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URS eyes high-speed rail, water projects for 2010

(Reuters circulated the following story by Braden Reddall on November 13, 2009.)

SAN FRANCISCO — Engineering company URS Corp (URS.N) sees plenty of opportunities for work next year as U.S. states seek to build high-speed rail lines with help from federal funds, and with a few big water projects on the way.

More broadly, $10 billion in federal stimulus money will be flowing to major infrastructure projects that URS could manage, compared with just $2 billion this year, the company said.

Last month 24 states applied for stimulus money earmarked for high-speed rail, and URS is already under contract for related work in California and Connecticut, the company said.

"We currently are hiring additional engineers to meet increased demand in this area," Chief Executive Martin Koffel told analysts on a conference call on Friday to discuss the company's better-than-expected third quarter earnings [ID:N12414393]

Shares of the San Francisco-based company closed up $4.36, or 10.8 percent, to $44.85.

URS also has won a stimulus-related contract from U.S. rail company Amtrak to improve its Northeast corridor, and a joint venture it leads won a potential $280 million deal for the St. Bernard levee near New Orleans. Koffel was encouraged by recent California legislation to improve its water delivery system.

Last month, URS bought oil and gas project specialist ForeRunner, anticipating a flurry of pipeline building in years ahead as natural gas becomes a bigger part of the U.S. energy mix. Rival Quanta Services Inc (PWR.N) gave similar reasons for its recent purchase of pipeline firm Price Gregory.

URS executives signaled more acquisitions could be on the way. Chief Financial Officer Tom Hicks said URS would bring in plenty of cash next year, lowering its leverage well below what he deems an optimal debt-to-capitalization ratio of 20 percent to 30 percent. So money would likely be redeployed for acquisitions or to grow the company internally, he added.

URS, with total capitalization on its balance sheet of more than $5 billion, now has long-term debt of just over $780 million, down from nearly $1.1 billion at the start of 2009.

"I have no career experience in managing an unleveraged company," Koffel said, recalling a brief exception to that two years ago when he was at a New York hotel to meet bankers to finance its Washington Group takeover.

"For about 10 days we were technically out of debt," he added. "And I said to the group 'I feel like I've lost an old friend'."

Monday, November 16, 2009

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