10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

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

For the quarterly period ended September 30, 2005

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.)
600 Montgomery Street, 26th Floor
San Francisco, California	94111-2728
(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 þ No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act).Yes þ No o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes þ 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 October 31, 2005
Common Stock, $.01 par value	49,541,068

URS CORPORATION AND SUBSIDIARIES

     This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may be identified by words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “will,” and similar terms used in reference to our future revenue and business prospects, future accounting and actuarial estimates, future impact of SFAS 123(R), future outcomes of our legal proceedings, future maintenance of our insurance coverage, future guarantees and debt service obligations, future pension contributions, future capital resources, future effectiveness of our disclosure and internal controls and future economic and industry conditions. 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 our forward-looking statements: an economic downturn, changes in our book of business; our compliance with government contract procurement regulations; our dependence on government appropriations and procurements; our ability to make accurate estimates; our ability to bid on contracts and execute contracts and guarantees; our leveraged position; our ability to service our debt; liability for pending and future litigation; the impact of changes in laws and regulations; our ability to maintain adequate insurance coverage; a decline in defense spending; industry competition; our ability to attract and retain key individuals; risks associated with SFAS 123(R); risks associated with international operations; project management and accounting software risks; terrorist and natural disaster risks; our relationships with our labor unions; and other factors discussed more fully in Management’s Discussion and Analysis of Financial Condition and Results of Operations beginning on page 29, Risk Factors That Could Affect Our Financial Conditions and Results of Operations beginning on page 48, as well as in other reports subsequently filed from time to time with the United States Securities and Exchange Commission. We assume no obligation to revise or update any forward-looking statements.

PART I. FINANCIAL INFORMATION:
Item 1.	Consolidated Financial Statements
	Consolidated Balance Sheets September 30, 2005 and December 31, 2004	2
	Consolidated Statements of Operations and Comprehensive Income Three months and nine months ended September 30, 2005 and September 30, 2004	3
	Consolidated Statements of Cash Flows Nine months ended September 30, 2005 and September 30, 2004	4
	Notes to Consolidated Financial Statements	5
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	56
Item 4.	Controls and Procedures	56
PART II. OTHER INFORMATION:
Item 1.	Legal Proceedings	57
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	58
Item 3.	Defaults Upon Senior Securities	58
Item 4.	Submission of Matters to a Vote of Security Holders	58
Item 5.	Other Information	58
Item 6.	Exhibits	59
EXHIBIT 4.1
EXHIBIT 10.1
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32

1

PART I
FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

URS CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS — UNAUDITED
(In thousands, except per share data)

	September 30, 2005			December 31, 2004
ASSETS
Current assets:
Cash and cash equivalents, including $27,213 and $59,175 of short-term money market funds, respectively	$	86,823		$	108,007
Accounts receivable, including retainage of $41,064 and $43,844 respectively		592,666			579,953
Costs and accrued earnings in excess of billings on contracts in process		470,561			400,418
Less receivable allowances		(43,608	)		(38,719	)
Net accounts receivable		1,019,619			941,652
Deferred income taxes		21,945			20,614
Prepaid expenses and other assets		47,969			26,061
Total current assets		1,176,356			1,096,334
Property and equipment at cost, net		144,797			142,907
Goodwill		1,006,253			1,004,680
Purchased intangible assets, net		5,831			7,749
Other assets		50,547			52,010
	$	2,383,784		$	2,303,680
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Book overdraft	$	7,280		$	70,871
Notes payable and current portion of long-term debt		26,464			48,338
Accounts payable and subcontractors payable, including retainage of $13,409 and $13,302, respectively		207,945			144,435
Accrued salaries and wages		175,974			171,004
Accrued expenses and other		62,595			59,914
Billings in excess of costs and accrued earnings on contracts in process		109,470			84,393
Total current liabilities		589,728			578,955
Long-term debt		335,069			508,584
Deferred income taxes		44,852			36,305
Other long-term liabilities		105,033			97,715
Total liabilities		1,074,682			1,221,559
Commitments and contingencies (Note 5)
Stockholders’ equity:
Common shares, par value $.01; authorized 100,000 shares; 49,546 and 43,838 shares issued, respectively; and 49,494 and 43,786 shares outstanding, respectively		495			438
Treasury stock, 52 shares at cost		(287	)		(287	)
Additional paid-in capital		909,506			734,843
Accumulated other comprehensive income		2,138			6,418
Retained earnings		397,250			340,709
Total stockholders’ equity		1,309,102			1,082,121
	$	2,383,784		$	2,303,680

See Notes to Consolidated Financial Statements

2

URS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME —
UNAUDITED
(In thousands, except per share data)

	Three Months Ended					Nine Months Ended
	September 30,			September 30,		September 30,			September 30,
	2005			2004		2005			2004
Revenues	$	962,940		$	861,681	$	2,846,556		$	2,554,307
Direct operating expenses		627,199			548,589		1,836,655			1,617,948
Gross profit		335,741			313,092		1,009,901			936,359
Indirect, general and administrative expenses		282,771			263,112		889,949			818,627
Operating income		52,970			49,980		119,952			117,732
Interest expense, net		4,513			10,326		24,771			43,597
Income before income taxes		48,457			39,654		95,181			74,135
Income tax expense		19,620			15,860		38,640			29,650
Net income		28,837			23,794		56,541			44,485
Other comprehensive income (loss):
Minimum pension liability adjustment		—			—		(270	)		—
Foreign currency translation adjustments		(229	)		600		(4,010	)		1,596
Comprehensive income	$	28,608		$	24,394	$	52,261		$	46,081
Net income per common share:
Basic	$	.59		$	.55	$	1.23		$	1.12
Diluted	$	.58		$	.55	$	1.20		$	1.11
Weighted-average shares outstanding:
Basic		48,934			43,388		45,836			39,661
Diluted		50,116			43,604		46,946			40,044

See Notes to Consolidated Financial Statements

3

URS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS—UNAUDITED
(In thousands)

	Nine Months Ended
	September 30,			September 30,
	2005			2004
Cash flows from operating activities:
Net income	$	56,541		$	44,485
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		29,225			31,003
Amortization of financing fees		3,315			4,943
Gain on disposal of property and equipment		(319	)		—
Costs incurred for extinguishment of debt		33,125			27,393
Provision for doubtful accounts		7,865			9,658
Deferred income taxes		7,216			(3,458	)
Stock compensation		4,508			3,020
Tax benefit of stock compensation		9,269			3,832
Changes in assets and liabilities:
Accounts receivable and costs and accrued earnings in excess of billings on contracts in process		(85,829	)		(37,137	)
Prepaid expenses and other assets		(25,532	)		(5,886	)
Accounts payable, accrued salaries and wages and accrued expenses		70,779			26,073
Billings in excess of costs and accrued earnings on contracts in process		25,077			(7,074	)
Other long-term liabilities		7,317			(80	)
Other liabilities, net		(8,603	)		591
Total adjustments and changes		77,413			52,878
Net cash from operating activities		133,954			97,363
Cash flows from investing activities:
Payment of business acquisition		(1,353	)		—
Proceeds from disposal of property and equipment		2,182			—
Capital expenditures, less equipment purchased through capital lease		(16,897	)		(14,695	)
Net cash from investing activities		(16,068	)		(14,695	)
Cash flows from financing activities:
Long-term debt principal payments		(535,919	)		(288,633	)
Long-term debt borrowings		351,376			26,496
Net borrowings (payments) under the line of credit		(16,750	)		19,961
Net change in book overdraft		(63,591	)		(13,438	)
Capital lease obligation payments		(11,184	)		(10,866	)
Short-term note borrowings		3,714			1,540
Short-term note payments		(3,610	)		(1,557	)
Proceeds from common stock offering, net of related expenses		130,257			204,287
Proceeds from sale of common stock from employee stock purchase plan and exercise of stock options		30,687			23,970
Tender and call premiums paid for debt extinguishment		(19,421	)		(19,075	)
Payments for financing fees		(4,629	)		(1,280	)
Net cash from financing activities		(139,070	)		(58,595	)
Net increase (decrease) in cash and cash equivalents		(21,184	)		24,073
Cash and cash equivalents at beginning of period		108,007			34,744
Cash and cash equivalents at end of period	$	86,823		$	58,817
Supplemental information:
Interest paid	$	25,611		$	48,336
Taxes paid	$	28,285		$	32,582
Equipment acquired through capital lease obligations	$	14,891		$	10,754

See Notes to Consolidated Financial Statements

4

URS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED

NOTE 1. BUSINESS, BASIS OF PRESENTATION, AND ACCOUNTING POLICIES

Overview

     The terms “we,” “us,” and “our” used in this quarterly report refer to URS Corporation and its consolidated subsidiaries unless otherwise indicated. We operate through two divisions: the URS Division and the EG&G Division. We offer a comprehensive range of professional planning and design, systems engineering and technical assistance, program and construction management, and operations and maintenance services for transportation, facilities, environmental, homeland security, defense systems, installations and logistics, commercial/industrial, and water/wastewater treatment projects. Headquartered in San Francisco, we operate in more than 20 countries with approximately 28,000 employees providing services to federal, state and local governments, and private industry clients in the United States and abroad.

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

     The accompanying unaudited interim consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. These financial statements include the financial position, results of operations and cash flows of our wholly-owned subsidiaries and joint ventures required to be consolidated under Financial Accounting Standards Board Interpretation No. 46 (revised December 2003), “Consolidation of Variable Interest Entities” (“FIN 46-R”). We participate in joint ventures formed for the purpose of bidding, negotiating and executing projects. Sometimes we function as the sponsor or manager of the projects performed by the joint venture. Investments in unconsolidated joint ventures are accounted for using the equity method. All significant intercompany transactions and accounts have been eliminated in consolidation.

     You should read our unaudited interim consolidated financial statements in conjunction with the audited consolidated financial statements and related notes contained in our amended Annual Report on Form 10-K/A for the fiscal year ended October 31, 2004. The results of operations for the nine months ended September 30, 2005 are not indicative of the operating results for the full year or for future years.

     In the opinion of management, the accompanying unaudited interim consolidated financial statements reflect all normal recurring adjustments that are necessary for a fair statement of our financial position, results of operations and cash flows for the interim periods presented.

     The preparation of our unaudited interim consolidated financial statements in conformity with GAAP necessarily requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the balance sheet dates and the reported amounts of revenues and costs during the reporting periods. Actual results could differ from those estimates. On an ongoing basis, we review our estimates based on information that is currently available. Changes in facts and circumstances may cause us to revise our estimates.

5

URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED (Continued)

Cash and Cash Equivalents/Book Overdraft

     At September 30, 2005 and December 31, 2004, we had book overdrafts for some of our disbursement accounts. These overdrafts represented transactions that had not cleared the bank accounts at the end of the reporting period. We transferred cash on an as-needed basis to fund these items as they cleared the bank in subsequent periods.

     At September 30, 2005 and December 31, 2004, cash and cash equivalents included $43.9 million and $13.5 million held by our consolidated joint ventures.

Income Per Common Share

     Basic income per common share is computed by dividing net income by the weighted-average number of common shares outstanding for the period, excluding unvested restricted stock. Diluted income per common share is computed giving effect to all potentially dilutive shares of common stock that were outstanding during the period. Potentially dilutive shares of common stock consist of the incremental shares of common stock issuable upon the exercise of stock options and vesting of the restricted stock. Diluted income per share is computed by dividing net income by the sum of the weighted-average common shares and potentially dilutive common shares that were outstanding during the period.

     A reconciliation of the numerator and denominator of basic and diluted income per common share is provided as follows:

	Three Months Ended				Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
	2005		2004		2005		2004
			(In thousands, except per share data)
Numerator — Basic
Net income	$	28,837	$	23,794	$	56,541	$	44,485
Denominator — Basic
Weighted-average common stock shares outstanding		48,934		43,388		45,836		39,661
Basic income per share	$	.59	$	.55	$	1.23	$	1.12
Numerator — Diluted
Net income	$	28,837	$	23,794	$	56,541	$	44,485
Denominator — Diluted
Weighted-average common stock shares outstanding		48,934		43,388		45,836		39,661
Effect of dilutive securities		1,182		216		1,110		383
Stock options and restricted stock		50,116		43,604		46,946		40,044
Diluted income per share	$	.58	$	.55	$	1.20	$	1.11

     All of the potential shares associated with outstanding stock options are included in our computation of diluted income per share for the three months ended September 30, 2005. For the three months ended September 30, 2004, we did not include 1.1 million of potential shares associated with outstanding stock options in our computation of diluted income per share because the exercise prices of the options were greater than the average per share market value of our common stock. In our computation of diluted income per share for the nine months ended September 30, 2005 and September 30, 2004, we did not include five thousand and fifty-two thousand of potential shares associated with outstanding stock options, respectively.

6

URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED (Continued)

Stock-Based Compensation

     In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 123 (Revised), “Share-Based Payment” (“SFAS 123(R)”). SFAS 123(R) replaces SFAS 123 and supersedes APB 25. In April 2005, the SEC adopted Rule 4-01(a) of Regulation S-X, which defers the required effective date of SFAS 123(R) to the first fiscal year beginning after June 15, 2005, instead of the first interim period beginning after June 15, 2005 as originally required. Because our fiscal year will end on December 30, 2005, SFAS 123(R) will become effective for us on December 31, 2005 (the “Effective Date”), but early adoption is allowed. Upon adoption of SFAS 123(R), we will be required to record an expense for our stock-based compensation plans using a fair value method. SFAS 123(R) applies to all stock-based compensation awards granted, modified or settled in interim or fiscal periods after the required Effective Date, but does not apply to awards granted in periods before the required Effective Date, unless they are modified, repurchased or cancelled after the Effective Date. SFAS 123(R) also amends Statement of Financial Accounting Standards No. 95, “Statement of Cash Flows,” to require reporting of excess tax benefits from the exercises of stock-based compensation awards as a financing cash inflow rather than as an operating cash inflow.

     In March 2005, the SEC issued Staff Accounting Bulletin No. 107 (“SAB 107”) to provide implementation guidance on SFAS 123(R). SAB 107 was issued to assist registrants in implementing SFAS 123(R) while enhancing the information that investors receive. The FASB has also issued interpretative guidance. We expect to use the modified prospective transition method in our adoption of SFAS 123(R), which will have a material impact on our financial statements as we have historically recorded our stock-based compensation in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”).

     As a result of our assessment of the impacts associated with the adoption of SFAS 123(R), we have re-evaluated our 1991 Stock Incentive Plan and 1999 Equity Incentive Plan (collectively, the “Stock Incentive Plans”), and have currently decided to issue restricted stock awards rather than stock option grants to selected employees.

     We have an Employee Stock Purchase Plan (“ESPP”) under which eligible employees have authorized payroll deductions of up to ten percent of their compensation, subject to Internal Revenue Code limitations, to purchase common stock at a price of 85% of the lower of the fair market value as of the beginning or the end of the six-month offering period. Due to the effects of adopting SFAS 123(R), effective December 31, 2005, our ESPP will be modified to allow employees to purchase common stock at a price of 95% of the fair market value as of the end of the six-month offering period.

     As permitted under Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”), we continue to apply APB 25 and related accounting interpretations for stock-based compensation. Under APB 25, the compensation expense associated with employee stock awards is measured as the difference, if any, between the price to be paid by an employee and the fair value of the common stock on the grant date. Accordingly, we recognize no compensation expense with respect to stock-based option awards. Stock purchased through the ESPP as currently structured qualifies under a specific exception under APB 25, and as result, we do not recognize any compensation expense with respect to such purchases either. Compensation expense is recognized for modifications of stock-based option grants in accordance with APB 25. In addition, we record compensation expense related to restricted stock over the applicable vesting period and such compensation expense is measured at the fair market value of the restricted stock at the date of award.

     Statement of Financial Accounting Standards No. 148, “Accounting for Stock-Based Compensation - - Transition and Disclosure” (“SFAS 148”), requires prominent disclosure of pro forma results in both annual and interim financial statements as if we had applied the fair value recognition provisions of SFAS 123. We use the Black-Scholes option pricing model to measure the estimated fair value of stock

7

URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED (Continued)

options and the ESPP. The following assumptions were used to estimate stock option and ESPP compensation expense using the fair value method of accounting:

	Stock Incentive Plans						Employee Stock Purchase Plan
	Three Months Ended						Three Months Ended
	September 30,			September 30,			September 30,			September 30,
	2005			2004			2005			2004
Risk-free interest rate		4.3	%		4.5	%		3.5	%		1.6	%
Expected life	5.78 years			7.39 years			0.5 year			0.5 year
Volatility		44.42	%		46.27	%		27.24	%		28.84	%
Expected dividends	None			None			None			None

	Stock Incentive Plans						Employee Stock Purchase Plan
	Nine Months Ended						Nine Months Ended
	September 30,			September 30,			September 30,			September 30,
	2005			2004			2005			2004
Risk-free interest rate		4.0% - 4.3	%		4.1%- 4.5	%		2.6% - 3.5	%		1.0% - 1.6	%
Expected life	5.78 years			7.39 years			0.5 year			0.5 year
Volatility (1)		44.42	%		46.27	%	23.33% and 27.24%			28.84% and 34.31%
Expected dividends	None			None			None			None

(1) Employees can participate in our ESPP semi-annually. As a result, there are two separate computations of the fair value of stock compensation expense during the nine-month periods ended September 30, 2005 and 2004.

     If the compensation cost for awards under the Stock Incentive Plans and the ESPP had been determined in accordance with SFAS 123, our net income and earnings per share would have been reduced to the pro forma amounts indicated below:

	Three Months Ended				Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
	2005		2004		2005		2004
			(In thousands, except per share data)
Numerator — Basic
Net income:
As reported	$	28,837	$	23,794	$	56,541	$	44,485
Add: Total stock-based compensation expense as reported, net of tax		618		1,032		2,740		1,835
Deduct: Total stock-based compensation expense determined under fair value based method for all awards, net of tax		4,591		8,541		8,875		12,232
Pro forma net income	$	24,864	$	16,285	$	50,406	$	34,088
Denominator — Basic
Weighted-average common stock shares outstanding		48,934		43,388		45,836		39,661
Basic income per share:
As reported	$	.59	$	.55	$	1.23	$	1.12
Pro forma	$	.51	$	.38	$	1.10	$	.86

8

URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED (Continued)

	Three Months Ended				Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
	2005		2004		2005		2004
			(In thousands, except per share data)
Numerator — Diluted
Net income:
As reported	$	28,837	$	23,794	$	56,541	$	44,485
Add: Total stock-based compensation expense as reported, net of tax		618		1,032		2,740		1,835
Deduct: Total stock-based compensation expense determined under fair value based method for all awards, net of tax		4,591		8,541		8,875		12,232
Pro forma net income	$	24,864	$	16,285	$	50,406	$	34,088
Denominator — Diluted
Weighted-average common stock shares outstanding		50,116		43,604		46,946		40,044
Diluted income per share:
As reported	$	.58	$	.55	$	1.20	$	1.11
Pro forma	$	.50	$	.37	$	1.07	$	.85

Adopted and Recently Issued Statements of Financial Accounting Standards

     In November 2004, the FASB issued Statement of Financial Accounting Standards No. 151, "Inventory Costs, and Amendment of Accounting Research Bulletin No. 43 (“ARB No. 43”), Chapter 4” (“SFAS 151”). SFAS 151 amends the guidance in ARB No. 43 Chapter 4, “Inventory Pricing,” by clarifying that abnormal amounts of idle facility expense, freight, handling costs and wasted material (spoilage) be recognized as current period charges. The provisions of SFAS 151 are effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The adoption of SFAS 151 will not have a material effect on our consolidated financial statements.

     In May 2005, the FASB issued Statement of Financial Accounting Standards No. 154, “Accounting Changes and Error Corrections” (“SFAS 154”), which replaces Accounting Principles Board Opinion No. 20, “Accounting Changes,” and Statement of Financial Accounting Standards No. 3, “Reporting Accounting Changes in Interim Financial Statements.” SFAS 154 requires retroactive application of a change in accounting principle to prior period financial statements unless it is impracticable or if another pronouncement mandates a different method. SFAS 154 also requires that a change in the method of depreciation, amortization or depletion for long-lived, non-financial assets be accounted for as a change in accounting estimate resulting from a change in accounting principle. It is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. Depending on the type of accounting change, the adoption of SFAS 154 may have a material impact on our consolidated financial statements.

Reclassifications

     We have made reclassifications to our fiscal year 2004 financial statements to conform them to the fiscal year 2005 presentation. These reclassifications have no effect on consolidated net income, stockholders’ equity and net cash flows.

9

URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED (Continued)

NOTE 2. PROPERTY AND EQUIPMENT

     Property and equipment consists of the following:

	September 30,			December 31,
	2005			2004
	(In thousands)
Equipment	$	155,654		$	153,278
Furniture and fixtures		21,244			20,855
Leasehold improvements		38,777			32,893
Construction in progress		6,202			4,328
		221,877			211,354
Accumulated depreciation and amortization		(117,821	)		(105,228	)
		104,056			106,126
Equipment, furniture and fixtures under capital leases		95,302			81,962
Accumulated amortization		(54,561	)		(45,181	)
		40,741			36,781
Property and equipment at cost, net	$	144,797		$	142,907

     As of September 30, 2005 and December 31, 2004, we capitalized internal-use software development costs of $60.1 million and $58.9 million, respectively. We amortize the capitalized software costs using the straight-line method over an estimated useful life of ten years.

     Property and equipment is depreciated using the following estimated useful lives:

	Estimated Useful Life
Equipment	4 – 10 years
Capital leases	3 – 10 years
Furniture and fixtures	5 – 10 years
Leasehold improvements	9 months – 20 years

     Depreciation expense related to property and equipment was $8.7 million and $9.3 million for the three months ended September 30, 2005 and September 30, 2004, respectively. Depreciation expense related to property and equipment for the nine months ended September 30, 2005 and September 30, 2004 was $27.1 million and $28.6 million, respectively.

     Amortization expense related to purchased intangible assets was $0.6 million and $0.8 million for the three months ended September 30, 2005 and September 30, 2004, respectively. Amortization expense related to purchased intangible assets for the nine months ended September 30, 2005 and September 30, 2004 was $2.1 million and $2.4 million, respectively.

NOTE 3. EMPLOYEE RETIREMENT PLANS

Executive Plan

     In July 1999, as amended and restated in September 2003, we entered into a Supplemental Executive Retirement Agreement (the “Executive Plan”) with Martin M. Koffel, our Chief Executive Officer, to provide an annual lifetime retirement benefit, which was fully earned as of September 30, 2005. The components of our net periodic pension costs related to the Executive Plan for the three months and nine months ended September 30, 2005 and September 30, 2004 were as follows:

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED (Continued)

	Three Months Ended				Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
	2005		2004		2005		2004
			(In thousands)
Service cost	$	—	$	228	$	—	$	684
Interest cost		131		109		393		327
Net periodic benefit cost	$	131	$	337	$	393	$	1,011

Radian SERP and SCA

     In fiscal year 1999, we acquired and assumed some of the defined benefit pension plans and post-retirement benefit plans of Radian International, L.L.C. (“Radian”), which were transferred to URS Corporation, a Nevada company. These retirement plans cover a selected group of Radian employees and former employees who will continue to be eligible to participate in the retirement plans.

     The Radian defined benefit plans include a Supplemental Executive Retirement Plan (“SERP”) and a Salary Continuation Agreement (“SCA”), which are intended to supplement the retirement benefits provided by other benefit plans upon the participants attaining minimum age and years of service requirements. The components of our net periodic pension costs related to the SERP and SCA for the three months and nine months ended September 30, 2005 and September 30, 2004 were as follows:

	Three Months Ended				Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
	2005		2004		2005		2004
			(In thousands)
Interest cost	$	145	$	177	$	435	$	531
Amortization of net loss		18		4		54		12
Net periodic benefit cost	$	163	$	181	$	489	$	543

EG&G Pension Plan

     In fiscal year 2002, we acquired and assumed the obligations of the defined benefit pension plan (“EG&G pension plan”) and post-retirement medical plan (“EG&G post-retirement medical plan”) of EG&G Technical Services, Inc. These plans cover some of our hourly and salaried employees of the EG&G Division and a joint venture in which the EG&G Division participates. The components of our net periodic pension and post-retirement benefit costs relating to the EG&G pension plan and the EG&G post-retirement medical plan were as follows:

	Three Months Ended						Nine Months Ended
	September 30,			September 30,			September 30,			September 30,
	2005			2004			2005			2004
				(In thousands)
Service cost	$	1,636		$	1,165		$	4,908		$	3,495
Interest cost		2,135			1,954			6,405			5,862
Expected return on plan assets		(2,292	)		(2,131	)		(6,876	)		(6,393	)
Amortization of:
Prior service cost		(518	)		(518	)		(1,554	)		(1,554	)
Net loss		406			30			1,218			90
Net periodic benefit cost	$	1,367		$	500		$	4,101		$	1,500

     We expect to make cash contributions during fiscal year 2005 of approximately $7.5 million to the EG&G pension plan.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED (Continued)

EG&G Post-retirement Medical Plan

	Three Months Ended						Nine Months Ended
	September 30,			September 30,			September 30,			September 30,
	2005			2004			2005			2004
				(In thousands)
Service cost	$	70		$	63		$	210		$	189
Interest cost		69			69			207			207
Expected return on plan assets		(64	)		(72	)		(192	)		(216	)
Amortization of:
Net loss		20			2			60			6
Net periodic benefit cost	$	95		$	62		$	285		$	186

NOTE 4. CURRENT AND LONG-TERM DEBT

Credit Facilities

New Credit Facility

     On June 28, 2005, we entered into a new senior credit facility (“New Credit Facility”) consisting of a 6-year Term Loan of $350.0 million and a 5-year Revolving Line of Credit of $300.0 million, against which up to $200.0 million can be used to issue letters of credit. As of September 30, 2005, we had $310.0 million outstanding under the Term Loan, $58.8 million in letters of credit, and no amount outstanding under the Revolving Line of Credit.

     Our Revolving Line of Credit is used to fund daily operating cash needs and to support our standby letters of credit. During the ordinary course of business, the use of our Revolving Line of Credit is a function of collection and disbursement activities. Our daily cash needs generally follow a predictable pattern that parallels our payroll cycles, which dictate, as necessary, our short term borrowing requirements.

     Principal amounts under the Term Loan will become due and payable on a quarterly basis: 15% of the principal will be payable in four equal quarterly payments beginning in the third quarter of 2008, 20% of the principal will be due during the next four quarters, and 65% will be due in the final four quarters ending on June 28, 2011. Our Revolving Line of Credit expires and is payable in full on June 28, 2010. At our option, we may repay the loans under our New Credit Facility without premium or penalty.

     All loans outstanding under our New Credit Facility bear interest at either LIBOR or the bank’s base rate plus an applicable margin, at our option. The applicable margin will change based upon our credit rating as reported by Moody’s Investor Services (“Moody’s”) and Standard & Poor’s. The LIBOR margin will range from 0.625% to 1.75% and the base rate margin will range from 0.0% to 0.75%. As of September 30, 2005, the LIBOR margin was 1.25% for both the Term Loan and Revolving Line of Credit. As of September 30, 2005, the interest rate on our Term Loan was 5.27%.

     A substantial number of our domestic subsidiaries are guarantors of the New Credit Facility on a joint and several basis. Initially, the obligations are collateralized by our guarantors’ capital stock. The collateralized obligations will be eliminated if we reach an investment grade credit rating of “Baa3” from Moody’s and “BBB-” from Standard & Poor’s. If our credit rating were to fall to or below “Ba2” from Moody’s or “BB” from Standard & Poor’s, we would be required to provide a secured interest in substantially all of our existing and subsequently acquired personal and real property, in addition to the collateralized guarantors’ capital stock. Although the capital stock of the non-guarantor subsidiaries are not required to be pledged as collateral, the terms of the New Credit Facility restrict the non-guarantors’ assets, with some exceptions, from being used as a pledge for future liens (a “negative pledge”). Moody’s upgraded

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED (Continued)

our credit rating from “Ba2” to “Ba1” on June 20, 2005. On July 26, 2005, Standard & Poor’s upgraded our credit rating from “BB” to “BB+.”

     Our New Credit Facility contains financial covenants. We are required to maintain: (a) a maximum ratio of total funded debt to total capital of 40% or less and (b) a minimum interest coverage ratio of not less than 3.0:1. The interest coverage ratio is calculated by dividing consolidated Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”), as defined in our New Credit Facility agreement, by consolidated cash interest expense.

     The New Credit Facility also contains customary events of default and customary affirmative and negative covenants including, but not limited to, limitations on mergers, consolidations, acquisitions, asset sales, dividend payments, stock redemptions or repurchases, transactions with stockholders and affiliates, liens, capital leases, negative pledges, sale-leaseback transactions, indebtedness, contingent obligations and investments.

     As of September 30, 2005, we were in compliance with all the covenants of the New Credit Facility.

Old Credit Facility

     Our old senior secured credit facility (“Old Credit Facility”) consisted of two term loans, Term Loan A and Term Loan B, and a revolving line of credit. Our Old Credit Facility was terminated and repaid in full on June 28, 2005. As of December 31, 2004, we had $353.8 million in principal amounts outstanding under the term loan facilities with an interest rate of 4.42%. We had also drawn $18.0 million against our revolving line of credit and had outstanding standby letters of credit aggregating to $55.3 million, reducing the amount available to us under our revolving credit facility to $151.7 million.

Revolving Line of Credit

     The effective average interest rates paid on the revolving line of credit during the three months ended September 30, 2005 and September 30, 2004 were approximately 6.43% and 4.87%, respectively. The effective average interest rates paid on the revolving line of credit from January 1 through September 30, 2005 and during the nine months ended September 30, 2004 were approximately 6.03% and 5.33%, respectively.

     Our average daily revolving line of credit balances for the three-month periods ended September 30, 2005 and September 30, 2004 were $0.1 million and $32.5 million, respectively. The maximum amounts outstanding at any one point in time during the three-month periods ended September 30, 2005 and September 30, 2004 were $3.1 million and $62.7 million, respectively. Our average daily revolving line of credit balances for the nine-month periods ended September 30, 2005 and September 30, 2004 were $2.2 million and $26.4 million, respectively. The maximum amounts outstanding at any one point in time during the nine-month periods ended September 30, 2005 and September 30, 2004 were $22.8 million and $74.6 million, respectively.

Other Indebtedness

     11¹/2% Senior Notes (“11¹/2% notes”). As of September 30, 2005 and December 31, 2004, we had outstanding amounts of $2.8 million and $130.0 million, of the original outstanding principal, due 2009. On June 15, 2005, we accepted tenders for and retired $127.2 million of the 11¹/2% notes. Interest is payable semi-annually in arrears on March 15 and September 15 of each year. These notes are effectively subordinate to our New Credit Facility, capital leases and notes payable.

     12¹/4% Senior Subordinated Notes (“12¹/4% notes”). On February 14, 2005, we retired the entire outstanding balance of $10 million of our 12¹/4% notes. As of December 31, 2004, we owed $10 million.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED (Continued)

     6¹/2% Convertible Subordinated Debentures (“6¹/2% debentures”). On August 15, 2005, we retired the entire outstanding balance of $1.8 million of our 6¹/2% debentures. As of December 31, 2004, we owed $1.8 million due 2012.

     Notes payable, foreign credit lines and other indebtedness. As of September 30, 2005 and December 31, 2004, we had outstanding amounts of $13.0 million and $13.4 million, respectively, in notes payable and foreign lines of credit. The weighted average interest rates of the notes were approximately 5.7% and 5.8% as of September 30, 2005 and December 31, 2004, respectively.

     We maintain foreign lines of credit, which are collateralized by the assets of our foreign subsidiaries and letters of credit. As of September 30, 2005, we had drawn $3.1 million on our foreign lines of credit, reducing the amount available under these facilities to $12.5 million. As of December 31, 2004, we had drawn $8.5 million under our foreign lines of credit, reducing the amount available to $7.9 million. The interest rates were 5.4% and 8.6% as of September 30, 2005 and December 31, 2004, respectively.

Fair Value of Financial Instruments

     The fair values of the 11¹/2% notes and the 12¹/4% notes fluctuate depending on market conditions and our performance and at times may differ from their carrying values. On February 14, 2005, we retired the entire outstanding balance of $10.0 million on the 12¹/4% notes. On June 15, 2005, we retired 97.8% of the $130.0 million of the 11¹/2% notes with $2.8 million outstanding. We believe that the fair value of our remaining 11¹/2% notes approximate their carrying value as of September 30, 2005. As of December 31, 2004, the total fair values of the 11¹/2% notes and the 12 ¹/4% notes were approximately $161.5 million.

Maturities

     As of September 30, 2005, the amounts of our long-term debt outstanding (excluding capital leases) that mature in the next five years and thereafter are as follows:

	(In thousands)
Less than one year	$	10,890
Second year		3,601
Third year		12,120
Fourth year		50,639
Fifth year		97,156
Thereafter		151,316
	$	325,722

Costs Incurred for Extinguishment of Debt

     We incurred the following costs to extinguish our Old Credit Facility, 6¹/2% debentures, 11¹/2% notes, and 12¹/4% notes during the three months and nine months ended September 30, 2005 and September 30, 2004.

	Three Months Ended September 30, 2005
	Old Credit		6 1/2%		11 1/2%		121/4%
	Facility		Debentures		Notes		Notes		Total
	(in thousands)
Write-off of pre-paid financing fees, debt issuance costs and discounts	$	—	$	16	$	—	$	—	$	16
Tender premiums and expenses		—		—		2		—		2
Total	$	—	$	16	$	2	$	—	$	18

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED (Continued)

	Three Months Ended September 30, 2004
	Old Credit		6 1/2%		11 1/2%		121/4%
	Facility		Debentures		Notes		Notes		Total
	(in thousands)
Write-off of pre-paid financing fees, debt issuance costs and discounts	$	—	$	—	$	—	$	337	$	337
Call premiums		—		—		—		1,225		1,225
Total	$	—	$	—	$	—	$	1,562	$	1,562

	Nine Months Ended September 30, 2005
	Old Credit		6 1/2%		11 1/2%		121/4%
	Facility		Debentures		Notes		Notes		Total
	(in thousands)
Write-off of pre-paid financing fees, debt issuance costs and discounts	$	6,012	$	16	$	7,527	$	149	$	13,704
Tender/Call premiums and expenses		—		—		18,808		613		19,421
Total	$	6,012	$	16	$	26,335	$	762	$	33,125

	Nine Months Ended September 30, 2004
	Old Credit		6 1/2%		11 1/2%		121/4%
	Facility		Debentures		Notes		Notes		Total
	(in thousands)
Write-off of pre-paid financing fees, debt issuance costs and discounts	$	—	$	—	$	5,191	$	3,127	$	8,318
Call premiums		—		—		8,050		11,025		19,075
Total	$	—	$	—	$	13,241	$	14,152	$	27,393

     The write-off of the pre-paid financing fees, debt issuance costs and discounts and the amounts paid for tender/call premiums and expenses are included in the indirect, general and administrative expenses of our Consolidated Statements of Operations and Comprehensive Income.

NOTE 5. COMMITMENTS AND CONTINGENCIES

     In the ordinary course of business, we are subject to certain contractual guarantees and governmental audits or investigations and we are involved in various legal proceedings that are pending against us and our subsidiaries alleging, among other things, breach of contract or tort in connection with the performance of professional services, the various outcomes of which cannot be predicted with certainty. The following provides updated information regarding proceedings that were described in Note 9 to our consolidated financial statements, which were included in our Annual Report on Form 10-K/A for the fiscal year ended October 31, 2004:

• Saudi Arabia: Prior to our acquisition of Lear Seigler Services, Inc. (“LSI”) in August 2002, LSI provided aircraft maintenance support services on F-5 aircraft under contracts (the “F-5 Contract”) with a Saudi Arabian government ministry (the “Ministry”). LSI’s operational performance under the F-5 Contract was completed in November 2000 and the Ministry has yet to pay a $12.2 million account receivable owed to LSI. The following legal proceedings ensued:

Two Saudi Arabian landlords have pursued claims over disputed rents in Saudi Arabia. The Saudi Arabian landlord of the Al Bilad complex received a judgment in Saudi Arabia against

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URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED (Continued)

LSI for $7.9 million. The $7.9 million judgment remains unpaid and LSI is currently pursuing a countersuit in Saudi Arabia against the Al Bilad landlord. Another landlord has obtained a judgment in Saudi Arabia against LSI for $1.2 million. The $1.2 million judgment also remains unpaid and LSI successfully appealed the decision in June 2005 in Saudi Arabia, which was remanded for future proceedings. LSI intends to continue to vigorously defend these matters.

During fiscal year 2004, an arbitration ruling by the International Chamber of Commerce was issued against LSI for a breach of a contract claim, which included a monetary award of approximately $5.5 million, plus continuing interest to a joint venture partner (the “Claimant”). In September 2005, LSI paid the Claimant $4.8 million in exchange for the full release of all claims against LSI.

LSI is involved in a dispute relating to a pending tax assessment issued by the Saudi Arabian taxing authority against LSI of approximately $5.1 million in taxes for the years 1999 through 2002. LSI disagrees with the Saudi Arabian taxing authority’s assessment and is providing responses, additional information and documentation to the taxing authority. Despite LSI’s position on the taxing authority’s assessment, the Ministry inappropriately directed payment of a performance bond outstanding under the F-5 Contract in the amount of approximately $5.6 million. Banque Saudi Fransi paid the bond and thereafter filed a reimbursement claim against LSI in December 2004 in the United Kingdom’s High Court of Justice, Queen’s Bench Division, Commercial Court. LSI believes Banque Saudi Fransi’s payment of the performance bond amount was inappropriate and constituted a contractual violation of our performance bond agreement. In April 2005, LSI responded to the Banque Saudi Fransi’s claim and the Commercial Court granted Banque Saudi Fransi an application for summary judgement of approximately $5.6 million, plus attorney fees and interest. In October 2005, LSI filed a motion in Commercial Court seeking permission to file an appeal. LSI intends to continue to vigorously defend this matter.

In November 2004, LSI filed a complaint against the Ministry in the United States District Court for the Western District of Texas for intentional interference with commercial relations caused by the Ministry’s wrongful demand of the performance bond. In addition, LSI’s complaint also asserts a breach of the F-5 Contract, unjust enrichment and promissory estoppel, and seeks payment of the $12.2 million account receivable owed to LSI under the F-5 Contract, as well as other damages. In March 2005, the Ministry responded to LSI’s complaint by filing a motion to dismiss, which the District Court denied. The Ministry failed to file a timely answer to LSI’s complaint and LSI is pursuing a motion for default judgment. LSI intends to continue to vigorously pursue this matter.

• Lebanon: Prior to our acquisition of Dames and Moore Group, Inc. in 1999, which included Radian International, LLC, a wholly-owned subsidiary (“Radian”), Radian entered into a contract to provide environmental remediation to a Lebanese company (“Solidere”) involved in the development and reconstruction of the central district of Beirut. Various disputes have arisen under this contract, including an allegation by Solidere that Radian breached the contract by, among other things, failing to reduce the level of chemical and biological constituents, including methane gas, at the project site to the contract level. The parties sought to resolve their disputes in an arbitration proceeding filed with the International Chamber of Commerce (“ICC”). During July 2004, an ICC arbitration panel ruled against Radian and ordered Radian to prepare a plan to, among other things, reduce the level of methane gas at the project site to the contract level, to pay approximately $2.4 million in attorney fees and other expenses to Solidere, and authorized Solidere to withhold project payments. As of September 30, 2005, Solidere had withheld project payments amounting to $10.3 million included in our consolidated accounts receivable. In addition, Radian has deferred other costs amounting to $5.2 million included in our consolidated costs and accrued earnings in excess of billings on contracts in process and $3.2 million included in our consolidated other assets. Radian is

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URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED (Continued)

complying with the terms of the ICC arbitration panel’s ruling and continues to be actively engaged in attempting to resolve the various disputes directly with Solidere through alternate resolution strategies that may be more advantageous to both parties. Radian intends to continue to vigorously defend this matter.

Solidere is also seeking damages for delays of up to $8.5 million and drew upon an $8.5 million bank guarantee at Saradar Bank, Sh.M.L. (“Saradar”). In July 2004, Saradar filed a reimbursement claim in the First Court in Beirut, Lebanon to recover the $8.5 million bank guarantee from Radian and co-defendant Wells Fargo Bank, N.A. In February 2005, Radian responded to Saradar’s claim by filing a Statement of Defense in the First Court of Beirut. In April 2005, Saradar also filed a reimbursement claim against Solidere in the First Court of Beirut. Radian believes that the bank guarantee has expired and as a result, it was not obligated under the guarantee. Radian intends to continue to vigorously defend this matter.

Prior to entering into the Solidere contract, Radian obtained a project-specific, $50 million insurance policy from Alpina Insurance Company (“Alpina”) with a $1 million deductible, which Radian believes is available to support its claims in excess of the deductible. The Solidere contract contains a $20 million limitation on damages. In October 2004, Alpina notified Radian of a denial of insurance coverage. Radian filed a breach of contract and bad faith claim against Alpina in the United States District Court for the Northern District of California in October 2004 seeking declaratory relief and monetary damages. In July 2005, Alpina responded to Radian’s claim by filing a motion to dismiss based on improper venue, which was granted by the District Court. The District Court’s decision, however, did not consider the underlying merits of Radian’s claim and Radian appealed the matter to the United States Court of Appeals for the Ninth Circuit in September 2005. Radian is involved in settlement discussions with Alpina and its other insurance carriers to resolve the matter and intends to continue to vigorously pursue this matter.

• Tampa-Hillsborough County Expressway Authority: In 1999, URS Corporation Southern, a wholly-owned subsidiary, entered into an agreement (“Agreement”) with the Tampa-Hillsborough County Expressway Authority (the “Authority”) to provide foundation design, project oversight and other support services in connection with the construction of the Lee Roy Selmon Elevated Expressway structure in Tampa, Florida. In 2004, during construction of the elevated structure, one pier subsided substantially, causing significant damage to a segment of the elevated structure, though no significant injuries were reported at the time of the incident. The Authority has completed and is implementing a plan to remediate the damage to the Expressway. In October 2005, the Authority filed a lawsuit in the Thirteenth Judicial Circuit of Florida against URS Corporation Southern and an unrelated third party, alleging breach of contract and professional negligence resulting in damages to the Authority exceeding $120 million. URS Corporation Southern believes that the Authority’s filing of the lawsuit was premature since the Agreement requires completion of a pre-suit mediation before a lawsuit may be filed, which the Authority failed to complete; and therefore URS Corporation Southern believes the lawsuit will be stayed. Sufficient information is not currently available to assess liabilities associated with a remediation plan. URS Corporation Southern intends to continue to vigorously defend this matter.

     Currently, we have limits of $125.0 million per loss and $125.0 million in the aggregate annually for general liability, professional errors and omissions liability and contractor’s pollution liability insurance (in addition to other policies for some specific projects). These policies include self-insured claim retention amounts of $4.0 million, $7.5 million and $7.5 million, respectively. In some actions, parties seek damages, including punitive or treble damages that substantially exceed our insurance coverage or are not insured.

     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 we do not continue to maintain these

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URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED (Continued)

policies, we will have no coverage for claims made after the termination date — even for claims based on events that occurred during the term of coverage. We intend to maintain these policies; however, we may be unable to maintain existing coverage levels. We have maintained insurance without lapse for many years with limits in excess of losses sustained.

     Although the outcome of our contingencies cannot be predicted with certainty and no assurances can be provided, based on our previous experience in such matters, we do not believe that any of our contingencies described above, individually or collectively, are likely to exceed established loss accruals or our various professional errors and omissions, project-specific and potentially other insurance policies. However, the resolution of outstanding contingencies is subject to inherent uncertainty and it is reasonably possible that such resolution could have an adverse effect on us.

     As of September 30, 2005, we had the following guarantee obligations and commitments:

     We have guaranteed the credit facility of one of our joint ventures, in the event of a default by the joint venture. This joint venture was formed in the ordinary course of business to perform a contract for the federal government. The term of the guarantee is equal to the remaining term of the underlying debt, which is five months. The maximum potential amount of future payments that we could be required to make under this guarantee at September 30, 2005, was $6.5 million.

     We also maintain a variety of commercial commitments that are generally made to support provisions of our contracts. In addition, in the ordinary course of business we provide letters of credit to clients and others against advance payments and to support other business arrangements. We are required to reimburse the issuers of letters of credit for any payments they make under the letters of credit.

     From time to time, we may provide guarantees related to our services or work. If our services under a guaranteed project are later determined to have resulted in a material defect or other material deficiency, then we may be responsible for monetary damages or other legal remedies. When sufficient information about claims on guaranteed projects is available and monetary damages or other costs or losses are determined to be probable, we recognize such guarantee losses. Currently, we have no material guarantee claims for which losses have been recognized.

NOTE 6. SEGMENT AND RELATED INFORMATION

     We operate our business through two segments: the URS Division and the EG&G Division. Our URS Division provides a comprehensive range of professional planning and design, program and construction management, and operations and maintenance services to the U.S. federal government, state and local government agencies, and private industry clients in the United States and internationally. Our EG&G Division provides planning, systems engineering and technical assistance, operations and maintenance, and program management services to various U.S. federal government agencies, primarily the Departments of Defense and Homeland Security.

     These two segments operate under separate management groups and produce discrete financial information. Their operating results also are reviewed separately by management. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies. The information disclosed in our consolidated financial statements is based on the two segments that comprise our current organizational structure.

     The following table presents summarized financial information of our reportable segments. “Eliminations” in the following tables include elimination of inter-segment sales and elimination of investments in subsidiaries.

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URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED (Continued)

	September 30, 2005
			Property
	Net		and
	Accounts		Equipment
	Receivable		at Cost, Net		Total Assets
	(In thousands)
URS Division	$	746,783	$	131,316	$	1,006,237
EG&G Division		272,836		8,322		304,236
		1,019,619		139,638		1,310,473
Corporate		—		5,159		1,732,162
Eliminations		—		—		(658,851	)
Total	$	1,019,619	$	144,797	$	2,383,784

	December 31, 2004
			Property
	Net		and
	Accounts		Equipment
	Receivable		at Cost, Net		Total Assets
	(In thousands)
URS Division	$	728,850	$	132,277	$	941,476
EG&G Division		212,802		7,254		230,573
		941,652		139,531		1,172,049
Corporate		—		3,376		1,721,031
Eliminations		—		—		(589,400	)
Total	$	941,652	$	142,907	$	2,303,680

	Three Months Ended September 30, 2005
				Operating			Depreciation
				Income			and
	Revenues			(Loss)			Amortization
	(In thousands)
URS Division	$	625,005		$	46,319		$	7,885
EG&G Division		339,796			16,740			1,239
Eliminations		(1,861	)		(110	)		—
		962,940			62,949			9,124
Corporate		—			(9,979	)		232
Total	$	962,940		$	52,970		$	9,356

	Three Months Ended September 30, 2004
				Operating			Depreciation
				Income			and
	Revenues			(Loss)			Amortization
	(In thousands)
URS Division	$	563,519		$	44,332		$	8,402
EG&G Division		298,627			15,644			1,495
Eliminations		(465	)		—			—
		861,681			59,976			9,897
Corporate		—			(9,996	)		147
Total	$	861,681		$	49,980		$	10,044

19

URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED (Continued)

	Nine Months Ended September 30, 2005
				Operating			Depreciation
				Income			and
	Revenues			(Loss)			Amortization
	(In thousands)
URS Division	$	1,855,159		$	136,702		$	24,394
EG&G Division		996,179			47,433			3,879
Eliminations		(4,782	)		(288	)		—
		2,846,556			183,847			28,273
Corporate		—			(63,895	)		952
Total	$	2,846,556		$	119,952		$	29,225

	Nine Months Ended September 30, 2004
				Operating			Depreciation
				Income			and
	Revenues			(Loss)			Amortization
	(In thousands)
URS Division	$	1,708,454		$	129,282		$	26,604
EG&G Division		847,896			41,388			4,080
Eliminations		(2,043	)		—			—
		2,554,307			170,670			30,684
Corporate		—			(52,938	)		319
Total	$	2,554,307		$	117,732		$	31,003

     We define our segment operating income (loss) as total segment net income, before income tax and net interest expense. Our long-lived assets primarily consist of our property and equipment.

Geographic areas

     Our revenues by geographic areas are shown below:

	Three Months Ended						Nine Months Ended
	September 30,			September 30,			September 30,			September 30,
	2005			2004			2005			2004
	(In thousands)
Revenues
United States	$	868,383		$	790,051		$	2,567,744		$	2,331,291
International		96,882			72,927			285,545			227,481
Eliminations		(2,325	)		(1,297	)		(6,733	)		(4,465	)
Total revenues	$	962,940		$	861,681		$	2,846,556		$	2,554,307

20

URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED (Continued)

Major Customers

     For the three months and nine months ended September 30, 2005 and September 30, 2004, we had multiple contracts with the U.S. Army that contributed more than ten percent of our total consolidated revenues:

	URS Division		EG&G Division		Total
	(In millions)
Three months ended September 30, 2005
The U.S. Army (1)	$	24.6	$	169.0	$	193.6
Three months ended September 30, 2004
The U.S. Army (1)	$	28.3	$	128.7	$	157.0
Nine months ended September 30, 2005
The U.S. Army (1)	$	75.0	$	484.1	$	559.1
Nine months ended September 30, 2004
The U.S. Army (1)	$	70.8	$	362.1	$	432.9

(1) The U.S. Army includes the U.S. Army Corps of Engineers.

NOTE 7. RELATED PARTY TRANSACTIONS

     On January 19, 2005, affiliates of Blum Capital Partners, L.P. (collectively, the “Blum Affiliates”) sold 2,000,000 shares of our common stock in an underwritten secondary offering. The general partner of Blum Capital Partners, L.P. was a member of our Board of Directors.

     On October 21, 2005, according to the terms of an existing registration rights agreement, the Blum Affiliates requested that we register 3,580,907 shares of URS common stock held by the Blum Affiliates. Accordingly, on October 27, 2005, we filed a Form S-3 registration statement with the SEC solely to register the Blum Affiliates’ shares of URS common stock.

NOTE 8. COMMON STOCK

     On June 8, 2005, we sold an aggregate of 3,636,721 shares of our common stock through a public offering. We granted the underwriters the right to purchase up to an additional 363,672 shares of our common stock to cover over-allotments (the “over-allotment shares”). On June 8, 2005, the underwriters exercised their option to purchase the over-allotment shares.

     The offering price of our common stock was $34.50 per share and the total offering proceeds to us were $130.3 million, net of underwriting discounts and commissions and other offering-related expenses of $7.8 million. We used the net proceeds from this common stock offering and cash available on hand to pay $127.2 million of the 11¹/2% notes and $18.8 million of tender premiums and expenses.

NOTE 9. SUPPLEMENTAL GUARANTOR INFORMATION

     Substantially all of our domestic operating subsidiaries have guaranteed our obligations under our 11¹/2% notes. Each of the subsidiary guarantors has fully and unconditionally guaranteed our obligations on a joint and several basis.

21

URS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED (Continued)

     Substantially all of our income and cash flows are generated by our subsidiaries. We have no operating assets or operations other than our investments in our subsidiaries. As a result, the funds necessary to meet our debt service obligations are provided in large part by distributions or advances from our subsidiaries. Financial conditions and operating requirements of the subsidiary guarantors may limit our ability to obtain cash from our subsidiaries for the purposes of meeting our debt service obligations, including the payment of principal and interest on our 11¹/2% notes. In addition, although the terms of our 11¹/2% notes limit us and our subsidiary guarantors’ ability to place contractual restrictions on the flow of funds to us, legal restrictions, including local regulations, and contractual obligations associated with secured loans, such as equipment financings at the subsidiary level, may restrict the subsidiary guarantors’ ability to pay dividends or make loans or other distributions to us.

     The following information sets forth our condensed consolidating balance sheets as of September 30, 2005 and December 31, 2004, and our condensed consolidating statements of operations and comprehensive income for the three months and nine months ended September 30, 2005 and September 30, 2004; and our condensed consolidating statements of cash flows for the nine months ended September 30, 2005 and September 30, 2004. Elimination entries necessary to consolidate our subsidiaries are reflected in the eliminations column. Separate complete financial statements for our subsidiaries, which guarantee our 11¹/2% notes, would not provide additional material information that would be useful in assessing the financial condition of such subsidiaries.

22

URS CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEET
(In thousands)
(unaudited)

	As of September 30, 2005
						Subsidiary
			Subsidiary			Non-			Reclassifications/
	Corporate		Guarantors			Guarantors			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	27,370	$	68,868		$	16,548		$	(25,963	)	$	86,823
Accounts receivable		—		500,615			92,051			—			592,666
Costs and accrued earnings in excess of billings on contracts in process		—		403,119			67,442			—			470,561
Less receivable allowance		—		(37,318	)		(6,290	)		—			(43,608	)
Net accounts receivable		—		866,416			153,203			—			1,019,619
Deferred income taxes		21,945		—			—			—			21,945
Prepaid expenses and other assets		17,325		25,867			4,777			—			47,969
Total current assets		66,640		961,151			174,528			(25,963	)		1,176,356
Property and equipment at cost, net		5,159		122,701			16,937			—			144,797
Goodwill		1,006,253		—			—			—			1,006,253
Purchased intangible assets, net		5,831		—			—			—			5,831
Investment in subsidiaries		658,851		—			—			(658,851	)		—
Other assets		15,391		34,006			1,150			—			50,547
	$	1,758,125	$	1,117,858		$	192,615		$	(684,814	)	$	2,383,784
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Book overdraft	$	—	$	32,913		$	330		$	(25,963	)	$	7,280
Notes payable and current portion of long-term debt		3,357		19,859			3,248			—			26,464
Accounts payable and subcontractors payable		6,591		175,523			25,831			—			207,945
Accrued salaries and wages		4,466		150,664			20,844			—			175,974
Accrued expenses and other		17,884		37,910			6,801			—			62,595
Billings in excess of costs and accrued earnings on contracts in process		—		85,921			23,549			—			109,470
Total current liabilities		32,298		502,790			80,603			(25,963	)		589,728
Long-term debt		311,527		22,818			724			—			335,069
Deferred income taxes		44,852		—			—			—			44,852
Other long-term liabilities		60,346		42,002			2,685			—			105,033
Total liabilities		449,023		567,610			84,012			(25,963	)		1,074,682
Stockholders’ equity:
Total stockholders’ equity		1,309,102		550,248			108,603			(658,851	)		1,309,102
	$	1,758,125	$	1,117,858		$	192,615		$	(684,814	)	$	2,383,784

23

URS CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEET
(In thousands)
(unaudited)

	As of December 31, 2004
						Subsidiary
			Subsidiary			Non-			Reclassifications/
	Corporate		Guarantors			Guarantors			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	58,982	$	34,886		$	14,329		$	(190	)	$	108,007
Accounts receivable		—		491,294			88,659			—			579,953
Costs and accrued earnings in excess of billings on contracts in process		—		346,331			54,087			—			400,418
Less receivable allowance		—		(31,933	)		(6,786	)		—			(38,719	)
Net accounts receivable		—		805,692			135,960			—			941,652
Deferred income taxes		20,614		—			—			—			20,614
Prepaid expenses and other assets		15,710		8,383			1,968			—			26,061
Total current assets		95,306		848,961			152,257			(190	)		1,096,334
Property and equipment at cost, net		3,376		124,886			14,645			—			142,907
Goodwill		1,004,680		—			—			—			1,004,680
Purchased intangible assets, net		7,749		—			—			—			7,749
Investment in subsidiaries		589,400		—			—			(589,400	)		—
Other assets		20,710		30,359			941			—			52,010
	$	1,721,221	$	1,004,206		$	167,843		$	(589,590	)	$	2,303,680
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Book overdraft	$	—	$	59,955		$	11,106		$	(190	)	$	70,871
Notes payable and current portion of long-term debt		29,116		17,582			1,640			—			48,338
Accounts payable and subcontractors payable		2,988		125,509			15,938			—			144,435
Accrued salaries and wages		4,158		147,431			19,415			—			171,004
Accrued expenses and other		21,656		32,614			5,644			—			59,914
Billings in excess of costs and accrued earnings on contracts in process		—		63,831			20,562			—			84,393
Total current liabilities		57,918		446,922			74,305			(190	)		578,955
Long-term debt		483,933		24,601			50			—			508,584
Deferred income taxes		36,305		—			—			—			36,305
Other long-term liabilities		60,944		36,158			613			—			97,715
Total liabilities		639,100		507,681			74,968			(190	)		1,221,559
Stockholders’ equity:
Total stockholders’ equity		1,082,121		496,525			92,875			(589,400	)		1,082,121
	$	1,721,221	$	1,004,206		$	167,843		$	(589,590	)	$	2,303,680

24

URS CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
(In thousands)
(unaudited)

	Three Months Ended September 30, 2005
						Subsidiary
				Subsidiary		Non-
	Corporate			Guarantors		Guarantors			Eliminations			Consolidated
Revenues	$	—		$	868,383	$	96,882		$	(2,325	)	$	962,940
Direct operating expenses		—			572,564		56,960			(2,325	)		627,199
Gross profit		—			295,819		39,922			—			335,741
Indirect, general and administrative expenses		9,979			236,071		36,721			—			282,771
Operating income (loss)		(9,979	)		59,748		3,201			—			52,970
Interest expense (income), net		4,467			64		(18	)		—			4,513
Income (loss) before income taxes		(14,446	)		59,684		3,219			—			48,457
Income tax expense (benefit)		(5,784	)		24,103		1,301			—			19,620
Income (loss) before equity in net earnings of subsidiaries		(8,662	)		35,581		1,918			—			28,837
Equity in net earnings of subsidiaries		37,499			—		—			(37,499	)		—
Net income		28,837			35,581		1,918			(37,499	)		28,837
Other comprehensive loss:
Foreign currency translation adjustments		(229	)		—		(229	)		229			(229	)
Comprehensive income	$	28,608		$	35,581	$	1,689		$	(37,270	)	$	28,608

	Three Months Ended September 30, 2004
						Subsidiary
				Subsidiary		Non-
	Corporate			Guarantors		Guarantors			Eliminations			Consolidated
Revenues	$	—		$	790,051	$	72,927		$	(1,297	)	$	861,681
Direct operating expenses		—			510,342		39,544			(1,297	)		548,589
Gross profit		—			279,709		33,383			—			313,092
Indirect, general and administrative expenses		9,996			219,455		33,661			—			263,112
Operating income (loss)		(9,996	)		60,254		(278	)		—			49,980
Interest expense, net		9,802			220		304			—			10,326
Income (loss) before income taxes		(19,798	)		60,034		(582	)		—			39,654
Income tax expense (benefit)		(7,919	)		24,011		(232	)		—			15,860
Income (loss) before equity in net earnings of subsidiaries		(11,879	)		36,023		(350	)		—			23,794
Equity in net earnings of subsidiaries		35,673			—		—			(35,673	)		—
Net income (loss)		23,794			36,023		(350	)		(35,673	)		23,794
Other comprehensive income:
Foreign currency translation adjustments		600			—		600			(600	)		600
Comprehensive income	$	24,394		$	36,023	$	250		$	(36,273	)	$	24,394

25

URS CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
(In thousands)
(unaudited)

	Nine Months Ended September 30, 2005
						Subsidiary
				Subsidiary		Non-
	Corporate			Guarantors		Guarantors			Eliminations			Consolidated
Revenues	$	—		$	2,567,744	$	285,545		$	(6,733	)	$	2,846,556
Direct operating expenses		—			1,679,483		163,905			(6,733	)		1,836,655
Gross profit		—			888,261		121,640			—			1,009,901
Indirect, general and administrative expenses		63,895			712,407		113,647			—			889,949
Operating income (loss)		(63,895	)		175,854		7,993			—			119,952
Interest expense, net		23,432			1,028		311			—			24,771
Income (loss) before income taxes		(87,327	)		174,826		7,682			—			95,181
Income tax expense (benefit)		(35,452	)		70,974		3,118			—			38,640
Income (loss) before equity in net earnings of subsidiaries		(51,875	)		103,852		4,564			—			56,541
Equity in net earnings of subsidiaries		108,416			—		—			(108,416	)		—
Net income		56,541			103,852		4,564			(108,416	)		56,541
Other comprehensive loss:
Minimum pension liability adjustment		(270	)		—		(270	)		270			(270	)
Foreign currency translation adjustments		(4,010	)		—		(4,010	)		4,010			(4,010	)
Comprehensive income	$	52,261		$	103,852	$	284		$	(104,136	)	$	52,261

	Nine Months Ended September 30, 2004
						Subsidiary
				Subsidiary		Non-
	Corporate			Guarantors		Guarantors		Eliminations			Consolidated
Revenues	$	—		$	2,331,291	$	227,481	$	(4,465	)	$	2,554,307
Direct operating expenses		—			1,500,591		121,822		(4,465	)		1,617,948
Gross profit		—			830,700		105,659		—			936,359
Indirect, general and administrative expenses		52,938			664,559		101,130		—			818,627
Operating income (loss)		(52,938	)		166,141		4,529		—			117,732
Interest expense, net		41,778			800		1,019		—			43,597
Income (loss) before income taxes		(94,716	)		165,341		3,510		—			74,135
Income tax expense (benefit)		(37,881	)		66,127		1,404		—			29,650
Income (loss) before equity in net earnings of subsidiaries		(56,835	)		99,214		2,106		—			44,485
Equity in net earnings of subsidiaries		101,320			—		—		(101,320	)		—
Net income		44,485			99,214		2,106		(101,320	)		44,485
Other comprehensive income:
Foreign currency translation adjustments		1,596			—		1,596		(1,596	)		1,596
Comprehensive income	$	46,081		$	99,214	$	3,702	$	(102,916	)	$	46,081

26

URS CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
(In thousands)
(unaudited)

	Nine Months Ended September 30, 2005
							Subsidiary
				Subsidiary			Non-			Reclassifications/
	Corporate			Guarantors			Guarantors			Eliminations			Consolidated
Cash flows from operating activities:
Net income	$	56,541		$	103,852		$	4,564		$	(108,416	)	$	56,541
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		952			25,065			3,208			—			29,225
Amortization of financing fees		3,315			—			—			—			3,315
(Gain) loss on disposal of property and equipment		—			(356	)		37			—			(319	)
Costs incurred for extinguishment of debt		33,125			—			—			—			33,125
Provision for doubtful accounts		—			7,902			(37	)		—			7,865
Deferred income taxes		7,216			—			—			—			7,216
Stock compensation		4,508			—			—			—			4,508
Tax benefit of stock compensation		9,269			—			—			—			9,269
Equity in net earnings of subsidiaries		(108,416	)		—			—			108,416			—
Changes in assets and liabilities:
Accounts receivable and costs and accrued earnings in excess of billings on contracts in process		—			(68,622	)		(17,207	)		—			(85,829	)
Prepaid expenses and other assets		(5,239	)		(17,485	)		(2,808	)		—			(25,532	)
Accounts payable, accrued salaries and wages and accrued expenses		37,046			6,326			24,061			3,346			70,779
Billings in excess of costs and accrued earnings on contracts in process		—			22,090			2,987			—			25,077
Other long-term liabilities		(598	)		5,843			2,072			—			7,317
Other liabilities, net		(1,402	)		(3,646	)		(209	)		(3,346	)		(8,603	)
Total adjustments and changes		(20,224	)		(22,883	)		12,104			108,416			77,413
Net cash from operating activities		36,317			80,969			16,668			—			133,954
Cash flows from investing activities:
Payment of business acquisition		—			—			(1,353	)		—			(1,353	)
Proceeds from disposal of property and equipment		—			2,165			17			—			2,182
Capital expenditures		(4,618	)		(8,362	)		(3,917	)		—			(16,897	)
Net cash from investing activities		(4,618	)		(6,197	)		(5,253	)		—			(16,068	)
Cash flows from financing activities:
Long-term debt principal payments		(532,781	)		(3,138	)		—			—			(535,919	)
Long-term debt borrowings		350,806			242			328			—			351,376
Net borrowings (payments) under the line of credit		(18,000	)		—			1,250			—			(16,750	)
Net change in book overdraft		—			(27,042	)		(10,776	)		(25,773	)		(63,591	)
Capital lease obligation payments		(211	)		(10,650	)		(323	)		—			(11,184	)
Short-term note borrowings		328			—			3,386			—			3,714
Short-term note payments		(347	)		(202	)		(3,061	)		—			(3,610	)
Proceeds from common stock offering, net of related expenses		130,257			—			—			—			130,257
Proceeds from sale of common shares from employee stock purchase plan and exercise of stock options		30,687			—			—			—			30,687
Tender and call premiums paid for debt extinguishment		(19,421	)		—			—			—			(19,421	)
Payments for financing fees		(4,629	)		—			—			—			(4,629	)
Net cash from financing activities		(63,311	)		(40,790	)		(9,196	)		(25,773	)		(139,070	)
Net increase (decrease) in cash and cash equivalents		(31,612	)		33,982			2,219			(25,773	)		(21,184	)
Cash and cash equivalents at beginning of year		58,982			34,886			14,329			(190	)		108,007
Cash and cash equivalents at end of year	$	27,370		$	68,868		$	16,548		$	(25,963	)	$	86,823

27

URS CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
(In thousands)
(unaudited)

	Nine Months Ended September 30, 2004
							Subsidiary
				Subsidiary			Non-			Reclassifications/
	Corporate			Guarantors			Guarantors			Eliminations			Consolidated
Cash flows from operating activities:
Net income	$	44,485		$	99,214		$	2,106		$	(101,320	)	$	44,485
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		319			27,544			3,140			—			31,003
Amortization of financing fees		4,943			—			—			—			4,943
Costs incurred for extinguishment of debt		27,393			—			—			—			27,393
Provision for doubtful accounts		—			8,712			946			—			9,658
Deferred income taxes		(3,458	)		—			—			—			(3,458	)
Stock compensation		3,020			—			—			—			3,020
Tax benefit of stock compensation		3,832			—			—			—			3,832
Equity in net earnings of subsidiaries		(101,320	)		—			—			101,320			—
Changes in assets and liabilities:
Accounts receivable and costs and accrued earnings in excess of billings on contracts in process		—			(16,892	)		(20,245	)		—			(37,137	)
Prepaid expenses and other assets		(6,246	)		200			160			—			(5,886	)
Accounts payable, accrued salaries and wages and accrued expenses		66,489			(38,282	)		(1,242	)		(892	)		26,073
Billings in excess of costs and accrued earnings on contracts in process		—			(9,042	)		1,968			—			(7,074	)
Other long-term liabilities		(736	)		210			446			—			(80	)
Other liabilities, net		(1,575	)		(11,669	)		12,943			892			591
Total adjustments and changes		(7,339	)		(39,219	)		(1,884	)		101,320			52,878
Net cash from operating activities		37,146			59,995			222			—			97,363
Cash flows from investing activities:
Capital expenditures		(347	)		(11,591	)		(2,757	)		—			(14,695	)
Net cash from investing activities		(347	)		(11,591	)		(2,757	)		—			(14,695	)
Cash flows from financing activities:
Long-term debt principal payments		(285,454	)		(3,179	)		—			—			(288,633	)
Long-term debt borrowings		25,000			1,496			—			—			26,496
Net borrowings under the line of credit		19,961			—			—			—			19,961
Net change in book overdraft		(3,641	)		(10,691	)		894			—			(13,438	)
Capital lease obligation payments		(163	)		(10,454	)		(249	)		—			(10,866	)
Short-term note borrowings		—			—			1,540			—			1,540
Short-term note payments		(123	)		(34	)		(1,400	)		—			(1,557	)
Proceeds from common stock offering, net of related expenses		204,287			—			—			—			204,287
Proceeds from sale of common shares from employee stock purchase plan and exercise of stock options		23,970			—			—			—			23,970
Call premiums paid for debt extinguishment		(19,075	)		—			—			—			(19,075	)
Payment for financing fees		(1,280	)		—			—			—			(1,280	)
Net cash from financing activities		(36,518	)		(22,862	)		785			—			(58,595	)
Net increase (decrease) in cash and cash equivalents		281			25,542			(1,750	)		—			24,073
Cash and cash equivalents at beginning of year		512			16,926			17,306			—			34,744
Cash and cash equivalents at end of year	$	793		$	42,468		$	15,556		$	—		$	58,817

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

     The following discussion contains, in addition to historical information, forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those described here. You should read this discussion in conjunction with: the section “Risk Factors That Could Affect Our Financial Condition and Results of Operations,” beginning on page 48 and the consolidated financial statements and notes thereto contained in Item 1, “Consolidated Financial Statements;” the footnotes to this report for the nine months ended September 30, 2005; the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations;” and the Consolidated Financial Statements included in our amended Annual Report on Form 10-K/A for the fiscal year ended October 31, 2004, which was previously filed with the Securities and Exchange Commission (“SEC”).

Fiscal Year Change

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

OVERVIEW

Business Summary

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

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

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

     We operate several offices and projects in the regions impacted by Hurricanes Katrina and Rita. Thus, our operations in those regions were affected by the hurricanes during the quarter ended September 30, 2005. A majority of our employees who were impacted by Hurricane Katrina were temporarily relocated to other URS offices and returned to work on their projects within two weeks of landfall. The offices and projects affected by Hurricane Rita reopened within a few days of the hurricane’s passing. We have also filed a preliminary claim under our business interruption insurance to recover expenses and lost profits covered under the policy, including those associated with the office closures and relocation expenses, and will file additional claims as necessary. Our financial position, results of operations and cash flow for the quarter were not materially affected by the hurricanes.

Revenues for Three Months Ended September 30, 2005

     Consolidated revenues for the three months ended September 30, 2005 increased 11.7% over the consolidated revenues for the three months ended September 30, 2004.

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     Revenues from our federal government clients for the three months ended September 30, 2005 increased approximately 11% compared with the corresponding period last year. The increase reflects continued growth in the services we provide to the Department of Defense (“DOD”), and the Department of Homeland Security (“DHS”), as a result of additional spending on engineering and technical services and operations and maintenance activities. In addition, we experienced an increase in environmental and facilities projects under existing contracts.

     Revenues from our state and local government clients for the three months ended September 30, 2005 increased approximately 13% compared with the corresponding period last year. During 2005, many states have experienced increases in tax receipts and, as a result, have increased their general fund budgets. The increase in general fund budgets and the improved economic and fiscal situation have reduced the pressure to limit infrastructure spending or shift funds away from infrastructure contracts, including transportation programs. The recent passage of the TEA-21 successor highway and transit bill, SAFETEA-LU, also had a positive effect on revenues from our state and local government clients. In addition, we have continued to see growth from the water/wastewater and school facilities portions of the state and local market.

     Revenues from our domestic private industry clients for the three months ended September 30, 2005 increased 4% compared with the corresponding period last year. This revenue increase reflects our strategic priority to focus on the emissions control portion of the power market and to build longer-term relationships with multinational corporations through Master Service Agreements (“MSAs”). Several years ago, the private sector market was primarily comprised of stand alone consulting assignments, a market that has declined steadily in the past three years. In addition, revenues from our oil and gas clients continued to grow as a result of higher gasoline prices, leading to additional investments in gas and pipeline infrastructure projects.

     Revenues from our international clients for the three months ended September 30, 2005 increased approximately 33% compared with the corresponding period last year. Approximately 4% of the increase was due to foreign currency exchange fluctuations. The remainder of the increase was due to growth in our MSAs and businesses, primarily in transportation, facilities and infrastructure work and environmental services. The growth in our international business reflects the successful implementation of our strategy to diversify beyond environmental services into the facilities and infrastructure markets internationally, as well as our ability to leverage our strong relationships with multinational clients in the U.S. to win new assignments abroad.

Financing Activities

     During the quarter ended July 1, 2005, we sold 4,000,393 shares of our common stock through a public offering. We used the net proceeds of $130.3 million from this common stock offering and cash available on hand to pay $127.2 million of our 11¹/2% Senior Notes (“11¹/2% notes”) and $18.8 million of tender premiums and expenses. In addition, we borrowed $350.0 million under our New Credit Facility (“New Credit Facility”) and used other available cash to pay off $353.8 million of outstanding term loan borrowings under our Old Senior Secured Credit Facility (“Old Credit Facility”).

Cash Flows and Debt

     During the nine months ended September 30, 2005, we generated $134.0 million in net cash provided by operating activities. Our ratio of debt to total capitalization (total debt divided by the sum of debt and total stockholders’ equity) decreased from 34% at December 31, 2004 to 22% at September 30, 2005. (See “Consolidated Statements of Cash Flows” to our “Consolidated Financial Statements” included under Item 1 of this report.) The decrease in our debt to total capitalization ratio reflects our continued focus on de-leveraging our balance sheet.

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Business Trends

     Revenues from our federal government clients have grown steadily during 2005 and we expect them to continue to increase through the remainder of the year, compared to fiscal year 2004, based on secured funding and anticipated spending by the DOD and the DHS. The $440 billion DOD appropriations budget for fiscal 2006 is now in the Senate-House Committee and we expect a final bill shortly. In September 2005, Congress approved fiscal 2006 appropriations for the DHS. The bill provides approximately $2.6 billion for the Federal Emergency Management Agency (“FEMA”), approximately $3.3 billion for first responder grants and assistance, including $325.0 million for rail, transit and port security grants. As a result, we expect to see additional federal government opportunities in the operations and maintenance, military construction, emergency response and the homeland security markets. Furthermore, federal government opportunities to provide environmental services for military sites under existing DOD contracts may also increase. In addition, we may see increased federal government opportunities for our URS and EG&G Divisions due to the increasing use of large “bundled” contracts issued by the DOD, which typically require the provision of a full range of services at multiple sites throughout the world.

     We expect that the volume of work from defense technical services and military equipment maintenance contracts related to maintenance and modification work for military vehicles and weapons will continue to increase during the remainder of 2005 and into 2006, due to the continuing high level of military activities in the Middle East. We expect this trend to continue during and after the military efforts in Iraq. However, because operations and maintenance and field-based services generally provide lower margins than most other services we offer, we expect our gross profit margin percentage to continue to decrease slightly while the demand for such services continues at a high volume.

     Finally, we see the latest round of the Base Realignment and Closure, or BRAC, activities as an important growth opportunity for our federal business over the next several years. The objective of the 2005 BRAC round is to reduce global military infrastructure. On October 27, 2005, the U.S. House of Representatives approved the final list of bases targeted for realignment or closure. Many of these bases will require environmental, planning and design services before they can be closed or redeveloped. Accordingly, the BRAC program may result in additional federal government opportunities for our URS Division, though it may have both positive and negative impacts on our EG&G Division.

     We expect revenues from our state and local government clients to continue to increase during fiscal year 2005 compared to fiscal year 2004. Generally, states have recovered from the recent recession and their economies and revenues continue to improve. The recent passage of the long-delayed $287 billion highway funding bill, SAFETEA-LU, will provide matching funds for state transportation projects through 2009. It will help re-start many projects that have been initiated but delayed for lack of stable funding.

     We also expect that the devastation caused by Hurricanes Katrina and Rita will inevitably result in a focus on re-building infrastructure in and around New Orleans and more broadly across the Gulf coast, bringing increased opportunities for significant new infrastructure projects across that region.

     We expect revenues from our domestic private industry clients to increase during the 2005 fiscal year compared to fiscal year 2004. The domestic private industry market has shown modest but steady improvement, particularly in the power sector and the oil and gas market. We have experienced and expect to continue to experience significant growth in the emissions control portion of the power sector, which is being driven by the Clean Air Act from the Environmental Protection Agency, and most recently the Clean Air Interstate and Clean Air Mercury rules. These new rules are accelerating the requirements for power companies to cut sulfur dioxide and mercury emissions. In addition, the Energy Policy Act of 2005, which was signed into law in early August 2005, may bring additional opportunities as the private sector increases investment in refining capacity and alternative power sources, such as coal gasification, hydro and solar power facilities. We also expect to continue to benefit from our growing number of MSA contracts with multinational companies.

     We expect revenues from our international business clients to continue to increase throughout 2005 compared to 2004. The increase in MSAs has benefited and strengthened revenues from our international

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private sector clients. In addition, we may see further international opportunities due to the European Union’s recent environmental directives and regulations, the selection of London as the host city for the 2012 Olympics, and increased demand for our facilities design services for the United Kingdom Ministry of Defense and the U.S. DOD. In the Asia-Pacific region, strong economic growth is expected to increase opportunities in the infrastructure market, and the increased global demand for mineral resources is expected to provide additional opportunities in the mining sector. Due to the rapid growth in China, many multinational companies have expanded their presence in that country. Through the acquisition of Austin Ausino, a small engineering and project management firm based in China, we have increased our presence and services in the China market to meet the needs of these multinational companies. In addition, this strategic acquisition, which was completed in August 2005, may provide opportunities for us to build new relationships with these multinational companies, which could expand our growth worldwide.

RESULTS OF OPERATIONS

Consolidated

	Three Months Ended
								Percentage
	September 30,		September 30,		Increase			increase
	2005		2004		(decrease)			(decrease)
	(In millions, except percentages)
Revenues	$	962.9	$	861.7	$	101.2			11.7	%
Direct operating expenses		627.2		548.6		78.6			14.3	%
Gross profit		335.7		313.1		22.6			7.2	%
Indirect, general and administrative expenses		282.8		263.1		19.7			7.5	%
Operating income		52.9		50.0		2.9			5.8	%
Interest expense, net		4.5		10.3		(5.8	)		(56.3	%)
Income before taxes		48.4		39.7		8.7			21.9	%
Income tax expense		19.6		15.9		3.7			23.3	%
Net income	$	28.8	$	23.8	$	5.0			21.0	%
Diluted net income per common share	$	.58	$	.55	$	.03			5.5	%

Three months ended September 30, 2005 compared with September 30, 2004

     Our consolidated revenues for the three months ended September 30, 2005 increased by 11.7% compared with the same period last year. The increase was due to the higher volume of work performed in each of our client categories during the three months ended September 30, 2005, compared with the same period last year.

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     The following table presents our consolidated revenues by client type for the three months ended September 30, 2005 and September 30, 2004.

	Three Months Ended
	September 30,		September 30,				Percentage
	2005		2004		Increase		increase
	(In millions, except percentages)
Revenues
Federal government clients	$	445	$	401	$	44		11	%
State and local government clients		227		201		26		13	%
Domestic private industry clients		194		187		7		4	%
International clients		97		73		24		33	%
Total Revenues	$	963	$	862	$	101		12	%

     Revenues from our federal government clients for the three months ended September 30, 2005 increased by 11% compared with the same period last year. The increase reflects continued growth in operations and maintenance work for military equipment associated with the continued high level of activities in the Middle East, and systems engineering and technical assistance services for the development, testing and evaluation of weapons systems. The volume of task orders issued under Indefinite Delivery Contracts (“IDCs”) for the federal government continued to increase, particularly for facilities and environmental projects and emergency preparedness exercises.

     The majority of our work in the state and local government, the domestic private industry and the international sectors is derived from our URS Division. Further discussion of the factors and activities that drove changes in operations on a segment basis for the three months ended September 30, 2005 can be found beginning on page 35.

     Our consolidated direct operating expenses for the three months ended September 30, 2005, which consist of direct labor, subcontractor costs and other direct expenses, increased by 14.3% compared with the same period last year. The factors that caused revenue growth also drove a corresponding increase in our direct operating expenses. Volume increases in work on existing contracts with lower profit margins and an increase in the amount of subcontractor and other direct costs caused direct operating expenses to increase at a faster rate than revenues.

     Our consolidated gross profit for the three months ended September 30, 2005 increased by 7.2% compared with the same period last year, due to the increase in our revenue volume described previously. Our gross margin percentage, however, fell from 36.3% to 34.9%. The decrease in gross profit margin percentage was caused by a change in revenue mix between the two periods, with a higher volume of revenue during the quarter ended September 30, 2005 coming from contracts with profit margins that were lower than those typically achieved through our historic portfolio of contracts, and an increase in the level of subcontractor and other direct costs, which generate lower profit margins than revenues earned through our direct labor.

     Our consolidated indirect, general and administrative (“IG&A”) expenses for the three months ended September 30, 2005 increased by 7.5% compared with the same period last year. This increase was due to an increase of $10.7 million in retirement program-related expenses, our employee benefit expenses, including workers’ compensation, primarily as a result of an increase in headcount, and benefit program expense increases, including retirement costs. The remaining increases were due to a $3.6 million increase in indirect labor, a $2.2 million increase in sales and business development expenses, and a $3.7 million increase in bad debt expenses. Indirect expenses as a percentage of revenues decreased to 29.4% from 30.5% for the three months ended September 30, 2005 and September 30, 2004, respectively, due to an increase in labor utilization and a decrease in healthcare costs per employee compared with the same period last year.

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     Our consolidated net interest expense for the three months ended September 30, 2005 decreased due to lower debt balances.

     Our effective income tax rates for the three months ended September 30, 2005 and September 30, 2004 were 40.5% and 40.0%, respectively.

     Our consolidated operating income, net income and earnings per share increased as a result of the factors previously described.

Reporting Segments

Three months ended September 30, 2005 compared with September 30, 2004

				Direct						Indirect,			Operating
				Operating			Gross			General and			Income
	Revenues			Expenses			Profit			Administrative			(Loss)
	(In millions)
Three months ended September 30, 2005
URS Division	$	625.0		$	381.1		$	243.9		$	197.6		$	46.3
EG&G Division		339.8			247.9			91.9			75.2			16.7
Eliminations		(1.9	)		(1.8	)		(0.1	)		—			(0.1	)
		962.9			627.2			335.7			272.8			62.9
Corporate		—			—			—			10.0			(10.0	)
Total	$	962.9		$	627.2		$	335.7		$	282.8		$	52.9
Three months ended September 30, 2004
URS Division	$	563.5		$	333.0		$	230.5		$	186.2		$	44.3
EG&G Division		298.6			216.0			82.6			66.9			15.7
Eliminations		(0.4	)		(0.4	)		—			—			—
		861.7			548.6			313.1			253.1			60.0
Corporate		—			—			—			10.0			(10.0	)
Total	$	861.7		$	548.6		$	313.1		$	263.1		$	50.0
Increase (decrease) for three months ended September 30, 2005 and September 30, 2004
URS Division	$	61.5		$	48.1		$	13.4		$	11.4		$	2.0
EG&G Division		41.2			31.9			9.3			8.3			1.0
Eliminations		(1.5	)		(1.4	)		(0.1	)		—			(0.1	)
		101.2			78.6			22.6			19.7			2.9
Corporate		—			—			—			—			—
Total	$	101.2		$	78.6		$	22.6		$	19.7		$	2.9
Percentage Increase (decrease) for three months ended September 30, 2005 vs. September 30, 2004
URS Division		10.9	%		14.4	%		5.8	%		6.1	%		4.5	%
EG&G Division		13.8	%		14.8	%		11.3	%		12.4	%		6.4	%
Eliminations		375.0	%		350.0	%		100.0	%		—			100.0	%
Corporate		—			—			—			—			—
Total		11.7	%		14.3	%		7.2	%		7.5	%		5.8	%

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  URS Division

     The URS Division’s revenues for the three months ended September 30, 2005 increased 10.9% compared with the same period last year. The increase in revenues was due to the various factors discussed below in each of our client markets.

     The following table presents the URS Division’s revenues, net of inter-company eliminations, by client type for the three months ended September 30, 2005 and September 30, 2004.

	Three Months Ended
	September 30,		September 30,				Percentage
	2005		2004		Increase		increase
	(In millions, except percentages)
Revenues
Federal government clients	$	105	$	102	$	3		3	%
State and local government clients		227		201		26		13	%
Domestic private industry clients		194		187		7		4	%
International clients		97		73		24		33	%
Total revenues	$	623	$	563	$	60		11	%

     Revenues from the URS Division’s federal government clients for the three months ended September 30, 2005 increased by 3% compared with the corresponding period last year. The increase was driven by additional environmental and facilities projects under existing contracts with the DOD. Revenues from homeland security projects also contributed to this growth, as we continue to provide a range of engineering services to the DHS. This work includes developing plans and conducting exercises to help states and communities prepare for natural and manmade disasters, preparing designs to help protect federal facilities from terrorist attacks and providing disaster recovery services for FEMA, which is now a part of DHS.

     Revenues from our state and local government clients for the three months ended September 30, 2005 increased approximately 13% compared with the same period last year. The increase reflects an improvement in the states’ economies and general funds, fueled by increased state tax revenues. Generally, states have recovered from the recent recession, and have begun to increase spending on programs for which we provide services, such as surface transportation. Our strategy to actively pursue portions of the state and local government market where funding remained stable or grew during the recession, such as school facilities and water/wastewater projects, has also contributed to our revenue growth. In addition, the recent passage of SAFETEA-LU has had a positive impact on revenues from our state and local government clients.

     Revenues from our domestic private industry clients for the three months ended September 30, 2005 increased by 4% compared with the same period last year. The growth in revenues from our private industry clients is primarily due to the growth of the emissions control portion of our power sector business in response to stricter air pollution control limits under the Clean Air Act and more recently the Clean Air Interstate and Clean Air Mercury rules. We have also successfully increased the number of client relationships managed under MSAs, as the number of stand-alone consulting assignments continues to decline. Revenues from our oil and gas clients continued to grow due to higher gasoline prices, which increased oil and gas company revenues, leading to additional investment in gas and pipeline infrastructure projects.

     Revenues from our international clients for the three months ended September 30, 2005 increased by 33% compared with the same period last year. Approximately 4% of this increase was due to foreign currency exchange fluctuations. The remainder of the increase was due to our continuing efforts to diversify beyond environmental work into the facilities and infrastructure markets. The Asia-Pacific region benefited from strong economic growth, leading to increased funding for facilities and infrastructure programs,

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including transportation and water/wastewater projects. In addition, the increased global demand for mineral resources has resulted in additional projects for the mining industry. In Europe, we continued to benefit from more stringent environmental directives from the European Union and the Kyoto Protocol, leading to increased work in environmental impact statements (including sustainability issues), water and wastewater projects, and carbon emissions control projects.

     The URS Division’s direct operating expenses for the three months ended September 30, 2005 increased by 14.4% compared with the same period last year. The factors that caused revenue growth also drove an increase in our direct operating expenses. Direct operating expenses increased at a higher percentage than revenues as a result of increases in subcontractor costs and other direct expenses.

     The URS Division’s gross profit for the three months ended September 30, 2005 increased by 5.8% compared with the same period last year, primarily due to the increase in revenue volume previously described. Our gross profit margin percentage decreased to 39.0% from 40.9% for the three months ended September 30, 2005 and September 30, 2004, respectively. Our gross profit margin percentage decreased primarily because our subcontractor costs and other direct costs, which usually bear lower profit margins than our direct labor costs, accounted for a higher percentage of our total direct operating expenses during the three months ended September 30, 2005 (58.6%), compared with the three months ended September 30, 2004 (54.5%).

     The URS Division’s IG&A expenses for the three months ended September 30, 2005 increased by 6.1% compared with the same period last year. This increase was due to an additional $4.1 million in retirement program-related expenses, employee benefit expenses, including workers’ compensation, as a result of an increase in headcount and benefit program expense increases, including recruitment costs. The remainder of the increase was due to a $1.9 million increase in indirect labor, a $1.9 million increase in sales and business development expenses, and a $4.0 million increase in bad debt. These increases were offset by a $1.9 million decrease in repairs and maintenance.

  EG&G Division

     The EG&G Division’s revenues for the three months ended September 30, 2005 increased by 13.8% compared with the corresponding period last year. This increase was driven by the high level of military activities in the Middle East, resulting in a higher volume of operations and maintenance and modification work for military vehicles and weapons. Revenues from the specialized systems engineering and technical assistance services that we provide for the development, testing and evaluation of weapons systems also increased. In addition, revenues generated from activities in the homeland security, logistics management and flight training services markets increased during the quarter.

     The EG&G Division’s direct operating expenses for the three months ended September 30, 2005 increased by 14.8% compared with the corresponding period last year. Higher revenues drove an increase in our direct operating expenses. In addition, a greater volume of work on existing contracts with lower profit margins caused direct operating expenses to increase faster than revenues.

     The EG&G Division’s gross profit for the three months ended September 30, 2005 increased by 11.3% compared with the corresponding period last year. The increase in gross profit was primarily due to higher revenues from existing defense technical services and military equipment maintenance contracts. However, gross profit grew at a slower rate than revenue because a significant portion of the revenue increase was generated by operations and maintenance and field-based services, which generally carry lower margins than most other services provided by the EG&G Division. Our gross profit margin percentage decreased to 27.1% from 27.7% for the three months ended September 30, 2005 and September 30, 2004, respectively.

     The EG&G Division’s IG&A expenses for the three months ended September 30, 2005 increased by 12.4% compared with the corresponding period last year. The increase was primarily due to a higher business

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volume. The EG&G Division’s indirect expenses are generally variable in nature and, as such, any increase in business volume tends to result in higher indirect expenses. Of the total increase, approximately $8.5 million was due to increases in retirement program-related expenses, and in indirect labor and employee benefit expenses, including higher healthcare and workers’ compensation, as a result of an increase in headcount. Indirect expenses as a percentage of revenues decreased to 22.1% from 22.4% for the three months ended September 30, 2005 and September 30, 2004, respectively, due to a decrease in healthcare costs per employee.

Consolidated

	Nine Months Ended
								Percentage
	September 30,		September 30,		Increase			increase
	2005		2004		(decrease)			(decrease)
	(In millions, except percentages)
Revenues	$	2,846.6	$	2,554.3	$	292.3			11.4	%
Direct operating expenses		1,836.7		1,617.9		218.8			13.5	%
Gross profit		1,009.9		936.4		73.5			7.8	%
Indirect, general and administrative expenses		889.9		818.6		71.3			8.7	%
Operating income		120.0		117.8		2.2			1.9	%
Interest expense, net		24.8		43.6		(18.8	)		(43.1	%)
Income before taxes		95.2		74.2		21.0			28.3	%
Income tax expense		38.7		29.7		9.0			30.3	%
Net income	$	56.5	$	44.5	$	12.0			27.0	%
Diluted net income per common share	$	1.20	$	1.11	$	.09			8.1	%

Nine months ended September 30, 2005 compared with September 30, 2004

     Our consolidated revenues for the nine months ended September 30, 2005 increased by 11.4% compared with the same period last year. The increase was due to the higher volume of work performed in each of our client categories during the nine months ended September 30, 2005, compared with the same period last year.

     The following table presents our consolidated revenues by client type for the nine months ended September 30, 2005 and September 30, 2004.

	Nine Months Ended
	September 30,		September 30,				Percentage
	2005		2004		Increase		increase
	(In millions, except percentages)
Revenues
Federal government clients	$	1,334	$	1,163	$	171		15	%
State and local government clients		647		604		43		7	%
Domestic private industry clients		580		560		20		4	%
International clients		286		227		59		26	%
Total Revenues	$	2,847	$	2,554	$	293		11	%

     Revenues from our federal government clients for the nine months ended September 30, 2005 increased by 15% compared with the same period last year. The increase reflects the continued high level of activities in the Middle East, resulting in a higher volume of maintenance and modification work for military vehicles and weapons, and systems engineering and technical assistance services for the development, testing

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and evaluation of weapons systems. The volume of task orders issued under Indefinite Delivery Contracts (“IDCs”) for the federal government continued to increase, particularly for facilities and environmental projects and emergency preparedness exercises.

     The majority of our work in the state and local government, the domestic private industry and the international sectors is derived from our URS Division. Further discussion of the factors and activities that drove changes in operations on a segment basis for the nine months ended September 30, 2005 can be found beginning on page 39.

     Our consolidated direct operating expenses for the nine months ended September 30, 2005, which consist of direct labor, subcontractor costs and other direct expenses, increased by 13.5% compared with the same period last year. The factors that caused revenue growth also drove a corresponding increase in our direct operating expenses. Volume increases in work on existing contracts with lower profit margins and an increase in the amount of subcontractor and other direct costs caused direct operating expenses to increase at a faster rate than revenues.

     Our consolidated gross profit for the nine months ended September 30, 2005 increased by 7.8% compared with the same period last year, primarily due to the increase in our revenue volume described previously. Our gross margin percentage, however, fell from 36.7% to 35.5%. The decrease in gross profit margin percentage was caused by a change in revenue mix between the two periods, with a higher volume of revenue during the nine months ended September 30, 2005 coming from contracts with profit margins that were lower than those typically achieved through our historic portfolio of contracts and an increase in the level of subcontractor and other direct costs, which generated lower profit margins than revenues earned through our direct labor.

     Our consolidated indirect, general and administrative (“IG&A”) expenses for the nine months ended September 30, 2005 increased by 8.7% compared with the same period last year. We incurred a $33.1 million of loss on extinguishment of debt during the nine months ended September 30, 2005, compared to $27.4 million for the same period last year, an increase of $5.7 million, or 20.8%. Our indirect labor increased by $10.7 million as a result of our increased work volume and our higher employee headcount. In addition, there was an increase of $42.9 million, or 12.3%, over the prior period in our employee benefit expenses, including healthcare, workers’ compensation, retirement program-related expenses and benefit program expenses, including recruitment costs. The remaining increases were primarily due to a $7.2 million increase in sales and business development expenses, and a $6.8 million increase in travel expenses. Indirect expenses as a percentage of revenues decreased to 31.3% from 32.1% for the nine months ended September 30, 2005 and September 30, 2004, respectively, due to an increase in labor utilization and a decrease in healthcare cost per employee compared with the same period last year.

     Our consolidated net interest expense for the nine months ended September 30, 2005 decreased due to lower debt balances.

     Our effective income tax rates for the nine months ended September 30, 2005 and September 30, 2004 were 40.6% and 40.0%, respectively.

     Our consolidated operating income, net income and earnings per share increased as a result of the factors previously described.

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Reporting Segments

Nine months ended September 30, 2005 compared with September 30, 2004

				Direct						Indirect,			Operating
				Operating			Gross			General and			Income
	Revenues			Expenses			Profit			Administrative			(Loss)
	(In millions)
Nine months ended September 30, 2005
URS Division	$	1,855.2		$	1,112.7		$	742.5		$	605.7		$	136.8
EG&G Division		996.2			728.5			267.7			220.3			47.4
Eliminations		(4.8	)		(4.5	)		(0.3	)		—			(0.3	)
		2,846.6			1,836.7			1,009.9			826.0			183.9
Corporate		—			—			—			63.9			(63.9	)
Total	$	2,846.6		$	1,836.7		$	1,009.9		$	889.9		$	120.0
Nine months ended September 30, 2004
URS Division	$	1,708.5		$	1,008.5		$	700.0		$	570.6		$	129.4
EG&G Division		847.8			611.4			236.4			195.1			41.3
Eliminations		(2.0	)		(2.0	)		—			—			—
		2,554.3			1,617.9			936.4			765.7			170.7
Corporate		—			—			—			52.9			(52.9	)
Total	$	2,554.3		$	1,617.9		$	936.4		$	818.6		$	117.8
Increase (decrease) for nine months ended September 30, 2005 and September 30, 2004
URS Division	$	146.7		$	104.2		$	42.5		$	35.1		$	7.4
EG&G Division		148.4			117.1			31.3			25.2			6.1
Eliminations		(2.8	)		(2.5	)		(0.3	)		—			(0.3	)
		292.3			218.8			73.5			60.3			13.2
Corporate		—			—			—			11.0			(11.0	)
Total	$	292.3		$	218.8		$	73.5		$	71.3		$	2.2
Percentage Increase (decrease) for nine months ended September 30, 2005 vs. September 30, 2004
URS Division		8.6	%		10.3	%		6.1	%		6.2	%		5.7	%
EG&G Division		17.5	%		19.2	%		13.2	%		12.9	%		14.7	%
Eliminations		140.0	%		125.0	%		100.0	%		—			100.0	%
Corporate		—			—			—			20.8	%		20.8	%
Total		11.4	%		13.5	%		7.8	%		8.7	%		1.9	%

  URS Division

     The URS Division’s revenues for the nine months ended September 30, 2005 increased 8.6% compared with the same period last year. The increase in revenues was due to the various factors discussed below in each of our client markets.

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     The following table presents the URS Division’s revenues, net of inter-company eliminations, by client type for the nine months ended September 30, 2005 and September 30, 2004.

	Nine Months Ended
	September 30,		September 30,				Percentage
	2005		2004		Increase		increase
	(In millions, except percentages)
Revenues
Federal government clients	$	338	$	315	$	23		7	%
State and local government clients		647		604		43		7	%
Domestic private industry clients		580		560		20		4	%
International clients		286		227		59		26	%
Total revenues	$	1,851	$	1,706	$	145		9	%

     Revenues from our URS Division’s federal government clients for the nine months ended September 30, 2005 increased by 7% compared with the corresponding period last year. The increase was driven by an increase in environmental and facilities projects under existing contracts with the DOD. Revenues from homeland security projects also contributed to this growth as we continue to provide a range of engineering services to the DHS. This work includes developing plans and conducting exercises to help states and communities prepare for natural and manmade disasters, preparing designs to help protect federal facilities from terrorist attacks and providing disaster recovery services for FEMA, which is now a part of DHS.

     Revenues from our state and local government clients for the nine months ended September 30, 2005 increased by approximately 7% compared with the same period last year. The increase reflects a continuing improvement in the states’ economies and general funds, fueled by increased state tax revenues. Generally, states have recovered from the recent recession, and have begun to increase spending on programs for which we provide services, such as surface transportation. Our strategy to actively pursue portions of the state and local government market where funding remained stable or grew during the recession, such as school facilities and water/wastewater projects, has also contributed to our revenue growth. Also, the recent passage of SAFETEA-LU has had a positive impact on revenues from our state and local government clients.

     Revenues from our domestic private industry clients for the nine months ended September 30, 2005 increased by 4% compared with the same period last year. The growth in revenues from our private industry clients is due to the growth of the emissions control portion of our power sector business in response to stricter air pollution control limits under the Clean Air Act and more recently the Clean Air Interstate and Clean Air Mercury rules. We have also successfully increased the number of client relationships managed under MSAs, as the number of stand-alone consulting assignments continues to decline. Revenues from our oil and gas clients continued to grow due to higher gasoline prices, which have increased oil and gas company revenues, leading to additional investments in gas and pipeline infrastructure projects.

     Revenues from our international clients for the nine months ended September 30, 2005 increased by 26% compared with the same period last year. Approximately 6% of this increase was due to foreign currency exchange fluctuations. We continued to benefit from a strong economy in the Asia-Pacific region, resulting in increased opportunities in facilities, infrastructure and natural resource projects, such as mining. In Europe, the increased revenues primarily were due to the enactment of more stringent environmental directives and regulations and the expansion of our service offerings to include a higher volume of infrastructure projects.

     The URS Division’s direct operating expenses for the nine months ended September 30, 2005 increased by 10.3% compared with the same period last year. The factors that caused revenue growth also

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drove an increase in our direct operating expenses. Direct operating expenses increased at a higher percentage than revenues as a result of increases in subcontractor costs and other direct expenses.

     The URS Division’s gross profit for the nine months ended September 30, 2005 increased by 6.1% compared with the same period last year, primarily due to the increase in revenue volume previously described. Our gross profit margin percentage decreased to 40.0% from 41.0% for the nine months ended September 30, 2005 and September 30, 2004, respectively, because our subcontractor costs and other direct costs, which usually bear lower profit margins than our direct labor costs, accounted for a higher percentage of our total direct operating expenses.

     The URS Division’s IG&A expenses for the nine months ended September 30, 2005 increased by 6.2% compared with the same period last year. This increase was due to an additional $23.7 million in retirement program-related expenses, employee benefit costs, including workers’ compensation, due to an increase in employee headcount, and benefit program expense increases, including recruitment costs. The remainder of the increase was due to a $4.5 million increase in indirect labor, a $6.9 million increase in sales and business development expenses, and a $2.6 million increase in travel expenses. These increases were offset by $2.3 million in bad debt expense.

  EG&G Division

     The EG&G Division’s revenues for the nine months ended September 30, 2005 increased by 17.5% compared with the corresponding period last year. This increase was driven by military activities in the Middle East, resulting in a higher volume of operations and maintenance and modification work for military vehicles and weapons systems. Revenues from the specialized systems engineering and technical assistance services that we provide for the development, testing and evaluation of weapons systems remained strong. In addition, revenues generated from activities in the homeland security market, logistics management and flight training services markets increased during the nine months ended September 30, 2005.

     The EG&G Division’s direct operating expenses for the nine months ended September 30, 2005 increased by 19.2% compared with the corresponding period last year. Higher revenues drove an increase in our direct operating expenses. In addition, a greater volume of work on existing contracts with lower profit margins caused direct operating expenses to increase faster than revenues.

     The EG&G Division’s gross profit for the nine months ended September 30, 2005 increased by 13.2% compared with the corresponding period last year. The increase in gross profit was primarily due to increased revenues from existing defense technical services and military equipment maintenance contracts. However, gross profit grew at a slower rate than revenue because a significant portion of the revenue increase was generated by operations and maintenance and field-based services, which generally carry lower margins than most other services provided by the EG&G Division. Our gross profit margin percentage decreased to 26.9% from 27.9% for the nine months ended September 30, 2005 and September 30, 2004, respectively.

     The EG&G Division’s IG&A expenses for the nine months ended September 30, 2005 increased by 12.9% compared with the corresponding period last year. The increase was primarily due to a higher business volume. The EG&G Division’s indirect expenses are generally variable in nature and, as such, any increase in business volume tends to lead to a higher employee headcount and higher indirect expenses. Of the total increase, approximately $17.3 million was due to an increase in retirement program-related costs and increases in employee benefit costs, including higher healthcare and workers’ compensation, as a result of a higher employee headcount. In addition, indirect labor increased by $5.2 million. The remaining increase was primarily due to a $4.0 million increase in travel expenses. Indirect expenses as a percentage of revenues decreased to 22.1% from 23.0% for the nine months ended September 30, 2005 and September 30, 2004, respectively, due to a decrease in healthcare cost per employee compared with the same period last year.

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Liquidity and Capital Resources

	Nine Months Ended,
	September 30,			September 30,
	2005			2004
	(In millions)
Cash flows provided by operating activities	$	134.0		$	97.4
Cash flows used by investing activities		(16.1	)		(14.7	)
Cash flows used by financing activities		(139.1	)		(58.6	)
Proceeds from common stock offering, net of related expenses		130.3			204.3
Proceeds from sale of common shares and exercise of stock options		30.7			24.0

     Our primary sources of liquidity are cash flows from operations, borrowings from our credit facilities and, during the nine months ended September 30, 2005, a public common stock offering. Our primary uses of cash are to fund our working capital and capital expenditures and to service our debt. We believe that we have sufficient resources to fund our operating and capital expenditure requirements, as well as service our debt, for the next 12 months and beyond. If we experience a significant change in our business such as the consummation of a significant acquisition, we would likely need to acquire additional sources of financing. We believe that we would be able to obtain adequate resources to address significant changes in our business at reasonable rates and terms, as necessary, based on our past experience with business acquisitions.

     We are dependent on the cash flows generated by our subsidiaries and, consequently, on their ability to collect on their respective accounts receivable. Substantially all of our cash flows are generated by our subsidiaries. As a result, the funds necessary to meet our debt service obligations are provided in large part by distributions or advances from our subsidiaries. The financial condition and operational requirements of our subsidiaries may limit our ability to obtain cash from them.

     Billings and collections on accounts receivable can impact our operating cash flows. Management places significant emphasis on collection efforts, has assessed the allowance accounts for receivables as of September 30, 2005 and has deemed them to be adequate; however, future economic conditions may adversely impact some of our clients’ ability to pay our bills or the timeliness of their payments. Consequently, it may also impact our ability to consistently collect cash from them to meet our operating needs.

Operating Activities

     The increase in cash flows from operating activities was primarily due to the changes in accounts payable, which resulted from the timing of payments, offset by the changes in accrued earnings in excess of billings on contracts in process, which resulted from the timing of billings.

Investing Activities

     As a professional services organization, we are not capital intensive. Capital expenditures historically have been primarily for computer-aided design, accounting and project management information systems, and general purpose computer equipment to accommodate our growth. Capital expenditures, excluding purchases financed through capital leases, during the nine months ended September 30, 2005 and September 30, 2004 were $16.9 million and $14.7 million, respectively.

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Financing Activities

     On June 8, 2005, we sold an aggregate of 3,636,721 shares of our common stock through a public offering. We granted the underwriters the right to purchase up to an additional 363,672 shares of our common stock to cover over-allotments (the “over-allotment shares”). On June 8, 2005, the underwriters exercised their option to purchase the over-allotment shares. The offering price of our common stock was $34.50 per share and the total offering proceeds to us were $130.3 million, net of underwriting discounts and commissions and other offering-related expenses of $7.8 million.

     We used the net proceeds from this common stock offering and cash available on hand to pay $127.2 million of the 11¹/2% notes and $18.8 million of tender premiums and expenses. In addition, we retired $353.8 million of the term loans outstanding under our Old Credit Facility and entered into a New Credit Facility of $350.0 million on June 28, 2005. As a result of the debt retirement and terms of the New Credit Facility, we expect our interest expense to be reduced substantially compared to historical levels.

     In addition, during the first quarter of fiscal year 2005, we retired the remaining $10.0 million of outstanding balance of 12¹/4% notes. We also retired the entire outstanding balance of $1.8 million of our 6¹/2% debentures on August 15, 2005. As a result of the debt retirement, we recognized a pre-tax charge of $33.1 million, which consisted of tender/call premiums and expenses of $19.4 million and the write-off of $13.7 million in unamortized financing fees, issuance costs and debt discounts.

     During the quarter ended September 30, 2005, we also repaid $30.0 million of the term loan under our New Credit Facility.

     Cash flows from financing activities of $139.1 million during the nine months ended September 30, 2005 consisted primarily of the following activities:

• Payment of $353.8 million of the term loans under our Old Credit Facility;

• Net payment of $16.8 million under the line of credit;

• Payment of $10.0 million of our 12¹/4% notes;

• Payment of $1.8 million of our 6¹/2% debentures;

• Payment of $11.2 million in capital lease obligation;

• Change in book overdraft of $63.6 million;

• Proceeds from the sale of common stock from the employee stock purchase plan and exercise of stock options of $30.7 million;

• Issuance of $350.0 million of new term loan, $40.0 million of which was paid during the nine-month period; and

• Net proceeds generated from our public common stock offering of $130.3 million, which was used to pay $127.2 million of our 11¹/2% notes and $18.8 million of tender premiums and expenses.

     Cash flows from financing activities of $58.6 million during the nine months ended September 30, 2004 consisted primarily of the following activities:

• Net proceeds generated from our public common stock offering of $204.3 million, which was used to fund a majority of the payments of $180.0 million of our 12¹/4% notes and $70.0 million of our 11¹/2% notes;

• Payment of $19.1 million in call premiums on our 12¹/4% notes and our 11¹/2% notes;

• Proceeds from the sale of common stock from the employee stock purchase plan and exercise of stock options of $24.0 million;

• Net payment of $4.0 million of the term loans under our Old Credit Facility with $1.3 million payments of financing fees;

• Payment of $6.5 million of our 8⁵/8% senior subordinated debentures;

• Net payment of $1.7 million of notes payable;

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• Payment of $10.9 million in capital lease obligation;

• Change in book overdraft of $13.4 million; and

• Net borrowings under the line of credit of $19.9 million.

     Below is a table containing information about our contractual obligations and commercial commitments followed by narrative descriptions as of September 30, 2005.

			Payments and Commitments Due by Period
Contractual Obligations			Less Than						After 5
(Debt payments include principal only):	Total		1 Year		1-3 Years		4-5 Years		Years
	(In thousands)
As of September 30, 2005:
New Credit Facility:
Term loan	$	310,000	$	—	$	11,625	$	147,250	$	151,125
111/2% senior notes (1)		2,825		2,825		—		—		—
Capital lease obligations		35,811		15,574		14,003		6,090		144
Notes payable, foreign credit lines and other indebtedness		13,021		8,118		4,132		579		192
Total debt		361,657		26,517		29,760		153,919		151,461
Pension funding requirements (2)		21,849		21,849		—		—		—
Purchase obligations (3)		4,279		2,708		1,571		—		—
Operating lease obligations (4)		416,717		86,571		143,332		103,622		83,192
Total contractual obligations	$	804,502	$	137,645	$	174,663	$	257,541	$	234,653

(1)	Amounts shown exclude remaining original issue discounts of $35 thousand and $88 thousand for our 111/2% notes and notes payable, respectively.
(2)	These pension funding requirements are for the EG&G pension plans, international benefit plans, and the supplemental executive retirement plan (“SERP”) for Mr. Koffel based on actuarially determined estimates and management assumptions. We are obligated to fund approximately $10.8 million into a rabbi trust for Mr. Koffel’s SERP. However, Mr. Koffel has agreed to defer this funding obligation until he chooses to request the funding by giving us a 15-day notice or until his death or the termination of his employment for any reason. We chose not to make estimates beyond one year based on a variety of factors, including amounts required by local laws and regulations, and other funding requirements.
(3)	Purchase obligations consist primarily of software maintenance contracts.
(4)	These operating leases are predominantly real estate leases.

     Off-balance Sheet Arrangements. As of September 30, 2005, we had a total available balance of $58.8 million in standby letters of credit under our New Credit Facility. Letters of credit are used primarily to support insurance programs, bonding arrangements and real estate leases. We are required to reimburse the issuers of letters of credit for any payments they make under the outstanding letters of credit. The New Credit Facility covers the issuance of our standby letters of credit and is critical for our normal operations. If we default on the New Credit Facility, our ability to issue or renew standby letters of credit would impair our ability to maintain normal operations.

     We have guaranteed the credit facility of one of our joint ventures in the event of a default by the joint venture. This joint venture was formed in the ordinary course of business to perform a contract for the federal government. The term of the guarantee is equal to the remaining term of the underlying debt, which is five months. The maximum potential amount of future payments that we could be required to make under this guarantee at September 30, 2005 was $6.5 million.

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     We have an agreement to indemnify one of our joint venture lenders up to $25.0 million for any potential losses and damages, and liabilities associated with lawsuits in relation to general and administrative services we provide to the joint venture.

     From time to time, we provide guarantees related to our services or work. If our services under a guaranteed project are later determined to have resulted in a material defect or other material deficiency, then we may be responsible for monetary damages or other legal remedies. When sufficient information about claims on guaranteed projects is available and monetary damages or other costs or losses are determined to be probable, we recognize such guarantee losses; however, we cannot estimate the amount of any guarantee until a determination has been made that a material defect has occurred. Currently, we have no guarantee claims for which losses have been recognized.

     New Credit Facility. On June 28, 2005, we entered into a new senior credit facility consisting of a 6-year Term Loan of $350.0 million and a 5-year Revolving Line of Credit of $300.0 million, against which up to $200.0 million can be used to issue letters of credit. As of September 30, 2005, we had $310.0 million outstanding under the Term Loan, $58.8 million in letters of credit, and no amount outstanding under the Revolving Line of Credit.

     Our Revolving Line of Credit is used to fund daily operating cash needs and to support our standby letters of credit. During the ordinary course of business, the use of our Revolving Line of Credit is a function of collection and disbursement activities. Our daily cash needs generally follow a predictable pattern that parallels our payroll cycles, which dictate, as necessary, our short term borrowing requirements.

     Principal amounts under the Term Loan will become due and payable on a quarterly basis: 15% of the principal will be payable in four equal quarterly payments beginning in the third quarter of 2008, 20% of the principal will be due during the next four quarters, and 65% will be due in the final four quarters ending on June 28, 2011. Our Revolving Line of Credit expires and is payable in full on June 28, 2010. At our option, we may repay the loans under our New Credit Facility without premium or penalty.

     All loans outstanding under our New Credit Facility bear interest at either LIBOR or the bank’s base rate plus an applicable margin, at our option. The applicable margin will change based upon our credit rating as reported by Moody’s Investor Services (“Moody’s”) and Standard & Poor’s. The LIBOR margin will range from 0.625% to 1.75% and the base rate margin will range from 0.0% to 0.75%. As of September 30, 2005, the LIBOR margin was 1.25% for both the Term Loan and Revolving Line of Credit. As of September 30, 2005, the interest rate on our Term Loan was 5.27%.

     A substantial number of our domestic subsidiaries are guarantors of the New Credit Facility on a joint and several basis. Initially, the obligations are collateralized by our guarantors’ capital stock. The collateralized obligations will be eliminated if we reach an investment grade credit rating of “Baa3” from Moody’s and “BBB-” from Standard & Poor’s. If our credit rating were to fall to or below “Ba2” from Moody’s or “BB” from Standard & Poor’s, we would be required to provide a secured interest in substantially all of our existing and subsequently acquired personal and real property, in addition to the collateralized guarantors’ capital stock. Although the capital stock of the non-guarantor subsidiaries are not required to be pledged as collateral, the terms of the New Credit Facility restrict the non-guarantors’ assets, with some exceptions, from being used as a pledge for future liens (a “negative pledge”). Moody’s upgraded our credit rating from “Ba2” to “Ba1” on June 20, 2005. On July 26, 2005, Standard & Poor’s upgraded our credit rating from “BB” to “BB+.”

     Our New Credit Facility contains financial covenants. We are required to maintain: (a) a maximum ratio of total funded debt to total capital of 40% or less and (b) a minimum interest coverage ratio of not less than 3.0:1. The interest coverage ratio is calculated by dividing consolidated Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”), as defined in our New Credit Facility agreement, by consolidated cash interest expense.

     The New Credit Facility also contains customary events of default and customary affirmative and negative covenants including, but not limited to, limitations on mergers, consolidations, acquisitions, asset

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sales, dividend payments, stock redemptions or repurchases, transactions with stockholders and affiliates, liens, capital leases, negative pledges, sale-leaseback transactions, indebtedness, contingent obligations and investments.

     As of September 30, 2005, we were in compliance with all the covenants of the New Credit Facility.

     Old Senior Secured Credit Facility. The Old Credit Facility consisted of two term loans, Term Loan A and Term Loan B, and a revolving line of credit. Our Old Credit Facility was terminated and repaid in full on June 28, 2005. As of December 31, 2004, we had $353.8 million in principal amounts outstanding under the term loan facilities with an interest rate of 4.42%. We had also drawn $18.0 million against our revolving line of credit and had outstanding standby letters of credit aggregating to $55.3 million, reducing the amount available to us under our revolving credit facility to $151.7 million.

     Revolving Line of Credit. The effective average interest rates paid on the revolving line of credit during the three months ended September 30, 2005 and September 30, 2004 were approximately 6.43% and 4.87%, respectively. The effective average interest rates paid on the revolving line of credit from during the nine months ended September 30, 2005 and September 30, 2004 were approximately 6.03% and 5.33%, respectively.

     Our average daily revolving line of credit balances for the three-month periods ended September 30, 2005 and September 30, 2004 were $0.1 million and $32.5 million, respectively. The maximum amounts outstanding at any one point in time during the three-month periods ended September 30, 2005 and September 30, 2004 were $3.1 million and $62.7 million, respectively. Our average daily revolving line of credit balances for the nine-month periods ended September 30, 2005 and September 30, 2004 were $2.2 million and $26.4 million, respectively. The maximum amounts outstanding at any one point in time during the nine-month periods ended September 30, 2005 and September 30, 2004 were $22.8 million and $74.6 million, respectively.

     11¹/2% Senior Notes. As of September 30, 2005 and December 31, 2004, we had outstanding amounts of $2.8 million and $130.0 million, respectively, of the original outstanding principal, due 2009. On June 15, 2005, we accepted tenders for and retired $127.2 million of the 11¹/2% notes. Interest is payable semi-annually in arrears on March 15 and September 15 of each year. These notes are effectively subordinate to our New Credit Facility, capital leases and notes payable.

     12¹/4% Senior Subordinated Notes. On February 14, 2005, we retired the entire outstanding balance of $10 million of our 12¹/4% notes. As of December 31, 2004, we owed $10 million.

     6¹/2% Convertible Subordinated Debentures. On August 15, 2005, we retired the entire outstanding balance of $1.8 million of our 6¹/2% debentures. As of December 31, 2004, we owed $1.8 million due 2012.

     Notes payable, foreign credit lines and other indebtedness. As of September 30, 2005 and December 31, 2004, we had outstanding amounts of $13.0 million and $13.4 million, respectively, in notes payable and foreign lines of credit.

     Capital Leases. As of September 30, 2005, we had $35.8 million in obligations under our capital leases, consisting primarily of leases for office equipment, computer equipment and furniture.

     Operating Leases. As of September 30, 2005, we had approximately $416.7 million in obligations under our operating leases, consisting primarily of real estate leases.

     Related-Party Transactions. On January 19, 2005, affiliates of Blum Capital Partners, L.P. (collectively, the “Blum Affiliates”) sold 2,000,000 shares of our common stock in an underwritten secondary offering. The general partner of Blum Capital Partners, L.P. was a member of our Board of Directors.

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     On October 21, 2005, according to the terms of an existing registration rights agreement, the Blum Affiliates requested that we register 3,580,907 shares of URS common stock held by the Blum Affiliates. Accordingly, on October 27, 2005, we filed a Form S-3 registration statement with the SEC solely to register the Blum Affiliates’ shares of URS common stock.

     Derivative Financial Instruments. We are exposed to risk of changes in interest rates as a result of borrowings under our New Credit Facility. During the nine months ended September 30, 2005, we did not enter into any interest rate derivatives due to our assessment of the costs/benefits of interest rate hedging. However, we may enter into derivative financial instruments in the future depending on changes in interest rates.

Critical Accounting Policies and Estimates

     The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions in the application of certain accounting policies that affect amounts reported in our consolidated financial statements and related footnotes included in Item 1 of this report. In preparing these financial statements, we have made our best estimates and judgments of certain amounts, giving consideration to materiality. Historically, our estimates have not materially differed from actual results. Application of these accounting policies, however, involves the exercise of judgment and the use of assumptions as to future uncertainties. Consequently, actual results could differ from our estimates.

     The accounting policies that we believe are most critical to an investor’s understanding of our financial results and condition, and require complex management judgment are included in our Annual Report on Form 10-K/A for the year ended October 31, 2004. To date, there have been no material changes to these critical accounting policies during the nine months ended September 30, 2005.

Adopted and Recently Issued Statements of Financial Accounting Standards

     In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 123 (Revised), “Share-Based Payment” (“SFAS 123(R)”). SFAS 123(R) replaces SFAS 123 and supersedes APB 25. In April 2005, the SEC adopted Rule 4-01(a) of Regulation S-X, which defers the required effective date of SFAS 123(R) to the first fiscal year beginning after June 15, 2005, instead of the first interim period beginning after June 15, 2005 as originally required. Because our fiscal year will end on December 30, 2005, SFAS 123(R) will become effective for us on December 31, 2005 (the “Effective Date”), but early adoption is allowed. Upon adoption of SFAS 123(R), we will be required to record an expense for our stock-based compensation plans using a fair value method. SFAS 123(R) applies to all stock-based compensation awards granted, modified or settled in interim or fiscal periods after the required Effective Date, but does not apply to awards granted in periods before the required Effective Date, unless they are modified, repurchased or cancelled after the Effective Date. SFAS 123(R) also amends Statement of Financial Accounting Standards No. 95, “Statement of Cash Flows,” to require reporting of excess tax benefits from the exercises of stock-based compensation awards as a financing cash inflow rather than as an operating cash inflow.

     In March 2005, the SEC issued Staff Accounting Bulletin No. 107 (“SAB 107”) to provide implementation guidance on SFAS 123(R). SAB 107 was issued to assist registrants in implementing SFAS 123(R) while enhancing the information that investors receive. The FASB has also issued interpretative guidance. We expect to use the modified prospective transition method in our adoption of SFAS 123(R), which will have a material impact on our financial statements as we have historically recorded our stock-based compensation in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees”, which does not require the recording of an expense related to options granted at a price equal to the fair market value of the shares on the grant date and for the fair value of the shares purchased through the ESPP.

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     As a result of our assessment of the impacts associated with adoption of SFAS 123(R), we have re-evaluated our 1991 Stock Incentive Plan and 1999 Equity Incentive Plan, and have currently decided to issue restricted stock awards to selected employees rather than stock option grants.

     In November 2004, the FASB issued Statement of Financial Accounting Standards No. 151, "Inventory Costs, and Amendment of Accounting Research Bulletin No. 43 (“ARB No. 43”), Chapter 4” (“SFAS 151”). SFAS 151 amends the guidance in ARB No. 43 Chapter 4, “Inventory Pricing,” by clarifying that abnormal amounts of idle facility expense, freight, handling costs and wasted material (spoilage) be recognized as current period charges. The provisions of SFAS 151 are effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The adoption of SFAS 151 will not have a material effect on our consolidated financial statements.

     In May 2005, the FASB issued Statement of Financial Accounting Standards No. 154, “Accounting Changes and Error Corrections” (“SFAS 154”), which replaces Accounting Principles Board Opinion No. 20, “Accounting Changes,” and Statement of Financial Accounting Standards No. 3, “Reporting Accounting Changes in Interim Financial Statements.” SFAS 154 requires retroactive application of a change in accounting principle to prior period financial statements unless it is impracticable or if another pronouncement mandates a different method. SFAS 154 also requires that a change in the method of depreciation, amortization or depletion for long-lived, non-financial assets be accounted for as a change in accounting estimate resulting from a change in accounting principle. It is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. Depending on the type of accounting change, the adoption of SFAS 154 may have a material impact on our consolidated financial statements.

     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 quarterly report on Form 10-Q, the following factors could affect our financial condition and results of operations:

Demand for our services is cyclical and vulnerable to economic downturns. If the current economy worsens, then our revenues, profits and our financial condition may deteriorate.

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

Unexpected termination of a substantial portion of our book of business could harm our operations and significantly reduce our future revenues.

     We account for all contract awards that may be recognized as revenues as our book of business, which includes backlog, designations, option years and indefinite delivery contracts. Our backlog consists of the amount billable at a particular point in time, including task orders issued under indefinite delivery contracts. As of September 30, 2005, our backlog was approximately $3.7 billion. Our designations consist of projects that clients have awarded us, but for which we do not yet have signed contracts. Our option year contracts are multi-year contracts with base periods plus option years that are exercisable by our clients without the need for us to go through another competitive bidding process. Our indefinite delivery contracts are signed contracts under which we perform work only when our clients issue specific task orders. Our book of business estimates may not result in actual revenues in any particular period since clients may terminate or delay projects, or decide not to award task orders under indefinite delivery contracts. Unexpected termination of a substantial portion of our book of business could harm our operations and significantly reduce our future revenues.

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As a government contractor, we are subject to a number of procurement laws, regulations and government audits; a violation of any such laws and regulations could result in sanctions, contract termination, harm to our reputation or loss of our status as an eligible government contractor.

     We must comply with and are affected by federal, state, local and foreign laws and regulations relating to the formation, administration and performance of government contracts. For example, we must comply with the Federal Acquisition Regulation (“FAR”), the Truth in Negotiations Act, the Cost Accounting Standards (“CAS”), the Service Contract Act, and DOD security regulations, as well as many other laws and regulations. These laws and regulations affect how we transact business with our clients and in some instances, impose additional costs to our business operations. Even though we take precautions to prevent and deter fraud and misconduct, we face the risk that our employees or outside partners may engage in misconduct, fraud or other improper activities. Government agencies, such as the U.S. Defense Contract Audit Agency (“DCAA”), routinely audit and investigate government contractors. These government agencies review and audit a government contractor’s performance under its contracts, cost structure and compliance with applicable laws, regulations and standards. In addition, during the course of its audits, the DCAA may question incurred costs if the DCAA believes we have accounted for such costs in a manner inconsistent with the requirements for the FAR or CAS and recommend that our U.S. government corporate administrative contracting officer disallow such costs. Historically, we have not experienced significant disallowed costs as a result of such audits. However, we can provide no assurance that the DCAA or other government audits will not result in material disallowances for incurred costs in the future. Government contract violations could result in the imposition of civil and criminal penalties or sanctions, contract termination, forfeiture of profit, and/or suspension of payment, any of which could make us lose our status as an eligible government contractor. We could also suffer serious harm to our reputation.

Because we depend on federal, state and local governments for a significant portion of our revenue, our inability to win or renew government contracts could harm our operations and significantly reduce or eliminate our profits.

     Revenues from federal government contracts and state and local government contracts represented approximately 47% and 23%, respectively, of our total revenues for the nine months ended September 30, 2005. Our inability to win or renew government contracts could harm our operations and significantly reduce or eliminate our profits. Government contracts are typically awarded through a heavily regulated procurement process. Some government contracts are awarded to multiple competitors, causing increases in overall competition and pricing pressure. The competition and pricing pressure, in turn may require us to make sustained post-award efforts to reduce costs in order to realize revenues under these contracts. If we are not successful in reducing the amount of costs we anticipate, our profitability on these contracts will be negatively impacted. Moreover, even if we are qualified to work on a government contract, we may not be awarded the contract because of existing government policies designed to protect small businesses and underrepresented minority contractors. Finally, government clients can generally terminate or modify their contracts with us at their convenience.

Each year a portion of our multiple-year government contracts may be subject to legislative appropriations. If legislative appropriations are not made in subsequent years of a multiple-year government contract, then we may not realize all of our potential revenues and profits from that contract.

     Each year a portion of our multiple-year government contracts may be subject to legislative appropriations. For example, the passage of the SAFETEA-LU transit bill in August of 2005 will provide matching funds for state transportation projects. Legislatures typically appropriate funds for a given program on a year-by-year basis, even though contract performance may take more than one year. As a result, at the beginning of a project, the related contract may only be partially funded, and additional funding is normally committed only as appropriations are made in each subsequent year. These appropriations, and the timing of payment of appropriated amounts, may be influenced by, among other things, the state of the economy, competing political priorities, curtailments in the use of government contracting firms, budget constraints, the timing and amount of tax receipts and the overall level of government expenditures. If appropriations are not

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made in subsequent years of a multiple-year contract, we may not realize all of our potential revenues and profits from that contract.

If we are unable to accurately estimate and control our contract costs, then we may incur losses on our contracts, which may result in decreases in our operating margins and in a significant reduction or elimination of our profits.

     It is important for us to control our contract costs so that we can maintain positive operating margins. We generally enter into three principal types of contracts with our clients: cost-plus, fixed-price and time-and-materials. Under cost-plus contracts, which may be subject to contract ceiling amounts, we are reimbursed for allowable costs and fees, which may be fixed or performance-based. If our costs exceed the contract ceiling or are not allowable under the provisions of the contract or any applicable regulations, we may not be reimbursed for all our costs. Under fixed-price contracts, we receive a fixed price regardless of what our actual costs will be. Consequently, we realize a profit on fixed-price contracts only if we control our costs and prevent cost over-runs on the contracts. Under time-and-materials contracts, we are paid for labor at negotiated hourly billing rates and for other expenses. Profitability on our contracts is driven by billable headcount and our ability to manage costs. Under each type of contract, if we are unable to control costs, we may incur losses on our contracts, which may result in decreases in our operating margins and in a significant reduction or elimination of our profits.

Our actual results could differ from the estimates and assumptions that we use to prepare our financial statements, which may significantly reduce or eliminate our profits.

     To prepare financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions as of the date of the financial statements, which affect the reported values of assets and liabilities and revenues and expenses and disclosures of contingent assets and liabilities. Areas requiring significant estimates by our management include:

• contract costs and profits and application of the “percentage-of-completion” method of accounting and revenue recognition of contracts and contract claims;

• provisions for uncollectible receivables and customer claims and recoveries of costs from subcontractors, vendors and others;

• provisions for income taxes and related valuation allowances;

• recoverability of goodwill and other intangible assets;

• valuation of assets acquired and liabilities assumed in connection with business combinations;

• valuation of defined benefit pension plans and other employee benefit plans; and

• accruals for estimated liabilities, including litigation and insurance reserves.

     Our actual results could differ from those estimates, which may significantly reduce or eliminate our profits.

Our use of the “percentage-of-completion” method of accounting could result in reduction or reversal of previously recorded revenues and profits.

     A substantial portion of our revenues and profits are measured and recognized using the “percentage-of-completion” method of accounting, which is further discussed in Note 2, “Accounting Policies” of our amended annual report on Form 10-K/A for our fiscal year ended October 31, 2004. Generally, our use of this method results in recognition of revenues and profits ratably over the life of the

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

If we fail to timely complete, miss a required performance standard or otherwise fail to adequately perform on a project, then we may incur a loss on that project, which may affect our overall profitability.

     We may commit to a client that we will complete a project by a scheduled date. We may also commit that a project, when completed, will achieve specified performance standards. If the project is not completed by the scheduled date or subsequently fails to meet required performance standards, we may either incur significant additional costs or be held responsible for the costs incurred by the client to rectify damages due to late completion or failure to achieve the required performance standards. The uncertainty of the timing of a project can present difficulties in planning the amount of personnel needed for the project. If the project is delayed or canceled, we may bear the cost of an underutilized workforce that was dedicated to fulfilling the project. In addition, performance of projects can be affected by a number of factors beyond our control, including unavoidable delays from weather conditions, unavailability of vendor materials, changes in the project scope of services requested by clients or labor disruptions. In some cases, should we fail to meet required performance standards, we may also be subject to agreed-upon damages, which are fixed in amount by the contract. To the extent that these events occur, the total costs of the project could exceed our estimates and we could experience reduced profits or, in some cases, incur a loss on that project, which may affect our overall profitability.

If our partners fail to perform their contractual obligations on a project, we could be exposed to legal liability, loss of reputation or reduced profits.

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

Our future revenues depend on our ability to consistently bid and win new contracts and renew existing contracts and, therefore, our failure to effectively obtain future contracts could adversely affect our profitability.

     Our future revenues and overall results of operations require us to successfully bid on new contracts and renew existing contracts. Contract proposals and negotiations are complex and frequently involve a lengthy bidding and selection process, which is affected by a number of factors, such as market conditions, financing arrangements and required governmental approvals. For example, a client may require us to provide a bond or letter of credit to protect the client should we fail to perform under the terms of the contract. If negative market conditions arise, or if we fail to secure adequate financial arrangements or the required governmental approval, we may not be able to pursue particular projects, which could adversely affect our profitability.

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Our indebtedness could negatively limit our ability to borrow, plan, make acquisitions, exploit business opportunities or maintain credit flexibility.

     During June 2005, we retired the entire outstanding amount of $365.8 million under our Old Credit Facility and entered into a New Credit Facility of $350.0 million on June 28, 2005. As of September 30, 2005, we had $361.5 million of outstanding indebtedness. In addition, as of September 30, 2005, we issued $58.8 million in letters of credit against our revolving line of credit. This level of indebtedness could negatively affect us because it may:

• limit our ability to borrow money in the future;

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

• place us at a competitive disadvantage if we are leveraged more than our competitors;

• limit us from making strategic acquisitions or exploiting business opportunities;

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

• require us to maintain financial ratios, which we may not be able to achieve.

Because we are a holding company, we may not be able to service our debt if our subsidiaries do not make sufficient distributions to us.

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

Restrictive covenants in our New Credit Facility may restrict our ability to pursue business strategies.

     Our New Credit Facility may limit our ability to, among other things:

• incur additional indebtedness;

• pay dividends and make distributions to our stockholders;

• repurchase or redeem our stock;

• repay indebtedness that is junior to our New Credit Facility or our outstanding indebtedness;

• make investments and other restricted payments;

• create liens securing debt or other encumbrances on our assets;

• enter into sale-leaseback transactions;

• enter into transactions with our stockholders and affiliates;

• sell or exchange assets; and

• pledge assets that would result in less security for our debt holders.

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     Our New Credit Facility also requires that we maintain financial ratios, which we may not be able to achieve and may impair our ability to finance future operations, capital needs or engage in other favorable business activities.

We may incur substantial costs of compliance with, or liabilities under, environmental laws and regulations.

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

Changes in environmental laws, regulations and programs could reduce demand for our environmental services, which could in turn negatively impact our revenues.

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

Our liability for damages due to legal proceedings may adversely affect us and result in a significant loss.

     Various legal proceedings are pending against us in connection with the performance of our professional services and other actions by us, the outcome of which cannot be predicted with certainty. For example, in performing our services we may be exposed to cost overruns, personal injuries, property damage, labor shortages or disputes, weather problems and unforeseen engineering, architectural, environmental and geological problems. In some actions, parties are seeking damages that exceed our insurance coverage or are not insured. Our services may require us to make judgments and recommendations about environmental, structural and other physical conditions at project sites. If our performance, judgments and recommendations are later found to be incomplete or incorrect, then we may be liable for the resulting damages. If we sustain damages that exceed our insurance coverage or that are not insured, there could be an adverse affect on us which may result in a significant loss.

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A general decline in U.S. defense spending could harm our operations and significantly reduce our future revenues.

     Revenues under contracts with the U.S. Department of Defense and other defense-related clients represented approximately 36% of our total revenues for the nine months ended September 30, 2005. While spending authorization for defense-related programs has increased significantly in recent years due to greater homeland security and foreign military commitments, as well as the trend to outsource federal government jobs to the private sector, these spending levels may not be sustainable. Future levels of expenditures and authorizations for these programs may decrease, remain constant or shift to programs in areas where we do not currently provide services. As a result, a general decline in U.S. defense spending could harm our operations and significantly reduce our future revenues.

Our overall market share will decline if we are unable to compete successfully in our industry.

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

Our failure to attract and retain key employees could impair our ability to provide services to our clients and otherwise conduct our business effectively.

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

Recent changes in accounting for equity-related compensation could impact our financial statements and our ability to attract and retain key employees.

     On December 2004, the FASB issued Statement of Financial Accounting Standards No. 123 (Revised), “Share-Based Payment” (“SFAS 123(R)”). Adoption of SFAS 123(R) will require us to record an expense for our equity-related compensation plans using a fair value method. SFAS 123(R) will be effective for us at the beginning of our next fiscal year. We are currently evaluating which transition method we will use upon adoption of SFAS 123(R) and the potential impacts adoption could have on our compensation plans. As a result of the impacts associated with the adoption of SFAS 123(R), we have re-evaluated our Stock Incentive Plans and have currently decided to issue restricted stock awards rather than stock option grants to selected employees.

Our international operations are subject to a number of risks that could harm our operations and significantly reduce our future revenues.

     As a multinational company, we have operations in over 20 countries and we derived approximately 10% and 9% of our revenues from international operations for the nine months ended September 30, 2005 and September 30, 2004, respectively. International business is subject to a variety of risks, including:

• lack of developed legal systems to enforce contractual rights;

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• greater risk of uncollectible accounts and longer collection cycles;

• currency fluctuations;

• logistical and communication challenges;

• potentially adverse changes in laws and regulatory practices, including export license requirements, trade barriers, tariffs and tax laws;

• changes in labor conditions;

• exposure to liability under the Foreign Corrupt Practices Act and export control and anti-boycott laws; and

• general economic and political conditions in these foreign markets.

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

Our business activities may require our employees to travel to and work in high security risk countries, which may result in employee injury, repatriation costs or other unforeseen costs.

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

If we are not able to successfully develop, integrate or maintain third party support for our Enterprise Resource Program (“ERP”) system in a timely manner, we may incur unexpected costs that could harm our results of operations, including the possibility of abandoning our current ERP system and migrating to another ERP system.

     We use accounting and project management information systems supported by Oracle Corporation. As of September 30, 2005, approximately 62% of our total revenues were processed on this ERP system. We depend on the vendor to develop, integrate and provide long-term software maintenance support for our ERP system. As a result of Oracle Corporation’s acquisition of PeopleSoft, Inc. in January 2005, it is possible that Oracle may discontinue further development, integration or long-term software maintenance support for our ERP system. Accordingly, we are re-evaluating the conversion of the EG&G Division’s accounting systems to the ERP system. In the event we do not successfully complete the development and integration of our ERP system or are unable to obtain necessary long-term third party software maintenance support, we may be required to incur unexpected costs that could harm our results of operations, including the possibility of abandoning our current ERP system and migrating all of our accounting and project management information systems to another ERP system.

Terrorists’ actions and natural disasters have and could negatively impact the United States economy and the local markets in which we operate, which may affect our financial condition, results of operations or cash flows.

     Since we have operations in nearly all domestic states, terrorist attacks, such as those that occurred in New York and Washington, D.C. on September 11, 2001, and natural disasters, such as Hurricane Katrina that affected the Gulf Coast in late August 2005, could negatively impact the United States economy and particular local markets in which we operate. For example, Hurricane Katrina caused several of our Gulf

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Coast offices to close, interrupted a number of active client projects and forced the relocation of our employees in that region from their homes. If we are not able to react quickly to terrorist attacks and natural disasters, our operations may be affected significantly, which would have a negative impact on our financial condition, results of operations or cash flows.

If our goodwill or intangible assets become impaired, then our profits may be significantly reduced or eliminated.

     Because we have grown through acquisitions, goodwill and other intangible assets represent a substantial portion of our assets. Goodwill and other purchased intangible assets were approximately $1.0 billion as of September 30, 2005. Our balance sheet includes goodwill and other intangible assets, the values of which are material. If any of our goodwill or intangible assets were to become impaired, we would be required to write-off the impaired amount, which may significantly reduce or eliminate our profits.

Negotiations with labor unions and possible work actions could divert management attention and disrupt operations. In addition, new collective bargaining agreements or amendments to agreements could increase our labor costs and operating expenses.

     As of September 30, 2005, approximately 7% of our employees were covered by collective bargaining agreements. The outcome of any future negotiations relating to union representation or collective bargaining agreements may not be favorable to us. We may reach agreements in collective bargaining that increase our operating expenses and lower our net income as a result of higher wages or benefits expenses. In addition, negotiations with unions could divert management attention and disrupt operations, which may adversely affect our results of operations. If we are unable to negotiate acceptable collective bargaining agreements, we may have to address the threat of union-initiated work actions, including strikes. Depending on the nature of the threat or the type and duration of any work action, these actions could disrupt our operations and adversely affect our operating results.

Delaware law and our charter documents may impede or discourage a takeover, which could cause the market price of our shares to decline.

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

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 New Credit Facility. Based on outstanding indebtedness of $310.0 million under our New Credit Facility at September 30, 2005, if market rates average 1% higher in the next twelve months, our net of tax interest expense would increase by approximately $1.8 million. Conversely, if market rates average 1% lower in the next twelve months, our net of tax interest expense would decrease by approximately $1.8 million.

ITEM 4. CONTROLS AND PROCEDURES

     (a) Evaluation of disclosure controls and procedures. Our Chief Executive Officer and Chief Financial Officer are responsible for establishing and maintaining “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) for our

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company. Based on their evaluation as of the end of the period covered by this report, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were sufficiently effective to ensure that the information required to be disclosed by us in this Quarterly Report on Form 10-Q was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules.

     Under current SEC rules we are not yet required to complete the requirements of Section 404 of the Sarbanes Oxley Act of 2002 (“Section 404”). In 2004, the SEC deferred, for one year, the implementation of Section 404 for qualifying companies with fiscal years ending prior to November 15, 2004. Because our previous fiscal year ended on October 31, 2004, we qualified for the deferral. On November 30, 2004, our Board of Directors approved a change in our future fiscal year end from October 31 to the Friday closest to December 31. Thus, our initial Section 404 reporting will be a required component of our Annual Report on Form 10-K for our fiscal year that will end on December 30, 2005.

     (b) Changes in internal controls.

     There were no changes in our internal controls over financial reporting during the quarter ended September 30, 2005 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

     (c) Limitations on the effectiveness of controls. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving these objectives, and our Chief Executive Officer and Chief Financial Officer believe that these controls and procedures are effective at the “reasonable assurance” level.

PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     Various legal proceedings are pending against us and certain of our subsidiaries alleging, among other things, breach of contract or tort in connection with the performance of professional services, the outcome of which cannot be predicted with certainty. See Note 5, “Commitments and Contingencies” for a discussion of some of these legal proceedings. In some actions, parties are seeking damages, including punitive or treble damages that substantially exceed our insurance coverage.

     Currently, we have limits of $125.0 million per loss and $125.0 million in the aggregate annually for general liability, professional errors and omissions liability and contractor’s pollution liability insurance (in addition to other policies for some specific projects). These policies include self-insured claim retention amounts of $4.0 million, $7.5 million and $7.5 million, respectively. In some actions, parties are seeking damages, including punitive or treble damages, that substantially exceed our insurance coverage or are not insured.

     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 we do not continue to maintain these policies, we will have no coverage for claims made after the termination date — even for claims based on events that occurred during the term of coverage. We intend to maintain these policies; however, we may be unable to maintain existing coverage levels. We have maintained insurance without lapse for many years with limits in excess of losses sustained.

57

     Although the outcome of our legal proceedings can not be predicted with certainty and no assurances can be provided, based on our previous experience in such matters, we do not believe that any of the legal proceedings described above, individually or collectively, are likely to exceed established loss accruals or our various professional errors and omissions, project-specific and potentially other insurance policies. However, the resolution of outstanding claims and litigation is subject to inherent uncertainty and it is reasonably possible that such resolution could have an adverse effect on us.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Stock Purchases

     The following table sets forth all purchases made by us or any “affiliated purchaser” as defined in Rule 10b-18(a)(3) of the Securities Exchange Act of 1934, as amended, of our common stock shares during the third quarter of 2005. No purchases were made pursuant to a publicly announced repurchase plan or program.

					(c) Total Number		(d) Maximum Number
					of Shares		(or Approximate Dollar
					Purchased as Part		Value) of Shares that
	(a) Total		(b) Average		of Publicly		May Yet be Purchased
	Number of		Price Paid		Announced Plans		Under the Plans or
Period	Shares Purchased (1)		per Share		or Programs		Programs
	(in thousands, except average price paid per share)
July 2, 2005 – July 29, 2005		63	$	37.80		—		—
July 30, 2005 – August 26, 2005		—		—		—		—
August 27, 2005 – September 30, 2005		113		38.61		—		—
Total		176				—		—

(1) Our Stock Incentives Plans allow our employees to surrender shares of our common stock as payment toward the exercise cost and tax withholding obligations associated with the exercise of stock options or the vesting of restricted or deferred stock.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

     None.

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

     None.

ITEM 5. OTHER INFORMATION

     None.

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ITEM 6. EXHIBITS

(a) Exhibits

4.1	Amended and Restated Bylaws of URS Corporation, a Nevada corporation. FILED HEREWITH.
10.1	Employee Stock Purchase Plan of URS Corporation, as amended and restated effective on September 8, 2005. FILED HEREWITH.
31.1	Certification of the Company’s Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. FILED HEREWITH.
31.2	Certification of the Company’s Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. FILED HEREWITH.
32	Certification of the Company’s Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. FILED HEREWITH.

59

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: November 8, 2005	URS CORPORATION
	/s/ Reed N. Brimhall
	Reed N. Brimhall
	Vice President, Controller
	and Chief Accounting Officer

60

Exhibit No.	Description
4.1	Amended and Restated Bylaws of URS Corporation, a Nevada corporation.
10.1	Employee Stock Purchase Plan of URS Corporation, as amended and restated effective on September 8, 2005.
31.1	Certification of the Company’s Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the Company’s Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification of the Company’s Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

61

EX-4.1

EXHIBIT 4.1

AMENDED AND RESTATED BYLAWS
OF
URS CORPORATION
a Nevada corporation

as of October 26, 2005

(Formerly known as URS GREINER WOODWARD-CLYDE INTERNATIONAL-AMERICAS, INC.)

(Formerly known as WOODWARD-CLYDE CONSULTANTS)

* * * * *
ARTICLE I
OFFICES

     Section 1. The registered office shall be in Reno, Nevada.

     Section 2. The corporation may also have offices at such other places both within and without the State of Nevada as the board of directors may from time to time determine or the business of the corporation may require.

ARTICLE II
MEETINGS OF STOCKHOLDERS

     Section 1. All annual meetings of the stockholders shall be held in the City of San Francisco, State of California. Special meetings of the stockholders may be held at such time and place within or without the State of Nevada as shall be stated in the notice of the meeting, or in a duly executed waiver of notice thereof.

     Section 2. Annual meetings of stockholders shall be held on the first day of November, if not a legal holiday, and if a legal holiday, then on the next secular day following at which they shall elect by a plurality vote a board of directors, and transact such other business as may properly be brought before the meeting.

     Section 3. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the articles of incorporation, may be called by the president and shall be called by the president or secretary at the request in writing of a majority of the board of directors, or at the request in writing of stockholders owning a majority in amount of the entire capital stock of the corporation issued and outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting.

     Section 4. Notices of meetings shall be in writing and signed by the president or a vice president, or the secretary, or an assistant secretary, or by such other natural person or persons as the directors shall designate. Such notice shall state the purpose or purposes for which the meeting is called and the time when and the place where it is to be held. A copy of such notice shall be either delivered personally to or shall be mailed, postage prepaid, to each stockholder of record entitled to vote at such meeting not less than ten nor more than sixty days before such meeting. If mailed, it shall be directed to a stockholder at his address as it appears upon the records of the corporation and upon such mailing of any such notice, the service thereof shall be complete, and the time of the notice shall begin to run from the date upon which such notice is deposited in the mail for transmission to such stockholder. Personal delivery of any such notice to any officer of a corporation or association, or to any member of a partnership shall constitute delivery of such notice to such corporation, association or partnership. In the event of the transfer of stock after delivery or mailing of the notice of and prior to the holding of the meeting it shall not be necessary to deliver or mail notice of the meeting to the transferee.

     Section 5. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice.

     Section 6. In no instance where action is authorized by unanimous written consent need a meeting of stockholders be called or notice given.

     Section 7. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the articles of incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified.

     Section 8. When a quorum is present or represented at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of the statutes or of the articles of incorporation a different vote is required in which case such express provision shall govern and control the decision of such question.

     Section 9. Every stockholder of record of the corporation shall be entitled at each meeting of stockholders to one vote for each share of stock standing in his name on the books of the corporation.

     Section 10. At any meeting of the stockholders, any stockholder may be represented and vote by a proxy or proxies appointed by an instrument in writing. In the event that any such instrument in writing shall designate two or more persons to act as proxies, a majority of such persons present at the meeting, or, if only one shall be present, then that one shall have and may exercise all of the powers conferred by such written instrument upon all of the persons so designated unless the instrument shall otherwise provide. No such proxy shall be valid after the expiration of six months from the date of its execution, unless coupled with an interest, or unless the person executing it specifies therein the length of time for which it is to continue in force, which in no case shall exceed seven years from the date of its execution. Subject to the above, any proxy duly executed is not revoked and continues in full force and effect until an instrument revoking it or a duly executed proxy bearing a later date is filed with the secretary of the corporation.

     Section 11. Any action, which may be taken by the vote of the stockholders at a meeting, may be taken without a meeting if authorized by the written consent of stockholders holding at least a majority of the voting power, unless the provisions of the statutes or of the articles of incorporation require a greater proportion of voting power to authorize such action in which case such greater proportion of written consents shall be required.

ARTICLE III
DIRECTORS

     Section 1. The authorized number of directors shall be determined from time to time by resolution of the Board of Directors, provided that the Board of Directors shall consist of at least one member. The number of Directors may not be less than three except that where all the shares of the corporation are owned beneficially and of record by either one or two Stockholders, the number of Directors may be less than three but not less than the number of Stockholders.

     Section 2. Vacancies, including those caused by an increase in the number of directors, may be filled by a majority of the remaining directors though less than a quorum. When one or more directors shall give notice of his or their resignation to the board, effective at a future date, the board shall have power to fill such vacancy or vacancies to take effect when such resignation or resignations shall become effective, each director so appointed to hold office during the remainder of the term of office of the resigning director or directors.

     Section 3. The business of the corporation shall be managed by its board of directors which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the articles of incorporation or by these by-laws directed or required to be exercised or done by the stockholders.

MEETINGS OF THE BOARD OF DIRECTORS

     Section 4. The board of directors of the corporation may hold meetings, both regular and special, either within or without the State of Nevada.

     Section 5. The first meeting of each newly elected board of directors shall be held at such time and place as shall be fixed by the vote of the stockholders at the annual meeting and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present. In the event of the failure of the stockholders to fix the time or place of such first meeting of the newly elected board of directors, or in the event such meeting is not held at the time and place so fixed by the stockholders, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the board of directors, or as shall be specified in a written waiver signed by all of the directors.

     Section 6. Regular meetings of the board of directors may be held without notice at such time and place as shall from time to time be determined by the board.

     Section 7. Special meetings of the board of directors may be called by the president or secretary on the written request of two directors. Written notice of special meetings of the board of directors shall be given to each director at least two (2) days before the date of the meeting.

     Section 8. A majority of the board of directors, at a meeting duly assembled, shall be necessary to constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which a quorum is present shall be the act of the board of directors, except as may be otherwise specifically provided by statute or by the articles of incorporation. Any action required or permitted to be taken at a meeting of the directors may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the directors entitled to vote with respect to the subject matter thereof.

COMMlTTEES OF DIRECTORS

     Section 9. The board of directors may, by resolution passed by a majority of the whole board, designate one or more committees, each committee to consist of one or more of the directors of the corporation, which, to the extent provided in the resolution, shall have and may exercise the powers of the board of directors in the management of the business and affairs of the corporation, and may have power to authorize the seal of the corporation to be affixed to all papers on which the corporation desires to place a seal. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the board of directors.

     Section 10. The committees shall keep regular minutes of their proceedings and report the same to the board when required.

COMPENSATION OF DIRECTORS

     Section 11. The directors may be paid their expenses, if any, of attendance at each meeting of the board of directors and may be paid a fixed sum for attendance at each meeting of the board of directors or a stated salary as director. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings.

ARTICLE IV
NOTICES

     Section 1. Notices to directors and stockholders shall be in writing and delivered personally or mailed to the directors or stockholders at their addresses appearing on the books of the corporation. Notice by mail shall be deemed to be given at the time when the same shall be mailed. Notice to directors may also be given by facsimile telecommunication.

     Section 2. Whenever all parties entitled to vote at any meeting, whether of directors or stockholders, consent, either by a writing on the records of the meeting or filed with the secretary, or by presence at such meeting and oral consent entered on the minutes, or by taking part in the deliberations at such meeting without objection, the doings of such meeting shall be as valid as if had at a meeting regularly called and noticed, and at such meeting any business may be transacted which is not excepted from the written consent or to the consideration of which no objection for want of notice is made at the time, and if any meeting be irregular for want of notice or of such consent, provided a quorum was present at such meeting, the proceedings of said meeting may be ratified and approved and rendered likewise valid and the irregularity or defect therein waived by a writing signed by all parties having the right to vote at such meetings; and such consent or approval of stockholders may be by proxy or attorney, but all such proxies and powers of attorney must be in writing.

     Section 3. Whenever any notice whatever is required to be given under the provisions of the statutes, of the articles of incorporation or of these by-laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto.

ARTICLE V
OFFICERS

     Section 1. The officers of the corporation shall be chosen by the board of directors and shall be a president, a vice president, a secretary and a treasurer. Any natural person may hold two or more offices.

     Section 2. The board of directors at its first meeting after each annual meeting of stockholders shall choose a president, a vice president, a secretary and a treasurer, none of whom need be a member of the board.

     Section 3. The board of directors may appoint additional vice presidents, and assistant secretaries and assistant treasurers and such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board.

     Section 4. The salaries of all officers and agents of the corporation shall be fixed by the board of directors.

     Section 5. The officers of the corporation shall hold office until their successors are chosen and qualify. Any officer elected or appointed by the board of directors may be removed at any time by the affirmative vote of a majority of the board of directors. Any vacancy occurring in any office of the corporation by death, resignation, removal or otherwise shall be filled by the board of directors.

THE PRESIDENT

     Section 6. The president shall be the chief executive officer of the corporation, shall preside at all meetings of the stockholders and the board of directors, shall have general and active management of the business of the corporation, and shall see that all orders and resolutions of the board of directors are carried into effect.

     Section 7. He shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation.

THE VICE PRESIDENT

     Section 8. The vice president shall, in the absence or disability of the president, perform the duties and exercise the powers of the president and shall perform such other duties as the board of directors may from time to time prescribe.

THE SECRETARY

     Section 9. The secretary shall attend all meetings of the board of directors and all meetings of the stockholders and record all the proceedings of the meetings of the corporation and of the board of directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the board of directors, and shall perform such other duties as may be prescribed by the board of directors or president, under whose supervision he shall be. He shall keep in safe custody the seal of the corporation and, when authorized by the board of directors, affix the same to any instrument requiring it and, when so affixed, it shall be attested by his signature or by the signature of the treasurer or an assistant secretary.

THE TREASURER

     Section 10. The treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the board of directors.

     Section 11. He shall disburse the funds of the corporation as may be ordered by the board of directors taking proper vouchers for such disbursements, and shall render to the president and the board of directors, at the regular meetings of the board, or when the board of directors so requires, an account of all his transactions as treasurer and of the financial condition of the corporation.

     Section 12. If required by the board of directors, he shall give the corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of his office and for the restoration to the corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation.

ARTICLE VI
CERTIFICATES OF STOCK

     Section 1. Every stockholder shall be entitled to have a certificate, signed by the president or a vice president and the treasurer or an assistant treasurer, or the secretary or an assistant secretary of the corporation, certifying the number of shares owned by him in the corporation. If the corporation is authorized to issue shares of more than one class or more than one series of any class, there shall be set forth upon the face or back of the certificate, or the certificate shall have a statement that the corporation will furnish to any stockholders upon request and without charge, a full or summary statement of the designations, preferences and relative, participating, optional or other special rights of the various classes of stock or series thereof and the qualifications, limitations or restrictions of such rights, and, if the corporation shall be authorized to issue only special stock, such certificate shall set forth in full or summarize the rights of the holders of such stock.

     Section 2. Whenever any certificate is countersigned or otherwise authenticated by a transfer agent or transfer clerk, and by a registrar, then a facsimile of the signatures of the officers or agents, the transfer agent or transfer clerk or the registrar of the corporation may be printed or lithographed upon such certificate in lieu of the actual signatures. If the corporation uses facsimile signatures of the officers and agents on its stock certificates, it cannot act as registrar of its own stock, but its transfer agent and registrar may be identical if the institution acting in those dual capacities countersigns or otherwise authenticates any stock certificates in both capacities. In case any officer or officers who shall have signed, or whose facsimile signature or signatures shall have been used on, any such certificate or certificates shall cease to be such officer or officers of the corporation, whether because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by the corporation, such certificate or certificates may nevertheless be adopted by the corporation and be issued and delivered as though the person or persons who signed such certificate or certificates, or whose facsimile signature or signatures shall have been used thereon, had not ceased to be an officer or officers of such corporation.

LOST CERTIFICATES

     Section 3. The board of directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost or destroyed. When authorizing such issue of a new certificate or certificates, the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost or destroyed.

TRANSFER OF STOCK

     Section 4. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books.

CLOSING OF TRANSFER BOOKS

     Section 5. The directors may prescribe a period not exceeding sixty days prior to any meeting of the stockholders during which no transfer of stock on the books of the corporation may be made, or may fix a day not more than sixty days or less than 10 days prior to the holding of any such meeting as the day as of which stockholders entitled to notice of and to vote at such meeting shall be determined; and only stockholders of record on such day shall be entitled to notice or to vote at such meeting.

REGISTERED STOCKHOLDERS

     Section 6. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Nevada.

ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS

     Section 1. Dividends upon the capital stock of the corporation, subject to the provisions of the articles of incorporation, if any, may be declared by the board of directors at any regular or special meeting pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the articles of incorporation.

     Section 2. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interest of the corporation, and the directors may modify or abolish any such reserves in the manner in which it was created.

CHECKS

     Section 3. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the board of directors may from time to time designate.

FISCAL YEAR

     Section 4. The fiscal year of the corporation shall be fixed by resolution of the board of directors.

SEAL

     Section 5. The Corporate seal shall have inscribed thereon the name of the Corporation, the year of its incorporation and the words, “Corporate Seal, Nevada”.

INDEMNITY OF OFFICERS, DIRECTORS, ETC.

     Section 6. The Corporation shall indemnify any person who was or is a party or its threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except in an action by or in the right of the Corporation by reason of the fact that he is or was a Director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a Director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses including attorneys’ fees, judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with such action, suit or proceedings if he acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation and with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation and that, with respect to any criminal action or proceeding, he had reasonable cause to believe that his conduct was unlawful.

     Section 7. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a Director, officer, employee, or agent of the Corporation, or is or was serving at the request of the Corporation as a Director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation; except no indemnification shall be made by the Corporation in respect of any claim, issue or matter as to which such person has been adjudged to be liable for negligence or misconduct in the performance of his duty to the Corporation unless and only to the extent that the court in which such action or suit was brought determines upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnification for such expenses as the court deems proper.

     Any indemnification under Section 6 or 7 of this Article, unless ordered by a court, shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the Director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in Sections 6 and 7. Determination as to such conduct shall be made:

     (1) By the stockholders; or

     (2) By the Board of Directors by majority vote of a quorum consisting of Directors who were not parties to such act, suit or proceeding; or

     (3) If such a quorum of disinterested Directors so orders, by independent legal counsel in a written opinion; or

     (4) If such a quorum of disinterested Directors cannot be obtained, by independent legal counsel in a written opinion.

     A Director, officer, employee or agent of the Corporation who is seeking indemnification shall make a written request for such indemnification to the Board. Upon receipt of such request the Board shall act promptly and in compliance with the procedure set forth above.

     Expenses incurred in defending any proceeding shall be advanced by the Corporation prior to the final disposition of such proceeding upon receipt of an undertaking by or on behalf of the Director, officer, employee or agent to repay such amount unless it shall be determined ultimately that the agent is entitled to be indemnified as authorized in this Section.

     Section 8. The Corporation shall indemnify any Director, officer, employee or agent of the Corporation who has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in this Section, or in defense of any item, issue or matter therein, against expenses, including attorneys’ fees, actually and reasonably incurred by him in connection with such defense.

ARTICLE VIII
STATEMENT OF PURPOSE

     Section 1. URS Corporation is a multi-disciplinary professional service firm committed to providing high quality professional consulting services. The purposes of the organization are to meet the needs of clients, to provide sufficient earnings and to maintain an environment in which the professional and financial goals of the firm and its employees may be achieved.

     Section 2. The Corporation desires to engage in the practice of the disciplines of Civil Engineering, Chemical Engineering, and Land Surveying in the State of Alaska. To engage in the lawful practice of these disciplines, the Corporation will continually maintain a duly registered professional in responsible charge of each discipline in the State of Alaska.

     Section 3. The Corporation desires to engage in the practice of architecture in the State of Washington. To engage in the lawful practice of this discipline the Corporation shall designate an architect in responsible charge, with authority to make all final decisions for architectural activities in the State of Washington.

     Section 4. The Board of Directors of the Corporation shall, by formal resolution, designate an engineer and a land surveyor to act in responsible charge for all engineering and land surveying activities in the state of Washington. The designated engineer or land surveyor, respectively, named in the resolution as being in responsible charge, or an engineer or land surveyor under the designated engineer or land surveyor’s direct supervision, shall make all engineering or land surveying decisions pertaining to engineering or land surveying activities in the state of Washington.

     Section 5. All engineering decisions pertaining to any project or engineering activities in the State of South Carolina shall be made by the designated engineer in responsible charge named in a resolution of the Board of Directors.

     Section 6. The Corporation desires to engage in the practice of architecture in Florida. To engage in the lawful practice of architecture, the Corporation will continually maintain a duly registered architect in responsible charge for the Corporation’s practice of architecture in Florida with authority to make all final decisions for the architectural activities in the State of Florida. The architect in responsible charge shall be a Director and/or principal officer of the Corporation.

ARTICLE IX
AMENDMENTS

     Section 1. These by-laws may be altered or repealed at any regular meeting of the stockholders or of the board of directors or at any special meeting of the stockholders or of the board of directors if notice of such alteration or repeal be contained in the notice of such special meeting.

EX-10.1

EXHIBIT 10.1

URS Corporation

EMPLOYEE STOCK PURCHASE PLAN

Adopted Effective July 1, 1997
Amended and Restated Effective July 1, 1999
Amendment and Restatement Approved By Stockholders on October 12, 1999
Amended Effective July 14, 2003
Amended Effective November 17, 2003
Amended Effective March 23, 2004
Amended and Restated Effective September 8, 2005

1. Purpose.

     (a) The purpose of the Employee Stock Purchase Plan (the “Plan”) is to provide a means by which employees of URS Corporation, a Delaware corporation (the “Company”), and its Affiliates, as defined in Subsection 1(b), which are designated as provided in Subsection 2(b), may be given an opportunity to purchase the common stock of the Company (the “Common Stock”).

     (b) The word “Affiliate” as used in the Plan means any parent corporation or subsidiary corporation of the Company, as those terms are defined in Sections 424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended (the “Code”).

     (c) The Company, by means of the Plan, seeks to retain the services of its employees, to secure and retain the services of new employees, and to provide incentives for such persons to exert maximum efforts for the success of the Company.

     (d) The Company intends that the rights to purchase stock of the Company granted under the Plan be considered options issued under an “employee stock purchase plan” as that term is defined in Section 423(b) of the Code.

2. Administration.

     (a) The Plan shall be administered by the Board of Directors (the “Board”) of the Company unless and until the Board delegates administration to a Committee, as provided in Subsection 2(c). Whether or not the Board has delegated administration, the Board shall have the final power to determine all questions of policy and expediency that may arise in the administration of the Plan.

     (b) The Board shall have the power, subject to, and within the limitations of, the express provisions of the Plan:

          (i) To determine when and how rights to purchase stock of the Company shall be granted and the provisions of each offering of such rights (which need not be identical).

          (ii) To designate from time to time which Affiliates of the Company shall be eligible to participate in the Plan.

          (iii) To construe and interpret the Plan and rights granted under it, and to establish, amend and revoke rules and regulations for its administration, including, but not by way of limitation, rules and regulations necessary to conform the Plan or any Offering thereunder to the laws and regulations of foreign jurisdictions. The

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Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan, in a manner and to the extent it shall deem necessary or expedient to make the Plan fully effective.

          (iv) To amend the Plan as provided in Section 13.

          (v) To suspend or terminate the Plan as provided in Section 16.

          (vi) Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests of the Company and its Affiliates and to carry out the intent that the Plan be treated as an “employee stock purchase plan” within the meaning of Section 423 of the Code.

     (c) The Board may delegate administration of the Plan to a Committee of one or more members of the Board. If administration is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board, subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board may abolish the Committee at any time and revest in the Board the administration of the Plan.

3. Shares Subject to the Plan.

     (a) Subject to the provisions of Section 12 relating to adjustments upon changes in stock, the stock that may be sold pursuant to rights granted under the Plan shall not exceed in the aggregate one million six hundred fifty thousand (1,650,000) shares of the Company’s common stock (the “Reserved Shares”). As of each July 1, beginning with July 1, 2000 and continuing through and including July 1, 2009, the number of Reserved Shares shall be increased automatically by the lesser of (i) three percent (3.0%) of the total number of shares of Common Stock outstanding, including for this purpose outstanding shares of capital stock convertible into Common Stock, on such date, or (ii) eight hundred thousand (800,000) shares of Common Stock. If any right granted under the Plan shall for any reason terminate without having been exercised, the Common Stock not purchased under such right shall again become available for the Plan.

     (b) The stock subject to the Plan may be unissued shares or reacquired shares, bought on the market or otherwise.

4. Grant of Rights; Offering.

     The Board or the Committee may from time to time grant or provide for the grant of rights to purchase Common Stock of the Company under the Plan to eligible employees (an “Offering”) on a date or dates (the “Offering Date(s)”) selected by the Board or the Committee. Each Offering shall be in such form and shall contain such terms and conditions as the Board or the Committee shall deem appropriate, which shall comply with the requirements of Section 423(b)(5) of the Code that all employees granted rights to purchase stock under the Plan shall have the same rights and privileges. The terms and conditions of an Offering shall be incorporated by reference into the Plan and treated as part of the Plan. The provisions of separate Offerings need not be identical, but each Offering shall include (through incorporation of the provisions of this Plan by reference in the document comprising the Offering or otherwise) the period during which the Offering shall be effective, which period shall not exceed twenty-seven (27) months beginning with the Offering Date, and the substance of the provisions contained in Sections 5 through 8, inclusive.

5. Eligibility.

     (a) Rights may be granted only to employees of the Company or, as the Board or the Committee may designate as provided in Subsection 2(b), to employees of any Affiliate of the Company. Except as provided in Subsection 5(b), an employee of the Company or any Affiliate shall not be eligible to be granted rights under the Plan, unless, on the Offering Date, such employee has been in the employ of the Company or any Affiliate for such continuous period preceding such grant as the Board or the Committee may require, but in no event shall the required period of continuous employment be equal to or greater than two (2) years. In addition, unless otherwise

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determined by the Board or the Committee and set forth in the terms of the applicable Offering, no employee of the Company or any Affiliate shall be eligible to be granted rights under the Plan, unless, on the Offering Date, such employee’s customary employment with the Company or such Affiliate is for at least twenty (20) hours per week and at least five (5) months per calendar year.

     (b) The Board or the Committee may provide that, each person who, during the course of an Offering, first becomes an eligible employee of the Company or designated Affiliate will, on a date or dates specified in the Offering which coincides with the day on which such person becomes an eligible employee or occurs thereafter, receive a right under that Offering, which right shall thereafter be deemed to be a part of that Offering. Such right shall have the same characteristics as any rights originally granted under that Offering, as described herein, except that:

          (i) the date on which such right is granted shall be the “Offering Date” of such right for all purposes, including determination of the exercise price of such right;

          (ii) the period of the Offering with respect to such right shall begin on its Offering Date and end coincident with the end of such Offering; and

          (iii) the Board or the Committee may provide that if such person first becomes an eligible employee within a specified period of time before the end of the Offering, he or she will not receive any right under that Offering.

     (c) No employee shall be eligible for the grant of any rights under the Plan if, immediately after any such rights are granted, such employee owns stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or of any Affiliate. For purposes of this Subsection 5(c), the rules of Section 424(d) of the Code shall apply in determining the stock ownership of any employee, and stock which such employee may purchase under all outstanding rights and options shall be treated as stock owned by such employee.

     (d) An eligible employee may be granted rights under the Plan only if such rights, together with any other rights granted under “employee stock purchase plans” of the Company and any Affiliates, as specified by Section 423(b)(8) of the Code, do not permit such employee’s rights to purchase stock of the Company or any Affiliate to accrue at a rate which exceeds twenty-five thousand ($25,000) of fair market value of such stock (determined at the time such rights are granted) for each calendar year in which such rights are outstanding at any time.

     (e) Officers of the Company and any designated Affiliate shall be eligible to participate in Offerings under the Plan, provided, however, that the Board may provide in an Offering that certain employees who are highly compensated employees within the meaning of Section 423(b)(4)(D) of the Code shall not be eligible to participate.

6. Rights; Purchase Price.

     (a) On each Offering Date, each eligible employee, pursuant to an Offering made under the Plan, shall be granted the right to purchase up to the number of shares of Common Stock of the Company purchasable with a percentage designated by the Board or the Committee not exceeding ten percent (10%) of such employee’s Earnings (as defined by the Board or the Committee in each Offering) during the period which begins on the Offering Date (or such later date as the Board or the Committee determines for a particular Offering) and ends on the date stated in the Offering, which date shall be no later than the end of the Offering. The Board or the Committee shall establish one or more dates during an Offering (the “Purchase Date(s)”) on which rights granted under the Plan shall be exercised and purchases of Common Stock carried out in accordance with such Offering.

     (b) In connection with each Offering made under the Plan, the Board or the Committee may specify a maximum number of shares that may be purchased by any employee as well as a maximum aggregate number of shares that may be purchased by all eligible employees pursuant to such Offering. In addition, in connection with

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each Offering that contains more than one Purchase Date, the Board or the Committee may specify a maximum aggregate number of shares which may be purchased by all eligible employees on any given Purchase Date under the Offering. If the aggregate purchase of shares upon exercise of rights granted under the Offering would exceed any such maximum aggregate number, the Board or the Committee shall make a pro rata allocation of the shares available in as nearly a uniform manner as shall be practicable and as it shall deem to be equitable.

     (c) With respect to Offerings commencing prior to January 1, 2006, the purchase price of stock acquired pursuant to rights granted under the Plan shall be not less than the lesser of:

          (i) an amount equal to eighty-five percent (85%) of the fair market value of the stock on the Offering Date; or

          (ii) an amount equal to eighty-five percent (85%) of the fair market value of the stock on the Purchase Date.

     (d) With respect to Offerings commencing on or after January 1, 2006, the purchase price of stock acquired pursuant to rights granted under the Plan shall be not less than an amount equal to ninety-five percent (95%) of the fair market value of the stock on the Purchase Date.

7. Participation; Withdrawal; Termination.

     (a) An eligible employee may become a participant in the Plan pursuant to an Offering by delivering a participation agreement to the Company within the time specified in the Offering, in such form as the Company provides. Each such agreement shall authorize payroll deductions of up to the maximum percentage specified by the Board or the Committee of such employee’s Earnings during the Offering (as defined by the Board or Committee in each Offering). The payroll deductions made for each participant shall be credited to an account for such participant under the Plan and shall be deposited with the general funds of the Company. A participant may reduce (including to zero) or increase such payroll deductions, and an eligible employee may begin such payroll deductions, after the beginning of any Offering only as provided for in the Offering. A participant may make additional payments into his or her account only if specifically provided for in the Offering and only if the participant has not had the maximum amount withheld during the Offering.

     (b) At any time during an Offering, a participant may terminate his or her payroll deductions under the Plan and withdraw from the Offering by delivering to the Company a notice of withdrawal in such form as the Company provides. Such withdrawal may be elected at any time prior to the end of the Offering except as provided by the Board or the Committee in the Offering. Upon such withdrawal from the Offering by a participant, the Company shall distribute to such participant all of his or her accumulated payroll deductions (reduced to the extent, if any, such deductions have been used to acquire stock for the participant) under the Offering, without interest, and such participant’s interest in that Offering shall be automatically terminated. A participant’s withdrawal from an Offering will have no effect upon such participant’s eligibility to participate in any other Offerings under the Plan but such participant will be required to deliver a new participation agreement in order to participate in subsequent Offerings under the Plan.

     (c) Rights granted pursuant to any Offering under the Plan shall terminate immediately upon cessation of any participating employee’s employment with the Company and any designated Affiliate, for any reason, and the Company shall distribute to such terminated employee all of his or her accumulated payroll deductions (reduced to the extent, if any, such deductions have been used to acquire stock for the terminated employee) under the Offering, without interest.

     (d) Rights granted under the Plan shall not be transferable by a participant otherwise than by will or the laws of descent and distribution, or by a beneficiary designation as provided in Section 14 and, otherwise during his or her lifetime, shall be exercisable only by the person to whom such rights are granted.

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8. Exercise.

     (a) On each Purchase Date specified therefor in the relevant Offering, each participant’s accumulated payroll deductions and other additional payments specifically provided for in the Offering (without any increase for interest) will be applied to the purchase of shares of stock of the Company (including fractional shares), up to the maximum number of shares permitted pursuant to the terms of the Plan and the applicable Offering, at the purchase price specified in the Offering. The amount, if any, of accumulated payroll deductions remaining in each participant’s account after the purchase of shares which is less than the amount required to purchase one share of stock on the final Purchase Date of an Offering shall be held in each such participant’s account for the purchase of shares under the next Offering under the Plan, unless such participant withdraws from such next Offering, as provided in Subsection 7(b), or is no longer eligible to be granted rights under the Plan, as provided in Section 5, in which case such amount shall be distributed to the participant after such final Purchase Date, without interest. The amount, if any, of accumulated payroll deductions remaining in any participant’s account after the purchase of shares which is equal to the amount required to purchase one or more whole shares of stock on the final Purchase Date of an Offering shall be distributed in full to the participant after such Purchase Date, without interest.

     (b) No rights granted under the Plan may be exercised to the extent that the shares of Common Stock to be issued upon such exercise (including rights granted thereunder) are not covered by an effective registration statement pursuant to the Securities Act of 1933, as amended (the “Securities Act”) or the Plan is not in material compliance with all applicable state, foreign and other securities and other laws applicable to the Plan with respect to such rights. If on a Purchase Date in any Offering hereunder the Plan is not so registered or in such compliance, rights granted under the Plan or any Offering shall not be exercised on such Purchase Date to the extent such exercise would violate the Securities Act or other applicable laws, and the Purchase Date shall be delayed with respect to those rights until the Plan is subject to such an effective registration statement and/or in such compliance, except that the Purchase Date shall not be delayed more than twelve (12) months and the Purchase Date shall in no event be more than twenty-seven (27) months from the Offering Date. If on the Purchase Date of any Offering hereunder, as delayed to the maximum extent permissible, the Plan is not registered and in such compliance, the rights so affected shall not be exercised and all payroll deductions accumulated during the Offering (reduced to the extent, if any, such deductions have been used to acquire stock) shall be distributed to the participants, without interest.

     (c) Common Stock that is purchased under the Plan will be registered in the name of the participant.

9. Covenants of the Company.

     (a) During the terms of the rights granted under the Plan, the Company shall keep available at all times the number of shares of Common Stock required to satisfy such rights.

     (b) The Company shall seek to obtain from each federal, state, foreign or other regulatory commission or agency having jurisdiction over the Plan such authority as may be required to issue and sell shares of stock upon exercise of the rights granted under the Plan. If, after reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the authority which counsel for the Company deems necessary for the lawful issuance and sale of Common Stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell Common Stock upon exercise of such rights unless and until such authority is obtained.

10. Use of Proceeds from Stock.

     Proceeds from the sale of Common Stock pursuant to rights granted under the Plan shall constitute general funds of the Company.

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11. Rights as a Stockholder.

     A participant shall not be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares subject to rights granted under the Plan unless and until the participant’s shareholdings acquired upon exercise of rights under the Plan are recorded in the books of the Company.

12. Adjustments upon Changes in Stock.

     (a) If any change is made in the Common Stock subject to the Plan, or subject to any rights granted under the Plan (through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or other transaction not involving the receipt of consideration by the Company), the Plan and outstanding rights will be appropriately adjusted in the class(es) and maximum number of shares subject to the Plan and the class(es) and number of shares and price per share of stock subject to outstanding rights. Such adjustments shall be made by the Board or the Committee, the determination of which shall be final, binding and conclusive. (The conversion of any convertible securities of the Company shall not be treated as a “transaction not involving the receipt of consideration by the Company.”)

     (b) In the event of (i) a sale, lease, license or other disposition of all or substantially all of the consolidated assets of the Company; (ii) a sale or other disposition of more than fifty percent (50%) of the outstanding securities of the Company; (iii) a merger, consolidation or similar transaction following which the Company is not the surviving corporation; or (iv) a merger, consolidation or similar transaction following which the Company is the surviving corporation but more than fifty (50%) of the shares of Common Stock outstanding immediately preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of the merger, consolidation or similar transaction into other property, whether in the form of securities, cash or otherwise, then, as determined by the Board in its sole discretion (i) any surviving or acquiring corporation may assume outstanding rights or substitute similar rights for those under the Plan; (ii) such rights may continue in full force and effect; or (iii) participants’ accumulated payroll deductions may be used to purchase Common Stock immediately prior to the transaction described above and the participants’ rights under the ongoing Offering terminated.

13. Amendment of the Plan.

     (a) The Board at any time, and from time to time, may amend the Plan. However, except as provided in Section 12 relating to adjustments upon changes in stock, no amendment shall be effective unless approved by the stockholders of the Company within twelve (12) months before or after the adoption of the amendment, where the amendment will:

          (i) Increase the number of shares reserved for rights under the Plan;

          (ii) Modify the provisions as to eligibility for participation in the Plan (to the extent such modification requires stockholder approval in order for the Plan to obtain employee stock purchase plan treatment under Section 423 of the Code or to comply with the requirements of Rule 16b-3); or

          (iii) Modify the Plan in any other way if such modification requires stockholder approval in order for the Plan to obtain employee stock purchase plan treatment under Section 423 of the Code or to comply with the requirements of Rule 16b-3.

It is expressly contemplated that the Board may amend the Plan in any respect the Board deems necessary or advisable to provide eligible employees with the maximum benefits provided or to be provided under the provisions of the Code and the regulations promulgated thereunder relating to employee stock purchase plans and/or to bring the Plan and/or rights granted under it into compliance therewith.

     (b) Subject to Section 12, rights granted before amendment of the Plan shall not be impaired by any amendment of the Plan, except with the consent of the person to whom such rights were granted, or except as

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necessary to comply with any laws or governmental regulations, or except as necessary to ensure that the Plan and/or rights granted under the Plan comply with the requirements of Section 423 of the Code.

14. Designation of Beneficiary.

     (a) A participant may file a written designation of a beneficiary who is to receive any shares and cash, if any, from the participant’s account under the Plan in the event of such participant’s death subsequent to the end of an Offering but prior to delivery to the participant of such shares and cash. In addition, a participant may file a written designation of a beneficiary who is to receive any cash from the participant’s account under the Plan in the event of such participant’s death during an Offering.

     (b) Such designation of beneficiary may be changed by the participant at any time by written notice. In the event of the death of a participant and in the absence of a beneficiary validly designated under the Plan who is living at the time of such participant’s death, the Company shall deliver such shares and/or cash to the executor or administrator of the estate of the participant, or if no such executor or administrator has been appointed (to the knowledge of the Company), the Company, in its sole discretion, may deliver such shares and/or cash to the spouse or to any one or more dependents or relatives of the participant, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate.

15. No Employment or Service Rights.

     Nothing in the Plan or any instrument executed or rights granted pursuant thereto shall confer upon any employee any right to continue to serve the Company or an Affiliate in the capacity in effect at the time the right was granted or shall affect the right of the Company or an Affiliate to terminate the employment of an employee with or without notice and with or without cause.

16. Termination or Suspension of the Plan.

     (a) The Board in its discretion, may suspend or terminate the Plan at any time. No rights may be granted under the Plan while the Plan is suspended or after it is terminated. This Plan shall terminate on October 11, 2009.

     (b) Rights and obligations under any rights granted while the Plan is in effect shall not be impaired by suspension or termination of the Plan, except as expressly provided in the Plan or with the consent of the person to whom such rights were granted, or except as necessary to comply with any laws or governmental regulation, or except as necessary to ensure that the Plan and/or rights granted under the Plan comply with the requirements of Section 423 of the Code.

17. Effective Date of Plan.

     This amended and restated Plan shall become effective on the date on which it is adopted by the Board (the “Effective Date”), but no rights granted under the Plan shall be exercised unless and until the Plan has been approved by the stockholders of the Company within twelve (12) months before or after the date the Plan is adopted by the Board.

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EX-31.1

Exhibit 31.1

CHIEF EXECUTIVE OFFICER CERTIFICATE

I, Martin M. Koffel, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of URS Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 8, 2005	/s/ Martin M. Koffel
	Martin M. Koffel
	Chief Executive Officer

EX-31.2

Exhibit 31.2

CHIEF FINANCIAL OFFICER CERTIFICATE

I, Kent P. Ainsworth, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of URS Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 8, 2005	/s/ Kent P. Ainsworth
	Kent P. Ainsworth
	Chief Financial Officer

EX-32

Exhibit 32

CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER CERTIFICATION

     Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Martin M. Koffel, the Chief Executive Officer of URS Corporation (the “Company”) and Kent P. Ainsworth, the Chief Financial Officer of the Company, do each hereby certify that, to the best of their knowledge:

1. The Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2005, to which this Certification is attached as Exhibit 32 (the “Periodic Report”), fully complies with the requirements of section 13(a) or section 15(d) of the Securities Exchange Act of 1934, and

2. The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 8, 2005	/s/ Martin M. Koffel
	Martin M. Koffel
	Chief Executive Officer
Date: November 8, 2005	/s/ Kent P. Ainsworth
	Kent P. Ainsworth
	Chief Financial Officer