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URS Stock Sale Allows Firm To Trim Past Acquisition Debt
By Richard Korman

Ending a period in which millions of shares of its stock were put on sale in large blocks, URS Corp. has trimmed its heavy debt significantly. To pay for the debt buyback, San Francisco-based URS sold $214 million worth of stock in late April. The offering, originally priced at $30 a share, was sold at $26.50 a share.

With the proceeds, URS cut its $834-million debt by $180 million, placing its debt-to-total capitalization ratio below 40%. The firm now begins saving $27 million in annual interest paid on the debt. “These transactions will improve our financial strength, enhance stockholder value and allow us to continue to invest in the business and further enhance our ability to perform for clients,” says CEO Martin M. Koffel.

The move fulfills a corporate goal and has earned an improved rating from Standard & Poor’s. The rating agency, like ENR, is a unit of the McGraw-Hill Cos.


URS’ big debt had been used to finance acquisitions that boosted its size and market share, with $3.19 billion in fiscal 2003 revenue, up from $2.43 billion the previous year. Net income was $58.1 million in fiscal 2003, compared to $55.2 million in 2002. The firm ranked number one on ENR’s list of Top Design Firms (ENR 4/19 p. 56).

In 2002, URS acquired EG&G Technical Services from The Carlyle Group, a Washington, D.C., investment firm. URS paid for the purchase partly by borrowing another $675 million.

But observers say URS sees itself as a clever operator of engineering and construction businesses, not as a consolidator. Management wanted to trim debt so that URS’ balance sheet more closely resembled balance sheets of other large publicly traded engineers and contractors, such as Fluor Corp. and Jacobs Engineering Group Inc. “They have comparatively little or no debt,” says a source at URS.

URS shares have slipped somewhat since the equity offering at $26.50. That shares were repriced down from $30 worries one sell-side stock analyst whose main interest is whether the firm hits its announced earnings target each quarter.

Another potentially worrisome sign of how financial markets regard URS is Carlyle’s exit last September as a shareholder, according to a Sept. 30, 2003, filing with the Securities and Exchange Commission. The investment firm, which received URS stock as part of its compensation, sold off more than 7 million shares at a per-share price of $18.38.

“That the share price for the equity offering had to be cut to less than the originally announced $30 per share shows the level of interest in the stock wasn’t as hot as [URS] would like it to be,” says the analyst. URS officials declined to discuss the Carlyle stock sale or the corporate share offering.

Even so, URS has size and wide-ranging expertise that should help it over the long run. Its services now include more logistics and military support. Earlier this year, URS won several joint venture construction management contracts in Iraq.

At the time of the EG&G buy, Koffel said he would continue building value through growth and diversification. That tends to bolster the image of the company as an acquisition machine, but one executive counters: “We are operators.”

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