URS Furloughs 3,000 Workers on U.S. Government Shutdown

URS Corp., a provider of engineering and construction services, furloughed about 3,000 employees, the most announced by a single federal contractor since the U.S. government’s partial shutdown began.

The total includes employees idled by the closing of a government facility where they work or directives from U.S. officials to halt operations or cut staffing, San Francisco-based URS said today in a statement. More employees may be furloughed if the impasse continues, URS said.

“The government shutdown, the continuing effects of sequestration and uncertainty about the federal budget are all having negative impacts on URS and many other government contractors,” Chief Financial Officer H. Thomas Hicks said in the statement. “We hope the situation is resolved as soon as possible to avoid additional impact on our federal business and our employees.”

URS’s pullback showed the spreading effect on private business from the partial closing of government operations that began Oct. 1 with furloughs for about 800,000 federal workers. Federal agencies award more than $500 billion a year, or a rough average of $1.4 billion a day, to tens of thousands of contractors.

‘Alert Investors’

The company is the 14th biggest U.S. government contractor with $3.9 billion in prime, or direct, awards in the fiscal year that ended Sept. 30, 2012, according to data compiled by Bloomberg. It had more than 54,000 employees globally as of Jan. 25, according to regulatory filings.

URS is “trying to alert investors that this is causing disruptions in fourth quarter earnings,” Sameer Rathod, an analyst at Macquarie Capital Inc. in New York, said today in a telephone interview. “I expect further announcements, perhaps before earnings.”

About 40 percent of the company’s $10.9 billion in revenue last year came from the federal government, according to regulatory filings. URS’s contracts with the government include providing weapons systems maintenance services to the Department of Defense and technical support at various military bases and laboratories, according to the company’s website.

Government Exposure

Revenue at URS from projects for the U.S. Army was 16 percent of total sales in 2012, or $1.8 billion, while revenue from the Department of Energy was 9 percent, or $989.7 million, the filings show.

URS rose 1.2 percent to $52.34 at the close in New York and has advanced 33 percent this year.

Engineering and construction contractors such as URS, Tetra Tech Inc. (TTI) and Babcock & Wilcox Co. (BWC) have the most exposure to the U.S. government, Rathod said yesterday in a note.

Tetra Tech, a provider of engineering and technical services, has furloughed “some workers,” Charlie MacPherson, a spokeswoman for the Pasadena, California-based company said today in a phone interview. She declined to give a specific number of employees.

Jud Simmons, a spokesman for Charlotte, North Carolina-based Babcock & Wilcox, didn’t immediately respond to e-mail and phone calls seeking comment.

BAE, Lockheed

“If the government reopens by next week, the impact on revenue and earnings will be limited,” Rathod said. “However in the event of a prolonged shutdown, we think cuts in numbers will be warranted.”

BAE Systems Plc, Europe’s biggest defense company, today said that about 1,200 employees across its intelligence, security and support solutions businesses have been “temporarily directed not to report to work” since the shutdown. Those workers are employees of BAE Systems Inc., Brian Roehrkasse, a spokesman for the U.S. unit, said in an e-mail.

Lockheed Martin Corp. (LMT), the biggest U.S. defense contractor, put 2,400 workers on leave this week and Gordon Johndroe, a spokesman, said the company has experienced delayed payments because federal workers who are needed to process invoices have been furloughed.

Lockheed should begin to recover payments now that most civilian military workers are back at work, Johndroe said in an e-mail. While the company reduced its furloughs by 20 percent, many employees aren’t able to work because civilian government sites are closed or the contractor has received a stop-work order.

To contact the reporter on this story: Caroline Chen in New York at cchen509@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net

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