FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(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, 1997
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)
(415) 774-2700
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: Name of each exchange on
which registered:
Common Shares, par value $.01 per share New York Stock Exchange
Pacific Exchange
8 5/8% Senior Subordinated Debentures New York Stock Exchange
due 2004 Pacific Exchange
6 1/2% Convertible Subordinated Debentures New York Stock Exchange
due 2012 Pacific Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
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 December 19, 1997, there were 14,799,274 Common Shares outstanding, and
the aggregate market value of the shares of Common Stock of URS Corporation held
by nonaffiliates was approximately $174.9 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 24, 1998.
<PAGE>
This Annual Report on Form 10-K contains forward-looking statements that involve
risks and uncertainties. The Company's 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 and those incorporated by reference from the Company's Form S-4/A
Registration Statement filed with the Securities and Exchange Commission on
October 10, 1997 (File No. 333-37531).
PART I
ITEM 1. BUSINESS
URS Corporation (the "Company") offers a broad range of planning, design
and program and construction management services. The Company serves public and
private sector clients on infrastructure projects involving transportation
systems, facilities and environmental programs.
The Company conducts its business through offices located throughout the
United States. The Company has approximately 3,300 employees, many of whom hold
advanced or technical degrees and have extensive experience in sophisticated
disciplines applicable to the Company's business. The Company believes that its
geographic and technical diversity allow it to compete for local, regional and
national projects, and enable it to apply to each project a variety of resources
from its national network.
Acquisitions
In January 1995, the Company acquired, for $3.6 million, privately-held
E.C. Driver & Associates, Inc. ("ECD") of Tallahassee, Florida, an engineering
firm specializing in bridge and highway design.
In March 1996, the Company acquired, for $78.8 million, publicly-held
Greiner Engineering, Inc., an Irving, Texas engineering and architectural design
services firm ("Greiner"). For a complete discussion of the impact of the
acquisition of Greiner upon the operations of the Company, see Item 7,
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
On November 14, 1997, the Company acquired, for approximately $100 million,
privately-held Woodward-Clyde Group, Inc. ("W-C") of Denver, Colorado, an
engineering firm. The description of the Company contained in this Part I does
not take into account the acquisition of W-C which was consummated after the
Company's fiscal year ended on October 31, 1997. See Item 8, Consolidated
Financial Statements and Supplementary Data, Note 16, Subsequent Event.
Services
The Company provides professional services in three major areas: planning,
design and program and construction management through the Company's 35
principal offices. Each of these offices is responsible for obtaining local or
regional contracts. This approach allows regional government agencies and
private clients to view the Company's offices as local businesses with superior
service delivery capabilities.
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Because the Company can draw from its large and diverse network of professional
and technical resources, the Company has the capability to market and perform
large multi-state projects.
Planning
Planning covers a broad range of assignments ranging from conceptual design
and technical and economic feasibility studies to community involvement
programs. Planning services also involve developing alternative concepts for
project implementation and analyzing the impacts of each alternative.
In addition to traditional engineering and architectural planning services,
the Company has extensive expertise in a number of highly specialized areas,
including toll facilities, health care facility renovation, environmental site
analysis, water quality planning for urban storm water management and site
remediation assignments.
Design
The Company's professionals provide a broad range of design and
design-related services, including computerized mapping, architectural and
interior design, civil, sanitary and geotechnical engineering, process design
and seismic (earthquake) analysis and design. For each project, the Company
identifies the project requirements and then integrates and coordinates 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 materials which should be used and the schedule for construction.
Other critical tasks in the design process may include value analysis and the
assessment of construction and maintenance requirements.
Program and Construction Management
The Company's program and construction management services include master
scheduling of both the design and construction phases, construction and
life-cycle cost estimating, cash flow analysis, value engineering,
constructability reviews and bid management. Once construction has begun, the
Company supervises and coordinates the activities of the construction
contractor. This frequently involves acting as the owner's representative for
on-site supervision and inspection of the contractor's work. In this role, the
Company's objective is to monitor a project's schedule, cost and quality. The
Company generally does not take contractual responsibility for the contractor's
risks and methods, nor for site safety conditions.
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Markets
The Company's strategy is to focus on the infrastructure market which
includes surface and air transportation systems, institutional and commercial
facilities, and environmental programs involving pollution control, water
resources and hazardous waste management.
Surface and Air Transportation Systems. The Company's engineers, designers,
planners and managers provide services for projects involving all types of
transportation systems and networks, such as highways, roadways, streets,
bridges, rapid and mass transit, airports and marine facilities. These services
range from the design of interstate highways to harbor traffic simulation
studies and may extend from conceptual planning through the preliminary and
final design to construction management. Historically, the Company's emphasis in
this market area has been on the design of new transportation systems, but in
recent years the rehabilitation of existing systems has become a major focus.
Institutional and Commercial Facilities. The Company provides
architectural, engineering design, space planning and construction supervision
services to this market area. Demand for low-maintenance, energy efficient
facilities drives today's market for commercial and industrial buildings. In
addition, there is increased pressure to renovate facilities to meet changing
needs and current building standards.
Pollution Control. The Company's principal services in this market include
the planning and design of new wastewater facilities, such as sewer systems and
wastewater treatment plants, and the analysis and expansion of existing systems.
The types of work performed by the Company include infiltration/inflow studies,
combined sewer overflow studies, water quality facilities planning projects and
design and construction management services for wastewater treatment plants.
Water Resources. The Company's capabilities in this market area include the
planning, design and program and construction management of water supply,
storage, distribution and treatment systems, as well as work in basin plans,
groundwater supply, customer rate studies, urban run-off, bond issues, flood
control, water quality analysis and beach erosion control.
Hazardous Waste Management. In this market segment, the Company conducts
initial site investigations, designs remedial actions for site clean-up and
provides construction management services during site clean-up. This market
involves identifying and developing measures to effectively dispose of hazardous
and toxic waste at contaminated sites. The Company also provides air quality
monitoring and designs individual facility modifications required to meet local,
state and Federal air quality standards. This work requires specialized
knowledge of and compliance with complex Federal and state regulations, as well
as the permitting and approval processes. Solid waste management services
provided by the Company include facility siting, transfer station design and
community-wide master planning.
3
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Clients
General
<TABLE>
<CAPTION>
The Company's clients include local, state and Federal government agencies
and private sector businesses. The Company's revenues from local, state and
Federal government agencies and private businesses for the last five fiscal
years are as follows:
<S> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1993
-------- ------- -------- -------- --------
(In thousands)
Local and
state
agencies ...... $255,423 63% $198,472 65% $ 99,871 56% $ 88,207 54% $ 80,350 55%
Federal
agencies ...... 67,042 17 64,226 21 58,751 33 59,611 36 48,713 33
Private
businesses .... 83,986 20 42,772 14 21,147 11 16,270 10 16,698 12
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total ........... $406,451 100% $305,470 100% $179,769 100% $164,088 100% $145,761 100%
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
Contract Pricing and Terms of Engagement
Under its cost-plus contracts, the Company charges clients negotiated rates
based on the Company's direct and indirect costs. Labor costs and subcontractor
services are the principal components of the Company's direct costs. Federal
Acquisition Regulations limit the recovery of certain specified indirect costs
on contracts subject to such regulations. In negotiating a cost-plus contract,
the Company estimates all recoverable direct and indirect costs and then adds 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. The
Company receives payment based on the total actual number of labor hours
expended. If the actual total 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, the Company must obtain a
contract modification to receive payment for such overage. The Company's profit
margin will increase to the extent the Company is able to reduce actual costs
below the estimates used to produce the negotiated fixed prices on contracts not
covered by Federal Acquisition Regulations; conversely, the Company's profit
margin will decrease and the Company may realize a loss on the project if the
Company does not control costs and exceeds the overall estimates used to produce
the negotiated price. Cost-plus contracts covered by Federal Acquisition
Regulations require an audit of actual costs and provide for upward or downward
adjustments if actual recoverable costs differ from billed recoverable costs.
The Defense Contract Audit Agency, auditors for the Department of Defense and
other Federal agencies, has completed incurred cost audits of the Company's
Federal contracts for fiscal years ended through October 31, 1988, resulting in
immaterial adjustments. Under its fixed-price contracts, the Company receives an
agreed sum negotiated in advance for the specified scope of work. Under
fixed-price contracts, no payment
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adjustments are made if the Company over-estimates or under-estimates the number
of labor hours required to complete the project, unless there is a change of
scope in the work to be performed. Accordingly, the Company's profit margin will
increase to the extent the number of labor hours and other costs are below the
contracted amounts. The profit margin will decrease and the Company may realize
a loss on the project if the number of labor hours required and other costs
exceed the estimates. For the fiscal year ended October 31, 1997, the percentage
of revenues attributable to cost-plus contracts was 48.4% and the percentage of
revenues attributable to fixed-price contracts was 27.8%.
Backlog, Project Designations and Indefinite Delivery Contracts
The Company's contract backlog was $470.4 million at October 31, 1997,
compared to $399.2 million at October 31, 1996. The Company's contract backlog
consists of the amount billable at a particular point in time for future
services under executed funded contracts. Indefinite delivery contracts, which
are executed contracts requiring the issuance of task orders, are included in
contract backlog only to the extent the task orders are actually issued and
funded. Of the contract backlog of $470.4 million at October 31, 1997,
approximately 30%, or $141.1 million, is not reasonably expected to be filled
within the next fiscal year ending October 31, 1998.
The Company has also been designated by customers as the recipient of
certain future contracts. These "designations" are projects that have been
awarded to the Company but for which contracts have not yet been executed. Task
orders under executed indefinite delivery contracts which are expected to be
issued in the immediate future are included in designations. Total contract
designations were estimated to be $446.0 million at October 31, 1997, as
compared to $295.9 million at October 31, 1996. Typically, a significant portion
of designations are converted into signed contracts. However, there is no
assurance this will continue to occur in the future.
<TABLE>
Indefinite delivery contracts are signed contracts pursuant to which
work is performed only when specific task orders are issued by the client.
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 the Company
believes that it will continue to get work under these contracts over their
entire term, because of renewals and the necessity for issuance of individual
task orders, continued work by the Company and the realization of their
potential maximum values under these contracts are not assured. However, because
of the increasing frequency with which the Company's government and private
sector clients use this contracting method, the Company believes their potential
value should be disclosed along with backlog and designations as an indicator of
the Company's future business. When the client notifies the Company of the scope
and pricing of task orders, the estimated value of such task orders is added to
designations. When such task orders are signed and funded, their value goes into
backlog. At October 31, 1997, the potential value of the Company's five largest
indefinite delivery contracts was as follows:
5
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<CAPTION>
At October 31, 1997
-----------------------------------
Total Revenues Estimated
Potential recognized thru Funded Estimated Remaining
Contract Term Values October 31, 1997 Backlog Designations Values
- -------- ---- ------ ------- -------- ------- ------------ ------
(In millions)
<S> <C> <C> <C> <C> <C> <C>
EPA ARCS (9&10) 1989-1999 $ 182.5 $ 45.1 $ 19.4 $ 3.5 $ 114.5
Navy CLEAN 1989-1999 166.0 136.7 7.8 3.3 18.2
EPA ARCS (6,7&8) 1989-1999 119.7 75.0 3.7 -- 41.0
Brooks AFB System 1994-1999 50.0 12.7 8.3 -- 29.0
NY State Environmental
Remediation 1990-2000 20.0 7.9 -- -- 12.1
-------- -------- ------- -------- --------
Total $ 538.2 $ 277.4 $ 39.2 $ 6.8 $ 214.8
======== ======== ======= ======== ========
</TABLE>
Competition
The engineering and architectural services industry is highly fragmented
and very competitive. As a result, in each specific market area the Company
competes with many engineering and consulting firms, several of which are
substantially larger than the Company and which possess greater financial
resources. No firm currently dominates any significant portion of the Company's
market areas. Competition is based on quality of service, expertise, price,
reputation and local presence. The Company believes that it competes favorably
with respect to each of these factors in the market areas it serves.
Employees
The Company has approximately 3,300 employees, many of whom hold advanced
or technical degrees and have extensive experience in a variety of disciplines
applicable to the Company's business. The Company also employs, at various times
on a temporary basis, up to several hundred additional persons to meet
contractual requirements. Fourteen of the Company's employees are covered by a
collective bargaining agreement. The Company has never experienced a strike or
work stoppage. The Company believes that employee relations are good.
ITEM 2. PROPERTIES
The Company leases office space in 35 principal locations throughout the
United States. Most of the leases are written for a minimum term of three years
with options for renewal, sublease rights and allowances for improvements.
Significant lease agreements expire at various dates through the year 2005. The
Company believes that its current facilities are sufficient for the operation of
its business and that suitable additional space in various local markets is
available to accommodate any needs that may arise.
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<PAGE>
ITEM 3. LEGAL PROCEEDINGS
Various legal proceedings are pending against the Company or its
subsidiaries alleging breaches of contract or negligence in connection with the
Company's performance of professional services. In some actions, damages
(including punitive or treble damages) are sought which substantially exceed the
Company's insurance coverage. Based upon management's experience that most legal
proceedings settle for less than any claimed damages, at this time management
does not believe that any of such proceedings are likely to result in a judgment
against, or settlement by, the Company materially exceeding the Company's
insurance coverage or have a material adverse effect on the consolidated
financial position and operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the Company's security holders
during the fourth quarter of the fiscal year ended October 31, 1997.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
Name Position Held Age
- ---- ------------- ---
Martin M. Koffel.............Chief Executive Officer, President 58
and Director of the Company
from May 1989; Chairman of the
Board from June 1989; Director,
Regent Pacific Management Corporation
since 1993.
Kent P. Ainsworth............Executive Vice President and Chief 51
Financial Officer of the
Company from January 1991; Secretary
of the Company from May, 1994.
Robert L. Costello ..........Executive Vice President, URS Greiner, 46
a wholly-owned subsidiary of the Company,
since November 1996; Vice President
and Director of the Company since
April 1996; President of Greiner
Engineering, Inc., a wholly-owned
subsidiary of the Company, and Director
of same since April 1995; President and
Chief Operating Officer of same from
August 1994 to August 1995; Executive
Vice President and Chief Financial Officer
of same from August 1988 to August 1994.
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<PAGE>
Name Position Held Age
- ---- ------------- ---
Joseph Masters...............General Counsel of the Company 41
since July 1997, Vice
President of the Company since
July 1994; Vice President,
Director of Legal Affairs of
URS Consultants, Inc., a
wholly-owned subsidiary of the
Company, from April 1994 to
July 1994; Vice President,
Associate General Counsel of
same from May 1992 to April
1994; outside counsel to the
Company from January 1990 to
May 1992.
Irwin L. Rosenstein..........President, URS Greiner, a wholly-owned 61
subsidiary of the Company,
since November 1996; President
of URS Consultants, Inc., a
wholly-owned subsidiary of the
Company and Director of the
Company since February 1989;
Vice President of the Company
since 1987.
8
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The shares of the Company's Common Stock are listed on the New York Stock
Exchange and the Pacific Exchange (under the symbol "URS"). At December 19,
1997, the Company had approximately 3,336 stockholders of record. The following
table sets forth the high and low closing sale prices of the Company's Common
Stock, as reported by The Wall Street Journal for the periods indicated.
MARKET PRICE
------------
LOW HIGH
--- ----
Fiscal Period:
1996:
First Quarter ............................. $ 6.38 $ 7.25
Second Quarter ............................ $ 6.25 $ 7.25
Third Quarter ............................. $ 6.88 $ 8.25
Fourth Quarter ............................ $ 7.00 $ 8.88
1997:
First Quarter ............................. $ 7.75 $ 10.38
Second Quarter ............................ $ 9.50 $ 10.88
Third Quarter ............................. $ 9.63 $ 15.06
Fourth Quarter ............................ $ 13.13 $ 18.81
1998:
First Quarter ............................. $ 12.75 $ 16.38
(through December 19, 1997)
The Company has not paid cash dividends since 1986 and at the present time,
management of the Company does not anticipate paying dividends in the near
future. Further, the Company is precluded from paying dividends on its
outstanding common stock pursuant to its senior secured revolving credit
facility with its lender and the Indenture governing the 85/8% Debentures. See
Item 8, Consolidated Financial Statements and Supplementary Data, Note 8, Long
Term Debt and Note 11, Stockholders' Equity.
ITEM 6. SUMMARY OF SELECTED FINANCIAL INFORMATION
The following table sets forth selected financial data of the Company for
the five years ended October 31, 1997. The data presented below should be read
in conjunction with the Consolidated Financial Statements of the Company
including the notes thereto.
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<TABLE>
SUMMARY OF SELECTED FINANCIAL INFORMATION
(In thousands, except per share data)
<CAPTION>
Years Ended October 31,
----------------------------------------------------------------------------
1997 1996 1995 1994 1993
----------------------------------------------------------------------------
Income Statement Data:
<S> <C> <C> <C> <C> <C>
Revenues $406,451 $305,470 $179,769 $164,088 $145,761
-------- -------- -------- -------- --------
Operating expenses:
Direct operating 241,002 187,129 108,845 102,500 91,501
Indirect, general and
administrative 141,442 102,389 63,217 55,455 51,607
-------- -------- -------- -------- --------
Total operating expenses 382,444 289,518 172,062 157,955 143,108
-------- -------- -------- -------- --------
Operating income 24,007 15,952 7,707 6,133 2,653
Interest expense, net 4,802 3,897 1,351 1,244 1,220
-------- -------- -------- -------- --------
Income before income taxes 19,205 12,055 6,356 4,889 1,433
Income tax expense 7,700 4,700 1,300 450 140
-------- -------- -------- -------- --------
Net income $ 11,505 $ 7,355 $ 5,056 $ 4,439 $ 1,293
======== ======== ======== ======== ========
Net income per share:
Primary $ 1.06 $ .82 $ .68 $ .60 $ .18
======== ======== ======== ======== ========
Fully diluted $ 1.06 $ .80 $ .67 $ .60 $ .18
======== ======== ======== ======== ========
Weighted average shares:
Primary 10,883 9,498 8,632 8,556 6,971
Fully diluted 10,883 9,498 8,632 8,556 6,971
</TABLE>
<TABLE>
<CAPTION>
As of October 31,
--------------------------------------------------------------------------------
1997 1996 1995 1994 1993
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital $ 63,236 $ 57,570 $ 36,307 $ 33,674 $ 27,684
Total assets 212,654 194,932 75,935 65,214 58,074
Total debt 48,049 61,263 9,999 9,270 8,277
Stockholders' equity $ 77,151 $ 56,694 $ 39,478 $ 33,973 $ 29,389
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Fiscal 1997 Compared with Fiscal 1996
Revenues in fiscal 1997 were $406.5 million, or 33% over the amount
reported in fiscal 1996. The growth in revenues is primarily attributable to the
acquisition of Greiner, the results of which are included commencing April 1,
1996. Accordingly, in fiscal 1997 the results of operations of Greiner were
included for twelve months compared to only seven months in fiscal 1996.
Revenues generated from the Company's three largest contracts; Navy CLEAN, EPA
ARCS 9&10 and EPA ARCS 6, 7 & 8, decreased in fiscal 1997 to $26.5 million as
compared to $30.2 million in fiscal 1996. The decrease in revenues from these
contracts is primarily due to a decrease in the number of task orders for
hazardous waste services on all of the above EPA ARCS contracts.
Direct operating expenses, which consist of direct labor and direct
expenses including subcontractor costs, increased $53.9 million, or 29%, over
the amount reported in fiscal 1996. The 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
("IG&A") increased to $141.4 million in fiscal 1997 from $102.4 million in
fiscal 1996 which is the result of the addition of the Greiner overhead as well
as an increase in business activity. Expressed as a percentage of revenues, IG&A
expenses increased slightly from 34% in fiscal 1996 to 35% in fiscal 1997. The
Company attributes this stability to the cost controls exercised by the Company.
Net interest expense increased to $4.8 million in fiscal 1997 from $3.9 million
in fiscal 1996 as a result of increased borrowings incurred in connection with
the acquisition of Greiner.
With an effective income tax rate of 40% in 1997, the Company earned net
income of $11.5 million while in 1996 net income was $7.4 million after an
effective income tax rate of 39%. The Company earned $1.06 per share on a
fully-diluted basis in fiscal 1997 compared to $.80 per share in fiscal 1996.
The Company's backlog of signed and funded contracts at October 31, 1997
was $470.4 million as compared to $399.2 million at October 31, 1996. The value
of the Company's designations was $446.0 million at October 31, 1997, as
compared to $295.9 million at October 31, 1996.
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Fiscal 1996 Compared with Fiscal 1995
Revenues in fiscal 1996 were $305.5 million, or 70% over the amount
reported in fiscal 1995. The growth in revenues is primarily attributable to the
acquisition of Greiner, the results of which are included commencing April 1,
1996, and to a lesser extent, an increase in revenues derived from existing
areas of the Company's business, particularly transportation and other
infrastructure projects in the Northeast. Revenues generated from the Company's
three largest contracts; Navy CLEAN, EPA ARCS 9&10 and EPA ARCS 6, 7 & 8,
decreased in fiscal 1996 to $30.2 million as compared to $37.1 million in fiscal
1995. The decrease in revenues from these contracts is primarily due to a
decrease in the number of task orders for hazardous waste services on all of the
above EPA ARCS contracts.
Direct operating expenses, which consist of direct labor and direct
expenses including subcontractor costs, increased $78.3 million, or 72%, over
the amount reported in fiscal 1995. The 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. IG&A expenses increased to $102.4 million in fiscal
1996 from $63.2 million in fiscal 1995 which is the result of the addition of
the Greiner overhead as well as an increase in business activity. Expressed as a
percentage of revenues, IG&A expenses decreased from 35% in fiscal 1995 to 34%
in fiscal 1996. The Company attributes this decrease to the cost controls
exercised by the Company. Net interest expense increased to $3.9 million in
fiscal 1996 from $1.4 million in fiscal 1995 as a result of increased borrowings
incurred in connection with the acquisition of Greiner.
With an effective income tax rate of 39% in 1996, the Company earned net
income of $7.4 million while in 1995 net income was $5.1 million after an
effective income tax rate of 20% when the Company had available net operating
loss ("NOL") carryforwards which partially offset otherwise taxable income for
Federal income tax purposes. The Company earned $.80 per share on a
fully-diluted basis in fiscal 1996 compared to $.67 per share in fiscal 1995.
The Company's backlog of signed and funded contracts at October 31, 1996
was $399.2 million as compared to $196.4 million at October 31, 1995. The value
of the Company's designations was $295.9 million at October 31, 1996, as
compared to $194.1 million at October 31, 1995.
Income Taxes
The Company currently has a $5.3 million NOL carryforward which is limited
to $750,000 per year, pursuant to Section 382 of the Internal Revenue Code,
related to its October 1989 quasi-reorganization.
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<PAGE>
Liquidity and Capital Resources
The Company's liquidity and capital measurements are set forth below:
October 31,
------------------------------------------
1997 1996 1995
------------------------------------------
Working capital $63,236,000 $57,570,000 $36,307,000
Working capital ratio 1.7 to 1 1.7 to 1 2.4 to 1
Average days to convert billed
accounts receivable to cash 71 85 62
Percentage of debt to equity 62.2% 107.7% 25.0%
The Company is a professional services organization and, as such, is not
capital intensive. Capital expenditures during fiscal years 1997, 1996 and 1995
were $5.1 million, $3.0 million, and $1.6 million, respectively. The
expenditures were principally for computer-aided design and general purpose
computer equipment to accommodate the Company's growth. The Company expects
fiscal 1998 capital expenditures to increase over fiscal 1997 as a result of the
W-C acquisition.
At October 31, 1997, the Company's senior secured revolving credit
facility, with Wells Fargo Bank, N.A. (the "Bank"), provides for advances up to
$20.0 million. Also at October 31, 1997, the Company had outstanding letters of
credit totaling $1.0 million which reduced the amount available to the Company
under its revolving credit facility to $19.0 million.
On February 12, 1997, the Bank exercised the 435,562 warrants held by the
Bank at $4.34 per share, resulting in the issuance of an additional 435,562
shares to the Bank and additional paid-in capital of approximately $1.9 million.
On February 14, 1997, various partnerships managed by Richard C. Blum &
Associates, Inc. ("RCBA") exercised the 1,383,586 warrants held by such entities
at $4.34 per share. The exercise price of these warrants was paid by a
combination of cash and the cancellation of the $3.0 million face amount of debt
drawn under the Company's line of credit with certain RCBA entities. The
exercise resulted in the issuance of an additional 1,383,586 shares to the RCBA
entities and additional paid-in capital of approximately $5.0 million.
On August 18, 1997, the Company executed an agreement to acquire W-C. W-C
is a professional services firm operating in the engineering services industry
and is headquartered in Denver, Colorado. The acquisition price consisted of
approximately $100 million and was approved by the Company's and W-C's
stockholders. The transaction closed November 14, 1997. To finance the cash
portion of the transaction, prior to October 31, 1997, the Company negotiated
with its lenders to obtain a $40,000,000 revolving credit facility with a term
of five years and a $110,000,000 term loan maturing six years from the closing
of the loan, which facilities are secured by guarantees from and pledges of the
stock of the Company's major subsidiaries. The new revolving credit facility and
term loan replaces the Company's current senior secured revolving credit
facility and term loan.
13
<PAGE>
The Company believes that its existing financial resources, together with
its planned cash flow from operations and its existing credit facilities, will
provide sufficient capital to fund its combined operations and capital
expenditure needs for the foreseeable future.
Cash paid during the period for:
Years Ended October 31,
-----------------------
1997 1996 1995
------ ------ ------
(In thousands)
Interest $5,181 $4,142 $ 891
Income taxes $8,780 $6,483 $1,358
Acquisitions
On January 4, 1995, the Company acquired ECD for an aggregate purchase
price of $3.6 million, which was paid in cash. In conjunction with the
acquisition, liabilities were assumed as follows:
(In thousands)
Fair value of assets acquired $4,952
Cash paid for the capital stock (3,596)
-------
Liabilities assumed $ 1,356
=======
On March 29, 1996, the Company acquired all of the capital stock of Greiner
for $78.8 million, comprised of cash of $69.3 million, and 1.4 million shares of
the Company's Common Stock.
(In thousands)
Purchase price of Greiner
(net of prepaid loan fees of $1.6 million) $77,184
Fair value of assets acquired (39,510)
-------
Excess purchase price over net assets acquired $37,674
=======
On November 14, 1997, the Company acquired W-C for approximately $100
million. See Item 8, Consolidated Financial Statements and Supplementary Data,
Note 16, Subsequent Event.
14
<PAGE>
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Stockholders of URS Corporation:
We have audited the accompanying consolidated balance sheets of URS Corporation
and its subsidiaries as of October 31, 1997 and 1996, and the related
consolidated statements of operations, changes in shareholders' equity and cash
flows for each of the three years in the period ended October 31, 1997. 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of URS Corporation
and its subsidiaries as of October 31, 1997 and 1996, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended October 31, 1997, in conformity with generally accepted
accounting principles.
/s/ Coopers & Lybrand L.L.P.
-------------------------------
COOPERS & LYBRAND L.L.P.
San Francisco, California
December 19, 1997
15
<PAGE>
<TABLE>
URS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
<CAPTION>
October 31,
--------------------------
1997 1996
-------- --------
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 22,134 $ 22,370
Accounts receivable, including retainage amounts of $9,191 and $8,379, less
allowance for doubtful accounts of $1,488 and $2,447 80,251 72,417
Costs and accrued earnings in excess of billings on contracts in process, less
allowance for losses of $1,838 and $2,419 37,741 32,922
Deferred income taxes 6,406 7,077
Prepaid expenses and other assets 2,885 2,426
-------- --------
Total current assets 149,417 137,212
Property and equipment at cost, net 17,848 15,815
Goodwill, net 42,485 40,261
Other assets 2,904 1,644
-------- --------
$212,654 $194,932
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 20,198 $ 21,684
Accrued salaries and wages 17,769 12,131
Accrued expenses and other 17,863 20,064
Billings in excess of costs and accrued earnings on contracts in process 23,013 18,175
Deferred income taxes 2,563 2,913
Long-term debt, current portion 4,775 4,675
-------- -------
Total current liabilities 86,181 79,642
Long-term debt 41,448 52,390
Long-term debt to related parties - 2,979
Deferred compensation and other 7,874 3,227
-------- --------
Total liabilities 135,503 138,238
-------- --------
Commitments and contingencies (Note 10)
Stockholders' equity:
Common shares, par value $.01; authorized 20,000 shares;
issued 10,741 and 8,640 shares, respectively 107 86
Treasury stock (287) (287)
Additional paid-in capital 51,085 41,894
Retained earnings since February 21, 1990, date of quasi-reorganization 26,246 15,001
-------- --------
Total stockholders' equity 77,151 56,694
-------- --------
$212,654 $194,932
======== ========
<FN>
See Notes to Consolidated Financial Statements
</FN>
</TABLE>
16
<PAGE>
URS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Years Ended October 31,
--------------------------------------
1997 1996 1995
-------- -------- --------
Revenues $406,451 $305,470 $179,769
-------- -------- --------
Expenses:
Direct operating 241,002 187,129 108,845
Indirect, general and
administrative 141,442 102,389 63,217
Interest expense, net 4,802 3,897 1,351
-------- -------- --------
387,246 293,415 173,413
-------- -------- --------
Income before taxes 19,205 12,055 6,356
Income tax expense 7,700 4,700 1,300
-------- -------- --------
Net income $ 11,505 $ 7,355 $ 5,056
======== ======== ========
Net income per share:
Primary $ 1.06 $ .82 $ .68
======== ======== ========
Fully diluted $ 1.06 $ .80 $ .67
======== ======== ========
See Notes to Consolidated Financial Statements
17
<PAGE>
<TABLE>
URS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In thousands)
<CAPTION>
Additional Total
Common Shares Treasury Paid-in Retained Stockholders'
Number Amount Stock Capital Earnings Equity
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Balances, October 31, 1994 7,019 $ 70 $ (59) $ 30,261 $ 3,700 $ 33,972
Employee stock purchases 190 1 -- 675 -- 676
Purchase of treasury shares (42) -- (228) -- -- (228)
Quasi-reorganization
NOL carryforward -- -- -- 855 (855) --
Net income -- -- -- -- 5,056 5,056
-------- -------- -------- -------- -------- --------
Balances, October 31, 1995 7,167 71 (287) 31,791 7,901 39,476
Employee stock purchases 72 1 -- 399 -- 400
Issuance of 1,401,983
shares in connection with
the Greiner acquisition 1,401 14 -- 9,449 -- 9,463
Quasi-reorganization
NOL carryforward -- -- -- 255 (255) --
Net income -- -- -- -- 7,355 7,355
-------- -------- -------- -------- -------- --------
Balances, October 31, 1996 8,640 86 (287) 41,894 15,001 56,694
Employee stock purchases 282 3 -- 2,026 -- 2,029
Issuance of 1,819,148
shares in connection with
the exercise of warrants 1,819 18 -- 6,905 -- 6,923
Quasi-reorganization
NOL carryforward -- -- -- 260 (260) --
Net income -- -- -- -- 11,505 11,505
-------- -------- -------- -------- -------- --------
Balances, October 31, 1997 10,741 $ 107 $ (287) $ 51,085 $ 26,246 $ 77,151
======== ======== ======== ======== ======== ========
<FN>
See Notes to Consolidated Financial Statements
</FN>
</TABLE>
18
<PAGE>
<TABLE>
URS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands)
<CAPTION>
Years Ended October 31,
--------------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 11,505 $ 7,355 $ 5,056
-------- -------- --------
Adjustments to reconcile net income to net cash provided (used) by
operating activities:
Deferred income taxes 322 (4,164) (615)
Depreciation and amortization 7,927 5,295 3,124
Changes in current assets and liabilities:
Accounts receivable and costs and accrued earnings in excess
of billings on contracts in process (12,653) (18,135) (4,067)
Prepaid expenses and other assets 461 1,411 (881)
Accounts payable, accrued salaries and wages and accrued
expenses 3,426 6,777 1,252
Billings in excess of costs and accrued earnings on contracts in process 4,839 18,174 --
Other, net (3,292) 7,801 224
-------- -------- --------
Total adjustments 1,030 17,159 (963)
-------- -------- --------
Net cash provided by operating activities 12,535 24,514 4,093
-------- -------- --------
Cash flows from investing activities:
Payment for business acquisition, net of cash acquired -- (56,354) (3,596)
Capital expenditures (5,127) (2,962) (1,610)
Other -- -- 43
-------- -------- --------
Net cash used by investing activities (5,127) (59,316) (5,163)
-------- -------- --------
Cash flows from financing activities:
Proceeds from issuance of debt -- 50,000 --
Repayment of debt (13,568) (2,056) --
Repurchase of common shares -- -- (228)
Proceeds from sale of common shares 1,028 389 247
Proceeds from exercise of stock options 1,001 11 430
Proceeds from exercise of warrants, net 3,895 -- --
Other -- ( 8 ) --
-------- -------- --------
Net cash (used) provided by financing activities (7,644) 48,336 449
-------- -------- --------
Net increase (decrease) in cash (236) 13,534 (621)
Cash at beginning of year 22,370 8,836 9,457
-------- -------- --------
Cash at end of year $ 22,134 $ 22,370 $ 8,836
======== ======== ========
<FN>
See Notes to Consolidated Financial Statements
</FN>
</TABLE>
19
<PAGE>
URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ACCOUNTING POLICIES
Principles of Consolidation and Basis of Presentation
The consolidated financial statements include the accounts of URS
Corporation and its subsidiaries (the "Company"), all of which are wholly-owned.
All significant intercompany accounts and transactions have been eliminated in
consolidation. The consolidated financial statements account for the acquisition
of Greiner Engineering, Inc. ("Greiner") in March, 1996 as a purchase. See Note
3, 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 U.S. Government 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 1989 through fiscal 1997 are
subject to review by the U.S.
Government.
20
<PAGE>
Concentration of Credit Risk
The Company provides services primarily to local, state and Federal
government agencies. The Company believes the credit risk associated with these
types of revenues is minimal. However, the Company does perform ongoing credit
evaluations of its customers and, generally, requires no collateral. The Company
maintains reserves for potential credit losses and such losses have been within
management's expectations. Substantially all cash balances are held in one
financial institution and at times exceed federally 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.
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 over the useful
service lives of the assets. Leasehold improvements are amortized over the
length of the lease or estimated useful life, whichever is less.
Income Per Share
The computation of earnings per common and common equivalent share is
based upon the weighted average number of common shares outstanding during the
period plus (in periods in which they have a dilutive effect) the effect of
common shares contingently issuable, primarily from stock options, warrants and
the potential conversion of convertible debentures, less the number of shares
assumed to be purchased from the exercise proceeds using the average market
price of the Company's common stock.
The fully diluted per share computation reflects the effect of common
and common equivalent shares based upon the weighted average number of common
shares outstanding during the period plus (in periods in which they have a
dilutive effect) the effect of common
21
<PAGE>
shares contingently issuable, primarily from stock options, exercise of warrants
and the potential conversion of convertible debentures, less the number of
shares assumed to be purchased from the exercise proceeds using the closing
market price of the Company's common stock, when higher than the average price
for the period.
<TABLE>
Computation of Fully-diluted Income Per Share
<CAPTION>
Years Ended October 31,
-------------------------------------
1997 1996 1995
---- ---- ----
(In thousands, except per share data)
<S> <C> <C> <C>
Net income $11,505 $7,355 $5,056
Add:
Interest on debentures and notes, net of
applicable income taxes 78 209 696
------- ------- ------
Net income for fully-diluted income per common share $11,583 $7,564 $5,752
======= ======= ======
Weighted average number of common shares
outstanding during the year 10,018 8,020 7,080
Add:
Common equivalent shares (determined using the
"treasury stock" method) representing shares issuable
upon exercise of employee stock options and warrants 865 3,206 2,985
Less:
Twenty percent limit on repurchase - ( 1,728) (1,433)
------- ------ -----
Weighted average number of shares used in
calculation of fully-diluted income per share 10,883 9,498 8,632
======= ======= ======
Fully-diluted income per common share $ 1.06 $ .80 $ .67
======= ======= ======
</TABLE>
Industry Segment Information
The Company's single business segment, consulting, provides engineering
and architectural services to local and state governments, the Federal
government and the private sector. The Company's services are primarily utilized
for planning, design and program and construction management of infrastructure
projects.
<TABLE>
The Company's revenues from local, state and Federal government
agencies and private businesses for the last three fiscal years are as follows:
<CAPTION>
Years Ended October 31,
------------------------------------------------------------------------------
1997 1996 1995
---------------------- -------------------------- ----------------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Local and state agencies $255,423 63% $198,472 65% $ 99,871 56%
Federal agencies 67,042 17 64,226 21 58,751 33
Private businesses 83,986 20 42,772 14 21,147 11
-------- --- -------- --- -------- ---
Total $406,451 100% $305,470 100% $179,769 100%
======== === ======== === ======== ===
</TABLE>
22
<PAGE>
Adoption of Statements of Financial Accounting Standards
In February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
("SFAS 128") SFAS 128 establishes standards for computing and presenting
earnings per share ("EPS"). It amends the standards in Accounting Principles
Board Opinion ("APB")-15 (Earnings per Share) for computing EPS by replacing
primary earnings per share with basic earnings per share and by altering the
calculation of diluted EPS, which replaces fully diluted EPS. Basic EPS excludes
potential dilution and is calculated by dividing income available to common
stockholders by the weighted average number of outstanding common shares.
Basic and diluted EPS figures are required on the face of the income
statement for all entities with complex capital structures. In addition,
required disclosures include a reconciliation of the numerator and denominator
used to calculate basic EPS to the numerator and denominator used to calculate
diluted EPS.
SFAS 128 is effective for fiscal years beginning after December 15,
1997, with earlier adoption permitted. The Company will adopt SFAS 128 effective
for its fiscal year ending October 31, 1998. The Company does not believe that
adoption of SFAS 128 will have a material adverse effect on its financial
position or results of operations.
In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130"), which is
effective for fiscal years beginning after December 15, 1997. SFAS 130 requires
that certain items that qualify as part of comprehensive income be presented in
the financial statements. The Company does not expect the impact on its
financial statements, if any, to be material.
Reclassifications
Certain reclassifications have been made to the 1996 and 1995 financial
statements to conform to the 1997 presentation with no effect on net income as
previously reported.
NOTE 2. QUASI-REORGANIZATION
In conjunction with a restructuring completed in fiscal year 1990, the
Company, with the approval of its Board of Directors, implemented a
quasi-reorganization effective February 21, 1990 and revalued certain assets and
liabilities to fair value as of that date.
The fair values of the Company's assets and liabilities at the date of
the quasi-reorganization were determined by management to approximate their
carrying value and no further adjustment of historical bases was required. No
assets were written-up in conjunction with the revaluation. As part of the
quasi-reorganization, the deficit in retained earnings of $92.5 million was
eliminated against additional paid-in capital. The balance in retained earnings
at October 31, 1997 represents the accumulated net earnings arising subsequent
to the date of the quasi-reorganization.
NOTE 3. ACQUISITIONS
During the year ended October 31, 1995, the Company acquired E.C.
Driver & Associates, Inc. ("ECD") for an aggregate purchase price of $3.6
million, and the assumption of ECD's liabilities totaling $1.4 million. This
acquisition was accounted for by the purchase method of
23
<PAGE>
accounting and the net assets of ECD are included in the Company's consolidated
balance sheet as of October 31, 1995 based upon their estimated fair value at
the transaction's effective date of January 4, 1995. Pro forma operating results
for the years ended October 31, 1994 and 1995, as if the acquisition had been
made on November 1, 1993, are not presented as they would not be materially
different from the Company's reported results. The excess of the purchase price
over the estimated fair value of the assets acquired has been allocated to
goodwill.
During the year ended October 31, 1996, the Company acquired Greiner
for an aggregate purchase price of $78.8 million, comprised of cash of $69.3
million, and 1.4 million shares of the Company's Common Stock. 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:
(In thousands)
Cash paid $ 19,321
Term debt-current portion 4,675
Term debt-long-term portion 45,325
Common Stock 9,463
--------
$ 78,784
The purchase price of Greiner
(net of prepaid loan fees of $1.6 million) $ 77,184
Fair value of assets acquired (39,510)
--------
Excess purchase price over net assets acquired (Goodwill) $ 37,674
========
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.
Fiscal Years Ended October 31:
1996 1995
---- ----
(In thousands, except per share data)
Revenues $368,572 $334,904
Net income $ 4,691 $ 2,868
Net income per share $ .49 $ .33
On August 18, 1997, the Company and Woodward-Clyde Group, Inc. ("W-C")
executed an agreement to acquire W-C. The transaction closed on November 14,
1997. See Note 16, Subsequent Event.
24
<PAGE>
NOTE 4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
October 31,
-----------
1997 1996
-------- --------
(In thousands)
Equipment $ 29,871 $ 26,924
Furniture and fixtures 5,335 5,972
Leasehold improvements 2,249 2,767
-------- --------
37,455 35,663
Less: accumulated depreciation
and amortization (19,607) (19,848)
-------- --------
Net property and equipment $ 17,848 $ 15,815
======== ========
NOTE 5. 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, 1997 and 1996 was $9.7 million and $7.7
million, respectively. Goodwill is amortized on the straight-line method over 30
years.
NOTE 6. INCOME TAXES
The components of income tax expense applicable to the operations each year
are as follows:
Years Ended October 31,
----------------------------------------
1997 1996 1995
------- ------- -------
(In thousands)
Current:
Federal $ 7,580 $ 5,020 $ 1,330
State and local 1,860 1,560 590
------- ------- -------
Subtotal 9,440 6,580 1,920
------- ------- -------
Deferred:
Federal (1,450) (1,320) (390)
State and local (290) (560) (230)
------- ------- -------
Subtotal (1,740) (1,880) (620)
------- ------- -------
Total tax provision $ 7,700 $ 4,700 $ 1,300
======= ======= =======
As of October 31, 1997, the Company has available net operating loss
("NOL") carryforwards for Federal income tax and financial statement purposes of
$5.3 million. The NOL utilization is limited to $750,000 per year pursuant to
section 382 of the Internal Revenue Code, related to its October 1989
quasi-reorganization.
25
<PAGE>
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 as of October 31 are as follows:
Deferred tax assets/(liabilities) - due to:
1997 1996
-------- --------
(In thousands)
Allowance for doubtful accounts $ 400 $ 1,520
Other accruals and reserves 6,620 6,630
Net operating loss 1,840 2,050
-------- --------
Total 8,860 10,200
Valuation allowance (2,460) (3,120)
-------- --------
Deferred tax asset 6,400 7,080
-------- --------
Other deferred gain and unamortized bond premium (1,450) (2,160)
Depreciation and amortization (1,110) (750)
-------- --------
Deferred tax liability (2,560) (2,910)
-------- --------
Net deferred tax asset $ 3,840 $ 4,170
======== ========
The net change in the total valuation allowance for the year ended
October 31, 1997 was a decrease of $660,000 due to the utilization of net
operating losses and other changes in deferred tax assets.
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,
-----------------------------
1997 1996 1995
------- ------- -------
(In thousands)
Federal income tax expense based upon
federal statutory tax rate of 35% $ 6,720 $ 4,100 $ 2,160
Nondeductible goodwill amortization 620 400 160
Nondeductible expenses 480 240 210
NOL carryforwards utilized (260) (250) (1,140)
AMT credit utilized -- -- (330)
State taxes, net of Federal benefit 1,120 660 240
Adjustment due to change in Federal and state (610) -- --
rates
Utilization of deferred tax allowance and other (370) (450) --
adjustments ------- ------- -------
Total taxes provided $ 7,700 $ 4,700 $ 1,300
======= ======= =======
26
<PAGE>
NOTE 7. RELATED PARTY TRANSACTIONS
Interest paid to related parties in connection with the January Notes was
$131,068, $260,712 and $194,000 in fiscal 1997, 1996 and 1995, respectively. See
Note 8, Long-Term Debt.
The Company has agreements for business consulting services to be provided
by Richard C. Blum & Associates, Inc. ("RCBA") and Richard C. Blum, a Director
of the Company. Under these agreements, the Company paid $90,000 and $60,000 to
RCBA and Richard C. Blum, respectively, during each of fiscal 1997, 1996 and
1995. Richard C. Blum also received an additional cash amount of $15,000,
$23,000 and $25,000 for his services as a Director of the Company in fiscal
1997, 1996 and 1995, respectively.
NOTE 8. LONG-TERM DEBT
Long-term debt consists of the following:
October 31,
-----------------
1997 1996
------- -------
(In thousands)
Third party:
Bank term loan, payable in quarterly installments $35,655 $49,207
6 1/2% Convertible Subordinated Debentures due
2012 (net of bond issue costs of $36 and $39) 2,108 2,106
85/8% Senior Subordinated Debentures due 2004 (net of
discount and bond issue costs of $3,437 and $3,657)
(effective interest rate on date of restructuring
was 25%) 3,018 2,798
Obligations under capital leases 7,268 4,173
------- -------
48,049 58,284
Less: Current maturities of long-term debt 4,775 4,675
Current maturities of capital leases 1,826 1,219
------- -------
$41,448 $52,390
======= =======
Related parties:
January Notes (net of discount of $-0- and $1,021) $ -- $ 2,979
======= =======
At October 31, 1997, the Company's senior secured revolving credit
facility with Wells Fargo Bank, N.A. (the "Bank") provides for advances up to
$20.0 million and expires March 29, 1999. Borrowings on the revolving credit
facility bear interest at the option of the Company 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 October 31, 1997, the
interest rate was based on the London Interbank Offered Rate ("LIBOR") of 5.66%,
plus spreads of 1.38% to 3.0%. At October 31, 1997, the Company had outstanding
letters of credit totaling $1.0 million which reduced the amount available to
the Company under its revolving credit facility to $19.0 million.
27
<PAGE>
Also at October 31, 1997, the Company had outstanding with the Bank
$35.7 million of senior 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 October 31, 1997, the interest rate
was based on the LIBOR of 5.66%, plus spreads of 1.38% to 3.0%.
On August 18, 1997, the Company and W-C executed an agreement to
acquire W-C. The transaction closed on November 14, 1997 and involved the
revision of the Company credit facility with the Bank and an increase in term
debt. See Note 16, Subsequent Event.
Related Parties
On February 12, 1997, the Bank exercised the 435,562 warrants held by
the Bank at $4.34 per share, resulting in the issuance of an additional 435,562
shares to the Bank and an additional paid-in capital of approximately $1.9
million.
On February 14, 1997, various partnerships managed by RCBA exercised
1,383,586 warrants held by such entities at $4.34 per share. The exercise price
of these warrants was paid by a combination $2.0 million of cash and the
cancellation of the $3.0 million amount of debt drawn under the Company's line
of credit with certain RCBA entities. The exercise resulted in the issuance of
an additional 1,383,586 shares to the RCBA entities. These equity transactions
are reflected in the Company's financial statements.
Debentures
The Company's 6 1/2% Convertible Subordinated Debentures due 2012 are
convertible into the Company's common shares at the rate of $206.30 per share.
Sinking fund payments are calculated to retire 70% of the debentures prior to
maturity beginning in February 1998. Interest is payable semi-annually in
February and August. Interest is payable semi-annually in January and July on
the Company's 8 5/8% Senior Subordinated Debentures due 2004 ("8 5/8%
Debentures"). Both the 6 1/2% Convertible Subordinated Debentures and the 8 5/8%
Debentures are subordinate to all debt to the Bank.
Maturities
The amounts of long-term debt outstanding at October 31, 1997 maturing
in the next five years are as follows:
(In thousands)
1998 $ 4,775
1999 5,175
2000 5,575
2001 6,175
2002 7,175
Thereafter 11,906
Amounts payable under capitalized lease agreements are excluded from the above
table.
28
<PAGE>
NOTE 9. OBLIGATIONS UNDER LEASES
Total rental expense included in operations for operating leases for
the fiscal years ended October 31, 1997, 1996 and 1995 amounted to $14.9
million, $10.9 million and $5.7 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 2005.
Obligations under non-cancelable lease agreements are as follows:
Capital Operating
Leases Leases
------- ---------
(In thousands)
1998 $ 2,130 $12,800
1999 1,761 10,404
2000 1,494 8,314
2001 1,274 6,889
2002 609 4,577
Thereafter -- 10,968
------- -------
Total minimum lease payments $ 7,268 $53,952
=======
Less amounts representing
interest 1,428
-------
Present value of net minimum
lease payments $ 5,840
=======
NOTE 10. COMMITMENTS AND CONTINGENCIES
Currently, the Company has $51.0 million per occurrence and $52.0
million aggregate commercial general liability insurance coverage. The Company
is also insured for professional errors and omissions ("E&O") and contractor
pollution liability ("CPL") claims with an aggregate limit of $30.0 million
after a self-insured retention of $.5 million. The E&O and CPL 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
this policy, it will have no coverage under the policy 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 this type of coverage, but there can be no
assurance that the Company can maintain its existing coverage, that claims will
not exceed the amount of insurance coverage or that there will not be claims
relating to prior periods that were subject only to "claims made" coverage.
Various legal proceedings are pending against the Company or its
subsidiaries alleging breaches of contract or negligence in connection with the
performance of professional services. In some actions punitive or treble damages
are sought which substantially exceed the Company's insurance coverage. The
Company's management does not believe that any of such proceedings will have a
material adverse effect on the consolidated financial position and operations of
the Company.
29
<PAGE>
NOTE 11. STOCKHOLDERS' EQUITY
Declaration of dividends, except Common Stock dividends, is restricted
by the senior secured credit facility with the Bank and the Indenture governing
the 8 5/8% Debentures. 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 March 26, 1991, the stockholders approved the 1991 Stock Incentive
Plan (the "1991 Plan"). The 1991 Plan provides for the grant not to exceed
2,250,000 Restricted Shares, Stock Units and Options. As of October 1997, the
Company had issued 21,200 shares of Restricted Stock under the 1991 Plan.
Under the Employee Stock Purchase Plan (the "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 140,469
shares under the ESP Plan in fiscal 1997 and 69,692 shares in fiscal 1996.
The Company applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees", and related interpretations in accounting for its 1991 Plan.
Accordingly, no compensation cost has been recognized for its 1991 Plan. Had
compensation cost for the Company's 1991 Plan been determined consistent with
SFAS Statement No. 123, "Accounting for Stock-Based Compensation", the Company's
net income and earnings per share would have been reduced to the pro forma
amounts indicated below:
1997 1996 1995
-------- ------- -------
(In thousands, except per share data)
Net income As Reported $ 11,505 $ 7,355 $ 5,056
Pro forma $ 11,237 $ 7,223 $ 4,994
Primary earnings As Reported $ 1.06 $ .82 $ .68
per share Pro forma $ 1.04 $ .81 $ .67
Fully diluted As Reported $ 1.06 $ .80 $ .67
earnings per share Pro forma $ 1.04 $ .78 $ .66
30
<PAGE>
<TABLE>
A summary of the status of the stock options granted under the
Company's 1991 Plan for the years ended October 31, 1997, 1996 and 1995, is
presented below:
<CAPTION>
1997 1996 1995
------------------------- ---------------------------- -------------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
year 1,382,434 $ 6.64 1,160,900 $6.61 1,130,100 $6.79
Granted 280,000 $10.63 242,900 $6.76 210,700 $5.74
Exercised (138,287) $ 7.52 (2,000) $5.63 (137,600) $3.64
Forfeited (15,867) $ 7.68 (19,366) $6.89 (42,300) $6.56
----------- --------- ----------
Outstanding at end of year 1,508,280 $ 7.70 1,382,434 $6.64 1,160,900 $6.61
=========== ========= ==========
Options exercisable at year- 1,064,683 $ 6.50 1,029,733 $6.66 775,500 $6.81
end
Weighted-average fair value
of options granted during
the year $3.30 $2.02 $1.83
</TABLE>
<TABLE>
The following table summarizes information about stock options
outstanding at October 31, 1997:
<CAPTION>
Weighted-Average
Range of Number Remaining Weighted-Average Number Weighted-Average
Exercise Prices outstanding Contractual Life Exercise Price Exercisable Exercise Price
--------------- ----------- ---------------- -------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
$3 -$8 1,105,280 6.4 years $ 6.03 936,683 $5.91
$8.01 - $14 403,000 8.5 years $ 10.19 128,000 $9.04
--------- ---------
1,508,280 1,064,683
========= =========
</TABLE>
The fair value of each option grant was estimated on the date of grant
using the Black-Scholes option-pricing model with the following assumptions:
1997 1996 1995
---- ---- ----
Risk-free interest rates 5.81%-6.35% 5.46%-6.53% 6.09%-7.79%
Expected life 4 Years 4 Years 4 Years
Volatility 24.73% 24.73% 24.73%
Expected dividends None None None
31
<PAGE>
NOTE 12. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Years Ended October 31,
--------------------------------------
1997 1996 1995
------ ------ ------
(In thousands)
Interest $5,181 $4,142 $ 891
Income taxes $8,780 $6,483 $1,358
In connection with the exercise of certain warrants, outstanding debt owed to
a related party aggregating approximately $3.0 million was canceled.
Equipment purchased through capital lease obligations was $4.3 million, $1.5
million and $1.4 million for the years ended October 31, 1997, 1996 and 1995.
On January 4, 1995, the Company purchased all of the capital stock of ECD for
$3.6 million. In conjunction with the acquisition, liabilities were assumed as
follows:
Fair value of assets acquired $ 4,952
Cash paid for the capital stock (3,596)
-------
Liabilities assumed $ 1,356
=======
On March 29,1996, the Company acquired all of the capital stock of Greiner
for $78.8 million.
Purchase price of Greiner
(net of prepaid loan fees of $1.6 million) $ 77,184
Fair value of assets acquired (39,510)
--------
Excess purchase price over net assets acquired $ 37,674
========
NOTE 13. DEFINED CONTRIBUTION PLAN
The Company has a defined contribution retirement plan under Internal Revenue
Code Section 401(k). The plan covers 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. Contributions in the amount of $2.0 million, $1.6 million
and $.8 million were made to the plan in fiscal 1997, 1996 and 1995,
respectively.
32
<PAGE>
<TABLE>
NOTE 14. VALUATION AND ALLOWANCE ACCOUNTS
<CAPTION>
Additions
Charged to Deductions
Beginning Costs and from Ending
Balance Expenses Reserves Balance
------- -------- -------- -------
(In thousands)
<S> <C> <C> <C> <C>
October 31, 1997
Allowances for losses and doubtful
accounts $4,866 $ 995 $2,535 $3,326
October 31, 1996
Allowances for losses and doubtful
accounts $1,270 $4,679 $1,083 $4,866
October 31, 1995
Allowances for losses and doubtful
accounts $1,141 $ 442 $ 313 $1,270
</TABLE>
NOTE 15. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected quarterly financial data for fiscal 1997 and 1996 is
summarized as follows:
Fiscal 1997 Quarters Ended
-----------------------------------------------
Jan. 31 Apr. 30 July 31 Oct. 31
-------- -------- -------- --------
(In thousands, except per share data)
Revenues $ 95,541 $ 99,759 $100,196 $110,955
Operating income 5,081 5,458 6,280 7,188
Net income $ 2,196 $ 2,457 $ 3,181 $ 3,671
Income per share:
Primary $ .22 $ .24 $ .28 $ .32
======== ======== -------- ========
Fully diluted $ .22 $ .24 $ .28 $ .32
======== ======== ======== ========
Weighted average
number of shares 10,102 10,226 11,318 11,518
======== ======== ======== ========
Fiscal 1996 Quarters Ended
-----------------------------------------------
Jan. 31 Apr. 30 July 31 Oct. 31
-------- -------- -------- --------
(In thousands, except per share data)
Revenues $ 48,503 $ 64,864 $ 89,734 $102,369
Operating income 1,637 3,270 4,863 6,182
Net income $ 812 $ 1,522 $ 2,072 $ 2,949
Income per share:
Primary $ .11 $ .18 $ .22 $ .31
======== ======== ======== ========
Fully diluted $ .11 $ .18 $ .22 $ .29
======== ======== ======== ========
Weighted average
number of shares 8,713 9,188 10,096 10,093
======== ======== ======== ========
Operating income represents continuing operations before interest income
and interest expense.
33
<PAGE>
NOTE 16. SUBSEQUENT EVENT (UNAUDITED)
During the year ended October 31, 1997 the Company and W-C executed an
agreement to acquire W-C for an aggregate purchase price of $100 million. The
acquisition was completed on November 14, 1997.
The purchase price consisted of:
(In thousands)
Cash paid $ 6,866
Term debt 31,198
Common stock 61,936
---------
$ 100,000
=========
The purchase price of W-C
(net of prepaid loan fees of $4 million) $ 96,000
Fair value of assets acquired (43,949)
---------
Excess purchase price over net assets acquired
(Goodwill) $ 52,051
=========
The following unaudited pro forma summary presents the consolidated results
of operations as if the W-C 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.
Fiscal Years Ended October 31:
1997 1996
-------- --------
(In thousands, except per share data)
Revenues $753,430 $625,698
Net income $ 16,211 $ 6,029
Net income per share $ 1.09 $ .43
To finance the cash portion of the transaction, prior to October 31, 1997,
the Company negotiated with its lenders to obtain a $40,000,000 revolving credit
facility with a term of five years and a $110,000,000 term loan maturing six
years from the closing of the loan, which facilities are secured by guarantees
from and pledges of the stock of the Company's major subsidiaries. The new
revolving credit facility and term loan replaces the Company's current senior
secured revolving credit facility and term loan.
ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
34
<PAGE>
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
the Company's definitive proxy statement for the Annual Meeting of Stockholders
to be held on March 24, 1998 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 the Company's definitive proxy statement for the Annual Meeting
of Stockholders to be held on March 24, 1998.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Incorporated by reference from the information under the caption "Stock
Ownership" in the Company's definitive proxy statement for the Annual Meeting of
Stockholders to be held on March 24, 1998.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference from Item 8, Financial Statement and
Supplementary Data, Note 8, Long-Term Debt and Note 7, Related Party
Transactions.
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, 1997 and October 31, 1996
Consolidated Statements of Operations
For the years ended October 31, 1997, 1996 and 1995
Consolidated Statements of Changes in Stockholders' Equity For the years
ended October 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows For the years ended October 31,
1997, 1996 and 1995
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.
35
<PAGE>
(a)(3) Exhibits
3.1 Certificate of Incorporation of the Company, filed as Exhibit 3.1 to
the Company's Annual Report on Form 10-K for the fiscal year ended
October 31, 1991 (the "1991 Form 10-K"), and incorporated herein by
reference.
3.2 Bylaws of the Company, filed as Exhibit 3.2 to the Company's Annual
Report on Form 10-K for the fiscal year ended October 31, 1996 (the
"1996 Form 10-K"), and incorporated herein by reference.
4.1 Indenture, dated as of February 15, 1987, between the Company and First
Interstate Bank of California, Trustees, relating to $57.5 million of
the Company's 6 1/2% Convertible Subordinated Debentures Due 2012,
filed as Exhibit 4.10 to the Company's 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 the
Company and First Interstate Bank of California, Trustee, filed as
Exhibit 4.9 to the Company's Registration Statement on Form S-1
(Commission File No. 33-56296) ("1990 Form S- 1") and incorporated
herein by reference.
4.3 Indenture, dated as of March 16, 1989, between the Company and MTrust
Corp., National Association, Trustee relating to the Company's 8 5/8%
Senior Subordinated Debentures due 2004, filed as Exhibit 13C to the
Company's 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 the Company and
MTrust Corp. National Association, Trustee, filed as Exhibit 4.12 to
the 1990 Form S-1 and incorporated herein by reference.
10.1 1979 Stock Option Plan of the Company, filed as Exhibit 10.01 to the
Company's Registration Statement on Form S-14 (Commission File No.
2-73909) and incorporated herein by reference.
10.2 1987 Restricted Stock Plan of the Company, filed as Appendix I to the
Company's definitive proxy statement filed with the Commission on March
2, 1987 and incorporated herein by reference.
10.3 1985 Employee Stock Purchase Plan of the Company, adopted effective
July 1, 1997, filed as Exhibit 10.3 to the 1996 Form 10-K and
incorporated herein by reference.
10.4 1991 Stock Incentive Plan of the Company, amended and restated
effective December 17, 1996, filed as Exhibit 10.4 to the 1996 Form
10-K and incorporated herein by reference.
10.5 Non-Executive Directors Stock Grant Plan of the Company, adopted
December 17, 1996, filed as Exhibit 10.5 to the 1996 Form 10-K and
incorporated herein by
36
<PAGE>
reference.
10.6 Selected Executive Deferred Compensation Plan of the Company, filed as
Exhibit 10.3 to the 1990 Form S-1 and incorporated herein by reference.
10.7 1997 Incentive Compensation Plan of the Company. FILED HEREWITH.
10.8 1997 Incentive Compensation Plan of URS Greiner. FILED HEREWITH.
10.9 Stock Appreciation Rights Agreement, dated July 18, 1989, between the
Company and Irwin L. Rosenstein, filed as Exhibit 10.13 to the 1990
Form S-1 and incorporated herein by reference.
10.10 Stock Appreciation Rights Agreement, dated October 9, 1989, between the
Company and Martin M. Koffel, filed as Exhibit 10.15 to the 1990 Form
S-1 and incorporated herein by reference.
10.11 Employment Agreement, dated August 1, 1991, between URS Consultants,
Inc. and Irwin L. Rosenstein, filed as Exhibit 10.12 to the 1991 Form
10-K and incorporated herein by reference.
10.11(a) Amendment to Employment Agreement, dated October 11, 1994, between URS
Consultants, Inc., and Irwin L. Rosenstein, filed as Exhibit 10.12(a)
to the Company's Annual Report on Form 10-K for the fiscal year ended
October 31, 1994, and incorporated herein by reference.
10.12 Employment Agreement, dated December 16, 1991, between the Company and
Martin Koffel, filed as Exhibit 10.13 to the 1991 Form 10-K and
incorporated herein by reference.
10.13 Employment Agreement, dated May 7, 1991, between the Company and Kent
P. Ainsworth, filed as Exhibit 10.16 to the 1991 Form 10-K and
incorporated herein by reference.
10.14 Letter Agreement, dated February 14, 1990, between the Company and
Richard C. Blum, filed as Exhibit 10.31 to the 1990 Form S-1 and
incorporated herein by reference.
10.15 Letter Agreement, dated February 14, 1990, between the Company and
Richard C. Blum & Associates, Inc., filed as Exhibit 10.32 to the 1990
Form S-1 and incorporated herein by reference.
10.16 Registration Rights Agreement, dated February 21, 1990, among the
Company, Wells Fargo Bank, N.A. and the Purchaser Holders named
therein, filed as Exhibit 10.33 to the 1990 Form S-1 and incorporated
herein by reference.
10.17 Post-Affiliation Agreement, dated July 19, 1989, between the Company
and URS International, Inc., filed as Exhibit 10.42 to the Company's
Annual Report on Form 10-K for the fiscal year ended October 31, 1989
and incorporated herein by reference.
10.18 Form of Indemnification Agreement filed as Exhibit 10.34 to the
Company'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 the Company and each of Messrs. Ainsworth, Blum, Koffel,
Madden, Praeger, Rosenstein and Walsh; dated as
37
<PAGE>
of March 22, 1994 between the Company and each of Admiral Foley and Mr.
Der Marderosian; dated as of March 29, 1996 between the Company and Mr.
Costello; dated as of November 6, 1996 between the Company and Mr.
Glynn; dated as of January 27, 1997 between the Company and Mr.
Johnston; and dated as of November 17, 1997 between the Company and
each of Messrs. Waller, Perez and Wilson.
10.19 Severance Agreement, dated as of November 22, 1993, between the Company
and Joseph Masters, filed as Exhibit 10.35 to the Company's Annual
Report on Form 10-K for the fiscal year ended October 31, 1995 and
incorporated herein by reference.
10.20 Employment Agreement, dated March 29, 1996, between Greiner, Inc. and
Robert L. Costello, filed as Exhibit 10.1 to the 1996 second quarter
Form 10-Q and incorporated herein by reference.
10.21 Form of Change-In-Control Agreement dated as of April 17, 1997 between
Woodward-Clyde Group, Inc. and each of Frank S. Waller and Robert K.
Wilson.
10.22 Agreement and Plan of Merger, dated as of January 10, 1996, between URS
Corporation, URS Acquisition Corporation and Greiner Engineering, Inc.,
filed as Exhibit 2(a) to the Form 8-K filed on January 12, 1996, and
incorporated herein by reference.
10.23 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 the Company's Current Report on
Form 8-K filed on August 21, 1997 and incorporated herein by reference.
10.24 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 the Company's Current Report on Form
8-K filed on November 26, 1997, and incorporated herein by reference.
21.1 Subsidiaries of the Company. FILED HEREWITH.
23.1 Consent of Coopers & Lybrand L.L.P. FILED HEREWITH.
24.1 Powers of Attorney of the Company's directors and officers. FILED
HEREWITH.
27 Financial Data Schedule. FILED HEREWITH.
(b)(1) Reports on Form 8-K.
The Company filed a Current Report on Form 8-K on August 21, 1997
disclosing under Item 5 thereof that on August 18, 1997, the Company
executed an Agreement and Plan of Merger, by and among the Company,
Woodward-Clyde Group, Inc. ("Woodward-Clyde"), and W-C Acquisition
Corporation ("Acquisition Corp."), pursuant to which Woodward-Clyde
would be merged with and into Acquisition Corp., with Acquisition Corp.
as the surviving corporation.
38
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(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 19, 1998
<TABLE>
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.
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/Martin M. Koffel Chairman of the Board January 19, 1998
- --------------------------------------- of Directors and Chief
(Martin M. Koffel) Executive Officer
/s/Kent P. Ainsworth Executive Vice President, January 19, 1998
- --------------------------------------- Chief Financial Officer
(Kent P. Ainsworth) Principal Accounting
Officer and Secretary
IRWIN L. ROSENSTEIN* Director January 19, 1998
- ---------------------------------------
(Irwin L. Rosenstein)
RICHARD C. BLUM* Director January 19, 1998
- ---------------------------------------
(Richard C. Blum)
SENATOR J. BENNETT JOHNSTON* Director January 19, 1998
- ---------------------------------------
(Senator J. Bennett Johnston)
<PAGE>
RICHARD Q. PRAEGER* Director January 19, 1998
- ---------------------------------------
(Richard Q. Praeger)
WILLIAM D. WALSH * Director January 19, 1998
- ---------------------------------------
(William D. Walsh)
RICHARD B. MADDEN* Director January 19, 1998
- ---------------------------------------
(Richard B. Madden)
ARMEN DER MARDEROSIAN* Director January 19, 1998
- ---------------------------------------
(Armen Der Marderosian)
ADM. S. ROBERT FOLEY, JR., USN (RET.)* Director January 19, 1998
- ---------------------------------------
(Adm. S. Robert Foley, Jr., USN (Ret.))
ROBERT D. GLYNN, JR.* Director January 19, 1998
- ---------------------------------------
(Robert D. Glynn Jr.)
ROBERT L. COSTELLO* Director January 19, 1998
- ---------------------------------------
(Robert Costello)
JEAN-YVES PEREZ* Director January 19, 1998
- ---------------------------------------
(Jean-Yves Perez)
FRANK S. WALLER* Director January 19, 1998
- ---------------------------------------
(Frank S. Waller)
<FN>
*By
/s/ Kent P. Ainsworth
- ---------------------------------------
(Kent P. Ainsworth, Attorney-in-fact)
</FN>
</TABLE>
URS CORPORATION
1997 INCENTIVE
COMPENSATION PLAN
<PAGE>
TABLE OF CONTENTS
I. PURPOSE OF THE PLAN
II. HOW AWARDS ARE EARNED UNDER THE PLAN
III. OTHER PLAN PROVISIONS
IV. DEFINITIONS
V. EXAMPLES OF PLAN OPERATION
<PAGE>
I. PURPOSE OF THE PLAN
<PAGE>
I.1 PURPOSE
The URS Corporation ("URS") 1997 Incentive Compensation Plan (the "Plan") is
intended to provide incentive compensation to individuals who make an important
contribution to URS's financial performance. Specific Plan objectives are to:
o Focus key Employees on achieving specific financial targets;
o Reinforce a team orientation;
o Provide significant award potential for achieving outstanding
performance; and
o Enhance the ability of URS to attract and retain highly
talented and competent individuals.
I-1
<PAGE>
II. HOW AWARDS ARE EARNED UNDER THE PLAN
<PAGE>
II.1 GENERAL PLAN DESCRIPTION
The Plan provides the opportunity for key Employees of URS to receive cash
Awards based on a combination of URS's and individual performance.
Here is an overview of how the Plan works. In general, certain Employees will be
selected to participate in the Plan at the beginning of or during the Plan Year.
These individuals are referred to as "Designated Participants." Upon selection
to participate in the Plan, each Designated Participant will be assigned a
Target Award Percentage. This Target Award Percentage, multiplied by the
Participant's Base Salary earned during the Plan Year, will equal the
Participant's Target Award. This Target Award represents the amount that is
expected to be paid to a Designated Participant if certain financial Performance
Objectives for URS have been fully met.
In addition, funds will be set aside for discretionary Awards to selected other
Employees (referred to as "Non-designated Participants"), who have demonstrated
outstanding individual performance during the Plan Year. It is expected that the
amount available to Non-designated Participants for the 1997 Plan Year will be
$25,000, assuming that URS meets its financial objectives.
The sum of all Target Awards for Designated Participants and expected payouts to
Non-designated Participants will equal the Target Bonus Pool. The Actual Bonus
Pool will vary from the Target Pool upward or downward based on URS's actual
performance in relationship to its Performance Objectives.
Actual Awards to Designated Participants and actual funds available for
distribution to Non-designated Participants will vary from target amounts based
on the relationship between the Actual Bonus Pool and the Target Bonus Pool.
A detailed description of how the Plan works is presented in the following
sections of this document.
II-1
<PAGE>
II.2 DESIGNATED AND NON-DESIGNATED PARTICIPANTS
Plan participation is extended to selected Employees who, in the opinion of the
Chief Executive Officer ("CEO") of URS, have the opportunity to significantly
impact the annual operating success of the Company. These Employees are the
Designated Participants and will be notified in writing of their selection to
participate in the Plan. This notification letter, for all Participants except
the CEO of URS, will be signed by the CEO of URS. The letter of participation
for the CEO will be signed by the Chairman of the Compensation/Option Committee
("Committee") of URS's Board of Directors.
In addition to the Designated Participants, there may be a group of other
Employees who are selected to receive Awards based on their outstanding
individual performance during the Plan Year. These other Employees are the
Non-designated Participants and will not be selected until the completion of the
Plan Year. The selection of Non-designated Participants will be determined by
the CEO of URS at his sole discretion.
II.3 TARGET AWARD PERCENTAGES FOR DESIGNATED PARTICIPANTS
Each Designated Participant will be assigned a Target Award Percentage. This
Target Award Percentage, when multiplied by the individual's Base Salary earned
during the Plan Year, represents the anticipated payout to a Designated
Participant if URS's Performance Objectives are met.
Each Designated Participant's Target Award Percentage will be included in the
letter of notification mentioned in Section II.2.
II.4 TARGET BONUS POOL
The Target Bonus Pool ("Target Pool") will equal the sum of all Target Awards
for Designated Participants plus an amount set aside for possible distribution
to Non-designated Participants. For 1997, the Target Bonus Pool equals $405,750.
II-2
<PAGE>
II.5 URS PERFORMANCE OBJECTIVES
For 1997, URS's Performance Objectives are focused on the need to reach the
Company's Target for Net Income. The Performance Objectives and weightings for
the 1997 Plan Year are as follows:
URS Corporation Performance Objectives and Weightings
Performance Measure Weighting Performance Objective
------------------- --------- ---------------------
Net Income ($000s) 100% $9,600
Net Income will be calculated after all URS and URS Consultants ("URSC") bonuses
are accrued and assumed to have been paid.
II.6 RELATIONSHIP BETWEEN PERFORMANCE AND THE ACTUAL BONUS POOL
The Actual Bonus Pool ("Actual Pool") will vary from the Target Pool based on
the relationship between the actual performance of URS and the Performance
Objectives. The Actual Pool will vary in relationship to the Target Pool based
on the following table:
Relationship Between URS Performance and the
Actual Bonus Pool as a % of the Target Bonus Pool(1)
Actual
Performance as a Net Income Actual Pool
% of Performance Actual as a % of
Objective Performance Target Pool
--------- ----------- -----------
(%) ($000's) (%)
> 125% > $12,000 200%
100% $ 9,600 100%
75% $ 7,200 30%
< 75% < $ 7,200 0%
- ------------------------------------
(1) The calculation of the Actual Award as a percent of Target will be
interpolated for performance between discrete points on a straight-line
basis.
Based on the table above, the Actual Award will vary depending upon actual
performance in relation to Target Net Income.
II-3
<PAGE>
II.7 ACTUAL AWARDS TO DESIGNATED AND NON-DESIGNATED PARTICIPANTS
Actual Awards to Designated Participants will vary from Target levels based on
the relationship between the Actual Bonus Pool and the Target Pool.
After allocating Actual Awards to Designated Participants, the remaining funds
in the Actual Pool will be available for allocation to Non-designated
Participants.
Actual Awards distributed to Non-designated Participants will be determined on a
discretionary basis by the CEO. URS is under no obligation to distribute any or
all of the Actual Pool. The sum of all Awards to Non-designated Participants may
not exceed the amount available in the Actual Pool after Actual Awards have been
allocated to Designated Participants.
EXAMPLE OF INTERPOLATION CALCULATION
To interpolate the Actual Award based on performance, apply the appropriate
formula for actual performance above or below the Performance Objective. In all
cases, solve for "X".
o For performance above Objective:
(Act. Perf. - Perf. Obj.) = X
------------------------- -------------------------------
(Max. Perf. - Perf. Obj.) (Max. Award % - Target Award %)
o For performance below Objective:
(Act. Perf. - Perf. Obj.) = X
------------------------- -------------------------------
(Min. Perf. - Perf. Obj.) (Min. Award % - Target Award %)
o Once you have solved for "X", add X to 100%.
II-4
<PAGE>
Below is a hypothetical example:
EXAMPLE OF ACTUAL BONUS POOL CALCULATION
The following example illustrates the weighting of the Performance Objectives,
and calculates the Actual Bonus Pool:
Hypothetical Assumptions:
o Target Bonus Pool = $ 405,750
o Net Income Objective (after bonus accrual) = $ 9,600,000
o Actual Net Income (after bonus accrual) = $10,800,000
Interpolation:
o Net Income Performance = 150%
Actual Bonus Pool = $ 596,125
II-5
<PAGE>
III. OTHER PLAN PROVISIONS
<PAGE>
III.1 AWARD PAYMENT
Assessment of actual performance and payout of Awards will be subject to the
completion of the 1997 Year-end independent audit.
The Actual Award earned, up to and in excess of the Target Award level, will be
paid to the Participant (or the Participant's heirs in the case of death) in
cash within 30 days of the completion of the independent audit. Payroll and
other taxes will be withheld as required by law.
III.2 EMPLOYMENT
In order to receive an Award under the Plan, a Participant must be employed by
URS or an Affiliate at the end of the Plan Year, except as otherwise noted
below. Selection for participation in the Plan does not convey any employment
rights. Terms and conditions of Participants' employment agreements with URS, if
any, supersede the terms and conditions of the Plan.
III.3 TERMINATION
If Termination of a Designated Participant's employment occurs during the Plan
Year by reason of death, permanent disability, or retirement, the Designated
Participant (or the Participant's heirs in the case of death) will be eligible
to receive a pro-rata Award based on the time employed as a Participant and the
Objectives achieved for the Plan Year. Participants who have earned an Award on
this basis will receive payment on the same schedule as other Plan Participants.
A Participant whose employment with URS or its Affiliates is terminated prior to
the end of the Plan Year for any other reason (whether voluntarily or
involuntarily) will forfeit the opportunity to earn an Award under the Plan,
except as otherwise provided for.
III.4 OTHER PRO-RATA AWARDS
Individuals who have been selected during the Year for Plan participation and
who have a minimum of three months as a Designated Participant will be eligible
to receive a pro-rata Award based on the time employed as a Participant and the
Objectives achieved for the Plan Year, provided that the Participant is employed
by URS or an Affiliate at Year-end.
III-1
<PAGE>
III.5 PLAN FUNDING
Estimated payouts for the Plan will be accrued monthly and charged as an expense
against the income statement of URS. At the end of each fiscal quarter, the
estimated Actual Awards under the Plan will be evaluated based on actual
performance to date. The monthly accrual rate will then be adjusted so that the
cost of the Plan is fully accrued at Year-end.
Accrual of Awards will not imply vesting of any individual Awards to
Participants.
III.6 PLAN ADMINISTRATION
Responsibility for decisions and/or recommendations regarding Plan
administration are divided among the URS CEO and the Committee. Section III.7
outlines the levels of responsibility and authority assigned to each.
Notwithstanding the above, the Committee retains final authority regarding all
aspects of Plan administration, and the resolution of any disputes. The
Committee may, without notice, amend, suspend or revoke the Plan.
III-2
<PAGE>
III.7 INCENTIVE PLAN GOVERNANCE
URS
Area of Administration CEO Committee
- ---------------------- --- ---------
Overall Plan Design R A
Determination of Performance
Objectives R A
Designated Participants R A
- --------------------------------------------------------------------------------
Individual Target Awards R A
Target funding for Non-
Designated Participants R A
Target Award for CEO R/A
- --------------------------------------------------------------------------------
Certification of actual
performance against Objectives R A
Awards to Designated
Participants R A
Award to CEO R/A
- --------------------------------------------------------------------------------
Amendment, suspension, or
termination of the Plan R A
Adjustments due to extraordinary
events R A
- --------------------------------------------------------------------------------
KEY: R = Authority A = Authority
to Recommend to Approve
- --------------------------------------------------------------------------------
III.8 ASSIGNMENT OF EMPLOYEE RIGHTS
No employee has a claim or right to be a Participant in the Plan, to continue as
a Participant, or to be granted an Award under the Plan. URS is not obligated to
give uniform treatment (e.g., Target Award Percentages, discretionary Awards,
etc.) to Employees or Participants under the Plan. Participation in the Plan
does not give an Employee the right to be retained in the employment of URS, nor
does it imply or confer any other employment rights.
Nothing contained in the Plan will be construed to create a contract of
employment with any Participant. URS reserves the right to elect any person to
its offices and to remove Employees in any manner and upon any basis permitted
by law.
III-3
<PAGE>
Nothing contained in the Plan will be deemed to require URS to deposit, invest
or set aside amounts for the payment of any Awards. Participation in the Plan
does not give a Participant any ownership, security, or other rights in any
assets of URS or any of its Affiliates.
III.9 WITHHOLDING TAX
URS will deduct from all Awards paid under the Plan any taxes required by law to
be withheld.
III.10 EFFECTIVE DATE
The Plan is effective as of November 1, 1996, and will remain in effect for the
Fiscal Year ending October 31, 1997 unless otherwise terminated or extended by
the Committee.
III.11 VALIDITY
In the event any provision of the Plan is held invalid, void, or unenforceable,
the same will not affect, in any respect whatsoever, the validity of any other
provision of the Plan.
III.12 APPLICABLE LAW
The Plan will be governed by and construed in accordance with the laws of the
State of California.
III-4
<PAGE>
IV. DEFINITIONS
<PAGE>
IV.1 DEFINITIONS
"Affiliates" refers to any entity owned partially or totally by URS Corporation
including URS Corporation.
"Actual Award" or "Award" refers to the incentive amount earned under the Plan
by a Designated or Non-designated Participant.
"Actual Bonus Pool" or "Actual Pool" refers to the calculated amount available
for distribution to all Designated and Non- designated Participants under the
terms and provisions of the Plan.
"Base Salary" refers to the actual base earnings of a Designated Participant for
the Plan Year exclusive of any bonus payments under this Plan or any other prior
or present commitment, including contractual arrangements, any salary advance,
any allowance or reimbursement, and the value of any basic or supplemental
Employee benefits or perquisites. Base Salary refers only to amounts earned
while a Designated Participant during the Plan Year.
"Compensation/Option Committee" or "Committee" refers to the Compensation/Option
Committee of the Board of Directors of URS Corporation.
"Designated Participant" refers to an Employee of URS Corporation designated by
the CEO of URS to participate in the Plan. Designation will be established only
in writing.
"Employee" refers to an Employee of URS Corporation.
"Fiscal Year" refers to the twelve months beginning November 1, 1996 and ending
October 31, 1997.
"Net Income" refers to the consolidated revenue less all expenses (including tax
and interest charges) of URS Corporation.
"Non-designated Participant" refers to an Employee of URS Corporation selected
to receive an Award under the Plan on the basis of outstanding individual
performance. Employee selection will be made at the end of the Plan Year, at the
recommendation of the CEO of URS. Unlike Designated Participants, Non-designated
Participants will not be assigned Target Award Percentages or individual
Performance Objectives.
IV-1
<PAGE>
"Performance Objectives" or "Objectives" refers to the pre-established financial
goals upon which URS Corporation performance will be assessed.
"Plan" refers to the URS Corporation 1997 Incentive Compensation Plan, as
described in this document. Any incentives for future years will be covered by
subsequent plan documents.
"Plan Year" or "Year" refers to the twelve months beginning November 1, 1996,
and ending October 31, 1997, over which performance is measured under this Plan.
"Target Award" refers to a Designated Participant's Target Award Percentage,
multiplied by the Participant's Base Salary earned during the Plan Year. This
amount represents the anticipated payout to the Designated Participant if all
URS Corporation's Performance Objectives are met.
"Target Award Percentage" refers to a percentage of Base Salary assigned to a
Designated Participant in accordance with the terms and provisions of the Plan.
"Target Bonus Pool" or "Target Pool" refers to the amount anticipated to be
distributed to all Designated and Non-designated Participants if all URS
Corporation's Performance Objectives are met.
"Termination" means the Participant's ceasing his/her service with the Company
or any of its Affiliates for any reason whatsoever, whether voluntarily or
involuntarily, including by reason of death or permanent disability.
"URS" refers to URS Corporation.
"Year-end" refers to the end of the Fiscal Year, October 31, 1997.
IV-2
<PAGE>
V. EXAMPLES OF PLAN OPERATION
<PAGE>
URS CORPORATION PERFORMANCE TABLE
Actual
Net Income Actual vs.
(100% weighting) Target Pool
- --------------------------------------------------------------------------------
> = $12,000 MM 200%
$ 9,600 MM 100%
$ 7,200 MM 30%
< = $ 7,200 MM 0%
- --------------------------------------------------------------------------------
<TABLE>
Scenario 1 - URS net income performance exceeds objectives
<CAPTION>
<S> <C> <C> <C>
Net income Objective ($MMs) $ 9.6 ($10.8 - 9.6)/($12.0 - $9.6) = 50.0%
URS Actual Net Income ($Mms) $10.8
+ 100% = 150%
TARGET BONUS POOL ($000s) $380.750
ACTUAL BONUS POOL ($000s) $571.125 ($380.750 * 150%)= $571.125
Scenario 2 - URS net income performance less than objectives
Net income Objective ($MMs) $9.6 ($8.2 - $9.6)/($7.2 - $9.6) * (.7) =
URS Actual Net Income ($MMs) $8.2
- 59% + 100% = 42%
TARGET BONUS POOL ($000s) $380.750
ACTUAL BONUS POOL ($000s) $158.646 ($380.750 * 42%) = $158.646
</TABLE>
URS GREINER
1997 INCENTIVE COMPENSATION PLAN
<PAGE>
TABLE OF CONTENTS
I. PURPOSE OF THE PLAN
II. HOW AWARDS ARE EARNED UNDER THE PLAN
III. OTHER PLAN PROVISIONS
IV. DEFINITIONS
V. EXAMPLES OF PLAN OPERATION
<PAGE>
I. PURPOSE OF THE PLAN
<PAGE>
I.1 PURPOSE
The URS Greiner 1997 Incentive Compensation Plan (the "Plan") is intended to
provide incentive compensation to individuals who make an important
contribution to URS Greiner's financial performance. Specific Plan
objectives are to:
o Focus key Employees on achieving specific financial targets;
o Reinforce a team orientation;
o Provide significant award potential for achieving outstanding
performance; and
o Enhance the ability of URS Greiner to attract and retain
highly talented and competent individuals.
I-1
<PAGE>
II. HOW AWARDS ARE EARNED UNDER THE PLAN
<PAGE>
II.1 GENERAL PLAN DESCRIPTION
The Plan provides the opportunity for key Employees of URS Greiner ("URSG")
to receive cash Awards based on a combination of URSC and individual
performance.
Here is an overview of how the Plan works. In general, a Target Bonus Pool
is established. This amount represents the total Awards that are expected to
be paid to selected URSG Employees if certain financial Performance
Objectives for URSG have been fully met. The Actual Bonus Pool will vary
from the Target Bonus Pool upward or downward based on URSG actual
performance in relationship to its Performance Objectives. This adjusted
bonus pool is the Actual Bonus Pool, from which Actual Award payouts will be
made.
At the beginning of or during the Plan Year, certain Employees will be
selected to participate in the Plan. These individuals are referred to as
"Designated Participants." Upon selection to participate in the Plan, each
Designated Participant will be assigned a Target Award Percentage. This
Target Award Percentage, multiplied by the Participant's Base Salary earned
during the Plan Year, will equal the Participant's Target Award. This Target
Award will be earned for meeting both pre-determined URSG and individual
Performance Objectives. Individual Performance Objectives will vary based on
the Participant's role within the organization. Each Designated
Participant's Actual Award could vary from the Target Award, based on the
individual's actual performance measured against his/her Performance
Objectives, subject to the amount available for distribution from the Actual
Bonus Pool.
Another key feature of the Plan is that a portion of the Actual Bonus Pool
will be set aside for discretionary Awards to selected other Employees
(referred to in the Plan as "Non- Designated Participants"), who have
demonstrated outstanding individual performance during the Plan Year.
A detailed description of how the Plan works is presented in the following
sections of this document.
II-1
<PAGE>
II.2 DESIGNATED AND NON-DESIGNATED PARTICIPANTS
Plan participation is extended to selected Employees who, in the opinion of
the President of URSG and the Chief Executive Officer ("CEO") of URS
Corporation (the "Parent Company"), have the opportunity to significantly
impact the annual operating success of URSG. These Employees are the
Designated Participants and will be notified in writing of their selection
to participate in the Plan. This notification letter will be signed by the
CEO of the Parent Company.
In addition to the Designated Participants, there may be a group of other
Employees who are selected to receive Awards based on their outstanding
individual performance during the Plan Year. These other Employees are the
Non-designated Participants and will not be selected until the completion of
the Plan Year. The selection of Non-designated Participants will be
determined by the President of URSG, subject to the approval of the CEO of
the Parent Company, at their sole discretion.
II.3 TARGET BONUS POOL
A Target Bonus Pool is established, equal to the sum of all target awards
for Designated Participants plus an amount set aside for possible
distribution to Non-designated Participants. (The Awards to Non-designated
Participants are estimated at approximately 25% of the total Designated
Participants' Bonus Pool.)
This Target Bonus Pool is determined based on the current group of
Designated Participants and the anticipated group of Non- designated
Participants. The Target Pool is subject to change if the group of
Designated Participants, the group of Non- Designated Participants, or the
Base Salaries of Designated
Participants change.
Subject to these potential changes, the Target Bonus Pool for the 1997 Plan
Year is established at $2,817,000.
II-2
<PAGE>
II.4 URSG PERFORMANCE OBJECTIVES
URSG Performance Objectives are focused on the need to achieve strong
operating results (i.e., contribution), generate cash through the management
of accounts receivables (DSOs) throughout the Year, achieve operating
results internationally (i.e., International Profit) and develop new
business opportunities. Accordingly, performance will be evaluated based on
a combination of URSG Contribution, Average Receivables Days Sales
Outstanding (DSO), New Sales and International Profit.
The URSG Performance Objectives for the 1997 Plan Year are as follows:
URSG Performance Objectives
Performance Measures Performance Objectives
-------------------- ----------------------
Contribution ($000s) $ 28,500
Average DSO (Days) 90
New Sales ($000s) $438,000
International Profit ($000s) $ 505
URSG Contribution is defined as total 1997 Fiscal Year URSG revenues less:
o Direct cost of sales;
o Indirect expenses; and
o Accrual of expected Awards for both Designated and
Non-designated Participants under the Plan (i.e., the Plan
must pay for itself)
The subtraction of expected Awards from revenues in calculating contribution
under the Plan means that the Contribution Objective, for purposes of the
Plan, is calculated after all bonuses have been accrued, or assumed to have
been paid.
URSG Days Sales Outstanding (DSO) is defined by the following formula:
BAR + UAR - BEC
--------------- X 90
REVENUES
where BAR is billed accounts receivable, UAR is unbilled accounts
receivable, BEC is billings in excess of cost, and REVENUES is the sum of
the last three months revenues. DSOs
II-3
<PAGE>
will be calculated monthly, and the average of the twelve months' DSOs will
equal Average DSOs.
URSG New Sales is defined as gross additions to backlog.
URSC International profit is defined as total 1997 Fiscal Year URSG -
Malaysia revenue less:
o Direct cost of sales;
o Indirect expenses; and
o Accrual of expected Awards for both Designated and
Non-designated Participants under the Plan (i.e., the Plan
must pay for itself)
The subtraction of expected Awards from revenues in calculating contribution
under the Plan means that the Contribution Objective, for purposes of the
Plan, is calculated after all bonuses have been accrued, or assumed to have
been paid.
II.5 WEIGHTING OF URSG PERFORMANCE OBJECTIVES
The Target Bonus Pool will be weighted based on the aggregate weightings of
the individual Participants' Performance Objectives in the Plan.
Contribution will be the most heavily weighted component followed by DSO
performance and New Sales. An example of the weighting calculation is shown
below.
II-4
<PAGE>
EXAMPLE OF WEIGHTING CALCULATION (1)
The Target Bonus Pool will be weighted based on the aggregate weightings of
the individual Performance Objectives for the Designated Participants in the
Plan. The following example illustrates the weighting calculation:
Target Bonus Pool = $2,817,000
Portion of Target Pool determined by:
Contribution (71%) $2,004,000
DSO Performance (18%) $ 506,000
New Sales (10%) $ 277,000
International Profit (1%) $ 30,000
(1) Weightings may be subject to change based on the Plan measures of the
Designated Participants at the end of the Plan Year.
II-5
<PAGE>
II.6 RELATIONSHIP BETWEEN PERFORMANCE AND THE ACTUAL BONUS
POOL
The Actual Bonus Pool will vary from the Target Bonus Pool based on the
relationship between the actual performance of URSG and the Performance
Objectives. The Actual Bonus Pool will vary in relationship to the Target
Bonus Pool based on the following table:
Relationship Between URSG Performance And
The Actual Bonus Pool As A % Of The Target Bonus Pool
URSG Contribution URSG DSO
----------------- --------
Actual
Performance Actual
As A % Of Bonus Pool Bonus Pool
Performance Actual As A % Of Actual As A % Of
Objective Performance Target Pool Performance Target Pool
--------- ----------- ----------- ----------- -----------
(%) ($000s) (%) (Days) (%)
> 125% > $35,625 200%(1) < 85 200%(1)
100% $28,500 100% 90 100%
75% $21,375 30% 95 30%
< 75% < $21,375 0% > 95 0%
URSG New Sales URSG International Profit
-------------- -------------------------
Actual Actual
Performance Actual Performance Actual
As A % Of Bonus Pool As A % Of Bonus Pool
Performance Actual As A % Of Performance Actual As A % of
Objective Performance Target Pool Objective Performance Target Pool
--------- ---------- ----------- --------- ----------- -----------
(%) ($000s) (%) (%) ($000s) (%)
> 125% > $547,500 200% > 125% > $631.250 200%
100% $438,000 100% 100% $505.000 100%
75% $328,500 30% 75% $378.750 30%
< 75% < $328,500 0% < 75% < $378.750 75%
(1) Maximum upside opportunity of 200% of the Target Bonus Pool may be
raised at the discretion of the Compensation/Option Committee ("Committee")
of the Parent Company Board of Directors. The calculation of the Actual
Bonus Pool As A % Of Target will be interpolated for performance between
discrete points shown in the table above.
II-6
<PAGE>
Based on the table above, the Actual Bonus Pool could vary between 0% and
200% of the Target Bonus Pool, depending upon actual performance in relation
to Performance Objectives and the weighting of the Performance Objectives.
Accrual of any Actual Pool tied to DSO, New Sales, and International Profit
is contingent upon Contribution performance being at or above 75% of the
Performance Objective.
Here is an example of the calculation of an Actual Bonus pool:
EXAMPLE OF INTERPOLATION CALCULATION
To interpolate the Actual Award based on performance, apply the appropriate
formula for actual performance above or below the Performance Objective. In
all cases, solve for "X".
o For performance above objective:
(Act. Perf. - Perf. Obj.) X
- --------------------------------------------------- = --------------------------
(Max. Perf. - Perf. Obj.) (Max. Award% - Target Award%)
o For performance below objective:
(Act. Perf. - Perf. Obj.) X
- --------------------------------------------------- = --------------------------
(Max. Perf. - Perf. Obj.) (Max. Award% - Target Award%)
o Once you have solved for "X", add X to 100%.
Below is a hypothetical example:
EXAMPLE OF ACTUAL BONUS POOL CALCULATION
The following example illustrates the weighting of the Performance
Objectives and calculates the Actual Bonus Pool:
Hypothetical assumptions:
o Target Bonus Pool = $2,817,000
URSG 1997 Performance Objective Actual
--------------------- --------- -------
o Contribution $ 28,500 $ 30,000
o DSO Performance 90 Days 89 Days
o New Sales $438,000 $418,000
o International Profit $ 505 $ 565
II-7
<PAGE>
Weighting:
o Contribution portion of Target Pool = $2,004,000
o DSO portion of Target Pool = $ 506,000
o New Sales portion of Target Pool = $ 277,000
o International Profit portion of Target Pool = $ 30,000
Interpolation:
o Contribution Performance = 121%
o DSO Performance = 120%
o New Sales Performance = 82%
o International Profit = 148%
Actual Bonus Pool = $3,303,580
($2,004,000 * 121%) + ($506,000 * 120%) +
($277,000 * 82%) + ($30,000 * 148%)
II-8
<PAGE>
II.7 DISCRETIONARY BONUS POOL
It is the intent of the Plan that if the Actual Bonus Pool, as calculated in
Section II.6, should fall below 30% of the Target Bonus Pool, then a
Discretionary Bonus Pool will be created instead.
Awards from the Discretionary Pool may be made to selected Employees (both
Designated and Non-designated Participants). Awards to Designated
Participants will be calculated based on actual performance, reduced pro
rata based on the amount of the Discretionary Pool. Awards to Non-designated
Participants will be made on a totally discretionary basis by the President
of URSG, subject to the approval of the CEO of the Parent Company. The
formation of the Discretionary Pool will not guarantee any Award payments.
Rather, the Discretionary Pool will be used to recognize selected
outstanding Employees in the event that URSG does not meet or exceed 75% of
its Contribution Performance Objective. The total sum of Awards made from
the Discretionary Pool may not exceed 30% of the total Target Bonus Pool.
II.8 ACTUAL BONUS POOL ALLOCATION
Awards will be paid from the funds available in the Actual Bonus Pool. The
portion of the pool actually allocated to Non- Designated Participants will
be determined after the end of the Plan Year at the discretion of the CEO of
the Parent Company, subject to the approval of the Committee, and may vary
from the estimated 20% of the total Actual Bonus Pool. The sum of the Actual
Awards paid, including Awards made to Non-designated Participants, may not
exceed the available Actual Bonus Pool.
II.9 TARGET AWARD PERCENTAGES
Each Designated Participant will be assigned a Target Award Percentage. This
Target Award Percentage, when multiplied by the individual's Base Salary
earned during the Plan Year, represents the anticipated payout to a
Designated Participant if all of the URSG and the individual's Performance
Objectives are met. Each Designated Participant's Target Award Percentage
and individual Performance Objectives will be included in the letter of
notification mentioned in Section II.2.
II-9
<PAGE>
II.10 ACTUAL AWARDS FOR DESIGNATED PARTICIPANTS
Individual Performance Objectives will be assigned based on the economic
unit (i.e., URSG, a region of URSG, or an office of URSG) on which the
Participant's performance has the greatest financial impact. Each Designated
Participant will be notified of his/her economic unit, the individual
Performance Objectives associated with that unit, the weighting of those
Performance Objectives, and the relationship between individual unit
performance and Award levels in the letter of notification mentioned in
Section II.2.
II.11 ADJUSTMENT TO ACTUAL AWARDS
It is possible that the sum of the Actual Awards for Designated Participants
could exceed the Actual Bonus Pool available for Designated Participants.
This result could happen for either one of two reasons. First, the CEO of
the Parent Company could allocate more for Awards to Non-designated
Participants than was accrued. Second, larger economic units could perform
worse relative to the smaller economic units, creating an insufficient
Actual Bonus Pool. In these cases, all Actual Awards will be reduced
pro-rata by a factor determined by dividing the Actual Bonus Pool for
Designated Participants by the sum of the individual Actual Awards for
Designated Participants.
If the sum of Actual Awards is less than the Actual Bonus Pool available for
Designated Participants, there will be no upward pro-ration of Awards paid.
II-10
<PAGE>
III. OTHER PLAN PROVISIONS
<PAGE>
III.1 AWARD PAYMENT
Assessment of actual performance and payout of Awards will be subject to the
completion of the 1997 Year-end independent audit.
The Actual Award earned, up to and in excess of the Target Award level, will
be paid to the Participant (or the Participant's heirs in the case of death)
in cash within 30 days of the completion of the independent audit. Payroll
and other taxes will be withheld as required by law.
III.2 EMPLOYMENT
To receive an Award under the Plan, a Participant must be employed by URSG
or an Affiliate at the end of the Plan Year, except as otherwise noted
below. A Participant must also have performed his/her duties satisfactorily
during the Year, as determined by the URSG President. The Parent Company CEO
will assess the performance of the President and Executive Vice President.
III.3 TERMINATION
If Termination of a Designated Participant's employment occurs during the
Plan Year by reason of death, permanent disability, or retirement, the
Designated Participant (or the Participant's heirs in the case of death)
will be eligible to receive a pro-rata Award based on the time employed as a
Participant and the Objectives achieved for the Plan Year. Participants who
have earned an Award on this basis will receive payment on the same schedule
as other Plan Participants.
A Participant whose employment with URSG or its Affiliates is terminated
prior to the end of the Plan Year for any other reason (whether voluntarily
or involuntarily) will forfeit the opportunity to earn an Award under the
Plan.
III.4 OTHER PRO-RATA AWARDS
Individuals who have been selected during the Year for Plan participation
and who have a minimum of three months as a Designated Participant will be
eligible to receive a pro-rata Award based on the time employed as a
Participant and the
III-1
<PAGE>
Objectives achieved for the Plan Year, provided that the Participant is
employed by URSG or an Affiliate at Year-end.
III.5 PLAN FUNDING
Estimated payouts for the Plan will be accrued monthly and charged as an
expense against the income statement of URSG and its economic units. At the
end of each fiscal quarter, the estimated Actual Bonus Pool under the Plan
will be evaluated based on actual performance to date. The monthly accrual
rate will then be adjusted so that the cost of the Plan is fully accrued at
Year-end.
Accrual of Awards will not imply vesting of any individual Awards to
Participants.
III.6 PLAN ADMINISTRATION
Responsibility for decisions and/or recommendations regarding Plan
administration are divided among the URSG President, the Parent Company CEO,
and the Committee. Section III.7 outlines the levels of responsibility and
authority assigned to each.
Notwithstanding the above, the Committee retains final authority regarding
all aspects of Plan administration, and the resolution of any disputes. The
Committee may, without notice, amend, suspend or revoke the Plan.
III-2
<PAGE>
III.7 INCENTIVE PLAN GOVERNANCE
Parent
Company
Area of Administration CEO Committee
---------------------- --- ---------
Overall Plan Design R A
Determination of Performance
Objectives R A
Designated Participants R A
- --------------------------------------------------------------------------------
Individual Target Awards R A
Target funding for Non-
Designated Participants R A
- --------------------------------------------------------------------------------
Certification of actual
performance against Objectives R A
Awards to Designated
Participants R A
Awards to Non-designated
Participants R
- --------------------------------------------------------------------------------
Amendment, suspension, or
termination of the Plan R A
Adjustments due to extraordinary
events R A
- --------------------------------------------------------------------------------
KEY: R = Authority A = Authority
to Recommend to Approve
- --------------------------------------------------------------------------------
III-3
<PAGE>
III.8 ASSIGNMENT OF EMPLOYEE RIGHTS
No employee has a claim or right to be a Participant in the Plan, to
continue as a Participant, or to be granted an Award under the Plan. URSG is
not obligated to give uniform treatment (e.g., Target Award Percentages,
discretionary Awards, etc.) to Employees or Participants under the Plan.
Participation in the Plan does not give an Employee the right to be retained
in the employment of URSG, nor does it imply or confer any other employment
rights.
Nothing contained in the Plan will be construed to create a contract of
employment with any Participant. URSG reserves the right to elect any person
to its offices and to remove Employees in any manner and upon any basis
permitted by law.
Nothing contained in the Plan will be deemed to require URSG to deposit,
invest or set aside amounts for the payment of any Awards. Participation in
the Plan does not give a Participant any ownership, security, or other
rights in any assets of URSG or any of its Affiliates.
III.9 WITHHOLDING TAX
URSG will deduct from all Awards paid under the Plan any taxes required by
law to be withheld.
III.10 EFFECTIVE DATE
The Plan is effective as of November 1, 1996, and shall remain in effect for
the Fiscal Year ending October 31, 1997 unless otherwise terminated or
extended by the Committee.
III.11 VALIDITY
In the event any provision of the Plan is held invalid, void, or
unenforceable, the same shall not affect, in any respect whatsoever, the
validity of any other provision of the Plan.
III.12 APPLICABLE LAW
The Plan shall be governed by and construed in accordance with the laws of
the State of California.
III-4
<PAGE>
IV. DEFINITIONS
<PAGE>
IV.1 DEFINITIONS
"Actual Bonus Pool" or "Actual Pool" refers to the calculated amount
available to be distributed to all Participants under the terms and
provisions of the Plan.
"Affiliate" refers to any entity owned partially or totally by URS
Corporation including URS Corporation.
"Award" refers to any incentive amount earned under the Plan by a Designated
or Non-designated Participant.
"Actual Award" refers to the calculated incentive amount earned by a
Participant under the terms and provisions of the Plan, before any
adjustments caused by the size of the Actual Bonus Pool.
"Base Salary" refers to the actual base earnings of a Designated Participant
for the Plan Year exclusive of any bonus payments under this Plan or any
other prior or present commitment, including contractual arrangements, any
salary advance, any allowance or reimbursement, and the value of any basic
or supplemental Employee benefits or perquisites. Base Salary refers only to
amounts earned while a Designated Participant during the Plan Year.
"Compensation/Option Committee" or "Committee" refers to the
Compensation/Option Committee of the Board of Directors of the
Parent Company.
"Designated Participant" refers to an Employee of URS Greiner designated by
the CEO of URS Corporation to participate in the Plan. Designation will be
established only in writing.
"Discretionary Bonus Pool" or "Discretionary Pool" is the total amount
available to be distributed if URS Greiner contribution does not reach or
exceed $21,375,000 (75% of the Performance Objective).
"Employee" refers to an Employee of URS Greiner
"Fiscal Year" refers to the twelve months beginning November 1, 1996 and
ending October 31, 1997.
IV-1
<PAGE>
"Non-designated Participant" refers to an Employee of URS Consultants
selected to receive an Award under the Plan on the basis of outstanding
individual performance. Employee selection will be made at the end of the
Plan Year, at the recommendation of the President of URS Greiner within
guidelines agreed with and subject to the approval of the CEO of URS
Corporation. Unlike Designated Participants, Non-designated Participants
will not be assigned Target Award Percentages or individual Performance
Objectives.
"Parent Company" refers to URS Corporation.
"Performance Objectives" or "Objectives" refers to the pre-established
financial goals upon which overall URS Consultants and economic unit (i.e.,
URS Greiner, a region of URS Greiner, or an office of URS Greiner)
performance will be assessed.
"Plan" refers to the URS Greiner 1997 Incentive Compensation Plan, as
described in this document. Any incentives for future years will be covered
by subsequent plan documents.
"Plan Year" or "Year" refers to the twelve months beginning November 1,
1996, and ending October 31, 1997, over which performance is measured under
this Plan.
"Target Award" refers to a Designated Participant's Target Award Percentage,
multiplied by the Participant's Base Salary earned during the Plan Year.
This amount represents the anticipated payout to the Designated Participant
if all URS Consultants and the individual's Performance Objectives are met.
"Target Award Percentage" refers to a percentage of Base Salary assigned to
a Designated Participant in accordance with the terms and provisions of the
Plan. Non-designated Participants are not assigned Target Award Percentages.
"Target Bonus Pool" or "Target Pool" refers to the sum of the Target Awards
for Designated Participants plus an estimated amount for Awards to
Non-designated Participants.
IV-2
<PAGE>
"Termination" means the Participant's ceasing his/her service with the
Company or any of its Affiliates for any reason whatsoever, whether
voluntarily or involuntarily, including by reason of death or permanent
disability.
"URSG" refers to URS Greiner.
"Year-end" refers to the end of the Fiscal Year, October 31, 1997.
IV-3
<PAGE>
V. EXAMPLES OF PLAN OPERATION
<PAGE>
EXAMPLE OF WEIGHTING CALCULATION (1)
The Target Bonus Pool will be weighted based on the aggregate weightings of
the individual Performance Objectives for the Designated Participants in the
Plan. The following example illustrates the weighting calculation:
Target Bonus Pool = $2,817,000
Portion of Target Pool determined by:
Contribution (71%) $2,004,000
DSO Performance (18%) $ 506,000
New Sales (10%) $ 277,000
International Profit (1%) $ 30,000
(1) Weightings may be subject to change based on the Plan measures of the
Designated Participants at the end of the Plan Year.
<PAGE>
EXAMPLE OF ACTUAL BONUS POOL CALCULATION
The following example illustrates the weighting of the Performance
Objectives and calculates the Actual Bonus Pool:
Hypothetical assumptions:
o Target Bonus Pool = $2,817,000
URSG 1997 Performance Objective Actual
--------------------- --------- ------
o Contribution $ 28,500 $ 30,000
o DSO Performance 90 Days 89 Days
o New Sales $438,000 $418,000
o International Profit $ 505 $ 565
Weighting:
o Contribution portion of Target Pool = $2,004,000
o DSO portion of Target Pool = $ 506,000
o New Sales portion of Target Pool = $ 277,000
o International Profit of Target Pool = $ 30,000
Interpolation:
o Contribution Performance = 121%
o DSO Performance = 120%
o New Sales Performance = 82%
o International Profit of Target Pool = 148%
Actual Bonus Pool = $3,303,580
($2,004,000 * 121%) + ($506,000 * 120%) +
($277,000 * 82%) + ($30,000 * 148%)
<PAGE>
EXAMPLE OF ACTUAL AWARD ADJUSTMENT
The following example illustrates the Actual Award adjustment that occurs if
the sum of the individual Actual Awards is greater than the Actual Bonus
Pool:
Hypothetical assumptions:
o Target Bonus Pool = $2,817,000
o Actual Bonus Pool = $3,303,580
o Sum of individual Actual Awards
(as calculated) = $3,500,000
o Actual Awards (as calculated)
- Participant A = $ 15,750
- Participant B = $ 30,000
Pro-rata reduction factor =
($3,303,580 / $3,500,000) = .94
Individual Awards (after reduction)
o Participant A =
($15,750 * .94) = $ 14,805
o Participant B =
($30,000 * .94) = $ 28,200
CHANGE-IN-CONTROL AGREEMENT
THIS AGREEMENT ("Agreement") is made effective as of _______________,
by and between WOODWARD-CLYDE GROUP, INC., a Delaware corporation ("Company"),
and _________________ ("Executive").
RECITAL
The Company is actively addressing equity needs which could lead to
change in ownership and control of Company. The Company's Board of Directors is
concerned that key executives of Company and its subsidiaries must be actively
involved in these efforts, that they hold positions that are likely to be the
most vulnerable in the event of a change in control, and that it is vital to the
success of Company's efforts that the essential participation of these key
executives not be influenced by concerns regarding this vulnerability.
Therefore, the Company desires to enter into this Agreement with Executive
whereby severance benefits will be paid to Executive in the event of the actual
or constructive termination of Executive's employment as a result of the change
in control.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and conditions contained herein, the parties agree as follows:
AGREEMENT
1. Executive's Commitment. Executive agrees that he or she will
actively assist in the Company's efforts in finding a solution to its equity
shortage irrespective of concerns over the vulnerability of Executive's position
in the event of a Change in Control of the Company, as defined below.
2. Company's Commitment. If a Change in Control occurs and Executive's
employment is Terminated, as defined below, Executive shall be paid, promptly
upon Termination, as severance benefits, a lump sum cash payment equal to
Executive's base annual salary for one (1) year and Executive shall be entitled
to the same medical, life and dental insurance coverage as was available to
Executive immediately prior to Termination for a period of one (1) year
following Termination. This shall be in lieu of any severance benefits that
would otherwise be due Executive under policies of the Company or its
subsidiaries. In the event of any termination of Executive other than a
Termination resulting from a Change in Control, as provided herein, Executive
shall receive the same severance benefits that Executive would otherwise be
entitled to receive irrespective of this Agreement.
3. Term Of Agreement. The severance benefits provided herein shall be
applicable to any Termination that occurs within two (2) years from a Change in
Control, provided that the Change in Control occurs within three (3) years from
the effective date of this Agreement.
1.
<PAGE>
4. Change In Control. For the purposes of this Agreement, a "Change in
Control" shall be deemed to have occurred upon the happening of any of the
following events within three (3) years from the effective date of this
Agreement:
(a) Merger Or Consolidation. If the shareholders of the WCGI
approve a merger or consolidation with any other corporation; or
(b) Liquidation Or Sale. If the shareholders of the WCGI
approve a plan of complete liquidation of WCGI or an agreement for the sale or
disposition of all or substantially all of the WCGI's assets; or
(c) Acquisition Of 30% Of Outstanding Securities. If any
person is or becomes the beneficial owner, directly or indirectly, of securities
of the Company representing 30% or more of the combined voting power of the
Company's then outstanding securities.
5. Termination Resulting From Change In Control ("Termination"). The
word Termination as used herein shall mean any actual or constructive
termination of Executive by Company, within two (2) years following a Change in
Control, which is other than a termination for Cause, as defined below. For
purposes of this Agreement, a constructive termination of Executive shall be
deemed to have occurred if Executive has made a good faith reasonable
determination that any of the following actions has been taken, if taken without
the express written consent of Executive:
(a) Any material change by the Company in Executive's
functions, duties, or responsibilities that would cause Executive's position
with the Company to become of less dignity, responsibility, importance, or scope
from the position and attributes that applied to Executive immediately prior to
the Change in Control;
(b) Any significant reduction in Executive's base salary,
other than a reduction effected as part of an across-the-board reduction
affecting all executive employees of the Company;
(c) Any material failure by the Company to comply with any of
the provisions of this Agreement (or of any employment agreement between the
parties);
(d) The Company's requiring Executive to be based at any
office or location more than fifty (50) miles from the office at which Executive
is based on the date immediately preceding the Change in Control, except for
travel reasonably required in the performance of Executive's responsibilities
and commensurate with the amount of travel required of Executive prior to the
Change in Control; or
(e) Any failure by the Company to obtain the express
assumption of this Agreement by any successor or assign of the Company.
2.
<PAGE>
6. Notice Of Constructive Termination By Executive. If Executive
determines in good faith that one of the grounds for claiming constructive
termination has occurred, Executive shall give the Company a notice of
termination based thereon and the Company shall have thirty (30) days after
receipt of such notice to remedy the facts and circumstances which constituted
the basis for the Executive's determination. Executive shall then make a
reasonable determination in good faith immediately thereafter as to whether such
facts and circumstances have been remedied and shall communicate such
determination in writing to the Company. If Executive determines that an
adequate remedy has not occurred, then the initial notice of termination shall
remain in effect. Any determination by Executive pursuant to this Paragraph 6
shall be presumed correct and shall govern unless the party contesting the
determination shows by a clear preponderance of the evidence that it was not a
good faith reasonable determination. If the Company disputes the Executive's
determination, the dispute will be immediately submitted to arbitration subject
to the provisions of Paragraph 12 hereof. Pending the arbitration award, the
Executive will continue to be paid his or her salary on a monthly basis, as an
advance against the severance benefits, and, if the award is in favor of the
Executive, the sum of the interim monthly payments to Executive shall be
credited against the severance benefits due Executive hereunder. If the award is
in favor of the Company, Executive shall be required to repay the sum of the
interim monthly payments to the Company.
7. Inapplicability Of Agreement In Retirement Or Disability. Executive
shall not be entitled to the benefits of this Agreement if Executive's
employment terminates pursuant to normal retirement under a policy in effect
prior to the Change in Control or by reason of his death or his total and
permanent disability. For the purposes of this Agreement, "total and permanent
disability" means a condition which prevents Executive from performing to a
significant degree the essential duties of his position and is expected to be of
long-term duration or result in death. A determination of total and permanent
disability must be based on competent medical evidence.
8. Termination Of Executive For Cause. Executive's employment shall be
deemed to have been terminated for "Cause" for purposes of this Agreement if the
termination is based upon Executive's willfully engaging in misconduct,
including, without limitation, the intentional failure to perform Executive's
duties, which is demonstrably and materially injurious to the Company and its
subsidiaries taken as a whole. No act, or failure to act, on Executive's part
shall be considered willful unless done, or omitted to be done, by Executive
without good faith and without reasonable belief that Executive's action or
omission was in the best interest of the Company or its subsidiaries.
9. Notice Of Termination For Cause. If, after a Change in Control, the
Company believes that the requirements for a termination for Cause exist, and
that, therefore, Executive is not entitled to the severance benefits provided
under this Agreement, the Company shall give written notice to Executive setting
forth the reasons for the Company's position as to Cause. Executive shall have
thirty (30) days after receipt of such notice to remedy the facts and
circumstances which are alleged to constitute Cause. The Board of Directors (or
any duly authorized Committee thereof) shall make a good faith reasonable
determination immediately after such thirty-day period as to whether such facts
and circumstances have been remedied and
3.
<PAGE>
shall communicate such determination in writing to Executive. If the Board
determines that adequate remedy has not occurred, then the initial notice of
termination shall remain in effect. Any dispute relating to the determination
shall be subject to dispute resolution under Paragraph 12 hereof,
10. No Effect On Employment Rights. This Agreement is not an employment
agreement. Nothing in this Agreement shall confer upon Executive any right to
continue in the employ of the Company or interfere with or restrict in any way
the rights of the Company, which are hereby expressly reserved, to terminate
Executive's employment at any time prior to a Change in Control for any reason,
with or without cause.
11. Successor To The Company. This Agreement shall be binding upon any
successor or resulting corporation following the change in control. The Company
shall require any successor or assign (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession or assignment had taken place.
12. Arbitration. Any dispute arising out of or relating to this
Agreement shall be finally settled by three arbiters under the then existing
Commercial Arbitration Rules of the American Arbitration Association in
arbitration proceedings conducted in Colorado. The arbiters shall have no power
or authority in making their award to modify, enlarge or add to the terms and
provisions of this Agreement. Judgment upon the award of the arbiters shall be
binding upon the parties and may be entered in any court having jurisdiction.
Costs and attorneys' fees shall be paid as the arbiters' award shall specify.
13. Notices. All notices and other communications provided for in this
Agreement shall be given or made by facsimile transmission, certified or
registered mail (return receipt requested), or delivered personally or by a
nationally recognized overnight courier service to the address set forth below
(or such other address as may be designated by any method permitted by this
Paragraph 13). All such communications shall be deemed to have been duly given
when transmitted by facsimile (if a copy thereof is also mailed to the
recipient, certified or registered mail, postage prepaid), or personally
delivered or delivered by nationally recognized overnight courier service, or
five (5) days after mailing, postage prepaid, to the address set forth below.
To the Company: WOODWARD-CLYDE GROUP, INC.
4582 S. Ulster Street
Denver, CO 80237
Attn: Jean-Yves Perez
FAX: (303) 740-2650
To Executive: WOODWARD-CLYDE GROUP, INC.
500 12th Street, Suite 100
Oakland, CA 94607
FAX: (510) 874-3131
4.
<PAGE>
14. Amendment; Waiver: Governing Law, Partial Invalidity. This
Agreement may not be amended or modified except in a writing signed by the
parties. No waiver of any provision of this Agreement shall be effective unless
in writing and no waiver as to one provision shall be deemed to, or shall,
operate as a waiver of any other provision, nor shall any waiver constitute a
continuing waiver. This Agreement shall be governed and construed under the laws
of the State of Colorado. If for any reason any provision of this Agreement
shall be determined to be inoperative or invalid, the validity and effect of the
other provisions hereof shall not be affected thereby.
15. Confidentiality. Executive agrees that he or she will hold this
Agreement in confidence and will not disclose its contents to others except
insofar as such communication is necessary in connection with its execution and
enforcement.
16. Entire Understanding. This Agreement embodies the entire
understanding of the parties and there are no promises, terms, conditions or
obligations, oral or written, express or implied, other than those contained
herein.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the day and year first set forth above.
WOODWARD-CLYDE GROUP, INC. EXECUTIVE
By: _________________________________ _________________________________
(Executive's Signature)
Title:
EXHIBIT 21.1
URS CORPORATION AND SUBSIDIARY COMPANIES
The Company and its subsidiaries (excluding spun-off companies) are as follows:
State of Percent of Stock
Parent and subsidiaries Incorporation Owned by URS
- ------------------------------- ------------- ---------------
URS Corporation (Parent) Delaware --
URS Greiner Consultants, Inc. Delaware 100
URS Greiner Operating Services, Inc. Delaware 100
URS Greiner Engineering, Inc. Nevada 100
URS Telecommunications, Inc. Delaware 100(12)
URS Consultants, Inc.--Florida Florida 100(4)(12)
URS Greiner, Inc.--California California 100(1)
URS Greiner Consultants, Inc. New York 100(1)
URS Greiner, Inc.--Washington Washington 100(1)
URS Greiner Consultants, Inc.--Colorado Colorado 100(1)
URS Greiner, Inc.--Ohio Ohio 100(1)
Coverdale & Colpitts, Inc. New York 100(4)(12)
Thortec Environmental Systems, Inc. California 100(12)
URS Consultants, Inc.--Texas Texas 100(1)(12)
URS Consultants, Inc.--Ingenieria Delaware 100(12)
Forrest & Cotton International Texas 100(12)
URS Company--Kansas City Missouri 100(12)
Hospital Development Corp. Missouri 100(3)(12)
Thortec Environmental Systems, Inc. Delaware 100(12)
Mitchell Management Systems, Inc. Delaware 100(12)
URS de Mexico Mexico 100(2)(12)
E.C. Driver & Associates, Inc. Florida 100(5)
GEL, Inc. Nevada 100(6)
GIC Services, Inc. Nevada 100(6)
GIE, Inc. Nevada 100(6)
GM Services LLC Nevada 100(7)
GPL, Inc. Nevada 100(7)
URS Greiner, Inc. Delaware 100(6)
Greiner Limited Hong Kong 100(8)
Greiner Engineering Limited Hong Kong 100(8)
Greiner FSC, Inc. Barbados 100(6)
Greiner Licensing Corp. Delaware 100(6)
Greiner (Malaysia)Sdn Bhd Malaysia 100(9)
M & M Aerial Surveys, Inc. California 100(6)(12)
SP Group/Southwest, Inc. Texas 100(6)(12)
URS Greiner, Inc. Colorado 100(6)
URS Greiner, Inc. Connecticut 100(6)
URS Greiner, Inc. Maryland 100(6)
URS Greiner, Inc. New York 100(10)
URS Greiner, Inc. Great Lakes Michigan 100(6)
URS Greiner, Inc. Pacific Nevada 100(6)
URS Greiner, Inc. Puerto Rico Puerto Rico 100(11)
URS Greiner, Inc. Southern California 100(6)
URS Greiner, Inc. Southwest Arizona 100(6)
URS Greiner, Inc. West Coast California 100(6)
WVP Corporation Missouri 100(1)
<PAGE>
Woodward-Clyde Group, Inc. Delaware 100
Woodward-Clyde Federal Services, Inc. Delaware 100(13)
Partnership for Response and Recovery Virginia 50(14)
EWI Engineering & Associates Inc. Delaware 100(13)
Clay Street Properties California 100(13)
Woodward Investments, Inc. Delaware 100(13)
GCH Acquisition Corp. Pennsylvania 100(13)
Geo-Systems, Inc. Georgia 100(15)
Geo-Con, Inc. Pennsylvania 100(15)
Environmental Landfill Mgmt., Inc. Delaware 100(15)
Woodward-Clyde/Tatman & Lee, Inc. Delaware 100(13)
Woodward-Clyde International, Inc. Delaware 100(13)
Woodward-Clyde International-Americas Nevada 100(16)
Geotesting Services, Inc. California 100(17)
Woodward-Clyde Consultants of Michigan, Inc. Michigan 100(17)
Woodward-Clyde Consultants, Inc. New York 100(17)
Woodward-Clyde Consultants of Canada, Ltd. Canada 100(17)
Cole, Sherman & Associates Ltd. Canada 100(18)
Cole, Sherman, Transmark Canada 100(19)
Cole, Sherman Industrial Consultants Inc. Canada 100(19)
Transport Technologies International, Inc. Canada 100(19)
Cole, Sherman Inc. Delaware 100(19)
Roscandor Consultants Ltd. Turks & Caicos 100(19)
Envirorail Partnership California 75(17)
Woodward-Clyde Consultants Ohio General
Partnership Ohio 100(17)
Woodward-Clyde International Holdings Inc. Delaware 100(16)
AGC Woodward-Clyde Pty. Ltd. Australia 100(20)
Woodward-Clyde (NZ) Limited New Zealand 100(20)
Murray North Consultants Ltd. New Zealand 100(21)
Murray North International Ltd. New Zealand 100(21)
Murray North Solomon Islands Ltd. Solomon Islands 100(22)
GCNZ Woodward-Clyde Limited New Zealand 100(21)
Woodward-Clyde International, Ltd. Hong Kong 100(20)
PT Geobis Woodward-Clyde Indonesia Indonesia 60(20)
Woodward-Clyde Malaysia SDNBHD Malaysia 100(20)
Woodward-Clyde Geoservices SDNBHD Malaysia 50(23)
Woodward-Clyde Philippines, Inc. Philippines 100(20)
Woodward-Clyde Japan, K.K. Japan 100(20)
WCI Umwelttechnik, GmbH Germany 100(20)
Woodward-Clyde International GmbH Germany 100(24)
Limnos, SA Spain 100(20)
Sert Ingenicurs-Conscils, SA Switzerland 94(20)
<PAGE>
WCI Ecoconcept, S.A. France 100(20)
Woodward-Clyde Ltd. United Kingdom 100(20)
Woodward-Clyde de Mexico, S.A. de C.V. Mexico 100(20)
Venezuelan Joint Venture Venezuela 50(20)
Montgomery Group, Ltd. Bermuda 100(13)
International Wastewater Consultants
(Singapore), Ltd. Singapore 33(13)
(1) Owned by URS Greiner Consultants, Inc. (Delaware)
(2) Owned equally by URS Greiner, Inc.--California and
URS Consultants, Inc.-- Ingenieria
(3) Owned by URS Company--Kansas City
(4) Owned by URS Greiner Consultants, Inc. (New York)
(5) Owned by URS Consultants, Inc.--Florida
(6) Owned by URS Greiner Engineering, Inc.
(7) Owned equally by GIC Services, Inc. and Greiner (Malaysia) Sdn Bhd
(8) Owned equally by URS Greiner Engineering, Inc. and
Greiner International Limited
(9) Owned by GIE, Inc.
(10) Owned by URS Greiner, Inc. (Connecticut)
(11) Owned by URS Greiner, Inc. (Delaware)
(12) Inactive
(13) Owned by Woodward-Clyde Group, Inc.
(14) Owned by Woodward-Clyde Federal Services, Inc.
(15) Owned by GCH Acquisition Corp.
(16) Owned by Woodward-Clyde International, Inc.
(17) Owned by Woodward-Clyde International-Americas
(18) Owned by Woodward-Clyde Consultants of Canada, Ltd.
(19) Owned by Cole, Sherman & Associates Ltd.
(20) Owned by Woodward-Clyde Internatioanl Holdings Inc.
(21) Owned by Woodward-Clyde (NZ) Limited
(22) Owned by Murray North International Ltd.
(23) Owned by Woodward-Clyde Malaysia SDNBHD
(24) Owned by WCI Umwelttechnik, GmbH
EXHIBIT 23.1
Coopers Coopers & Lybrand L.L.P.
& Lybrand a professional services firm
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the following registration
statements of URS Corporation on:
Form S-8 (File No. 2-63576) for 41,825 common shares related to the
1979 Stock Option Plan filed February 8, 1980
Form S-8 (File No. 2-99410) for 50,000 common shares related to the
1985 Employee Stock Purchase Plan filed August 1, 1985
Form S-8 (File No. 33-42192) for 261,177 common shares related to the
1985 Employee Stock Purchase Plan filed August 31, 1991
Form S-8 (File No. 33-41047) for 1,000,000 common shares related to the
1979 Stock Incentive Plan filed June 7, 1991
Form S-8 (File No. 33-61230) for 500,000 common shares related to the
1991 Stock Incentive Plan filed April 1, 1993
Form S-8 (File No. 333-24063) for 750,000 common shares related to the
1991 Stock Incentive Plan, filed March 27, 1997
Form S-8 (File No. 333-24067) for 250,000 common shares related to the
Employee Stock Purchase Plan, filed March 27, 1997
Form S-8 (File No. 333-24069) for 55,000 common shares related to the
Non-Executive Directors Stock Grant Plan, filed March 27, 1997
Form S-4/A (File No. 333-37531) for up to 5,200,000 common shares
related to the acquisition of Woodward-Clyde Group, Inc., filed October
10, 1997
of our report dated December 19, 1997, on our audits of the consolidated
financial statements of URS Corporation and its subsidiaries as of October 31,
1997 and 1996, and for the years ended October 31, 1997, 1996 and 1995, which
report is included in this Annual Report on Form 10-K.
/s/ Coopers & Lybrand L.L.P.
San Francisco, California
January 16, 1998
Coopers & Lybrand L.L.P. is a member of Coopers & Lybrand International,
a Swiss limited liability association.
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints any one of MARTIN M. KOFFEL and KENT P. AINSWORTH, each with full power
to act without the other, as his true and lawful attorney-in-fact and agent,
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign the Annual Report on SEC Form 10-K
for fiscal year 1997 of URS Corporation, and any or all amendments thereto, and
to file the same with all the exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all extents and purposes as he might or could do in
person, thereby ratifying and confirming all that such attorney-in-fact and
agent, or his substitute or substitutes, may lawfully do or cause to be done by
virtue thereof.
This Power of Attorney may be executed in separate counterparts.
Dated: December 18, 1997
/s/RICHARD C. BLUM /s/ROBERT D. GLYNN, JR.
- ------------------------ ----------------------
Richard C. Blum Robert D. Glynn, Jr.
Director Director
/s/ROBERT L. COSTELLO /s/J. BENNETT JOHNSTON
- ------------------------ ----------------------
Robert L. Costello J. Bennett Johnston
Director Director
/s/ARMEN DER MARDEROSIAN /s/MARTIN M. KOFFEL
- ------------------------ ----------------------
Armen Der Marderosian Martin M. Koffel
Director Director
/s/S. ROBERT FOLEY, JR. /s/RICHARD B. MADDEN
- ------------------------ ----------------------
S. Robert Foley, Jr. Richard B. Madden
Director Director
/s/JEAN-YVES PEREZ /s/FRANK S. WALLER
- ------------------------ ----------------------
Jean-Yves Perez Frank S. Waller
Director Director
/s/RICHARD Q. PRAEGER /s/WILLIAM D. WALSH
- ------------------------ ----------------------
Richard Q. Praeger William D. Walsh
Director Director
/s/IRWIN L. ROSENSTEIN
- ------------------------
Irwin L. Rosenstein
Director
1.
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<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
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