selected Executive Deferred Compensation Plan of URS Corporation,
filed as Exhibit 10.3 to the 1990 Form S-1, and incorporated herein
by reference.
55
10.6 1999 Incentive Compensation Plan of URS Corporation, filed as
Appendix A to our definitive proxy statement for the 1999 Annual
Meeting of Shareholders, filed with the SEC on February 17, 1999,
and incorporated herein by reference.
10.7 Non-Executive Directors Stock Grant Plan, as amended, filed as
Exhibit 10.1 to the Form 10-Q for the quarter ended January 31,
1998, and incorporated herein by reference.
10.8 Contingent Restricted Stock Award Agreement dated as of December
16, 1997, between URS Corporation and Martin M. Koffel, filed as
Exhibit 10.12 to our Annual Report on Form 10-K for the fiscal year
ended October 31, 1998 (the "1998 Form 10-K"), filed with the SEC
on January 29, 1999, and incorporated herein by reference.
10.9 Contingent Restricted Stock Award Agreement dated as of December
16, 1997, between URS Corporation and Kent P. Ainsworth, filed as
Exhibit 10.13 to our 1998 Form 10-K filed with the SEC on January
29, 1999, and incorporated herein by reference.
10.10 Employment Agreement, dated December 16, 1991, between URS
Corporation and Martin M. Koffel, filed as Exhibit 10.13 to our
1991 Form 10-K and incorporated herein by reference.
10.11 Employment Agreement, dated September 8, 2000, between URS
Corporation and Kent P. Ainsworth. FILED HEREWITH.
10.12 Employment Agreement, dated October 12, 2000, between URS
Corporation and Irwin L. Rosenstein. FILED HEREWITH.
10.13 Employment Agreement, dated November 1, 1997, between
Woodward-Clyde Group, Inc. and Jean-Yves Perez, filed as Exhibit
10.1 to our Form 10-Q for the quarter ended April 30, 1998, and
incorporated herein by reference.
10.14 Employment Agreement, dated as of September 8, 2000, between
URS Corporation and Joseph Masters. FILED HEREWITH.
10.15 Amendment to Employment Agreement dated as of October 13, 1998
between URS Corporation and Martin M. Koffel filed as Exhibit 10.21
to our 1998 Form 10-K and incorporated herein by reference.
10.16 Form of Amendment to Employment Agreement dated as of October 13,
1998 between URS Corporation, URS Greiner Woodward-Clyde
Consultants, Inc., or URS Greiner Woodward-Clyde, Inc. and each of
Martin Tanzer, and Jean-Yves Perez filed as Exhibit 10.22 to our
1998 Form 10-K and incorporated herein by reference.
10.17 Employment Agreement, dated November 19, 1999, between URS
Corporation and David C. Nelson, filed as Exhibit 10.1 to our Form
10-Q for the quarter ended July 31, 2000, and incorporated herein
by reference.
10.18 Registration Rights Agreement, dated February 21, 1990, by and
among URS Corporation, Wells Fargo Bank, N.A. and the Purchaser
Holders named therein, filed as Exhibit 10.33 to our 1990 Form S-1
and incorporated herein by reference.
10.19 Form of Indemnification Agreement filed as Exhibit 10.34 to URS
Corporation's Annual Report on Form 10-K for the fiscal year ended
October 31, 1992 and incorporated herein by reference; dated as of
May 1, 1992 between URS Corporation and each of Messrs. Ainsworth,
Blum, Koffel, Madden, Praeger, Rosenstein and Walsh; dated as of
March 22, 1994 between URS Corporation and each of Admiral Foley
and Mr. Der Marderosian; and dated as of August 5, 1999 between URS
Corporation and Marie L. Knowles; dated as of January 20, 1997
between URS Corporation and Mr. Masters; and dated as of November
17, 1997 between URS Corporation and Mr. Perez.
10.20 Agreement and Plan of Merger dated August 18, 1997, by and among
URS Corporation, Woodward-Clyde Group, Inc. and W-C Acquisition
Corporation, filed as Exhibit 2.1 to URS Corporation's Current
Report on Form 8-K filed on August 21, 1997 and incorporated herein
by reference.
56
10.21 Credit Agreement, dated as of November 14, 1997, between URS
Corporation, the Financial Institutions listed therein as Lenders
and Wells Fargo Bank, National Association, as Administrative Agent
for the Lenders, filed as Exhibit 2.2 to URS Corporation's Current
Report on Form 8-K filed on November 26, 1997, and incorporated
herein by reference.
10.22 URS Corporation Supplemental Executive Retirement Agreement, dated
as of July 13, 1999, between Martin M. Koffel and URS Corporation,
filed as Exhibit 10.1 to our Form 10-Q for the quarter ended July
31, 1999, and incorporated herein by reference.
10.23 URS Corporation 1991 Stock Incentive Plan Nonstatutory Stock Option
Agreement, dated as of March 23, 1999, between URS Corporation and
Martin M. Koffel, filed as Exhibit 10.2 to our Form 10-Q for the
quarter ended July 31, 1999, and incorporated herein by reference.
10.24 Stock Option Agreement, dated as of November 5, 1999, by and
between URS Corporation and Martin M. Koffel. Filed as Exhibit
10.24 to our Form 10-K for the fiscal year ended October 31, 1999
(the "1999 Form 10-K"), and incorporated herein by reference.
10.25 Stock Option Agreement, dated as of November 5, 1999, by and
between URS Corporation and Kent P. Ainsworth. Filed as Exhibit
10.25 to our 1999 Form 10-K and incorporated herein by reference.
10.26 Stock Option Agreement, dated as of November 5, 1999, by and
between URS Corporation and Joseph Masters. Filed as Exhibit 10.26
to our 1999 Form 10-K and incorporated herein by reference.
21.1 Subsidiaries of URS Corporation. FILED HEREWITH.
23.1 Consent of PricewaterhouseCoopers LLP. FILED HEREWITH.
24.1 Powers of Attorney of URS Corporation's directors and officers.
FILED HEREWITH.
(b) Reports on Form 8-K. We filed the following reports on Form 8-K during the
quarter ended October 31, 2000:
None
57
SIGNATURES
Pursuant to the requirements of Section 13 or 19(d) of the Securities Exchange
Act of 1934, URS Corporation, the Registrant, has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
URS Corporation
(Registrant)
By /s/ Kent P. Ainsworth
------------------------------------
Kent P. Ainsworth
Executive Vice President and
Chief Financial Officer
Dated: January 18, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant in
the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
/s/ MARTIN M. KOFFEL Chairman of the Board of Directors January 18, 2001
- ----------------------------------------- and Chief Executive Officer
(Martin M. Koffel)
/s/ KENT P. AINSWORTH Executive Vice President, Chief January 18, 2001
- ----------------------------------------- Financial Officer, Principal
(Kent P. Ainsworth) Accounting Officer and Secretary
/s/ IRWIN L. ROSENSTEIN* Director January 18, 2001
- -----------------------------------------
(Irwin L. Rosenstein)
/s/ RICHARD C. BLUM* Director January 18, 2001
- -----------------------------------------
(Richard C. Blum)
/s/ RICHARD Q. PRAEGER* Director January 18, 2001
- -----------------------------------------
(Richard Q. Praeger)
/s/ WILLIAM D. WALSH* Director January 18, 2001
- -----------------------------------------
(William D. Walsh)
/s/ RICHARD B. MADDEN* Director January 18, 2001
- -----------------------------------------
(Richard B. Madden)
/s/ ARMEN DER MARDEROSIAN* Director January 18, 2001
- -----------------------------------------
(Armen Der Marderosian)
58
Signature Title Date
--------- ----- ----
/s/ ADM. S. ROBERT FOLEY, JR.,
USN (RET)* Director January 18, 2001
- ----------------------------------------
(Adm. S. Robert Foley, Jr., USN (Ret.))
/s/ JEAN YVES PEREZ* Director January 18, 2001
- ----------------------------------------
(Jean Yves Perez)
MARIE L. KNOWLES* Director January 18, 2001
- ----------------------------------------
(Marie L. Knowles)
*By /s/ Kent P. Ainsworth
- ----------------------------------------
(Kent P. Ainsworth, Attorney-in-fact)