UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

(Mark one)

For the quarterly period ended April 30, 2004

OR

For the Transition Period from                     to                    

Commission file number 1-7567

URS CORPORATION

(Exact name of registrant as specified in its charter)

(415) 774-2700
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

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

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

URS CORPORATION AND SUBSIDIARIES

     This quarterly report 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 in connection with our revenue and earnings projections, our debt repayments, conversion of our debentures, our contributions to our retirement plans, the maintenance of our insurance coverage, our settlement of legal claims, our future capital resources, our Enterprise Resource Program implementation 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: the recent economic downturn; our dependence on government appropriations; changes in regulations; our ability to manage our contracts; our leveraged position; our ability to service our debt; pending and future litigation; industry competition; our ability to attract and retain key individuals; risks associated with international operations; our ability to successfully integrate our accounting and management information systems; and other factors discussed more fully in Management’s Discussion and Analysis of Financial Condition and Results of Operations beginning on page 26, Risk Factors That Could Affect Our Financial Conditions and Results of Operations beginning on page 43, 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.

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PART I
FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

URS CORPORATION AND SUBSIDIARIES

See Notes to Consolidated Financial Statements

2

URS CORPORATION AND SUBSIDIARIES

See Notes to Consolidated Financial Statements

3

URS CORPORATION AND SUBSIDIARIES

See Notes to Consolidated Financial Statements

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URS CORPORATION AND SUBSIDIARIES

NOTE 1. 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 offer a comprehensive range of professional planning and design, systems engineering and technical assistance, program and construction management, and operations and maintenance services for surface transportation, air transportation, rail transportation, industrial process, facilities and logistics support, water/wastewater treatment, hazardous waste management, and military platforms support. Headquartered in San Francisco, we operate in over 20 countries with approximately 26,000 employees providing engineering and technical services to federal, state and local governmental agencies as well as private clients in the chemical, manufacturing, pharmaceutical, forest product, mining, oil, gas, and utility industries.

     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 accounts of our consolidated subsidiaries, all of which are wholly owned, and certain joint ventures. In order to bid, negotiate and execute projects, we may form joint ventures with third parties. Unconsolidated joint ventures are accounted for using the equity method. We consolidate our proportionate share of revenues, direct operating expenses and gross profits generated by joint ventures related to construction activities. Total joint venture revenues, direct operating expenses and gross profit are included in the Consolidated Statements of Operations and Comprehensive Income for all other consolidated joint ventures. 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 Annual Report on Form 10-K for the fiscal year ended October 31, 2003. The results of operations for the six months ended April 30, 2004 are not necessarily 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 presentation 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.

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

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. 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. Diluted income per share is computed by taking net income and dividing it by the sum of the weighted-average common shares and potentially dilutive common shares that were outstanding during the period.

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

     Our 6 ½% Convertible Subordinated Debentures (“6 ½% debentures”) are due in 2012 and are convertible into shares of our common stock at the rate of $206.30 per share. However, the 6 ½% debentures were not included in our computation of diluted income per share because it would be anti-dilutive.

     The following outstanding stock options were not included in our computation of diluted income per share because the exercise price of those options was greater than the average market value of the shares of our common stock in the periods presented.

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

Stock-Based Compensation

     We account for stock issued to employees and outside directors in accordance with Accounting Principles Board Opinion No. 25 (“APB 25”), “Accounting for Stock Issued to Employees.” Accordingly, compensation cost is measured based on the excess, if any, of the market price of our common stock over the exercise price of a stock option, determined on the date the option is granted.

     The Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard No. 148 (“SFAS 148”), “Accounting for Stock-Based Compensation – Transition and Disclosure,” which amends the disclosure requirements of Statement No. 123 (“SFAS 123”), “Accounting for Stock-Based Compensation,” to require prominent disclosure in both annual and interim financial statements of the method of accounting for stock-based employee compensation and the effect of the method used on reported results. SFAS 148 also requires disclosure of pro forma results on an interim basis as if we had applied the fair value recognition provisions of SFAS 123.

     We continue to apply APB 25 and related interpretations in accounting for our 1991 Stock Incentive Plan and 1999 Equity Incentive Plan (collectively, the “Plans”). All of our options are awarded with an exercise price that is equal to the market price of our common stock on the date of the grant and accordingly, no compensation cost has been recognized in connection with options granted under the Plans. We use the Black-Scholes option pricing model to calculate the estimated stock option compensation expense based on the fair value of stock options granted and the assumptions described below. Had compensation cost for awards under the Plans been determined in accordance with SFAS 123, as amended, our net income and earnings per share would have been reduced to the pro forma amounts indicated below:

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

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

Adopted and Recently Issued Statements of Financial Accounting Standards

     In January 2003, the FASB issued Financial Accounting Standards Board Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”), which is an interpretation of Accounting Research Bulletin No. 51, “Consolidated Financial Statements.” FIN 46 requires a variable interest entity (“VIE”) to be consolidated by a company that is considered to be the primary beneficiary of that VIE. In December 2003, the FASB issued FIN 46 (revised December 2003), “Consolidation of Variable Interest Entities” (“FIN 46-R”), to address certain FIN 46 implementation issues. Although we have no SPEs as defined in FIN 46, we evaluated the impact of FIN 46 related to our joint ventures with third parties. We adopted FIN 46-R as of April 30, 2004.

	1)		Non-special purpose entities (“non-SPEs”) created prior to February 1, 2003. In general, we account for non-SPEs in accordance with Emerging Issues Task Force Issue 00-01, “Investor Balance Sheet and Income Statement Display under the Equity Method for Investments in Certain Partnerships and Other Ventures” (“EITF 00-01”), or in accordance with the equity method of accounting. Adoption of FIN 46-R did not have a material impact on our accounting for these non-SPEs created prior to February 1, 2003 and we continue to account for these non-SPEs under the equity method or under EITF 00-01 as appropriate.
	2)		All entities, regardless of whether a special purpose entity, created subsequent to January 31, 2003. We have not entered into any material joint venture or partnership agreements subsequent to January 31, 2003. If we enter into any significant joint venture or partnership agreements in the future that would require consolidation under FIN 46-R, it could have a material impact on our consolidated financial statements in future filings.

     In December, 2003, the FASB issued Statement of Financial Accounting Standards No. 132 (Revised) (“Revised SFAS 132”), “Employer’s Disclosure about Pensions and Other Postretirement Benefits.” Revised SFAS 132 retains disclosure requirements from the original SFAS 132 and requires additional disclosures relating to assets, obligations, cash flows and net periodic benefit cost. Revised SFAS 132 is effective for fiscal years ending after December 15, 2003, except that certain disclosures are effective for fiscal years ending after June 15, 2004. Interim period disclosures are effective for interim periods beginning after December 15, 2003. Our required Revised SFAS 132 interim disclosures are included in Note 3, “Employee Retirement Plans.”

     On December 17, 2003, the Staff of the Securities and Exchange Commission (“SEC” or the “Staff”) issued Staff Accounting Bulletin No. 104 (“SAB 104”), “Revenue Recognition,” which supercedes SAB 101, “Revenue Recognition in Financial Statements.” SAB 104’s primary purpose is to rescind accounting guidance contained in SAB 101 related to multiple element revenue arrangements, which was superceded as a result of the issuance of Emerging Issues Task Force Consensus No. 00-21 (“EITF 00-21”), “Accounting for Revenue Arrangements with Multiple Deliverables.” Additionally, SAB 104 rescinds the SEC’s Revenue Recognition in Financial Statements Frequently Asked Questions and Answers (the “FAQ”) issued with SAB 101 that had been codified in SEC Topic 13, Revenue Recognition. Selected portions of the FAQ have been incorporated into SAB 104. While the wording of SAB 104 has changed to reflect the issuance of EITF 00-21, the revenue recognition principles of SAB 101 remain largely unchanged by the issuance of SAB 104. SAB 104 applies to our service related contracts. We do not have any material multiple element arrangements and thus SAB 104 does not impact our financial statements nor is adoption of SAB 104 considered a change in accounting principle.

     On January 12, 2004 and May 19, 2004, the FASB issued FASB Staff Position (“FSP”) No. 106-1 and 106-2, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003” (“FSP 106-1” and “FSP 106-2”). The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Medicare Act”) was signed into law in December

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

2003 and establishes a prescription drug benefit, as well as a federal subsidy to sponsors of retiree health care benefit plans that provide a prescription drug benefit that is at least actuarially equivalent to Medicare’s prescription drug coverage. FSP 106-2 provides guidance on the accounting for the effects of the Medicare Act for employers that sponsor postretirement health care plans, which provide prescription drug benefits. FSP 106-2 requires those employers to provide certain disclosures regarding the effect of the federal subsidy provided by the Medicare Act. Under FSP 106-1, we elected to defer accounting for the effects of the Medicare Act. This deferral remains in effect until the appropriate effective date of FSP 106-2. For entities that elected deferral and for which the impact is significant, FSP 106-2 is effective for the first interim or annual period beginning after June 15, 2004. Entities for which FSP 106-2 does not have a significant impact are permitted to delay recognition of the effects of the Medicare Act until the next regularly scheduled measurement date following the issuance of FSP 106-2. We are currently evaluating the impact of the Medicare Act on our post-retirement plans. Should adoption of FSP 106-2 have a significant impact on our financial statements, we may be required to recognize the effects of the Medicare Act either during the third or fourth quarter of our fiscal year 2004.

     On April 9, 2004, FASB issued FASB Staff Position No. FAS 129-1, “Disclosure of Information about Capital Structure, Relating to Contingently Convertible Securities” (“FSP 129-1”). FSP 129-1 clarifies that the disclosure requirements of Statement of Financial Accounting Standards No. 129, “Disclosure of Information about Capital Structure” apply to all contingently convertible securities and to their potentially dilutive effects on earnings per share (“EPS”), including those for which the criteria for conversion have not been satisfied, and thus are not included in the computation of diluted EPS. The guidance in FSP 129-1 is effective immediately and applies to all existing and newly created securities. Our required FSP 129-1 disclosures are included above under “Income Per Common Share.” Our 6 ½% debentures are convertible to shares of our common stock; however, the number of shares which they could be converted to is not material to our income per share computation.

Reclassifications

     Certain reclassifications have been made to our 2003 financial statements to conform them to the 2004 presentation. These reclassifications have no effect on the consolidated net income, equity or cash flows previously reported.

NOTE 2. PROPERTY AND EQUIPMENT

     Property and equipment consists of the following: