As Of               Filer                 Filing     As/For/On Docs:Pgs              Issuer               Agent

 6/01/05  Urs Corp/New                      424B3                  1:392                                    950149

Document/Exhibit                   Description                      Pages   Size 

 1: 424B3       Prospectus Supplement                               HTML  2,565K 

Filed Pursuant To Rule 424(b)(3)

Registration Nos. 333-112216 and 333-125385

(To Prospectus dated March 1, 2004)

3,690,000 Shares

Common Stock

        We are offering 3,690,000 shares of our common stock.

      Our common stock is listed on the New York Stock Exchange under the symbol “URS.” On May 31, 2005, the last reported sale price of our common stock on the New York Stock Exchange was $33.83 per share.

PRICE $          A SHARE

      We have granted the underwriters the right to purchase up to an additional 369,000 shares of common stock from us to cover over-allotments, if any.

      The Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities, or determined if this prospectus supplement or the accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

      The underwriters expect to deliver the shares to purchasers on                           , 2005.

Joint Book-Running Managers

 

      Unless stated otherwise, references in this prospectus supplement and the accompanying prospectus to “our,” “URS,” “us” or “we” refer to URS Corporation, a Delaware corporation, and its subsidiaries. Except as otherwise indicated, the information in this prospectus supplement assumes no exercise of the underwriters’ over-allotment option to purchase up to 369,000 shares of common stock.

      This document is in two parts. The first part is this prospectus supplement, which describes the terms of the offering of common stock and also adds to and updates information contained in the accompanying prospectus and the documents incorporated by reference. The second part is the accompanying prospectus, which gives more general information, including a description of our common stock beginning on page 6. To the extent there is a conflict between the information contained in this prospectus supplement and the information contained in the accompanying prospectus or any document incorporated by reference, the information in this prospectus supplement shall control.

      You should rely only on the information contained in this prospectus supplement, the accompanying prospectus and the documents incorporated by reference. We have not authorized anyone to provide you with information that is different. We are offering to sell, and seeking offers to buy, shares of common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus supplement, the accompanying prospectus and the documents incorporated by reference is accurate only as of their respective dates, regardless of the time of delivery of this prospectus supplement and the accompanying prospectus, or of any sale of the common stock. It is important for you to read and consider all information contained in this prospectus supplement and the accompanying prospectus, including the documents incorporated by reference, in making your investment decision. You should also read and consider the information in the documents we have referred you to in the section of the prospectus supplement entitled “Incorporation of Certain Documents by Reference.”

      Industry and market data presented in this prospectus supplement, the accompanying prospectus and in the documents incorporated by reference, including information relating to our relative position in the engineering design services industry, is based upon our review of industry publications, such as Engineering News-Record and publications by the Government Electronics Industry Association, and other publicly available information. Although we believe that these sources are reliable, we have not verified the information and cannot assure you that such information is accurate or complete.

 

      You should carefully consider the risks described below before making an investment decision. The risks described below are not the only ones facing our company. Additional risks not currently known to us or that we currently deem immaterial may also impair our business operations.

      Our business, financial condition or results of operations could be materially adversely affected by any of these risks. The trading price of our common stock could decline due to any of these risks, and you may lose all or part of your investment.

      This prospectus supplement and the accompanying prospectus and the documents incorporated by reference also contain forward-looking statements that involve risks and uncertainties. Our actual results could materially differ from those anticipated in these forward-looking statements as a result of certain factors, including the risks faced by us described below and elsewhere in this prospectus supplement and the accompanying prospectus and the documents incorporated by reference.

Demand for our services is cyclical and vulnerable to economic downturns, which may result in clients delaying, curtailing or canceling proposed and existing projects. Our clients may demand better pricing terms and their ability to pay our invoices may be affected by the economy. Our government clients may face budget deficits that prohibit them from funding proposed and existing projects. Our business traditionally lags the overall recovery in the economy; therefore, our business may not recover immediately when the economy improves. Although some economic fundamentals have improved, demand for services from some of our clients has not increased. If the current economy worsens, then our revenues, profits and overall financial condition may deteriorate.

We account for all contract awards that may be recognized as revenues as our book of business, which includes backlog, designations, option years and indefinite delivery contracts. Our backlog consists of the amounts we can earn for future services under signed contracts at a particular point in time. As of April 1, 2005, our backlog was approximately $3.7 billion. Our designations consist of projects that clients have awarded us, but for which we do not yet have signed contracts. Our option year contracts are multi-year contracts with base periods plus option years that are exercisable by our clients without the need for us to go through another competitive bidding process. Our indefinite delivery contracts are signed contracts under which we perform work only when our client issues specific task orders. Our book of business estimates may not result in actual revenues in any particular period since clients may terminate or delay projects, or decide not to award task orders under indefinite delivery contracts. Unexpected termination of a substantial portion of our book of business could harm our operations and adversely affect our future revenues.

We must comply with and are affected by federal, state, local and foreign laws and regulations relating to the formation, administration and performance of government contracts. For example, we must comply with the Federal Acquisition Regulation (“FAR”), the Truth in Negotiations Act, the Cost Accounting Standards (“CAS”), the Service Contract Act, and DOD security regulations, as well as many other rules and regulations. These laws and regulations affect how we transact business with our clients and in some instances, impose added costs on our business operations.

      As a federal government contractor, we must maintain our status as a responsible contractor. Even though we take precautions to prevent and deter fraud and misconduct, we face the risk that our employees or outside partners may engage in misconduct, fraud or other improper activities. Government agencies, such as the U.S. Defense Contract Audit Agency (“DCAA”), routinely audit and investigate government contractors. These government agencies review and audit a government contractor’s performance under its contracts, cost structure and compliance with applicable laws, regulations and standards. In addition, during the course of its audits, the DCAA may question incurred costs if the DCAA believes we have accounted for such costs in a manner inconsistent with the requirements for the FAR or CAS and recommend that our U.S. government corporate administrative contracting officer disallow such costs. Historically, we have not experienced significant disallowed costs as a result of such audits. However, we can provide no assurance that the DCAA audits will not result in material disallowances for incurred costs in the future. A violation of specific laws and regulations could result in the imposition of civil and criminal penalties or sanctions, contract termination, forfeiture of profit, and/or suspension of payment, any of which could cause us to lose our status as an eligible government contractor. We could also suffer serious harm to our reputation.

Revenues from federal government contracts and state and local government contracts represented approximately 47% and 23%, respectively, of our total revenues for the three months ended April 1, 2005. Our inability to win profitable government contracts could harm our operations and adversely affect our net income. Government contracts are typically awarded through a heavily regulated procurement process. Some government contracts are awarded to multiple competitors, causing increases in overall competition and pricing pressure. The competition and pricing pressure, in turn may require us to make sustained post-award efforts to reduce costs in order to realize revenues under these contracts. If we are not successful in reducing the amount of costs we anticipate, our profitability on these contracts will be negatively impacted. Moreover, even if we are qualified to work on a new government contract, we may not be awarded the contract because of existing government policies designed to protect small businesses and underrepresented minority contractors. Finally, government clients can generally terminate or modify their contracts with us at their convenience.

We derive a significant amount of our revenues from multi-year government contracts, many of which are appropriated on an annual basis. Legislatures typically appropriate funds for a given program on a year-by-year basis, even though contract performance may take more than one year. As a result, at the beginning of a project, the related contract may only be partially funded, and additional funding is normally committed only as appropriations are made in each subsequent year. These appropriations, and the timing of payment of appropriated amounts, may be influenced by, among other things, the state of the economy, competing political priorities, curtailments in the use of government contracting firms, budget constraints, the timing and amount of tax receipts and the overall level of government expenditures. If appropriations are not made in subsequent years of a multiple-year contract, we may not realize all of our potential revenues and profits from that contract.

We generally enter into three principal types of contracts with our clients: cost-plus, fixed-price and time-and-materials. Under cost-plus contracts, which may be subject to contract ceiling amounts, we are reimbursed for allowable costs and fees, which may be fixed or performance-based. If our costs exceed the contract ceiling or are not allowable under the provisions of the contract or any applicable regulations, we may not be reimbursed for all our costs. Under fixed-price contracts, we receive a fixed price regardless of what our actual costs will

be. Consequently, we realize a profit on fixed-price contracts only if we control our costs and prevent cost over-runs on the contracts. Under time-and-materials contracts, we are paid for labor at negotiated hourly billing rates and for other expenses. Profitability on these types of contracts is driven by billable headcount and control of cost over-runs.

      Accounting for these contracts requires judgment in assessing their estimated risks, revenues and costs. Due to the size and nature of many of our contracts, the estimation of overall risk, revenues and costs at completion is complicated and subject to many variables. Changes in underlying assumptions, circumstances or estimates may also adversely affect financial performance in future periods. If we are unable to accurately estimate the overall revenues or costs on a contract, we may incur a loss on the contract or generate a lower profit.

We may guarantee to our client that we will complete a project by a scheduled date. We may also sometimes guarantee that a project, when completed, will achieve specified performance standards. If the project is not completed by the scheduled date or subsequently fails to meet guaranteed performance standards, we may either incur significant additional costs or be held responsible for the costs incurred by the client to rectify damages due to late completion or to achieve the required performance standards. In some cases, should we fail to meet required performance standards, we may also be subject to agreed-upon damages, which are fixed in amount by the contract. To the extent that these events occur, the total costs of the project could exceed our estimates and we could experience reduced profits or, in some cases, incur a loss on that project.

A substantial portion of our revenues and profits are measured and recognized using the percentage-of-completion method of accounting. Generally, our use of this method results in recognition of revenues and profits ratably over the life of the contract, based on the proportion of costs incurred to date to total costs expected to be incurred for the entire project. The effect of revisions to revenues and estimated costs is recorded when the amounts are known and can be reasonably estimated. Such revisions could occur in any period and their effects could be material. Although we have historically made reasonably reliable estimates of the progress towards completion of long-term engineering, program and construction management or construction contracts in process, the uncertainties inherent in the estimating process make it possible for actual costs to vary materially from estimates, including reductions or reversals of previously recorded revenues and profits.

We sometimes enter into subcontracts, joint ventures and other contractual arrangements with outside partners to jointly bid on and execute a particular project. The success of these joint projects depends on the satisfactory performance of the contractual obligations of our partners. If any of our partners fails to satisfactorily perform their contractual obligations, we may be required to make additional investments and provide additional services to complete the project. If we are unable to adequately address our partner’s performance issues, then our client could terminate the joint project, exposing us to legal liability, loss of reputation or reduced profits.

As of April 1, 2005, we had $540.1 million of outstanding indebtedness. Assuming the successful completion of the Refinancing, our outstanding indebtedness as of April 1, 2005 would have been approximately $450.3 million. This level of indebtedness could have a negative impact on us because it may:

We have no direct operations and no significant assets other than investments in the stock of our subsidiaries. Because we conduct our business operations through our operating subsidiaries, we depend on those entities for dividends and other payments to generate the funds necessary to meet our financial obligations. Legal restrictions, including local regulations and contractual obligations associated with secured loans, such as equipment financings, may restrict our subsidiaries’ ability to pay dividends or make loans or other distributions to us. The earnings from, or other available assets of, these operating subsidiaries may not be sufficient to make distributions to enable us to pay interest on our debt obligations when due or to pay the principal of such debt at maturity.

Our Existing Credit Facility and our indentures relating to our outstanding notes and our other outstanding indebtedness restrict our ability to, among other things:

      Our Existing Credit Facility also requires that we maintain financial ratios, which we may not be able to achieve. The covenants in our various debt instruments may impair our ability to finance future operations or capital needs or to engage in other favorable business activities. We expect that our New Credit Facility will contain certain covenants comparable to those in the Existing Credit Facility.

Our environmental business involves the planning, design, program and construction management and operation and maintenance of pollution control facilities, hazardous waste or Superfund sites and military bases. In addition, we contract with U.S. governmental entities to destroy hazardous materials, including chemical agents and weapons stockpiles. These activities require us to manage, handle, remove, treat, transport and dispose of toxic or hazardous substances. We must comply with a number of governmental laws that strictly regulate the handling, removal, treatment, transportation and disposal of toxic and hazardous substances. Under the Comprehensive Environmental Response, Compensation and Liability Act or CERCLA and comparable state laws, we may be required to investigate and remediate regulated materials. CERCLA and comparable state laws typically impose strict, joint and several liabilities without regard to whether a company knew of or caused the release of hazardous substances. The liability for the entire cost of clean-up can be imposed upon any responsible party. Other principal federal environmental, health and safety laws affecting us include, but are not limited, to the Resource Conservation and Recovery Act or RCRA, the National Environmental Policy Act, the Clean Air Act, the Occupational Safety and Health Act, the Toxic Substances Control Act and the Superfund Amendments and Reauthorization Act. Our business operations may also be subject to similar state and international laws relating to environmental protection. In addition, so-called “toxic tort” litigation has increased markedly in recent years as people injured by hazardous substances seek recovery for personal injuries and/or property damages. Liabilities related to environmental contamination or human exposure to hazardous substances, or a failure to comply with applicable regulations could result in substantial costs to us, including clean-up costs, fines and civil or criminal sanctions, third party claims for property damage or personal injury or cessation of remediation activities.

Our environmental business is driven by federal, state, local and foreign laws, regulations and programs related to pollution and environmental protection. Accordingly, a relaxation or repeal of these laws and regulations, or changes in governmental policies regarding the funding, implementation or enforcement of these programs, could result in a decline in demand for environmental services, which could in turn negatively impact our revenues.

Various legal proceedings are pending against us and our subsidiaries in connection with the performance of professional services and other activities, the outcome of which cannot be predicted with certainty. In some actions, parties are seeking damages that exceed our insurance coverage or are not insured. Our services may require us to make judgments and recommendations about environmental, structural and other physical conditions at project sites. If our judgments and recommendations are later found to be incomplete or incorrect, then we may be liable for the resulting damages. If we sustain damages that exceed our insurance coverage or that are not insured, there could be a material adverse effect on our net income.

Revenues under contracts with the DOD and other defense-related entities represented approximately 35% our total revenues for the three months ended April 1, 2005. While spending authorization for defense-related programs has increased significantly in recent years due to greater homeland security and foreign military commitments, as well as the trend to outsource federal government jobs to the private sector, these spending levels may not be sustainable. Future levels of expenditures and authorizations for these programs may

decrease, remain constant or shift to programs in areas where we do not currently provide services. As a result, a general decline in U.S. defense spending could harm our operations and adversely affect our future revenues.

Our industry is highly fragmented and intensely competitive. Our competitors are numerous, ranging from small private firms to multi-billion dollar public companies. In addition, the technical and professional aspects of our services generally do not require large upfront capital expenditures and provide limited barriers against new competitors. Some of our competitors have achieved greater market penetration in some of the markets in which we compete and have substantially more financial resources and/or financial flexibility than we do. These competitive forces could have a material adverse effect on our business, financial condition and results of operations by reducing our relative share in the markets we serve.

As a professional and technical services company, we are labor intensive and therefore our ability to attract, retain and expand our senior management and our professional and technical staff is an important factor in determining our future success. From time to time, it may be difficult to attract and retain qualified individuals with the expertise demanded by our clients. For example, some of our government contracts may require us to employ only individuals who have particular government security clearance levels. In addition, we rely heavily upon the expertise and leadership of our senior management. The failure to attract and retain key individuals could impair our ability to provide services to our clients and conduct our business effectively.

On December 2004, the FASB issued Statement of Financial Accounting Standards No. 123 (Revised), “Share-Based Payment” (“SFAS 123(R)”). Adoption of SFAS 123(R) will require us to record an expense for our equity-related compensation plans using a fair value method. SFAS 123(R) will be effective for us at the beginning of our next fiscal year. We are currently evaluating which transition method we will use upon adoption of SFAS 123(R) and the potential impacts adoption could have on our compensation plans. SFAS 123(R) will impact our financial statements and could impact our ability to attract and retain key employees.

As a multinational company, we have operations in over 20 countries and we derived approximately 10% and 9% of our revenues from international operations for the three months ended April 1, 2005 and March 31, 2004, respectively. International business is subject to a variety of risks, including:

      These and other risks associated with international operations could harm our overall operations and adversely affect our future revenues. In addition, services billed through foreign subsidiaries are attributed to the international category of our business, regardless of where the services are performed and conversely, services billed through domestic operating subsidiaries are attributed to a domestic category of clients, regardless of where the services are performed. As a result, our exposure to international operations may be more or less than the percentage of revenues we attribute to the international category.

As a multinational company, our employees often travel to and work in high security risk countries around the world that are undergoing political, social and economic upheavals resulting in war, civil unrest, criminal activity or acts of terrorism. For example, we have employees working in Iraq, a high security risk country with substantial civil unrest and acts of terrorism. As a result, we may be subject to costs related to employee injury, repatriation or other unforeseen circumstances.

We are consolidating all of our accounting and project management information systems to an ERP software system originally developed and customized for us by PeopleSoft, Inc. As of April 1, 2005, approximately 63% of our total revenues were processed on this ERP system. We depend on the vendor to develop, integrate and provide long-term software maintenance support for our ERP system. As a result of Oracle Corporation’s acquisition of PeopleSoft, Inc. in January 2005, it is possible that Oracle may discontinue further development, integration or long-term software maintenance support for our ERP system.

      Accordingly, we are re-evaluating the conversion of the EG&G Division’s accounting systems to our ERP system. In the event we do not successfully complete the development and integration of our ERP system or are unable to obtain necessary long-term third party software maintenance support, we may be required to incur unexpected costs that could harm our results of operations, including the possibility of abandoning our current ERP system and migrating all of our accounting and project management information systems to another ERP system.

Our balance sheet includes goodwill and other intangible assets, the values of which are material. If any of our goodwill or intangible assets were to become impaired, we would be required to write-off the impaired amount, which would negatively affect our earnings.

As of April 1, 2005, approximately 8% of our employees were covered by collective bargaining agreements. The outcome of any future negotiations relating to union representation or collective bargaining agreements may not be favorable to us. We may reach agreements in collective bargaining that increase our operating expenses and lower our net income as a result of higher wages or benefits expenses. In addition, negotiations with unions could divert management attention and disrupt operations, which may adversely affect our results of operations. If we are unable to negotiate acceptable collective bargaining agreements, we may have to address the threat of union-initiated work actions, including strikes. Depending on the nature of the threat or

the type and duration of any work action, these actions could disrupt our operations and adversely affect our operating results.

As of May 25, 2005, our officers and directors and their affiliates beneficially owned approximately 15% of the outstanding shares of our common stock. Because of the concentrated ownership of our common stock, these stockholders may be able to influence matters requiring approval by our stockholders, including the election of directors and the approval of mergers or other business combination transactions. This concentration of ownership may also have the effect of delaying, deferring or preventing a change in control.

In the future, we or our stockholders may sell additional shares of our common stock in subsequent public offerings. We may also issue additional shares of our common stock to finance future acquisitions. Additionally, we have a substantial number of shares of our common stock available for future sale pursuant to stock options that we granted to our employees to purchase shares of our common stock and also pursuant to a registration rights agreement with certain of our stockholders. We cannot predict the size of any future issuance of our common stock or the effect, dilutive or otherwise, that future sales and issuances of shares of our common stock will have on the market price of our common stock. Sales of substantial amounts of our common stock (including shares issued upon the exercise of stock options or acquisition financing), or the perception that such sales could occur, may adversely affect prevailing market prices for our common stock.

The market price of our publicly traded equity securities may change significantly in response to various factors and events, many of which are beyond our control, including the following:

      In addition, in recent years the stock market has experienced extreme price and volume fluctuations. This volatility has had a significant effect on the market prices of securities issued by many companies for reasons unrelated to their operating performance. These broad market fluctuations may materially adversely affect our stock price, regardless of our operating results.

This offering is not conditioned on the consummation of the repurchase of our 11¹/2% Notes or the refinancing of our Existing Credit Facility. Consequently, we cannot assure you that either of these transactions will be consummated on the terms described herein or at all. If the repurchase of our 11¹/2% Notes is not

consummated, we will use the proceeds from this offering to repay a portion of our outstanding borrowings under our Existing Credit Facility.

We are a Delaware corporation and the anti-takeover provisions of Delaware law impose various impediments to the ability of a third party to acquire control of us, even if a change in control would be beneficial to our existing stockholders. In addition, our board of directors has the power, without stockholder approval, to designate the terms of one or more series of preferred stock and issue shares of preferred stock, which could be used defensively if a takeover is threatened. Our incorporation under Delaware law, the ability of our board of directors to create and issue a new series of preferred stock and certain provisions in our certificate of incorporation and by-laws could impede a merger, takeover or other business combination involving us or discourage a potential acquirer from making a tender offer for our common stock, which could reduce the market price of our common stock.

 

      This prospectus supplement, the accompanying prospectus and the documents incorporated by reference contain forward-looking statements within the meaning of Section 17A of the Securities Act of 1933, as amended (the “Securities Act”), and within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are subject to the “safe harbor” created by those sections. These forward-looking statements can generally be identified as such because the context of the statement will include words such as “anticipates,” “believes,” “continue,” “estimates,” “expects,” “intends,” “may,” “opportunity,” “plans,” “potential,” “predicts,” “should,” or “will,” the negative of these words or words of similar import. The statements include, but are not limited to, statements relating to our operating performance, our claims and legal proceedings, our capital resources (including consummation of the Refinancing) and our future growth opportunities. Discussions containing these forward-looking statements may be found, among other places, in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” below. These forward-looking statements are or will be, as applicable, based largely on our expectations and projections about future events and future trends affecting our business, and so are or will be, as applicable, subject to risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. The risks and uncertainties include, among others, those listed in the section entitled “Risk Factors” above and in the accompanying prospectus. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by law, we undertake no obligation to publicly revise our forward-looking statements to reflect events or circumstances that arise after the date of this prospectus supplement or the accompanying prospectus or the date of documents incorporated by reference that include forward-looking statements.

 

      The net proceeds of this offering are estimated to be approximately $117.6 million, assuming an offering price of $33.83 per share, after deducting the estimated underwriting discounts and commissions and estimated offering expenses. If the underwriters exercise their over-allotment option in full, we estimate our net proceeds from this offering will be approximately $129.5 million. We intend to use the net proceeds of this offering, together with available cash and borrowings, if necessary, to repurchase the 11¹/2% Notes tendered to us in the Note Repurchase. The total estimated consideration in the Note Repurchase for all of our outstanding 11¹/2% Notes will be approximately $148.4 million, excluding accrued interest, assuming all outstanding 11¹/2% Notes are repurchased by us in the Note Repurchase. If the Note Repurchase is not consummated, we will use the net proceeds from this offering to repay a portion of our borrowings under our Existing Credit Facility. This offering is not conditioned upon the completion of the Note Repurchase and we cannot assure you that any of the 11¹/2% Notes will be repurchased by us.

      The following table sets forth our anticipated sources and uses of funds assuming (a) the completion of this offering (with no exercise of the underwriters’ over-allotment option) and (b) the Refinancing is successfully completed on July 1, 2005:

 

      The shares of our common stock are listed on the New York Stock Exchange and the Pacific Exchange under the symbol “URS”. At May 25, 2005, we had approximately 4,450 stockholders of record. The following table sets forth the high and low closing sale prices of our common stock as reported on the New York Stock Exchange Composite Tape for the period indicated.

 

      We have not paid cash dividends since 1986 and, at the present time, we do not anticipate paying dividends on our outstanding common stock in the near future. In addition, we are precluded from paying dividends on our outstanding common stock pursuant to our Existing Credit Facility. We expect that our New Credit Facility will also contain a restriction on our ability to pay dividends on our outstanding common stock. The indenture governing our 11¹/2% Notes restricts our ability to pay dividends. See Note 6 to our consolidated financial statements on page F-43 for more information relating to our Existing Credit Facility and this indenture.

 

      The following table sets forth, as of April 1, 2005, our capitalization:

      This table should be read in conjunction with our consolidated financial statements and the accompanying notes thereto, and other financial information and statistical data included elsewhere in this prospectus supplement, the accompanying prospectus and in the documents incorporated by reference.

 

      The selected financial information presented below as of and for (a) each of the fiscal years in the five-year period ended October 31, 2004 is derived from our audited consolidated financial statements and (b) each of the two months ended December 31, 2004 and 2003, and each of the three months ended April 1, 2005 and March 31, 2004, is derived from our unaudited consolidated financial statements. Effective January 1, 2005, we adopted a 52/53 week fiscal year ending on the Friday closest to December 31st, with interim quarters ending on the Fridays closest to March 31st, June 30th and September 30th. We filed a transition report on Form 10-Q with the SEC for the two months ended December 31, 2004. Our 2005 fiscal year began on January 1, 2005 and will end on December 30, 2005. In the opinion of management, the selected financial information reflects all normal recurring adjustments that are necessary for the presentation of the interim periods presented. The two-month and three-month results are not necessarily indicative of the results that may be expected for the full fiscal year. The selected financial information reflects the 2002 acquisition of EG&G which was accounted for under the purchase accounting method. Our selected financial information should be read in conjunction with the other information contained in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the accompanying notes thereto, and other financial and statistical data included elsewhere in, or incorporated by reference into, this prospectus supplement and accompanying prospectus.

 

AND RESULTS OF OPERATIONS

      The following discussion should be read in conjunction with our consolidated financial statements and related notes that appear in this prospectus supplement. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this prospectus supplement, particularly in the “Risk Factors” section above and in the accompanying prospectus.

      Effective January 1, 2005, we adopted a 52/53 week fiscal year ending on the Friday closest to December 31st, with interim quarters ending on the Fridays closest to March 31st, June 30th and September 30th. We filed a transition report on Form 10-Q with the SEC for the two months ended December 31, 2004. Our 2005 fiscal year began on January 1, 2005 and will end on December 30, 2005.

      We are one of the world’s largest engineering design services firms and a major U.S. federal government contractor for systems engineering and technical assistance, and operations and maintenance services. Our business focuses primarily on providing fee-based professional and technical services in the engineering and defense markets, although we perform some construction work. As a service company, we are labor and not capital intensive. We derive income from our ability to generate revenues and collect cash from our clients through the billing of our employees’ time and our ability to manage our costs. We operate our business through two segments: the URS Division and the EG&G Division.

      Our revenues are driven by our ability to attract qualified and productive employees, identify business opportunities, allocate our labor resources to profitable markets, secure new contracts, renew existing client agreements and provide outstanding services. Moreover, as a professional services company, the quality of the work generated by our employees is integral to our revenue generation.

      Our costs are driven primarily by the compensation we pay to our employees, including fringe benefits, the cost of hiring subcontractors and other project-related expenses, and administrative, marketing, sales, bid and proposal, rental and other overhead costs.

      Consolidated revenues for the three months ended April 1, 2005 increased 11% over the consolidated revenues for the three months ended March 31, 2004.

      Revenues from our federal government clients for the three months ended April 1, 2005 increased approximately 16% compared with the corresponding period last year. The increase reflects continued growth in the services we provide to the DOD and the DHS as a result of additional spending on engineering and technical services and operations and maintenance activities. In addition, we experienced an increase in environmental and facilities projects under existing contracts.

      Revenues from our state and local government clients for the three months ended April 1, 2005 increased by approximately 7% compared with the corresponding period last year. The increase reflects a moderate improvement in state spending for infrastructure projects in certain parts of the U.S., particularly in the Southeast. Revenues from our domestic private industry clients for the three months ended April 1, 2005 increased 4% compared with the corresponding period last year. While revenues increased during the quarter, market conditions continued to be challenging for many of our multinational clients, and domestic capital spending remained constrained. Revenues from our international clients for the three months ended April 1,

2005 increased approximately 19% compared with the corresponding period last year. Approximately 3% of the increase was due to foreign currency exchange fluctuations. The remainder of the increase was due to growth in our businesses, primarily surface and air transportation projects in Australia and New Zealand, and facilities and environmental projects in Europe.

      We generated $13.5 million in net cash provided by operating activities for the three months ended April 1, 2005. Our ratio of debt to total capitalization (total debt divided by the sum of debt and total stockholders’ equity) was approximately 33% and 34% at April 1, 2005 and December 31, 2004, respectively. Our working capital increased by $21.8 million for the three months ended April 1, 2005 compared with the corresponding period last year. (See “Consolidated Statements of Cash Flows” on page F-139.)

      Management continues to emphasize generating positive cash flows from operations, repaying our debt and strengthening our balance sheet. Consistent with our strategy, on June 1, 2005, we commenced a tender offer to purchase, for cash, any and all of the outstanding $130 million aggregate principal amount of 11¹/2% Notes. The purchase price for each $1,000 principal amount of 11¹/2% Notes validly tendered and accepted for purchase will be determined by the yield to the earliest redemption date of the 11¹/2% Notes of a fixed spread of 50 basis points (0.50%) over the yield to maturity of the 2.5% U.S. Treasury Note due September 30, 2006, as calculated on June 15, 2005. The total estimated consideration of approximately $148.4 million, or $1,141.90 per $1,000 principal amount of 11¹/2% Notes, includes a consent payment of $30 per $1,000 principal amount of 11¹/2% Notes payable only to holders who tender their 11¹/2% Notes and deliver their consents to the proposed amendments to the indenture for the 11¹/2% Notes on or prior to June 14, 2005. The proposed amendments would eliminate from the indenture substantially all of the restrictive covenants and certain events of default and related provisions. Holders who tender their 11¹/2% Notes after June 14, 2005 and prior to the expiration of the Note Repurchase on June 29, 2005 will be entitled to receive the total consideration less the consent payment. We intend to use the net proceeds of this offering and other available cash and borrowings, if necessary, to repurchase the 11¹/2% Notes tendered to us in the Note Repurchase and to pay the associated fees and expenses. The Note Repurchase will expire on June 29, 2005 unless the offer is earlier terminated or extended by us. The completion of the Note Repurchase is conditioned upon the tender of at least two-thirds of the outstanding principal amount of the 11¹/2% Notes, the completion of this offering and certain other conditions. Assuming all 11¹/2% Notes are tendered and accepted by us at the offer price, we will recognize a charge, net of income taxes, of approximately $16.2 million in the second quarter of fiscal 2005. On a pro forma basis, consummation of the Note Repurchase would reduce our ratio of debt to total capitalization to approximately 27% at April 1, 2005.

      In addition, on June 1, 2005, we commenced negotiations to enter into the New Credit Facility to replace and refinance our Existing Credit Facility and reduce our debt service costs, extend certain of our debt maturities and increase our financial flexibility. We expect to enter into the New Credit Facility on or about July 1, 2005 for up to $650 million, consisting of a $300 million revolving credit facility, with a term of six years, and a $350 million term loan, with a term of six years. Initial borrowings under the New Credit Facility will be used primarily to repay amounts outstanding under the Existing Credit Facility and, thereafter, borrowings may be used for working capital and general corporate purposes. In addition, if the net proceeds of this offering are not sufficient to repurchase all of the 11¹/2% Notes, we intend to use available cash and borrowings under either the Existing Credit Facility or the New Credit Facility, as applicable, to repurchase all of the 11¹/2% Notes tendered for repurchase in response to the Note Repurchase.

      We expect revenue from our federal government clients to continue to grow throughout fiscal year 2005, based on secured funding and anticipated spending by the DOD and the DHS. The DOD supplemental financing bill, which includes approximately $76 billion to fund military operations in the Middle East, has been passed by the House of Representatives. If approved, a portion of this funding will be used to maintain and update military equipment. As a result, we expect continued demand for EG&G’s operations and

maintenance services. We also expect an increased volume of work under existing DOD contracts to provide environmental services for military sites and architectural and engineering services for facilities projects.

      We are also experiencing an increase in the number of large “bundled” contracts being issued by the DOD. These contracts, which typically require the provision of a full range of services — from planning and design through operations and maintenance — at multiple sites throughout the world, will provide increased opportunities for our URS and EG&G Divisions. In addition, the next phase of the BRAC or Base Realignment and Closure program is proceeding, and Congress is expected to approve the list of bases to be closed or realigned by the end of 2005. A large number of the military’s bases worldwide will be affected by BRAC, and many will require environmental, planning and design services before they can be closed or redeveloped. Accordingly, BRAC may offer some opportunities for the URS Division. However, depending on the bases selected for closure, BRAC could have a negative or positive impact on our EG&G Division’s revenues.

      We expect revenues from our state and local government market to increase moderately during fiscal year 2005. State economics and revenues have improved slightly since 2004 due to increases in state sales and income tax receipts. The recovery in the state and local market continues to be uneven, with only the Southeastern states and Texas showing steady growth.

      One of the major drivers of potential growth in the state and local market in 2005 and beyond, is the expected passage of the Highways Authorization bill. Passage of the bill should help re-start some of the awarded projects that have been on hold and start the procurement process for many other transportation projects. However, there can be no assurance that the Highways Authorization bill will be approved. In addition, the school market remains steady, driven largely by funding secured through local bond issuances.

      Revenues from the private industry market are expected to increase slightly during the 2005 fiscal year. The recovery in the private industry market remains uneven, although some of our clients are beginning to plan capital expenditures. However, we do not expect to see a more significant impact on our business until 2006 and 2007. Despite the continued weakness in the private industry market, we expect some revenue growth opportunities from work under MSA contracts with multinational companies. In addition, in response to stricter emissions control regulations associated with the U.S. Environmental Protection Agency’s Clean Air Act we expect to see increased activity in the design and implementation of air pollution control systems on coal-fired power plants.

      We expect revenues from our international business to continue to grow. Although our private industry clients are not expected to increase capital expenditures domestically, we do expect increasing capital investment in countries outside the U.S. In addition, we expect to see increasing opportunities as a result of recent European Union environmental directives and regulations. Our work to provide facilities design services for the United Kingdom Ministry of Defense and the U.S. DOD is also expected to grow. We expect the transportation market in the Asia-Pacific region to remain strong, particularly for airport projects.

      Our consolidated revenues for the three months ended April 1, 2005 increased by 11% compared with the same period last year. The increase was due to an increase in the volume of work performed during the three months ended April 1, 2005, compared with the same period last year.

      The following table presents our consolidated revenues by client type for the three months ended April 1, 2005 and March 31, 2004.