AMENDED MERGER PROPOSAL — YOUR VOTE IS VERY IMPORTANT

 

On or about October 1, 2007, URS Corporation and Washington Group International, Inc. mailed to each URS and Washington Group stockholder a joint proxy statement/prospectus, dated September 28, 2007, relating to special meetings of stockholders of URS and Washington Group, originally scheduled for October 30, 2007, to approve a merger that combines URS and Washington Group. On November 4, 2007, URS and Washington Group amended the terms of the merger agreement. This amendment has the effect of increasing the merger consideration to be paid to Washington Group stockholders for their shares and of providing Washington Group stockholders the additional flexibility to elect to receive the merger consideration either all in shares of URS common stock or all in cash (subject to proration as descried below). More specifically, under the amended merger agreement, each Washington Group stockholder will have the right to elect to receive, for each share of Washington Group common stock (other than those shares held by URS, any subsidiary of URS, Elk Merger Corporation or Bear Merger Sub and other than treasury shares and shares as to which a Washington Group stockholder has validly demanded and perfected appraisal rights under Delaware law) (a) 0.90 of a share of URS common stock and $43.80 in cash, without interest and without being subject to proration, (b) an amount in cash, without interest, equal to the sum of (i) $43.80 and (ii) 0.90 multiplied by the volume weighted average of the trading prices of URS common stock during the five trading days ending on the trading day that is one day prior to the date of the Washington Group special meeting at which stockholder approval is received, or (c) a number of shares equal to the sum of (i) 0.90 and (ii) $43.80 divided by the volume weighted average of the trading prices of URS common stock during the five trading days ending on the trading day that is one day prior to the date of the Washington Group special meeting at which stockholder approval is received. Note that all-cash and all-stock elections are subject to proration in order to preserve an overall per share mix of 0.90 of a share of URS common stock and $43.80 in cash for all of the outstanding shares of Washington Group common stock taken together.

 

Based on the outstanding shares and equity awards of Washington Group as of November 2, 2007, in the aggregate, Washington Group shares and equity awards will be converted into approximately $1.4 billion in cash and approximately 29.4 million shares of URS common stock. Under the modified terms of the merger, Washington Group stockholders are expected to own approximately 35% of the shares of URS common stock outstanding after the merger. URS stockholders will continue to own their existing shares of URS common stock, which generally should not be affected by the merger, other than by the dilution resulting from the issuance of URS common stock in the merger. URS common stock is traded on the New York Stock Exchange under the trading symbol “URS.” On November 2, 2007, URS common stock closed at $60.10 per share as reported on the New York Stock Exchange Composite Transaction Tape.

 

The merger cannot be completed unless URS stockholders approve the issuance of shares of URS common stock in the merger and Washington Group stockholders adopt the merger agreement, as amended, and approve the merger. The boards of directors of URS and Washington Group unanimously recommend that their respective stockholders vote “FOR” these proposals. Dennis R. Washington, founder and Chairman of the Washington Group board of directors, has executed a binding agreement to exercise all of his beneficially owned stock options for 3.224 million shares of Washington Group stock (or approximately 10% of outstanding Washington Group stock) and vote his shares in favor of the revised merger agreement if necessary to receive the required Washington Group stockholder approval. If it is necessary for Mr. Washington to exercise his options and vote his shares, a new record date and meeting date for the Washington Group special meeting will be set.

 

The proposals are being presented to the respective stockholders of each company at their special meetings. The dates, times and places of the meetings are as follows:

 

 

This supplement to the September 28, 2007 joint proxy statement/prospectus contains important information about URS, Washington Group, the amendment to the merger agreement, the modified terms of the proposed merger and the special meetings of the respective stockholders of URS and Washington Group. We encourage you to read carefully this supplement and the September 28 joint proxy statement/prospectus before voting, including the section entitled “Risk Factors” beginning on page 19 of the September 28 joint proxy statement/prospectus.

 

Your vote is very important. Whether or not you plan to attend your company’s special meeting, please take the time to vote by completing and mailing to us the enclosed proxy card or, if the option is available to you, by granting your proxy electronically over the Internet or by telephone.

 

Sincerely,

 

 

Neither the Securities and Exchange Commission nor any state securities regulator has approved or disapproved of the transactions described in this supplement or the securities to be issued pursuant to the merger or determined if the information contained in this supplement is accurate or adequate. Any representation to the contrary is a criminal offense.

 

This supplement is dated November 5, 2007, and is being mailed to stockholders of URS and Washington Group on or about November 6, 2007.

URS CORPORATION

600 Montgomery Street, 26^th Floor

San Francisco, California 94111-2728

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON NOVEMBER 15, 2007

 

 

To the Stockholders of URS Corporation:

 

We will hold a special meeting of stockholders of URS at the offices of Cooley Godward Kronish LLP, located at 1114 Avenue of the Americas, New York, NY 10036-7798, on November 15, 2007, at 9:00 a.m., local time, for the following purposes:

1. To consider and vote upon a proposal to approve the issuance of shares of URS common stock pursuant to the Agreement and Plan of Merger, dated as of May 27, 2007, as amended, by and among URS, Elk Merger Corporation, a wholly owned subsidiary of URS, Bear Merger Sub, Inc., a wholly owned subsidiary of URS, and Washington Group International, Inc., pursuant to which Elk Merger Corporation will merge with and into Washington Group. Each Washington Group stockholder would have the right to elect to receive, for each outstanding share of Washington Group common stock, other than those shares held by URS, any subsidiary of URS, Elk Merger Corporation or Bear Merger Sub and other than treasury shares and shares as to which a Washington Group stockholder has validly demanded and perfected appraisal rights under Delaware law, (a) 0.90 of a share of URS common stock and $43.80 in cash, without interest, (b) an amount in cash, without interest, equal to the sum of (i) $43.80 and (ii) 0.90 multiplied by the volume weighted average of the trading prices of URS common stock during the five trading days ending on the trading day that is one day prior to the date of the Washington Group special meeting at which stockholder approval is received, or (c) a number of shares equal to the sum of (i) 0.90 and (ii) $43.80 divided by the volume weighted average of the trading prices of URS common stock during the five trading days ending on the trading day that is one day prior to the date of the Washington Group special meeting at which stockholder approval is received; provided, however, that all-cash and all-stock elections are subject to proration in order to preserve an overall per share mix of 0.90 of a share of URS common stock and $43.80 in cash for all of the outstanding shares of Washington Group common stock taken together.

2. To consider and vote upon a proposal to authorize the proxyholders to vote to adjourn the special meeting, in their sole discretion, to solicit additional proxies if there are not sufficient votes in favor of the foregoing.

3. To transact any other business as may properly come before the special meeting or any adjournments or postponements of the special meeting.

These items of business are described in the attached supplement and in the joint proxy statement/prospectus dated September 28, 2007. Only URS stockholders of record at the close of business on September 21, 2007, the record date for the special meeting, are entitled to notice of and to vote at the special meeting and any adjournments of the special meeting.

The URS board of directors unanimously recommends that you vote “FOR” the proposal to approve the issuance of shares of URS common stock pursuant to the merger agreement, as amended, and “FOR” the proposal to authorize the adjournment the URS special meeting.

A list of stockholders eligible to vote at the URS special meeting will be available for inspection at the special meeting, and at the executive offices of URS during regular business hours for a period of no less than ten days prior to the special meeting.

Your vote is very important. It is important that your shares be represented and voted whether or not you plan to attend the special meeting in person. Instructions regarding the different methods for voting your shares are provided under the section entitled “Questions and Answers About the Special Meetings of Stockholders of URS and Washington Group” on page ii.

 

By Order of the Board of Directors,

 

Martin M. Koffel
Chairman of the Board of Directors and
Chief Executive Officer
URS Corporation

 

November 5, 2007

WASHINGTON GROUP INTERNATIONAL, INC.

720 Park Boulevard, P.O. Box 73
Boise, Idaho 83729

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 15, 2007

 

 

 

 

To the Stockholders of Washington Group International, Inc.:

 

We will hold a special meeting of stockholders of Washington Group at Washington Group’s offices located at 720 Park Boulevard, Boise, Idaho 83712, on November 15, 2007, at 7:00 a.m. local time, for the following purposes:

 

 

These items of business are described in the attached supplement and in the joint proxy statement/prospectus dated September 28, 2007. Only Washington Group stockholders of record at the close of business on September 21, 2007, the record date for the special meeting, are entitled to notice of and to vote at the special meeting and any adjournments of the special meeting.

 

The Washington Group board of directors has approved the merger agreement, as amended, and the transactions contemplated by the merger agreement, as amended, including the merger, and unanimously recommends that you vote “FOR” the proposal to adopt the merger agreement, as amended, and approve the merger and “FOR” the proposal to authorize the adjournment of the Washington Group special meeting.

 

A list of stockholders eligible to vote at the Washington Group special meeting will be available for inspection at the special meeting, and at the executive offices of Washington Group during regular business hours for a period of no less than ten days prior to the special meeting.

Your vote is very important. It is important that your shares be represented and voted whether or not you plan to attend the special meeting in person. Instructions regarding the different methods for voting your shares are provided under the section entitled “Questions and Answers About the Special Meetings of Stockholders of URS and Washington Group” on page ii.

 

By Order of the Board of Directors,

 

Stephen G. Hanks
President and Chief Executive Officer
Washington Group International, Inc.

 

November 5, 2007

 

TABLE OF CONTENTS

 

 

QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETINGS OF STOCKHOLDERS
OF URS AND WASHINGTON GROUP

 

The following are some questions that you, as a stockholder of URS or Washington Group, may have regarding the respective special meetings of stockholders of URS and Washington Group and brief answers to those questions. They may not include all of the information that is important to you. URS and Washington Group recommend that you read carefully this entire supplement, including the annexes, the September 28 joint proxy statement/prospectus and the other documents we refer to in this supplement and in the September 28 joint proxy statement/prospectus.

 

About the Merger

 

 

 

Unless you make an all-cash or an all-stock election, but not the mixed election, you will receive the mixed merger consideration in the merger. In addition, the all-cash and all-stock elections are subject to proration in order to preserve an overall per share mix of 0.90 of a share of URS common stock and $43.80 in cash for all of the outstanding shares of Washington Group common stock taken together.

 

 

 

About the Special Stockholders Meeting

 

 

 

 

 

If your shares are held in a “street name” account, you must contact your broker, bank or other nominee to change your vote.

 

About the Merger Consideration Election Available to Washington Group Stockholders

 

 

Election forms must be RECEIVED by the exchange agent by the election deadline, which is 5:00 p.m., eastern time, on the date that is three business days after the closing date of the merger.

 

If you hold Washington Group shares in “street name,” you should receive instructions from the broker, bank or nominee that is holding your shares advising you of the procedures for making your election. If these instructions are not received, you should contact the broker, bank or nominee holding your shares. Election forms must be returned to the broker, bank or nominee in time for it to respond to the election deadline.

If you do not properly submit an election form, then, promptly after the closing date of the merger, the exchange agent will mail you a letter of transmittal and instructions for surrendering your stock certificates for use in exchanging your stock certificates for the mixed merger consideration.

 

 

 

 

Washington Group stockholders will not be entitled to revoke or change their election following the election deadline. As a result, if you make an election, you will be unable to revoke your election or sell your shares of Washington Group common stock during the interval between the election deadline and the date of completion of the merger.

 

 

How to Get More Information

 

 

if you are a URS stockholder:

 

 

if you are a Washington Group stockholder:

 

	•	a combination of 0.90 of a share of URS common stock and $43.80 in cash;
	•	an amount in cash, without interest, equal to the sum of (i) $43.80 and (ii) 0.90 multiplied by the Volume Weighted Average Price; or
	•	a number of shares equal to the sum of (i) 0.90 and (ii) $43.80 divided by the Volume Weighted Average Price.

				Value of Cash		Value of Stock
Volume Weighted				Portion of Merger		Portion of Merger
Average Price				Consideration		Consideration		Blended Value
	$56.3165			$43.80		$50.68			$94.48
	$61.3165			$43.80		$55.18			$98.98
	$66.3165			$43.80		$59.68			$103.68

	•	a combination of (i) an amount in cash, without interest, equal to the option consideration multiplied by 0.4474 and (ii) a number of shares of URS common stock equal to the option consideration less the cash payable pursuant to the preceding clause (i), divided by $60.10;
	•	an amount in cash, without interest, equal to the option consideration; or
	•	a number of shares of URS common stock equal to the option consideration divided by $60.10;

		Six Months				Year Ended
		Ended June 29,				December 29,
		2007				2006
		(In thousands, except
		per share amounts)
Statements of Operations Data:
Revenues		$	4,183,154			$	7,629,723
Operating income			182,902				305,004
Net income			64,937				117,896
Net income per share of common stock:
Basic		$	0.80			$	1.47
Diluted		$	0.79			$	1.46

		June 29, 2007
		(In thousands)
Balance Sheet Data:
Cash and cash equivalents		$	63,511
Total assets			6,713,952
Long-term debt			1,388,916
Stockholders’ equity			3,360,383

														Pro Forma
		URS				Washington Group				Pro Forma				Washington Group
		Historical				Historical				Combined				Equivalents(1)
Year Ended December 29, 2006
Net income per share:
Basic			$    2.23				$        2.83				$    1.47				$        1.32
Diluted			$    2.19				$        2.64				$    1.46				$        1.31
Six Months Ended June 29, 2007
Net income per share:
Basic			$    1.31				$        0.83				$    0.80				$        0.72
Diluted			$    1.28				$        0.77				$    0.79				$        0.71
As of June 29, 2007:
Book value per share			$   30.13				$        28.93				$   40.77				$        36.69

(1)		Washington Group equivalent per share amounts are calculated by multiplying pro forma per share amounts by the exchange ratio of 0.90, the portion of the acquisition consideration to be paid in shares of URS common stock.

		URS Common Stock
		High				Low				Dividends Paid
Fiscal Year 2005
First quarter		$	31.53			$	27.21				—
Second quarter		$	37.73			$	28.15				—
Third quarter		$	40.39			$	36.45				—
Fourth quarter		$	43.29			$	37.06				—
Fiscal Year 2006
First quarter		$	44.75			$	38.26				—
Second quarter		$	48.87			$	37.78				—
Third quarter		$	41.99			$	36.79				—
Fourth quarter		$	44.25			$	38.14				—
Fiscal Year 2007
First quarter		$	45.98			$	40.83				—
Second quarter		$	50.50			$	42.15				—
Third quarter		$	58.25			$	46.06				—
Fourth quarter (through November 2, 2007)		$	62.37			$	58.09				—

		Washington Group Common Stock
		High				Low				Dividends Paid
Fiscal Year 2005
First quarter		$	46.70			$	38.21				—
Second quarter		$	52.14			$	41.23				—
Third quarter		$	54.16			$	49.28				—
Fourth quarter		$	53.99			$	48.04				—
Fiscal Year 2006
First quarter		$	59.35			$	53.13				—
Second quarter		$	61.21			$	48.02				—
Third quarter		$	59.80			$	50.93				—
Fourth quarter		$	61.79			$	54.47				—
Fiscal Year 2007
First quarter		$	66.42			$	56.40				—
Second quarter		$	85.04			$	64.74				—
Third quarter		$	88.50			$	77.75				—
Fourth quarter (through November 2, 2007)		$	97.35			$	90.50				—

	•	the last reported sale price of a share of URS common stock, as reported on the NYSE; and
	•	the last reported sale price of a share of Washington Group common stock, as reported on the NYSE;

		URS				Washington Group
Date		Common Stock				Common Stock
May 25, 2007		$	46.89			$	69.97
November 2, 2007		$	60.10			$	96.15

 

THE MODIFIED TERMS OF THE MERGER

 

The following is a description of the material changes to the terms of the merger resulting from the amendment of the merger agreement, including a description of the background of the amendment of the merger agreement and related matters. While we believe that the following description covers the material changes to the material terms of the merger, the description may not contain all of the information that is important to you. We encourage you to read carefully this entire supplement, including the amendment to the merger agreement attached to this supplement as Annex A, for a more complete understanding of the changes to the terms of the merger.

 

General

 

On November 4, 2007, the board of directors of URS and Washington Group each unanimously voted to approve an amendment to the terms of the merger agreement. This amendment has the effect of increasing the merger consideration to be paid to Washington Group stockholders for their shares and of providing Washington Group stockholders the additional flexibility to elect to receive the merger consideration either all in shares of URS common stock or all in cash (subject to proration as described below). More specifically, under the amended merger agreement, each Washington Group stockholder would have the right to elect to receive, for each share of Washington Group common stock held, other than those shares held by URS, any subsidiary of URS, Elk Merger Corporation or Bear Merger Sub and other than treasury shares and shares as to which a Washington Group stockholder has validly demanded and perfected appraisal rights under Delaware law, (a) 0.90 of a share of URS common stock and $43.80 in cash, without interest (and without being subject to proration), (b) an amount in cash, without interest, equal to the sum of (i) $43.80 and (ii) 0.90 multiplied by the Volume Weighted Average Price, or (c) a number of shares equal to the sum of (i) 0.90 and (ii) $43.80 divided by the Volume Weighted Average Price, upon the terms and subject to adjustments as provided in the amended merger agreement and as further described below under “The Amendment to the Merger Agreement — Increase in Merger Consideration; Stock and Cash Elections” on page S-31 and “The Amendment to the Merger Agreement — Proration of the Stock and Cash Elections” on page S-31.

 

Background of the Amendment to the Merger Agreement

 

On or about October 1, 2007, URS and Washington Group mailed a definitive joint proxy statement/prospectus to their respective stockholders. The definitive joint proxy statement/prospectus describes the background of the proposed transaction up to and including September 28, 2007. The discussion below supplements that description.

 

During October and November, Washington Group and its proxy solicitor MacKenzie Partners, Inc. (“MacKenzie”) communicated with Washington Group’s stockholders, and URS and its proxy solicitor D.F. King & Co., Inc. (“D.F. King”) communicated with URS’ stockholders, regarding the proposed transaction and monitored the votes cast by stockholders who had submitted their proxies. The Washington Group and the URS boards of directors held periodic meetings throughout this time to discuss with their advisors their respective proxy solicitation efforts.

 

On October 1, 2007, a Washington Group stockholder filed a putative class action in Delaware against Washington Group, URS, and each of Washington Group’s directors seeking to enjoin the Washington Group special meeting of stockholders. On October 18, 2007, Washington Group, URS, and each of Washington Group’s directors and the plaintiff entered into a memorandum of understanding settling the litigation. As part of the settlement, Washington Group agreed to provide additional disclosures, which were made in a Form 8-K that was filed on October 18, 2007.

 

On the morning of October 15, 2007, Washington Group issued a press release announcing its preliminary earnings for the third quarter of 2007.

 

In mid-October, three prominent independent proxy advisory firms — Glass Lewis, Proxy Governance and Egan-Jones — recommended that Washington Group stockholders vote in favor of the proposed transaction. In issuing their recommendations, the firms cited the merger’s strategic logic, the value to be provided to Washington Group stockholders, and the process that the Washington Group board of directors conducted before entering into the merger agreement. One other prominent independent proxy advisory firm — Institutional Shareholder

Services — recommended a vote against the transaction. Permission to cite the recommendations of Glass Lewis, Proxy Governance, Egan-Jones, and Institutional Shareholder Services was neither sought nor obtained.

 

On the morning of October 25, 2007, URS issued a press release announcing its preliminary earnings for the third quarter of 2007.

 

On October 28, 2007, Washington Group’s board of directors convened by telephone to discuss Washington Group’s proxy solicitation efforts with its financial and legal advisors and its proxy solicitor, MacKenzie.

 

On October 28, 2007, URS’ board of directors also held a telephonic meeting with representatives of Morgan Stanley, Latham & Watkins LLP (“Latham & Watkins”) and Cooley Godward Kronish LLP (“Cooley Godward”). At that meeting, the URS board was informed about the status of the votes for the special meetings of stockholders and feedback from stockholders during the proxy solicitation process. The board also discussed the performance of the two businesses since the date of the merger agreement.

 

On the morning of October 29, 2007, Washington Group issued a press release announcing its earnings for the third quarter of 2007, and updated its outlook for the remainder of the year.

 

On October 29, 2007, Washington Group’s board of directors convened by telephone to further discuss Washington Group’s proxy solicitation efforts with its financial and legal advisors and its proxy solicitor, MacKenzie. A representative from MacKenzie explained that, based on preliminary vote tallies, it appeared unlikely that, as of such date, the proposed merger transaction would be approved on October 30, 2007, the previously scheduled date for Washington Group’s special meeting of stockholders. After discussion, Mr. William H. Mallender, Washington Group’s lead independent director, and Mr. Stephen G. Hanks, Washington Group’s President and Chief Executive Officer, to whom the authority to set the meeting date had been delegated, agreed (with the concurrence of the other directors) to postpone the special meeting of stockholders until November 9, 2007 to permit the solicitation of additional votes. The next morning, Washington Group and URS issued separate press releases announcing the postponement of their respective special meetings of stockholders to November 9, 2007.

 

Between October 29 and November 2, 2007, the financial advisors, legal advisors and proxy solicitors for URS and Washington Group had numerous discussions regarding the status of the vote by the Washington Group stockholders.

 

On the evening of November 2, 2007, a representative of Morgan Stanley contacted a representative of Goldman Sachs and indicated that URS was willing to increase the stock component of the merger consideration to 0.90 of a share of URS common stock for each share of Washington Group common stock, subject to the following three conditions: (i) that the merger agreement be amended to provide Washington Group stockholders the opportunity to elect to receive cash, stock or mixed consideration (subject to proration), (ii) that Mr. Dennis Washington agree to enter into an option exercise and transaction support agreement with URS and Washington Group to exercise all of his options and to vote in favor of the proposed transaction if necessary to obtain the required Washington Group stockholder approval and (iii) that no additional changes to the merger agreement be made.

 

On November 3, 2007, Washington Group’s board of directors held a telephonic meeting to discuss URS’ proposal. Representatives from Wachtell, Lipton, Rosen & Katz (“Wachtell Lipton”), MacKenzie and Goldman Sachs were also in attendance. At the meeting, a representative of Wachtell Lipton summarized the terms of the proposal received by URS and discussed various issues related to the proposal, including the terms of the option exercise and transaction support agreement. The board then received a presentation from Goldman Sachs on the financial aspects of the proposal. After consideration and deliberation in which Wachtell Lipton, MacKenzie and Goldman Sachs participated, the board reached a consensus that Goldman Sachs should contact Morgan Stanley and request that URS increase its proposed merger consideration. The board further instructed Wachtell Lipton to negotiate with Latham & Watkins a proposed amendment to the merger agreement and, together with Mr. Washington’s counsel, a proposed option exercise and transaction support agreement.

 

Following the Washington Group board meeting, a representative of Goldman Sachs called a representative of Morgan Stanley to convey the Washington Group board’s request that URS increase the proposed merger

consideration. The representative of Morgan Stanley informed the representative of Goldman Sachs that URS was unwilling to increase the proposed merger consideration, and that the proposal previously provided was URS’ best and final offer.

 

Following the conversation between Goldman Sachs and Morgan Stanley, Mr. Hanks called Mr. Koffel to further discuss the Washington Group board’s request that URS increase URS’ proposed merger consideration. Mr. Koffel reiterated that URS was unwilling to increase the proposed merger consideration and that the proposal was URS’ best and final offer.

 

During November 3 and November 4, 2007, representatives of Latham & Watkins and Wachtell Lipton negotiated the terms of the amendment to the merger agreement and, together with Mr. Washington’s counsel, negotiated the terms of the option exercise and transaction support agreement.

 

On the afternoon of November 4, 2007, URS’ board of directors convened in person (with six directors participating by telephone) to consider the proposed amendment to the merger agreement. Portions of the meeting were also attended by representatives of Latham & Watkins, Morgan Stanley, URS’ management, Cooley Godward and D.F. King. Latham & Watkins summarized the terms of the proposed amendment and discussed various issues related to the proposed transaction. Representatives of Morgan Stanley presented an updated financial analysis of the proposed transaction and delivered Morgan Stanley’s oral opinion, subsequently confirmed in writing, to the effect that, as of such date and based on and subject to the factors and assumptions explained in their presentation and set forth in their written opinion, the overall per share mix of $43.80 in cash and 0.90 of a share of URS common stock to be issued in exchange for each share of Washington Group common stock pursuant to the amended merger agreement was fair from a financial point of view to URS. After consideration and deliberation in which Latham & Watkins, Cooley Godward, Morgan Stanley and D.F. King participated, and taking into consideration the factors described under “— Recommendation of the URS Board of Directors and Its Reasons for Adopting the Amendment to the Merger Agreement” on page S-10, the URS board of directors voted unanimously to declare it advisable and in the best interests of URS and its stockholders for URS to enter into the proposed amendment, approved and adopted the proposed amendment to the merger agreement and determined to recommend to URS’ stockholders that they vote to approve the issuance of shares of URS common stock in the proposed merger under the terms of the amended merger agreement.

 

During the evening of November 4, 2007, Washington Group’s board of directors held another telephonic meeting. Representatives from Wachtell Lipton, MacKenzie and Goldman Sachs were also in attendance. Wachtell Lipton summarized the terms of the proposed amendment and addressed various other issues related to the proposed transaction. Representatives of Goldman Sachs then presented an updated financial analysis of the proposed transaction and delivered Goldman Sachs’ oral opinion, subsequently confirmed in writing, to the effect that, as of the date of their written opinion and based on and subject to the factors and assumptions explained in their presentation and set forth in their written opinion, the merger consideration to be received by holders of the outstanding shares of Washington Group common stock pursuant to the amended merger agreement, taken in the aggregate, was fair from a financial point of view to such holders. The full text of the written opinion of Goldman Sachs, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with such opinion, is set forth as Annex D hereto. After consideration and deliberation in which Wachtell Lipton, MacKenzie and Goldman Sachs participated, and taking into consideration the factors described under “ — Recommendation of the Washington Group Board of Directors and Its Reasons for the Merger” on page S-11, the Washington Group board of directors voted unanimously to declare it advisable and in the best interests of Washington Group and its stockholders for Washington Group to enter into the proposed amendment, to approve and adopt the proposed amendment to the merger agreement, to recommend to Washington Group’s stockholders that they vote “FOR” the proposal to adopt the merger agreement, as amended, and approve the merger and “FOR” the proposal to authorize the adjournment of the Washington Group special meeting.

 

Following the conclusion of the Washington Group board meeting, URS and Washington Group each executed the definitive amendment to the merger agreement and Mr. Washington, URS and Washington Group each executed the definitive option exercise and transaction support agreement.

On November 5, 2007, URS and Washington Group issued a joint press release announcing the terms of the amended merger agreement and the option exercise and transaction support agreement and the further postponement of the stockholder meetings to November 15, 2007. On November 5, Dennis Washington and Washington Group filed notifications under the HSR Act in connection with the exercise of his options.

 

Recommendation of the URS Board of Directors and Its Reasons for Adopting the Amendment to the Merger Agreement

 

The URS board of directors, at a special meeting, considered whether to approve the amendment to the merger agreement and to recommend that the URS stockholders vote to approve the issuance of shares of URS common stock in the proposed merger under the terms of the amended merger agreement. The URS board of directors unanimously:

 

 

In reaching its decision to reaffirm its approval of the merger under the modified terms of the amended merger agreement, the URS board of directors re-examined and reconsidered the matters described in “The Merger — Recommendation of the URS Board of Directors and Its Reasons for the Merger” beginning on page 65 of the September 28 joint proxy statement/prospectus. In addition, the URS board of directors consulted with senior members of URS’ management team, representatives of Morgan Stanley and URS’ other advisors regarding the current business operations, financial condition and future prospects of Washington Group. The URS board of directors also consulted with Morgan Stanley as to the fairness, from a financial point of view, to URS of the merger consideration to be paid to by URS under the amended merger agreement. The URS board of directors also consulted with representatives of Latham & Watkins and Cooley Godward regarding the terms of the amended merger agreement and the option exercise and transaction support agreement. In reaching its decision to reaffirm its approval of the merger under the amended merger agreement, the URS board of directors considered a variety of factors, a number of which are summarized below:

 

 

 

 

In addition, the URS board of directors identified and considered a variety of potentially negative factors in its deliberations concerning the merger, including:

 

 

The URS board of directors concluded that these factors could be managed or mitigated by URS or were unlikely to have a material impact on the merger or URS, and that, overall, the potentially negative factors associated with the merger were outweighed by the potential benefits of the merger.

 

It was not practical to, and thus the URS board of directors did not, quantify, rank or otherwise assign relative weights to the wide variety of factors it considered in evaluating the merger and the amended merger agreement, nor did the board determine that any one factor was of particular importance in deciding that the amended merger agreement and associated transactions were in the best interests of URS and its stockholders. This discussion of information and material factors considered by the URS board of directors is intended to be a summary rather than an exhaustive list. In considering these factors, individual members of the board may have given different weight to different factors. The board conducted an overall analysis of the factors described above, and considered as a whole the factors to support its decision in favor of the merger and the merger agreement. The decision of each member of the URS board of directors was based upon his or her own judgment, in light of all of the information presented, regarding the overall effect of the amended merger agreement and associated transactions on URS’ stockholders as compared to any potential alternative courses of action. After considering this information, all members of the URS board of directors unanimously approved the amendment to the merger agreement and the transactions contemplated by the amended merger agreement, including the merger, and recommended that URS’ stockholders approve the issuance of shares of URS common stock pursuant to the amended merger agreement.

 

Recommendation of the Washington Group Board of Directors and Its Reasons for Adopting the Amendment to the Merger Agreement

 

The Washington Group board of directors, at a special meeting, approved the amendment to the merger agreement. The Washington Group board of directors unanimously:

 

 

 

In reaching its decision to reaffirm its approval of the merger under the modified terms of the amended merger agreement, the Washington Group board of directors re-examined and reconsidered the matters described in “The Merger — Recommendation of the Washington Group board of directors and Its Reasons for the Merger” beginning on page 68 of the September 28 joint proxy statement/prospectus. In addition, the Washington Group board of directors consulted with senior members of Washington Group’s management team, representatives of Goldman Sachs and Washington Group’s other advisors regarding the current business operations, financial condition and future prospects of Washington Group. The Washington Group board of directors also consulted with Goldman Sachs as to the fairness, from a financial point of view, of the merger consideration, taken in the aggregate, to Washington Group’s stockholders pursuant to the amended merger agreement. The Washington Group board of directors also consulted with representatives of Wachtell Lipton regarding the terms of the amended merger agreement. In reaching its decision to reaffirm its approval of the merger under the amended merger agreement, the Washington Group board of directors considered a variety of factors, a number of which are summarized below:

 

 

 

 

 

 

In addition, the Washington Group board of directors identified and considered a variety of potentially negative factors in its deliberations concerning the amendment to the merger agreement, including:

 

 

The Washington Group board of directors concluded that these factors could be managed or mitigated or were unlikely to have a material impact on the merger or the combined company, and that, overall, the potentially negative factors associated with the merger were outweighed by the potential benefits of the merger.

 

It was not practical to, and thus the Washington Group board of directors did not, quantify, rank or otherwise assign relative weights to the wide variety of factors it considered in evaluating the merger and the amended merger agreement, nor did the board determine that any one factor was of particular importance in deciding that the amended merger agreement and associated transactions were in the best interests of Washington Group and its stockholders. This discussion of information and material factors considered by the Washington Group board of directors is intended to be a summary rather than an exhaustive list. In considering these factors, individual members of the board may have given different weight to different factors. The board conducted an overall analysis of the factors described above, and considered as a whole the factors to support its decision in favor of the merger and the amended merger agreement. The decision of each member of the Washington Group board of directors was based upon his or her own judgment, in light of all of the information presented, regarding the overall effect of the amended merger agreement and associated transactions on Washington Group’s stockholders as compared to any potential alternative courses of action. After considering this information, all members of the Washington Group board of directors unanimously approved the amendment to the merger agreement and the transactions contemplated by the amended merger agreement, including the merger, and recommended that Washington Group’s stockholders vote “FOR” the proposal to adopt the merger agreement, as amended, and approve the merger and “FOR” the proposal to authorize the adjournment of the Washington Group special meeting.

 

Opinion of URS’ Financial Advisor

 

Morgan Stanley & Co. Incorporated

 

On March 23, 2007, the URS board of directors retained Morgan Stanley to act as its exclusive financial advisor and provide a financial opinion letter in connection with a possible acquisition of or business combination with Washington Group. The URS board of directors selected Morgan Stanley to provide financial advice and

assistance in connection with the merger based on Morgan Stanley’s qualifications, expertise, reputation, and experience in transactions similar to the merger. At a URS board of directors meeting held on November 4, 2007, Morgan Stanley delivered its oral opinion, subsequently confirmed in writing that, as of that date and based upon and subject to the various assumptions, qualifications and limitations set forth in the opinion, the merger consideration to be paid by URS pursuant to the merger agreement, as amended, was fair from a financial point of view to URS.

 

The full text of Morgan Stanley’s opinion, dated November 4, 2007, which sets forth, among other things, the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of the review undertaken by Morgan Stanley in rendering its opinion, is included as Annex C to this supplement. The summary of Morgan Stanley’s fairness opinion set forth in this supplement is qualified in its entirety by reference to the full text of the opinion. URS stockholders should read this opinion carefully and in its entirety. Morgan Stanley’s opinion is directed to the board and only addresses the fairness from a financial point of view of the merger consideration to URS. Morgan Stanley’s opinion did not address any other aspect of the merger. Morgan Stanley expressed no opinion or recommendation as to how the URS stockholders or Washington Group stockholders should vote at the stockholder meetings to be held in connection with the merger.

 

In connection with rendering its opinion, Morgan Stanley, among other things:

 

 

 

In arriving at its opinion, Morgan Stanley assumed and relied upon, without independent verification, the accuracy and completeness of the information supplied or otherwise made available to it by Washington Group and URS for the purposes of its opinion. With respect to the financial forecasts prepared by the management of URS, including information relating to certain strategic, financial and operational benefits anticipated from the merger, Morgan Stanley assumed that they had been reasonably prepared on bases reflecting the best currently available estimates and judgments of the future financial performance of Washington Group and URS.

 

In addition, Morgan Stanley assumed that the merger will be consummated in accordance with the terms set forth in the merger agreement, as amended, without any material waiver, amendment or delay of any terms or conditions, including, among other things, that the second merger will be consummated promptly following the merger, that the merger and the second merger will be treated as a single integrated transaction and that the merger will be treated as a tax-free “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code. Morgan Stanley did not make any independent valuation or appraisal of the assets or liabilities of URS or Washington Group nor was it furnished with any such appraisals. In addition, Morgan Stanley assumed that URS will obtain financing in connection with the merger on terms consistent with the Commitment Letters and as discussed with the senior management of URS. Morgan Stanley assumed that, in connection with the receipt of all the necessary governmental, regulatory or other approvals and consents required for the merger, no delays, limitations, conditions or restrictions will be imposed that would have a material adverse effect on the contemplated benefits expected to be derived in the merger. Morgan Stanley relied upon, without independent verification, the assessment by the management of URS of: (i) the strategic, financial and other benefits expected to result from the merger; (ii) the timing and risks associated with the integration of Washington Group and URS; (iii) the strategic rationale for the merger and (iv) the validity of, and risks associated with, Washington Group’s and URS’ existing and future services, technologies, intellectual property, products and business models. Morgan Stanley is not a legal, tax or regulatory advisor and has relied upon, without independent verification, the assessment of URS and its legal, tax or regulatory advisors with respect to legal, tax and regulatory matters. Morgan Stanley’s opinion was necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to it as of, November 4, 2007. Events occurring after the date of the opinion may affect the opinion and the assumptions used in preparing it, and Morgan Stanley did not assume any obligations to update, revise, or reaffirm this opinion.

 

The opinion was for the information of the URS board of directors in connection with the merger. In addition, Morgan Stanley’s opinion did not in any manner address the prices at which the URS common stock will trade following consummation of the merger and expressed no opinion or recommendation as to how the URS stockholders and the Washington Group stockholders should vote at the stockholder meetings to be held in connection with the merger.

 

Valuation Methods and Analyses

 

The following is a summary of the material financial analyses performed by Morgan Stanley in connection with its oral opinion and the preparation of its written opinion letter dated November 4, 2007. The various analyses summarized below were based on closing prices for the common stock of URS and Washington Group as of November 2, 2007, the last full trading day preceding the day of the special meeting of the URS board of directors to consider and approve, adopt and authorize the amendment to the merger agreement. As of that date, the value of the merger consideration was $97.89 per share of Washington Group common stock. Although each analysis was provided to the URS board of directors, in connection with arriving at its opinion, Morgan Stanley considered all of its analyses as a whole and did not attribute any particular weight to any analysis described below. Some of these summaries of financial analyses include information presented in tabular format. In order to fully understand the financial analyses used by Morgan Stanley, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses used by Morgan Stanley.

Merger Consideration

 

Morgan Stanley reviewed the merger consideration and calculated its value based on URS common stock prices of: $46.89, the URS closing price on May 25, 2007, which was the last trading day prior to the initial announcement of the transaction, and $60.10, the URS closing price on November 2, 2007, which was the last trading day prior to the special meeting of the URS board of directors on November 4 to consider and approve, adopt and authorize the merger agreement amendment. Based on a URS common stock price of $46.89, the value of the merger consideration is $86.00, which represents a 23%, 23%, and 26% premium to the Washington Group closing prices one day, one week and four weeks prior to the initial announcement of the transaction. Based on a URS common stock price of $60.10, the value of the merger consideration is $97.89, which represents a 40%, 40%, and 43% premium to the Washington Group closing prices one day, one week and four weeks prior to the initial announcement of the transaction

 

Washington Group

 

Trading History

 

Morgan Stanley reviewed the historical trading prices for Washington Group common stock for the four-month period from January 26, 2007 (the last trading day prior to the delivery of the initial offer) to May 25, 2007 (one trading day prior to the announcement of the merger agreement) and for the twelve-month period prior to the announcement of the merger agreement. Morgan Stanley observed that the twelve-month range of trading prices was $47-$74 and the range of trading prices from January 26, 2007 to May 25, 2007 was $56-$74. Morgan Stanley noted that as of May 25, 2007, the closing price of Washington Group common stock was $69.97 per share, and that, as of November 2, 2007, the closing price of Washington Group common stock was $96.15 per share. Morgan Stanley also noted that, based on closing prices for the common stock of URS and Washington Group as of November 2, 2007, the implied transaction value per share of Washington Group common stock was $97.89.

 

Comparable Company Analysis

 

Using publicly available information, Morgan Stanley reviewed the market values and trading multiples of Washington Group and the following seven publicly held companies in the engineering and construction industry that Morgan Stanley deemed comparable to Washington Group:

 

Engineering and Construction Comparables

 

Fluor Corporation

McDermott International, Inc.

Foster Wheeler Ltd.

Jacobs Engineering Group Inc.

The Shaw Group Inc.

Chicago Bridge & Iron Company N.V.

AECOM Technology Corporation

EMCOR Group, Inc.

Granite Construction Incorporated

Tetra Tech, Inc.

 

All multiples were based on closing stock prices on November 2, 2007. Estimated financial data for the selected companies were based on public filings and publicly available equity research analysts’ estimates, as aggregated by the Institutional Brokers’ Estimate System, which is referred to as the IBES. Estimated financial data for Washington Group were based on public filings, publicly announced earnings guidance, URS management’s estimates, D.A. Davidson research estimates (10/30/07) and publicly available equity research analysts’ estimates as aggregated by IBES.

 

For each of the comparable companies, Morgan Stanley calculated the following:

 

 

 

A summary of the reference range of market trading multiples is set forth below:

 

 

Morgan Stanley calculated an implied valuation range by applying multiple ranges to the applicable operating statistics based on publicly available equity research analyst estimates, and other publicly available data. Based upon and subject to the foregoing, Morgan Stanley calculated implied valuation ranges for the Washington Group common stock of $95 to $110 per share based on Aggregate Value/2008E EBITDA and $84 to $102 based on Price/2008E Earnings. Morgan Stanley noted that, based on closing prices for the common stock of URS and Washington Group as of November 2, 2007, the implied transaction value per share of Washington Group common stock was $97.89.

 

Although the foregoing companies were compared to Washington Group for purposes of this analysis, Morgan Stanley noted that no company used in the comparable company analysis is identical to Washington Group because of differences between the business mix, markets served, operations, and other characteristics of Washington Group and the comparable companies. In evaluating the comparable companies, Morgan Stanley relied on publicly available equity research analyst estimates, which estimates are based in part on judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions, and other matters, many of which are beyond the control of Washington Group, such as the impact of competition on the business of Washington Group, as well as on the industry generally, industry growth, and the absence of any adverse material change in the financial condition and prospects of Washington Group or the industry or in the markets generally. Mathematical analysis, such as determining the mean or median, is not in itself a meaningful method of using comparable company data.

 

Discounted Equity Value Analysis

 

Morgan Stanley performed an analysis of the implied present value per share of the Washington Group common stock on a standalone basis based on Washington Group’s projected future equity value using calendar year 2009 estimates based on D.A. Davidson research estimates (10/30/07).

 

To calculate the discounted equity value, Morgan Stanley multiplied the applicable earnings estimate by the current calendar year multiple range used in the comparable company analysis described above, and discounted the implied nominal equity values of Washington Group to a present value at an illustrative discount rate of 10.3%, which reflected Washington Group’s estimated average cost of equity capital. Based on these forecasts and assumptions, Morgan Stanley derived an implied valuation range for the Washington Group common stock of $87 to $105. Morgan Stanley noted that based on closing prices for the common stock of URS and Washington Group as of November 2, 2007, the implied transaction value per share of Washington Group common stock was $97.89.

 

Discounted Cash Flow Analysis

 

Morgan Stanley performed a discounted cash flow analysis of the projected unlevered free cash flows of Washington Group for calendar years 2008 through 2011, based on forecasts prepared by the management of URS. Morgan Stanley calculated implied equity values per share of Washington Group common stock by using estimated discount rates ranging from 9.0% to 10.0% and multiples of estimated 2012 EBITDA ranging from 10.0x to 13.0x. Based on selected ranges of multiples and discount rates, this analysis indicated a range of equity values per share of $84 to $104. Morgan Stanley noted that, based on closing prices for the common stock of URS and Washington

Group as of November 2, 2007, the implied transaction value per share of Washington Group common stock was $97.89.

 

Morgan Stanley performed a discounted cash flow analysis of the projected unlevered free cash flows for calendar years 2008 through 2011, based on an extrapolation from the operating forecasts for 2007 through 2009 in D.A. Davidson’s research (10/30/07). Morgan Stanley calculated implied equity values per share of Washington Group common stock by using estimated discount rates ranging from 9.0% to 10.0% and multiples of estimated 2012 EBITDA ranging from 10.0x to 13.0x. Based on selected ranges of multiples and discount rates, this analysis indicated a range of equity values per share of $91 to $113. Morgan Stanley noted that, based on closing prices for the common stock of URS and Washington Group as of November 2, 2007, the implied transaction value per share of Washington Group common stock was $97.89.

 

The valuation stated above is not necessarily indicative of Washington Group’s respective actual, present or future value or results, which may be more or less favorable than suggested by this type of analysis.

 

URS

 

Trading History

 

Morgan Stanley reviewed the historical trading prices for URS common stock for the twelve-month period prior to the announcement of the merger agreement. Morgan Stanley observed that the twelve-month range of trading prices was $36 — $49. Morgan Stanley noted that, as of May 25, 2007, the closing price of URS common stock was $46.89 per share and that as of November 2, 2007, the closing price of URS common stock was $60.10 per share.

 

Comparable Company Analysis

 

Using publicly available information, Morgan Stanley reviewed the market values and trading multiples of URS and the following twelve publicly held companies in the engineering and construction and government services industries that Morgan Stanley deemed comparable to URS:

 

 

All multiples were based on closing stock prices on November 2, 2007. Estimated financial data for the selected companies were based on public filings and publicly available equity research analysts’ estimates as aggregated by IBES. Estimated financial data for URS were based on public filings, publicly announced earnings guidance, URS management’s estimates, and publicly available equity research analysts’ estimates as aggregated by IBES.

 

For each of the comparable companies, Morgan Stanley calculated the following, each as previously defined:

 

 

A summary of the reference range of market trading multiples is set forth below:

 

 

 

Morgan Stanley calculated an implied valuation range by applying multiple ranges to the applicable operating statistics based on publicly available equity research analyst estimates, and other publicly available data. Based upon and subject to the foregoing, Morgan Stanley calculated implied valuation ranges for the URS common stock of $56 to $74 per share based on Aggregate Value/2008E EBITDA and $55 to $67 based on Price/2008E Earnings.

 

Although the foregoing companies were compared to URS for purposes of this analysis, Morgan Stanley noted that no company used in the comparable company analysis is identical to URS because of differences between the business mix, markets served, operations, and other characteristics of URS and the comparable companies. In evaluating the comparable companies, Morgan Stanley relied on publicly available equity research analyst estimates, which estimates are based in part on judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions, and other matters, many of which are beyond the control of URS, such as the impact of competition on the business of URS, as well as on the industry generally, industry growth, and the absence of any adverse material change in the financial condition and prospects of URS or the industry or in the markets generally. Mathematical analysis, such as determining the mean or median, is not in itself a meaningful method of using comparable company data.

 

Securities Research Analysts’ Price Targets

 

Morgan Stanley reviewed and analyzed future public market trading price targets for URS common stock prepared and published by equity research analysts. These targets reflect each analyst’s estimate of the future public market trading price of URS common stock. Morgan Stanley discounted the price targets at URS’ estimated average cost of equity capital of 10.6%. The range of discounted analyst price targets for URS was $51 to $68.

 

The public market trading price targets published by the securities research analysts do not necessarily reflect current market trading prices for URS common stock and these estimates are subject to uncertainties, including the future financial performance of URS and future financial market conditions.

 

Discounted Equity Value Analysis

 

Morgan Stanley performed an analysis of the implied present value per share of the URS common stock on a standalone basis based on URS’ projected future equity value using calendar year 2009 estimates based on URS management forecasts.

 

To calculate the discounted equity value, Morgan Stanley multiplied the applicable earnings estimate by the current calendar year multiple range used in the comparable company analysis described above, and discounted the implied nominal equity values of URS to a present value at an illustrative discount rate of 10.6%, which reflected URS’ estimated average cost of equity capital. Based on the aforementioned forecasts and assumptions, Morgan Stanley derived an implied valuation range for the URS common stock of $56 to $68.

 

Discounted Cash Flow Analysis

 

Morgan Stanley performed a discounted cash flow analysis of the projected unlevered free cash flows of URS for calendar years 2008 through 2011, based on the forecasts prepared by the management of URS. Morgan Stanley calculated implied equity values per share of URS common stock by using estimated discount rates ranging from 9.0% to 10.0% and multiples of estimated 2012 EBITDA ranging from 8.0x to 10.0x. Based on selected ranges of multiples and discount rates, this analysis indicated a range of equity values per share of $55 to $68.

 

The valuation stated above is not necessarily indicative of URS’ respective actual, present or future value or results, which may be more or less favorable than suggested by this type of analysis.

Pro Forma Merger Analysis

 

Morgan Stanley analyzed the potential pro forma impact of the transaction on URS’ earnings per share and cash earnings per share for calendar years 2008 through and 2011. Morgan Stanley calculated such pro forma earnings per share and cash earnings per share on the basis of the transaction exchange ratio provided for by the merger agreement, as amended, URS’ estimates of earnings per share for URS and synergies resulting from the merger estimated by URS management. Morgan Stanley calculated that estimated pro forma GAAP earnings per share would be below estimated GAAP earnings per share by 4% in 2008 and exceed estimated GAAP earnings per share by 3%, 8%, and 9% in 2009, 2010, and 2011, respectively, and exceed estimated cash earnings per share by 4%, 10%, 14%, and 15% in 2008, 2009, 2010 and 2011, respectively, not including the impact of revenue synergies expected to be achieved through the combination.

 

General

 

The summary set forth above does not purport to be a complete description of all the analyses performed by Morgan Stanley. The preparation of a fairness opinion is a complex process that involves various determinations as to the most appropriate and relevant methods of financial analyses and the application of these methods to the particular circumstances and is not necessarily susceptible to a partial analysis or summary description. In arriving at its opinion, Morgan Stanley considered the results of all of the analyses as a whole and did not attribute any particular weight to any particular analysis or factor considered by it. The summary provided and the analyses described above must be considered as a whole, and selecting any portion of Morgan Stanley’s analyses, without considering all analyses, would create an incomplete view of the process underlying Morgan Stanley’s opinion. In addition, Morgan Stanley may have given various factors more or less weight than other factors and may have deemed various assumptions more or less probable than other assumptions, so that the ranges of valuations resulting from any particular analysis described above should not be taken to be Morgan Stanley’s view of the actual value of Washington Group or URS.

 

In performing its analysis, Morgan Stanley made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of Washington Group or URS. Any estimates contained in the analyses performed by Morgan Stanley are not necessarily indicative of actual values, which may be significantly more or less favorable than suggested by such estimates. The analyses performed were prepared solely as part of Morgan Stanley’s analysis of the fairness from a financial point of view to URS of the merger consideration to be paid by URS pursuant to the merger agreement, as amended, and were conducted in connection with the delivery by Morgan Stanley of its opinion, dated November 4, 2007, to the URS board of directors. These analyses do not purport to be appraisals or to reflect the prices at which shares of common shares of URS or Washington Group might naturally trade.

 

The merger consideration pursuant to the merger agreement, as amended, was determined through arm’s-length negotiations between URS and Washington Group and was approved by the URS board of directors. Morgan Stanley provided advice to URS during these negotiations. Morgan Stanley did not, however, recommend any specific merger consideration to URS or the URS board of directors or that any specific merger consideration constituted the only appropriate consideration for the transaction. Morgan Stanley’s opinion to the URS board of directors was one of many factors taken into consideration by the URS board of directors in deciding to approve the transaction. Morgan Stanley did not advise the URS board of directors that any specific consideration constituted the only appropriate consideration for the transaction.

 

Consequently, the analyses as described above should not be viewed as determinative of the opinion of the URS board of directors with respect to the merger consideration or of whether the URS board of directors would have been willing to agree to different consideration. The foregoing summary describes the material analyses performed by Morgan Stanley but does not purport to be a complete description of the analyses performed by Morgan Stanley.

 

Morgan Stanley is an internationally recognized investment banking and advisory firm. Morgan Stanley, as part of its investment banking business, is continuously engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and valuations for corporate, estate and other purposes. In the ordinary course of its business, Morgan Stanley and its affiliates may from time to time trade in the securities or the indebtedness of URS and its affiliates for its own account, the accounts of investment funds and other clients under

the management of Morgan Stanley and for the accounts of its customers and accordingly, may at any time hold a long or short position in such securities or indebtedness for any such account.

 

Under the terms of its engagement letter, Morgan Stanley provided URS financial advisory services and a financial opinion in connection with the merger. Pursuant to the terms of this engagement letter, URS has agreed to pay Morgan Stanley and its affiliates advisory and financing fees currently estimated at $30 million, of which $2 million was paid upon the announcement of the transaction, and the remainder of which is contingent upon closing of the transaction. URS has also entered into a financing commitment letter with an affiliate of Morgan Stanley to provide 50% of a senior secured debt financing in connection with the transaction, for which the affiliate will receive the financing portion of the aforementioned fees upon the closing of the transaction. URS has also agreed to reimburse Morgan Stanley for its fees and expenses incurred in performing its services. In addition, URS has agreed to indemnify Morgan Stanley and any of its affiliates, their respective directors, officers, agents and employees and each person, if any, controlling Morgan Stanley or any of its affiliates against certain liabilities and expenses, including certain liabilities under the federal securities laws relating to or arising out of its engagement and any related transactions. In the past, Morgan Stanley and its affiliates have provided financial advisory and financing services for URS and have received fees for the rendering of these services. Other than the fees disclosed above, since August 15, 2005, Morgan Stanley has not received any investment banking fees from URS or its affiliates.

 

Opinion of Washington Group’s Financial Advisor

 

Goldman, Sachs & Co.

 

At the meeting of Washington Group’s board of directors on November 4, 2007, Goldman Sachs delivered its oral opinion, which opinion was later confirmed in writing, that, as of November 4, 2007 and based upon and subject to the factors and assumptions set forth in such opinion, the mixed merger consideration, all-cash consideration and all-stock consideration to be received by holders of Washington Group common stock, taken in the aggregate, pursuant to the merger agreement, as amended, is fair from a financial point of view to such holders.

 

The full text of the written opinion of Goldman Sachs, dated November 4, 2007, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex D. Goldman Sachs provided its opinion for the information and assistance of Washington Group’s board of directors in connection with its consideration of the transaction. The Goldman Sachs opinion is not a recommendation as to how any holder of Washington Group common stock should vote with respect to the transaction.

 

In connection with rendering the opinion described above and performing its related financial analyses, Goldman Sachs reviewed, among other things:

 

 

Goldman Sachs also held discussions with members of the senior managements of Washington Group and URS regarding their assessment of the strategic rationale for, and the potential benefits of, the transaction and the past and current business operations, financial condition, and future prospects of their respective companies. In

addition, Goldman Sachs reviewed the reported price and trading activity for shares of Washington Group common stock and URS common stock, compared certain financial and stock market information for Washington Group and URS with similar financial and stock market information for certain other companies the securities of which are publicly traded, and reviewed the financial terms of certain recent business combinations in the engineering and construction industry specifically and in other industries generally and performed such other studies and analyses, and considered such other factors, as it considered appropriate.

 

Goldman Sachs relied upon the accuracy and completeness of all of the financial, legal, accounting, tax and other information discussed with or reviewed by it and assumed such accuracy and completeness for purposes of rendering the opinion described above. In that regard, Goldman Sachs assumed that the internal financial analyses and forecasts, including certain cost savings and operating synergies, were reasonably prepared on a basis reflecting the best then available estimates and judgments of the managements of Washington Group and URS, as the case may be. In addition, Goldman Sachs did not make an independent evaluation or appraisal of the assets and liabilities (including any contingent, derivative or off-balance-sheet assets and liabilities) of Washington Group and URS or any of their respective subsidiaries, nor was any evaluation or appraisal of the assets or liabilities of Washington Group and URS or any of their respective subsidiaries furnished to Goldman Sachs. Goldman Sachs’ opinion does not address any legal, regulatory, tax or accounting matters, and did not address the underlying business decision of Washington Group to engage in the transaction or the relative merits of the transaction as compared to any alternative business strategies or transactions that might be available to Washington Group. In addition, Goldman Sachs’ opinion does not express any opinion as to the prices at which the common stock of URS will trade at any time. The Goldman Sachs opinion was approved by a fairness committee of Goldman Sachs.

 

The following is a summary of the material financial analyses delivered by Goldman Sachs to the board of directors of Washington Group in connection with rendering the opinion described above. The following summary, however, does not purport to be a complete description of the financial analyses performed by Goldman Sachs, nor does the order of analyses described represent relative importance or weight given to those analyses by Goldman Sachs. Some of the summaries of the financial analyses include information presented in tabular format. The tables must be read together with the full text of each summary and are alone not a complete description of Goldman Sachs’ financial analyses. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before November 4, 2007, and is not necessarily indicative of current market conditions.

 

Implied Premiums and Multiples.  Goldman Sachs performed certain analyses, based on historical information, SEC filings, estimates supplied by Institutional Brokers’ Estimate System or IBES, a data service that compiles estimates issued by securities analysts, and forecasts provided by management of Washington Group, (i) at the undisturbed closing market price as of May 25, 2007 of $69.97 per share of Washington Group common stock, (ii) at the implied transaction price under the unamended merger agreement, as of May 25, 2007, of $80.00 per share, consisting of $43.80 in cash and 0.772 shares of URS common stock for each share of Washington Group common stock, (iii) at the implied transaction price under the unamended merger agreement, as of November 2, 2007, of $90.20 per share, consisting of $43.80 in cash and 0.772 shares of URS common stock for each share of Washington Group common stock, and (iv) at the implied transaction price of the amended merger agreement, as of November 2, 2007, of $97.89 per share, consisting of $43.80 in cash and 0.900 shares of URS common stock for each share of Washington Group common stock. Using these share prices, Goldman Sachs calculated an implied equity value for Washington Group. Goldman Sachs added to this implied equity value the net debt to be incurred as part of the transaction to derive an implied enterprise value of Washington Group. Based on these calculations, Goldman Sachs calculated the multiples described below:

 

 

The following table presents the results of Goldman Sachs’ analysis (dollar amounts in millions, except for purchase price per share):

 

 

Comparison of Selected Companies.  Goldman Sachs reviewed and compared certain financial information for Washington Group and URS to corresponding financial information, ratios and public market multiples for the following publicly traded corporations in the engineering and construction industry:

 

 

Although none of the selected companies is directly comparable to Washington Group or URS, the companies included were chosen because they are publicly traded companies with operations that for purposes of analysis may be considered similar to certain operations of Washington Group and URS.

 

Goldman Sachs also calculated and compared various financial multiples and ratios based on financial data as of November 2, 2007, information it obtained from SEC filings and IBES estimates. The multiples and ratios of Washington Group were calculated using Washington Group’s closing price on November 2, 2007 and the multiples

and ratios of URS were calculated using the URS closing price on November 2, 2007. The multiples and ratios of Washington Group, URS and each of the selected companies were based on company reports, SEC filings and IBES estimates as of November 2, 2007. With respect to the selected companies, Goldman Sachs calculated, on a fully diluted basis:

 

 

The results of these analyses are summarized as follows:

 

 

Illustrative Analysis of Potential Future Stock Price.  Goldman Sachs performed an illustrative analysis of the standalone present value of potential future trading prices of Washington Group common stock by applying selected ranges of multiples to estimates of EPS of Washington Group based on management forecasts of Washington Group provided by the management of Washington Group and estimates provided by IBES. In performing this analysis, Goldman Sachs applied multiples ranging from 18x to 25x, based upon a review of current and historical multiples of price to EPS estimates provided by IBES of certain publicly traded corporations in the engineering and construction industry, including those with and without significant oil and gas exposure, to Washington Group’s estimated EPS for fiscal years 2008 and 2009. Based on the implied future share prices derived from the range of multiples noted above as well as the EPS estimates for Washington Group, Goldman Sachs calculated the present values of the resulting implied per share equity values using a discount rate of 9.5%. The results of this analysis are summarized below:

 

 

Discounted Cash Flow Analysis.  Goldman Sachs performed an illustrative discounted cash flow analysis on Washington Group using Washington Group’s management forecasts to determine indications of implied total equity values per share of Washington Group common stock based on the present value as of December 31, 2007 of the standalone, unlevered, after-tax estimated future free cash flows of Washington Group and net operating losses for United States federal income tax purposes, which are referred to as NOLs, available to Washington Group (including indications of value ranging from $4.61 to $4.75 per share for tax savings from goodwill deductibility and NOL carryforwards that were incorporated into the range of implied present values of the total equity value per share of Washington Group common stock). In performing the discounted cash flow analysis, Goldman Sachs calculated illustrative terminal values based upon free cash flow perpetuity growth rates ranging from 2.5% to 4.0%, and discounted all free cash flows to December 31, 2007 using discount rates ranging from 9.0% to 10.0%, reflecting estimates of the weighted average cost of capital for Washington Group. This analysis resulted in a range of implied present values of the total equity value per share of Washington Group common stock of $69.59 to $92.61. The illustrative terminal value calculations indicated a range of implied last twelve months EBITDA multiples of 6.9x to 10.4x and a range of implied forward price/earnings multiples of 14.8x to 21.7x. The calculations of implied multiples did not include the value related to tax savings from goodwill deductibility and NOL carryforwards. The mean of Washington Group’s last twelve months EBITDA multiples from July 2002 through May 2007 was 6.0x and the mean of industry composite last twelve months EBITDA multiples over a 10-year period ending May 2007 was 8.7x. Using the same range of perpetuity growth rate assumptions, assuming a discount rate of 9.5%, and applying annual percentage increases and decreases to Washington Group’s management’s estimates of earnings before interest and taxes (EBIT) from (5.0)% to 15.0%, Goldman Sachs also

performed an illustrative sensitivity analysis and calculated the implied present values of the total equity value of Washington Group common stock of $70.49 to $96.46. Goldman Sachs noted that the 2008 IBES earnings per share estimate for Washington Group as of November 2, 2007 was approximately 8% above the 2008 IBES earnings per share estimate for Washinton Group as of May 25, 2007.

 

Premium Analysis at Implied Offer Price.  Goldman Sachs calculated the implied premium for Washington Group common stock represented by the implied consideration of $97.89 per share, as of November 2, 2007, of Washington Group common stock, consisting of $43.80 cash and 0.900 shares of URS common stock for each share of Washington Group common stock, and based on the volume-weighted average closing prices of Washington Group common stock on May 25, 2007 and the closing price of URS common stock on November 2, 2007 and during the one-month, three-month, six-month, twelve-month and three-year periods ended May 25, 2007.

 

The results of Goldman Sachs’ calculations are reflected below:

 

 

Precedent Premiums Analysis.  Goldman Sachs also analyzed the premiums for selected precedent transactions involving U.S. targets acquired for between $1 billion and $5 billion in transaction value since May 2005 in which the consideration included a cash component. Goldman Sachs analyzed such premiums as of one day, one week and four weeks prior to the announcement of the transaction. The results of Goldman Sachs’ analysis are reflected below:

 

 

Selected Precedent Transactions Analysis.  Goldman Sachs analyzed certain information relating to the following selected transactions in the engineering and construction industry since May 1999:

 

 

 

For each of the selected transactions, Goldman Sachs calculated and compared, based on company reports, public filings, press releases, Wall Street research estimates and other public sources, the transaction value as a multiple of EBITDA for the latest twelve months and compared it against the multiples implied for the proposed transaction.

 

The following table presents the results of this analysis:

 

 

Illustrative Pro Forma Merger Analysis.  Goldman Sachs analyzed the potential pro forma impact of the transaction on URS’ GAAP earnings per share and cash earnings per share for the calendar years 2008 through 2009 based on (i) URS management forecasts provided by the management of URS, Washington Group management forecasts provided by the management of Washington Group and (ii) IBES estimates for Washington Group and URS financial forecasts, and in each case, using estimates of synergies resulting from the merger provided by the managements of URS and Washington Group and based on the closing prices per share of URS and Washington Group common stock as of November 2, 2007, the 0.900 of a share of URS common stock and $43.80 in cash to be received for each share of Washington Group common stock pursuant to the merger agreement, as amended, the number of shares and options to purchase shares of URS common stock outstanding as of November 2, 2007 and the number of shares and options to purchase shares of Washington Group common stock outstanding as of November 2, 2007.

 

Based on the projections and estimates provided by the management of URS and Washington Group, this analysis indicated that the transaction would be 10% dilutive to URS’ GAAP EPS and 2% accretive to URS’ cash EPS in 2008 and 3% dilutive to URS’ GAAP EPS and 8% accretive to URS’ cash EPS in 2009. Based on the IBES estimates for Washington Group and URS financial forecasts, this analysis indicated that the transaction would be 4% dilutive to URS’ GAAP EPS and 8.0% accretive to URS’ cash EPS in 2008 and 4% accretive to URS’ GAAP EPS and 14% accretive to URS’ cash EPS in 2009.

 

Illustrative Pro Forma Future Stock Price.  Goldman Sachs compared the illustrative potential standalone stock price analysis to the present value of the implied consideration to Washington Group stockholders based on potential future trading prices of URS common stock, incorporating the potential pro forma impact of the

transaction, by applying selected ranges of multiples to pro forma estimates of EPS of URS based on (i) management forecasts of Washington Group provided by the management of Washington Group and management forecasts of URS provided by the management of URS and (ii) IBES estimates for Washington Group and URS financial forecasts. Goldman Sachs applied multiples ranging from 18x to 23x to the pro forma estimates of URS EPS for fiscal years 2008 and 2009. Based on the implied future share prices derived from the range of multiples noted above as well as the pro forma EPS estimates for URS, Goldman Sachs calculated the present values of the resulting implied per share consideration to Washington Group stockholders using discount rates of 9.0% and 9.5%. The results of this analysis are summarized below:

 

 

The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary set forth above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Goldman Sachs’ opinion. In arriving at its fairness determination, Goldman Sachs considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis considered by it. Rather, Goldman Sachs made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of its analyses. No company or transaction used in the above analyses as a comparison is directly comparable to Washington Group or URS or the contemplated transaction.

 

Goldman Sachs prepared these analyses for purposes of Goldman Sachs’ providing its opinion to Washington Group’s board of directors as to the fairness from a financial point of view of the mixed merger consideration, all-cash consideration and all-stock consideration to be received by holders of shares of Washington Group common stock, taken in the aggregate, pursuant to the merger agreement, as amended. These analyses do not purport to be appraisals nor do they necessarily reflect the prices at which businesses or securities actually may be sold. Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by these analyses. Because these analyses are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors, none of Washington Group, URS, Goldman Sachs or any other person assumes responsibility if future results are materially different from those forecast.

 

The consideration to be received by holders of shares of Washington Group common stock pursuant to the merger agreement, as amended, was determined through arms’-length negotiations between Washington Group and URS and was approved by Washington Group’s board of directors. Goldman Sachs provided advice to Washington Group during these negotiations. Goldman Sachs did not, however, recommend any specific exchange ratio or amount of consideration to Washington Group or its board of directors or that any specific exchange ratio or amount of consideration constituted the only appropriate exchange ratio or consideration for the transaction.

 

As described above, Goldman Sachs’ opinion to Washington Group’s board of directors was one of many factors taken into consideration by Washington Group’s board of directors in making its determination to approve the merger agreement, as amended. The foregoing summary describes the material analyses underlying Goldman Sachs’ fairness opinion, but does not purport to be a complete description of the analyses performed by Goldman Sachs in connection with the fairness opinion and is qualified in its entirety by reference to the written opinion of Goldman Sachs attached as Annex D.

 

Goldman Sachs and its affiliates, as part of their investment banking business, are continually engaged in performing financial analyses with respect to businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and other transactions as well as for estate, corporate and other purposes. Goldman Sachs has acted as financial advisor to Washington Group in connection with, and has participated in certain of the negotiations leading to, the transaction contemplated by the merger agreement, as amended. In addition, Goldman

Sachs has provided certain investment banking and other financial services to Washington Group from time to time. Goldman Sachs also may provide investment banking and other financial services to Washington Group and URS in the future. In connection with the above-described services, Goldman Sachs has received, and may receive in the future, compensation. Except for this transaction, the investment banking business of Goldman Sachs has not had any material engagements with Washington Group or any of its affiliates within the past two years for which it has received or will receive fees for its services. Goldman Sachs is not part of the syndicate providing financing to URS for the proposed Merger.

 

Goldman Sachs is a full service securities firm engaged, either directly or through its affiliates, in securities trading, investment management, financial planning and benefits counseling, risk management, hedging, financing and brokerage activities for both companies and individuals. In the ordinary course of these activities, Goldman Sachs and its affiliates may provide such service to Washington Group, URS and their respective affiliates, may actively trade the debt and equity securities of Washington Group and URS (or related derivative securities) for their own account and for the accounts of their customers and may at any time hold long and short positions of such securities.

 

The board of directors of Washington Group selected Goldman Sachs as its financial advisor because it is an internationally recognized investment banking firm that has substantial experience in transactions similar to the transaction. Pursuant to a letter agreement dated May 18, 2006, Washington Group engaged Goldman Sachs to act as its financial advisor in connection with the evaluation of potential strategic transactions. Pursuant to the terms of this engagement letter, Washington Group has agreed to pay Goldman Sachs a financial advisory fee of $1.0 million that has become due and payable (but will be credited against the payment of any transaction fee), and a transaction fee, calculated based on the aggregate consideration for the transaction, of approximately $22.4 million, $5.4 million of which became payable upon the public announcement of the transaction and the balance of which is contingent upon consummation of the transaction. If Goldman Sachs failed to deliver to Washington Group’s board of directors an opinion stating that the mixed merger consideration, all-cash consideration and all-stock consideration to be received by Washington Group’s stockholders in the merger was fair from a financial point of view to such stockholders, it is unlikely that the board would have approved the merger, preventing Goldman Sachs’s transaction fee from becoming payable. In addition, Washington Group has agreed to reimburse Goldman Sachs for its expenses, including attorneys’ fees and disbursements, and to indemnify Goldman Sachs and related persons against various liabilities, including certain liabilities under the federal securities laws.

 

Supplemental Material United States Federal Income Tax Consequences

 

This discussion of supplemental United States federal income tax consequences is a supplement to, and is intended to be read together with, the discussion of “Material United States Federal Income Tax Consequences” set forth in the September 28 joint proxy statement/prospectus. The qualifications and limitations set forth in such discussion are applicable to this discussion.

 

In the September 28 joint proxy statement/prospectus, the bullet-point list immediately following the sentence that reads, “Based on and subject to the foregoing, the material United States federal income tax consequences of the merger transaction to holders of Washington Group common stock will be as follows” is amended and restated as follows:

 

respect to such stock (other than any cash received instead of a fractional share of URS common stock). A holder’s gain realized will equal the difference between the fair market value of the URS common stock and cash received and such holder’s tax basis in the Washington Group common stock surrendered. Any such gain recognized will be a capital gain;

 

 

Appraisal Rights

 

Any stockholder who wishes to assert appraisal rights should not submit an election form, as doing so will be considered a withdrawal of any previously filed written demand for appraisal. For additional information regarding appraisal rights, see “The Merger — Appraisal Rights,” beginning on page 91 of the September 28 joint proxy statement/prospectus.

 

Interests of Washington Group’s Directors and Executive Officers in the Merger

 

In considering the recommendation of the Washington Group board of directors with respect to the merger agreement, Washington Group stockholders should be aware that some of the Washington Group directors and executive officers have interests in the merger and have arrangements that are different from, or in addition to, those of Washington Group stockholders generally. These interests and arrangements may create potential conflicts of interest. The Washington Group board of directors was aware of these potential conflicts of interest and considered them, among other matters, in reaching its decisions to approve and adopt the merger agreement and to recommend that Washington Group stockholders vote in favor of adopting the merger agreement and approving the merger.

 

Stock Options, Restricted Stock, Deferred Shares and Performance Units

 

Stock Options

 

Immediately following the completion of the merger, each outstanding option to acquire shares of Washington Group common stock, whether or not vested, that remains outstanding as of the closing of the merger will be cancelled and converted into the right to receive either cash or URS common stock or a combination of cash and URS common stock as described in “The Amendment to the Merger Agreement — Increase in Option Consideration” on page S-33 and “The Amendment to the Merger Agreement — Proration of the Stock and Cash Elections” beginning on page S-33. The cash and shares payable pursuant to the preceding sentence will be subject to any applicable withholding taxes. Immediately after the merger is completed, any cancelled option will no longer be exercisable by its former holder, but will only entitle the holder to the payment of the option consideration.

 

Deferred Shares

 

Upon the completion of the merger, each deferred share of Washington Group will be converted into the right to receive $97.89 in cash, payable on a deferred basis at the time that the underlying deferred shares would have

been settled under their terms as in effect immediately prior to the effective time of the merger, plus earnings thereon as described in the merger agreement.

 

Consideration to be Received by Directors and Executive Officers

 

The following table reflects the amounts described above and under “The Merger — Interests of Washington Group’s Directors and Executive Officers in the Merger” beginning on page 95 of the September 28 joint proxy statement/prospectus, with respect to each of Washington Group’s directors and executive officers as a result of the merger.

 

 

 

 

THE AMENDMENT TO THE MERGER AGREEMENT

 

The following summary describes the amendment to the merger agreement and the material effect of the amendment on the original terms of the merger. The amendment to the merger agreement is included as Annex A and is incorporated by reference into this supplement. This summary may not contain all of the information about the amendment to the merger agreement that is important to you. You are encouraged to read the amendment to the merger agreement carefully in its entirety.

 

The September 28 joint proxy statement/prospectus includes the original merger agreement as an annex and also includes a summary of the merger agreement, beginning on page 100 of the September 28 joint proxy statement/prospectus.

 

Increase in Merger Consideration; Stock and Cash Elections

 

The amendment to the merger agreement provides for an increase in the merger consideration to be received by Washington Group stockholders in the merger. In addition, under the merger agreement, as amended, each Washington Group stockholder will have the right to elect to receive, for each Washington Group share owned:

 

 

Washington Group stockholders may elect to receive one of these three categories of merger consideration. Washington Group stockholders that do not make either an all-cash or an all-stock election will automatically receive the mixed merger consideration, except with respect to shares as to which they have validly demanded and perfected appraisal rights under Delaware law. Election materials are included in this package.

 

Proration of the Stock and Cash Elections By Stockholders

 

URS will pay Washington Group stockholders an overall per-share mix of 0.90 of a share of URS common stock and $43.80 in cash for each outstanding share of Washington Group common stock taken together, providing for a blended merger consideration value of approximately $98.98 per share of Washington Group common stock based on the volume weighted average trading prices of URS common stock on November 2, 2007. The aggregate amount of URS common stock that will be issued in the merger to holders of Washington Group common stock will be equal to 0.90 multiplied by the total number of shares of Washington common stock outstanding immediately prior to completion of the merger, other than those shares held by URS or any subsidiary of URS, treasury shares and shares as to which a Washington Group stockholder has validly demanded and perfected appraisal rights under Delaware law. The aggregate amount of cash that will be paid to holders of Washington Group common stock in the merger will be equal to $43.80 multiplied by the total number of shares of Washington Group common stock outstanding immediately prior to completion of the merger, other than those shares held by URS or any subsidiary of URS, treasury shares and shares as to which a Washington Group stockholder has validly demanded and perfected appraisal rights under Delaware law, which we refer to as the aggregate cash amount. Based on the outstanding shares and equity awards of Washington Group as of November 2, 2007, in the aggregate, Washington Group shares and equity awards will be converted into approximately $1.4 billion in cash and approximately 29.4 million shares of URS common stock.

 

Although Washington Group stockholders who elect the mixed merger consideration will not be subject to proration, all-stock and all-cash elections are subject to proration to preserve an overall per share mix of 0.90 of a share of URS common stock and $43.80 in cash for all of the outstanding shares of Washington Group common stock taken together. Assuming, for this purpose only, a Volume Weighted Average Price of $61.3165, proration will occur for Washington Group stockholders making all-cash elections if the number of all-cash elections make up more than approximately 45% of the total number of all-cash and all-stock elections. However, in all cases,

Washington Group stockholders who make the all-cash election will receive at least as much cash as is received by stockholders electing the mixed merger consideration. Similarly, assuming, for this purpose only, a Volume Weighted Average Price of $61.3165, proration will occur for Washington Group stockholders making all-stock elections if the number of all-stock elections make up more than approximately 55% of the total number of all-cash and all-stock elections. However, in all cases, Washington Group stockholders who make the all-stock election will receive at least as much stock as is received by stockholders electing the mixed merger consideration.

 

We illustrate below how the proration mechanism will be used and calculated.

 

Proration If Too Much Cash Is Elected By Stockholders

 

Assuming a Volume Weighted Average Price of $61.3165, if the number of all-cash elections make up more than approximately 45% of the total number of all-cash and all-stock elections, Washington Group stockholders making an all-cash election will not receive the maximum per share cash amount for each share of Washington Group common stock, but instead will receive a mix of stock and cash calculated in the following manner:

 

Step 1:  Derive the available cash election amount: The available cash election amount is equal to the aggregate cash amount minus the amount of cash to be paid in respect of shares of Washington Group common stock as to which a valid election for the mixed merger consideration was made or is deemed to have been made.

 

Step 2:  Derive the all-cash elected amount: The all-cash elected amount is an amount equal to $98.98 multiplied by the number of shares of Washington Group common stock as to which a valid all-cash election was made. If the all-cash elected amount exceeds the available cash election amount, then steps 3 through 6 below will be completed. However, if the available cash election amount exceeds the all-cash elected amount, then steps 3 through 6 below will not be completed because Washington Group stockholders making an all-cash election will receive the maximum per share cash amount.

 

Step 3:  Derive the cash proration factor: The cash proration factor equals the available all-cash election amount divided by the all-cash elected amount.

 

Step 4:  Derive the prorated cash merger consideration: The prorated cash merger consideration is an amount in cash equal to $98.98 multiplied by the cash proration factor.

 

Step 5:  Derive the prorated stock merger consideration: The prorated stock merger consideration is an amount of shares of URS common stock equal to product of (i) the maximum per share stock amount multiplied by (ii) one (1) minus the cash proration factor.

 

Step 6:  Determine the stock and cash mix: Each share of Washington Group common stock as to which a valid all-cash election was made will be converted into the right to receive the prorated cash merger consideration and the prorated stock merger consideration.

 

Proration If Too Many Shares of URS Common Stock Are Elected By Stockholders

 

Assuming a Volume Weighted Average Price of $61.3165, if the number of all-stock elections make up more than approximately 55% of the total number of all-cash and all-stock elections, Washington Group stockholders making an all-stock election will not receive the maximum per share stock amount for each share of Washington Group common stock, but instead will receive a mix of stock and cash calculated in the following manner:

 

Step 1:  Derive the available cash election amount: The available cash election amount is equal to the aggregate cash amount minus the amount of cash to be paid in respect of shares of Washington Group common stock as to which a valid election for the mixed merger consideration was made or is deemed to have been made.

 

Step 2:  Derive the all-cash elected amount: The all-cash elected amount is an amount equal to $98.98 multiplied by the number of shares of Washington Group common stock as to which a valid all-cash election was made. If the available cash election amount exceeds the all-cash elected amount, then steps 3 through 6 below will be completed. However, if the all-cash elected amount exceeds the available cash election amount,

then steps 3 through 6 below will not be completed because Washington Group stockholders making an all-stock election will receive the maximum per share stock amount.

 

Step 3:  Derive the excess cash amount: The excess cash amount is the difference between the available cash election amount and the all-cash elected amount.

 

Step 4:  Derive the prorated cash merger consideration: The prorated cash merger consideration is an amount in cash equal to the excess cash amount divided by the number of shares of Washington Group common stock as to which a valid all-stock election was made.

 

Step 5:  Derive the stock proration factor: The stock proration factor is a fraction the numerator of which is equal to $98.98 minus the per share prorated cash consideration calculated in Step 4 and the denominator of which is $98.98.

 

Step 6:  Derive the prorated stock merger consideration: The prorated stock merger consideration is a number of shares of URS common stock equal to the product of the maximum per share stock amount multiplied by the stock proration factor.

 

Step 7:  Determine the stock and cash mix: Each share of Washington Group common stock as to which a valid all-stock election was made will be converted into the right to receive the prorated cash merger consideration and the prorated stock merger consideration.

 

Increase in Option Consideration; Stock and Cash Elections

 

The amendment to the merger agreement provides for an increase in the consideration to be received by Washington Group optionholders in the merger. Under the amended merger agreement, immediately following the completion of the merger, each outstanding option to acquire shares of Washington Group common stock, whether or not vested, that remains outstanding as of the effective time of the merger will be cancelled and converted into the right to receive the “option consideration,” which equals the product of (1) the number of shares of Washington Group common stock subject to such option and (2) the excess, if any, of $97.89 over the exercise price per share of Washington Group common stock subject to the option. Under the amended merger agreement, each Washington Group optionholder, other than Dennis Washington, will have the right to elect to receive the option consideration, for each cancelled Washington Group option owned, in:

 

 

Washington Group optionholders, other than Mr. Washington, may elect to receive one of these three categories of option consideration. Mr. Washington will not be entitled to make an election with respect to any cancelled options held by him after the effective time of the merger. Instead, under the merger agreement, as amended, any cancelled option held by Mr. Washington will be exchanged only for the combination of cash and stock, as if Mr. Washington had elected the per option mixed consideration. Washington Group optionholders that do not make either an all-cash or an all-stock election will automatically receive the mixed option consideration. Election materials are included in this package.

 

Proration of the Stock and Cash Elections By Optionholders

 

Of the aggregate option consideration that URS will pay to Washington Group optionholders, 44.74% will be paid in cash and the remaining 55.26% will be paid in shares of URS stock. In the aggregate, URS will issue approximately 3.0 million shares of URS common stock and pay approximately $144.5 million in cash to Washington Group optionholders in the merger.

Although Washington Group optionholders who elect the mixed option consideration will not be subject to proration, all-stock and all-cash elections are subject to proration to preserve an overall allocation of 44.74% of the aggregate option consideration being paid in cash and the remaining 55.26% of the aggregate option consideration being paid in shares of URS common stock. Assuming, for this purpose only, that shares of URS common stock are valued at $60.10 per share, proration will occur for Washington Group optionholders making all-cash elections if the aggregate option consideration represented by the number of all-cash elections makes up more than approximately 44.74% of the total number of all-cash and all-stock elections. However, in all cases, Washington Group optionholders who make the all-cash election will receive at least as much cash as is received by optionholders electing the mixed merger consideration. Similarly, assuming, for this purpose only, that shares of URS common stock are valued at $60.10 per share, proration will occur for Washington Group optionholders making all-stock elections if the aggregate option consideration represented by the number of all-stock elections makes up more than approximately 55.26% of the aggregate option consideration represented by the total number of all-cash and all-stock elections. However, in all cases, Washington Group optionholders who make the all-stock election will receive at least as much stock as is received by optionholders electing the mixed merger consideration.

 

We illustrate below how the option consideration proration mechanism will be used and calculated.

 

Proration If Too Much Cash Is Elected By Optionholders

 

Assuming that shares of URS common stock are valued at $60.10 per share, if the aggregate option consideration represented by the number of all-cash elections make up more than approximately 44.74% of the aggregate option consideration represented by the total number of all-cash and all-stock elections, Washington Group optionholders making an all-cash election will not receive an amount in cash, without interest, equal to the option consideration for each cancelled Washington Group option, but instead will receive a mix of stock and cash calculated in the following manner:

 

Step 1:  Derive the available cash option election amount: The available cash option election amount is equal to the aggregate amount of per option mixed cash consideration that would be payable to holders of mixed election options if all cancelled Washington Group options were converted into mixed election options, minus the aggregate amount of per option mixed cash consideration payable to all holders of mixed election options.

 

Step 2:  Derive the all-cash option elected amount: The all-cash option elected amount is equal to the aggregate amount of option consideration payable to all holders that made an all-cash election. If the all-cash option elected amount exceeds the available cash option election amount, then steps 3 through 6 below will be completed. However, if the available cash option election amount exceeds the all-cash option elected amount, then steps 3 through 6 below will not be completed because Washington Group optionholders making an all-cash election will receive an amount in cash, without interest, equal to the option consideration for each cancelled Washington Group option.

 

Step 3:  Derive the option cash proration factor: The option cash proration factor equals the available all-cash option election amount divided by the all-cash option elected amount.

 

Step 4:  Derive the prorated cash option consideration: The prorated cash option consideration is an amount in cash equal to the option consideration multiplied by the option cash proration factor.

 

Step 5:  Derive the prorated stock option consideration: The prorated stock option consideration is an amount of shares of URS common stock equal to product of (i) the option consideration divided by $60.10, multiplied by (ii) one (1) minus the option cash proration factor.

 

Step 6:  Determine the stock and cash mix: Each cancelled Washington Group option as to which a valid all-cash election was made will be converted into the right to receive the prorated cash option consideration and the prorated stock option consideration.

Proration If Too Many Shares of URS Common Stock Are Elected By Optionholders

 

Assuming that shares of URS common stock are valued at $60.10 per share, if the aggregate option consideration represented by the number of all-stock elections makes up more than approximately 55.26% of the aggregate option consideration represented by the total number of all-cash and all-stock elections, Washington Group optionholders making an all-stock election will not receive an amount of shares of URS common stock equal to the option consideration divided by $60.10 for each cancelled Washington Group option, but instead will receive a mix of stock and cash calculated in the following manner:

 

Step 1:  Derive the available cash option election amount: The available cash option election amount is equal to the aggregate amount of per option mixed cash consideration that would be payable to holders of mixed election options if all cancelled Washington Group options were converted into mixed election options, minus the aggregate amount of per option mixed cash consideration payable to all holders of mixed election options.

 

Step 2:  Derive the all-cash option elected amount: The all-cash option elected amount is equal to the aggregate amount of option consideration payable to all holders that made an all-cash election. If the available cash option election amount exceeds the all-cash option elected amount, then steps 3 through 6 below will be completed. However, if the all-cash option elected amount exceeds the available cash option election amount, then steps 3 through 6 below will not be completed because Washington Group optionholders making an all-stock election will receive a number of shares equal to the option consideration divided by $60.10 for each cancelled Washington Group option.

 

Step 3:  Derive the excess cash option amount: The excess cash option amount is the difference between the available cash option election amount and the all-cash option elected amount.

 

Step 4:  Derive the prorated cash option consideration: The prorated cash option consideration is an amount in cash equal to the product of the excess cash option amount multiplied by a fraction, the numerator of which shall be the option consideration and the denominator of which shall be the aggregate amount of option consideration payable to all holders of stock election options.

 

Step 5:  Derive the option proration factor: The option proration factor is a fraction, the numerator of which is the option consideration minus the prorated cash option consideration and the denominator of which is the option consideration.

 

Step 6:  Derive the prorated stock option consideration: The prorated stock option consideration is a number of shares of URS common stock equal to the product of (i) the option consideration divided by $60.10, multiplied by (ii) the option proration factor.

 

Step 7:  Determine the stock and cash mix: Each cancelled Washington Group option as to which a valid all-stock election was made will be converted into the right to receive the prorated cash option consideration and the prorated stock option consideration.

 

THE OPTION EXERCISE AND TRANSACTION SUPPORT AGREEMENT

 

The following summary describes the material provisions of the option exercise and transaction support agreement, which is referred to as the support agreement, entered into by URS, Washington Group and Dennis Washington on November 4, 2007, and which is included in this supplement as Annex B and is incorporated by reference into this supplement. The summary may not contain all of the information about the support agreement that is important to you. You are encouraged to read the support agreement in its entirety.

 

Pursuant to the support agreement, Mr. Washington agreed to exercise his options and vote in favor of the merger if necessary to achieve the required Washington Group stockholder approval. The exercise price will be paid entirely in cash, with the result that, following the exercise, he will have record and beneficial ownership of 3,224,100 shares of Washington Group common stock. Under the support agreement, he has also agreed not to, directly or indirectly, sell, transfer, exchange or otherwise dispose of any of his options or shares until the earlier of the consummation of the proposed transaction and the termination of the amended merger agreement. From and after the exercise of his options, he has agreed to vote, his shares in favor of the amended merger agreement and the approval of the transactions contemplated thereby and against any proposal for any recapitalization, merger, sale of assets or other business combination between Washington Group and any person or entity other than URS. He will be eligible to vote those shares on any proposals at the special meeting if the special meeting is adjourned or postponed again and a new record date is set for the meeting. Under certain circumstances, at the request of URS, Mr. Washington must irrevocably constitute and appoint URS as his attorney and proxy with full power to vote his shares of Washington Group common stock in favor of the merger. The Support Agreement will terminate on the earlier to occur of (a) the termination of the merger agreement in accordance with the terms thereof, (b) the date following the date of the Washington Group Stockholder meeting, including any adjournment or postponement thereof and (c) the effective time of the merger. Nothing in the Support Agreement may be construed to limit or affect any action or inaction by Mr. Washington in his capacity as a director or fiduciary of Washington Group. The independent directors of Washington Group authorized Washington Group to pay Mr. Washington’s filing fee under the HSR Act, and the legal fees of his counsel in preparing such filing without any gross-up for imputed income.

 

On November 5, 2007, Mr. Washington and Washington Group filed notifications under the HSR Act in connection with the exercise of his options.

 

UPDATE TO FINANCIAL FORECASTS

 

On November 2, 2007, representatives of URS management and representatives of Washington Group management, together with their respective financial and legal advisors, met to discuss the financial performance and outlook of URS and Washington Group. In the course of these discussions, the representatives of URS and Washington Group management provided the financial forecasts set forth below. These financial forecasts update or confirm the information contained under “Financial Forecasts” beginning on page 133 of the September 28, joint proxy statement/prospectus.

 

These financial forecasts were developed from historical financial statements and do not give effect to any changes or expenses as a result of the merger or any other effects of the merger. Furthermore, the financial forecasts were not prepared with a view toward public disclosure or compliance with published guidelines of the SEC or the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information or GAAP.

 

The financial forecasts of URS and Washington Group included below were prepared by, and are the responsibility of, URS management and Washington Group management, respectively. Neither URS’ nor Washington Group’s independent auditors, nor any other independent auditors, have compiled, examined or performed any procedures with respect to the prospective financial information contained in the financial forecasts, nor have they expressed any opinion or given any form of assurance on the financial forecasts or their achievability. The auditors’ reports included in the September 28 joint proxy statement/prospectus relate, to URS and Washington Group’s historical financial information. The auditors’ reports do not extend to prospective financial information and should not be read to do so. In addition, Morgan Stanley and Goldman Sachs did not assist in the preparation of the financial forecasts, have no responsibility for the financial forecasts, and may have varied some of the assumptions underlying the financial forecasts for purposes of their respective analyses. Furthermore, the financial forecasts:

 

 

URS and Washington Group believe that the assumptions that their respective managements used as a basis for the financial forecasts were reasonable at the time the financial forecasts were prepared, given the information their respective managements had at the time.

 

These financial forecasts are not a guarantee of performance. Financial forecasts involve risks, uncertainties and assumptions. The future financial results of URS, Washington Group and, if the merger is completed, the combined company, may materially differ from those expressed in the financial forecasts due to factors that are beyond URS’ and/or Washington Group’s ability to control or predict. Neither URS nor Washington Group can assure you that their respective financial forecasts will be realized or that their respective future financial results will not materially vary from the financial forecasts. Since the financial forecasts cover multiple years, such information by its nature becomes less reliable with each successive year. The financial forecasts do not take into account any circumstances or events occurring after the date they were prepared. URS and Washington Group do not intend to update or revise the financial forecasts.

 

The financial forecasts are forward-looking statements. For more information on factors which may cause URS’ and Washington Group’s future financial results to materially vary, see “Cautionary Statement Concerning Forward-Looking Statements” on page 41 and “Risk Factors” on page 19 of the September 28 joint proxy statement/prospectus. URS’ and Washington Group’s management have prepared their respective financial forecasts using accounting policies consistent with their respective annual and interim financial statements, as well as any changes

to those policies known to be effective in future periods. The financial forecasts do not reflect the effect of any proposed or other changes in GAAP that may be made in the future. Any such changes could have a material impact to the information shown below.

 

Updated URS Financial Forecasts

 

 

2008 and 2009 Guidance

 

URS management confirmed the forecasts for the projected fiscal years 2008 and 2009 set forth under “Financial Forecasts — URS Financial Forecasts” beginning on page 133 of the September 28 joint proxy statement/prospectus.

 

Updated Washington Group Financial Forecasts

 

 

The above financial forecast assumes that Washington Group continues to operate as a stand-alone company through fiscal 2007, and excludes merger-related costs and future change orders and claim recoveries.

 

2008 Guidance

 

Washington Group management confirmed the forecast for the projected fiscal year 2008 set forth under “Financial Forecasts — Washington Group Financial Forecasts” beginning on page 133 of the September 28 joint proxy statement/prospectus.

 

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

 

The unaudited pro forma condensed combined balance sheet as of June 29, 2007 and the unaudited pro forma condensed combined statements of operations for the year ended December 29, 2006 and the six months ended June 29, 2007 are based on the separate historical consolidated financial statements of URS and Washington Group. These unaudited pro forma condensed combined financial statements reflect the merger and related events using the purchase method of accounting and apply the assumptions and adjustments described in the accompanying notes to the unaudited pro forma condensed combined financial statements. The unaudited pro forma condensed combined balance sheet as of June 29, 2007 reflects the merger and related events as if they had been consummated on June 29, 2007. The unaudited pro forma condensed combined statements of operations for the year ended December 29, 2006 and the six months ended June 29, 2007 reflect the merger and related events as if they had been consummated on December 31, 2005, the beginning of URS’ 2006 fiscal year.

 

The pro forma adjustments are based upon available information and assumptions that the managements of URS and Washington Group believe reasonably reflect the merger. We present the unaudited pro forma condensed combined financial statements for informational purposes only. The pro forma condensed combined financial statements are not necessarily indicative of what our financial position or results of operations actually would have been had we completed the merger as of the dates indicated. In addition, the unaudited pro forma condensed combined financial statements do not purport to project the future financial position or operating results of the combined company. You should read this information together with the following:

 

 

The financial statements identified above are also incorporated by reference into this supplement to the September 28 joint proxy statement/prospectus. For a more detailed description of the information incorporated by reference into this supplement to the September 28 joint proxy statement/prospectus, and how you may obtain it, see “Additional Information — Where You Can Find More Information” on page 146 of the September 28 joint proxy statement/prospectus.

 

We prepared the unaudited pro forma condensed combined financial statements using the purchase method of accounting, with URS as the acquirer. Accordingly, the total estimated purchase price, calculated as described in Note 1 to the unaudited pro forma condensed combined financial statements, is allocated to the net tangible and identifiable intangible assets of Washington Group acquired in connection with the merger, based on their respective fair values. The allocation is dependent upon valuations and other studies that have not progressed to a stage where there is sufficient information to make a definitive allocation. Accordingly, the purchase price allocation pro forma adjustments are preliminary and have been made solely for the purpose of providing unaudited pro forma condensed combined financial statements. The final purchase price allocation, which will be determined subsequent to the closing of the merger, and its effect on results of operations may differ significantly from the pro

forma amounts included in the unaudited pro forma condensed combined financial statements. These amounts represent the managements’ best estimate as of the date of this joint proxy statement/prospectus.

 

In connection with the plan to integrate the operations of URS and Washington Group, we anticipate that non-recurring charges, such as costs associated with systems implementation, relocation expenses, severance and other costs associated with exit or disposal activities, will be incurred. We are not able to determine the timing, nature and amount of these charges as of the date of this joint proxy statement/prospectus. However, these charges could affect the combined results of operations of URS and Washington Group, as well as those of the combined company following the merger, in the period in which they are recorded. The unaudited pro forma condensed combined financial statements do not include the effects of the costs associated with any restructuring or integration activities resulting from the transaction, as they are non-recurring in nature and not factually supportable at the time that the unaudited pro forma condensed combined financial statements were prepared. In addition, the unaudited pro forma condensed combined financial statements do not include the realization of any cost savings from operating efficiencies or synergies resulting from the transaction, nor do they include any potential incremental revenues and earnings that may be achieved with the combined capabilities of the companies.

Unaudited Pro Forma Condensed Combined Balance Sheet
As of June 29, 2007

 

 

See accompanying notes to unaudited pro forma condensed combined financial statements.

Unaudited Pro Forma Condensed Combined Statement of Operations
Six Months Ended June 29, 2007