Form 10-Q

10-Q 1 f82277e10vq.htm QUARTERLY REPORT FOR PERIOD ENDED APRIL 30, 2002 Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


(Mark one)
x		QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 30, 2002

OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from to

Commission file number 1-7567

URS CORPORATION

(Exact name of registrant as specified in its charter)


Delaware		94-1381538
(State or other jurisdiction of incorporation)		(I.R.S. Employer Identification No.)

100 California Street, Suite 500 San Francisco, California		94111-4529
(Address of principal executive offices)		(Zip Code)

(415) 774-2700

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class		Outstanding at June 3, 2002

Common Stock, $.01 par value		19,065,248

TABLE OF CONTENTS


PART I FINANCIAL INFORMATION
	ITEM 1. FINANCIAL STATEMENTS
		CONSOLIDATED BALANCE SHEETS
		CONSOLIDATED STATEMENTS OF OPERATIONS
		CONSOLIDATED STATEMENTS OF CASH FLOWS
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
PART II OTHER INFORMATION
	ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
	ITEM 3. DEFAULTS UPON SENIOR SECURITIES
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
	ITEM 5. OTHER INFORMATION
	ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
Exhibit 99.1

URS CORPORATION AND SUBSIDIARIES

This Form 10-Q for the quarter ended April 30, 2002, contains forward-looking statements, including statements about the continued strength of our business and opportunities for future growth. We believe that our expectations are reasonable and are based on reasonable assumptions. However, such forward-looking statements by their nature involve risks and uncertainties. We caution that a variety of factors, including but not limited to the following, could cause our business and financial results to differ materially from those expressed or implied in forward-looking statements: our highly leveraged position; our ability to service our debt; our ability to pursue business strategies; our continued dependence on federal, state and local appropriations for infrastructure spending; pricing pressures; changes in the regulatory environment; outcomes of pending and future litigation; our ability to attract and retain qualified professionals; industry competition; changes in international trade, monetary and fiscal policies; our ability to integrate future acquisitions successfully; our ability to successfully integrate our accounting and management information systems; and other factors discussed more fully in the attached Management’s Discussion and Analysis of Financial Condition and Results of Operations, as well as in our Annual Report on Form 10-K for the year ended October 31, 2001, and other reports subsequently filed from time to time with the Securities and Exchange Commission. We assume no obligation to update any forward-looking statements.


PART I.	FINANCIAL INFORMATION:

Item 1.	Financial Statements
	Consolidated Balance Sheets April 30, 2002 and October 31, 2001	3
	Consolidated Statements of Operations Three and six months ended April 30, 2002 and 2001	4
	Consolidated Statements of Cash Flows Six months ended April 30, 2002 and 2001	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28

PART II.	OTHER INFORMATION:

Item 1.	Legal Proceedings	29
Item 2.	Changes in Securities and Use of Proceeds	29
Item 3.	Defaults Upon Senior Securities	29
Item 4.	Submission of Matters to a Vote of Security Holders	29
Item 5.	Other Information	29
Item 6.	Exhibits and Reports on Form 8-K	30

PART I

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

URS CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)


			April 30, 2002			October 31, 2001

			(unaudited)
ASSETS
Current assets:
	Cash and cash equivalents		$	25,077		$	23,398
	Accounts receivable			467,008			484,107
	Costs and accrued earnings in excess of billings on contracts in process			259,599			289,644
	Less receivable allowances			(30,091	)		(28,572	)

		Net accounts receivable		696,516			745,179

	Deferred income taxes			8,296			10,296
	Prepaid expenses and other assets			24,411			24,769

		Total current assets		754,300			803,642
Property and equipment, net				143,297			106,997
Goodwill, net				501,086			500,286
Other assets				42,118			52,451

			$	1,440,801		$	1,463,376

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Current portion of long-term debt		$	60,456		$	54,425
	Accounts payable			105,029			135,066
	Accrued salaries and wages			46,629			69,982
	Accrued expenses and other			23,976			21,232
	Billings in excess of costs and accrued earnings on contracts in process			86,568			95,520

		Total current liabilities		322,658			376,225
Long-term debt				560,406			576,704
Deferred income taxes				40,514			34,700
Deferred compensation and other				33,676			33,146

		Total liabilities		957,254			1,020,775

Commitments and contingencies (Note 4)
Mandatorily redeemable Series B exchangeable convertible preferred stock, par value $1.00; authorized 150 shares; issued 58 and 55, respectively; liquidation preference $124,951 and $120,099, respectively				124,951			120,099

Stockholders’ equity:
	Common shares, par value $.01; authorized 50,000 shares; issued 18,921 and 18,198 shares, respectively			188			182
	Treasury stock			(287	)		(287	)
	Additional paid-in capital			168,472			155,273
	Other comprehensive loss			(6,391	)		(3,962	)
	Retained earnings			196,614			171,296

		Total stockholders’ equity		358,596			322,502

			$	1,440,801		$	1,463,376

See Notes to Consolidated Financial Statements

URS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)



		Three months ended					Six months ended
		April 30,					April 30,

		2002		2001			2002			2001


		(unaudited)					(unaudited)
Revenues		$	564,410	$	545,996		$	1,107,408		$	1,061,620

Expenses:
	Direct operating		332,692		319,727			663,508			625,260
	Indirect, general and administrative		191,774		185,711			368,620			361,229
	Interest expense, net		12,322		16,907			24,938			34,525

			536,788		522,345			1,057,066			1,021,014

Income before taxes			27,622		23,651			50,342			40,606
Income tax expense			10,710		10,770			20,140			18,270

Net income			16,912		12,881			30,202			22,336
Preferred stock dividend			2,466		2,235			4,884			4,449

Net income available for common stockholders			14,446		10,646			25,318			17,887
Other comprehensive income (loss)			549		(938	)		(2,429	)		(817	)

Comprehensive income		$	14,995	$	9,708		$	22,889		$	17,070

Net income per common share:
	Basic	$	.77	$	.62		$	1.37		$	1.05

	Diluted	$	.64	$	.55		$	1.16		$	.97

Weighted average shares outstanding:
	Basic		18,701		17,202			18,482			17,045

	Diluted		26,353		23,621			25,895			23,101

See Notes to Consolidated Financial Statements

URS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)



				Six Months Ended
				April 30,

				2002			2001


				(unaudited)
Cash flows from operating activities:
	Net income			$	30,202		$	22,336

	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization			15,252			20,277
		Amortization of financing fees			1,859			1,789
		Receivable allowances			1,519			2,622
		Stock compensation			1,206			906
	Effect of changes in current assets and liabilities:
		Accounts receivable and costs and accrued earnings in excess of billings on contracts in process			47,144			(13,433	)
		Income taxes recoverable			—			4,997
		Prepaid expenses and other assets			(1,167	)		(4,605	)
		Accounts payable, accrued salaries and wages and accrued expenses			(50,678	)		(33,364	)
		Billings in excess of costs and accrued earnings on contracts in process			(8,952	)		10,224
		Deferred income taxes			7,814			(1,167	)
		Deferred compensation and other			530			1,636
		Other, net			7,104			(1,127	)

			Total adjustments		21,631			(11,245	)

	Net cash provided by operating activities				51,833			11,091

Cash flows from investing activities:
	Capital expenditures, less equipment purchased through capital leases of $16,696 and $7,711, respectively				(34,856	)		(14,254	)

	Net cash used by investing activities				(34,856	)		(14,254	)

Cash flows from financing activities:
	Principal payments on long-term debt				(18,532	)		(12,082	)
	Borrowings of long-term debt				275			—
	Borrowings under the line of credit				42,576			30,000
	Repayments on the line of credit				(42,576	)		(25,000	)
	Repayments on capital lease obligations				(6,767	)		(3,600	)
	Borrowings under short-term notes				92			—
	Repayments on short-term notes				(2,365	)		(5,485	)
	Proceeds from sale of common shares through Employee Stock Purchase Plan and exercise of stock options				11,999			4,933

	Net cash used by financing activities				(15,298	)		(11,234	)

Net increase (decrease) in cash					1,679			(14,397	)
Cash and cash equivalents at beginning of period					23,398			23,693

Cash and cash equivalents at end of period				$	25,077		$	9,296

Supplemental Information:
	Interest paid			$	25,581		$	33,370

	Taxes paid			$	16,758		$	18,009

	Equipment acquired subject to capital lease obligations			$	16,696		$	7,711

	Non-cash dividends paid in-kind			$	4,852		$	4,422

See Notes to Consolidated Financial Statements

URS CORPORATION AND SUBSIDIARIES

NOTE 1. ACCOUNTING POLICIES

Overview

In the opinion of management, the information furnished reflects all adjustments, consisting only of normal recurring adjustments, which are necessary for the fair statement of the interim financial information.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted. These condensed financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2001. The results of operations for the three and six months ended April 30, 2002 are not necessarily indicative of the operating results for the full year.

Income Per Common Share

Basic income per common share is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted income per common share is computed giving effect to all dilutive potential common shares that were outstanding during the period. Dilutive potential shares of common stock consist of the incremental shares of common stock issuable upon the exercise of stock options and conversion of preferred stock. Diluted income per share is computed by dividing net income available to common stockholders plus the preferred stock dividend by the weighted-average common shares and dilutive potential common shares that were outstanding during the period.

In accordance with the disclosure requirement of Statement of Financial Accounting Standards No. 128 (“SFAS 128”), “Earnings per Share,” a reconciliation of the numerator and denominator of basic and diluted income per common share is provided as follows:



		Three months ended				Six months ended
		April 30				April 30

		2002		2001		2002		2001


		(In thousands, except per share amounts)
Numerator — Basic
	Net income available for common stockholders	$	14,446	$	10,646	$	25,318	$	17,887

Denominator — Basic
	Weighted-average common stock outstanding		18,701		17,202		18,482		17,045

Basic income per share		$	.77	$	.62	$	1.37	$	1.05

Numerator — Diluted
	Net income available for common stockholders	$	14,446	$	10,646	$	25,318	$	17,887
	Preferred stock dividend		2,466		2,235		4,884		4,449

Net income		$	16,912	$	12,881	$	30,202	$	22,336

Denominator — Diluted
	Weighted-average common stock outstanding		18,701		17,202		18,482		17,045
Effect of dilutive securities:
	Stock options		1,966		1,168		1,783		858
	Convertible preferred stock		5,686		5,251		5,630		5,198

			26,353		23,621		25,895		23,101

Diluted income per share		$	.64	$	.55	$	1.16	$	.97

Derivative Financial Instruments

The Company is exposed to risk of changes in interest rates as a result of borrowings under the senior collateralized credit facility. The Company has entered into interest rate derivatives to protect against the risk. At April 30, 2002, the only derivative instrument held by the Company was an interest rate cap agreement relating to $189.4 million of the Company’s LIBOR bank term loan borrowings. This agreement will expire on July 31, 2002. From an economic standpoint, the cap agreement provides the Company with protection against LIBOR interest rate increases above 7%. For accounting purposes, the Company has elected not to designate the cap agreement as a hedge, and in accordance with Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities,” which the Company adopted on November 1, 2000, changes in the fair market value of the cap agreement were included in indirect, general and administrative expenses in the Consolidated Statements of Operations. The value of the interest rate cap agreement at April 30, 2002 was zero.

Adoption of Statements of Financial Accounting Standards

In July 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 142 (“SFAS 142”), “Goodwill and Other Intangible Assets.” SFAS 142 supercedes Accounting Principles Board Opinion No. 17 and addresses the financial accounting and reporting standards for goodwill and intangible assets subsequent to their initial recognition. SFAS 142 requires that goodwill be separately disclosed from other intangible assets in the statement of financial position, and no longer be amortized. It also requires that goodwill and other intangible assets be tested for impairment at least annually. The provisions of SFAS 142 are effective for fiscal years beginning after December 15, 2001 and must be applied to all goodwill and other intangible assets that are recognized in an entity’s balance sheet at the beginning of that fiscal year. Early application of SFAS 142 is permitted for entities with fiscal years beginning after March 15, 2001, provided that the first interim period financial statements have not been issued previously. SFAS 142 primarily addresses the accounting for goodwill and intangible assets subsequent to their acquisition. The Company adopted SFAS 142 on November 1, 2001 and ceased to amortize goodwill on that date.

As part of the adoption of SFAS 142, the Company completed the initial impairment tests during the first quarter of fiscal year 2002, and these tests resulted in no impairment. The adoption of SFAS 142 removed certain differences between book and tax income; therefore, the Company’s estimated fiscal year 2002 effective tax rate has been reduced to approximately 40%. If amortization expense related to goodwill that is no longer amortized had been excluded from operating expenses for the quarter and six months ended April 30, 2001, and if the effective tax rate remained at 45%, diluted earnings per share for the three and six months ended April 30, 2001 would have increased by $0.09 and $0.18, respectively.

The Company regularly evaluates whether events and circumstances have occurred that indicate a possible impairment of goodwill. In determining whether there is an impairment of goodwill, the Company calculates its estimated fair value using the closing sales price of its common stock as of the date it performs the impairment tests. The Company has two reporting units — domestic and international. A portion of the total fair value is allocated to the international reporting unit based on discounted cash flows. The resulting fair values by reporting unit are then compared to their respective net book values, including goodwill. If the net book value of a reporting unit exceeds its fair value, the Company would measure the amount of impairment loss by comparing the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill. To the extent that the carrying amount of the reporting unit’s goodwill exceeds its implied fair value, a goodwill impairment loss would be recognized. This impairment test will be performed annually and whenever facts and circumstances indicate that there is a possible impairment of goodwill. The Company believes the methodology it uses in testing impairment of goodwill provides a reasonable basis in determining whether an impairment charge should be taken.

The Company has recorded goodwill in the domestic segment, which includes the parent company. The changes in the carrying amount of goodwill as of October 31, 2001 and April 30, 2002 were as follows:


					Accumulated			Net
		Goodwill			Amortization			Goodwill


		(In thousands)
Balance at October 31, 2000		$	553,806		$	(39,195	)	$	514,611
	Contingent purchase price related to prior acquisitions		1,436			—			1,436
	Goodwill amortization		—			(15,617	)		(15,617	)
	Goodwill written off due to sale of subsidiary		(152	)		8			(144	)

Balance at October 31, 2001			555,090			(54,804	)		500,286
	Contingent purchase price related to prior acquisitions		800			—			800

Balance at April 30, 2002		$	555,890		$	(54,804	)	$	501,086

The following table reflects the adjusted net income and net income per share as if SFAS 142 had been effective as of November 1, 2000:



		Three months ended				Six months ended
		April 30				April 30

		2002		2001		2002		2001


		(In thousands, except per share amounts)
Net Income
	Reported net income	$	16,912	$	12,881	$	30,202	$	22,336
	Add: goodwill amortization, net of tax		—		2,124		—		4,286

	Adjusted net income	$	16,912	$	15,005	$	30,202	$	26,622

Basic income per share
	Reported net income	$	.77	$	.62	$	1.37	$	1.05
	Goodwill amortization		—		.12		—		.25

	Adjusted net income	$	.77	$	.74	$	1.37	$	1.30

Diluted income per share
	Reported net income	$	.64	$	.55	$	1.16	$	.97
	Goodwill amortization		—		.09		—		.18

	Adjusted net income	$	.64	$	.64	$	1.16	$	1.15

In October 2001, FASB issued Statement of Financial Accounting Standards No. 144 (“SFAS 144”), “Accounting for the Impairment or Disposal of Long-Lived Assets.” SFAS 144 supersedes SFAS 121, and the accounting and reporting provisions of Accounting Principles Board Opinion No. 30, “Reporting the Results of Operations — Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions”, for the disposal of a segment of a business (as previously defined in that Opinion). SFAS 144 establishes a single accounting model, based on the framework established in SFAS 121, for long-lived assets to be disposed of by sale and to resolve significant implementation issues related to SFAS 121. The Company intends to adopt SFAS 144 on November 1, 2002. SFAS 144 is not expected to significantly impact the assessment of impairment of long-lived assets by the Company, other than the fact that SFAS 144 removes goodwill from its scope and, therefore, eliminates the requirement of SFAS 121 to allocate goodwill to long-lived assets to be tested for impairment. As indicated above, assessment of impairment of goodwill is required in accordance with the provisions of SFAS 142, which the Company adopted on November 1, 2001.

Reclassifications

Certain reclassifications have been made to the 2001 financial statements to conform to the 2002 presentation with no effect on consolidated net income, equity or cash flows as previously reported.

NOTE 2. PROPERTY AND EQUIPMENT

Property and equipment consists of the following:


		April 30,			October 31,
		2002			2001


		(In thousands)
Equipment		$	100,133		$	87,245
Capital leases			64,761			49,695
Furniture and fixtures			26,539			25,375
Leasehold improvements			22,045			20,248
Construction in progress			32,353			11,752

			245,831			194,315
Less: accumulated depreciation and amortization			(102,534	)		(87,318	)

	Net property and equipment	$	143,297		$	106,997

The Company capitalizes certain costs incurred in the development of software for internal use, including external direct material costs, external service costs, payroll and employee-related costs and interest costs incurred during the period of development.

NOTE 3. DEBT COVENANTS

The senior collateralized credit facility is governed by affirmative and negative covenants. These covenants include restrictions on incurring additional debt; paying dividends or making distributions to the Company’s stockholders; making certain investments, including joint ventures; creating contingent obligations; incurring liability in a sale-leaseback transaction; incurring or assuming liens; exceeding limits on consolidated capital expenditures, which was recently amended to allow for the additional costs associated with the Company’s new Enterprise Resource Program; repurchasing or retiring capital stock; making subordinated junior debt payments; and violating specified financial covenants. The financial covenants include maintenance of a minimum current ratio of 1.20 to 1.00, a minimum fixed charge coverage ratio of 1.10 to 1.00, an EBITDA minimum of $185.0 million and a maximum leverage ratio of 3.25 to 1.00 for the period ended April 30, 2002.

NOTE 4. COMMITMENTS AND CONTINGENCIES

Currently, the Company has limits of $125.0 million per loss and $125.0 million in the annual aggregate for general liability, professional errors and omissions liability, and contractor’s pollution liability insurance. These programs each have a self-insured claim retention of $1.0 million, $3.0 million and $0.25 million, respectively. With respect to various claims of Dames and Moore Group (“D-M”), an engineering and construction services firm acquired in June 1999, that arose from professional errors and omissions prior to the acquisition, the Company has maintained a self-insured retention of $5.0 million per claim. Excess limits provided for these coverages are on a “claims made” basis, covering only claims actually made during the policy period currently in effect. Thus, if the Company does not continue to maintain these excess policies, it will have no coverage for claims made after its termination date even if the occurrence was during the term of coverage. The Company intends to maintain these policies, but there can be no assurance that the Company can maintain existing coverages or that claims will not exceed the available amount of insurance. The Company believes that any settlement of these claims will not have a material adverse effect on its consolidated financial position and operations.

On January 18, 2002, the Attorney General of the State of Michigan filed a civil action against Radian International, L.L.C. (“Radian”), a subsidiary of the Company, entitled Jennifer M. Granholm, Attorney General of the State of Michigan, and the Michigan Department of Environmental Quality v. Radian, L.L.C., (Ingham County Michigan Circuit Court). The complaint alleges violations by Radian of the Michigan Hazardous Waste Management Act and the Michigan Air Pollution Control Act and related regulations. The claimed violations arose out of an environmental remediation project undertaken by Radian in 1997 and 1998 (prior to the Company’s acquisition of Radian as part of the D-M acquisition in 1999) at the Midland, Michigan facility of Dow Chemical Co. during which minor amounts of pollutants may have been released into the air during maintenance of a hazardous waste incinerator. The complaint seeks payment of civil penalties, costs, attorney’s fees and other relief against Radian. The Michigan Attorney General’s office has offered to settle the matter for $1.2 million.

Various other legal proceedings are pending against the Company or its subsidiaries alleging, among other things, breaches of contract or negligence in connection with the performance of professional services. In some actions, parties are seeking damages, including punitive or treble damages that substantially exceed the Company’s insurance coverage. Based on the Company’s previous experience with claims settlement and the nature of the pending legal proceedings, the Company does not believe that any of the legal proceedings are likely to result in a judgment against, or settlement by the Company, that would materially exceed its insurance coverage or have a material adverse effect on its consolidated financial position or operations.

NOTE 5. SUBSEQUENT EVENT

On June 9, 2002, the Company exercised its right to convert the outstanding Series B Exchangeable Convertible Preferred Stock (“Series B Stock”) to voting common stock. Under the terms of the Series B Stock, the Company had the option, exercisable at any time on or after June 9, 2002 (the third anniversary of the financing for the D-M acquisition), to convert all of the outstanding Series B Stock to common stock if the share price of its common stock on the relevant stock exchanges was at least $29.30 per share for 30 out of the 45 trading days prior to the conversion date. This requirement was satisfied, and accordingly, the Board of Directors met on June 9, 2002 and approved the conversion. As a result, all outstanding shares of the Series B Stock were converted to 5,845,104 shares of voting common stock.

NOTE 6. SEGMENT AND RELATED INFORMATION

Management has organized the Company by geographic divisions. The divisions are Parent, Domestic and International. The Parent division comprises the Parent Company. The Domestic division comprises all offices located in the United States of America. The International division comprises all offices in the Americas (e.g., Canada, Mexico, Central and South America), in Europe and in Asia/ Pacific (e.g., Australia, Indonesia, Singapore, New Zealand and the Philippines).

Accounting policies for each of the reportable segments are the same as those of the Company. The Company provides services throughout the world. Services to other countries may be performed within the United States of America, and generally, revenues are classified within the geographic area where the services are performed.

The following table shows summarized financial information (in thousands) on the Company’s reportable segments. Included in the “Eliminations” column are elimination of inter-segment sales and elimination of investment in subsidiaries.


As of April 30, 2002:	Parent		Domestic		International		Eliminations			Total

Total accounts receivable	$	—	$	619,882	$	76,634	$	—		$	696,516
Total assets	$	671,245	$	1,571,127	$	119,054	$	(920,625	)	$	1,440,801


As of October 31, 2001:	Parent		Domestic		International		Eliminations			Total

Total accounts receivable	$	—	$	667,009	$	78,170	$	—		$	745,179
Total assets	$	665,015	$	1,574,865	$	116,995	$	(893,499	)	$	1,463,376


For the Three Months Ended
April 30, 2002:	Parent			Domestic		International		Eliminations			Total

Revenue	$	—		$	512,965	$	53,661	$	(2,216	)	$	564,410
Segment operating income (loss)	$	(6,885	)	$	44,371	$	2,458	$	—		$	39,944


For the Three Months Ended
April 30, 2001:	Parent			Domestic		International		Eliminations			Total

Revenue	$	—		$	496,697	$	50,519	$	(1,220	)	$	545,996
Segment operating income (loss)	$	(5,762	)	$	45,446	$	874	$	—		$	40,558


For the Six Months Ended
April 30, 2002:	Parent			Domestic		International		Eliminations			Total

Revenue	$	—		$	1,008,005	$	103,696	$	(4,293	)	$	1,107,408
Segment operating income (loss)	$	(12,869	)	$	85,465	$	2,684	$	—		$	75,280


For the Six Months Ended
April 30, 2001:	Parent			Domestic		International		Eliminations			Total

Revenue	$	—		$	963,127	$	101,075	$	(2,582	)	$	1,061,620
Segment operating income (loss)	$	(10,334	)	$	83,158	$	2,307	$	—		$	75,131

Operating income is defined as income before income taxes and net interest expense.

NOTE 7. SUPPLEMENTAL GUARANTOR INFORMATION

In June 1999, the Company completed a private placement of $200.0 million principal amount of its 12 1/4% Senior Subordinated Exchange Notes due in the year 2009, which were exchanged in August 1999 for 12 1/4% Senior Subordinated Notes (the “Notes”) due in the year 2009. The Notes are fully and unconditionally guaranteed on a joint and several basis by certain of the Company’s wholly owned subsidiaries. Substantially all of the Company’s income and cash flow is generated by its subsidiaries. The Company has no operating assets or operations other than its investments in its subsidiaries. As a result, funds necessary to meet the Company’s debt service obligations are provided mainly by distributions or advances from its subsidiaries. Under certain circumstances, contractual and legal restrictions, as well as the financial condition and operating requirements of the Company’s subsidiaries, could limit the Company’s ability to obtain cash from its subsidiaries for the purpose of meeting its debt service obligations, including the payment of principal and interest on the Notes.

The following information sets forth the condensed consolidating balance sheets of the Company as of April 30, 2002 and October 31, 2001, the condensed consolidating statements of operations for the three and six months ended April 30, 2002 and 2001, and the condensed consolidating statements of cash flows for the six months ended April 30, 2002 and 2001. Entries necessary to consolidate the Company and all of its subsidiaries are reflected in the eliminations column. Separate complete financial statements of the Company and its subsidiaries that guarantee the Notes would not provide additional material information that would be useful in assessing the financial composition of such subsidiaries.

URS CORPORATION

CONDENSED CONSOLIDATING BALANCE SHEET

(In thousands)

(unaudited)



			April 30, 2002

									Subsidiary
						Subsidiary			Non-
						Guarantors			Guarantors
			Parent			(Domestic)			(International)		Eliminations			Consolidated

ASSETS
Current assets:
	Cash and cash equivalents		$	9,302		$	2,586		$	13,189	$	—		$	25,077
	Accounts receivable, net			—			619,882			76,634		—			696,516
	Prepaid expenses and other assets			14,660			15,646			2,401		—			32,707

		Total current assets		23,962			638,114			92,224		—			754,300
Property and equipment, net				1,920			131,389			9,988		—			143,297
Goodwill, net				386,197			114,889			—		—			501,086
Investment in unconsolidated subsidiaries				247,643			656,986			15,996		(920,625	)		—
Other assets				11,523			29,749			846		—			42,118

			$	671,245		$	1,571,127		$	119,054	$	(920,625	)	$	1,440,801

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Current portion of long-term debt		$	45,711		$	13,199		$	1,546	$	—		$	60,456
	Accounts payable			(5,634	)		97,839			12,824		—			105,029
	Inter-company payable			34,316			(81,712	)		46,755		641			—
	Accrued expenses and other			5,806			46,796			18,003		—			70,605
	Billings in excess of costs and accrued earnings on contracts in process			—			76,110			10,458		—			86,568

		Total current liabilities		80,199			152,232			89,586		641			322,658
Long-term debt				524,437			35,553			416		—			560,406
Other				47,009			26,696			485		—			74,190

		Total liabilities		651,645			214,481			90,487		641			957,254

Mandatorily redeemable Series B exchangeable convertible preferred stock				124,951			—			—		—			124,951
Total stockholders’ equity				(105,351	)		1,356,646			28,567		(921,266	)		358,596

			$	671,245		$	1,571,127		$	119,054	$	(920,625	)	$	1,440,801

URS CORPORATION

CONDENSED CONSOLIDATING BALANCE SHEET

(In thousands)



			October 31, 2001

									Subsidiary
						Subsidiary			Non-
						Guarantors			Guarantors
			Parent			(Domestic)			(International)		Eliminations			Consolidated

ASSETS
Current assets:
	Cash and cash equivalents		$	1,699		$	9,371		$	12,328	$	—		$	23,398
	Accounts receivable, net			—			667,009			78,170		—			745,179
	Prepaid expenses and other assets			16,615			17,416			1,034		—			35,065

		Total current assets		18,314			693,796			91,532		—			803,642
Property and equipment, net				820			96,193			9,984		—			106,997
Goodwill, net				385,749			114,537			—		—			500,286
Investment in unconsolidated subsidiaries				247,643			631,103			14,753		(893,499	)		—
Other assets				12,489			39,236			726		—			52,451

			$	665,015		$	1,574,865		$	116,995	$	(893,499	)	$	1,463,376

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Current portion of long-term debt		$	39,794		$	10,803		$	3,828	$	—		$	54,425
	Accounts payable			1,012			120,414			13,640		—			135,066
	Inter-company payable			(32,720	)		(13,341	)		47,130		(1,069	)		—
	Accrued expenses and other			6,672			68,945			15,597		—			91,214
	Billings in excess of costs and accrued earnings on contracts in process			—			84,411			11,109		—			95,520

		Total current liabilities		14,758			271,232			91,304		(1,069	)		376,225
Long-term debt				547,954			28,276			474		—			576,704
Other				40,035			27,286			525		—			67,846

		Total liabilities		602,747			326,794			92,303		(1,069	)		1,020,775
Mandatorily redeemable Series B exchangeable convertible preferred stock				120,099			—			—		—			120,099
Total stockholders’ equity				(57,831	)		1,248,071			24,692		(892,430	)		322,502

			$	665,015		$	1,574,865		$	116,995	$	(893,499	)	$	1,463,376

URS CORPORATION

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(In thousands)

(unaudited)



		Three Months Ended April 30, 2002

							Subsidiary
					Subsidiary		Non-
					Guarantors		Guarantors
		Parent			(Domestic)		(International)		Eliminations			Consolidated

Revenues		$	—		$	512,965	$	53,661	$	(2,216	)	$	564,410

Expenses:
	Direct operating		—			307,195		27,713		(2,216	)		332,692
	Indirect, general and administrative		6,885			161,399		23,490		—			191,774
	Interest expense, net		11,823			380		119		—			12,322

			18,708			468,974		51,322		(2,216	)		536,788

Income (loss) before taxes			(18,708	)		43,991		2,339		—			27,622
Income tax expense			9,954			110		646		—			10,710

Net income (loss)			(28,662	)		43,881		1,693		—			16,912
Preferred stock dividend			2,466			—		—		—			2,466

Net income (loss) available for common stockholders			(31,128	)		43,881		1,693		—			14,446
Other comprehensive income			—			—		549		—			549

Comprehensive income (loss)		$	(31,128	)	$	43,881	$	2,242	$	—		$	14,995



		Three Months Ended April 30, 2001

							Subsidiary
					Subsidiary		Non-
					Guarantors		Guarantors
		Parent			(Domestic)		(International)			Eliminations			Consolidated

Revenues		$	—		$	496,697	$	50,519		$	(1,220	)	$	545,996

Expenses:
	Direct operating		—			296,465		24,482			(1,220	)		319,727
	Indirect, general and administrative		5,762			154,786		25,163			—			185,711
	Interest expense, net		16,519			249		139			—			16,907

			22,281			451,500		49,784			(1,220	)		522,345

Income (loss) before taxes			(22,281	)		45,197		735			—			23,651
Income tax expense			9,521			778		471			—			10,770

Net income (loss)			(31,802	)		44,419		264			—			12,881
Preferred stock dividend			2,235			—		—			—			2,235

Net income (loss) available for common stockholders			(34,037	)		44,419		264			—			10,646
Other comprehensive loss			—			—		(938	)		—			(938	)

Comprehensive income (loss)		$	(34,037	)	$	44,419	$	(674	)	$	—		$	9,708

URS CORPORATION

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(In thousands)

(unaudited)



		Six Months Ended April 30, 2002

							Subsidiary
					Subsidiary		Non-
					Guarantors		Guarantors
		Parent			(Domestic)		(International)			Eliminations			Consolidated

Revenues		$	—		$	1,008,005	$	103,696		$	(4,293	)	$	1,107,408

Expenses:
	Direct operating		—			613,861		53,940			(4,293	)		663,508
	Indirect, general and administrative		12,869			308,679		47,072			—			368,620
	Interest expense, net		23,911			789		238			—			24,938

			36,780			923,329		101,250			(4,293	)		1,057,066

Income (loss) before taxes			(36,780	)		84,676		2,446			—			50,342
Income tax expense			19,063			166		911			—			20,140

Net income (loss)			(55,843	)		84,510		1,535			—			30,202
Preferred stock dividend			4,884			—		—			—			4,884

Net income (loss) available for common stockholders			(60,727	)		84,510		1,535			—			25,318
Other comprehensive loss			—			—		(2,429	)		—			(2,429	)

Comprehensive income (loss)		$	(60,727	)	$	84,510	$	(894	)	$	—		$	22,889



		Six Months Ended April 30, 2001

							Subsidiary
					Subsidiary		Non-
					Guarantors		Guarantors
		Parent			(Domestic)		(International)			Eliminations			Consolidated

Revenues		$	—		$	963,127	$	101,075		$	(2,582	)	$	1,061,620

Expenses:
	Direct operating		—			573,291		54,551			(2,582	)		625,260
	Indirect, general and administrative		10,334			306,678		44,217			—			361,229
	Interest expense, net		33,650			507		368			—			34,525

			43,984			880,476		99,136			(2,582	)		1,021,014

Income (loss) before taxes			(43,984	)		82,651		1,939			—			40,606
Income tax expense			16,812			909		549			—			18,270

Net income (loss)			(60,796	)		81,742		1,390			—			22,336
Preferred stock dividend			4,449			—		—			—			4,449

Net income (loss) available for common stockholders			(65,245	)		81,742		1,390			—			17,887
Other comprehensive loss			—			—		(817	)		—			(817	)

Comprehensive income (loss)		$	(65,245	)	$	81,742	$	573		$	—		$	17,070

URS CORPORATION

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

(In thousands)

(unaudited)



			Six Months Ended April 30, 2002

									Subsidiary
						Subsidiary			Non-
						Guarantors			Guarantors
			Parent			(Domestic)			(International)			Eliminations			Consolidated

Cash flows from operating activities:
	Net income (loss)		$	(55,843	)	$	84,510		$	1,535		$	—		$	30,202

Adjustments to reconcile net income to net cash provided by operating activities:
	Depreciation and amortization			223			13,632			1,397			—			15,252
	Amortization of financing fees			1,859			—			—			—			1,859
	Receivable allowances			—			13			1,506			—			1,519
	Stock compensation			1,206			—			—			—			1,206
Effect of changes in current assets and liabilities:
	Accounts receivable and costs and accrued earnings in excess of billings on contracts in process			—			47,114			30			—			47,144
	Prepaid expenses and other assets			(1,569	)		1,769			(1,367	)		—			(1,167	)
	Accounts payable, accrued salaries and wages and accrued expenses			59,493			(114,912	)		2,312			2,429			(50,678	)
	Billings in excess of costs and accrued earnings on contracts in process			—			(8,301	)		(651	)		—			(8,952	)
	Deferrals and other, net			9,492			8,545			(160	)		(2,429	)		15,448

		Total adjustments		70,704			(52,140	)		3,067			—			21,631

	Net cash provided by operating activities			14,861			32,370			4,602			—			51,833

Cash flows from investing activities:
		Capital expenditures		(1,214	)		(32,241	)		(1,401	)		—			(34,856	)

	Net cash used by investing activities			(1,214	)		(32,241	)		(1,401	)		—			(34,856	)

Cash flows from financing activities:
	Principal payments on long-term debt, bank borrowings and capital lease obligations			(18,043	)		(6,914	)		(2,340	)		—			(27,297	)
	Proceeds from sale of common shares through Employee Stock Purchase Plan and exercise of stock options			11,999			—			—			—			11,999

	Net cash used by financing activities			(6,044	)		(6,914	)		(2,340	)		—			(15,298	)

Net increase (decrease) in cash				7,603			(6,785	)		861			—			1,679
Cash and cash equivalents at beginning of period				1,699			9,371			12,328			—			23,398

Cash and cash equivalents at end of period			$	9,302		$	2,586		$	13,189		$	—		$	25,077

URS CORPORATION

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

(In thousands)

(unaudited)



			Six Months Ended April 30, 2001

									Subsidiary
						Subsidiary			Non-
						Guarantors			Guarantors
			Parent			(Domestic)			(International)			Eliminations			Consolidated

Cash flows from operating activities:
	Net income (loss)		$	(60,796	)	$	81,742		$	1,390		$	—		$	22,336

Adjustments to reconcile net income to net cash provided (used) by operating activities:
	Depreciation and amortization			70			18,787			1,420			—			20,277
	Amortization of financing fees			1,789			—			—			—			1,789
	Receivable allowances			(174	)		1,055			1,741			—			2,622
	Stock compensation			906			—			—			—			906
Effect of changes in current assets and liabilities:
	Accounts receivable and costs and accrued earnings in excess of billings on contracts in process			—			(16,855	)		3,422			—			(13,433	)
	Prepaid expenses and other assets			3,592			(821	)		(2,379	)		—			392
	Accounts payable, accrued salaries and wages and accrued expenses			47,462			(82,727	)		502			1,399			(33,364	)
	Billings in excess of costs and accrued earnings on contracts in process			—			7,966			2,258			—			10,224
	Deferrals and other, net			(2,733	)		14,060			(10,586	)		(1,399	)		(658	)

		Total adjustments		50,912			(58,535	)		(3,622	)		—			(11,245	)

	Net cash provided (used) by operating activities			(9,884	)		23,207			(2,232	)		—			11,091

Cash flows from investing activities:
		Capital expenditures		(264	)		(12,861	)		(1,129	)		—			(14,254	)

	Net cash used by investing activities			(264	)		(12,861	)		(1,129	)		—			(14,254	)

Cash flows from financing activities:
	Principal payments on long-term debt, bank borrowings, and capital lease obligations			(8,375	)		(3,625	)		(4,167	)		—			(16,167	)
	Proceeds from sale of common shares through Employee Stock Purchase Plan and exercise of stock options			4,933			—			—			—			4,933

	Net cash used by financing activities			(3,442	)		(3,625	)		(4,167	)		—			(11,234	)

Net increase (decrease) in cash				(13,590	)		6,721			(7,528	)		—			(14,397	)
Cash and cash equivalents at beginning of period				10,901			(5,820	)		18,612			—			23,693

Cash and cash equivalents at end of period			$	(2,689	)	$	901		$	11,084		$	—		$	9,296


ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

We report the results of our operations on a fiscal year, which ends on October 31. This Management’s Discussion and Analysis (“MD&A”) should be read in conjunction with the MD&A and the footnotes to the Consolidated Financial Statements included in the Annual Report on Form 10-K for the fiscal year ended October 31, 2001, which was previously filed with the Securities and Exchange Commission.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying consolidated financial statements and related footnotes. In preparing these financial statements, management has made its best estimates and judgments of certain amounts included in the financial statements, giving consideration to materiality. We do not believe there is a great likelihood that materially different amounts would be reported related to the accounting policies described below. However, application of these accounting policies involves exercise of judgment and use of assumptions as to future uncertainties; as a result, actual results could differ from these estimates.

In accordance with recent Securities and Exchange Commission guidance, those material accounting policies that we believe are the most critical to an investor’s understanding of our financial results and condition and require complex management judgment have been expanded and are discussed below. Information regarding our other accounting policies is included in our Annual Report on Form 10-K for the year ended October 31, 2001.

Revenue Recognition

We earn our revenues from cost-plus, fixed-price and time-and-materials contracts. Currently, approximately one-third of our revenues is recognized under each of the contract types. We currently have approximately 4,000 active jobs, none of which represent more than 1% of our total revenues for the quarter. If estimated total costs on any contract indicate a loss, the entire estimated loss is charged to operations in the period the loss first becomes known.

Cost-Plus Contracts. Under cost-plus contracts, we charge clients negotiated rates based on direct and indirect costs. Labor costs and subcontractor services are the principal components of our direct costs. Federal Acquisition Regulations, which are applicable to all Federal government contracts and which are partially incorporated in many local and state agency contracts, limit the recovery of certain specified indirect costs on contracts subject to such regulations. In negotiating a cost-plus contract, we estimate all recoverable direct and indirect costs and then add 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. We receive payment and recognize revenues based on the total actual number of labor hours expended and total costs incurred. If the total actual 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, we must obtain a contract modification to receive payment for such overage. Cost-plus contracts covered by Federal Acquisition Regulations and certain state and local agencies require an audit of actual costs and provide for upward or downward adjustments if actual recoverable costs differ from billed recoverable costs.

Fixed-Price Contracts. Under our fixed-price contracts, clients pay us an agreed sum negotiated in advance for the specified scope of work. Under fixed-price contracts, we make no revenue adjustments if we over-estimate or under-estimate the costs required to complete the project, unless there is a change of scope in the work to be performed. Accordingly, our profit margin will increase to the extent that costs are below the contracted amounts. The profit margin will decrease, and we may realize a loss on the project if the costs exceed the estimates. Revenues on fixed-price contracts are recognized using the percentage-of-completion method and include a proportion of the earnings expected to be realized on a contract in the ratio that costs

incurred bear to total estimated costs. The percentage-of-completion is calculated on a contract by contract basis to arrive at the total estimated revenues recognized under fixed-price contracts.

Time-and-Materials Contracts. Under our time-and-materials contracts, we negotiate hourly billing rates and charge our clients based on actual time expended. In addition, clients reimburse us for the actual out-of-pocket costs of materials and other direct incidental expenditures incurred in connection with performing the contract. Our profit margins on time-and-materials contracts fluctuate based on actual labor and overhead costs directly charged or allocated to contracts compared with negotiated billing rates. Revenues under these contracts are recognized based on the actual number of hours we spend on the projects plus any actual out-of-pocket costs of materials and other direct incidental expenditures incurred on the projects.

Goodwill

In July 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 142 (“SFAS 142”), “Goodwill and Other Intangible Assets.” SFAS 142 supercedes Accounting Principles Board Opinion No. 17 and addresses the financial accounting and reporting standards for goodwill and intangible assets subsequent to their initial recognition. SFAS 142 requires that goodwill be separately disclosed from other intangible assets in the statement of financial position, and no longer be amortized. It also requires that goodwill and other intangible assets be tested for impairment at least annually. The provisions of SFAS 142 are effective for fiscal years beginning after December 15, 2001 and must be applied to all goodwill and other intangible assets that are recognized in an entity’s balance sheet at the beginning of that fiscal year. Early application of SFAS 142 is permitted for entities with fiscal years beginning after March 15, 2001, provided that the first interim period financial statements have not been issued previously. SFAS 142 primarily addresses the accounting for goodwill and intangible assets subsequent to their acquisition. We adopted SFAS 142 on November 1, 2001 and ceased to amortize goodwill on that date.

As part of our adoption of SFAS 142, we completed the initial impairment tests during the first quarter of fiscal year 2002, and these tests resulted in no impairment. The adoption of SFAS 142 removed certain differences between book and tax income; therefore, our estimated fiscal year 2002 effective tax rate has been reduced to approximately 40%. If amortization expense related to goodwill that is no longer amortized had been excluded from operating expenses for the quarter and year-to-date ended April 30, 2001, and if the effective tax rate remained at 45%, diluted earnings per share for the three and six months ended April 30, 2001 would have increased by $0.09 and $0.18, respectively.

We regularly evaluate whether events and circumstances have occurred that indicate a possible impairment of goodwill. In determining whether there is an impairment of goodwill, we calculate the estimated fair value of our company using the closing sales price of our common stock as of the date we perform the impairment tests. We have two reporting units — domestic and international. A portion of the total fair value is allocated to the international reporting unit based on discounted cash flows. The resulting fair values by reporting unit are then compared to their respective net book values, including goodwill. If the net book value of a reporting unit exceeds its fair value, we would measure the amount of the impairment loss by comparing the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill. To the extent that the carrying amount of the reporting unit’s goodwill exceeds its implied fair value, a goodwill impairment loss would be recognized. This impairment test will be performed annually and whenever facts and circumstances indicate that there is a possible impairment of goodwill. We believe the methodology we use in testing impairment of goodwill provides us a reasonable basis in determining whether an impairment charge should be taken.

Allowance for Uncollectible Accounts Receivable

Our accounts receivable and accrued earnings in excess of billings on contracts in process are reduced by an allowance for amounts that may become uncollectible in the future. The estimated allowance for uncollectible amounts is based primarily on management’s evaluation of the financial condition of our clients. Management regularly evaluates the adequacy of the allowance for uncollectible amounts by taking into

consideration factors such as the type of customer — governmental agencies or private sector client; trends in actual and forecasted credit quality, including delinquency and late payment history; and current economic conditions that may affect a client’s ability to pay. The use of different estimates or assumptions could produce different provisions for uncollectible accounts receivable.

RESULTS OF OPERATIONS

Second quarter ended April 30, 2002 vs. April 30, 2001

Consolidated

Our revenues were $564.4 million for the quarter ended April 30, 2002, an increase of $18.4 million, or 3.4%, over the amount reported for the same period last year. The increase is due to increased demand for our services.

Direct operating expenses for the quarter ended April 30, 2002, which consist of direct labor and other direct expenses, including subcontractor costs, increased $13.0 million, an increase of 4.1% over the amount reported for the same period last year, due to an increase in the use of subcontractors and an increase in direct labor and other direct costs as a result of the increase in revenues. Indirect, general and administrative expenses (“IG&A”) for the quarter ended April 30, 2002 increased $6.1 million, or 3.3%, from the amount reported for the same period last year due to an increase in indirect labor, benefits and rental expense, which was partially offset by the decrease in amortization expense of $3.9 million as a result of implementing SFAS 142. Net interest expense for the quarter ended April 30, 2002 decreased $4.6 million due to repayments of our long-term debt and to decreases in interest rates.

Our earnings before income taxes were $27.6 million for the second quarter ended April 30, 2002, compared to $23.7 million for the same period last year. Our effective income tax rates for the quarters ended April 30, 2002 and 2001 were approximately 39% and 46%, respectively. The decrease in the effective income tax rate was primarily due to the adoption of SFAS 142, which removed certain differences between book and tax income.

We reported net income of $16.9 million, or $0.64 per share on a diluted basis, for the second quarter ended April 30, 2002, compared with $12.9 million, or $0.55 per share on a diluted basis, for the same period last year.

Our backlog of signed and funded contracts was $1,679.5 million at April 30, 2002, as compared with $1,684.1 million at October 31, 2001.

Domestic Segment Including Parent Company

Revenues for the domestic segment were $513.0 million for the quarter ended April 30, 2002, an increase of $16.3 million, or 3.3%, over the amount reported for the same period last year. The increase was due to increased demand for our services.

Domestic direct operating expenses for the quarter ended April 30, 2002 increased $10.7 million, a 3.6% increase over the amount reported for the same period last year, due to increases in direct labor and other direct costs as a result of an increase in revenues and an increase in the use of subcontractors. Indirect, general and administrative expenses for the quarter ended April 30, 2002 increased $7.7 million, or 4.8%, from the amount reported for the same period last year, due to an increase in indirect labor, benefits and rental expense during the quarter, which was partially offset by a decrease in amortization expense of $3.9 million as a result of implementing SFAS 142. Interest expense decreased $4.6 million due to repayments of our long-term debt and to decreases in interest rates.

International Segment

Revenues for the international segment were $53.7 million for the quarter ended April 30, 2002, an increase of $3.1 million, or 6.2%, from the amount reported for the same period last year. The increase was mainly due to decreases in foreign currency exchange rates versus the U.S. dollar.

Foreign direct operating expenses for the quarter ended April 30, 2002 increased $3.2 million, a 13.2% increase from the amount reported for the same period last year, primarily due to the decrease in foreign currency exchange rates versus the U.S. dollar as well as decreases in the use of subcontractors and in pass-through expenses. Indirect, general and administrative expenses for the quarter ended April 30, 2002 decreased $1.7 million, or 6.7%, from the amount reported for the same period last year, primarily due to a decrease in benefits, rental expense and travel expenses, in addition to the effect of the decrease in foreign currency exchange rates.

Six months ended April 30, 2002 vs. April 30, 2001

Consolidated

Our revenues were $1,107.4 million for the six months ended April 30, 2002, an increase of $45.8 million, or 4.3%, over the amount reported for the same period last year. The increase is due to increased demand for our services.

Direct operating expenses for the six months ended April 30, 2002, which consist of direct labor and other direct expenses, including subcontractor costs, increased $38.2 million, an increase of 6.1% over the amount reported for the same period last year, due to an increase in the use of subcontractors and an increase in direct labor and other direct costs as a result of the increase in revenues. Indirect, general and administrative expenses (“IG&A”) for the six months ended April 30, 2002 increased $7.4 million, or 2.1%, from the amount reported for the same period last year, due to an increase in indirect labor, benefits and rental expense, which was partially offset by the decrease in amortization expense of $7.8 million as a result of implementing SFAS 142. Net interest expense for the six months ended April 30, 2002 decreased $9.6 million due to repayments of our long-term debt and to decreases in interest rates.

Our earnings before income taxes were $50.3 million for the six months ended April 30, 2002, compared to $40.6 million for the same period last year. Our effective income tax rates for the six months ended April 30, 2002 and 2001 were approximately 40% and 45%, respectively. The decrease in the effective income tax rate was primarily due to the adoption of SFAS 142, which removed certain differences between book and tax income.

We reported net income of $30.2 million, or $1.16 per share on a diluted basis, for the six months ended April 30, 2002, compared with $22.3 million, or $0.97 per share on a diluted basis, for the same period last year.

Domestic Segment Including Parent Company

Revenues for the domestic segment were $1,008.0 million for the six months ended April 30, 2002, an increase of $44.9 million, or 4.7%, over the amount reported for the same period last year. The increase was due to increased demand for our services.

Domestic direct operating expenses for the six months ended April 30, 2002 increased $40.6 million, a 7.1% increase over the amount reported for the same period last year, as a result of an increase in the use of subcontractors, and an increase in direct labor and other direct costs as a result of the increase in revenues. Indirect, general and administrative expenses for the six months ended April 30, 2002 increased $4.5 million, or 1.4%, from the amount reported for the same period last year, due to an increase in indirect labor, benefits and rental expense, which was partially offset by a decrease in amortization expense of $7.8 million as a result of implementing SFAS 142. Interest expense decreased $9.5 million due to repayments of our long-term debt and to decreases in interest rates.

International Segment

Revenues for the international segment were $103.7 million for the six months ended April 30, 2002, an increase of $2.6 million, or 2.6%, from the amount reported for the same period last year. The increase was mainly due to decreases in foreign currency exchange rates versus the U.S. dollar.

Foreign direct operating expenses for the six months ended April 30, 2002 decreased $0.6 million, a 1.1% decrease from the amount reported for the same period last year, primarily due to the decrease in foreign currency exchange rates versus the U.S. dollar as well as a decrease in the use of subcontractors. Indirect, general and administrative expenses for the six months ended April 30, 2002 increased $2.9 million, or 6.5%, from the amount reported for the same period last year, primarily due to an increase in indirect labor, benefits, contract labor and consulting services.

Liquidity and Capital Resources

At April 30, 2002, we had working capital of $431.6 million, an increase of $4.2 million from October 31, 2001.

Substantially all of our cash flow is generated by our subsidiaries. As a result, funds necessary to meet our debt service obligations are provided mainly by receipts from our subsidiaries. Under certain circumstances, legal and contractual restrictions, as well as the financial condition and operating requirements of the subsidiaries, may limit our ability to obtain cash from our subsidiaries.

Our cash and cash equivalents amounted to $25.1 million at April 30, 2002, an increase of $1.7 million from October 31, 2001. During the six months ended April 30, 2002, we generated $51.8 million from operations and $12.0 million of proceeds from sales of common stock and exercises of stock options. We used $27.3 million, net of additional borrowings, to repay debt and $34.9 million for capital expenditures. During the six months ended April 30, 2002, we borrowed various amounts under our revolving line of credit that totaled in the aggregate $42.6 million and repaid the entire outstanding balance by the end of the quarter.

Our primary sources of liquidity are cash flow from operations and borrowings under the senior collateralized credit facility, if necessary. Our primary uses of cash are to fund our working capital and capital expenditures and to service our debt. We believe that our existing financial resources, together with our planned cash flow from operations and existing credit facilities, will provide sufficient resources to fund our combined operations and capital expenditure needs for the foreseeable future.

Collections on accounts receivable can impact our operating cash flows. Management places significant emphasis on collection efforts; however, current general economic conditions may impact our client base and as such, may impact their credit-worthiness and our ability to collect cash to meet our operating needs. In addition, we are in the process of designing, testing and installing a company-wide accounting and project management system known as our Enterprise Resource Program. In the event we do not complete the project successfully, we may experience reduced cash flow due to an inability to issue invoices to our customers and collect cash in a timely manner.

During the fiscal year ended October 31, 1999, we paid $376.2 million for the purchase of D-M. To fund this transaction and to refinance outstanding bank debt, we incurred new borrowings of $650.0 million from the establishment of a long-term senior collateralized credit facility with a syndicate of banks led by Wells Fargo Bank, N.A. (“the Bank”) and from the issuance of 12 1/4% Senior Subordinated Notes. In addition, we sold 46,083 shares of our Series B Preferred Stock to RCBA Strategic Partners, L.P. for aggregate consideration of $100.0 million.

Below is a table containing information for our contractual obligations and commercial commitments as of April 30, 2002, followed by narrative descriptions.



			Principal Payments Due by Period (In thousands)
			Less Than						After 5
	Total		1 Year		1-3 Years		4-5 Years		Years
Contractual Obligations
Long Term Debt (Principal Only)	$	573,224		34,858		136,126		177,529		224,711
Capital Lease Obligations		49,147		13,379		26,093		9,675		—

Total

Total Committed to Letters

Remaining

Commitment

of Credit (Expires Within

Amount

(Expires 2005)

the Next Year)

Drawn

Available

Other Commitments

(In thousands)

Revolving Line of Credit

100,000

35,700

—

64,300

Senior Collateralized Credit Facility. The senior collateralized credit facility was funded on June 9, 1999 (“Funding Date”), and provides for three term loan facilities in the aggregate amount of $450.0 million and a revolving credit facility in the amount of $100.0 million. The term loan facilities consist of Term Loan A, a $250.0 million tranche, Term Loan B, a $100.0 million tranche, and Term Loan C, another $100.0 million tranche.

Principal amounts under Term Loan A became due, commencing on October 31, 1999, in the amount of approximately $3.0 million per quarter for the subsequent three quarters. Commencing on October 31, 2000 and through June 9, 2005, annual principal payments under Term Loan A range from $25.0 million up to a maximum of $58.0 million, with Term Loan A expiring and the then-outstanding principal amount becoming due and repayable in full on June 9, 2005. Principal amounts under Term Loan B became due, commencing on October 31, 1999, in the amount of $1.0 million in each year through July 31, 2005, with Term Loan B expiring and the then-outstanding principal amount becoming due and repayable in full in equal quarterly installments beginning on October 31, 2005 and ending on June 9, 2006. Principal amounts under Term Loan C became due, commencing on October 31, 1999, in the amount of $1.0 million in each year through July 31, 2006, with Term Loan C expiring and the then-outstanding principal amount becoming due and repayable in full in equal quarterly installments beginning on October 31, 2006 and ending on June 9, 2007. The revolving credit facility expires and is repayable in full on June 9, 2005.

The term loans each bear interest at a rate per annum equal to, at our option, either the Base Rate or LIBOR, in each case plus an applicable margin. The revolving credit facility bears interest at a rate per annum equal to, at our option, any of the Base Rate, LIBOR or the Adjusted Sterling Rate, in each case plus an applicable margin. The applicable margin adjusts according to a performance-pricing grid based on our ratio of Consolidated Total Funded Debt to Consolidated Earnings Before Income Taxes, Depreciation and Amortization (“EBITDA”). The “Base Rate” is defined as the higher of the Bank’s Prime Rate and the Federal Funds Rate plus 0.50%. “LIBOR” is defined as the offered quotation by first class banks in the London interbank market to the Bank for dollar deposits, as adjusted for reserve requirements. The “Adjusted Sterling Rate” is defined as the rate per annum displayed by Reuters at which Sterling is offered to the Bank in the London interbank market as determined by the British Bankers’ Association. We may determine which interest rate options to use and which interest periods will apply for both the term loans and the revolving credit facility.

At April 30, 2002, our revolving credit facility with the Bank provided for advances of up to $100.0 million. At April 30, 2002, we had outstanding letters of credit aggregating $35.7 million, which reduced the amount available to us under our revolving credit facility to $64.3 million.

violating specified financial covenants. The financial covenants include maintenance of a minimum current ratio of 1.20 to 1.00, a minimum fixed charge coverage ratio of 1.10 to 1.00, an EBITDA minimum of $185.0 million and a maximum leverage ratio of 3.25 to 1.00 for the period ended April 30, 2002.

12 1/4% Senior Subordinated Notes. Our notes are due in 2009. Each note bears interest at 12 1/4% per annum. Interest on the notes is payable semi-annually on May 1 and November 1 of each year, commencing November 1, 1999. The notes are subordinate to the senior collateralized credit facility. As of April 30, 2002, we owed $200.0 million on our notes.

Certain of our wholly owned subsidiaries fully and unconditionally guarantee the notes on a joint and several basis. We may redeem any of the notes beginning May 1, 2004. The initial redemption price is 106.125% of their principal amount, plus accrued and unpaid interest. The redemption price will decline each year after 2004 and will be 100% of their principal amount, plus accrued and unpaid interest beginning on May 1, 2007.

8 5/8% Senior Subordinated Debentures. Our 8 5/8% Debentures are due in 2004. Interest is payable semiannually in January and July. The 8 5/8% Debentures are subordinate to the senior collateralized credit facility. As of April 30, 2002, we owed approximately $6.5 million on the 8 5/8% Debentures.

6 1/2% Convertible Subordinated Debentures. Our 6 1/2% Debentures are due in 2012 and are convertible into shares of common stock at the rate of $206.30 per share. Interest is payable semi-annually in February and August. Sinking fund payments calculated to retire 70% of the 6 1/2% Debentures prior to maturity began in February 1998. The 6 1/2% Debentures are subordinate to the senior collateralized credit facility. As of April 30, 2002, we owed approximately $1.8 million on the 6 1/2% Debentures.

Mandatorily Redeemable Series B Exchangeable Convertible Preferred Stock. In June 1999, we issued 46,082.95 shares of our Series A Preferred Stock and 450,000 shares of our Series C Preferred Stock to RCBA Strategic Partners, L.P. for an aggregate consideration of $100.0 million. The proceeds of this issuance were used in connection with the D-M acquisition. We paid a transaction fee of $1.5 million to RCBA Strategic Partners, L.P. in connection with this placement. In October 1999, we issued 46,083 shares of our Series B Exchangeable Convertible Preferred Stock (“Series B Stock”) to RCBA Strategic Partners, L.P. in exchange for the shares of Series A and Series C Preferred Stock.

There are 3,000,000 shares of preferred stock authorized for issuance with a $1.00 par value. Of these 3,000,000 shares, 150,000 shares have been designated Series B Stock. At April 30, 2002 and October 31, 2001, we had 57,581 and 53,345 shares, respectively, of Series B Stock outstanding. The Series B Stock had a liquidation preference equal to its original purchase price plus certain formulaic adjustments calculated at the time of liquidation. The Series B Stock was senior to the common stock and has voting rights equal to that number of shares of common stock into which it could be converted. Cumulative dividends were payable in-kind in additional shares of Series B Stock each calendar quarter at a dividend rate of 8%. Each share of the Series B Stock could be converted into shares of common stock at the option of the holder at any time (approximately 5,758,000 and 5,335,000 shares in the aggregate as of April 30, 2002 and October 31, 2001, respectively).

On June 9, 2002, we exercised our right to convert the outstanding Series B Exchangeable Convertible Preferred Stock (“Series B Stock”) to voting common stock. Under the terms of the Series B Stock, we had the option, exercisable at any time on or after June 9, 2002 (the third anniversary of the financing for the D-M acquisition), to convert all of the outstanding Series B Stock to common stock if the share price of our common stock on the relevant stock exchanges was at least $29.30 per share for 30 out of the 45 trading days prior to the conversion date. This requirement was satisfied, and accordingly, the Board of Directors met on June 9, 2002 and approved the conversion. As a result, all outstanding shares of the Series B Stock were converted to 5,845,104 shares of voting common stock.

Derivative Financial Instruments. We are exposed to risk of changes in interest rates as a result of borrowings under the senior collateralized credit facility. We have entered into interest rate derivatives to protect against this risk. At April 30, 2002, the only derivative instrument we held was an interest rate cap agreement relating to $189.4 million of our LIBOR bank term loan borrowings. This agreement will expire on

July 31, 2002. From an economic standpoint, the cap agreement provides us with protection against LIBOR interest rate increases above 7%. For accounting purposes, we have elected not to designate the cap agreement as a hedge, and in accordance with Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities,” which we adopted on November 1, 2000, changes in the fair market value of the cap agreement are included in other expenses in the Consolidated Statements of Operations. The value of the interest rate cap agreement at April 30, 2002 was zero.

Enterprise Resource Program (ERP). During fiscal year 2001, we commenced a project to consolidate all of our accounting and project management information systems. The costs of implementing this project, including hardware, software licenses, consultants, internal staffing costs and training, are estimated to be approximately $50.0 million. As of April 30, 2002, we incurred a total of approximately $37.6 million for this project, with the remaining costs to be incurred over the next eighteen months. We have been financing a substantial portion of these costs through capital lease arrangements with various lenders. If, and to the extent, that financing cannot be obtained through capital leases, we will draw on our line of credit as alternative financing for expenditures to be incurred for this project.

Risk Factors That Could Affect Our Financial Condition and Results of Operations

In addition to the other information included or incorporated by reference in this Form 10-Q, the following factors could affect our actual results:

Our substantial indebtedness could adversely affect our financial condition.

We are a highly leveraged company. As of April 30, 2002, we had approximately $620.9 million of outstanding indebtedness following consummation of the D-M acquisition and the related financing plan. This level of indebtedness could have important consequences, including the following:

• it may limit our ability to borrow money or sell stock for working capital, capital expenditures, debt service requirements or other purposes;

• it may limit our flexibility in planning for, or reacting to, changes in our business;

• we could be more highly leveraged than some of our competitors, which may place us at a competitive disadvantage;

• it may make us more vulnerable to a downturn in our business or the economy; and

• a substantial portion of our cash flow from operations is dedicated to the repayment of our indebtedness and would not be available for other purposes.

To service our indebtedness, we require a significant amount of cash. The ability to generate cash depends on many factors beyond our control.

Our ability to make payments on our indebtedness depends on our ability to generate cash in the future. If we do not generate sufficient cash flow to meet our debt service and working capital requirements, we may need to seek additional financing or sell assets. This need may make it more difficult for us to obtain financing on terms that are acceptable to us, or at all. Without this financing, we could be forced to sell assets to make up for any shortfall in our payment obligations under unfavorable circumstances.

Our senior collateralized credit facility and our obligations under the notes limit our ability to sell assets and also restrict the use of proceeds from any such sale. Moreover, the senior collateralized credit facility is secured by substantially all of our assets. Furthermore, substantial portions of our assets are, and may continue to be, intangible assets. Therefore, we cannot assure you that our assets could be sold quickly enough or for sufficient amounts to enable us to meet our debt obligations.

Restrictive covenants in our senior collateralized credit facility and the indenture relating to the notes may restrict our ability to pursue business strategies.

Our senior collateralized credit facility and indenture relating to the notes restrict our ability to, among other things:

• incur additional indebtedness or contingent obligations;

• pay dividends or make distributions to our stockholders;

• repurchase or redeem our stock;

• make investments;

• grant liens;

• make capital expenditures;

• enter into transactions with our stockholders and affiliates;

• sell assets; and

• acquire the assets of, or merge or consolidate with, other companies.

In addition, our senior collateralized credit facility requires us to maintain certain financial ratios. We may not be able to maintain these ratios. Additionally, covenants in the senior collateralized credit facility and the indenture relating to the notes may impair our ability to finance future operations or capital needs or to engage in other favorable business activities.

If we default under our various debt obligations, the lenders could require immediate repayment of the entire principal. If the lenders require immediate repayment on the entire principal, we will not be able to repay them, and our inability to meet our debt obligations could have a material adverse effect on our business, financial condition and results of operations.

We derive approximately 60% of our revenues from contracts with government agencies. Any disruption in government funding or in our relationship with those agencies could adversely affect our business and our ability to meet our debt obligations.

We derive approximately 60% of our revenues from local, state and federal government agencies. The demand for our services will be directly related to the level of government program funding that is allocated to rebuild and expand the nation’s infrastructure. We believe that the success and further development of our business depend upon the continued funding of these government programs and upon our ability to participate in these government programs. We cannot assure you that governments will have the available resources to fund these programs, that these programs will continue to be funded even if governments have available financial resources, or that we will continue to win government contracts.

Some of these government contracts are subject to renewal or extension annually, so we cannot assure you of our continued work under these contracts in the future. Unsuccessful bidders may protest or challenge the award of these contracts. In addition, government agencies can terminate these contracts at their convenience. As a result, we may incur costs in connection with the termination of these contracts and suffer a loss of business. Also, contracts with government agencies are subject to substantial regulation and an audit of actual costs incurred. Consequently, there may be a downward adjustment in our revenues if actual recoverable costs exceed billed recoverable costs.

We have a responsibility to maintain our eligibility to perform government contracts. From time to time allegations of improper conduct in connection with government contracting have been made against us, and these could be the subjects of suspension or debarment consideration. We investigate all such allegations thoroughly and believe that appropriate actions have been taken in all cases. Additionally, we maintain a compliance program in an effort to assure that no improper conduct occurs in connection with government contracting.

We may be unable to estimate accurately our costs in performing services for our clients. This may cause us to have low profit margins or incur losses.

We submit some proposals on projects based on an estimate of the costs that we will likely incur. To the extent we cannot control overhead, general and administrative and other costs, or if we underestimate such costs, we may have low profit margins or may incur losses.

We are subject to risks from changes in environmental legislation, regulation and governmental policies.

Federal laws, such as the Resource Conservation and Recovery Act of 1976, as amended, and the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, (“CERCLA”), and various state and local laws, strictly regulate the handling, removal, treatment and transportation of toxic and hazardous substances and impose liability for environmental contamination caused by such substances. Moreover, so-called “toxic tort” litigation has increased markedly in recent years as people injured by hazardous substances seek recovery for personal injuries or property damages. We handle, remove, treat and transport toxic or hazardous substances. Consequently, we may be exposed to claims for damages caused by environmental contamination.

Federal and state laws, regulations, and programs related to environmental issues will generate, either directly or indirectly, much of our environmental business. Accordingly, a reduction of these laws and regulations, or changes in governmental policies regarding the funding, implementation or enforcement of these programs, could have a material effect on our business. Environmental laws, regulations and enforcement policies remained essentially unchanged during fiscal year 2001 and for the first six months of fiscal year 2002, including further deferral of congressional reauthorization of CERCLA. The outlook for congressional action on CERCLA legislation in fiscal year 2002 remains unclear.

Our liability for damages due to legal proceedings may be significant. Our insurance may not be adequate to cover this risk.

Various legal proceedings are pending against us alleging, among other things, breaches of contract or negligence in connection with our performance of professional services. In some actions, punitive or treble damages are sought that substantially exceed our insurance coverage. If we sustain damages greater than our insurance coverage, there could be a material adverse effect on our business, financial condition and results of operations.

Our engineering practices, including general engineering and civil engineering services, involve professional judgments about the nature of soil conditions and other physical conditions, including the extent to which toxic and hazardous materials are present, and about the probable effect of procedures to mitigate problems or otherwise affect those conditions. If the judgments and the recommendations based upon those judgments are incorrect, we may be liable for resulting damages that our clients incur.

The failure to attract and retain key professional personnel could adversely affect our business.

The ability to attract, retain and expand our staff of qualified technical professionals is an important factor in determining our future success. A shortage of professionals qualified in certain technical areas exists from time to time in the engineering and design industry. The market for these professionals is competitive, and we cannot assure you that we will be successful in our efforts to continue to attract and retain such professionals. In addition, we rely heavily upon the experience and ability of our senior executive staff, and the loss of a significant number of such individuals could have a material adverse effect on our business, financial condition and results of operations.

We may be unable to compete successfully in our industry.

We are engaged in highly fragmented and very competitive markets in our service areas. We compete with firms of various sizes, some of which are substantially larger than us and possess greater resources. Furthermore, the engineering and design industry is undergoing consolidation, particularly in the United

States. These competitive forces could have a material adverse effect on our business, financial condition and results of operations.

Our international operations are subject to a number of risks that could adversely affect the results from these operations and our overall business.

As a worldwide provider of engineering services, we have operations in over 30 countries and derive approximately 9% of our revenues from international operations. International business is subject to the customary risks associated with international transactions, including political risks, local laws and taxes, the potential imposition of trade or currency exchange restrictions, tariff increases and difficulties or delays in collecting accounts receivable. Weak foreign economies and/or a weakening of foreign currencies against the U.S. dollar could have a material adverse effect on our business, financial condition and results of operations.

Additional acquisitions may adversely affect our ability to manage our business.

Historically, we have completed numerous acquisitions, and in implementing our business strategy, we may continue to do so in the future. We cannot assure you that we will identify, finance and complete additional suitable acquisitions on acceptable terms. We may not successfully integrate future acquisitions. Any acquisitions may require substantial attention from our management, which may limit the amount of time that management can devote to daily operations. Our inability to find additional attractive acquisition candidates or to effectively manage the integration of any businesses acquired in the future could adversely affect our business, financial condition and results of operations.

We may not be able to successfully integrate our accounting and project management systems.

We are in the process of designing, testing and installing a company-wide accounting and project management system. In the event we do not complete the project successfully, we may experience reduced cash flow due to an inability to issue invoices to our customers and collect cash in a timely manner.

External factors may affect our ability to conduct business.

Recent terrorist attacks on the United States of America present a potential threat to communication systems, information technology and security, damage to buildings and their contents and injury to or death of key employees. We may need to take steps to increase security and add necessary protections against terrorist threats. Although built to structural standards, our facilities are physically vulnerable to a terrorist attack. Significant structural damage to our facilities could cause a disruption of our information systems and loss of financial data and certain customer data, which may affect our ability to conduct business.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to changes in interest rates as a result of our borrowings under our senior collateralized credit facility. If market rates average 1% more in fiscal year 2002 than in fiscal year 2001, our net of tax interest expense, after considering the effect of the interest rate cap agreement, would increase by approximately $2.2 million. Conversely, if market rates average 1% less in fiscal year 2002 than in fiscal year 2001, our net of tax interest expense would decrease by approximately $2.2 million.

PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See Note 4 of the Consolidated Financial Statements.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

At our annual meeting of stockholders held on March 26, 2002, the following proposals were adopted by the margins indicated:

1. The stockholders approved the election of Directors to hold office until the next annual meeting of stockholders and until their successors are elected and qualified, or until their earlier death or resignation.



	Number of Shares

	For		Withheld

Richard C. Blum		15,145,399		80,018
Armen Der Marderosian		15,147,113		78,304
Admiral S. Robert Foley, Jr., USN (Ret.)		15,146,218		79,199
Marie L. Knowles		15,146,284		79,133
Martin M. Koffel		12,915,057		2,310,360
Richard B. Madden		15,148,134		77,283
Richard Q. Praeger		15,142,804		82,613
Irwin L. Rosenstein		15,147,485		77,932
William D. Walsh		15,145,001		80,416

No stockholders abstained from voting in this election of directors and there were no broker non-votes.

2. The stockholders ratified the selection of PricewaterhouseCoopers L.L.P. as our independent auditors for the fiscal year 2002.


	Number of Shares

For		15,148,392
Against		34,153
Abstain		42,872

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits


99.1		Second Amendment, dated June 4, 2002, to Credit Agreement, dated June 9, 1999, by and among URS Corporation, the Lenders named therein, and Wells Fargo Bank, N.A., as Administrative Agent. FILED HEREWITH.

(b) Reports on Form 8-K

None.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated June 12, 2002

URS CORPORATION

/s/ Kent Ainsworth

Kent P. Ainsworth

Executive Vice President and

Chief Financial Officer

(Principal Accounting Officer)

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	•	it may limit our ability to borrow money or sell stock for working capital, capital expenditures, debt service requirements or other purposes;

	•	it may limit our flexibility in planning for, or reacting to, changes in our business;

	•	we could be more highly leveraged than some of our competitors, which may place us at a competitive disadvantage;

	•	it may make us more vulnerable to a downturn in our business or the economy; and

	•	a substantial portion of our cash flow from operations is dedicated to the repayment of our indebtedness and would not be available for other purposes.


	•	incur additional indebtedness or contingent obligations;

	•	pay dividends or make distributions to our stockholders;

	•	repurchase or redeem our stock;

	•	make investments;

	•	grant liens;

	•	make capital expenditures;

	•	enter into transactions with our stockholders and affiliates;

	•	sell assets; and

	•	acquire the assets of, or merge or consolidate with, other companies.


	1.	The stockholders approved the election of Directors to hold office until the next annual meeting of stockholders and until their successors are elected and qualified, or until their earlier death or resignation.


		No stockholders abstained from voting in this election of directors and there were no broker non-votes.

	2.	The stockholders ratified the selection of PricewaterhouseCoopers L.L.P. as our independent auditors for the fiscal year 2002.


	URS CORPORATION

	/s/ Kent Ainsworth

	Kent P. Ainsworth
	Executive Vice President and
	Chief Financial Officer
	(Principal Accounting Officer)