URS Corporation

views updated May 17 2018

URS Corporation

100 California Street, Suite 500
San Francisco, California 94111-4529
U.S.A.
Telephone: (415) 774-2700
Fax: (415) 398-1905
Web site: http://www.urscorp.com

Public Company
Incorporated: 1950
Employees: 16,000
Sales: $2.21 billion (2000)
Stock Exchanges: New York Pacific
Ticker Symbol: URS
NAIC: 23332 Commercial and Institutional Building Construction; 23411 Highway and Street Construction; 23491 Water, Sewer, and Pipeline Construction; 23594 Wrecking and Demolition Contractors; 54133 Engineering Services; 54131 Architectural Services

Ranked number one on ENR’s list of the top U.S. design firms, URS Corporation has 300 offices in 30 countries. Aside from being the largest pure engineering firm in the United States, URS is also a top ten construction firm. It is a leader in airport construction and is also involved in environmental consulting.

Origins

URS Corporation was founded in 1950. Though a fairly successful firm, it would not grow to become an engineering industry giant until the 1980s and 1990s.

URS’s international aspirations manifested themselves fairly early on. The company began doing business in Japan in the mid-1960s. For the next 20 years, however, nearly all of its work there would come not from local clients, but from the U.S. government, which hired the firm for projects at military bases. Although it found the Japanese market practically closed to outsiders, URS was able to perform some work in the United States for Japanese firms.

By the mid-1980s, URS Corporation had 40 sales and engineering offices in the United States. The company maintained these offices with the realization that the services market was, indeed, primarily local. Fierce competition for large billion-dollar projects, however, was prompting more giant builders to come look for smaller projects. The company’s backlog was $70 million in 1985.

Four of the company’s top executives, including Chairman and CEO Arthur Stromberg, were charged with overstating the company’s fiscal 1986 revenues and income (reported at $115.7 million and $8.7 million) by $8.4 million. They later settled the case without admitting or denying the charges.

The company’s largest shareholder, Richard C. Blum, was the husband of former San Francisco Mayor Dianne Feinstein, who was running for governor. This resulted in the SEC investigation getting national media attention, particularly from the Los Angeles Times, which revealed that payments totaling $35 million were made to settle shareholders’ lawsuits at URS and two other companies in which Blum was a major shareholder.

Public As Thortec in 1987

URS underwent a major restructuring in 1987. It changed its name to Thortec International Inc. (and its NYSE ticker symbol to THT) in November and offered a 35 percent interest in its URS International Inc. subsidiary on the London Unlisted Securities Market. In addition, the company formed a new 1,800-person subsidiary, URS Consultants Inc., to handle its domestic consulting services, which were centered on infrastructure, waste management, and pollution control. As part of the restructuring, Thortec International was expanding its range of waste treatment services, project management software systems, and forensic engineering services.

Around this time, URS was lobbying for more access to the Japanese market. To further this end, the company acquired an architectural firm in Japan and formed a venture with an engineering firm there. In 1988, the Hong Kong office of URS International landed a contract to design the $49 million, 450-room Hua Qiao Mansion Hotel being built in Beijing, China.

The board sought a new leader to turn the company around. One director, Bill Walsh, chairman of Sequoia Associates, a Menlo Park buyout firm, suggested his friend Martin M. Koffel, who had formerly been president of ophthalmic products and services company CooperVision Inc. and had helped position Oral-B Laboratories Inc. for its sale to Gillette Co. Koffel was named president and CEO of Thortec International in May 1989. Former CEO Arthur H. Stromberg remained chairman before resigning that post one month later.

Koffel, a native of Australia, had been a mining engineer before leading CooperVision. Koffel’s management team would guide Thortec back to its core business of engineering. The firm’s financial problems had stemmed from an overactive diversification policy. Soon, URS Engineers would be the company’s only operating unit.

In June 1989, Thortec relocated its headquarters from San Mateo to the San Francisco office of its largest subsidiary, URS Consultants. Revenues fell about 10 percent, to $99.4 million, in the fiscal year ended October 31. The company lost $19 million in 1989 and $12 million the year before. By February 1990, Thortec had defaulted on interest payments to one of its creditors; the prospect of bankruptcy had been raised. A restructuring plan announced in October 1989 had called for San Francisco investment firm Richard C. Blum and Associates to acquire 53 percent of the company in return for $12.5 million in cash.

Thortec reverted to its old name of URS Corporation by the time its restructuring was completed in late February 1990. Blum ended up with a 68 percent holding in URS, while Wells Fargo Bank owned 14 percent. The company’s debt was cut from $73 million to $37 million in the process. In June 1991, URS had a public offering, which further helped reduce debt.

URS closed its software unit in May 1990. Westborough, Massachusetts-based Mitchell Management Systems Inc. had accounted for 8 percent of URS’s $99.5 million in revenue for fiscal 1989, but lost $3.3 million that year and $1.4 million the year before.

The restructuring produced some tangible results. URS became profitable again in 1991, when revenues were about $120 million. By October 1992, backlog had increased to $278 million, up 25 percent in a year. Revenues rose 11 percent while net income leaped 86 percent to $4.3 million. The public sector accounted for 80 percent of business.

A new subsidiary, URS Telecommunications, based in Washington D.C., was created in 1995 to focus on the emerging wireless telecommunications market. It would be the transportation segment, however, that would provide URS with its best opportunity for growth. Revenues were $180 million for the 1995 fiscal year, producing net income of $5 million—both figures up 10 percent.

Big-Time Growth in the Late 1990s

URS doubled in size in 1996 through the purchase of Dallas-based Greiner Engineering Inc. for $63.5 million in cash plus 1.4 million shares of common stock worth about $10 million. This increased URS’s total revenues to $400 million per year. The deal doubled Greiner’s workforce of 1,500 and made URS Greiner a top-five architectural company.

Greiner, which specialized in designing schools, brought with it some international operations, based in Malaysia, and reduced URS’s dependence on the environmental business and the federal government. According to ENR, URS and Greiner had been considering a merger for three years preceding the deal.

In August 1997, URS bought Denver-based Woodward-Clyde Group Inc. in a stock-plus-cash deal worth $100 million. The purchase again doubled URS Corp.’s size, making it the country’s fifth largest engineering company, with revenues of $800 million and 6,000 employees.

Transportation projects accounted for a third of URS Corp.’s business in the late 1990s. This sector was given a boost by the $217 billion Transportation Equity Act for the 21st Century (TEA-21) approved by Congress in 1998. As a result, URS was named joint program manager of a ten-year, $3.2 billion project to connect commuter trains between Long Island, New York, and Manhattan’s Grand Central Terminal. URS would split $24 million in engineering fees with its partner for the project, Bechtel. Other highway jobs included a $12 million upgrade of 1-15 in Salt Lake City and $20 million worth of work on Miami’s Palmetto Expressway.

By October 1998, URS was searching for an acquisition to help the firm enter the European market. Private finance initiative schemes were making the United Kingdom a particularly attractive market. In early 1999, URS bought Thorburn Colquhoun, a £25 million-a-year civil and structural engineering firm based in Great Britain.

Company Perspectives:

What We Do: Planning and Design: We develop and improve the transportation systems and infrastructure on which society depends. We produce high-quality designs for buildings and facilities that keep pace with the needs of a new century. We provide environmental solutions that restore ecosystems and protect the earth’s resources. Construction Services: We apply proactive and proven program and construction management techniques to meet quality, schedule and cost objectives. We bring the value of practical experience in planning, design, and program and construction management to dispute resolution. We provide demolition and remedial contracting solutions for all phases of site decommissioning.

On the other side of the world, URS Corp.’s Greiner Engineering unit was participating in the design of a terminal at one of China’s busiest airports in Guangzhou. Pasadena, California-based based Parsons Corp. and the Guangdong Provincial Architectural Design Institute were also collaborating on the project.

URS continued its buying spree by acquiring, in June 1999, the Los Angeles-based Dames & Moore Group for $312 million in cash, plus the assumption of $300 million of debt. Dames had become susceptible to a takeover because its stock price had fallen by 40 percent since 1992 as the company pursued an aggressive acquisition policy. One of Dames & Moore’s divisions was a leading provider of construction and program management services—likely to be highly marketable by URS in the coming transportation boom. Most of Dames & Moore’s revenues, however, were coming from environmental consulting.

After the deal, URS had annual revenues of $2 billion and 15,000 employees in more than 30 countries. Revenues and employment had grown tenfold since 1996. It was perceived as a leader in the consolidation of the engineering services industry.

URS’s newfound mass promised to help it win larger, more lucrative contracts. The company began to compete with the giants of the engineering industry, such as Fluor Corporation, Brown & Root Inc., Bechtel Group Inc., and Parsons Corporation.

At the end of 1999, North America accounted for 90 percent of the firm’s revenues. The international acquisitions, however, gave the company a platform from which to grow abroad. Koffel expected the firm’s size to double by 2005. URS was already involved in some high-profile projects overseas, including work on London’s Millennium Dome and Sydney’s Olympic stadium.

URS sold its DecisionQuest unit, which provided litigation support services, to a management-led group in June 2000. URS realized $20 million in cash from the deal, all earmarked for debt reduction.

While it was acquiring companies during the 1990s, URS’s main operating unit also was picking up names. It was known as URS Greiner Inc., then URS Greiner Woodward Clyde, until autumn 2000, when it reverted to the URS Corp. name.

Thanks to its growth in business at home and abroad, the company planned to hire more than 500 employees in the summer of 2001. Employment was 15,800 before the recruitment drive. Although CEO Martin Koffel expected the transportation market to mature in the next five years, the company planned to push energy and wastewater services after that. URS also continued to design airports and other public facilities.

Principal Divisions

Parent; Domestic; International.

Principal Competitors

AECOM Technology Corp.; Bechtel Group Inc.; CH2M Hill Cos. Ltd.; The IT Group, Inc.; Jacobs Engineering Corp.; Parsons Corp.

Key Dates:

1950:: URS Corporation is founded.
1980:: URS has 40 offices in the United States.
1987:: URS goes public under the name Thortec.
1989:: Turnaround specialist Martin M. Koffel is hired as CEO.
1990:: URS reverts to old name as restructuring is completed.
1996:: The purchase of Greiner Engineering doubles URS’s size.
1997:: The Woodward-Clyde purchase again doubles URS’s size.
1999:: The Dames & Moore acquisition makes URS the largest U.S. engineering firm.

URS Corporation

views updated May 21 2018

URS Corporation

600 Montgomery Street, 26th Floor
San Francisco, California 94111-2728
U.S.A.
Telephone: (415) 774-2700
Fax: (415) 398-1905
Web site: http://www.urscorp.com

Public Company
Incorporated: 1957 as Broadview Research Corporation
Employees: 27,500
Sales: $3.92 billion (2005)
Stock Exchanges: New York Pacific
Ticker Symbol: URS
NAIC: 541330 Engineering Services

URS Corporation is one of the world's largest engineering design firms. Listed on the New York Stock Exchange, San Francisco-based URS operates in 20 countries, although 90 percent of its sales come from North America. Business is divided among two divisions. The URS division offers planning, design, and program and construction management services to both public and private clients, involved in such projects as mass transit systems, highways, bridges, airports, water supply and treatment systems, manufacturing plants, healthcare facilities, college facilities, grade school and high schools, military housing, courthouses, and the construction of other government buildings. The EG&G division provides planning, systems engineering and technical assistance, and operations and maintenance services to the United States government, primarily the Department of Homeland Security and the military.

COMPANY ORIGINS: 1951

URS was started in 1951 under the name Broadview Research. It was a small private company that was dependent on a modest Army operations contract, employing physical and engineering sciences. The business was incorporated in 1957 as Broadview Research Corporation, and in 1962 changed its name to United Research Services, Inc. Two years later it took the name URS Corporation, the company's current name, though more permutations were to follow over the years. In 1967 the company launched a strategy to become a multidisciplinary services firm. A year later it made an initial public offering of stock, gaining a listing on the American Stock Exchange, and once again changed its name, this time becoming URS Systems Corporation. It also looked to grow externally through acquisitions, making half-a-dozen purchases over the next two years. URS still relied on its military contract, however, and when that expired in fiscal 1970, the company lost money, prompting a change in management and direction.

In March 1970 Arthur H. Stromberg joined URS and became chief executive officer in 1971. (He added the chairmanship in 1976.) Under his direction the company bounced back, recording record earnings for two consecutive years before business fell off during a recession, resulting in three straight years of declining profits. The company at this stage provided architectural and engineering services, mostly to local, state, and federal agencies. Earlier Stromberg diversified somewhat by acquiring Pollution Control Engineering, Inc. in 1973, and URS would continue to add environmental practices, but in 1976 he went far a field by purchasing Advanced Systems, Inc., which produced video-assisted training programs. A year later he added the well-known speed-reading company, Evelyn Wood Reading Dynamics, Inc., for $7 million. It was an unlikely combination, but it at least improved the company's non-government business. The new assets also played their part in URS posting a record $3.8 million in profits in 1977 on sales of about $37 million.

URS enjoyed steady growth for several years, as the number of offices increased from nine to 32 and sales approach $100 million by fiscal 1985. Investors were having a difficult time, however, comprehending a company that on one hand cleaned up toxic waste sites and on the other taught speed reading. To simplify the company, Evelyn Wood was divested and Advanced Systems was spun off, the shares distributed to URS stock holders. The company now became listed on the New York Stock Exchange and enjoyed a nice run, as did the stock of the now independent Advanced Systems.

In 1986 URS had a healthy backlog of contracts and appeared to be well positioned in high growth areas like hazardous waste and pollution control. The company wanted to commit further to this sector and in 1987 began a reorganization, spinning off its consulting business into two companies: URS Consultants Inc. and URS International Inc. The remaining assets now took the name Thortec International, Inc. in November 1987. The plan was to make public offerings of the spin-offs, with Thortec retaining majority stock ownership of both companies. The money raised would then be used to expand Thortec's hazardous- and toxic-waste remediation business into a full-service operation. In addition, Thortec hoped to build its forensic engineering, project and program management software systems, and other management services. The strategy did not work out as planned, however.

FISCAL 1986 RESULTS DRAW SEC SCRUTINY

Thortec lost money in fiscal 1987 and the situation grew worse in 1988, as it lost $17.3 million on revenues of $113.7 million. Moreover, the company had to admit in its public filings that it had become the subject of a Securities and Exchange Commission investigation of its reported results for fiscal 1986. The SEC contended that the company added $8.4 million to the reported $115.7 in revenues and $8.7 million in revenues, and inflated fiscal 1987 results by another $5 million. Shareholders then filed a class-action suit alleging the company misrepresented its financial situation, and this matter was eventually settled out of court. In the meantime, Thortec's chief financial officer, its chief accounting officer, and its chief operating officer resigned in 1988. Stromberg held out until the spring of 1989, when he relinquished the CEO post and the chairmanship (although he stayed on as a director for several more months). The four executives reached an agreement with the SEC in 1990, agreeing to a permanent injunction that barred them from future securities laws violations, although they neither admitted or denied the charges.

COMPANY PERSPECTIVES

URS is one of the largest engineering design firms worldwide and a leading U.S. federal government contractor. Our business focuses primarily on providing professional and technical services in the engineering, construction services and defense markets. We execute large and complex engineering projects and provide a comprehensive range of professional planning and design, systems engineering and technical assistance, program and construction management, and operations and maintenance services.

While the SEC matter was being resolved, a group of shareholders, lead by Richard C. Blum—husband of former San Francisco mayor and future U.S. Senator, Dianne Feinstein—took control and launched a reorganization. Blum would also end up with a controlling interest of more than 60 percent after providing $12.5 million in much needed cash in October 1989, adding to a small stake he previously owned. A new CEO had already been brought in several months earlier, Martin M. Koffel, a friend recruited by new director, Bill Walsh, the chairman of buyout firm Sequoia Associates. (Koffel was subsequently named chairman as well.) Walsh told the Wall Street Journal, "I knew he was very expert at turnarounds, and we needed help badly." An Australian, Koffel had proven his abilities by turning around, among other companies, Oral-B Laboratories Inc. and selling it to Gillette Co. According to the Wall Street Journal, "Koffel spent his first three years at URS shutting down all businesses that had no relation to the company's basic expertise in providing engineering services for large-scale projects such as airport and road construction. 'We had a great reputation for engineering, so I wanted to get back to that,' Mr. Koffel says." In keeping with that plan, the company reverted to the URS name in February 1990. To shore up the company's stock price, which had fallen to the $1 range, he engineered a one-for-ten reverse stock, thus increasing the price ten-fold and making it more visible with investors. Koffel's changes began to have an immediate positive effect, as URS returned to profitability in 1991 on sales of $122 million. The company was strong enough that in June 1991 it was able to return to the public market to raised nearly $20 million in an offering of new shares of stock. Most of the proceeds were used to pay down debt.

By 1995 URS had increased its revenues to $180 million and net income reached $5.1 million. "As it grew," reported industry publication ENR, "URS Engineers needed to win the mega projects that will keep its staff busy and challenged. But the company wasn't getting the respect afforded to companies the size of Sverdrup Corporation and CH2M Hill Cos. Ltd." Koffel now became a consolidator in the engineering field, which was undergoing a industry shakeout that would result in a handful of large international companies and many small specialty firms. His first major step came in 1995 with the $73 million cash and stock acquisition of Greiner Engineering Inc., an Irving, Texas-based firm that for the past three years had been of interest to Koffel. Although it was struggling financially, primarily due to an investment in a California toll road project, Greiner had a solid reputation in airports as well as expertise in surface transportation and bridges, thus providing a better business mix for URS, which was too dependent on environmental projects, as well as federal contracts. Moreover, Greiner added some international assets, operating in Asia.

With Greiner in the fold, URS saw revenues increase to $305.5 million in fiscal 1996 and net income improve to $7.4 million. The next major acquisition occurred in November 1997, when URS added Woodward-Clyde Group, Inc, in a $132.4 million transaction that included $39.2 million in cash, stock worth $61.9 million, and the assumption of $31.1 million in debt. Denver-based Woodward-Clyde, a major geotechnical engineering and environmental consulting firm, doubled the size of URS, making it the United States' fifth largest engineering firm. The deal lessened URS's dependence on government contracts and expanded the firm's market coverage, which now included offices in Canada, Europe and Latin America.

DAMES & MOORE ACQUISITION: 1999

Revenues increased to $406.5 million in fiscal 1997 and net income improved to $11.5 million, but once Woodward-Clyde was digested and contributing to the balance sheet for the full year, the results would become even more dramatic. Revenues nearly doubled to $806 million, as did net income, which totaled $22.7 million in fiscal 1998. With Greiner and Woodward-Clyde fully assimilated, URS was ready once again on the acquisition trail. In February 1999 the company completed a relatively small purchase, paying $13.6 million and assuming debt to pick up Thorbun Colquhoun Holdings plc, a mid-size United Kingdom based engineering firm that specialized in transportation projects and structural engineering services for manufacturing facilities and stadiums. Thorbun's addition beefed up URS's operations in Europe. A far more significant transaction took place in June 1999 when URS acquired Dames & Moore Group in a $357.4 million deal. Based in Los Angeles, Dames & Moore had fancied itself an industry consolidator, so that its willingness to be acquired by URS came as a surprise to knowledgeable observers. Dames & Moore, in fact, had also attempted to buy Woodward-Clyde. Combined with URS, the result, according to ENR, was a "supercompany," one that set a new size standard for design firms. Dames & Moore maintained offices in more than 30 countries, thereby adding to URS's presence in the United States, Europe, and Asia. URS also broadened its areas of expertise by adding nearly 8,000 engineers, planners, and construction managers. With Dames & Moore's partial contribution, URS recorded revenues of more than $1.4 billion and net income of $33.2 million in fiscal 1999. Those totals grew to more than $2.2 billion in revenue and net income of nearly $50 million in fiscal 2000 when Dames & Moore was more fully integrated. During the course of the year, URS also completed a corporate branding program, applying the URS name to all aspects of the now massive firm.

KEY DATES

1951:: Company is founded as Broadview Research Corporation.
1964:: Company first assumes the URS Corporation name.
1971:: Arthur H. Stromberg is named CEO.
1989:: Martin M. Koffel replaces Stromberg amid an SEC investigation.
1996:: Greiner Engineering, Inc., is acquired.
1999:: Dames & Moore Group is acquired.
2002:: EG&G Federal Services Inc. is acquired.

According to ENR, URS emerged in 2001 as number one on the publication's annual list of the Top 500 Design Firms. In fiscal 2001, URS increased revenues to $2.32 billion and net income to $57.9 million. The company was not content, however, to stand pat. In August 2002 it completed yet another significant acquisition: the $500 million purchase of EG&G Federal Services Inc. from The Carlyle Group. The Gaithersburg, Maryland-based firm positioned URS to become a major player in the growing markets for homeland security, in the wake of the September 11th terrorist attacks, and government outsourcing. Moreover, EG&G brought other aspects to the table. "EG&G has all sorts of whizbang things but was not allowed to flex its technology wings under Carlyle," an engineering executive told ENR. "Now we have a company with a bigger toolbox and we will see them in the market quite quickly and competitively."

URS assimilated EG&G and reorganized the business into two units: URS Division and EG&G. Revenues totaled $3.2 billion in fiscal 2003, when net income reached 58.1 million. In fiscal 2005 revenues approached the $4 billion threshold and the company reported net income of $61.7 million. In a matter of 15 years, URS had gone from the brink of bankruptcy to becoming a dominant international firm, and there was every reason to expect the upward trend to continue for some time to come.