sc13d

0000950134-07-016057.txt : 20070727 0000950134-07-016057.hdr.sgml : 20070727 20070727085741 ACCESSION NUMBER: 0000950134-07-016057 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20070727 DATE AS OF CHANGE: 20070727 GROUP MEMBERS: DAVID EINHORN GROUP MEMBERS: DME ADVISORS LP GROUP MEMBERS: GREENLIGHT CAPITAL INC SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: WASHINGTON GROUP INTERNATIONAL INC CENTRAL INDEX KEY: 0000906469 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ENGINEERING SERVICES [8711] IRS NUMBER: 330565601 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-46235 FILM NUMBER: 071004824 BUSINESS ADDRESS: STREET 1: 720 PARK BLVD STREET 2: WASHINGTON GROUP PLAZA CITY: BOISE STATE: ID ZIP: 83712 BUSINESS PHONE: 2083865000 MAIL ADDRESS: STREET 1: P O BOX 73 CITY: BOISE STATE: ID ZIP: 83729 FORMER COMPANY: FORMER CONFORMED NAME: KASLER HOLDING CO DATE OF NAME CHANGE: 19930604 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: GREENLIGHT CAPITAL LLC CENTRAL INDEX KEY: 0001040272 IRS NUMBER: 133886851 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 140 EAST 45TH STREET STREET 2: 24TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2129731900 MAIL ADDRESS: STREET 1: 140 EAST 45TH STREET STREET 2: 24TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10017 SC 13D 1 d48464sc13d.htm SCHEDULE 13D sc13d


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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 13D

Under the Securities Exchange Act of 1934
(Amendment No. )*

WASHINGTON GROUP INTERNATIONAL, INC.

(Name of Issuer)

Shares of Common Stock, par value $0.01 per share

(Title of Class of Securities)

938862208

(CUSIP Number)

Greenlight Capital, L.L.C.
140 East 45th Street, 24th Floor
New York, New York 10017
(212) 973-1900

(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)

- with copies to -
Eliot D. Raffkind
Akin Gump Strauss Hauer & Feld LLP
1700 Pacific Avenue, Suite 4100
Dallas, Texas 75201-4618
(214) 969-2800

July 26, 2007

(Date of Event Which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. þ

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See §240.13d-7 for other parties to whom copies are to be sent.

* The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).


CUSIP No.		938862208


1	NAMES OF REPORTING PERSONS: GREENLIGHT CAPITAL, L.L.C.

	I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY):
	13-3886851

2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS):
	(a) o
	(b) o

3	SEC USE ONLY:



4	SOURCE OF FUNDS (SEE INSTRUCTIONS):



5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e):

	o

6	CITIZENSHIP OR PLACE OF ORGANIZATION:

	DELAWARE

		7	SOLE VOTING POWER:

NUMBER OF			1,321,512

SHARES		8	SHARED VOTING POWER:
BENEFICIALLY
OWNED BY			0

EACH		9	SOLE DISPOSITIVE POWER:
REPORTING
PERSON			1,321,512

WITH		10	SHARED DISPOSITIVE POWER:

			0

11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:

	1,321,512

12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS):

	o

13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11):

	4.5%

14	TYPE OF REPORTING PERSON (SEE INSTRUCTIONS):

	OO


CUSIP No.		938862208


1	NAMES OF REPORTING PERSONS: GREENLIGHT CAPITAL, INC.

	I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY):
	13-3871632

2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS):
	(a) o
	(b) o

3	SEC USE ONLY:



4	SOURCE OF FUNDS (SEE INSTRUCTIONS):



5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e):

	o

6	CITIZENSHIP OR PLACE OF ORGANIZATION:

	DELAWARE

		7	SOLE VOTING POWER:

NUMBER OF			1,392,500

SHARES		8	SHARED VOTING POWER:
BENEFICIALLY
OWNED BY			0

EACH		9	SOLE DISPOSITIVE POWER:
REPORTING
PERSON			1,392,500

WITH		10	SHARED DISPOSITIVE POWER:

			0

11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:

	1,392,500

12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS):

	o

13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11):

	4.8%

14	TYPE OF REPORTING PERSON (SEE INSTRUCTIONS):

	CO


CUSIP No.		938862208


1	NAMES OF REPORTING PERSONS: DME ADVISORS, L.P.

	I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY):
	20-1365209

2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS):
	(a) o
	(b) o

3	SEC USE ONLY:



4	SOURCE OF FUNDS (SEE INSTRUCTIONS):



5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e):

	o

6	CITIZENSHIP OR PLACE OF ORGANIZATION:

	DELAWARE

		7	SOLE VOTING POWER:

NUMBER OF			203,388

SHARES		8	SHARED VOTING POWER:
BENEFICIALLY
OWNED BY			0

EACH		9	SOLE DISPOSITIVE POWER:
REPORTING
PERSON			203,388

WITH		10	SHARED DISPOSITIVE POWER:

			0

11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:

	203,388

12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS):

	o

13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11):

	0.7%

14	TYPE OF REPORTING PERSON (SEE INSTRUCTIONS):

	PN


CUSIP No.		938862208


1	NAMES OF REPORTING PERSONS: DAVID EINHORN

	I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY):


2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS):
	(a) o
	(b) o

3	SEC USE ONLY:



4	SOURCE OF FUNDS (SEE INSTRUCTIONS):



5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e):

	o

6	CITIZENSHIP OR PLACE OF ORGANIZATION:

	UNITED STATES

		7	SOLE VOTING POWER:

NUMBER OF			2,917,400

SHARES		8	SHARED VOTING POWER:
BENEFICIALLY
OWNED BY			0

EACH		9	SOLE DISPOSITIVE POWER:
REPORTING
PERSON			2,917,400

WITH		10	SHARED DISPOSITIVE POWER:

			0

11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:

	2,917,400

12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS):

	o

13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11):

	10.0%

14	TYPE OF REPORTING PERSON (SEE INSTRUCTIONS):

	IN

CUSIP No. 938862208

SCHEDULE 13D

This Schedule 13D (the “Schedule 13D”) is being filed on behalf of Greenlight Capital, L.L.C., a Delaware limited liability company (“Greenlight LLC”), Greenlight Capital, Inc., a Delaware corporation (“Greenlight Inc”), DME Advisors, L.P., a Delaware limited partnership (“Advisors,” and together with Greenlight LLC and Greenlight Inc, “Greenlight”), and Mr. David Einhorn, principal of Greenlight (“Mr. Einhorn,” and collectively with Greenlight, the “Reporting Persons”).

This Schedule 13D relates to shares of common stock, par value $0.01 per share (“Common Stock”), of Washington Group International, Inc., a Delaware corporation (the “Issuer”), purchased by Greenlight for the account of (i) Greenlight Capital, L.P. (“Greenlight Fund”), of which Greenlight LLC is the general partner, (ii) Greenlight Capital Qualified, L.P. (“Greenlight Qualified”), of which Greenlight LLC is the general partner, (iii) Greenlight Capital Offshore, Ltd. (“Greenlight Offshore”), to which Greenlight Inc acts as investment advisor, and (iv) any managed accounts for which Advisors acts as investment manager.

The Reporting Persons previously reported beneficial ownership of the Common Stock of the Issuer on a Schedule 13G filed July 29, 2004, the last amendment to such Schedule 13G being filed March 1, 2007.

Item 1. Security and Issuer.


Securities acquired: Common stock, par value $0.01 per share

Issuer:		Washington Group International, Inc.
		720 Park Boulevard
		Boise, ID 83712

Item 2. Identity and Background.

(a) This statement is filed by: (i) Greenlight LLC, a Delaware limited liability company, (ii) Greenlight Inc, a Delaware corporation, (iii) Advisors, a Delaware limited partnership, and (iv) Mr. Einhorn, a United States citizen. Mr. Einhorn is the sole Senior Managing Member of Greenlight LLC and of DME Advisors GP, LLC, a Delaware limited liability company that serves as general partner of Advisors. Mr. Einhorn is the President and a Director of Greenlight Inc. In addition to Mr. Einhorn, the executive officers of Greenlight Inc are Mr. Daniel Roitman (“Mr. Roitman”), Chief Operating Officer, and Mr. Harry Brandler (“Mr. Brandler”), Chief Financial Officer.

(b) The business address of each of the Reporting Persons and Messrs. Roitman and Brandler is 140 East 45 Street, Floor 24, New York, NY 10017.

(c) Greenlight LLC, Greenlight Inc, and Advisors provide investment management services to private individuals and institutions. The principal occupation of Mr. Einhorn is investment management. The principal occupation of Mr. Roitman is Chief Operating Officer of Greenlight Inc and its affiliates. The principal occupation of Mr. Brandler is Chief Financial Officer of Greenlight Inc and its affiliates.

(d) None of the Reporting Persons, nor Mr. Roitman or Mr. Brandler, have, during the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors).

CUSIP No. 938862208

(e) None of the Reporting Persons, nor Mr. Roitman or Mr. Brandler, have, during the last five years, been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, Federal or State securities laws or finding any violation with respect to such laws.

(f) Greenlight LLC is a Delaware limited liability company; Greenlight Inc is a Delaware corporation; and Advisors is a Delaware limited partnership. Messrs. Einhorn, Roitman and Brandler are United States citizens.

Item 3. Source and Amount of Funds or Other Consideration.

The net investment costs (including commissions, if any) of the shares of Common Stock purchased by the Reporting Persons is approximately $108,674,470. The source of these funds was the working capital of Greenlight Fund, Greenlight Qualified, Greenlight Offshore and any managed accounts for which Advisors acts as investment manager.

Item 4. Purpose of Transaction.

The Reporting Persons acquired Common Stock of the Issuer for investment purposes. This Schedule 13D is being filed in connection with the proposed merger of the Issuer with URS Corporation. On July 26, 2007, the Reporting Persons sent a letter to the Board of Directors of the Issuer expressing their view that the acquisition price in the merger is inadequate. Greenlight stated that it will vote against the merger agreement between the Issuer and URS Corporation because it is not in the best interests of the Issuer and its stockholders. The letter, a copy of which is filed as an exhibit to this Schedule 13D, is incorporated herein by reference.

The Reporting Persons may make, or cause to be made, further acquisitions of Common Stock from time to time and may dispose of, or cause to be disposed of, any or all of the Common Stock held by the Reporting Persons at any time. The Reporting Persons intend to evaluate on an ongoing basis the investment in the Issuer and their options with respect to such investment. In connection with that evaluation, the Reporting Persons, in their individual capacities, may seek to meet with the board of directors and/or members of senior management or communicate publicly or privately with other stockholders or third parties to indicate their views on issues relating to the strategic direction undertaken by the Issuer and other matters of interest to stockholders generally. As part of any such discussions, the Reporting Persons, in their individual capacities, may make recommendations, including but not limited to changes in the strategic direction of the Issuer as a means of enhancing shareholder value, an increase or decrease in the size of the Issuer’s board of directors, the addition of independent members to the Issuer’s board of directors, a stock repurchase plan and changes in the Issuer’s capital structure and dividend policy.

Item 5. Interest in Securities of the Issuer.

According to information provided by the Issuer in its Form 10-Q, as of April 27, 2007, there were 29,181,543 shares of Common Stock outstanding.

(a)(i) Greenlight LLC may be deemed the beneficial owner of 1,321,512 shares of Common Stock held for the account of Greenlight Fund and Greenlight Qualified, which represents 4.5% of the Issuer’s outstanding shares of Common Stock.

CUSIP No. 938862208

(ii) Greenlight Inc may be deemed the beneficial owner of 1,392,500 shares of Common Stock held for the account of Greenlight Offshore, which represents 4.8% of the Issuer’s outstanding shares of Common Stock.

(iii) Advisors may be deemed the beneficial owner of 203,388 shares of Common Stock held for the account of any managed accounts for which Advisors acts as investment manager, which represents 0.7% of the Issuer’s outstanding shares of Common Stock.

(iv) Mr. Einhorn may be deemed the beneficial owner of 2,917,400 shares of Common Stock (which equals the sum of: (A) 1,321,512 shares of Common Stock held for the account of Greenlight Fund and Greenlight Qualified, (B) 1,392,500 shares of Common Stock held for the account of Greenlight Offshore, and (C) 203,388 shares of Common Stock held for the account of any managed accounts for which Advisors acts as investment manager), which represents 10.0% of the Issuer’s outstanding shares of Common Stock.

The filing of this Schedule 13D shall not be construed as an admission that any of the Reporting Persons is for the purposes of Section 13(d) or 13(g) of the Securities Exchange Act of 1934, the beneficial owner of any of the 2,917,400 shares of Common Stock owned by Greenlight Fund, Greenlight Qualified, Greenlight Offshore or any managed account managed by Advisors. Pursuant to Rule 13d-4, each of the Reporting Persons disclaims all such beneficial ownership.

(b) Greenlight LLC and Mr. Einhorn, for the account of each of Greenlight Fund and Greenlight Qualified, have the power to vote and dispose of the aggregate 1,321,512 shares of Common Stock held for the account of Greenlight Fund and Greenlight Qualified. Greenlight Inc and Mr. Einhorn, for the account of Greenlight Offshore, have the power to vote and dispose of the aggregate 1,392,500 shares of Common Stock held for the account of Greenlight Offshore. Advisors and Mr. Einhorn, for the account of any managed accounts for which Advisors acts as investment manager, have the power to vote and dispose of the aggregate 203,388 shares of Common Stock held for such accounts.

(d) Not applicable.

(e) Not applicable.


Item 6.		Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer.

To the best knowledge of the Reporting Persons, there are no contracts, arrangements, understandings or relationships (legal or otherwise) between the persons enumerated in Item 2 and any other person with respect to any securities of the Issuer, including but not limited to, transfer or voting of any of the Common Stock, finder’s fees, joint ventures, loan or option arrangements, puts or calls, guarantees of profits, division of profits or loss, or the giving or withholding of proxies.


Item 7.		Material to be Filed as Exhibits.

Exhibit 99.1 — Joint Filing Agreement by and among Greenlight LLC, Greenlight Inc, Advisors and Mr. Einhorn.

Exhibit 99.2 — Letter dated July 26, 2007 to the Board of Directors of Washington Group International.

CUSIP No. 938862208

SIGNATURES

After reasonable inquiry and to the best of my knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct.


Date: July 27, 2007	GREENLIGHT CAPITAL, L.L.C.

	By:	/S/ Daniel Roitman

		Name:	Daniel Roitman
		Title:	Chief Operating Officer

	GREENLIGHT CAPITAL, INC.

	By:	/S/ Daniel Roitman

		Name:	Daniel Roitman
		Title:	Chief Operating Officer

	DME ADVISORS, L.P.

	By:	DME Advisors GP, L.L.C.,
		its general partner

		By:	/S/ Daniel Roitman

			Name: Daniel Roitman
			Title: Chief Operating Officer

	/S/ Daniel Roitman

	Daniel Roitman, on behalf of David Einhorn

The Power of Attorney, executed by David Einhorn authorizing Harry Brandler and Daniel Roitman to sign and file this Schedule 13D on David Einhorn’s behalf, which was filed with the Schedule 13G filed with the Securities and Exchange Commission on July 18, 2005, by the Reporting Persons with respect to the Ordinary Shares of Flamel Technologies S.A. is hereby incorporated by reference.

EX-99.1 2 d48464exv99w1.htm JOINT FILING AGREEMENT exv99w1

EXHIBIT 99.1

JOINT FILING AGREEMENT

In accordance with Rule 13d-1(k) under the Securities Exchange Act of 1934, as amended, the undersigned agree to the joint filing on behalf of each of them of a Statement on Schedule 13D (including any and all amendments thereto) with respect to the shares of common stock, par value $.01 per share, of Washington Group International, Inc. and further agree that this Joint Filing Agreement shall be included as an Exhibit to such joint filings.

The undersigned further agree that each party hereto is responsible for the timely filing of such Statement on Schedule 13D and any amendments thereto, and for the accuracy and completeness of the information concerning such party contained therein; provided, however, that no party is responsible for the accuracy or completeness of the information concerning any other party, unless such party knows or has reason to believe that such information is inaccurate.

This Joint Filing Agreement may be signed in counterparts with the same effect as if the signature on each counterpart were upon the same instrument.

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of July 27, 2007.


GREENLIGHT CAPITAL, L.L.C.

By:	/S/ Daniel Roitman

	Name:	Daniel Roitman
	Title:	Chief Operating Officer

GREENLIGHT CAPITAL, INC.

By:	/S/ Daniel Roitman

	Name:	Daniel Roitman
	Title:	Chief Operating Officer

DME ADVISORS, L.P.

By:	DME Advisors GP, L.L.C.,
	its general partner

	By:	/S/ Daniel Roitman

		Name: Daniel Roitman
		Title: Chief Operating Officer

/S/ Daniel Roitman

Daniel Roitman, on behalf of David Einhorn

EX-99.2 3 d48464exv99w2.htm LETTER TO THE BOARD OF DIRECTORS OF WASHINGTON GROUP INTERNATIONAL exv99w2

EXHIBIT 99.2

July 26, 2007

The Board of Directors
Washington Group International
720 Park Boulevard
Boise, ID 83729

Dear Members of the Board of Directors,

We have determined to vote our Washington Group shares against the proposed merger with URS Corporation and are writing to explain why we think the merger is not in the best interest of Washington Group shareholders. We are not aware of any other large institutional shareholder of Washington Group that is in favor of the deal.

We met with the managements of both companies on May 29, 2007 and have reviewed the preliminary proxy materials. To summarize our views, while it is possible that combining the two companies makes sense, the proposed split of value between the companies does not give sufficient credit to Washington Group’s more robust growth prospects. As a result, based on the proposed merger terms, we believe that Washington Group shareholders will do better by rejecting the merger.

We have been long-standing shareholders of Washington Group. We began acquiring a stake in early 2001 and have added to it over the years. We have generally supported management’s efforts and backed management’s view about the optimal capital structure for the company. Our intent has been to be passive, supportive shareholders. However, the proposed merger is so inadequate that we feel required to speak out in respectful opposition.

Problems with the Sale and Sale Process

The Board of Directors relied on a fairness opinion from Goldman Sachs instead of an auction. Considering that the proposed transaction is a sale to a strategic buyer through a non-auction process, the approximate fifteen percent premium to the pre-announcement share price strongly suggests that a higher value could have been obtained through an auction. This is particularly true inasmuch as Washington Group had received unsolicited interest from several parties. If the company determined it was to be sold, we believe it should have either demanded a larger premium or sought additional competing bids through an auction process.

The proposed merger consideration of $43.80 in cash and 0.772 shares of URS common stock per Washington Group share does not represent full value for Washington Group shareholders. Based on our review of the proxy materials, the fairness opinion on which the Board relied contained overly conservative forecasts that do not recognize the real future earnings potential of the Washington Group business. That analysis does not assign value to Washington Group’s substantial tax asset, relies on overly conservative estimates of Washington Group’s earnings potential, and ignores the potential of several major opportunities Washington Group is pursuing.

We believe management’s net income estimates in the preliminary proxy of $88 million for 2007 and $104 million for 2008 (EPS of $2.88 and $3.41 respectively) are too conservative. In 2006, Washington Group had $42.2 million in charges related to problematic highway contracts in Southern California and Nevada and expects another $25 million in losses this year. The problematic contracts are nearing completion, as the largest is expected to be finished this fall. Management has indicated Washington Group no longer participates in the type of bidding that led to the Southwest highway contracts. These losses have at a minimum depressed recent and current results.

We believe that a valuation should attempt to normalize for these losses. Further, Washington Group expects (or at least hopes) to recover some of the monies lost on these projects. While we find it appropriate to exclude claims recoveries in forecasts for the purpose of managing Wall Street’s expectations, we believe that the value of future claims recoveries should be considered when selling the company. Certainly, it is inconsistent to count the losses and ignore the recoveries. The Goldman fairness opinion which relies on IBES (i.e. sell-side analysts’) estimates that exclude claims recoveries and management’s forecast that also appears to exclude claims recoveries, apparently failed to take this into account.

We observe that, adjusted to eliminate the Southwest highway projects, management apparently projects declining gross profit margin and operating margin in 2008. This is not consistent with the favorable environment and management’s view that it is achieving higher margins on new business than it has over the last few years.


	Proxy Forecast									Adjusted Forecast
	2006			2007			2008			2006			2007			2008
Revenue		3,398.1			4,002.0			4,645.0			3,398.1			4,002.0			4,645.0
Revenue growth					17.8	%		16.1	%					17.8	%		16.1	%

Ordinary cost of goods sold		3,242.3			3,809.1			4,416.1			3,242.3			3,809.1			4,416.1
Highway charges											(42.2	)		(25.0	)

Normalized cost of goods sold		3,242.3			3,809.1			4,416.1			3,200.1			3,784.1			4,416.1

Gross profit		155.8			192.9			228.9			198.0			217.9			228.9

Gross profit margin		4.59	%		4.82	%		4.93	%		5.83	%		5.44	%		4.93	%

Operating income		115.9			153.0			187.0			158.1			178.0			187.0

Operating margin		3.41	%		3.82	%		4.03	%		4.65	%		4.45	%		4.03	%

Net income		70.1			88.0			104.0			90.9			103.6			104.0

EPS	$	2.29		$	2.88		$	3.41		$	2.97		$	3.39		$	3.41

Source: Company Estimates. All amounts in millions of dollars except per share amounts.

On July 16, 2007, Washington Group affirmed its 2007 guidance of $2.60 — $2.92 in earnings per share, which now includes the $25 million charge for the Southwest highway contracts. This further supports the notion that management’s guidance history is based on setting a low bar designed not to be missed even when negative surprises occur. This was the second time in two years the company took a large, unexpected charge for the highway projects and still maintained its guidance.

We met with Washington Group management on March 28, 2007, and discussed Washington Group’s profit potential. Management identified possible adjustments to the 2006 results that would be unlikely to be repeated in future years:

	1.		Unusual Savannah River project operating earnings of $29 million

	2.		Reduced amortization expense of $10 million

	3.		Reduced pension expense of $2 million

	4.		Elimination of one-time financing costs of $5 million

	5.		Unusual mining project losses of $11 million

	6.		Unusual Southwest highway contract losses of $42 million

These items suggested adjusting pretax income for 2006 from $115 million to $155 million to create a baseline for 2007.

Washington Group management was very optimistic about business prospects, including its ability to win new work and to achieve an internal goal of increasing margins by one-to-two percent on new work. The midpoint of management’s guidance for work backlog at the end of 2007 is $6.7 billion, a nineteen percent increase from year-end 2006. While management initially suggested an additional adjustment for reduced work in Iraq, after further conversations management agreed this was not necessary because reduced Iraq work had been taken into account in the backlog forecast.

Management expects eighteen percent revenue growth in 2007. Assuming no margin improvement, pretax income should grow eighteen percent in 2007 from the adjusted 2006 baseline. This implies $183 million of pretax income in 2007, which translates into $107 million of net income and $3.49 of earnings per share. There should be further upside as the company achieves improved margins.

Management agreed it saw this potential and was focused on execution. Management referred us to its comments made on the fourth quarter conference call when CEO Stephen Hanks said Washington Group’s goal is to increase earnings by twenty percent in 2008. Based on our discussion of 2007, this implies estimated earnings of at least $4.19 per share in 2008. Management did not disagree with our view that revenue growth should follow from backlog growth, projected to grow by nineteen percent in 2007. Should the company achieve annual improvements in margins of one percent per year, as the new work flows through the income statement, earnings could be as much as $4.46 this year and $6.37 per share next year. In our meeting, Mr. Hanks then indicated that the five-year operating environment was so favorable he believed twenty percent growth was a good target for several years beyond 2008 as well. We wonder why the management forecast in the proxy is so disconnected from Mr. Hanks’s views.

During the company’s quarterly earnings call on May 10, 2007, Mr. Hanks estimated Washington Group has a deferred tax asset worth more than six dollars per share. Based on the description in the proxy statement, there is no evidence that Goldman took that asset into account in calculating Washington Group’s enterprise value or price-to-earnings ratio. The proposed transaction price of $80 represents a multiple of less than twelve times the company’s earnings potential adjusted for the $6 per share tax asset value.

Washington Group Earnings Potential


	2006			2007			2008
Revenue		3,398.1			4,002.0			4,762.4
Revenue growth					17.8	%		19.0	%

Gross profit		191.4			265.4			363.4
Gross profit margin		5.63	%		6.63	%		7.63	%

Pre tax income		155.3			230.8			326.8

Net income		90.0			136.3			194.5

EPS	$	2.94		$	4.46		$	6.37
P/E at $74 ($80 - $6 tax asset)		25.2			16.6			11.6

In the preliminary proxy statement, Goldman highlights a comparable company median price-to-earnings multiple of nineteen times 2008 estimates. From the close of the market on May 25, 2007 to the close of the market on July 25, 2007, the comparable group has appreciated and now trades at an average multiple of twenty-one. We believe the market is better discounting the favorable prospects for the engineering and construction industry as a whole.

If we apply the midpoint of our range of adjusted 2008 earnings estimates ($4.19 to $6.37 per share) to the current industry multiple of twenty-one times and add the six dollars per share of value for the tax asset, we estimate a fair value of Washington Group to be $117 per share. Obviously, this does not reflect a control premium or a portion of any anticipated synergies that should be available to shareholders in a sale.

This analysis also does not take into account claims recoveries or the potential upside from the Sellafield contract. Washington Group is one of four bidders for the contract worth $2.0 to $2.5 billion per year. The contract award is not included in our estimates but could add $2.00 to $2.50 of annual earnings per share for Washington Group during the life of the contract. We believe Washington Group is well positioned to compete for this unique contract and is not being compensated for its potential in the proposed merger.

Based on the above analysis, we believe the proposed merger consideration is inadequate and intend to vote against the deal.

Washington Group’s Opportunity as a Standalone Enterprise

Washington Group is over-capitalized. In the proposed sale, URS would use the cash on Washington Group’s balance sheet and take on additional leverage to try to deliver outsize returns to URS shareholders. URS has repeatedly cited its track record of successfully repaying debt as a corporate strength. On the conference call on May 29, Mr. Hanks cited the opportunity for Washington Group shareholders to “take some cash off the table.” Washington Group did not cite the leverage of the combined company as a negative.

Given that the Washington Group Board has determined that these traits are desirable, the company can create this opportunity for shareholders itself. Washington Group should consider returning its cash to shareholders and taking on debt comparable to that in the proposed sale to deliver outsize returns to Washington Group shareholders.

Management has addressed pressure from other investors to increase leverage by claiming the company risked losing customers if its balance sheet were less conservative. For several years, we have deferred to management’s judgment on this point. However, implicit in the proposed merger is the view that the company can operate with leverage without adverse impact on its business. In light of the Board now adopting a new view, it should reconsider the company’s standalone capital structure.

URS estimates it will have 3.2 times debt to EBITDA post merger. Washington Group should consider recapitalizing at a similar ratio. EBITDA adjusted to exclude highway contract charges for the twelve months ended March 31, 2007 was $207 million. This implies Washington Group has debt capacity of $660 million, which it could use along with cash on the balance sheet to pay a special dividend of $27.50 per share. The related interest expense and foregone interest income would reduce 2008 earnings by about $1 per share. At a constant earnings multiple, this would add approximately $7 per share to the company’s value and give shareholders an opportunity to “take some cash off the table.” Rather than accepting $43.80 per share in cash and thirty percent of the combined URS, Washington Group shareholders could receive $27.50 per share and own all of Washington Group.

Concluding Thoughts

A combination of URS and Washington Group is not by definition bad for Washington Group shareholders. When we met URS management, we were impressed with Messrs. Koffel and Hicks. We believe they could lead a combined company to great success. In addition to a possible $50 million of expense synergies, the proxy describes the advantages URS would have by offering a full complement of services to customers.

However, the proposed merger consideration neither gives Washington Group credit for its full value nor its superior growth prospects. The proposal does not share with Washington Group shareholders (other than through reduced participation as future URS holders) any portion of the synergies. Though a combination may make business sense, we are skeptical that URS will increase its bid to compensate Washington Group shareholders adequately. Like any good management, we believe Messrs. Koffel and Hicks are, in part, attracted to the proposed bargain price in the deal.

We believe Washington Group should remain a standalone company. While we understand that the merger agreement requires that this be brought to a shareholder vote, we would urge Washington Group management to remain focused on Washington Group as a standalone entity and not allow performance to suffer as a result of this distracting process. We have been long-time patient holders of Washington Group and are optimistic about its prospects. We look forward to remaining shareholders.

Sincerely,

/s/ David Einhorn

David Einhorn
President
Greenlight Capital, Inc.