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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1996
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
San Francisco, California 94111-4529
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 415-774-2700
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Class Outstanding at September 1, 1996
<S> <C>
Common stock, $.01 par value 8,603,367
</TABLE>
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URS CORPORATION AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION:
In the opinion of management, the information furnished reflects all
adjustments, consisting only of normal recurring adjustments, which are
necessary for a fair statement of the interim financial information. Net
earnings per share computations are based upon the weighted average number of
common shares outstanding during the period plus shares issuable under warrants
and stock options that have a dilutive effect.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted. These condensed financial statements should be
read in conjunction with the financial statements and notes thereto included in
the Company's Annual Report on Form 10-K for the fiscal year ended October 31,
1995. The results of operations for the three and nine month periods ended July
31, 1996 are not necessarily indicative of the operating results for the full
year.
<TABLE>
<CAPTION>
Item 1. Financial Statements (unaudited)
<S> <C> <C>
Consolidated Balance Sheets
July 31, 1996 and October 31, 1995...............................................3
Consolidated Statements of Operations
Three and nine months ended July 31,
1996 and 1995...................................................................4
Consolidated Statements of Cash Flows
Nine months ended July 31, 1996 and 1995.........................................5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations......................................................................6
PART II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K..................................................9
</TABLE>
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
URS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
<TABLE>
<CAPTION>
July 31, October 31,
ASSETS 1996 1995
---- ----
unaudited)
<S> <C> <C>
Current assets:
Cash $ 18,781 $ 8,836
Accounts receivable, less allowance for
doubtful accounts of $3,008 and $664 74,831 35,822
Costs and accrued earnings in excess of
billings on contracts in process, less
allowances for losses of $1,946 and $606 11,066 13,200
Prepaid expenses and other 5,931 1,849
------- ------
Total current assets 110,609 59,707
Property and equipment at cost, net 15,779 5,835
Goodwill, net 40,466 7,765
Other assets 1,479 768
------- ------
$168,333 $74,075
------- ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 4,675 $ -
Accounts payable 20,273 7,724
Accrued salaries and wages 13,236 6,588
Accrued expenses 20,649 9,088
------- ------
Total current liabilities 58,833 23,400
Long-term debt, including related parties 55,233 9,999
Deferred compensation and other 757 1,198
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Total liabilities 114,823 34,597
Stockholders' equity:
Common shares, par value $.01; authorized 20,000 shares;
issued 8,603 and 7,167 shares 87 73
Treasury stock (287) (287)
Additional paid-in capital 41,451 31,791
Retained earnings since February 21, 1990, date of
quasi-reorganization 12,259 7,901
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TOTAL STOCKHOLDERS' EQUITY 53,510 39,478
------- ------
$168,333 $74,075
======= ======
</TABLE>
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URS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Nine months ended
July 31, July 31,
----------------- ------------
1996 1995 1996 1995
---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues $89,734 $44,456 $203,101 $129,573
------ ------ ------- -------
Expenses:
Direct operating 53,027 26,404 122,552 77,956
Indirect, general and
administrative 31,844 15,992 70,782 46,576
Interest expense, net 1,431 347 2,434 1,044
------ ------ ------ -------
86,302 42,770 195,768 125,576
------ ------ ------- -------
Income before taxes 3,432 1,686 7,333 3,997
Income tax expense 1,360 350 2,930 810
------ ------ ------ -------
NET INCOME $ 2,072 $ 1,336 $ 4,403 $ 3,187
====== ====== ====== =======
NET INCOME PER SHARE:
PRIMARY AND FULLY DILUTED $ .22 $ .18 $ .51 $ .44
====== ====== ====== =======
</TABLE>
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URS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JULY 31,
1996 1995
---- ----
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,403 $ 3,187
-------- -------
Adjustment to reconcile net income to net cash provided
(used) by operating activities:
Depreciation and amortization 4,060 2,142
Changes in current assets and liabilities, net of effect of
business acquisitions:
Accounts receivable and costs and accrued earnings
in excess of billings on contracts in process 1,307 (1,661)
Prepaid expenses (2,094) (1,067)
Accounts payable, accrued salaries and wages
and accrued expenses 7,347 (858)
Deferred income taxes and other, net 1,730 (324)
-------- -------
Total adjustments 12,350 ( 1,768)
-------- -------
Net cash provided by operating activities 16,753 1,419
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CASH FLOWS FROM INVESTING ACTIVITIES:
business acquisition, net of cash acquired (54,556) (3,596)
Capital expenditures (2,280) (1,068)
Other - 43
-------- -------
Net cash (used) by investing activities (56,836) (4,621)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt 50,000 -
Repayment of debt (127) -
Repurchase of common shares - (217)
Proceeds from sale of common shares 163 99
Proceeds from exercise of stock options 8 310
Other (16) -
-------- -------
Net cash provided by financing activities 50,028 192
-------- -------
Net increase in cash 9,945 (3,010)
Cash at beginning of period 8,836 9,457
-------- -------
Cash at end of period $ 18,781 $ 6,447
======= ======
SUPPLEMENTAL INFORMATION:
Interest paid $ 1,682 $ 1,065
======= ======
Taxes paid $ 2,132 $ 939
======= ======
Issuance of common stock in business acquisition $ 9,463 $ -
======= ======
</TABLE>
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URS CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company reports the results of its operations on a fiscal year which
ends on October 31. This Management Discussion and Analysis (MD&A) should be
read in conjunction with the MD&A and the footnotes to the Consolidated
Financial Statements included in the Annual Report on Form 10-K for the fiscal
year ended October 31, 1995 which was previously filed with the Securities and
Exchange Commission.
Acquisition
On March 29, 1996, the Company acquired Greiner Engineering, Inc., an
Irving, Texas, engineering and architectural design services firm (Greiner), for
$78,524,000, comprised of cash of $69,061,000, and 1.4 million shares of the
Company's Common Stock.
The purchase was partially financed by $50.0 million of secured term loans
payable over seven years beginning October 1996. The loans bear interest based
on rate indexes selected by the Company, with variable spreads over the selected
index based on loan maturity and the Company's financial performance. At July
31, 1996, the interest rate was based on the London Interbank Offered Rate
(LIBOR) of 5.44%, plus spreads of 2.625% or 3.00%.
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 has been allocated to goodwill. The operating results of Greiner
are included in the Company's results of operations from the date of purchase.
The purchase price consisted of:
<TABLE>
<CAPTION>
<S> <C> <C>
Cash paid $19,061
Term debt-current portion 4,675
Term debt-long-term portion 45,325
Common Stock 9,463
-------
$78,524
=======
The purchase price of Greiner
(net of prepaid loan fees of $1.6 million) $76,916
Fair value of assets acquired (42,510)
-------
Excess purchase price over net assets acquired $34,406
=======
</TABLE>
The following unaudited pro forma summary presents the consolidated
results of operations as if the Greiner acquisition had occurred at the
beginning of the periods presented and does not purport to indicate what would
have occurred had the acquisition been made as of those dates or of results
which may occur in the future. The substantial decrease in 1996 pro forma
operating results compared to 1995 is attributable to the substantial losses
reported by Greiner in the third and fourth quarters of calender 1995.
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Nine Months Ended July 31, 1996:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C> <C>
Revenues $265,790 $244,963
======= =======
Net income $ 2,064 $ 5,276
======= =======
Net income per share $ .22 $ .61
======= =======
</TABLE>
Results of Operations
Third quarter ended July 31, 1996 vs. July 31, 1995.
The Company's revenues were $89,734,000 for the third quarter ended July
31, 1996, an increase of $45,278,000 or 102% over the amount reported for the
same period last year. The growth in revenue is attributable to the acquisition
of Greiner, the results of which are included commencing May 1, 1996, and to an
equal extent, an increase in demand for the Company's on-going services on both
infrastructure and environmental projects. The revenues generated from the
Company's three largest indefinite delivery contracts, the Navy CLEAN, EPA ARCS
9 & 10, and EPA ARCS 6,7 & 8 contracts, were $7,159,000 for the quarter ended
July 31, 1996, compared to $8,554,000 for the same period last year.
Direct operating expenses for the quarter ended July 31, 1996, which
consist of direct labor and other direct expenses, including subcontractor
costs, increased $26,623,000 a 101% increase over the amount reported for the
same period last year. This increase is due to the addition of the direct
operating expenses of Greiner and to increases in subcontractor costs and direct
labor costs as well.
Indirect, general and administrative expenses for the quarter ended July
31, 1996 increased $15,852,000, or 99% over the amount reported for the same
period last year as a result of the addition of the Greiner overhead as well as
an increase in business activity.
The Company earned $3,432,000 before income taxes for the third quarter
ended July 31, 1996 compared to $1,686,000 for the same period last year. The
Company's effective income tax rate for the quarter ended July 31, 1996 was
approximately 40% compared to 20% in 1995 when the Company had available net
operating loss carryforwards.
The Company reported net income of $2,072,000, or $.22 per share for the
third quarter ended July 31, 1996, compared with $1,336,000, or $.18 per share
for the same period last year.
Nine months ended July 31, 1996 vs. July 31, 1995.
The Company's revenues were $203,101,000 for the nine months ended July
31, 1996, an increase of $73,528,000, or 57% over the amount reported for the
same period last year. The growth in revenues is attributable to all areas of
the Company's business including infrastructure projects involving
transportation systems, institutional and commercial facilities and
environmental projects as well as the Greiner acquisition. The revenues
generated from the Company's three largest indefinite delivery contracts (Navy
CLEAN, EPA ARCS 9 & 10 and EPA ARCS 6, 7 & 8) were $21,314,000 for the nine
months ended July 31, 1996, compared to $28,847,000 for the same period last
year.
7
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Direct operating expenses for the nine months ended July 31, 1996, which
consist of direct labor and other direct expenses including subcontractor costs,
increased $44,596,000, or 57% over the amount reported in the same period last
year. This increase is attributable to the overall increase in the Company's
business as compared to the same period last year as well as the Greiner
acquisition. Indirect, general and administrative expenses were $70,782,000 for
the nine months ended July 31, 1996, an increase of $24,206,000, or 52% over the
amount reported for the same period last year. The increase in indirect, general
and administrative expenses is due to an increase in business activity in
addition to the addition of the Greiner overhead.
The Company earned $7,333,000 before income taxes for the nine months
ended July 31, 1996 compared to $3,997,000 for the same period last year. The
Company's effective income tax rate for the nine months ended July 31, 1996 was
approximately 40% compared to 20% in 1995 when the Company had available net
operating loss carryforwards.
The Company reported net income of $4,403,000 or $.51 per share, for the
nine months ended July 31, 1996, compared with $3,187,000, or $.44 per share for
the same period last year.
The Company's backlog at July 31, 1996 was $398,703,000, as compared to
$196,400,000 at October 31, 1995. This increase is due primarily to the addition
of the Greiner backlog as a result of the acquisition, as well as to an overall
increase in contracts signed by the Company.
Liquidity and Capital Resources
At July 31, 1996, the Company had working capital of $51,776,000, an
increase of $15,469,000 from October 31, 1995, due primarily to the Greiner
acquisition.
The Company's current revolving line of credit is $20,000,000, of which
$19,500,000 was available at July 31, 1996.
The Company's credit agreement requires compliance with certain financial
and other covenants. The Company was in compliance with such covenants at July
31, 1996.
The Company believes that its existing financial resources, together with
its planned cash flow from operations and its unused bank line of credit, will
provide sufficient capital to fund its combined operations and capital
expenditure needs for the foreseeable future.
8
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PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 - Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter
ended July 31, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated September 13, 1996
URS CORPORATION
/s/ Kent Ainsworth
- --------------------------------------
Kent P. Ainsworth
Executive Vice President and
Chief Financial Officer
(Principal Accounting Officer)
9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> JUL-31-1996
<CASH> 18,781
<SECURITIES> 0
<RECEIVABLES> 77,839
<ALLOWANCES> (3,008)
<INVENTORY> 0
<CURRENT-ASSETS> 110,609
<PP&E> 24,130
<DEPRECIATION> (8,351)
<TOTAL-ASSETS> 168,333
<CURRENT-LIABILITIES> 58,833
<BONDS> 55,233
0
0
<COMMON> 87
<OTHER-SE> 53,423
<TOTAL-LIABILITY-AND-EQUITY> 168,333
<SALES> 0
<TOTAL-REVENUES> 89,734
<CGS> 0
<TOTAL-COSTS> 53,027
<OTHER-EXPENSES> 31,860
<LOSS-PROVISION> (16)
<INTEREST-EXPENSE> 1,431
<INCOME-PRETAX> 3,432
<INCOME-TAX> 1,360
<INCOME-CONTINUING> 2,072
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,072
<EPS-PRIMARY> 0.22
<EPS-DILUTED> 0.22
</TABLE>
