ITEM 1. BUSINESS
URS Corporation (the "Company") offers a broad range of planning, design and program and construction management services for engineering, architectural and environmental projects. The Company serves public and private sector clients throughout the United States in two principal markets: infrastructure projects involving transportation systems, institutional and commercial facilities and water resources; and environmental projects involving hazardous waste management and pollution control.
The Company conducts its business through 24 offices located throughout the United States. The Company has approximately 1,100 full-time 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.
Services --------
The Company provides professional services in three major areas: planning, design and program and construction management through the Company's 24 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. 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.
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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.
Markets ------- The Company's strategy is to focus on two major markets: infrastructure projects involving transportation systems, institutional and commercial facilities and water resources; and environmental projects involving hazardous waste management and pollution control. The Company has developed a nationwide identity based on its successful completion of a number of highly visible rehabilitation and expansion projects in these markets. Although the Company views these markets as being distinct, the Company provides its planning, design and program and construction management services to both markets.
Infrastructure - --------------
The Company has significant expertise in three areas relating to the infrastructure market: transportation systems, institutional and commercial facilities and water resources projects.
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TRANSPORTATION SYSTEMS. The Company's engineers, designers, planners and managers provide services for projects involving all types of transportation networks, such as highways, roadways, streets, bridges, rapid and mass transit systems, 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 preliminary and final design to construction management. Historically, the Company's emphasis in this area has been on the design of new transportation facilities, but in recent years the rehabilitation of existing facilities has become a major focus.
INSTITUTIONAL AND COMMERCIAL FACILITIES. The Company provides architectural, engineering design, space planning and construction supervision services to this market. Demand for low-maintenance, energy efficient facilities drive 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.
WATER RESOURCES. The Company's capabilities in this market 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.
Environmental - ------------- The Company has developed expertise in two principal environmental markets: hazardous waste management and pollution control.
HAZARDOUS WASTE MANAGEMENT. 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.
The Company has been awarded several significant contracts with government agencies, including a contract with the U.S. Department of Defense for environmental engineering and remediation work in the Northwest and Alaska under the Comprehensive Long-Term Environmental Action-Navy ("Navy CLEAN") program and two contracts with the U.S. Environmental Protection Agency ("EPA") under its Alternative Remedial Contracting Strategy ("EPA ARCS") program. Under the Navy CLEAN contract, the Company provides site inspections, site characterizations, remediation designs and action plans for contaminated Navy facilities. A portion of the Navy CLEAN contract, which is expected to have a ten-year term, is awarded each year over the life of the contract. In fiscal 1993 and 1992, the Company generated revenues associated with the Navy CLEAN contract of $22.1 million and $29.3 million, respectively. The Company's services under the ten year EPA ARCS contracts include investigating the nature and extent of contamination by hazardous materials, performing risk assessments, evaluating the feasibility of various options for remedial action and providing management, technical, quality assurance and health and safety reviews of potentially responsible party submittals. Work under the EPA ARCS contracts is performed on a task order
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basis. In fiscal 1993 and 1992, the Company recognized revenues of $16.5 million and $12.4 million, respectively, under the EPA ARCS contracts.
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.
Clients ------- General - ------- The Company's clients include local, state and Federal government agencies and private sector businesses. Since 1989, revenues from Federal government projects have increased as a percentage of the Company's total revenues. The Company's revenues from local, state and Federal government agencies and private businesses for the last five fiscal years are as follows:
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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 in order 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, 1986, resulting in immaterial adjustments. The Company does not anticipate significant contract adjustments or other government action resulting from government audits of the years 1987 through 1993.
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 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.
Backlog, Project Designations and Indefinite Delivery Contracts - --------------------------------------------------------------- The Company's contract backlog was $142.0 million at October 31, 1993, compared to $123.5 million at October 31, 1992. 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 $142.0 million at October 31, 1993, approximately 30%, or $43 million, is not reasonably expected to be filled within the next fiscal year ending October 31, 1994.
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.
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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 $213.6 million at October 31, 1993, as compared to $154.8 million at October 31, 1992. Typically, a significant portion of designations are converted into signed contracts. However, there is no assurance this will continue to occur in the future.
Indefinite delivery contracts are signed contracts where 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. Examples of such contracts are the Navy CLEAN and EPA ARCs contracts. 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 is 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 are added to designations. When such task orders are signed and funded, their value goes into backlog. At October 31, 1993, the potential value of the Company's five largest indefinite delivery contracts was as follows:
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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 markets.
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 markets it serves.
Employees ---------
The Company has approximately 1,100 full-time 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. None of the Company's employees are covered by collective bargaining agreements. The Company has never experienced a strike or work stoppage. The Company believes that employee relations are good.
ITEM 2.
ITEM 2. PROPERTIES
The Company leases office space in 24 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 2002. 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.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
Item 8, Financial Statements and Supplementary Data, Note 7 -- Commitments and Contingencies is hereby incorporated by reference.
ITEM 4.
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, 1993.
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ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
NAME POSITION HELD AGE - ---- ------------- --- Martin M. Koffel.........Chief Executive Officer, President 54 and Director of the Company from May 1989; Chairman of the Board from June 1989; independent executive management services contractor, 1988 to 1989; President, Optometric Group, The Cooper Companies, Inc. (formerly CooperVision, Inc.), 1987 to 1988; President, CooperVision, Inc., 1987; President, Cooper LaserSonics, Inc., 1986; President, Diasonics, Inc., 1985 to 1986; President, Oral-B Laboratories, Inc., 1981 to 1985; Director, Regent Pacific Corporation since 1993.
Michael B. Shane.........Executive Vice President and 52 Director of the Company from February 1989; Acting Chief Operating Officer of the Company from February 1989 until May 1989 when Mr. Koffel became Chief Executive Officer; General Counsel of the Company since April 1987; Secretary and Vice President of the Company from April 1987 to February 1989 and Secretary since January 1990; outside litigation counsel for the Company from 1979 to 1987.
Irwin L. Rosenstein......President of URS Consultants, 57 Inc., a wholly-owned subsidiary of the Company, and Director since February 1989; Vice President of the Company since 1987; President of Eastern Region of URS Consultants, Inc. from August 1986 to February 1989.
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NAME POSITION HELD AGE - ---- ------------- --- Kent P. Ainsworth........Vice President and Chief 48 Financial Officer of the Company from January 1991; financial consultant from March 1990 through December 1990; Vice President and Chief Financial Officer of DiGiorgio Corporation from November 1987 through February 1990; Vice President and Chief Financial Officer of Hale Technology Corporation and various of its subsidiaries from January 1982 through October 1987.
Martin S. Tanzer, Ph.D...Executive Vice President of 49 URS Consultants, Inc., a wholly-owned subsidiary of the Company, since February 1989. Vice President of URS Consultants, Inc. from 1984 through February 1989.
Marvin J. Bloom..........Sr. Vice President and Regional 52 Manager of URS Consultants, Inc., a wholly-owned subsidiary of the Company, since January 1993; Sr. Vice President and Division Manager of URS Consultants, Inc. from December 1992 through January 1993; Vice President and Division Manager of URS Consultants, Inc. from March 1991 through December 1992; Vice President and Branch Manager of URS Consultants, Inc. from August 1990 through February 1991; Deputy Division Manager of Sverdrup Corporation from June 1987 through August 1990.
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NAME POSITION HELD AGE - ---- ------------- --- Charles A. Rodenfels.....Sr. Vice President of Architectural 38 Services, URS Consultants, Inc., a wholly-owned subsidiary of the Company, National Director of Architectural Services from July 1993; Sr. Vice President, URS Consultants, Inc., Ohio Division Manager from November 1990 to July 1993; Vice President, URS Consultants, Inc. Ohio Branch Manager from November 1989 to November 1990; Director of Business Development, URS Consultants, Inc., Ohio Columbus office, November 1981 to November 1989.
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PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Shares are listed on the New York and Pacific Stock Exchanges (under the symbol "URS"). At January 14, 1994, the Company had approximately 2,200 stockholders of record. The following table sets forth the high and low closing sale prices of the URS Common Shares, as reported by The Wall Street Journal for the periods indicated.
MARKET PRICE LOW HIGH ----------------------- Fiscal Period: 1992: First Quarter $ 7.88 $10.38 Second Quarter $ 8.00 $10.75 Third Quarter $ 7.13 $ 8.38 Fourth Quarter $ 6.63 $ 8.38 1993: First Quarter $ 7.50 $10.00 Second Quarter $ 7.13 $ 9.63 Third Quarter $ 4.38 $ 7.50 Fourth Quarter $ 4.75 $ 5.50 1994: First Quarter $ 4.75 $ 6.38 (through January 14, 1994)
The Company has not paid cash dividends since 1986. The declaration of dividends, except stock dividends, is restricted by the terms of the Company's credit agreement with it's bank and the indenture governing the 8-5/8% Senior Subordinated Debentures due 2004 (see Item 8, Financial Statements and Supplementary Data, Note 6 -- Long-Term Debt). Further, the declaration of dividends could be precluded by existing Delaware law.
ITEM 6.
ITEM 6. SUMMARY OF SELECTED FINANCIAL INFORMATION
The following table sets forth selected financial data of the Company for the years ended October 31, 1989 through 1993. 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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ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Fiscal 1993 Compared with Fiscal 1992 - ------------------------------------- Revenues in fiscal 1993 were $145.8 million, or 7% over the amount reported in fiscal 1992. The growth in revenues is primarily attributable to increases in revenues derived from all 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 slightly in fiscal 1993 to $38.5 million as compared to $41.7 million in fiscal 1992. The decrease in revenues from these contracts is primarily due to a decrease in the number of task orders for hazardous waste services on the Navy CLEAN contract. Revenues generated from private commercial businesses decreased from $18.9 million in fiscal 1992 to $16.7 million in fiscal 1993.
Direct operating expenses, which consist of direct labor and direct expenses, including subcontractor costs, increased $6.1 million, or 7%, over the amount reported in fiscal 1992. The increase is due to an overall increase in the Company's business in fiscal 1993 as compared to fiscal 1992. Indirect general and administrative expenses ("IG&A") increased to $51.6 million in fiscal 1993 from $45.5 million in fiscal 1992. Expressed as a percentage of revenues, IG&A expenses increased from 33% in fiscal 1992 to 35% in fiscal 1993. The increase in IG&A expenses is primarily attributable to the overall increase in the Company's business and to the one-time charge of $2.0 million taken in the third quarter of fiscal 1993 in connection with the planned phase-out of certain of the Company's architectural offices and for claims on certain of the Company's architectural projects. To a lesser extent, IG&A expenses increased due to program delays experienced in connection with certain of the Company's contracts. Net interest expense remained relatively constant at $1.2 million in fiscal 1993.
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The Company earned $1.4 million before income taxes in fiscal 1993 compared to $4.7 million in fiscal 1992. While the Company has available net operating loss carryforwards for Federal income tax purposes, for state income tax purposes such amounts are not necessarily available to offset income subject to tax. Accordingly, the Company's effective tax rate for fiscal 1993 was approximately 10%.
Net income decreased to $1.3 million in fiscal 1993 as compared to $4.3 million in fiscal 1992. The Company earned $.18 per share in fiscal 1993 compared to $.55 per share in fiscal 1992.
The Company's backlog of signed and funded contracts at October 31, 1993 was $142.0 million, as compared to $123.5 million at October 31, 1992. The value of the Company's designations, which are awarded projects for which contracts have not been signed, was $213.6 million at October 31, 1993, as compared to $154.8 million at October 31, 1992.
Fiscal 1992 Compared with Fiscal 1991 - ------------------------------------- Revenues in fiscal 1992 grew to $136.8 million, or 11% over the amount reported in fiscal 1991. The growth in revenues is primarily attributable to increases in revenues generated from the Company's three largest contracts; Navy CLEAN; EPA ARCS 9 & 10; and EPA ARCS 6, 7 & 8. Combined revenues on these contracts were $41.7 million in fiscal 1992 compared to $25.5 million in fiscal 1991. The increase in revenues from these contracts is due to an increase in the number of task orders for hazardous waste clean-up services. Revenues generated from private commercial businesses increased marginally to $18.9 million from $18.5 million in fiscal 1991.
Direct operating expenses, which consist of direct labor and direct expenses, including subcontractor costs, increased $12.7 million, or 17% over the amount reported in fiscal 1991. The increase is due to a greater volume of subcontractor and outside laboratory services related to the Navy CLEAN and EPA ARCS contracts in fiscal 1992. Conversely, while revenues increased by 11%, IG&A expenses remained relatively constant at $45 million. Expressed as a percentage of revenues, IG&A expenses decreased from 37% in fiscal 1991 to 33% in fiscal 1992. The Company attributes this decrease to continued emphasis on cost controls. Net interest expense decreased from $2.3 million in fiscal 1991 to $1.2 million in fiscal 1992 due to significantly lower debt levels in fiscal 1992 as the result of the secondary common stock offering completed by the Company in June 1991.
The Company earned $4.7 million before income taxes in fiscal 1992 compared to $2.5 million in fiscal 1991. While the Company has available net operating loss carryforwards for Federal income tax purposes, for state income tax purposes such amounts are not necessarily available to offset income subject to tax. Accordingly, the Company's effective tax rate for fiscal 1992 was approximately 10%.
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Net income increased 86% to $4.3 million, compared to $2.3 million in fiscal 1991. The Company earned $.55 per share in fiscal 1992 compared to $.38 per share in fiscal 1991.
The Company's backlog of signed and funded contracts at October 31, 1992 was $123.5 million, as compared to $120.6 million at October 31, 1991. The value of the Company's designations, which are awarded projects for which contracts have not been signed, was $154.8 million at October 31, 1992, as compared to $101.4 million at October 31, 1991.
Income Taxes - ------------ Prior to October 10, 1989, the Company had available net operating loss ("NOL") carryforwards for Federal income tax purposes of approximately $51 million. As a result of a change in ownership as defined by Section 382 of the Internal Revenue Code ("IRC") that occurred on October 10, 1989, the Company's NOL carryforwards for financial statement and Federal income tax purposes became limited to approximately $750,000 per year for the succeeding fifteen-year carryforward period, for an aggregate of $11.2 million, plus NOL attributable to recognized built-in gains, limited to $14 million by IRC Section 382, for a total of $25.2 million. The financial statement tax benefits arising from these NOL carryforwards will be recognized as a reduction in financial statement tax expense and an addition to paid-in capital in the years utilized. At October 31, 1993, the Company had utilized $8.0 million of the total $25.2 million for Federal income tax purposes and $8.1 million for financial statement purposes.
Liquidity and Capital Resources -------------------------------
The Company's liquidity and capital measurements are set forth below:
October 31, 1993 1992 1991 ------------------------------------------------ Working capital $27,684,000 $26,836,000 $21,891,000 Working capital ratio 2.5 to 1 2.6 to 1 2.4 to 1 Average days to convert billed accounts receivable to cash 67 61 68 Percentage of debt to equity 28.2% 31.2% 35.9%
In October 1992, the Company amended its existing line of credit agreement with Wells Fargo Bank (the "Bank"). The amended line of credit, which is secured by all the assets of the Company, provides for advances up to $10,000,000 and expires April 29, 1994. Borrowings on the line of credit bear interest at the Bank's prime rate plus one-half percent payable monthly in arrears. At October 31, 1993, the Company had $9,829,000 available to it under the line of credit. At October 31, 1993, the Company had outstanding letters of credit totalling $171,000 which reduced the amount available to the Company under the line of credit.
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Under the amended Bank line of credit agreement, the Company is required to satisfy certain financial and non-financial covenants. The Company was in compliance with all financial and non-financial covenants related to the line of credit agreement at October 31, 1993 and October 31, 1992.
The Company is a professional services organization and as such, is not capital intensive. Capital expenditures during fiscal years 1993, 1992 and 1991 were $1,952,000, $1,158,000 and $1,004,000, respectively. The expenditures were principally for computer aided design and drafting equipment and facilities expansion to accommodate the Company's growth. The Company expects fiscal 1994 capital expenditures to be comparable to the expenditures in fiscal 1993.
The Company believes that its existing financial resources, together with its planned cash flow from operations and its unused Bank line of credit, will provide sufficient capital to fund its operations in fiscal 1994.
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ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT ACCOUNTANTS ---------------------------------
The Board of Directors and Shareholders of URS Corporation:
We have audited the accompanying consolidated balance sheets of URS Corporation and its subsidiaries as of October 31, 1993 and 1992, 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, 1993. 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, 1993 and 1992, and the consolidated results of their operations and their cash flows for each of the three years in the period ended October 31, 1993, in conformity with generally accepted accounting principles.
/s/ COOPERS & LYBRAND -----------------------
San Francisco, California December 7, 1993
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URS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except per share data) October 31, 1993 1992 ---- ---- ASSETS Current assets: Cash $ 6,628 $ 5,729 Accounts receivable, including retainage amounts of $3,087 and $2,650, less allowance for doubtful accounts of $665 and $346 27,157 23,088 Costs and accrued earnings in excess of billings on contracts in process, less allowances for losses of $416 and $422 11,783 13,903 Prepaid expenses 955 1,092 ------- ------- Total current assets 46,523 43,812 Property and equipment at cost, net 4,596 3,955 Goodwill, net 5,260 5,568 Other assets 1,695 1,557 ------- ------- $58,074 $54,892 ====== ====== LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities: Accounts payable $ 8,078 $ 6,792 Accrued salaries and wages 3,574 3,759 Accrued expenses 7,187 6,425 ------- -------- Total current liabilities 18,839 16,976 Long-term debt 5,790 5,167 Long-term debt to related parties 2,487 3,538 Deferred compensation and other 1,569 1,333 ------- -------- Total liabilities 28,685 27,014 ------- -------- Commitments and contingencies (Note 7) - -
Shareholders' equity: Common shares, par value $.01; authorized 20,000 shares; issued 6,989 and 6,959 70 70 Additional paid-in capital 28,365 27,697 Retained earnings since February 21, 1990, date of quasi-reorganization (total deficit eliminated $92,523) 954 111 ------- ------- Total shareholders' equity 29,389 27,878 ------- ------ $58,074 $54,892 ====== ======
See Notes to Consolidated Financial Statements
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URS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data)
Years Ended October 31, 1993 1992 1991 ---- ---- ----
Revenues $145,761 $136,793 $122,838 -------- -------- -------- Expenses:
Direct operating 91,501 85,384 72,659
Indirect, general and administrative 51,607 45,473 45,311
Interest expense, net 1,220 1,208 2,326 -------- -------- -------- 144,328 132,065 120,296 -------- -------- --------
Income before taxes 1,433 4,728 2,542
Income tax expense 140 460 250 -------- -------- -------- Net income $ 1,293 $ 4,268 $ 2,292 ======= ======= ======= Net income per share:
Primary $ .18 $ .55 $ .40 ======= ======= ======= Fully diluted $ .18 $ .55 $ .38 ======= ======= =======
See Notes to Consolidated Financial Statements
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URS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW (In thousands) Years Ended October 31, 1993 1992 1991 ---- ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 1,293 $ 4,268 $ 2,292 ------ ------ ------ Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation and amortization 2,986 2,396 1,971 Unusual gain - (743) - Changes in current assets and liabilities: Increase in accounts receivable and costs and accrued earnings in excess of billings on contracts in process (1,949) (5,000) (872) Decrease (increase) in prepaid expenses and other 137 (459) 142 Increase (decrease) in accounts payable, accrued salaries and wages and accrued expenses 1,455 1,442 (5,840) Other, net 517 (292) (232) ------- ------- ------- Total adjustments 3,146 (2,656) (4,831) ------- ------- ------- Net cash provided (used) by operating activities 4,439 1,612 (2,539) ------- ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (1,952) (1,158) (1,004) Other (400) - (514) ------- ------- ------- Net cash used by investing (2,352) (1,158) (1,518) activities ------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES: Net repayments under line of - - (11,188) credit agreement Repayment of debt (1,340) - (6,300) Proceeds from sale of common shares 152 94 19,515 ------- ------- ------- Net cash provided (used) by financing activities (1,188) 94 2,027 ------- ------- ------- Net increase (decrease) in cash 899 548 (2,030) Cash at beginning of year 5,729 5,181 7,211 ------- ------- ------- Cash at end of year $ 6,628 $ 5,729 $ 5,181 ====== ====== ====== See Notes to Consolidated Financial Statements Page 22 of 90
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. All significant intercompany accounts and transactions have been eliminated.
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 include 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, indirect, and 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 1987 through fiscal 1993 are subject to review by the U.S. Government.
Income Taxes - ------------ In accordance with Statement of Financial Accounting Standards No. 96, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts. Investment tax credits are treated as a reduction of income tax expense in the year in which the related assets are acquired.
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Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes ("SFAS 109") will be effective for the Company in fiscal 1994. The Company believes that the implementation of the new standard will not have a material affect on the Company's consolidated financial statements.
Depreciation and Amortization - ----------------------------- Depreciation is provided on the straight-line method over the useful service lives of the assets. Goodwill is amortized on the straight-line method ranging from 10 to 20 years.
Income Per Share - ---------------- Primary earnings per share calculations are based on the weighted average number of shares outstanding, warrants and on shares issuable under stock options that have a dilutive affect (shares used in such calculations were 6,742,000 in 1991, 8,221,000 in 1992 and 6,971,000 in 1993).
Fully diluted earnings per share calculations assume the conversion of the Company's convertible debentures when there is a dilutive effect on income per share and when the ending market price of the Company's common stock exceeds the average price during the year (shares used in such calculations were 6,282,000 in 1991, 8,221,000 in 1992 and 6,971,000 in 1993).
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 and environmental projects.
The Company's revenues from local, state and Federal government agencies and private businesses for the last three fiscal years are as follows:
Years Ended October 31, 1993 1992 1991 --------------- --------------- --------------- (In thousands)
Local and state agencies $ 80,350 55% $ 65,314 48% $ 68,720 56%
Federal agencies 48,713 33 52,530 38 35,614 29
Private business 16,698 12 18,948 14 18,504 15 ------ --- ------- --- ------ ---
Total $145,761 100% $136,793 100% $122,838 100% ======= === ======= === ======= ===
Page 24 of 90
Reclassifications - ----------------- Reclassifications of certain balances for the years ended October 31, 1992 and 1991 have been made to conform to the October 31, 1993 financial statement presentation and have not affected previously reported net income or shareholders' equity.
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 $92,523,000 was eliminated against additional paid-in capital. The balance in retained earnings at October 31, 1993 represents the accumulated net earnings arising subsequent to the date of the quasi-reorganization.
NOTE 3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
October 31, 1993 1992 ---- ---- (In thousands)
Furniture and fixtures $ 2,894 $ 2,368
Equipment 6,406 4,789
Leasehold improvements 1,011 564 ------ ----- 10,311 7,721
Less: Accumulated depreciation and amortization (5,715) (3,766) ------ -----
Net property and equipment $ 4,596 $3,955 ====== =====
NOTE 4. GOODWILL
Goodwill represents the excess of the purchase price over the fair value of the net tangible assets of various operations acquired by the Company. Accumulated amortization at October 31, 1993 and 1992 was $2,035,000 and $1,467,000, respectively.
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NOTE 5. INCOME TAXES
The provision for income taxes consists of the following:
Years Ended October 31, 1993 1992 1991 ---- ---- ---- (In thousands) Current:
Federal $ 70 $ 110 $ -
State and local 85 110 161 ---- ---- ---- 155 220 161 Deferred:
Federal - - -
State and local (15) 240 89 ---- ---- ---- (15) 240 89 ---- ---- ---- Total tax provision $ 140 $ 460 $ 250 ==== ==== ====
Prior to October 10, 1989, the Company had available net operating loss ("NOL") carryforwards for Federal income tax purposes of approximately $51,000,000. As a result of a change in ownership, as defined by Section 382 of the Internal Revenue Code ("IRC") that occurred on October 10, 1989, the Company's NOL carryforwards for financial statement and Federal income tax purposes became limited to approximately $750,000 per year for the succeeding fifteen-year carryforward period for an aggregate of $11,250,000, plus NOL attributable to recognized built-in gains limited to $14,000,000 by IRC Section 382, for a total of $25,250,000. The financial statement tax benefits arising from these NOL carryforwards will be recognized as a reduction in financial statement tax expense and an addition to paid-in capital in the years utilized. At October 31, 1993, the Company had utilized $8,000,000 of the total $25,250,000 for Federal income tax purposes and $8,100,000 for financial statement purposes.
Subsequent to October 10, 1989, the date of the change in ownership, the Company incurred and has available additional NOL carryforwards of approximately $3,000,000 for Federal income tax and financial statement purposes. Generally, these NOL carryforwards will offset future income without limitation over the following fifteen-year period and will be recognized as a reduction in financial statement tax expense in the year utilized.
While the Company has available NOL carryforwards for Federal income tax purposes, for state tax purposes such amounts are not necessarily available to offset income subject to tax. Accordingly, state income taxes have been provided.
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The difference between total tax expense and the amount computed by applying the statutory Federal income tax rate to income before taxes are as follows:
Years Ended October 31, 1993 1992 1991 ---- ---- ---- (In thousands) Federal income tax expense based upon Federal statutory tax rate of 34% $ 490 $1,600 $ 860
Nondeductible goodwill amortization 185 185 185
Nondeductible expenses 60 50 40
Financial statement NOL carryforward utilized (640) (1,605) (1,000)
State taxes, net of Federal benefit 45 230 165 ------ ------ ------ Total taxes provided $ 140 $ 460 $ 250 ===== ===== =====
NOTE 6. LONG-TERM DEBT
Long-term debt consists of the following: October 31, 1993 1992 ---- ---- (In thousands) THIRD PARTY: 6 % Convertible Subordinated Debentures due 2012 (net of bond issue costs of $46 and $49) $2,099 $2,096
8-5/8% Senior Subordinated Debentures due 2004 (net of discount and bond issue costs of $4,081 and $4,171) (effective yield on date of issue was 2,374 2,284 25%) Obligations under capital leases 1,916 1,297 ------ ------ 6,389 5,677 Less: Current maturities of capital leases 599 510 ------ ------ $5,790 $5,167 ===== =====
October 31, 1993 1992 ---- ---- (In thousands) RELATED PARTIES: January Notes (net of discount of $1,513 and $2,462) (effective interest rate on date of restructuring was 12%) $2,487 $3,538 ===== ===== Page 27 of 90
Credit Agreement - ---------------- At October 1993, the Company's line of credit agreement with Wells Fargo Bank (the "Bank") provides for advances up to $10,000,000 and expires April 29, 1994. The line of credit is collateralized by all the assets of the Company, including the stock of its subsidiaries. Borrowings on the line of credit bear interest at the Bank's prime rate plus one-half percent. At October 31, 1993, the Company had $9,829,000 available to it under the line of credit agreement. At October 31, 1993, the Company had outstanding letters of credit totalling $171,000 which reduced the amount available to the Company under its Bank line of credit.
Under the Bank line of credit agreement the Company is required to satisfy certain financial and non-financial covenants. The Company was in compliance with all financial and non-financial covenants related to the line of credit agreement at October 31, 1993 and October 31, 1992.
Related Parties - --------------- At October 31, 1992, the Company had a $6,000,000 line of credit represented by the January Notes, of which $4,000,000 is with Richard C. Blum & Associates Incorporated, ("RCBA, Inc.") and $2,000,000 with Altus Finance ("Altus"). RCBA, Inc., through various partnerships, beneficially owns approximately 25% of the Company's common shares (approximately 37% assuming exercise of additional warrants) outstanding at October 31, 1993. Richard C. Blum, a director of the Company, is also Chairman of RCBA, Inc.
The January Notes were fully drawn at October 31, 1992 and are due November 1, 2000. In December 1992, the Company repurchased the $2,000,000 in January Notes held by Altus for $1,340,000 in cash. On the date of the transaction, the $2,000,000 in January Notes had a net book value of $1,190,000. The remaining $4,000,000 line of credit with RCBA, Inc. was fully drawn at October 31, 1993, bears interest at 6 % per annum and is subordinate only to the Bank line of credit.
Debentures - ---------- The Company's 6 % 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% Subordinated Debentures due 2004. Both the 6 % Convertible Subordinated Debentures and the 8-5/8% Senior Subordinated Debentures are subordinate to all debt to RCBA, Inc. and the Bank.
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The amounts of long-term debt outstanding at October 31, 1993 maturing in the next five years are as follows:
(In thousands) 1994 $ - 1995 - 1996 - 1997 - 1998 - Thereafter $12,600
Amounts payable under capitalized lease agreements are excluded from the above table.
Obligations under Leases - ------------------------ Total rental expense included in operations for operating leases for the fiscal years ended October 31, 1993, 1992 and 1991 amounted to $4,938,000, $5,306,000 and $4,994,000, 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 2002.
In fiscal 1992, the Company terminated its lease at its Cleveland, Ohio facility. As a result of this transaction, the Company recorded a net gain of $743,000.
Obligations under non-cancelable lease agreements are as follows:
Capital Operating Leases Leases ------- --------- (In thousands) 1994 $ 828 $ 4,265 1995 568 3,814 1996 472 3,255 1997 324 2,557 1998 90 1,723 Thereafter - 3,601 ------ ------- Total minimum lease payments 2,282 $19,215 ====== Less amounts representing interest 366 ------ Present value of net minimum lease payments $1,916 =====
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NOTE 7. COMMITMENTS AND CONTINGENCIES
Currently, the Company has $21,000,000 "per occurrence" comprehensive general liability insurance coverage with an aggregate limit of $22,000,000. The Company has also deposited $1,000,000 with an insurer to cover errors and omissions ("E&O") and environmental impairment liability ("EIL") claims and maintains with different insurers' policies for excess E&O coverage with an aggregate limit of $14,000,000. The first $1,000,000 policy of E&O and EIL coverage is essentially self-insurance. Also, the E&O and EIL coverage is on a "claims made" basis, covering only claims actually made to the insurer during the one-year 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.
NOTE 8. CAPITAL STOCK
Declaration of dividends, except Common Stock dividends, is restricted by the Bank line of credit agreement. Further, declaration of dividends may be precluded by existing Delaware law.
In fiscal 1991, the Company in a secondary public offering sold 2,875,000 shares of Common Stock at $7.50 per share.
The 1987 Restricted Stock Plan provides for grants of up to 16,537 shares of Common Stock to key employees of the Company and its subsidiaries. An employee selected to receive shares under the Plan will not be required to pay any consideration for the shares. Shares issued to an employee are subject to forfeiture in the event that the employment of the employee terminates for any reason other than death. The forfeiture restrictions lapse with respect to portions of the grant over a five-year period subsequent to the grant date. As of October 31, 1993, 6,872 restricted shares have been granted.
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The 1979 Stock Option Plan (the "1979 Option Plan") provided for grants of options to purchase shares of Common Stock to directors, officers and key employees of the Company and its subsidiaries at prices and for periods (not to exceed ten years) as determined by the Board of Directors. The 1979 Option Plan also provided for the granting of Stock Appreciation Rights and incentive stock options. The 1979 Option Plan expired in February 1989, and no further options or rights may be granted under the Plan.
On October 20, 1988, the stockholders approved a replacement option program pursuant to which non-management members of the Board of Directors granted replacement stock options to selected employees, exercisable at then current market prices. The selected employees then exchanged their outstanding options for new options covering two shares for each three shares covered by the options being replaced. Options to purchase 16,561 shares were exchanged for pre-existing options.
On April 27, 1989, the stockholders approved the 1989 Stock Option and Rights Plan (the "1989 Plan"). The 1989 Plan provides for the grant of 50,000 options to purchase shares of Common Stock to directors, officers and key employees of the Company and its subsidiaries at prices and for periods (not to exceed ten years) as determined by the Board of Directors. The 1989 Option Plan also provides for the granting of Stock Appreciation Rights. No options have been granted under this plan.
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 1,500,000 Restricted Shares, Stock Units and Options, plus the number of shares of Common Stock remaining available for awards under the 1987 Restricted Stock Plan (9,655) and the 1989 Plan (50,000) to key employees of the Company and its subsidiaries at prices and for periods as determined by the Board of Directors. The 1991 Plan prohibits granting new options under the 1987 Restricted Stock Plan and the 1989 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 percent of the fair market value of such share on the last trading day before the participation period commences or 85 percent of the fair market value of such share on the last trading day in the participation period. The ESP Plan was suspended effective September 19, 1988. On March 24, 1992, the stockholders approved reinstating the ESP Plan. Employees purchased 26,246 shares under the ESP Plan in fiscal 1993 and 16,492 shares in fiscal 1992.
On February 21, 1990, the Company issued warrants to purchase 1,819,148 shares of Common Stock at a purchase price of $4.34 per share and expires February 14, 1997.
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A summary of the Stock Options under the 1979, 1989 and 1991 Plans follows:
October 31, 1993 Shares Per Share ------ --------- Number of options: Outstanding at year end 856,445 $3.12 - 31.25 Exercisable at year end 689,275 $3.12 - 31.25 Exercised during the year - - Available for grant at year end 705,565 -
October 31, 1992 Shares Per Share ------ --------- Number of options: Outstanding at year end 854,452 $3.12 - 31.25 Exercisable at year end 421,915 $3.12 - 31.25 Exercised during the year - - Available for grant at year end 205,565 -
October 31, 1991 Shares Per Share ------ --------- Number of options: Outstanding at year end 739,207 $3.12 - 31.25 Exercisable at year end 171,354 $3.12 - 31.25 Exercised during the year - - Available for grant at year end 334,065 -
[FN] Reflects lowest and highest exercise price.
NOTE 9. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Years Ended October 31, 1993 1992 1991 ---- ---- ---- (In thousands)
Interest $1,170 $888 $2,123 Income taxes $ 518 $405 $ 490
There were no significant non-cash investing or financing activities in fiscal 1993 and 1991.
In fiscal 1992, the Company terminated its lease at its Cleveland, Ohio facility. As a result of the transaction, the Company recorded a $743,000 gain.
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NOTE 10. 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 $486,100, $439,000 and $347,000 were made to the plan in fiscal 1993, 1992 and 1991, respectively.
NOTE 11. VALUATION AND ALLOWANCE ACCOUNTS
Additions Charged to Deductions Beginning Costs and from Ending Balance Expenses Reserves Balance ------- -------- -------- ------- (In thousands)
October 31, 1993 Allowances for losses and doubtful collections $ 768 $603 $ 290 $1,081
October 31, 1992 Allowances for losses and doubtful collections $ 699 $310 $ 241 $ 768
October 31, 1991 Allowances for losses and doubtful collections $1,528 $234 $1,063 $ 699
NOTE 12. RELATED PARTY TRANSACTIONS
Interest paid to related parties in connection with the January Notes was $254,000, $240,000 and $240,000 in fiscal 1993, 1992 and 1991, respectively. (See Note 6 - Long Term Debt).
The Company has agreements for business consulting services to be provided by RCBA Inc., and Richard C. Blum, a Director of the Company. Under these agreements, the Company paid $90,000 and $60,000 to RCBA Inc. and Richard C. Blum, respectively, for fiscal 1993, 1992 and 1991. Richard C. Blum also received an additional $19,000, $12,500 and $15,750 for his services as a Director of the Company in fiscal 1993, 1992 and 1991, respectively. In addition, during fiscal 1993, URS Consultants, Inc., a wholly-owned subsidiary of the Company ("URSC"), performed an underground storage tank remediation investigation on behalf of RCBA, Inc. Such investigation was completed by October 28, 1993, and on November 19, 1993, RCBA, Inc. paid URSC $70,000 in gross revenues.
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NOTE 13. 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.
NOTE 14. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected quarterly financial data for fiscal 1993 and 1992 are summarized as follows:
Fiscal 1993 Quarters Ended Jan. 31 Apr. 30 July 31 Oct. 31 ------- ------- ------- ------- (In thousands, except per share data)
Revenues $32,957 $36,585 $35,627 $40,592 Gross profit 12,944 13,894 13,111 14,311 Operating income 1,008 1,476 (1,545) 1,714 (loss) $ 632 $ 1,076 $(1,681) $ 1,266 Net income (loss)
Income (loss) per share: Primary and fully diluted $ .08 $ .14 $ (.24) $ .18 Weighted average ====== ====== ====== ====== number of shares 8,254 8,255 6,974 8,270 ====== ====== ====== ======
Fiscal 1992 Quarters Ended Jan. 31 Apr. 30 July 31 Oct. 31 ------- ------- ------- ------- (In thousands, except per share data)
Revenues $29,619 $35,328 $33,801 $38,045 Gross profit 11,659 13,104 13,108 13,538 Operating income 1,003 1,513 1,613 1,807 Net income $ 624 $ 1,118 $ 1,166 $ 1,360
Income per share: Primary and fully diluted $ .08 $ .14 $ .15 $ .18 Weighted average ====== ====== ====== ====== number of shares 8,099 8,219 8,224 8,239 ====== ====== ====== ======
Operating income represents continuing operations before interest income and interest expense.
ITEM 9.
ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None. Page 34 of 90
PART III
ITEM 10.
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 22, 1994, and from Item 4a -- "Executive Officers of the Registrant" in Part I.
ITEM 11.
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 22, 1994.
ITEM 12.
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 22, 1994.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference from Item 8, Financial Statement and Supplementary Data, Note 6 -- Long-Term Debt and Note 12 -- Related Party Transactions.
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PART IV
ITEM 14.
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, 1993 and October 31, 1992
Consolidated Statements of Operations For the years ended October 31, 1993, 1992 and 1991
Consolidated Statements of Changes in Shareholders' Equity For the years ended October 31, 1993, 1993 and 1991
Consolidated Statements of Cash Flows For the years ended October 31, 1993, 1992 and 1991
Notes to Consolidated Financial Statements
(a)(2) Financial Statement Schedules
Schedules are omitted because they are not applicable, not required or because the required information is included in the Consolidated Financial Statements or Notes thereto.
(a)(3) Exhibits
3.1 Certificate of Incorporation of the Company, filed as Exhibit 3.1 to the Annual Report on Form 10-K for the fiscal year ended October 31, 1991 ("1991 Form 10-K"), and incorporated herein by reference.
3.2 By-laws of the Company as amended, filed as Exhibit 3.2 to the Annual Report on Form 10-K for the fiscal year ended October 31, 1992 ("1992 Form 10-K"), and incorporated herein by reference.
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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 % 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 % 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 as amended and restated, filed as Exhibit 10.3 to the 1991 Form 10-K and incorporated herein by reference.
10.4 1991 Stock Incentive Plan of the Company as amended, filed as Exhibit 10.4 to the 1992 Form 10-K and incorporated herein by reference.
10.5 Selected Executive Deferred Compensation Plan of the Company, filed as Exhibit 10.3 to the 1990 Form S-1 and incorporated herein by reference.
10.6 1993 Incentive Compensation Plan of the Company. FILED HEREWITH.
10.7 1993 Incentive Compensation Plan of URS Consultants, Inc. FILED HEREWITH.
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10.8 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.
10.9 Stock Appreciation Rights Agreement, dated September 19, 1989, between the Company and Michael B. Shane, filed as Exhibit 10.14 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 Stock Appreciation Rights Agreement, dated August 23, 1989, between the Company and Martin S. Tanzer, filed as Exhibit 10.11 to the 1991 Form 10-K and incorporated herein by reference.
10.12 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.
10.13 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.
10.14 Employment Agreement, dated January 24, 1992 between the Company and Michael B. Shane, filed as Exhibit 10.14 to the 1991 Form 10-K and incorporated herein by reference.
10.15 Employment Agreement, dated August 1, 1991, between URS Consultants, Inc. and Martin S. Tanzer, filed as Exhibit 10.15 to the 1991 Form 10-K and incorporated herein by reference.
10.16 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.
10.17 Second Restated Credit Agreement, dated as of October 19, 1992, between Wells Fargo Bank, N.A., the Company, URS Consultants, Inc., Thortec Environmental Systems, Inc. and Mitchell Management Systems, Inc., filed as Exhibit 10.17 to the 1992 Form 10-K and incorporated herein by reference.
10.18 Letter Agreement, dated May 31, 1990, among the Company and certain subsidiaries and certain affiliates of Richard C. Blum & Associates, Inc., amending the Thortec Entities Credit and Security Agreement, filed as Exhibit 10.21 to the 1990 Form S-1 and incorporated herein by reference.
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10.19 Thortec Entities Credit and Security Agreement, dated January 30, 1989, between the Company and certain subsidiaries and certain affiliates of Richard C. Blum & Associates, Inc., filed as Exhibit 10.54 to the 1988 Form 10-K, and incorporated herein by reference.
10.20 First, Second, Third and Fourth Amendments to the Thortec Entities Credit and Security Agreement, dated January 30, 1989, between the Company and certain entities managed or advised by Richard C. Blum & Associates, Inc., filed as Exhibit 10.23 to the 1990 Form S-1 and incorporated herein by reference.
10.21 Fifth, Sixth and Seventh Amendments to the Thortec Entities Credit and Security Agreement, dated January 30, 1989, between the Company and certain entities managed or advised by Richard C. Blum & Associates, Inc., filed as Exhibit 10.21 to the 1992 Form 10-K and incorporated herein by reference.
10.22 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.
10.23 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.
10.24 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.
10.25 Warrant Agreement, dated February 21, 1990, between the Company, Wells Fargo Bank, N.A. and the Purchasers named therein, filed as Exhibit 10.24 to the 1990 Form S-1 and incorporated herein by reference.
10.26 URS Corporation Warrant Agreement, dated February 21, 1990, issued to BK Capital Partners I, filed as Exhibit 10.25 to the 1990 Form S-1 and incorporated herein by reference.
10.27 URS Corporation Warrant Agreement, dated February 21, 1990, issued to BK Capital Partners II, filed as Exhibit 10.26 to the 1990 Form S-1 and incorporated herein by reference.
10.28 URS Corporation Warrant Agreement, dated February 21, 1990, issued to BK Capital Partners III, filed as Exhibit 10.27 to the 1990 Form S-1 and incorporated herein by reference.
10.29 URS Corporation Warrant Agreement, dated February 21, 1990, issued to Executive Life Insurance Company, filed as Exhibit 10.28 to the 1990 Form S-1 and incorporated herein by reference.
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10.30 URS Corporation Warrant Agreement, dated February 21, 1990, issued to Wells Fargo Bank, N.A., filed as Exhibit 10.29 to the 1990 Form S-1 and incorporated herein by reference.
10.31 URS Corporation Warrant Agreement, dated February 21, 1990, issued to Wells Fargo Bank, N.A., filed as Exhibit 10.30 to the 1990 Form S-1 and incorporated herein by reference.
10.32 Post-Affiliation Agreement, dated July 19, 1989, between the Company and URS International, Inc., filed as Exhibit 10.42 to the 1989 Form 10-K and incorporated herein by reference.
10.33 Contract between URS Consultants, Inc. and the U.S. Department of the Navy (No. N62474-89-R-9295) dated June 6, 1989, filed as Exhibit 10.34 to the 1991 Form 10-K and incorporated herein by reference.*
10.34 Form of Indemnification Agreement dated as of May 1, 1992 between the Company and each of Messrs. Ainsworth, Blum, Cashin, Koffel, Madden, Praeger, Rosenstein, Shane and Walsh, and Dr. Tanzer, filed as Exhibit 10.34 to the 1992 Form 10-K and incorporated herein by reference.
22.1 Subsidiaries of the Company, filed as Exhibit 22.1 to the 1992 Form 10-K and incorporated herein by reference.
24.1 Consent of Coopers & Lybrand. FILED HEREWITH.
25.1 Powers of Attorney of certain Directors and Officers. FILED HEREWITH.
(b)(1) Reports on Form 8-K
No reports were filed on Form 8-K during the fourth quarter of the fiscal year ended October 31, 1993.
* Note: Certain material contained in this exhibit and indicated by an asterisk has been omitted and filed separately with the Commission pursuant to an application for confidential treatment under Rule 24b-2 promulgated under the Securities Exchange Act of 1934, as amended, which was granted by the Commission effective April 30, 1992.
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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 Vice President and Chief Financial Officer Dated: January 28, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant in the capacities and on the date indicated.
Signature Title Date - --------- ----- ----
/s/ Martin M. Koffel Chairman of the Board January 28, 1994 - -------------------------- of Directors and Chief (Martin M. Koffel) Executive Officer
/s/ Michael B. Shane Executive Vice President, January 28, 1994 - -------------------------- General Counsel, (Michael B. Shane) Secretary and Director
/s/ Kent P. Ainsworth Vice President, Chief January 28, 1994 - -------------------------- Financial Officer and (Kent P. Ainsworth) Principal Accounting Officer
Irwin L. Rosenstein* Director January 28, 1994 - -------------------------- (Irwin L. Rosenstein)
Page 41 of 90
Richard C. Blum* Director January 28, 1994 - -------------------------- (Richard C. Blum)
Emmet J. Cashin, Jr.* Director January 28, 1994 - -------------------------- (Emmet J. Cashin, Jr.)
Richard Q. Praeger* Director January 28, 1994 - -------------------------- (Richard Q. Praeger)
William D. Walsh* Director January 28, 1994 - -------------------------- (William D. Walsh)
Richard B. Madden* Director January 28, 1994 - -------------------------- (Richard B. Madden)
*By
/s/ Kent P. Ainsworth January 28, 1994 - -------------------------- (Attorney-in-fact)
Page 42 of 90
EXHIBIT INDEX
Exhibit Page No. Description No. - ----------------------------------------------------------------------------
3.1 Certificate of Incorporation of the Company, filed as Exhibit 3.1 to the Annual Report on Form 10-K for the fiscal year ended October 31, 1991 ("1991 Form 10-K"), and incorporated herein by reference.
3.2 By-laws of the Company as amended, filed as Exhibit 3.2 to the Annual Report on Form 10-K for the fiscal year ended October 31, 1992 ("1992 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 % 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 % 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.
Page 43 of 90
Exhibit Page No. Description No. - ---------------------------------------------------------------------------- 10.3 1985 Employee Stock Purchase Plan as amended and restated, filed as Exhibit 10.3 to the 1991 Form 10-K and incorporated herein by reference.
10.4 1991 Stock Incentive Plan of the Company as amended, filed as Exhibit 10.4 to the 1992 Form 10-K and incorporated herein by reference.
10.5 Selected Executive Deferred Compensation Plan of the Company, filed as Exhibit 10.3 to the 1990 Form S-1 and incorporated herein by reference.
10.6 1993 Incentive Compensation Plan of the Company. FILED HEREWITH. 48
10.7 1993 Incentive Compensation Plan of URS Consultants, Inc. FILED HEREWITH. 66
10.8 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.
10.9 Stock Appreciation Rights Agreement, dated September 19, 1989, between the Company and Michael B. Shane, filed as Exhibit 10.14 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 Stock Appreciation Rights Agreement, dated August 23, 1989, between the Company and Martin S. Tanzer, filed as Exhibit 10.11 to the 1991 Form 10-K and incorporated herein by reference.
10.12 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.
10.13 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.
10.14 Employment Agreement, dated January 24, 1992 between the Company and Michael B. Shane, filed as Exhibit 10.14 to the 1991 Form 10-K and incorporated herein by reference.
Page 44 of 90
Exhibit Page No. Description No. - ---------------------------------------------------------------------------- 10.15 Employment Agreement, dated August 1, 1991, between URS Consultants, Inc. and Martin S. Tanzer, filed as Exhibit 10.15 to the 1991 Form 10-K and incorporated herein by reference.
10.16 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.
10.17 Second Restated Credit Agreement, dated as of October 19, 1992, between Wells Fargo Bank, N.A., the Company, URS Consultants, Inc., Thortec Environmental Systems, Inc. and Mitchell Management Systems, Inc., filed as Exhibit 10.17 to the 1992 Form 10-K and incorporated herein by reference.
10.18 Letter Agreement, dated May 31, 1990, among the Company and certain subsidiaries and certain affiliates of Richard C. Blum & Associates, Inc., amending the Thortec Entities Credit and Security Agreement, filed as Exhibit 10.21 to the 1990 Form S-1 and incorporated herein by reference.
10.19 Thortec Entities Credit and Security Agreement, dated January 30, 1989, between the Company and certain subsidiaries and certain affiliates of Richard C. Blum & Associates, Inc., filed as Exhibit 10.54 to the 1988 Form 10-K, and incorporated herein by reference.
10.20 First, Second, Third and Fourth Amendments to the Thortec Entities Credit and Security Agreement, dated January 30, 1989, between the Company and certain entities managed or advised by Richard C. Blum & Associates, Inc., filed as Exhibit 10.23 to the 1990 Form S-1 and incorporated herein by reference.
10.21 Fifth, Sixth and Seventh Amendments to the Thortec Entities Credit and Security Agreement, dated January 30, 1989, between the Company and certain entities managed or advised by Richard C. Blum & Associates, Inc., filed as Exhibit 10.21 to the 1992 Form 10-K and incorporated herein by reference.
10.22 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.
10.23 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.
10.24 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.
Page 45 of 90
Exhibit Page No. Description No. - ---------------------------------------------------------------------------- 10.25 Warrant Agreement, dated February 21, 1990, between the Company, Wells Fargo Bank, N.A. and the Purchasers named therein, filed as Exhibit 10.24 to the 1990 Form S-1 and incorporated herein by reference.
10.26 URS Corporation Warrant Agreement, dated February 21, 1990, issued to BK Capital Partners I, filed as Exhibit 10.25 to the 1990 Form S-1 and incorporated herein by reference.
10.27 URS Corporation Warrant Agreement, dated February 21, 1990, issued to BK Capital Partners II, filed as Exhibit 10.26 to the 1990 Form S-1 and incorporated herein by reference.
10.28 URS Corporation Warrant Agreement, dated February 21, 1990, issued to BK Capital Partners III, filed as Exhibit 10.27 to the 1990 Form S-1 and incorporated herein by reference.
10.29 URS Corporation Warrant Agreement, dated February 21, 1990, issued to Executive Life Insurance Company, filed as Exhibit 10.28 to the 1990 Form S-1 and incorporated herein by reference.
10.30 URS Corporation Warrant Agreement, dated February 21, 1990, issued to Wells Fargo Bank, N.A., filed as Exhibit 10.29 to the 1990 Form S-1 and incorporated herein by reference.
10.31 URS Corporation Warrant Agreement, dated February 21, 1990, issued to Wells Fargo Bank, N.A., filed as Exhibit 10.30 to the 1990 Form S-1 and incorporated herein by reference.
10.32 Post-Affiliation Agreement, dated July 19, 1989, between the Company and URS International, Inc., filed as Exhibit 10.42 to the 1989 Form 10-K and incorporated herein by reference.
10.33 Contract between URS Consultants, Inc. and the U.S. Department of the Navy (No. N62474-89-R-9295) dated June 6, 1989, filed as Exhibit 10.34 to the 1991 Form 10-K and incorporated herein by reference.*
10.34 Form of Indemnification Agreement dated as of May 1, 1992 between the Company and each of Messrs. Ainsworth, Blum, Cashin, Koffel, Madden, Praeger, Rosenstein, Shane and Walsh, and Dr. Tanzer, filed as Exhibit 10.34 to the 1992 Form 10-K and incorporated herein by reference.
22.1 Subsidiaries of the Company, filed as Exhibit 22.1 to the 1992 Form 10-K and incorporated herein by reference.
24.1 Consent of Coopers & Lybrand. FILED HEREWITH. 89
25.1 Powers of Attorney of certain Directors and Officers. FILED HEREWITH. 90
Page 46 of 90
* Note:Certain material contained in this exhibit and indicated by an asterisk has been omitted and filed separately with the Commission pursuant to an application for confidential treatment under Rule 24b-2 promulgated under the Securities Exchange Act of 1934, as amended, which was granted by the Commission effective April 30, 1992.
Page 47 of 90
EXHIBIT 10.6
1993 Incentive Compensation Plan of URS Corporation
URS CORPORATION
1993 INCENTIVE COMPENSATION PLAN
Page 48 of 90
-----------------
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 49 of 90
I. PURPOSE OF THE PLAN
Page 50 of 90
I.1 PURPOSE
The URS Corporation ("URS") 1993 Incentive Compensation Plan (the "Plan") is intended to provide incentive compensation to individuals who make an important contribution to URS' financial performance. Specific Plan objectives are to:
- Focus key Employees on achieving specific financial targets;
- Reinforce a team orientation;
- Provide significant award potential for achieving outstanding performance; and
- Enhance the ability of URS Corporation to attract and retain highly talented and competent individuals.
I-1
Page 51 of 90
II. HOW AWARDS ARE EARNED UNDER THE PLAN
Page 52 of 90
II.1 GENERAL PLAN DESCRIPTION
The 1993 Incentive Compensation Plan provides the opportunity for key Employees of URS Corporation (the "Company") to receive cash Awards based on a combination of Company and individual performance.
An overview of how the Plan works is shown schematically on the facing page. 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 in the Plan 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 in the Plan as "Nondesignated Participants"), who have demonstrated outstanding individual performance during the Plan Year. It is expected that the amount available to Non-designated Participants for the 1993 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' 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.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, referred to as "Designated Participants," 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
II-1
Page 53 of 90
of URS. The letter of participation for the CEO will be signed by the chairman of the Compensation Committee.
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, referred to as "Nondesignated Participants," 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, subject to the approval of the Compensation Committee.
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' 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 distribution to Non-designated Participants. For 1993, the Target Bonus Pool equals $442,000.
II.5 URS PERFORMANCE OBJECTIVES
For 1993, URS' Performance Objectives are focused on the need to improve profitability and generate cash. The Performance Objectives and weightings for the 1993 Plan Year are as follows:
II-2
Page 54 of 90
URS CORPORATION PERFORMANCE OBJECTIVES AND WEIGHTINGS
Performance Measure Weighting Performance Objective ------------------- --------- --------------------- Net Income ($000s) 50% $5,600 Return on Total Capital (ROTC) 50% 15%
For the purposes of the Plan, ROTC is defined as:
[(A+B) ((C+D) 2)]
where:
A = Net Income B = After-Tax Interest C = Interest-bearing debt plus equity at the beginning of the Plan Year D = Interest-bearing debt plus equity at the end of the Plan Year
Net Income will be calculated AFTER all URS Corporation (corporate) AND URS Consultants (URSC) bonuses are assumed to have been paid.
It is possible that in the course of the Plan Year, unforeseen events could have a material effect upon URS Corporation's performance relative to the Performance Measures. Such events might include, but are not limited to, acquisitions and public offerings. The effect of such events will be treated on a case by case basis. In general, acquisitions and public offerings will be treated as follows:
Acquisitions - ------------ In the event that the Company completes an acquisition during the Plan Year, the Performance Objectives will be adjusted for the projected financial impact of the acquisition for the balance of the Year and potential Awards under the Plan will be calculated accordingly.
Equity Transactions - ------------------- In the event that URS issues or buys back Company stock during the Plan Year, the financial impact of such a transaction will not be included in calculating potential Awards under the Plan.
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:
II-3
Page 55 of 90
RELATIONSHIP BETWEEN URS PERFORMANCE AND THE ACTUAL BONUS POOL AS A % OF THE TARGET BONUS POOL
Net Income (weighted 50%) ROTC (weighted 50%) -------------------------- -------------------------- Actual Actual Pool Actual Actual Pool Performance as a % of Performance as a % of ($000s) Target Pool (%) Target Pool ----------- ----------- ----------- ----------- $11,200 200% 30% 200% 5,600 100% 15% 100% =< 4,200 0% =< 12% 0%
[FN] The calculation of the Actual Award as a % of Target will be interpolated for performance between discrete points.
Awards have no upper limit and will be extrapolated for performance beyond discrete points.
Based on the table above, the Actual Award will vary depending upon actual performance in relation to Performance Objectives and the weighting of the Performance Objectives. The example on the opposite page illustrates the application of the table and the interpolation and weighting calculations.
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, subject to the approval of the Compensation Committee. The Company is under no obligation to distribute the entire Actual Pool. The sum of all Awards to Non-designated Participants may not exceed the amount available in the Actual Pool.
II-4
Page 56 of 90
III. OTHER PLAN PROVISIONS
Page 57 of 90
III.1 AWARD PAYMENT
Assessment of actual performance and payout of Awards will be subject to the completion of the 1993 Year-end independent audit.
The Actual Award earned, up to 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. Any Actual Award earned in excess of the Target Award will be automatically deferred until the end of fiscal 1994. This deferred portion of the Award will be paid to the Participant within 30 days of the end of fiscal 1994, provided that the Participant is still an Employee of URS or one of its Affiliates at Year-end 1994 except for death, permanent disability, or retirement. A Participant whose employment with the Company or an Affiliate is terminated prior to the end of fiscal 1994 for any other reason forfeits the deferred portion of the Award.
The Company is under no obligation to pay interest on the deferred portion of the Award and will not do so.
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. A Participant must also have performed his/her duties satisfactorily during the Year, as determined by the CEO of URS. The Compensation Committee will assess the performance of the CEO.
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 prorata 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, except that there will be no deferral of Awards in excess of Target. In the event that a Participant terminates for reasons above during Fiscal Year 1993, any deferred Award will be paid within 30 days of Termination.
A Participant whose employment with the Company 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-1
Page 58 of 90
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.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 Compensation Committee of the URS Board of Directors. The exhibit on the facing page 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.7 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-2
Page 59 of 90
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.8 WITHHOLDING TAX
URS will deduct from all Awards paid under the Plan any taxes required by law to be withheld.
III.9 EFFECTIVE DATE
The Plan is effective as of November 1, 1992, and will remain in effect for the Fiscal Year ending October 31, 1993 unless otherwise terminated or extended by the Committee.
III.10 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.11 APPLICABLE LAW
The Plan will be governed by and construed in accordance with the laws of the State of California.
III-3
Page 60 of 90
IV. DEFINITIONS
Page 61 of 90
IV.1 DEFINITIONS
"Affiliate" 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 Nondesignated 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.
"Company" refers to URS Corporation.
"Compensation Committee" or "Committee" refers to the Compensation 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, and ending October 31.
"Net Income" refers to the consolidated revenue less all expenses (including tax and interest charges) of the Company.
"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, within the guidelines agreed with and subject to the approval of the Compensation Committee. Unlike Designated Participants, Non-designated Participants will not be assigned Target Award Percentages or individual Performance Objectives.
"Performance Objectives" or "Objectives" refers to the preestablished financial goals upon which URS Corporation performance will be assessed.
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Page 62 of 90
"Plan" refers to the URS Corporation 1993 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, 1992, and ending October 31, 1993, 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 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 Nondesignated Participants if all URS Performance Objectives are met.
"Termination" means the Participant's ceasing his 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 a Fiscal Year, October 31.
IV-2
Page 63 of 90
V. EXAMPLES OF PLAN OPERATION
Page 64 of 90
URS CORPORATION PERFORMANCE TABLE
Actual Actual Net Income Actual vs. Return on Total Capital Actual vs. (50% weighting) Target Pool (50% weighting) Target Pool --------------- ----------- ----------------------- ----------- >= $11.200MM 200% >= 30% 200% $5.600MM 100% 15% 100% <= $4.200MM 0% <= 12% 0%
Scenario 1 - URS net income and return on total capital performance - ---------- exceeds objectives
Net Income Objective ($MMs) $5.6 ($5.8 - $5.6)/($11.2 - $5.6) URS Actual Net Income ($MMs) $5.8 = 3.6% + 100% = 103.6%
Return on Total Capital Objective (%) 15.0% (17% - 15%)/(30% - 15%) = 13.3% URS Actual Return on + 100% = 113.3% Total Capital (%) 17.0%
TARGET BONUS POOL ($000s) $442.0 (($442 * 50%) * 103.6%) + (($442 ACTUAL BONUS POOL ($000s) $479.4 * 50%) * 113.3%) = $229.0 + $250.4
Scenario 2 - URS net income minimum met; return on total capital not met - ----------
Net Income Objective ($MMs) $5.6 ($4.5 - $5.6)/($4.2 - $5.6) * (-1) URS Actual Net Income ($MMs) $4.5 = -78.6% + 100% = 21.4%
Return on Total Capital Objective (%) 15.0% Since the minimum of 12% ROTC is URS Actual Return on not met, there is no bonus for this Total Capital(%) 11.0% Performance Objective
TARGET BONUS POOL ($000s) $442.0 (($442 * 50%) * 21.4%) + (($442 * ACTUAL BONUS POOL ($000s) $47.3 50%) * 0.0%) = $47.3 + $0.0
Scenario 3 - URS net income exceeds maximum; return on total capital exceeds - ---------- objective
Since the maximum net income equal Net Income Objective ($MMs) $5.6 to $11.2 MM has been met, the bonus URS Actual Net Income ($MMs) $12.3 percentage for this objective is 200% of Target Return on Total Capital Objective (%) 15.0% (18% - 15%)/(30% - 15%) = 20% + URS Actual Return on 100% = 120% Total Capital (%) 18.0%
TARGET BONUS POOL ($000s) $442.0 (($442 * 50%) * 200%) + (($442 * ACTUAL BONUS POOL ($000s) $707.2 50%) * 120%) = $442.0 + $265.2
Actual awards to Designated Participants and funds available for distribution to Non-designated Participants will vary from Target levels in relationship to the Actual Bonus Pool versus the Target Pool.
V-1 Page 65 of 90
EXHIBIT 10.7
1993 Incentive Compensation Plan of URS Consultants Inc.
URS CONSULTANTS INC.
1993 INCENTIVE COMPENSATION PLAN
Page 66 of 90
-----------------
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 67 of 90
I. PURPOSE OF THE PLAN
Page 68 of 90
I.1 PURPOSE
The URS Consultants Inc. 1993 Incentive Compensation Plan (the "Plan") is intended to provide incentive compensation to individuals who make an important contribution to URS Consultants financial performance. Specific Plan objectives are to:
- Focus key Employees on achieving specific financial targets;
- Reinforce a team orientation;
- Provide significant award potential for achieving outstanding performance; and
- Enhance the ability of URS Consultants to attract and retain highly talented and competent individuals.
I-1
Page 69 of 90
II. HOW AWARDS ARE EARNED UNDER THE PLAN
Page 70 of 90 II.1 GENERAL PLAN DESCRIPTION (see facing exhibit)
The 1993 Incentive Compensation Plan provides the opportunity for key Employees of URS Consultants Inc. ("the Company") to receive cash Awards based on a combination of Company and individual performance.
An overview of how the Plan works is shown schematically on the facing page. In general, a Target Bonus Pool is established. This amount represents the total Awards that are expected to be paid to selected URS Consultants Employees if certain financial Performance Objectives for URS Consultants have been fully met. The Actual Bonus Pool will vary from the Target Bonus Pool upward or downward based on URS Consultants' 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 in the Plan 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 URS Consultants 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 "NonDesignated 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.2 DESIGNATED AND NON-DESIGNATED PARTICIPANTS
Plan participation is extended to selected Employees who, in the opinion of the President of URS Consultants and the Chief Executive Officer ("CEO") of URS Corporation (the "Parent Company"), have the opportunity to significantly impact the annual operating success of URS Consultants. These Employees, referred to as "Designated Participants," will be notified in writing of their selection to participate in the Plan. This notification letter will be signed by both the President of URS Consultants and the CEO of the Parent Company.
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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, referred to as "Nondesignated Participants," will not be selected until the completion of the Plan Year. The selection of Non-designated Participants will be determined by the President of URS Consultants, subject to the approval of the CEO of the Parent Company.
II.3 TARGET BONUS POOL
A Target Bonus Pool is established, representing an amount which is expected to be sufficient to pay each Designated Participant 100% of his/her Target Award, with a remaining amount available for distribution to Non-designated Participants. (The Awards to Non-designated Participants are estimated at approximately 25% of the total Non-Designated Participants' Bonus Pool.)
This Target Bonus Pool is determined based on the current group of Designated Participants and the anticipated group of Nondesignated Participants. The Target Pool is subject to change if the group of Designated Participants, the group of NonDesignated Participants, or the Base Salaries of Designated Participants change.
Subject to these potential changes, the Target Bonus Pool for the 1993 Plan Year is established at $1,380,244.
II.4 URS CONSULTANTS PERFORMANCE OBJECTIVES
URS Consultants Performance Objectives are focused on the need to achieve strong operating results (i.e., contribution) and generate cash through the management of DSOs throughout the Year. Performance will be evaluated based on a combination of URS Consultants Contribution, Average Receivables Days Sales Outstanding (DSO), New Sales and Other Growth measures.
The URS Consultants Performance objectives for the 1993 Plan Year are as follows:
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URS CONSULTANTS PERFORMANCE OBJECTIVES
Performance Measures Performance Objectives -------------------- ---------------------- Contribution ($000s) $12,600 Average DSO (Days) 92 New Sales ($000s) $161,000 Other Growth ($000s) Varies by Participant
URS Consultants Contribution is defined as total 1993 Fiscal Year URS Consultants revenues less:
- Direct cost of sales; - Indirect expenses; and - 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.
URS Consultants 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 will be calculated monthly, and the average of the twelve months DSOs will equal Average DSOs.
URS Consultants New Sales is defined as gross additions to backlog.
URS Consultants Other Growth is defined as growth in New Sales, designations, indefinite delivery contracts, inter-office cooperation, and/or other measures as defined in the Participant's notification letter.
II.5 WEIGHTING OF URS CONSULTANTS 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, New Sales, and Other Growth Measures. An example of the weighting calculation is shown on the facing page.
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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 URs Consultants and the Performance Objectives. The Actual Bonus Pool will vary in relationship to the Target Bonus Pool based on the following table:
RELATIONSHIP BETWEEN URS CONSULTANTS PERFORMANCE AND THE ACTUAL BONUS POOL AS A % OF THE TARGET BONUS POOL
URS Consultants Contribution URS Consultants 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) (%)
=> 115% => $14,490 200% =< 87 200% 100% $12,600 100% 92 100% 85% $10,710 25% 97 25% < 85% < $10,710 0% > 97 0%
URS Consultants New Sales - --------------------------------------- Actual Performance Actual As A % Of Pool Bonus Performance Actual As A % Of Objective Performance Target Pool ----------- ----------- ----------- (%) ($000s) (%)
=> 115% => $185,150 200% 100% $161,000 100% 85% $136,850 25% < 85% < $136,850 0%
[FN] Awards for the Other Growth performance measure will be made at the discretion of the President of the Company and the Chief Executive Officer of the Parent Company.
Maximum upside opportunity of 200% of the Target Bonus Pool may be raised at the discretion of the Compensation Committee. The calculation of the Actual Bonus Pool As A % Of Target will be interpolated for performance between discrete points shown in the table above.
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
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Performance Objectives and the weighting of the Performance Objectives. The example on the opposite page illustrates the application of the table and the interpolation and weighting calculations.
Accrual of any Actual Pool tied to DSO, New Sales, and Other Growth performance is contingent upon Contribution performance being at or above 85% of the Performance Objective.
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 25% 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) on a totally discretionary basis by the President of URS Consultants, 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 URS Consultants does not meet or exceed 85% of its Contribution Performance Objective. The total sum of Awards made from the Discretionary Pool may not exceed 25% of the 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 NonDesignated 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 Compensation 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 URS Consultants and the individual's Performance Objectives are met.
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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.10 ACTUAL AWARDS FOR DESIGNATED PARTICIPANTS
Individual Performance Objectives will be assigned based on the economic unit (i.e., URS Consultants, a region of URS Consultants, or an office of URS Consultants) 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 URS Corporation 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. An example of this calculation is shown on the opposite page.
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.
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III. OTHER PLAN PROVISIONS
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III.1 AWARD PAYMENT
Assessment of actual performance and payout of Awards will be subject to the completion of the 1993 Year-end independent audit.
The Actual Award earned, up to 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. Any Actual Award earned in excess of the Target Award will be automatically deferred until the end of fiscal 1994. This deferred portion of the Award will be paid to the Participant within 30 days of the end of fiscal 1994, provided that the Participant is still an Employee of URS Consultants or one of its Affiliates at Year-end 1994, except for death, permanent disability, or retirement. A Participant whose employment with the Company or an Affiliate is terminated prior to the end of fiscal 1994 for any other reason forfeits the deferred portion of the Award.
The Company is under no obligation to pay interest on the deferred portion of the Award and will not do so.
III.2 EMPLOYMENT
In order to receive an Award under the Plan, a Participant must be employed by URS Consultants 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 URS Consultants 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 prorata 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, except that there will be no deferral of Awards in excess of Target. In the event that a Participant terminates for reasons above during Fiscal Year 1993, any deferred Award will be paid within 30 days of Termination.
A Participant whose employment with the Company 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.
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Page 78 of 90 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 Consultants 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 URS Consultants 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 URS Consultants President, the URS Corporation CEO, and the Compensation Committee of the URS Corporation Board of Directors. The exhibit on the facing page 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.7 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 Consultants 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 Consultants, nor does it imply or confer any other employment rights.
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Page 79 of 90 Nothing contained in the Plan will be construed to create a contract of employment with any Participant. URS Consultants 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 URS Consultants 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 Consultants or any of its Affiliates.
III.8 WITHHOLDING TAX
URS Consultants will deduct from all Awards paid under the Plan any taxes required by law to be withheld.
III.9 EFFECTIVE DATE
The Plan is effective as of November 1, 1992, and shall remain in effect for the Fiscal Year ending October 31, 1993 unless otherwise terminated or extended by the Committee.
III.10 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.11 APPLICABLE LAW
The Plan shall be governed by and construed in accordance with the laws of the State of California.
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IV. DEFINITIONS
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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.
"Company" refers to URS Consultants, Inc.
"Compensation Committee" or "Committee" refers to the compensation Committee of the Board of Directors of the Parent Company.
"Designated Participant" refers to an Employee of URS Consultants 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 Consultants contribution does not reach or exceed $10,710,000 (85% of the Performance Objective). -----------
"Employee" refers to an Employee of URS Consultants, Inc.
"Fiscal Year" refers to the twelve months beginning November 1, and ending October 31.
"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 Consultants, within guidelines agreed with and subject to the approval of the CEO of URS Corporation. Unlike Designated Participants, Nondesignated Participants will not be assigned Target Award Percentages or individual Performance Objectives.
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"Parent Company" refers to URS Corporation.
"Performance Objectives" or "Objectives" refers to the preestablished financial goals upon which overall URS Consultants and economic unit (i.e., URS Consultants, a region of URS Consultants, or an office of URS Consultants) performance will be assessed.
"Plan" refers to the URS Consultants Inc. 1993 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, 1992, and ending October 31, 1993, 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.
"Termination" means the Participant's ceasing his 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.
"Year-end" refers to the end of a Fiscal Year, October 31.
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V. EXAMPLES OF PLAN OPERATION
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URS CONSULTANTS PERFORMANCE TABLE
Actual Actual Actual Contribution Actual DSO New Sales Other Growth (70% weighting) (18% weighting) (8% weighting) (4% weighting) --------------- --------------- -------------- -------------- >= $14,490 <= 87 > $185,150 $12,600 92 $161,000 To be $10,710 97 $136,850 Determined
Scenario 1 - URSC Contribution, DSO performance, and New Sales exceed - ---------- objectives; Other Growth target objective met
Contribution Objective ($000s) $12,600 ($13,000 - $12,600)/($14,490 - Actual Contribution ($000s) $13,000 $12,600) = 21.2% + 100% = 121.2%
DSO Objective (days) 92 (90 - 92)/(87 - 92) = 40% + 100% = Actual DSO (days) 90 140%
New Sales Objective ($000s) $161,000 ($170,000 - $161,000)/($185,150 - Actual New Sales ($000s) $170,000 $161,000) = 37.3% + 100% = 137.3%
Other Growth Objective ($000s) $xx,xxx = 100% Actual Growth ($000s) $xx,xxx
TARGET BONUS POOL ($000s) $1,380 (($1,380 * 70%) * 121.2%) + (($1,380 ACTUAL BONUS POOL ($000s) $1,725 * 18%) * 140%) + (($1,380 * 8%) * 137.3%) + ($1,380 * 4%) * 100%) = $1,725
Scenario 2 - URSC Contribution minimum met; DSO minimum not met; New Sales - ---------- exceeds objectives; Other Growth target objective met
Contribution Objective ($000s) $12,600 ($11,000 - $12,600)/($10,710 - Actual Contribution ($000s) $11,000 $12,600) * (-75%) = -63.5% + 100% = 36.5%
DSO Objective (days) 92 Since the minimum DSO performance Actual DSO (days) 98 allowable under plan is not met, there is no bonus payout for this Performance Objective
New Sales Objective ($000s) $161,000 ($170,000 - $161,000)/($185,150 - Actual New Sales ($000s) $170,000 $161,000) = 37.3% + 100% = 137.3%
Other Growth Objective ($000s) $xx,xxx = 100% Actual Growth ($000s) $xx,xxx
TARGET BONUS POOL ($000s) $1,380 (($1,380 * 70%) * 36.5%) + (($1,380 ACTUAL BONUS POOL ($000s) $559 * 18%) * 0%) +(($1,380 * 8%) * 137.3%) + ($1,380 * 4%) * 100%) = $559
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Scenario 3 - URSC Contribution minimum not met; DSO and New Sales minimum - ---------- objectives met; Other Growth target objective met
Contribution Objective ($000s) $12,600 Contribution < 85% of Target; Actual Contribution ($000s) $10,000 Contribution Pool = 0%
DSO Objective (days) 92 DSO portion is contingent upon Actual DSO (days) 94 Contribution of 85% of Target. DSO portion is therefore 0%
New Sales Objective ($000s) $161,000 New Sales portion is contingent upon Actual New Sales ($000s) $140,000 Contribution of 85% of Target. New Sales portion is therefore 0%
Other Growth Objective ($000s) $xx,xxx Other Growth portion is contingent Actual Growth ($000s) $xx,xxx upon Contribution of 85% of Target. Other Growth portion is therefore 0%
TARGET BONUS POOL ($000s) $1,380 Since the pool generated is less ACTUAL BONUS POOL ($000s) $0 than 25% of the Target Pool, a Discretionary Pool not to exceed 25% of Target ($345) is generated
Actual awards to Designated Participants and funds available for distribution to Non-designated Participants will vary from Target levels in relationship to the Actual Bonus Pool versus the Target Pool.
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DESIGNATED PARTICIPANT PERFORMANCE
Contribution DSO New Sales Other Growth vs. Objective vs. Objective vs. Objective vs. Objective Actual vs. (70% weighting) (18% weighting) (8% weighting) (4% weighting) Target Award - --------------- --------------- -------------- -------------- ------------ >= 115% >= - 5 days >= 115% >= 115% 200% 100% 0 days 100% 100% 100% <= 85% <= + 5 days <= 85% <= 85% 0%
INDIVIDUAL PERFORMANCE (Assume the percentage weightings in the table above apply to managers a, b, and c)
Manager a - exceeds Contribution, DSO, New Sales, and Other Growth minimums, but does not meet target
Salary ($000s) $100 Target Bonus % 25% Target Bonus ($000s) $25
Contribution Objective ($000s) $1,325 ($1,250 - $1,325)/($1,126 - $1,325) Actual Contribution ($000s) $1,250 * (-100%) = -38% + 62% = 62%
DSO Objective (days) 90 (92 - 90)/(95 - 90) * (-100%) Actual DSO (days) 92 = -40% + 100% = 60%
New Sales Objective ($000s) $250 ($230 - $250)/($212.5 - $250) Actual New Sales ($000s) $230 * (- 100%) = -53% + 100% = 47%
Other Growth Objective ($000s) $150 ($135 - $150)/($128 - $150) Actual Growth ($000s) $135 * (-100%) = -68% + 100% = 32%
ACTUAL BONUS ($000s) $14.8 (($25 * 70%) * 62%) + (($25 * 18%) * 60%) + (($25 * 8%) * 47%) + (($25 * 4%) * 32%) = $14.8
Manager b - URSC Contribution minimum met; DSO minimum not met; New Sales exceeds objective; Other Growth exceeds objective
Salary ($000s) $100 Target Bonus % 15% Target Bonus ($000s) $15
Contribution Objective ($000s) $1,325 ($1,300 - $1,325)/($1,126 - $1,325) Actual Contribution ($000s) $1,300 * (-100%) = -13% + 100% = 87%
DSO Objective (days) 90 Since the minimum DSO performance Actual DSO (days) 97 allowable under plan is not met, there is no bonus payout for this objective
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New Sales Objective ($000s) $300 ($320 - $300)/($345 - $320) * (100%) Actual New Sales ($000s) $320 = 80% + 100% = 180%
Other Growth Objective ($000s) $200 ($220 - $200)/($230 - $200) * (100%) Actual Growth ($000s) $220 = 67% + 100% = 167%
ACTUAL BONUS ($000s) $12.3 (($15 * 70%) * 87%) + (($15 * 18%) * 0%) + (($15 * 8%) * 180%) + (($15 * 4%) * 167%) = $12.3
Manager c - URSC Contribution minimum met; DSO and New Sales minimums met; Other Growth meets objective
Salary ($000s) $120 Target Bonus % 25% Target Bonus ($000s) $30
Contribution Objective ($000s) $1,500 $1,250/$1,500 = 83% Actual Contribution ($000s) $1,250
DSO Objective (days) 92 Actual DSO (days) 94
New Sales Objective ($000s) $200 Actual New Sales ($000s) $180
Other Growth Objective ($000s) $180 Actual Growth ($000s) $180
ACTUAL BONUS ($000s) $0.0 CONTRIBUTION MINIMUM NOT MET = NO BONUS
Actual awards to Designated Participants and funds available for distribution to Non-designated Participants will vary from Target levels in relationship to the Actual Bonus Pool versus the Target Pool.
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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
of our report dated December 7, 1993, on our audits of the consolidated financial statements of URS Corporation and its subsidiaries as of October 31, 1993 and 1992, and for the years ended October 31, 1993, 1992 and 1991, which report is included in this Annual Report on Form 10-K.
/s/ COOPERS & LYBRAND ---------------------
San Francisco, California January 21, 1994
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POWER OF ATTORNEY -----------------
Each person whose signature appears below hereby constitutes and appoints any one of MARTIN M. KOFFEL, MICHAEL B. SHANE and KENT P. AINSWORTH, each with full power to act without the other, as his true and lawful attorney- in-fact and agent, with 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 1993 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 21, 1993.
/s/Richard C. Blum /s/William D. Walsh - ------------------------------ -------------------------- Richard C. Blum, Director William D. Walsh, Director
/s/Emmet J. Cashin, Jr. /s/Irwin L. Rosenstein - ------------------------------ -------------------------- Emmet J. Cashin, Jr., Director Irwin L. Rosenstein, Director
/s/Richard Q. Praeger /s/Michael B. Shane - ------------------------------ -------------------------- Richard Q. Praeger, Director Michael B. Shane, Director
/s/Martin M. Koffel /s/Richard B. Madden - ------------------------------ -------------------------- Martin M. Koffel, Director Richard B. Madden, Director
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