EX-99.1 2 f11544exv99w1.htm EXHIBIT 99.1 exv99w1
 

EXHIBIT 99.1
(URS LOGO)
     
Contacts:
    
 
    
URS Corporation
  Citigate Sard Verbinnen
 
    
Kent P. Ainsworth
  Hugh Burns/Jamie Tully/Kara Findlay
Executive Vice President
  (212) 687-8080
& Chief Financial Officer
    
(415) 774-2700
    
URS CORPORATION REPORTS SECOND QUARTER
RESULTS FOR FISCAL 2005
Results In line With Guidance, Excluding Previously
Announced Charge Related to Note Redemption
and Restructuring of Senior Credit Facility
Company Raises 2005 Guidance; Pays Down $143 Million in Debt, Reducing Debt to Total
Capitalization Ratio to 24%
     SAN FRANCISCO, CA — August 10, 2005 — URS Corporation (NYSE: URS) today reported its financial results for the second quarter of fiscal 2005, which ended on July 1, 2005. Revenues for the quarter were $961.6 million, an increase of 12% compared with revenues of $862.3 million during the comparable period in 2004. Net income for the quarter was $7.6 million, including a pre-tax charge of $32.3 million, or $0.42 per share, net of tax, related to the Company’s recent $127.2 million note redemption and restructuring of its senior credit facility. Net income for the comparable period in 2004 was $6.9 million, including a pre-tax charge of $25.8 million, or $0.37 per share, net of tax, related to note redemptions of $230.0 million.1
     Diluted earnings per share (“EPS”) for the second quarter of fiscal year 2005 were $0.17 after the $0.42 per share charge described above. This compares to diluted EPS of $0.17 per share for the same period in 2004 after the $0.37 charge in that quarter. Weighted-average shares outstanding for the second quarter of 2005 for purposes of calculating diluted EPS were
 
1 As previously announced, the Company changed to a calendar fiscal year, effective January 1, 2005. URS now reports its financial results on a 52/53-week fiscal year ending on the Friday closest to December 31, with interim quarters ending on the Fridays closest to March 31, June 30 and September 30. The note redemptions of $230 million and the $16 million after tax charge taken in the comparable period of calendar 2004 were reported as part of the Company’s third quarter results under its prior fiscal calendar.

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46 million compared to 42 million weighted-average shares outstanding for the comparable period of 2004. This increase in weighted-average shares is due to the Company’s common stock offering in April of 2004, which weights the shares more in 2005 than in 2004, and to additional shares issued pursuant to the Company’s employee stock option and purchase plans.
     During the second quarter of fiscal 2005, the Company used net proceeds from a common stock offering and cash from operations to pay down debt of $143 million, which included $127 million in note redemption. As of the end of the quarter, the Company’s debt to total capitalization was 24%, down from 58% following the acquisition of EG&G in 2002.
     For the six months ended July 1, 2005, revenues increased by 11% to $1.884 billion, from $1.693 billion for the first six months of 2004. Net income for the six months ended July 1, 2005 was $27.7 million, including a pre-tax charge of $33.1 million, or $0.43 per share, net of tax, related to the Company’s recent $127.2 million of note redemption, retirement of $10 million of its 12 1/4% notes and restructuring of its senior credit facility. Net income for the comparable period in 2004 was $20.7 million, including a pre-tax charge of $25.8 million, or $0.40 per share, net of tax, related to the note redemptions of $230.0 million.
     As of July 1, 2005, the Company’s backlog was $3.681 billion, compared to $3.633 billion as of December 31, 2004.
     Commenting on the Company’s financial results, Martin M. Koffel, Chairman and Chief Executive Officer, stated: “Our double-digit revenue growth this quarter reflects a continuation of the strong performance of our federal and international businesses, combined with expected modest increases in revenues from our state and local government and private sector businesses, as these markets continue to recover from extended downturns. Our results this quarter give us added confidence in our ability to meet the business and financial objectives we have set for 2005.”
     Mr. Koffel continued: “During the quarter we also successfully completed a common stock offering, related note redemption and entered into a new senior credit agreement with favorable terms. These transactions, which will strengthen our balance sheet, represent important milestones in the continued maturation of our balance sheet and will result in additional financial flexibility and reduction in our interest expense.”
Business Segments
     In addition to providing consolidated financial results, the Company provides separate financial information for its two segments: the URS Division and the EG&G Division. The URS

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Division includes the Company’s work in the state and local government market, the private sector and the international business. In addition, the URS Division includes a portion of the Company’s federal business, consisting primarily of facilities and environmental work. The EG&G Division primarily serves the federal government market, providing a range of operations and maintenance and technical support services.
     URS Division. For the second quarter of fiscal 2005, the URS Division reported revenues of $622.1 million and operating income of $47.5 million, compared to revenues of $584.4 million and operating income of $45.9 million for the corresponding period in 2004.
     For the six months ended July 1, 2005, the URS Division reported revenues of $1,230.1 million and operating income of $90.4 million, compared to revenues of $1,144.9 million and operating income of $85.0 million for the same period last year.
     EG&G Division. For the second quarter of fiscal 2005, the EG&G Division reported revenues of $340.9 million and operating income of $18.0 million, compared to revenues of $279.2 million and operating income of $14.8 million for the corresponding period in 2004.
     For the six months ended July 1, 2005, the EG&G Division reported revenues of $656.4 million and operating income of $30.7 million, compared to revenues of $549.3 million and operating income of $25.7 million for the same period last year.
Common Stock Offering, Note Redemptions and Credit Facility Refinancing
     As previously announced, during the second quarter of fiscal year 2005, the Company completed a public offering of 4,000,393 shares of its common stock at a price of $34.50 per share, including 363,672 shares sold upon exercise of the underwriters’ over-allotment option, for total net proceeds of $130.3 million, net of underwriting discounts, commissions and other expenses.
     The Company used the net proceeds from its recent common stock offering and $16 million of cash from operations to pay down debt of $143 million, which included $127 million of its outstanding 11 1/2% Senior Notes due 2009.
     The Company has also previously disclosed that it entered into a new $650 million Senior Credit Agreement as of June 28, 2005, that replaces the Company’s previous $675 million senior secured credit facility. The new Senior Credit Agreement provides for a six-year, $350 million term loan facility and a five-year $300 million revolving credit facility, of which up to $200 million is available in the form of letters of credit. The new Senior Credit Agreement provides the Company

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with more flexible terms and conditions, along with improved pricing as compared to the Company’s previous senior secured credit facility.
Outlook for the Remainder of Fiscal 2005
     Based on revenue growth for the first half of 2005 and the continued positive outlook for the Company’s markets, URS is raising its financial guidance for fiscal 2005 revenues. The Company now expects that consolidated revenues will be between $3.7 billion and $3.8 billion for the year compared to prior guidance of $3.6 billion.
     In addition, the Company now expects that net income for the year will be approximately $102 million, excluding the charge of $20 million, net of tax, related to note redemptions during the year, or $82 million including the charge. The Company had previously expected net income of $96 million. Also, the Company now expects that earnings per share for 2005 will be approximately $2.10 to $2.12, excluding the charge of $0.43 per share, net of tax, related to the note redemptions and restructuring of its senior credit facility. The Company also confirmed its guidance regarding repayment of debt of $80 million for 2005, in addition to the $127 million debt redemption it completed during the quarter.
     Finally, the Company expects that third quarter earnings per share will be between 25% and 30% of the Company’s full year fiscal 2005 earnings per share guidance.
     URS Corporation offers a comprehensive range of professional planning and design, systems engineering and technical assistance, program and construction management, and operations and maintenance services for transportation, commercial/industrial, facilities, environmental, water/wastewater, homeland security, installations and logistics, and defense systems. Headquartered in San Francisco, the Company operates in more than 20 countries with approximately 28,000 employees providing engineering and technical services to federal, state and local governmental agencies as well as private clients in the chemical, pharmaceutical, oil and gas, power, manufacturing, mining and forest products industries (www.urscorp.com).
Web Cast Information
     URS will host a dial-in conference call on Thursday, August 11 at 11:00 a.m. (EDT) to discuss its results for the second quarter of fiscal year 2005. A live web cast of this call will be available on the investor relations portion of URS’ website at www.urscorp.com.

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TABLES TO FOLLOW
# # #
Statements contained in this earning release that are not historical facts may constitute forward-looking statements, including statements relating to the Company’s future revenue projections, future business prospects, future debt repayment and future earning projections. The Company believes that its expectations are reasonable and are based on reasonable assumptions. However, such forward-looking statements by their nature involve risks and uncertainties that could cause actual results to differ materially from the results predicted. The potential risks and uncertainties include, but are not limited to: an economic downturn; changes in the Company’s book of business; the Company’s compliance with government contract procurement regulations; the Company’s dependence on government appropriations and procurements; the Company’s ability to make accurate estimates; the Company’s ability to profitably execute its contracts and guarantees; the Company’s leveraged position; the Company’s ability to service its debt; liability for pending and future litigation; the impact of changes in laws and regulations; the Company’s ability to maintain adequate insurance coverage; a decline in defense spending; industry competition; the Company’s ability to attract and retain key individuals; risks associated with SFAS 123(R); risks associated with international operations; risks associated with the Company’s accounting and project management software; the Company’s relationship with its labor unions; and other factors discussed more fully in the Company’s Form 10-Q for the second quarter of fiscal 2005, as well as in other reports subsequently filed from time to time with the Securities and Exchange Commission. The Company assumes no obligation to update any forward-looking statements.

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URS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS — UNAUDITED
(In thousands, except per share data)
                 
    July 1, 2005   December 31, 2004
ASSETS
                
Current assets:
                
Cash and cash equivalents, including $31,626 and $59,175 of short-term money market funds, respectively
   $ 76,724     $ 108,007  
Accounts receivable, including retainage of $45,364 and $43,844, respectively
     574,765       579,953  
Costs and accrued earnings in excess of billings on contracts in process
     456,619       400,418  
Less receivable allowances
     (40,671 )     (38,719 )
 
                
Net accounts receivable
     990,713       941,652  
Deferred income taxes
     23,058       20,614  
Prepaid expenses and other assets
     39,945       26,061  
 
                
Total current assets
     1,130,440       1,096,334  
Property and equipment at cost, net
     143,790       142,907  
Goodwill
     1,004,680       1,004,680  
Purchased intangible assets, net
     6,263       7,749  
Other assets
     51,138       52,010  
 
                
 
   $ 2,336,311     $ 2,303,680  
 
                
LIABILITIES AND STOCKHOLDERS’ EQUITY
                
Current liabilities:
                
Book overdraft
   $ 1,028     $ 70,871  
Notes payable and current portion of long-term debt
     26,692       48,338  
Accounts payable and subcontractors payable, including retainage of $14,077 and $13,302, respectively
     182,722       144,435  
Accrued salaries and wages
     177,984       171,004  
Accrued expenses and other
     65,031       59,914  
Billings in excess of costs and accrued earnings on contracts in process
     99,153       84,393  
 
                
Total current liabilities
     552,610       578,955  
Long-term debt
     370,423       508,584  
Deferred income taxes
     41,885       36,305  
Other long-term liabilities
     101,639       97,715  
 
                
Total liabilities
     1,066,557       1,221,559  
 
                
Commitments and contingencies
                
Stockholders’ equity:
                
Common shares, par value $.01; authorized 100,000 shares; 49,112 and 43,838 shares issued, respectively; and 49,060 and 43,786 shares outstanding, respectively
     491       438  
Treasury stock, 52 shares at cost
     (287 )     (287 )
Additional paid-in capital
     898,770       734,843  
Accumulated other comprehensive income
     2,367       6,418  
Retained earnings
     368,413       340,709  
 
                
Total stockholders’ equity
     1,269,754       1,082,121  
 
                
 
   $ 2,336,311     $ 2,303,680  
 
                

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URS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME — UNAUDITED
(In thousands, except per share data)
                                 
    Three Months Ended   Six Months Ended
    July 1,   June 30,   July 1,   June 30,
    2005   2004   2005   2004
Revenues
   $ 961,616     $ 862,298     $ 1,883,616     $ 1,692,626  
Direct operating expenses
     620,617       548,284       1,209,456       1,069,359  
 
                                
Gross profit
     340,999       314,014       674,160       623,267  
 
                                
Indirect, general and administrative expenses
     318,392       287,818       607,177       555,515  
 
                                
Operating income
     22,607       26,196       66,983       67,752  
Interest expense, net
     9,930       14,650       20,259       33,271  
 
                                
Income before income taxes
     12,677       11,546       46,724       34,481  
Income tax expense
     5,060       4,620       19,020       13,790  
 
                                
Net income
     7,617       6,926       27,704       20,691  
Other comprehensive income (loss):
                                
Unrealized loss
     (270 )     —       (270 )     —  
Foreign currency translation adjustments
     (3,115 )     (20 )     (3,781 )     996  
 
                                
Comprehensive income
   $ 4,232     $ 6,906     $ 23,653     $ 21,687  
 
                                
Net income per common share:
                                
Basic
   $ .17     $ .17     $ .63     $ .55  
 
                                
Diluted
   $ .17     $ .17     $ .61     $ .54  
 
                                
Weighted-average shares outstanding:
                                
Basic
     44,844       41,204       44,288       37,798  
 
                                
Diluted
     46,158       41,719       45,454       38,426  
 
                                

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URS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS — UNAUDITED
(In thousands)
                                 
    Three Months Ended   Six Months Ended
    July 1,   June 30,   July 1,   June 30,
    2005   2004   2005   2004
Cash flows from operating activities:
                                
Net income
   $ 7,617     $ 6,926     $ 27,704     $ 20,691  
 
                                
Adjustments to reconcile net income to net cash provided by operating activities:
                                
Depreciation and amortization
     10,082       9,912       19,869       20,959  
Amortization of financing fees
     1,391       1,638       2,873       3,468  
Gain on disposal of property and equipment
     (310 )     —       (310 )     —  
Costs incurred for extinguishment of debt
     32,345       25,831       33,107       25,831  
Provision for doubtful accounts
     1,681       6,650       5,057       10,549  
Deferred income taxes
     1,794       (1,942 )     3,136       (4,168 )
Stock compensation
     1,767       661       3,492       1,321  
Tax benefit of stock options
     3,080       343       4,602       3,913  
Changes in current assets and liabilities:
                                
Accounts receivable and costs and accrued earnings in excess of billings on contracts in process
     (22,131 )     6,643       (54,116 )     16,027  
Prepaid expenses and other assets
     (14,130 )     (8,415 )     (17,630 )     (11,095 )
Accounts payable, accrued salaries and wages and accrued expenses
     47,048       (8,266 )     50,386       (9,307 )
Billings in excess of costs and accrued earnings on contracts in process
     8,651       (11,134 )     14,760       (17,810 )
Other long-term liabilities
     3,672       1,236       3,923       2,299  
Other liabilities, net
     (8,092 )     (1,750 )     (8,848 )     1,051  
 
                                
Total adjustments and changes
     66,848       21,407       60,301       43,038  
 
                                
Net cash from operating activities
     74,465       28,333       88,005       63,729  
 
                                
Cash flows from investing activities:
                                
Proceeds from disposal of property and equipment
     1,900       —       1,900       —  
Capital expenditures, less equipment purchased through capital leases
     (5,133 )     (6,272 )     (9,095 )     (11,746 )
 
                                
Net cash from investing activities
     (3,233 )     (6,272 )     (7,195 )     (11,746 )
 
                                
Cash flows from financing activities:
                                
Long-term debt principal payments
     (492,459 )     (245,799 )     (503,526 )     (267,657 )
Long-term debt borrowings
     351,271       26,118       351,271       26,464  
Net borrowings/(payments) under the line of credit
     (7,711 )     (753 )     (13,711 )     16,544  
Net change in book overdraft
     (33,093 )     12,877       (69,842 )     (8,859 )
Capital lease obligations payments
     (3,360 )     (3,671 )     (6,871 )     (7,043 )
Short-term note borrowings
     1,875       —       1,875       1,540  
Short-term note payments
     (1,726 )     (64 )     (3,340 )     (110 )
Proceeds from common stock offering, net of related expenses
     130,260       204,287       130,260       204,287  
Proceeds from sale of common stock from employee stock purchase plan and exercise of stock options
     16,118       653       25,626       17,262  
Tender/Call premiums paid for debt extinguishment
     (18,806 )     (17,850 )     (19,419 )     (17,850 )
Payments of financing fees
     (4,009 )     (1,190 )     (4,416 )     (1,193 )
 
                                
Net cash from financing activities
     (61,640 )     (25,392 )     (112,093 )     (36,615 )
 
                                
Net increase (decrease) in cash
     9,592       (3,331 )     (31,283 )     15,368  
Cash and cash equivalents at beginning of period
     67,132       53,443       108,007       34,744  
 
                                
Cash and cash equivalents at end of period
   $ 76,724     $ 50,112     $ 76,724     $ 50,112  
 
                                

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URS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS — UNAUDITED
(In thousands)
                                 
    Three Months Ended   Six Months Ended
    July 1,   June 30,   July 1,   June 30,
    2005   2004   2005   2004
Supplemental information:
                                
Interest paid
   $ 11,164     $ 18,458     $ 20,879     $ 34,930  
 
                                
Taxes paid
   $ 12,578     $ 6,807     $ 21,360     $ 25,042  
 
                                
Equipment acquired through capital lease obligations
   $ 7,306     $ 3,917     $ 12,563     $ 8,883  
 
                                

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URS CORPORATION AND SUBSIDIARIES

RECONCILIATION OF NET INCOME AND EARNINGS PER SHARE BEFORE LOSSES
FROM DEBT TRANSACTIONS
     Our earnings release discusses net income and earnings per share (“EPS”) for the three and six months ended July 1, 2005 and June 30, 2004, excluding the effect of the charges for the redemption and refinancing of debt. Excluding the effects of these charges from net income and EPS is not in accordance with generally accepted accounting principles (“GAAP”). We are providing these non-GAAP measures to demonstrate the effect of the debt refinancing charges on net income and EPS amounts for the three and six months ended July 1, 2005 and June 30, 2004. The debt refinancing charges were not part of our normal, recurring business operations and therefore we believe these non-GAAP measures help investors gain a more complete understanding of our business since they allow for a more comprehensive comparison with our historical results. Net income and EPS excluding the effects of these debt charges should not be used as a substitute for net income and earnings per share prepared in conformity with GAAP, or as a GAAP measure of profitability.
     Net income and EPS, excluding the effects of debt redemption and refinancing charges for the three and six months ended July 1, 2005 and June 30, 2004, are calculated as follows:
                                         
    Three Months Ended July 1, 2005
    Income                   Weighted-    
    before   Income           Average    
    Income   Tax           Shares   Earnings
    Taxes   Expense   Net Income   Outstanding   per Share
            (In thousands, except per share data)        
Amounts excluding the effect below
   $ 45,022     $ 17,970     $ 27,052       46,158     $ 0.59  
Effect of a charge related to note redemption and refinancing of the Old Credit Facility
     (32,345 )     (12,910 )     (19,435 )     46,158       (0.42 )
 
                                        
 
Amounts reported under GAAP
   $ 12,677     $ 5,060     $ 7,617       46,158     $ .17  
 
                                        
                                         
    Six Months Ended July 1, 2005
    Income                   Weighted-    
    before   Income           Average    
    Income   Tax           Shares   Earnings
    Taxes   Expense   Net Income   Outstanding   per Share
            (In thousands, except per share data)        
Amounts excluding the effect below
   $ 79,831     $ 32,490     $ 47,341       45,454     $ 1.04  
Effect of a charge related to note redemption and refinancing of the Old Credit Facility
     (33,107 )     (13,470 )     (19,637 )     45,454       (0.43 )
 
                                        
 
Amounts reported under GAAP
   $ 46,724     $ 19,020     $ 27,704       45,454     $ .61  
 
                                        

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URS CORPORATION AND SUBSIDIARIES

RECONCILIATION OF NET INCOME AND EARNINGS PER SHARE BEFORE LOSSES
FROM DEBT TRANSACTIONS
                                         
    Three Months Ended June 30, 2004
    Income                   Weighted-    
    before   Income           Average    
    Income   Tax           Shares   Earnings
    Taxes   Expense   Net Income   Outstanding   per Share
            (In thousands, except per share data)        
Amounts excluding the effect below
   $ 37,377     $ 14,950     $ 22,427       41,719     $ 0.54  
Effect of a charge related to note redemptions
     (25,831 )     (10,330 )     (15,501 )     41,719       (0.37 )
 
                                        
                                         
Amounts reported under GAAP
   $ 11,546     $ 4,620     $ 6,926       41,719     $ .17  
 
                                        
                                         
    Six Months Ended June 30, 2004
    Income                   Weighted-    
    before   Income           Average    
    Income   Tax           Shares   Earnings
    Taxes   Expense   Net Income   Outstanding   per Share
            (In thousands, except per share data)        
Amounts excluding the effect below
   $ 60,312     $ 24,120     $ 36,192       38,426     $ 0.94  
Effect of a charge related to note redemptions
     (25,831 )     (10,330 )     (15,501 )     38,426       (0.40 )
 
                                        
                                         
Amounts reported under GAAP
   $ 34,481     $ 13,790     $ 20,691       38,426     $ .54  
 
                                        

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URS CORPORATION AND SUBSIDIARIES

RECONCILIATION OF PROJECTED NET INCOME AND EARNINGS PER SHARE
BEFORE ACCOUNTING FOR CERTAIN TRANSACTIONS
     Our earnings release discusses projected net income and earnings per share (“EPS”) for fiscal year 2005, excluding the effect of the charges for the redemption and refinancing of debt. The table below presents our EPS excluding the effects of (1) the additional 4 million shares resulting from the Company’s stock offering; (2) the $33 million charge related to the charges for the Company’s note redemption and refinancing of debt; and (3) the $10 million in interest savings the Company expects to realize during fiscal year 2005 as a result of the note redemption and the refinancing of debt. Excluding the effects of these charges from net income and EPS is not in accordance with generally accepted accounting principles (“GAAP”). We are providing these non-GAAP measures to demonstrate the projected effects of our common stock offering and the related changes in our capital structure for our total fiscal year 2005. The debt refinancing charges were not part of our normal, recurring business operations and therefore we believe these non-GAAP measures help investors gain a more complete understanding of our business since they allow for a more comprehensive comparison with our historical results. Net income and EPS excluding the effects of these items should not be used as a substitute for net income and earnings per share prepared in conformity with GAAP, or as a GAAP measure of profitability.
     Projected net income and EPS excluding the effects of the items mentioned above for fiscal year are calculated as follows:
                                         
    Fiscal Year 2005
    Income                   Weighted-    
    before   Income           Average    
    Income   Tax           Shares   Earnings
    Taxes   Expense   Net Income   Outstanding   per Share
            (In thousands, except per share data)        
Projected amounts excluding the effects below
   $ 161,900     $ 66,400     $ 95,500       45,500     $ 2.10  
Effect of public stock offering
     —       —       —       50,400       (0.08 )
Effect of a charge related to note redemption and refinancing of the Old Credit Facility
     (33,100 )     (13,600 )     (19,500 )     45,500       (0.43 )
Effect of interest savings due to note redemption and refinancing of the Old Credit Facility
     10,200       4,200       6,000       50,400       0.12  
 
                                        
 
Amounts projected under GAAP
   $ 139,000     $ 57,000     $ 82,000       48,000     $ 1.71  
 
                                        

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