URS Q3 Profit Down 17%, Lowers Full-year Outlook

(RTTNews) - Engineering and technical services provider URS Corp. (URS) on Tuesday reported a 17 percent decline in profit for the third quarter on lower revenues at the company's federal services as well as oil and gas segments. Revenues for the quarter missed analysts' expectations.

Looking ahead, URS lowered its financial outlook for fiscal 2013, citing the effects of the federal government shutdown, the uncertainty surrounding the federal budget, and sequestration, as well as the impacts of weather-related delays in the company's Canadian oil and gas fields. Shares of the company declined more than 6 percent in extended trades.

Martin Koffel, Chairman and Chief Executive Officer of URS, said, "URS continued to benefit from our strategy of diversification across private and public market sectors. Financial results for the quarter were solid despite the effects of the government shutdown, the uncertainty surrounding the federal budget, and sequestration."

San Francisco, California-based URS' infrastructure & environment segment recorded third-quarter revenues that edged up slightly to $922.3 million, while federal services revenues declined 21 percent to $538.9 million. Energy & construction revenues declined 1 percent to $775.5 million, and oil & gas segment revenues decreased 10 percent to $532.6 million.

URS noted that its industrial sector performed well as increased manufacturing activity in North America generated higher demand for facilities expansion as well as operations and maintenance services. Infrastructure revenues also increased, reflecting the continuing recovery of the market.

However, oil & gas sector revenues declined slightly due to the residual effects of weather-related delays, especially in the Canadian oil and gas fields.

The company's net income for the third quarter was $88.8 million or $1.20 per share, down from $106.7 million or $1.43 per share in the year-ago period.

The latest quarter's results included after-tax income of $1.6 million or $0.02 per share for the recognition of foreign currency gains caused by movements in the Canadian dollar versus the U.S. dollar related to intercompany loans.

The prior-year quarter's results included after-tax income of $10.3 million or $0.14 per share for the recognition of foreign currency gains, and and an after-tax adjustment of $0.6 million or $0.01 per share related to expenses for the acquisition of Flint Energy Services Ltd. on May 14, 2012.

Excluding these items, adjusted net income for the latest quarter was $87.2 million or $1.18 per share, compared to $95.8 million or $1.28 per share in the same period last year. On average, analysts polled by Thomson Reuters expected the company to report earnings of $1.20 per share for the quarter. Analysts' estimates typically exclude one-time items.

Revenues for the quarter declined 7 percent to $2.74 billion from $2.95 billion in the same period last year. Analysts had a consensus revenue estimate of $2.96 billion for the quarter.

URS ended the third quarter with a book of business of $23.3 billion, including backlog of $11.63 billion. This compared to book of business of $24.9 billion, including backlog of $13.28 billion, as on December 28, 2012.

Looking ahead to fiscal 2013, URS now expects earnings of $4.10 to $4.25 per share and revenues of $11.0 billion and $11.5 billion. Previously, the company forecast full-year earnings of $4.25 to $4.50 per share on revenues of $11.5 billion to $12.0 billion.

Analysts expect the company to report earnings of $4.27 per share for the year on revenues of $11.53 billion.

URS affirmed its intention to return at least $500 million to stockholders in the form of share repurchases and dividends by the end of fiscal 2015. The company expects to use its remaining cash flow to fund organic growth and to pay down its debt.

The company also reiterated that it does not expect to seek or undertake any financially significant acquisitions during this period. Specifically, it does not intend to use more than $200 million in total cash on acquisitions in 2014 and 2015.

URS said that its results for fiscal 2011 included a non-cash, after-tax charge of $732.2 million for the impairment of goodwill. However, the amount of the impairment charge recorded was overstated, while net income for the year was understated.

The company said it will correct the excess goodwill impairment charge overstated and estimates that correction of this error will increase reported net income for the fiscal year ended December 30, 2011 by about $423 million.

On November 1, 2013, URS declared a quarterly cash dividend of $0.21 per common share. The dividend will be paid on January 10, 2014 to stockholders of record as of December 14, 2013.

URS closed Tuesday's regular trading session at $53.50, down $1.16 or 2.12 percent on a volume of 895,100 shares. In after-hours, the stock further declined $3.50 or 6.54 percent to $50.00.