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URS CORP /NEW/ - 10-K - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
[February 26, 2013]

URS CORP /NEW/ - 10-K - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Edgar Glimpses Via Acquire Media NewsEdge) The following discussion contains, in addition to historical information, forward-looking statements that involve risks and uncertainties. Our actual results and the timing of events could differ materially from those described herein. See "URS Corporation and Subsidiaries" regarding forward-looking statements on page 1. You should read this discussion in conjunction with Item 1A, "Risk Factors," beginning on page H20; the consolidated financial statements and notes thereto contained in Item 8, "Consolidated Financial Statements and Supplementary Data," of this report.

BUSINESS SUMMARY We are a leading international provider of engineering, construction and technical services. We offer a broad range of program management, planning, design, engineering, construction and construction management, operations and maintenance, and decommissioning and closure services to public agencies and private sector clients around the world. We also are a U.S. federal government contractor in the areas of systems engineering and technical assistance, operations and maintenance, and IT services. With approximately 54,000 employees, as of January 25, 2013, in a global network of offices and contract-specific job sites in nearly 50 countries, we provide services for federal, infrastructure, oil and gas, power and industrial programs and projects. On May 14, 2012, we completed the acquisition of Flint, a provider of construction and maintenance services to clients in the oil and gas industry, expanding our presence in the oil and gas market sector in North America. At the close of the acquisition, the operations of Flint became our new Oil & Gas Division.

Our strategy is to maintain a balanced portfolio of diversified businesses that serve a variety of markets worldwide. We believe that this strategy helps to mitigate our exposure to industrial, technological, environmental, financial, economic and political risks that may affect a particular market or geographic region. Our growth strategy involves both organic growth as well as expansion through acquisitions of other companies that complement or enhance our technical capabilities or enable us to address new markets or geographic regions.

We generate revenues by providing fee-based professional and technical services and by executing construction contracts. As a result, our professional and technical services are primarily labor intensive and our construction projects are labor and capital intensive. To derive income from our revenues, we must effectively manage our costs.

Our revenues are dependent upon our ability to attract and retain qualified and productive employees, identify business opportunities, allocate our labor resources to profitable markets, secure new contracts, execute existing contracts, and maintain existing client relationships. Moreover, as a professional services company, the quality of the work generated by our employees is integral to our revenue generation.

Our cost of revenues is comprised of the compensation we pay to our employees, including fringe benefits; the cost of subcontractors, construction materials and other project-related expenses; and segment administrative, marketing, sales, bid and proposal, rental and other overhead costs.

We report our financial results on a consolidated basis and for our four reporting segments: the Infrastructure & Environment Division, the Federal Services Division, the Energy & Construction Division and the Oil & Gas Division.

42-------------------------------------------------------------------------------- Table of Contents OVERVIEW AND BUSINESS TRENDSFiscal Year 2012 Results Consolidated revenues for the year ended December 28, 2012 were $11.0 billion, an increase of $1.4 billion, or 15.0%, compared to revenues for fiscal year 2011. Our results for the 2012 fiscal year include revenues resulting from the acquisition of Flint in May 2012. Flint generated $1.5 billion in revenues from the completion of the acquisition on May 14, 2012, through the end of our fiscal year on December 28, 2012. During the 2012 fiscal year, revenues increased significantly from our work in the oil and gas market sector, as a result of the Flint acquisition, and from our work in the power market sector. By contrast, we experienced a decline in revenues from our work in the industrial, federal and infrastructure market sectors.

Net income attributable to URS for the year ended December 28, 2012 was $310.6 million compared with a net loss of $465.8 million for the year ended December 30, 2011. Included in the fiscal year 2011 net loss attributable to URS was an after-tax goodwill impairment charge of $732.2 million.

Cash Flows and Debt During the year ended December 28, 2012, we generated $430.2 million in net cash from operations. (See "Consolidated Statements of Cash Flows" to our "Consolidated Financial Statements and Supplementary Data" included under Item 8 of this report.) Cash flows from operations decreased by $75.7 million for fiscal year 2012 compared with fiscal year 2011. This decrease was primarily due to the timing of: collections from clients on accounts receivable, advance project payments from clients, project performance payments, vendor and subcontractor payments, employer contribution payments to our retirement plans, and dividend distributions from our unconsolidated joint ventures. In addition, our interest payments were higher due to increased debt.

On March 15, 2012, in a private placement, we issued $400.0 million in 3.85% Senior Notes due on April 1, 2017 and $600.0 million in 5.00% Senior Notes due on April 1, 2022 (collectively, the "Senior Notes"). We used the net proceeds from the notes together with borrowings from our senior credit facility ("2011 Credit Facility") to finance our acquisition of Flint.

During March and April 2012, we entered into various foreign currency forward contracts with an aggregate notional amount of C$1.25 billion (equivalent to US$1.25 billion), which settled during the second quarter of 2012.

In addition, we had cash outflows of $44.7 million of cash dividends and $40.0 million related to repurchases of our common stock for the year ended December 28, 2012.

Acquisitions On May 14, 2012, we acquired the outstanding common shares of Flint for C$25.00 per share in cash, or C$1.24 billion (US$1.24 billion based on the exchange rate on the date of acquisition) and paid $110.3 million of Flint's debt prior to the closing of the transaction in exchange for a promissory note from Flint. The operating results of Flint from the acquisition date through December 28, 2012 are included in our consolidated financial statements under the Oil & Gas Division.

On June 1, 2011, we completed the acquisition of Apptis for a total purchase consideration of $283.0 million. Since the acquisition date, the operating results of Apptis have been included in our consolidated financial statements under the Federal Services Division.

On September 10, 2010, we completed the acquisition of Scott Wilson for a total purchase consideration of $343.0 million. Since the acquisition date, the operating results of Scott Wilson have been included in our consolidated financial statements under the Infrastructure & Environment Division.

43-------------------------------------------------------------------------------- Table of Contents Dividend Program On February 24, 2012, our Board of Directors authorized the implementation of a dividend program and authorized a $0.20 per share quarterly dividend. On February 22, 2013, our Board of Directors approved the continuation of this program and authorized a $0.21 per share quarterly dividend. Future dividends are subject to approval by our Board of Directors or the Audit Committee of the Board of Directors.

Book of Business As of December 28, 2012 and December 30, 2011, our total book of business was $24.9 billion and $27.0 billion, respectively. Our backlog decreased primarily due to reductions resulting from the recognition of revenues and equity in earnings of unconsolidated joint ventures, and from the removal of $560 million from federal backlog resulting from a decision by the DOE to remove funding of pension obligations from the scope of one of our contracts, which otherwise would have resulted in recognition of revenues as reimbursement for offsetting pension expenses on that contract. Additional decreases in backlog and IDCs were caused primarily by lower than expected activity on an IDC contract with the DOD, and reductions in project scope and project cancellations by a power client. These decreases were partially offset by additions of $1.4 billion to our book of business resulting from our acquisition of Flint.

Business Trends Given the current economic uncertainty, it is difficult to predict the impact of the continuing global economic weakness on our business or to forecast business trends accurately. Federal deficits, weak state budgets, the national debt, the potential budgetary sequestration, economic disruption in Europe, a relatively anemic recovery in the U.S., and efforts made to address any of these issues, could negatively affect our business. In particular, federal expenditures on defense, as well as expenditures, both private and public, on other programs that we support or in markets that we participate in, could be adversely affected. For example, the Budget Control Act of 2011 could impose an estimated $1.2 trillion in automatic federal budget cuts, or sequestrations, beginning in fiscal year 2013. These budget cuts are in addition to the $917 billion in budget cuts required over the next 10 years, and would severely impact our defense and other federal services, unless Congress acts to resolve the budget issues or postpone the expected cuts. Any significant reduction in federal government spending could reduce the demand for our overall services, and result in the cancellation or delay of existing projects as well as potential projects in our book of business. It is also difficult to determine the extent to which concerns over the public debt of, and recessionary conditions in, the U.K. and various European countries could affect demand for, and spending on, the services we provide to our clients. Many of these uncertainties are difficult to predict and are beyond our control.

We believe that our expectations regarding business trends are reasonable and are based on reasonable assumptions. However, such forward-looking statements, by their nature, involve risks and uncertainties and, in the current economic climate, may be subject to an unusual degree of uncertainty. You should read this discussion of business trends in conjunction with Part II, Item 1A, "Risk Factors," of this report, which begins on page 20.

Federal Market Sector Due to federal budget uncertainty, we expect to continue to experience delays and cancellations in procurement decisions and reductions in spending on some existing contracts. The Budget Control Act of 2011 could impose significant and automatic federal budget cuts, or sequestrations, beginning in fiscal year 2013, if Congress fails to pass a budget reduction bill. A large portion of these budget cuts would affect defense spending. Although we expect that we will continue to be adversely affected by these budget challenges, some of the specialized technical services we provide and programs we support are vital to national security or mandated by law, and may have more predictable funding. As a result, we expect that many of these services and programs, including the management of chemical demilitarization sites; the provision of nuclear management services; and the support of unmanned aerial vehicles, electronic warfare, threat reduction, and cyber-security programs would be more likely to continue receiving stable funding, if automatic federal budget cuts are imposed.

44-------------------------------------------------------------------------------- Table of Contents Infrastructure Market Sector We anticipate that the passage in 2012 of the two-year, $105 billion federal transportation funding bill, Moving Ahead for Progress in the 21st Century Act ("MAP-21"), will provide states and municipalities with stable funding for highway and transit projects. In addition, the $50.5 billion Hurricane Sandy federal aid package includes $13 billion to repair roads and transit systems damaged by the storm, as well as $1.7 billion to the State of New York and $1.8 billion to New York City in block grants to address other public infrastructure needs.

Oil & Gas Market Sector During the second quarter of the 2012 fiscal year, we acquired Flint, a provider of construction and maintenance services to clients in the North American oil and gas industry. The acquisition significantly expanded our presence in the North American oil and gas market sector, which we anticipate will create new opportunities for our business in 2013. As a result of the acquisition, we expect that any increase in capital spending to develop North American oil and gas resources could lead to increased demand for the engineering, construction and operations and maintenance services that we provide to clients in the oil and gas market sector.

Power Market Sector For the 2013 fiscal year, we expect steady demand for our air quality control services, which involve the retrofit of coal-fired power plants with clean air technology to reduce sulfur dioxide, mercury and other emissions. We are currently working on 18 retrofit projects to help utilities comply with state consent decrees and federal regulatory mandates. Following events at the Fukushima nuclear power plant in Japan, the Nuclear Regulatory Commission issued new safety requirements to strengthen containment structures and to improve on-site flood control and seismic safety plans. We also expect to benefit from new investments being made in transmission and distribution systems to improve the efficiency and reliability of these systems and accommodate the transmission of electricity from alternative and renewable energy sources.

Industrial Market Sector For the 2013 fiscal year, we expect our industrial clients to continue to experience challenges as a result of economic conditions. However, if our clients experience increased demand for durable goods, we may see increased demand for the engineering, construction and facilities management services we provide. We also anticipate growth in our mining business in the U.S. and Australia, as a result of new contract awards in 2012.

Seasonality We experience seasonal trends in our business in connection with federal holidays, such as Memorial Day, Independence Day, Labor Day, Thanksgiving, Christmas and New Year's Day. Our revenues typically are lower during these times of the year because many of our clients' employees, as well as our own employees, do not work during these holidays, resulting in fewer billable hours charged to projects and thus, lower revenues recognized. In addition to holidays, our business also is affected by seasonal bad weather conditions, such as hurricanes, floods, snowstorms or other inclement weather, which may cause some of our offices and projects to close or reduce activities temporarily. For example, in the first quarter of the year, winter weather sometimes results in intermittent office closures and work interruptions. In our Oil & Gas Division, winter weather enables increased access to remote work areas in Northern Canada, while spring road bans limit access to work areas in Canada and the Northern U.S.

45-------------------------------------------------------------------------------- Table of Contents Other Business Trends The diversification of our business and changes in the mix and timing of our fixed-cost, target-price and other contracts can cause earnings and profit margins to vary between periods. For example, we have, for some time, experienced an increase in the number of fixed-price contracts we are awarded, particularly among clients in the federal sector. The increase in fixed-price contracting creates additional risks of incurring losses and opportunities for achieving higher margins on these contracts. There is also an increase in the award of federal contracts based on a low-price, technically acceptable criteria emphasizing price over qualitative factors, such as past performance. As a result, pricing pressure may reduce our profit margins on future federal contracts. Also, our government clients are increasingly using IDCs that require us to engage in a competitive procurement process before any task orders are issued as compared to traditional award contracts. Additionally, the traditional award relationship between backlog and revenues, resulting in smaller, shorter term increments moving from IDCs and option years into backlog and then potentially realized as revenues. Ultimately, however, revenues from IDC task orders and option years will typically lower our reported backlog and increase our reported IDC and option years in our book of business. In addition, earnings recognition on many contracts is measured based on progress achieved as a percentage of the total project effort or upon the completion of milestones or performance criteria rather than evenly or linearly over the period of performance.

The achievement of early completion milestones on several chemical weapons stockpile processing projects indicates that those projects are approaching the end of their contract life cycle. We expect to continue to generate revenues and operating income at these sites and other sites over the next several years, but in declining amounts as the projects approach final completion.

We cannot determine if proposed climate change and greenhouse gas regulations would have a material impact on our business or our clients' businesses at this time; however, any new regulations could affect demand for the services we provide to our clients. For example, depending on legislation enacted, we could see reduced client demand for our services related to fossil fuel and industrial projects, and increased demand for services related to environmental, infrastructure and nuclear and alternative energy.

46-------------------------------------------------------------------------------- Table of Contents REVENUES BY MARKET SECTOR The Year Ended December 28, 2012 Compared with the Year Ended December 30, 2011 Year Ended Percentage December 28, December 30, Increase Increase (In millions, except percentages) 2012 (1) 2011 (2) (Decrease) (Decrease) Revenues by Market Sector: Federal $ 4,435.0 $ 4,639.7 $ (204.7 ) (4.4 %) Infrastructure 1,791.4 1,861.3 (69.9 ) (3.8 %) Oil & Gas (3) 2,310.6 692.1 1,618.5 233.9 % Power 1,304.4 1,126.6 177.8 15.8 % Industrial (3) 1,131.1 1,225.3 (94.2 ) (7.7 %)Total revenues, net of eliminations $ 10,972.5 $ 9,545.0 $ 1,427.5 15.0 % (1) The operating results of Flint have been included in our consolidated results since the acquisition on May 14, 2012.

(2) The operating results of Apptis have been included in our consolidated results since the acquisition on June 1, 2011.

(3) Historically, we have included revenues from the oil & gas market sector as part of our industrial & commercial market sector. Effective at the beginning of our 2012 fiscal year, we revised our presentation to show our revenues from the oil & gas market sector separately. In addition, we changed the name of our "industrial and commercial" market sector to the "industrial" market sector. For comparative purposes, we reclassified the prior period's data to conform them to the current period's presentation.

47-------------------------------------------------------------------------------- Table of Contents Consolidated Revenues by Market Sector Our consolidated revenues for the year ended December 28, 2012 were $11.0 billion, an increase of $1.4 billion, or 15.0%, compared with the year ended December 30, 2011.

See the discussion of revenues by market sector below for more detail.

Federal Year Ended Percentage December 28, December 30, Increase Increase (In millions, except percentages) 2012 2011 (Decrease) (Decrease) Federal Market Sector: Infrastructure & Environment $ 670.1 $ 636.5 $ 33.6 5.3 % Federal Services 2,720.8 2,694.3 26.5 1.0 % Energy & Construction 1,044.1 1,308.9 (264.8 ) (20.2 %) Federal total $ 4,435.0 $ 4,639.7 $ (204.7 ) (4.4 %) Consolidated revenues from our federal market sector for the year ended December 28, 2012 declined compared with the year ended December 30, 2011. During the 2012 fiscal year, revenues declined from the nuclear management services we provide to the DOE, due largely to the completion of ARRA stimulus-funded projects, the completion of a cleanup and closure project at a former nuclear fuel reprocessing/treatment facility, as well as lower activity on on-going DOE contracts. In addition, we experienced decreased demand for the systems engineering and technical assistance services we provide to the DOD for the development, testing and evaluation of new weapons systems and the modernization of aging weapons systems. The decrease in revenues from these activities was largely the result of delays in the award of new contracts and task orders under existing contracts. Revenues also declined from our work managing the destruction of chemical weapons stockpiles at chemical agent disposal facilities throughout the U.S. This decline reflects the transition at several facilities from the operations phase of the project to the closure phase, which is characterized by lower levels of activity.

By contrast, revenues increased from the federal IT market as a result of the acquisition of Apptis in June 2011. In addition, revenues grew from the services we provide to the DOD to maintain, repair and overhaul aircraft, ground vehicles and other equipment returning from military operations, as well as from increased activity on a contract to provide operations and installations management support at a space flight center. We also experienced increased demand for the design and construction services we provide to the DOD for the development of military facilities and related infrastructure.

48-------------------------------------------------------------------------------- Table of Contents Infrastructure Year Ended Percentage December 28, December 30, Increase Increase (In millions, except percentages) 2012 2011 (Decrease) (Decrease) Infrastructure Market Sector: Infrastructure & Environment $ 1,550.1 $ 1,544.0 $ 6.1 0.4 % Energy & Construction 241.3 317.3 (76.0 ) (24.0 %) Infrastructure total $ 1,791.4 $ 1,861.3 $ (69.9 ) (3.8 %) Consolidated revenues from our infrastructure market sector for the year ended December 28, 2012 decreased compared with the year ended December 30, 2011. The decline in infrastructure revenues was primarily due to the completion early in the 2012 fiscal year of a levee construction project in New Orleans, which experienced higher levels of activity and generated significant revenues during the 2011 fiscal year. The revenue decline also reflects a close-out and settlement agreement reached on a light rail project and a toll road project. In addition, demand decreased for the services we provide to modernize and expand airports and educational facilities.

By contrast, revenues increased from the planning, design, engineering, program and construction management services we provide to develop surface and rail transportation infrastructure, and water storage, conveyance and treatment systems. We also benefited from higher demand for our work providing program management services to international agencies in support of economic development efforts.

Oil & Gas Year Ended Percentage December 28, December 30, Increase Increase (In millions, except percentages) 2012 2011 (Decrease) (Decrease) Oil & Gas Market Sector: (1) Infrastructure & Environment $ 552.5 $ 529.7 $ 22.8 4.3 % Energy & Construction 288.9 162.4 126.5 77.9 % Oil & Gas (2) 1,469.2 - 1,469.2 N/M Oil & Gas total $ 2,310.6 $ 692.1 $ 1,618.5 233.9 % N/M = Not meaningful (1) Historically, we have included revenues from the oil & gas market sector as part of our presentation of revenues from the industrial & commercial market sector. Effective at the beginning of our 2012 fiscal year, we revised our presentation to show our revenues from the oil & gas market sector separately. In addition, we changed the name of our "industrial and commercial" market sector to the "industrial" market sector. For comparative purposes, we reclassified the prior period's data to conform them to the current period's presentation.

(2) The operating results of Flint have been included in our consolidated results since the acquisition on May 14, 2012.

Consolidated revenues from our oil & gas market sector for the year ended December 28, 2012 increased compared with the year ended December 30, 2011. Our results reflect the acquisition of Flint on May 14, 2012. At the completion of the acquisition, Flint became our new Oil & Gas Division. For the fiscal year ended December 28, 2012, the Oil & Gas Division generated revenues of $1.5 billion from work providing construction and maintenance services to the North American oil and gas industry. We also benefited from strong demand for the environmental and engineering services we provide to multinational oil and gas clients at facilities worldwide through long-term master service agreements ("MSAs"), as well as from increased activity on contracts to provide construction, facility management, and operations and maintenance services at refineries and other oil and gas facilities.

49-------------------------------------------------------------------------------- Table of Contents Power Year Ended Percentage December 28, December 30, Increase Increase (In millions, except percentages) 2012 2011 (Decrease) (Decrease) Power Market Sector: Infrastructure & Environment $ 209.8 $ 201.1 $ 8.7 4.3 % Energy & Construction 1,094.6 925.5 169.1 18.3 % Power total $ 1,304.4 $ 1,126.6 $ 177.8 15.8 % Consolidated revenues from our power market sector for the year ended December 28, 2012 increased compared with the year ended December 30, 2011. During the 2012 fiscal year, revenues increased from services we provide to retrofit and upgrade existing nuclear power plants to increase the generating capacity and extend the service life of these facilities. We also continued to experience a steady demand for our work in retrofitting coal-fired power plants with air quality control systems that reduce emissions and help utilities comply with regulatory mandates, as well as from the compliance, permitting and remediation services we provide to mitigate the environmental impact of their operations. By contrast, revenues declined from the engineering, procurement and construction services we provide for the development of new fossil fuel and nuclear power-generating facilities.

Industrial Year Ended Percentage December 28, December 30, Increase Increase (In millions, except percentages) 2012 2011 (Decrease) (Decrease) Industrial Market Sector: (1) Infrastructure & Environment $ 700.5 $ 763.8 $ (63.3 ) (8.3 %) Energy & Construction 430.6 461.5 (30.9 ) (6.7 %) Industrial total $ 1,131.1 $ 1,225.3 $ (94.2 ) (7.7 %) (1) Historically, we have included revenues from the oil & gas market sector as part of our presentation of revenues from the industrial & commercial market sector. Effective at the beginning of our 2012 fiscal year, we revised our presentation to show our revenues from the oil & gas market sector separately. In addition, we changed the name of our "industrial and commercial" market sector to the "industrial" market sector. For comparative purposes, we reclassified the prior period's data to conform them to the current period's presentation.

Consolidated revenues from our industrial market sector for the year ended December 28, 2012 declined compared with the year ended December 30, 2011. The decline in revenues was largely driven by decreased demand for the environmental, engineering and construction services we provide to mining clients. During the 2011 fiscal year, we experienced high levels of activity and generated significant revenues from an engineering and construction mining project in Australia; the project has not been replaced by a comparable assignment. The decrease was partially offset by a moderate increase in revenues from the facilities management services we provide to manufacturing clients, resulting from increased activity on ongoing contracts and increased activities with other mining clients.

50-------------------------------------------------------------------------------- Table of Contents CONSOLIDATED RESULTS BY DIVISION The Year Ended December 28, 2012 Compared with the Year Ended December 30, 2011 Year Ended Percentage December 28, December 30, Increase Increase (In millions, except percentages and per share amounts) 2012 (1) 2011 (2) (Decrease) (Decrease) Revenues $ 10,972.5 $ 9,545.0 $ 1,427.5 15.0 % Cost of revenues (10,294.5 ) (8,988.8 ) 1,305.7 14.5 % General and administrative expenses (83.6 ) (79.5 ) 4.1 5.2 % Acquisition-related expenses (16.1 ) (1.0 ) 15.1 N/M Restructuring costs - (5.5 ) (5.5 ) N/M Goodwill impairment - (825.8 ) (825.8 ) N/M Equity in income of unconsolidated joint ventures 107.6 132.2 (24.6 ) (18.6 %) Operating income (loss) 685.9 (223.4 ) 909.3 407.0 % Interest expense (70.7 ) (22.1 ) 48.6 219.9 % Other income (expenses) 0.5 - 0.5 N/M Income (loss) before income taxes 615.7 (245.5 ) 861.2 350.8 % Income tax expense (189.9 ) (91.8 ) 98.1 106.9 % Net income (loss) including noncontrolling interests 425.8 (337.3 ) 763.1 226.2 % Noncontrolling interests in income of consolidated subsidiaries (115.2 ) (128.5 ) (13.3 ) (10.4 %) Net income (loss) attributable to URS $ 310.6 $ (465.8 ) $ 776.4 166.7 % Diluted earnings (loss) per share $ 4.17 $ (6.03 ) $ 10.20 169.2 % N/M = Not meaningful (1) The operating results of Flint have been included in our consolidated results since the acquisition on May 14, 2012.

(2) The operating results of Apptis have been included in our consolidated results since the acquisition on June 1, 2011.

51-------------------------------------------------------------------------------- Table of Contents Revenues Infrastructure & Federal Energy & (In millions, except percentages) Environment Services (1) Construction Oil & Gas (2) Eliminations Total Year ended December 28, 2012 $ 3,792.1 $ 2,721.6 $ 3,138.1 $ 1,475.1 $ (154.4) $ 10,972.5 December 30, 2011 3,760.9 2,695.4 3,251.1 - (162.4) 9,545.0 Increase (decrease) 31.2 26.2 (113.0) 1,475.1 (8.0) 1,427.5 Percentage increase (decrease) 0.8% 1.0% (3.5%) N/M N/M 15.0% N/M = Not meaningful (1) The operating results of Apptis have been included in our consolidated results since the acquisition on June 1, 2011.

(2) The operating results of Flint have been included in our consolidated results since the acquisition on May 14, 2012.

The revenues reported are presented prior to the elimination of inter-segment transactions. Our analysis of the changes in revenues by reporting segment is discussed below.

The Infrastructure & Environment Division's Revenues The Infrastructure & Environment Division's revenues were essentially flat for the year ended December 28, 2012 compared to the year ended December 30, 2011. During the 2012 fiscal year, revenues increased from the services we provide to expand and modernize surface and rail transportation infrastructure, as well as from our work providing program management services to international aid agencies in support of economic development efforts. We also benefited from strong demand for our work providing engineering and construction services to the DOD for the development of military facilities and related infrastructure. In addition, demand grew for the compliance, permitting and remediation services we perform in the power sector to assist utilities in meeting regulatory requirements and mitigating the environmental impact of their operations.

By contrast, we experienced a decline in revenues from the environmental and engineering services we provide to industrial and mining clients. The results in our mining market reflect the completion of an engineering and construction assignment, which generated significant revenues in the comparable period last year and was not replaced by a similar project. In the oil and gas sector, revenues declined from our work supporting a major pipeline project in Alaska, due to the postponement of the project, while we continued to benefit from strong demand for the environmental and engineering services we provide to multinational oil and gas clients at facilities worldwide through long-term MSAs.

The Federal Services Division's Revenues The Federal Services Division's revenues were essentially flat for the year ended December 28, 2012 compared to the year ended December 30, 2011. Revenues increased from the IT services we now provide to federal clients, as a result of our June 2011 acquisition of Apptis. Revenues from the services we provide to the DOD to maintain, repair and overhaul aircraft, ground vehicles and other equipment were essentially flat.

Revenues from our work managing the destruction of chemical weapons stockpiles at chemical agent disposal facilities declined. This decline reflects the transition at several facilities from the operations phase of the project to the closure phase, which is characterized by lower levels of activity.

52-------------------------------------------------------------------------------- Table of Contents The Energy & Construction Division's Revenues The Energy & Construction Division's revenues for the year ended December 28, 2012 decreased compared with the year ended December 30, 2011. The decrease was primarily due to the completion of a large power project and a large levee construction project in the prior year. In addition, revenues declined from our work providing nuclear management services to the DOE, as a result of completing ARRA stimulus-funded projects and lower activity on ongoing DOE projects compared to the same period last year.

These decreases were partially offset by the start-up of new projects, including a new air quality control project at a coal-fired power plant and projects to replace steam generators at nuclear power plants. However, revenues during the engineering and early construction phases associated with the start-up of projects tend to be lower than revenues during the active construction phases. During the year ended December 30, 2011, there were more projects in active construction compared to the year ended December 28, 2012. As a result, revenues for the year ended December 28, 2012 were relatively lower than for the year ended December 30, 2011.

The Oil & Gas Division's Revenues The Oil & Gas Division's revenues for the year ended December 28, 2012 were derived from the construction and construction management, and operations and maintenance services that we provide, including facility and pipeline construction, transportation, and asset management and maintenance services, for the North American oil and gas industry. Since the acquisition on May 14, 2012, the revenues of Flint have been included in our consolidated results under our Oil & Gas Division.

Cost of Revenues Infrastructure & Federal Energy & (In millions, except percentages) Environment Services (1) Construction Oil & Gas (2) Eliminations Total Year ended December 28, 2012 $ (3,575.2) $ (2,478.7) $ (2,976.9) $ (1,418.1) $ 154.4 $ (10,294.5) December 30, 2011 (3,537.2) (2,503.9) (3,110.1) - 162.4 (8,988.8) Increase (decrease) 38.0 (25.2) (133.2) 1,418.1 (8.0) 1,305.7 Percentage increase (decrease) 1.1% (1.0%) (4.3%) N/M N/M 14.5% N/M = Not meaningful (1) The operating results of Apptis have been included in our consolidated results since the acquisition on June 1, 2011.

(2) The operating results of Flint have been included in our consolidated results since the acquisition on May 14, 2012.

Our consolidated cost of revenues, which consists of labor, subcontractor costs, and other expenses related to projects, and services provided to our clients, for the year ended December 28, 2012 increased compared with the year ended December 30, 2011. Because our revenues are primarily project-based, the factors that generally caused revenues to increase or decrease also drove a corresponding increase or decrease in our cost of revenues.

Consolidated cost of revenues as a percent of revenues decreased from 94.2% for the year ended December 30, 2011 to 93.8% for the year ended December 28, 2012.

53-------------------------------------------------------------------------------- Table of Contents General and Administrative Expenses Our consolidated general and administrative ("G&A") expenses for the year ended December 28, 2012 increased by 5.2% compared with the year ended December 30, 2011. The increase in G&A expenses was due primarily to increases in employee salaries and the related benefit expenses of $2.4 million, foreign currency loss of $1.5 million, legal expenses of $1.2 million, and corporate communication and information technology-related expenses of $0.8 million, partially offset by the release of $2.1 million of sales tax reserve. Consolidated G&A expenses as a percent of revenues was 0.8% for both years ended December 28, 2012 and December 30, 2011.

Acquisition-related Expenses Our consolidated acquisition-related expenses generally include legal fees, consultation fees, travel expenses, and other miscellaneous direct and incremental administrative expenses. For the year ended December 28, 2012, we recorded $16.1 million of acquisition-related expenses for our acquisition of Flint.

Restructuring Costs Restructuring costs consisted primarily of costs for severance and associated benefits. We did not incur restructuring costs for the year ended December 28, 2012. For the year ended December 30, 2011, our restructuring costs were $5.5 million, the majority of which resulted from the integration of Scott Wilson into our existing U.K. and European business and necessary responses to reductions in market opportunities in Europe.

Goodwill Impairment Our 2012 annual review, performed as of October 26, 2012, did not indicate any further adjustment to our goodwill. For the year ended December 30, 2011, we recognized an impairment charge of $825.8 million affecting five of our six reporting units. On a net, after-tax basis, this charge resulted in decreases to net income and diluted EPS of $732.2 million and $9.46, respectively, for the year ended December 30, 2011.

Equity in Income of Unconsolidated Joint Ventures Infrastructure & Federal Energy & (In millions, except percentages) Environment Services (1) Construction Oil & Gas (2) Total Year ended December 28, 2012 $ 4.0 $ 6.4 $ 93.0 $ 4.2 $ 107.6 December 30, 2011 3.9 6.2 122.1 - 132.2 Increase (decrease) 0.1 0.2 (29.1 ) 4.2 (24.6 ) Percentage increase (decrease) 2.6 % 3.2 % (23.8 %) N/M (18.6 %) N/M = Not meaningful (1) The operating results of Apptis have been included in our consolidated results since the acquisition on June 1, 2011.

(2) The operating results of Flint have been included in our consolidated results since the acquisition on May 14, 2012.

Our consolidated equity in income of unconsolidated joint ventures for the year ended December 28, 2012 decreased compared with the year ended December 30, 2011. The decrease was primarily attributable to a $21.1 million decrease in earnings from nuclear management, operations and cleanup projects in the U.K., a $9.5 million favorable settlement on a highway construction project during the year ended December 30, 2011, and a $5.9 million decrease in earnings on a DOE cleanup project due to the timing of recognizing target-cost savings and other performance-based earnings. These decreases were partially offset by an $8.2 million increase in earnings from a light rail project.

54-------------------------------------------------------------------------------- Table of Contents Operating Income (Loss) Federal Infrastructure & Services Energy & (In millions, except percentages) Environment (1) Construction Oil & Gas (2) Corporate Total Year ended December 28, 2012 $ 220.9 $ 249.3 $ 254.2 $ 61.2 $ (99.7) $ 685.9 December 30, 2011 222.0 (151.5) (214.4) - $ (79.5) (223.4) Increase (decrease) (1.1) 400.8 468.6 61.2 $ 20.2 909.3 Percentage increase (decrease) (0.5%) 264.6% 218.6% N/M 25.4% 407.0% N/M = Not meaningful (1) The operating results of Apptis have been included in our consolidated results since the acquisition on June 1, 2011.

(2) The operating results of Flint have been included in our consolidated results since the acquisition on May 14, 2012.

As a percentage of revenues, operating income for the year ended December 28, 2012 was 6.3% compared to (2.3)% for the year ended December 30, 2011. The increase in operating income in fiscal year 2012 relative to the corresponding period of 2011 was primarily due to the goodwill impairment charge recorded during the year ended December 30, 2011. In addition, operating income increased due to the inclusion of operating income resulting from the acquisition of Flint and an increase in net performance-based incentive fees from work, performed by our Federal Services Division, managing chemical demilitarization programs in the U.S. These increases were partially offset by the decrease in operating income resulting from the wind down and completion of projects, and delayed awards of new task orders. See the detailed discussion of operating income by segment below.

The Infrastructure & Environment Division's Operating Income Operating income as a percentage of revenues was 5.8% for the year ended December 28, 2012 compared to 5.9% for the year ended December 30, 2011. The change in operating income was primarily attributable to our contract mix, which in 2012, utilized more subcontractors with higher associated costs. The increase in subcontract costs was partially offset by higher revenues and decreases in employee benefits and other indirect costs. Overhead costs as a percentage of revenues decreased to 31.1% for the year ended December 28, 2012 from 32.0% for the year ended December 30, 2011.

The Federal Services Division's Operating Income (Loss) Operating income (loss) as a percentage of revenues was 9.2% for the year ended December 28, 2012 compared to (5.6)% for the year ended December 30, 2011. For the year ended December 30, 2011, the operating loss was the result of a $348.3 million goodwill impairment charge. Operating income included a $75.7 million increase in net performance-based incentive fees from work managing chemical demilitarization programs recognized in the current year compared to the prior year. This increase was partially offset by delayed awards of new task orders under existing contracts and lower margins on federal operations and support services contracts due to low-price, technically acceptable contracting strategies, which emphasize price over qualitative factors, such as past performance.

55-------------------------------------------------------------------------------- Table of Contents The Energy & Construction Division's Operating Income (Loss) Operating income (loss) as a percentage of revenues was 8.1% for the year ended December 28, 2012 compared to (6.6)% for the year ended December 30, 2011. The operating loss was the result of a $477.5 million goodwill impairment charge recorded in the year ended December 30, 2011. The decrease in operating income after considering the goodwill impairment charge was due to the $29.1 million decrease in equity in income of unconsolidated joint ventures described above, and a $31.5 million decline resulting from the substantial completion of a levee construction project in New Orleans in the prior year. These decreases were partially offset by an increase of $22.8 million, consisting of a $3.4 million current year insurance recovery compared to a prior year loss of $19.4 million on a common sulfur project and an increase of $20.6 million on a new air quality control project.

The Oil & Gas Division's Operating Income The Oil & Gas Division's operating income for the year ended December 28, 2012 was $61.2 million, which reflects activities from May 14, 2012, the effective date of the Flint acquisition and includes $38.6 million of amortization of intangible assets in connection with the Flint acquisition.

Interest Expense Our consolidated interest expense for the year ended December 28, 2012 increased by $48.6 million or 219.9% compared with the year ended December 30, 2011. This increase was primarily due to the interest expense incurred on the additional borrowings and the assumption of debt in connection with the Flint acquisition.

Other Income (Expenses) Our consolidated other income (expenses) for the year ended December 28, 2012 represents a foreign currency gain of $0.8 million recognized on intercompany financing arrangements and a net loss of $0.3 million recognized on foreign currency forward contracts.

Income Tax Expense The change in the effective income tax rate for the year ended December 28, 2012 compared with the comparable period in 2011 was primarily due to the non-deductibility of the goodwill impairment charge taken in 2011.

Noncontrolling Interests in Income of Consolidated Subsidiaries Our noncontrolling interests in income of consolidated subsidiaries decreased by $13.3 million or 10.4% in the year ended December 28, 2012 compared with the year ended December 30, 2011. The decrease in noncontrolling interests in income of consolidated subsidiaries, net of tax was primarily due to lower earnings from one of our U.K. joint ventures, the substantial completion of a levee construction project in New Orleans in the prior year, and lower earnings from certain DOE nuclear cleanup projects. These decreases were partially offset by increases related to higher activity at air quality control services projects and steam generator replacement projects performed through consolidated joint ventures.

56-------------------------------------------------------------------------------- Table of Contents REVENUES BY MARKET SECTOR The Year Ended December 30, 2011 Compared with the Year Ended December 31, 2010 Year Ended Percentage December 30, December 31, Increase Increase (In millions, except percentages) 2011 (1) 2010 (2) (Decrease) (Decrease) Revenues by Market Sector: Federal $ 4,639.7 $ 4,523.4 $ 116.3 2.6 % Infrastructure 1,861.3 1,902.4 (41.1 ) (2.2 %) Oil & Gas (3) 692.1 685.1 7.0 1.0 % Power 1,126.6 1,109.2 17.4 1.6 % Industrial (3) 1,225.3 957.0 268.3 28.0 %Total revenues, net of eliminations $ 9,545.0 $ 9,177.1 $ 367.9 4.0 % (1) The operating results of Apptis have been included in our consolidated results since the acquisition on June 1, 2011.

(2) The operating results of Scott Wilson have been included in our consolidated results since the acquisition on September 10, 2010.

(3) Historically, we have included revenues from the oil & gas market sector as part of our presentation of revenues from the industrial & commercial market sector. Effective at the beginning of our 2012 fiscal year, we revised our presentation to show our revenues from the oil & gas market sector separately. In addition, we changed the name of our "industrial and commercial" market sector to the "industrial" market sector. For comparative purposes, we reclassified the prior period's data to conform them to the current period's presentation.

57-------------------------------------------------------------------------------- Table of Contents Consolidated Revenues by Market Sector Our consolidated revenues for the year ended December 30, 2011 were $9.5 billion, an increase of $367.9 million, or 4.0%, compared with the year ended December 31, 2010.

See the discussion of revenues by market sector below for more detail.

Federal Year Ended Percentage December 30, December 31, Increase Increase (In millions, except percentages) 2011 2010 (Decrease) (Decrease) Federal Market Sector: Infrastructure & Environment (1) $ 636.5 $ 682.7 $ (46.2 ) (6.8 %) Federal Services (2) 2,694.3 2,581.2 113.1 4.4 % Energy & Construction 1,308.9 1,259.5 49.4 3.9 % Federal total $ 4,639.7 $ 4,523.4 $ 116.3 2.6 % (1) The operating results of Scott Wilson have been included in our consolidated results since the acquisition on September 10, 2010.

(2) The operating results of Apptis have been included in our consolidated results since the acquisition on June 1, 2011.

Consolidated revenues from our federal market sector for the year ended December 30, 2011 were $4.6 billion, an increase of $116.3 million, or 2.6%, compared with the year ended December 31, 2010. During the 2011 fiscal year, we benefited from the growth of our business in the federal IT market through the acquisition of Apptis, which generated $180.0 million in revenues, commencing with the acquisition date. We also experienced increased demand for the environmental and nuclear management services we provide to the DOE and NDA involving the storage, treatment and disposal of radioactive waste. In addition, revenues increased from our work managing chemical demilitarization programs at chemical agent disposal facilities in the U.S., as well as from the global threat reduction services we provide to secure and eliminate weapons of mass destruction at locations worldwide. By contrast, revenues declined from the services we provide to modernize aging weapons systems, develop new systems, and maintain and repair military vehicles and aircraft. Revenues also declined from the operations and installations management support we provide at military bases, test ranges and space flight centers. The decline in revenues from these activities was primarily due to delays in the award of new contracts and task orders under existing contracts. Revenues also decreased from projects involving the design and construction of military facilities and other government installations, compared to the 2010 fiscal year.

58-------------------------------------------------------------------------------- Table of Contents Infrastructure Year Ended Percentage December 30, December 31, Increase Increase (In millions, except percentages) 2011 2010 (Decrease) (Decrease) Infrastructure Market Sector: Infrastructure & Environment (1) $ 1,544.0 $ 1,402.8 $ 141.2 10.1 % Energy & Construction 317.3 499.6 (182.3 ) (36.5 %) Infrastructure total $ 1,861.3 $ 1,902.4 $ (41.1 ) (2.2 %) (1) The operating results of Scott Wilson have been included in our consolidated results since the acquisition on September 10, 2010.

Consolidated revenues from our infrastructure market sector for the year ended December 30, 2011 were $1.9 billion, a decrease of $41.1 million, or 2.2%, compared with the year ended December 31, 2010. The decline in infrastructure revenues was primarily due to a decline in revenues resulting from the completion of a levee construction project in New Orleans, which experienced greater levels of activity and generated higher revenues during the 2010 fiscal year. We also experienced decreased activity on an ongoing dam construction project in Illinois, primarily as a result of adverse weather conditions and flooding, which resulted in project delays. The decrease in revenues was partially offset by the growth of our infrastructure business outside the U.S.

resulting from the acquisition of Scott Wilson in September 2010. Scott Wilson generated $282.4 million in infrastructure revenues during the year ended December 30, 2011. During our 2010 fiscal year, we recognized revenues of $92.8 million from the operations of Scott Wilson from the date of the acquisition through December 31, 2010. We also benefited from steady demand for the services we provide to expand and modernize surface and rail transportation systems, and ports and harbors.

Oil & Gas Year Ended Percentage December 30, December 31, Increase Increase (In millions, except percentages) 2011 2010 (Decrease) (Decrease) Oil & Gas Market Sector: (1) Infrastructure & Environment (2) $ 529.7 $ 418.8 $ 110.9 26.5 % Energy & Construction 162.4 266.3 (103.9 ) (39.0 %) Oil & Gas total $ 692.1 $ 685.1 $ 7.0 1.0 % (1) Historically, we have included revenues from the oil & gas market sector as part of our presentation of revenues from the industrial & commercial market sector. Effective at the beginning of our 2012 fiscal year, we revised our presentation to show our revenues from the oil & gas market sector separately. In addition, we changed the name of our "industrial and commercial" market sector to the "industrial" market sector. For comparative purposes, we reclassified the prior period's data to conform them to the current period's presentation.

(2) The operating results of Scott Wilson have been included in our consolidated results since the acquisition on September 10, 2010.

Consolidated revenues from our oil & gas market sector for the year ended December 30, 2011 increased compared with the year ended December 31, 2010. Our results reflect the sustained high level of oil prices, which resulted in increased capital spending by many of our clients in the oil and gas industry on the initial phases of projects that had previously been deferred, increasing demand for the front-end engineering and design services we provide. We also benefited from strong demand for the environmental and engineering services we provide to oil and gas clients through long-term MSAs. In addition, revenues increased due to high levels of activity on an assignment to construct a natural gas storage facility in Louisiana.

59-------------------------------------------------------------------------------- Table of Contents Power Year Ended Percentage December 30, December 31, Increase Increase (In millions, except percentages) 2011 2010 (Decrease) (Decrease) Power Market Sector: Infrastructure & Environment (1) $ 201.1 $ 156.5 $ 44.6 28.5 % Energy & Construction 925.5 952.7 (27.2 ) (2.9 %) Power total $ 1,126.6 $ 1,109.2 $ 17.4 1.6 % (1) The operating results of Scott Wilson have been included in our consolidated results since the acquisition on September 10, 2010.

Consolidated revenues from our power market sector for the year ended December 30, 2011 were $1.1 billion, an increase of $17.4 million, or 1.6%, compared with the year ended December 31, 2010. During fiscal year 2011, we benefited from demand for the engineering, compliance, permitting and remediation services we provide to utilities to assist them in meeting regulatory requirements and in mitigating the environmental impact of their operations. Revenues also increased from projects involving the development of new nuclear power facilities. By contrast, we experienced a decline in revenues from our work retrofitting coal-fired power plants with air quality control systems, due primarily to the completion of several major assignments. These projects experienced higher levels of activity and generated significant revenues during our 2010 fiscal year. Recently awarded emission control projects are in earlier design stages, which are typically characterized by lower levels of activity and generate lower revenues. We also experienced lower revenues from projects involving the replacement of major components at existing nuclear power plants to extend their efficiency and generating capacity, due largely to the completion of several major assignments.

60-------------------------------------------------------------------------------- Table of Contents Industrial Year Ended Percentage December 30, December 31, Increase Increase (In millions, except percentages) 2011 2010 (Decrease) (Decrease) Industrial Market Sector: (1) Infrastructure & Environment (2) $ 763.8 $ 553.4 $ 210.4 38.0 % Energy & Construction 461.5 403.6 57.9 14.3 % Industrial total $ 1,225.3 $ 957.0 $ 268.3 28.0 % (1) Historically, we have included revenues from the oil & gas market sector as part of our presentation of revenues from the industrial & commercial market sector. Effective at the beginning of our 2012 fiscal year, we revised our presentation to show our revenues from the oil & gas market sector separately. In addition, we changed the name of our "industrial and commercial" market sector to the "industrial" market sector. For comparative purposes, we reclassified the prior period's data to conform them to the current period's presentation.

(2) The operating results of Scott Wilson have been included in our consolidated results since the acquisition on September 10, 2010.

Consolidated revenues from our industrial and commercial market sector for the year ended December 30, 2011 were $1.9 billion, an increase of $275.3 million, or 16.8%, compared with the year ended December 31, 2010. During our 2011 fiscal year, revenues increased from the engineering and environmental services we provide under MSAs to multinational corporations to help them meet regulatory requirements and support their existing operations. In the manufacturing industry, we benefited from strong demand for facilities management services as our clients continued to outsource these services to help save costs and maximize the efficiency of their operations. Revenues also increased from engineering, environmental and construction assignments for mining clients. By contrast, we continued to experience a decline in revenues from major capital expenditure projects, as well as from the completion of several large-scale contracts that have not been replaced by comparable projects.

61-------------------------------------------------------------------------------- Table of Contents CONSOLIDATED RESULTS BY DIVISION The Year Ended December 30, 2011 Compared with the Year Ended December 31, 2010 Year Ended Percentage December 30, December 31, Increase Increase (In millions, except percentages and per share amounts) 2011 (1) 2010 (2) (Decrease) (Decrease) Revenues $ 9,545.0 $ 9,177.1 $ 367.9 4.0 % Cost of revenues (8,988.8 ) (8,609.5 ) 379.3 (4.4 %) General and administrative expenses (79.5 ) (71.0 ) 8.5 (12.0 %) Acquisition-related expenses (1.0 ) (11.9 ) (10.9 ) 91.6 % Restructuring costs (5.5 ) (10.6 ) (5.1 ) 48.1 % Goodwill impairment (825.8 ) - 825.8 N/M Equity in income of unconsolidated joint ventures 132.2 70.3 61.9 88.1 % Operating income (loss) (223.4 ) 544.4 (767.8 ) (141.0 %) Interest expense (22.1 ) (30.6 ) (8.5 ) 27.8 % Income (loss) before income taxes (245.5 ) 513.8 (759.3 ) (147.8 %) Income tax expense (91.8 ) (127.6 ) (35.8 ) (28.1 %) Net income (loss) including noncontrolling interests (337.3 ) 386.2 (723.5 ) (187.3 %) Noncontrolling interests in income of consolidated subsidiaries (128.5 ) (98.3 ) 30.2 30.7 % Net income attributable to URS $ (465.8 ) $ 287.9 $ (753.7 ) (261.8 %) $ Diluted earnings per share $ (6.03 ) $ 3.54 $ (9.57 ) (270.3 %) (1) The operating results of Apptis have been included in our consolidated results since the acquisition on June 1, 2011.

(2) The operating results of Scott Wilson have been included in our consolidated results since the acquisition on September 10, 2010.

62-------------------------------------------------------------------------------- Table of Contents Revenues Federal Infrastructure & Services Energy & (In millions, except percentages) Environment (1) (2) Construction Eliminations Total Year ended December 30, 2011 $ 3,760.9 $ 2,695.4 $ 3,251.1 $ (162.4 ) $ 9,545.0 December 31, 2010 3,248.5 2,582.8 3,420.6 (74.8 ) 9,177.1 Increase (decrease) 512.4 112.6 (169.5 ) 87.6 367.9 Percentage increase (decrease) 15.8 % 4.4 % (5.0 %) 117.1 % 4.0 % (1) The operating results of Scott Wilson have been included in our consolidated results since the acquisition on September 10, 2010.

(2) The operating results of Apptis have been included in our consolidated results since the acquisition on June 1, 2011.

The revenues reported are presented prior to the elimination of inter-segment transactions. Our analysis of the changes in revenues by reporting segment is discussed below.

The Infrastructure & Environment Division's Revenues The Infrastructure & Environment Division's revenues increased for the year ended December 30, 2011 compared to the year ended December 31, 2010.

For the 2011 fiscal year, Scott Wilson, which we acquired in September 2010, generated $451.1 million in revenues. For the 2010 fiscal year, Scott Wilson generated $150.4 million in revenues, beginning on the date of the acquisition through December 31, 2010. During the 2011 year, we benefited from the growth of our infrastructure business outside North America as a result of the acquisition of Scott Wilson. Revenues increased from the services we provide to expand and modernize surface and rail transportation infrastructure, and ports and harbors. In addition, we continued to experience steady demand for the disaster response services we provide to the Federal Emergency Management Agency, particularly following tornado damage in Alabama and flooding caused by Hurricane Irene. We also benefited from strong demand for the engineering and environmental work we provide to multinational corporations under MSAs. The sustained level of oil prices is causing many clients in the oil and gas industry to move forward with the initial phases of projects that had previously been deferred. Revenues also increased from our work supporting mining clients. As a result of higher commodity prices for metals and mineral resources, many of our mining clients are expanding their operations to meet growing demand.

By contrast, revenues declined from the engineering and construction services we provide to the DOD due to the completion of large task orders under existing contracts to design and build military facilities at installations in the U.S.

and overseas. During the 2010 fiscal year, these task orders experienced great levels of activities and generated higher revenues than similar design-build assignments that were in progress during the 2011 fiscal year.

63-------------------------------------------------------------------------------- Table of Contents The Federal Services Division's Revenues The Federal Services Division's revenues increased for the year ended December 30, 2011 compared to the year ended December 31, 2010. The increase was primarily due to the growth of our federal IT services business as a result of the acquisition of Apptis, which generated $180.0 million in revenues during the year ended December 30, 2011. Revenues also increased from our work managing chemical demilitarization programs in the U.S., as well as from the global threat reduction services we provide to secure and eliminate weapons of mass destruction at locations worldwide. These increases were partially offset by a decrease in revenues from the services we provide to modernize aging weapons systems, develop new systems, and maintain and repair military vehicles and aircraft. Revenues also declined from the operations and installations management support we provide at military bases, test ranges and space flight centers. The decline in revenues from these activities was primarily due to delays in the award of new contracts and task orders under existing contracts, as well as decreased U.S. military activity in the Middle East.

The Energy & Construction Division's Revenues The Energy & Construction Division's revenues for the year ended December 30, 2011 decreased compared with the year ended December 31, 2010.

The decline in revenues was primarily due to the completion of new fossil power generation projects, which accounted for a decrease of $124.7 million; a $53.2 million decrease at an ongoing air quality control services project; a decrease in major component replacement projects and other related services performed at nuclear power plants, which accounted for a decrease of $57.5 million; and a $74.5 million decrease due to the completion of projects involving the retrofit of coal-fired power plants with clean air technologies. We also experienced a $119.8 million decrease on a levee construction project, which was nearing completion in the 2011 fiscal year, and a $32.6 million decrease as a result of lower activity at an ongoing dam construction project. In addition, revenues declined $76.6 million due to the completion and wind down of oil and gas and mining projects.

These declines were partially offset by revenue increases from both new and ongoing projects for the DOE and for clients in the power and manufacturing industries. We experienced higher revenues on a DOE contract to provide nuclear management services for the treatment and disposal of high-level liquid waste, which accounted for an increase of $97.7 million; a $40.2 million increase in revenues due to increased activity on a DOE deactivation, demolition and removal project; and a $30.0 million increase in revenues on a DOE nuclear cleanup project. We also experienced a $217.8 million increase from new air quality control and transmission and distribution projects; a $61.6 million increase due to higher activity at a new nuclear power generation project; and a $23.5 million increase at an ongoing gas power generation plant. Revenues also increased $35.3 million, as a result of higher activity on an engineering and construction project at a manufacturing facility.

64-------------------------------------------------------------------------------- Table of Contents Cost of Revenues Infrastructure & Federal Energy & (In millions, except percentages) Environment (1) Services (2) Construction Eliminations Total Year ended December 30, 2011 $ (3,537.2 ) $ (2,503.9 ) $ (3,110.1 ) $ 162.4 $ (8,988.8 ) December 31, 2010 (3,006.0 ) (2,423.1 ) (3,255.2 ) 74.8 (8,609.5 ) Increase (decrease) 531.2 80.8 (145.1 ) 87.6 379.3 Percentage increase (decrease) 17.7 % 3.3 % (4.5 %) 117.1 % 4.4 % (1) The operating results of Scott Wilson have been included in our consolidated results since the acquisition on September 10, 2010.

(2) The operating results of Apptis have been included in our consolidated results since the acquisition on June 1, 2011.

Our consolidated cost of revenues, which consists of labor, subcontractor costs, and other expenses related to projects and the services we provided to our clients, increased by 4.4% for the year ended December 30, 2011 compared with the year ended December 31, 2010. Because our revenues are primarily project-based, the factors that generally caused revenues to increase resulted in a corresponding increase in our cost of revenues. Consolidated cost of revenues as a percent of revenues increased from 93.8% for the year ended December 31, 2010 to 94.2% for the year ended December 30, 2011. See "Operating Income" for further discussion.

General and Administrative Expenses Our consolidated G&A expenses for the year ended December 30, 2011 increased by 12.0% compared with the year ended December 31, 2010. Consolidated G&A expenses as a percent of revenues remained the same at 0.8% for the years ended December 30, 2011 and December 31, 2010. The increase was primarily caused by a $6.6 million increase in expenses for employee benefits and the $2.8 million reversal, in the second quarter of fiscal year 2010, of a foreign payroll tax accrual related to a prior acquisition. These increases were partially offset by $2.2 million of net foreign currency gains recorded in fiscal year 2011.

Acquisition-related Expenses Our consolidated acquisition-related expenses for the years ended December 30, 2011 and December 31, 2010 were $1.0 million and $11.9 million, respectively. We incurred these expenses in connection with our acquisitions of Apptis and Scott Wilson, which were completed on June 1, 2011 and September 10, 2010, respectively. These expenses included legal fees, bank fees, consultation fees, travel expenses, and other miscellaneous direct and incremental administrative expenses associated with the acquisitions.

Restructuring Costs Restructuring costs for the year ended December 30, 2011 and December 31, 2010 were $5.5 million and $10.6 million, respectively, which consisted primarily of costs for severance and associated benefits. The majority of the restructuring costs resulted from the integration of Scott Wilson into our existing U.K. and European business and necessary responses to reductions in market opportunities in Europe.

65-------------------------------------------------------------------------------- Table of Contents Goodwill Impairment During the year ended December 30, 2011, we completed our goodwill impairment review and recognized an impairment charge of $825.8 million affecting five of our six reporting units. The decline in the fair value of our goodwill was due to the effects of the adverse equity market conditions that caused a decrease in market multiples and the decline in our stock price during the third quarter of 2011, which resulted in a decrease in our market capitalization. On a net, after-tax basis, this resulted in decreases to net income and diluted EPS of $732.2 million and $9.46, respectively, for the year ended December 30, 2011.

Equity in Income of Unconsolidated Joint Ventures Infrastructure & Federal Energy & (In millions, except percentages) Environment (1) Services (2) Construction Total Year ended December 30, 2011 $ 3.9 $ 6.2 $ 122.1 $ 132.2 December 31, 2010 2.9 5.9 61.5 70.3 Increase (decrease) 1.0 0.3 60.6 61.9 Percentage increase (decrease) 34.5 % 5.1 % 98.5 % 88.1 % (1) The operating results of Scott Wilson have been included in our consolidated results since the acquisition on September 10, 2010.

(2) The operating results of Apptis have been included in our consolidated results since the acquisition on June 1, 2011.

Our consolidated equity in income of unconsolidated joint ventures for the year ended December 30, 2011 increased by $61.9 million or 88.1% compared with the year ended December 31, 2010. The increase was primarily due to a $34.5 million increase resulting from a $25.0 million charge taken in the comparable period in fiscal 2010 as compared to a $9.5 million favorable settlement recovery on a Southern California highway project recognized in fiscal year 2011, and a $21.6 million increase resulting from higher performance-based earnings on our nuclear management, operations and cleanup projects in the U.K.

66-------------------------------------------------------------------------------- Table of Contents Operating Income (Loss) Federal Infrastructure & Services Energy & (In millions, except percentages) Environment (1) (2) Construction Corporate Total Year ended December 30, 2011 $ 222.0 $ (151.5 ) $ (214.4 ) $ (79.5 ) $ (223.4 ) December 31, 2010 222.9 165.6 226.9 $ (71.0 ) 544.4 Increase (decrease) (0.9 ) (317.1 ) (441.3 ) $ 8.5 (767.8 ) Percentage increase (decrease) (0.4 %) (191.5 %) (194.5 %) 12.0 % (141.0 %) (1) The operating results of Scott Wilson have been included in our consolidated results since the acquisition on September 10, 2010.

(2) The operating results of Apptis have been included in our consolidated results since the acquisition on June 1, 2011.

Our consolidated operating loss for the year ended December 30, 2011 was $223.4 million, a decrease of $767.8 million or 141.0% compared with operating income for the year ended December 31, 2010.

The operating loss for the year ended December 30, 2011 was the result of an $825.8 million goodwill impairment charge. This charge was partially offset by operating income resulting from the increases in revenues and equity in income of unconsolidated joint ventures described above. See the detailed discussion in operating income (loss) by segment below.

The Infrastructure & Environment Division's Operating Income Operating income as a percentage of revenues was 5.9% for the year ended December 30, 2011 compared to 6.9% for the year ended December 31, 2010. The decrease in operating income was caused primarily by our European and Middle Eastern operations, particularly in the U.K. Lower European revenues resulted in decreases in the utilization of our staff and increases in systems integration-related costs, which caused decreases in our operating income. These decreases were partially offset by a reduction in restructuring costs of $5.1 million and a reduction in acquisition expenses of $11.8 million that we incurred during the corresponding period last year related to our acquisition of Scott Wilson. Overhead costs including acquisition-related expenses and restructuring costs as a percentage of revenues decreased from 32.0% to 31.2% for the years ended December 30, 2011 and December 31, 2010.

The Federal Services Division's Operating Income (Loss) Operating income (loss) as a percentage of revenues was (5.6)% for the year ended December 30, 2011, of which the goodwill impairment charge amounted to (12.9)%, compared to 6.4% for the year ended December 31, 2010. The loss was the result of a $348.3 million goodwill impairment charge taken during fiscal year 2011. In addition to this charge, delayed awards of new task orders under existing contracts also contributed to the decrease in operating income. These decreases were partially offset by increases in operating income resulting from our acquisition of Apptis in June 2011 and the recognition of performance-based incentive fees on various projects.

67-------------------------------------------------------------------------------- Table of Contents The Energy & Construction Division's Operating Income (Loss) Operating income (loss) as a percentage of revenues was (6.6)% for the year ended December 30, 2011 compared to 6.6% for the year ended December 31, 2010.

The loss was the result of a $477.5 million goodwill impairment charge recorded during fiscal year 2011. The following results partially offset the goodwill impairment charge: · a $34.5 million increase resulting from a $25.0 million charge taken in the comparable period in fiscal 2010 as compared to a $9.5 million favorable settlement recovery on a Southern California highway project recognized in fiscal 2011; · a $21.6 million increase resulting from higher performance-based earnings on our nuclear management, operations and cleanup projects in the U.K.; · a $17.4 million increase due to higher performance-based earnings on a nuclear cleanup project; · an $11.9 million increase resulting from higher activity on a nuclear management services project; · an $11.9 million increase resulting from close-out and settlement of suspended mining projects in Jamaica; and · a $10.7 million increase resulting from our share of cost savings on an air quality control services project.

Other items reducing operating income were · a $13.6 million decrease resulting from a higher loss recorded in the current year compared to the prior year on a common sulfur project; · a $30.6 million decrease associated with completed projects; · a $10.0 million decrease resulting from a one-time schedule incentive earned in the prior year on a clean air project; · a $10.9 million decrease in major component replacement projects and other related services performed at nuclear power plants; and · a $10.9 million decrease resulting from a recovery in fiscal year 2010 related to legacy workers' compensation and general liability insurance programs that did not recur in fiscal year 2011.

68-------------------------------------------------------------------------------- Table of Contents Interest Expense Our consolidated interest expense for the year ended December 30, 2011 decreased by $8.5 million or 27.8% compared with the year ended December 31, 2010. This decrease was caused primarily by $7.8 million of interest expense we incurred in fiscal year 2010 on a floating-for-fixed interest rate swap, which matured on December 31, 2010. We did not have a similar interest rate instrument in 2011. The decrease was partially offset by a $2.9 million charge to write-off prepaid financing fees and debt issuance costs in connection with the extinguishment of our 2007 Credit Facility during fiscal year 2011.

Income Tax Expense Our effective income tax rates for the years ended December 30, 2011 and December 31, 2010 were (37.4%) and 24.8%, respectively. See further discussion in the "Income Tax Expense" in the Liquidity and Capital Resources section below.

Noncontrolling Interests in Income of Consolidated Subsidiaries Our noncontrolling interests in income of consolidated subsidiaries for the year ended December 30, 2011 increased by $30.2 million or 30.7% compared with the year ended December 31, 2010. The increase in noncontrolling interests in income of consolidated subsidiaries was primarily due to a $12.2 million increase resulting from higher earnings on the nuclear management, operations and cleanup projects in the U.K., a $10.3 million increase in higher earnings on a DOE nuclear cleanup project, a $6.2 million increase in higher earnings on a levee construction project and a $5.7 million increase in earnings resulting from higher activity on a DOE nuclear management project for the treatment of high-level liquid waste. These increases were partially offset by a $5.7 million decrease in major component replacement projects and other related services performed at nuclear power plants.

69-------------------------------------------------------------------------------- Table of Contents LIQUIDITY AND CAPITAL RESOURCES Year Ended December 28, December 30, December 31, (In millions) 2012 2011 2010Cash flows from operating activities $ 430.2 $ 505.9 $ 526.4 Cash flows from investing activities (1,446.6 ) (348.1 ) (299.8 ) Cash flows from financing activities 892.3 (294.3 ) (375.1 ) Overview Our primary sources of liquidity are collections of accounts receivable from our clients, dividends from our unconsolidated joint ventures and borrowings related to our Senior Notes and lines of credit. Our primary uses of cash are to fund working capital, acquisitions, income tax payments, and capital expenditures; to service our debt; to pay dividends; to repurchase our common stock; and to make distributions to the noncontrolling interests in our consolidated joint ventures.

Our cash flows from operations are primarily impacted by fluctuations in working capital requirements, which are affected by numerous factors, including the billing and payment terms of our contracts, the stage of completion of contracts performed by us, the timing of payments to vendors, subcontractors, and joint ventures, and the changes in income tax and interest payments, as well as unforeseen events or issues that may have an impact on our working capital.

Liquidity Cash and cash equivalents include all highly liquid investments with maturities of 90 days or less at the date of purchase, including interest-bearing bank deposits and money market funds. At December 28, 2012 and December 30, 2011, restricted cash was $17.1 million and $21.0 million, respectively, which amounts were included in "Other current assets" on our Consolidated Balance Sheets. At December 28, 2012 and December 30, 2011, cash and cash equivalents included $80.1 million and $91.4 million, respectively, of cash held by our consolidated joint ventures, which is available only to fund activities and obligations related to the joint ventures.

Accounts receivable and costs and accrued earnings in excess of billings on contracts (also referred to as "Unbilled Accounts Receivable") represent our primary sources of cash inflows from operations. Unbilled Accounts Receivable represents amounts that will be billed to clients as soon as invoice support can be assembled, reviewed and provided to our clients, or when specific contractual billing milestones are achieved. In some cases, Unbilled Accounts Receivable may not be billable for periods generally extending from two to six months and, occasionally, beyond a year. As of December 28, 2012 and December 30, 2011, $264.9 million and $185.0 million, respectively, of Unbilled Accounts Receivable are not expected to become billable within twelve months of the balance sheet date and, as a result, are included as a component of "Other long-term assets." As of December 28, 2012 and December 30, 2011, significant unapproved change orders and claims, which are included in Unbilled Accounts Receivable, collectively represented approximately 3% and 2%, respectively, of our gross accounts receivable and Unbilled Accounts Receivable.

Net Accounts Receivable, which is comprised of accounts receivable and the current portion of Unbilled Accounts Receivable, net of receivable allowances, at December 28, 2012 was $2.9 billion, an increase of $665.8 million, or 30.2% over the balance at December 30, 2011. The increase was primarily the result of $537.8 million from the Flint acquisition. The remaining difference relates to normal flows within the billing cycle.

All accounts receivable and Unbilled Accounts Receivable are evaluated on a regular basis to assess the risk of collectability and allowances are provided as deemed appropriate. Based on the nature of our customer base, including U.S.

federal, state and local governments and large reputable companies, and contracts, we have not historically experienced significant write-offs related to receivables and Unbilled Accounts Receivable. The size of our allowance for uncollectible receivables as a percentage of the combined totals of our accounts receivable and Unbilled Accounts Receivable is indicative of our history of successfully billing and collecting from our clients.

70-------------------------------------------------------------------------------- Table of Contents As of December 28, 2012 and December 30, 2011, our receivable allowances represented 2.37% and 1.92%, respectively, of the combined total accounts receivable and the current portion of Unbilled Accounts Receivable. We believe that our allowance for doubtful accounts receivable as of December 28, 2012 is adequate. We have placed significant emphasis on collection efforts and continually monitor our receivables allowance. However, future economic conditions may adversely affect the ability of some of our clients to make payments or the timeliness of their payments; consequently, it may also affect our ability to consistently collect cash from our clients to meet our operating needs. The other significant factors that typically affect our realization of our accounts receivable include the billing and payment terms of our contracts, as well as the stage of completion of our performance under the contracts. Our operating cash flows may also be affected by changes in contract terms or the timing of advance payments to our joint ventures, partnerships and partially-owned limited liability companies relative to the contract collection cycle. In addition, substantial advance payments or billings in excess of costs also have an impact on our liquidity. Billings in excess of costs as of December 28, 2012 and December 30, 2011 were $289.1 million and $310.8 million, respectively.

We use Days Sales Outstanding ("DSO") to monitor the average time, in days, that it takes us to convert our accounts receivable into cash. DSO also is a useful tool for investors to measure our liquidity and understand our average collection period. We calculate DSO by dividing net accounts receivable, less billings in excess of costs and accrued earnings on contracts as of the end of the quarter by the amount of revenues recognized during the quarter, and multiplying the result of that calculation by the number of days in that quarter. We included the non-current amounts in our calculation of DSO and the ratio of accounts receivable to revenues. Our DSO increased from 79 days as of December 30, 2011 to 87 days as of December 28, 2012.

We also analyze the ratio of our accounts receivable to quarterly revenues (the "Ratio"), which changed from 86.8% at December 30, 2011 to 95.7% at December 28, 2012. We calculate this ratio by dividing net accounts receivable less billings in excess of costs and accrued earnings on contracts as of the end of the quarter by the amount of revenues recognized during the quarter.

The factors that affect the Ratio also have the same effect on DSO. The increases in the Ratio, and therefore the increases in DSO, occurred primarily for the following reasons: · Accruals of amounts from performance-based incentives under long-term U.S.

federal government contracts added 4.3% to our ratio of accounts receivable to revenues for the quarter ended December 30, 2011 and 8.1% for the quarter ended December 28, 2012. These amounts were included in Unbilled Accounts Receivable and they become billable as provided under the terms of the contracts to which they relate. We do not expect to bill for these incentives until 2013 and beyond. Our Unbilled Accounts Receivable included amounts earned under milestone payment clauses, which provided for payments to be received beyond a year from the date service occurs. Based on our historical experience, we generally consider the collection risk related to these amounts to be low.

· Other, smaller increases in the ratio of accounts receivable to revenues were caused by: o Accruals related to reimbursement under U.S. federal government contracts for employee "stay-and-perform" incentive payments; o Receivables related to activity on a DOE deactivation, demolition, and removal project; and o Adjustments on some U.S. federal government contracts from bi-monthly to monthly billing cycles, U.S. federal government agency billing requirement changes and invoice reviews by the DCAA, which have caused delays and re-billings.

We believe that we have sufficient resources to fund our operating and capital expenditure requirements, to pay income taxes, and to service our debt for at least the next twelve months. In the ordinary course of our business, we may experience various loss contingencies including, but not limited to, the pending legal proceedings identified in Note 17, "Commitments and Contingencies," to our "Consolidated Financial Statements and Supplementary Data" included under Item 8 of this report, which may adversely affect our liquidity and capital resources.

We have determined that the restricted net assets as defined by Rule 4-08(e)(3) of Regulation S-X are less than 25% of our consolidated net assets.

71-------------------------------------------------------------------------------- Table of Contents Acquisition On May 14, 2012, we acquired the outstanding common shares of Flint for C$25.00 per share in cash, or C$1.24 billion (US$1.24 billion based on the exchange rate on the date of acquisition) and paid $110.3 million of Flint's debt prior to the closing of the transaction in exchange for a promissory note from Flint. On the date of acquisition, Flint had outstanding Canadian notes with a face value of C$175.0 million (US$175.0 million), in addition to $31.6 million of other indebtedness.

On March 15, 2012, we issued two Senior Notes with an aggregate principal amount of $1.0 billion. We used the net proceeds from the notes together with borrowings from our 2011 Credit Facility to finance our acquisition of Flint. See Note 10, "Indebtedness," to our "Consolidated Financial Statements and Supplementary Data" included under Item 8 of this report, for more information regarding the Senior Notes.

Dividend Program On February 24, 2012, our Board of Directors approved the initiation of a quarterly cash dividend program. Our Board of Directors has declared the following dividends: Total Dividend Record Estimated Payment Declaration Date Per Share Date Amount Date (In millions, except per share data) March 16, February 24, 2012 $ 0.20 2012 $ 15.2 April 6, 2012 June 15, May 4, 2012 $ 0.20 2012 $ 15.4 July 6, 2012 September August 3, 2012 $ 0.20 14, 2012 $ 15.4 October 5, 2012 December 14, November 2, 2012 $ 0.20 2012 $ 15.4 January 4, 2013 On February 22, 2013, our Board of Directors approved the continuation of this program and authorized a $0.21 per share quarterly dividend. Future dividends are subject to approval by our Board of Directors or the Audit Committee of the Board of Directors.

Operating Activities The decrease in cash flows from operating activities for the year ended December 28, 2012, compared to the year ended December 30, 2011, was primarily due to the timing of billings, collections and advance payments from clients on accounts receivables, employer contribution payments to our 401(k) plan, project incentive awards that were recognized but are not currently billable, and an increase in interest payments and acquisition expenses, partially offset by a decrease in income tax payments.

In 2011, we merged the Energy & Construction Division's 401(k) plan into the company-wide 401(k) plan and the timing of employer contributions was shifted from a bi-weekly basis to an annual basis. Prior to the merger of the plans, we generally made the employer contributions for the Energy & Construction Division's 401(k) plan within the same fiscal year in which the benefits were earned. Under the merged plan, we expect to pay the contributions in the first quarter following the end of the fiscal year. Due to the difference in timing of contributions made, we paid $37.5 million more in contributions during the year ended December 28, 2012 compared to the same period last year. If the plans were not merged, the majority of these contributions would have been made in 2011.

The decrease in cash flows from operating activities for the year ended December 30, 2011, compared to the year ended December 31, 2010, was primarily due to the timing of: dividend distributions from our unconsolidated joint ventures, collections from clients on accounts receivable, advance project payments from clients, project performance payments, and vendor and subcontractor payments. In addition, we made larger income tax payments.

During the first quarter of 2013, we expect to make estimated payments of $135.2 million to pension, post-retirement, defined contribution and multiemployer pension plans and incentive payments.

72-------------------------------------------------------------------------------- Table of Contents Investing Activities Cash flows used for investing activities of $1.4 billion during the year ended December 28, 2012 consisted of the following significant activities: · payments for business acquisition, net of cash acquired, of $1.3 billion; and · capital expenditures, excluding purchases financed through capital leases and equipment notes, of $125.4 million.

These cash flows were partially offset by: · proceeds from disposal of property and equipment of $25.3 million, including the residual payment received on the close out and settlement of mining projects in Jamaica.

Cash flows used for investing activities of $348.1 million during the year ended December 30, 2011 consisted of the following significant activities: · payments for business acquisition, net of cash acquired, of $282.1 million; · capital expenditures, excluding purchases financed through capital leases and equipment notes, of $67.5 million; and · disbursements related to advances to unconsolidated joint ventures of $19.6 million.

Cash flows used for investing activities of $299.8 million during the year ended December 31, 2010 consisted of the following significant activities: · payments for business acquisition, net of cash acquired, of $291.7 million; · capital expenditures, excluding purchases financed through capital leases and equipment notes, of $45.2 million; and · $16.1 million in net change in restricted cash balance primarily due to restrictions on cash balance of $28.0 million that collateralize the five-year loan notes that we issued to shareholders of Scott Wilson as an alternative to cash consideration, partially offset by the removal of restrictions on $11.9 million in cash held at a project.

These cash flows were partially offset by: · maturity of short-term investments of $30.2 million; and · consolidation of joint ventures, which resulted in a $20.7 million increase to the cash balance at the beginning of our 2010 fiscal year.

For fiscal year 2013, we expect to incur approximately $193 million in capital expenditures, a portion of which will be financed through capital leases or equipment notes.

73-------------------------------------------------------------------------------- Table of Contents Financing Activities Cash flows generated from financing activities of $892.3 million during the year ended December 28, 2012 consisted of the following significant activities: · proceeds of our Senior Notes, net of debt discount and issuance costs, of $990.1 million; · net borrowings from our revolving line of credit of $78.0 million; and · net change in overdrafts of $54.5 million.

These cash flows were partially offset by: · distributions to noncontrolling interests of consolidated joint ventures of $83.8 million; · dividend payments of $44.7 million; · repurchases of our common stock of $40.0 million; and · payment of $30.0 million of the term loan under our 2011 Credit Facility.

Cash flows used for financing activities of $294.3 million during the year ended December 30, 2011 consisted of the following significant activities: · payment of all outstanding indebtedness under our 2007 Credit Facility, which included outstanding term loans of $625.0 million and a drawn balance on our revolving line of credit in the amount of $50.0 million; · repurchases of our common stock of $242.8 million; · distributions to noncontrolling interests of consolidated joint ventures of $111.7 million; and · net change in overdrafts of $18.0 million.

These cash flows were partially offset by: · a term loan borrowing from our 2011 Credit Facility of $700.0 million; and · net borrowings from our revolving line of credit of $72.9 million under our 2011 Credit Facility.

Cash flows used for financing activities of $375.1 million during the year ended December 31, 2010 consisted of the following significant activities: · payments of $150.0 million of the term loans under our 2007 Credit Facility; · repurchases of our common stock of $128.3 million; and · distributions to noncontrolling interests of $107.2 million.

74-------------------------------------------------------------------------------- Table of Contents Contractual Obligations and Commitments The following table contains information about our contractual obligations and commercial commitments as of December 28, 2012: Contractual Obligations Payments and Commitments Due by Period (Debt payments include principal only) Less Than After (In millions) Total 1 Year 1-3 Years 4-5 Years 5 Years Other As of December 28, 2012: 2011 Credit Facility (1) $ 670.0 $ 18.1 $ 126.9 $ 525.0 $ - $ - 3.85% Senior Notes (2) 400.0 - - 400.0 - - 5.00% Senior Notes (2) 600.0 - - - 600.0 - 7.50% Canadian Notes (2) 175.8 - - - 175.8 - Revolving line of credit 100.5 - - 100.5 - - Capital lease obligations (1) 59.2 28.5 20.0 10.7 - - Notes payable, foreign credit lines and other indebtedness 35.5 26.3 7.0 2.2 - - Total debt 2,041.0 72.9 153.9 1,038.4 775.8 - Operating lease obligations (3) 801.0 224.9 267.7 145.5 162.9 - Pension and other retirement plans funding requirements (4) 631.5 218.8 97.4 85.7 229.6 - Interest (5) 502.0 74.9 147.6 124.7 154.8 - Dividends payable (6) 16.7 15.6 0.9 0.2 - - Purchase obligations (7) 26.1 15.5 10.4 0.2 - - Asset retirement obligations (8) 13.8 1.9 2.6 3.9 5.4 - Other contractual obligations (9) 78.0 65.5 - - - 12.5 Total contractual obligations $ 4,110.1 $ 690.0 $ 680.5 $ 1,398.6 $ 1,328.5 $ 12.5 (1) Amounts shown exclude unamortized debt issuance costs of $3.7 million for our 2011 Credit Facility. For capital lease obligations, amounts shown exclude interest of $3.1 million. For information regarding events that could accelerate the due dates of these payments, see "2011 Credit Facility" section below.

(2) Amounts shown exclude unamortized discount for the 3.85% and 5.00% Senior Notes of $1.0 million, and unamortized premium for the 7.50% Canadian Notes of $28.0 million. For information regarding events that could accelerate these payments, see "Senior Notes and Canadian Notes" section below.

(3) Operating leases are predominantly real estate leases.

(4) Amounts consist of estimated pension and other retirement plan funding requirements, to the extent that we were able to develop reasonable estimates, for various defined benefit, post-retirement, defined contribution, multiemployer, and other retirement plans. Estimates do not include potential multiemployer plan termination or withdrawal amounts since we are unable to estimate the amount of contributions that could be required.

(5) Interest for the next five years, which excludes non-cash interest, is determined based on the current outstanding balance of our debt and payment schedule at the estimated interest rate.

(6) On February 24, 2012, our Board of Directors approved the initiation of a regular quarterly cash dividend program. Dividends for unvested restricted stock awards and units will be paid upon vesting. Future dividends are subject to approval by our Board of Directors or, pursuant to delegated authority, the Audit Committee of the Board.

(7) Purchase obligations consist primarily of software maintenance contracts.

(8) Asset retirement obligations represent the estimated costs of removing and restoring our leased properties to the original condition pursuant to our real estate lease agreements.

75-------------------------------------------------------------------------------- Table of Contents (9) Other contractual obligations include accrued discretionary and non-discretionary bonuses, net liabilities for anticipated settlements and interest on our tax liabilities, accrued benefits for our executives pursuant to their employment agreements, and our contractual obligations to joint ventures. Generally, it is not practicable to forecast or estimate the payment dates for the above-mentioned tax liabilities. Therefore, we included the estimated liabilities under "Other" above.

Off-balance Sheet Arrangements In the ordinary course of business, we may use off-balance sheet arrangements if we believe that such an arrangement would be an efficient way to lower our cost of capital or help us manage the overall risks of our business operations. We do not believe that such arrangements have had a material adverse effect on our financial position or our results of operations.

The following are our off-balance sheet arrangements: · Letters of credit and bank guarantees are used primarily to support project performance, insurance programs, bonding arrangements and real estate leases. We are required to reimburse the issuers of letters of credit and bank guarantees for any payments they make under the outstanding letters of credit or bank guarantees. Our credit facilities and banking arrangements cover the issuance of our standby letters of credit and bank guarantees that are critical for our normal operations. If we default on these credit facilities and banking arrangements, we would be unable to issue or renew standby letters of credit and bank guarantees, which would impair our ability to maintain normal operations. As of December 28, 2012, we had $132.0 million in standby letters of credit outstanding under our 2011 Credit Facility and $36.3 million in bank guarantees outstanding under foreign credit facilities and other banking arrangements with remaining availability of approximately $24 million.

· We have agreed to indemnify one of our joint venture partners up to $25.0 million for any potential losses, damages, and liabilities associated with lawsuits in relation to general and administrative services we provide to the joint venture. Currently, we have not been advised of any indemnified claims under this guarantee.

· We have guaranteed a letter of credit issued on behalf of one of our consolidated joint ventures. The total amount of the letter of credit was $0.9 million as of December 28, 2012.

· From time to time, we provide guarantees and indemnifications related to our services or work. If our services under a guaranteed or indemnified project are later determined to have resulted in a material defect or other material deficiency, then we may be responsible for monetary damages or other legal remedies. When sufficient information about claims on guaranteed or indemnified projects is available and monetary damages or other costs or losses are determined to be probable, we recognize such guarantee losses.

· In the ordinary course of business, we enter into various agreements providing performance assurances and guarantees to clients on behalf of certain unconsolidated subsidiaries, joint ventures, and other jointly executed contracts. We enter into these agreements primarily to support the project execution commitments of these entities. The potential payment amount of an outstanding performance guarantee is typically the remaining cost of work to be performed by or on behalf of third parties under engineering and construction contracts. However, we are not able to estimate other amounts that may be required to be paid in excess of estimated costs to complete contracts and, accordingly, the total potential payment amount under our outstanding performance guarantees cannot be estimated. For cost-plus contracts, amounts that may become payable pursuant to guarantee provisions are normally recoverable from the client for work performed under the contract. For lump sum or fixed-price contracts, this amount is the cost to complete the contracted work less amounts remaining to be billed to the client under the contract. Remaining billable amounts could be greater or less than the cost to complete. In those cases where costs exceed the remaining amounts payable under the contract, we may have recourse to third parties, such as owners, co-venturers, subcontractors or vendors, for claims.

76-------------------------------------------------------------------------------- Table of Contents · In the ordinary course of business, our clients may request that we obtain surety bonds in connection with contract performance obligations that are not required to be recorded in our Consolidated Balance Sheets. We are obligated to reimburse the issuer of our surety bonds for any payments made thereunder. Each of our commitments under performance bonds generally ends concurrently with the expiration of our related contractual obligation.

2011 Credit Facility As of December 28, 2012 and December 30, 2011, the outstanding balance of the term loan under our 2011 Credit Facility was $670.0 million and $700.0 million, respectively. As of December 28, 2012 and December 30, 2011, the interest rates applicable to the term loan were 1.71% and 1.80%, respectively. Loans outstanding under our 2011 Credit Facility bear interest, at our option, at the base rate or at the London Interbank Offered Rate ("LIBOR") plus, in each case, an applicable per annum margin. The applicable margin is determined based on the better of our debt ratings or our leverage ratio in accordance with a pricing grid. The interest rate at which we normally borrow is LIBOR plus 150 basis points.

Our 2011 Credit Facility will mature on October 19, 2016. We have an option to prepay the term loans at any time without penalty.

Under our 2011 Credit Facility, we are subject to financial covenants and other customary non-financial covenants. Our financial covenants include a maximum consolidated leverage ratio, which is calculated by dividing total debt by earnings before interest, taxes, depreciation and amortization ("EBITDA"), as defined below, and a minimum interest coverage ratio, which is calculated by dividing cash interest expense into EBITDA. Both calculations are based on the financial data of our most recent four fiscal quarters.

For purposes of our 2011 Credit Facility, consolidated EBITDA is defined as consolidated net income attributable to URS plus interest, depreciation and amortization expense, income tax expense, and other non-cash items (including impairments of goodwill or intangible assets). Consolidated EBITDA shall include pro-forma components of EBITDA attributable to any permitted acquisition consummated during the period of calculation.

Our 2011 Credit Facility contains restrictions, some of which apply only above specific thresholds, regarding indebtedness, liens, investments and acquisitions, contingent obligations, dividend payments, stock repurchases, asset sales, fundamental business changes, transactions with affiliates, and changes in fiscal year.

Our 2011 Credit Facility identifies various events of default and provides for acceleration of the obligations and exercise of other enforcement remedies upon default. Events of default include our failure to make payments under the credit facility; cross-defaults; a breach of financial, affirmative and negative covenants; a breach of representations and warranties; bankruptcy and other insolvency events; the existence of unsatisfied judgments and attachments; dissolution; other events relating to the Employee Retirement Income Security Act; a change in control and invalidity of loan documents.

Our 2011 Credit Facility is guaranteed by all of our existing and future domestic subsidiaries that, on an individual basis, represent more than 10% of either our consolidated domestic assets or consolidated domestic revenues. If necessary, additional domestic subsidiaries will be included so that assets and revenues of subsidiary guarantors are equal at all times to at least 80% of our consolidated domestic assets and consolidated domestic revenues of our available domestic subsidiaries.

We may use any future borrowings from our 2011 Credit Facility along with operating cash flows for general corporate purposes, including funding working capital, making capital expenditures, funding acquisitions, paying dividends and repurchasing our common stock.

We were in compliance with the covenants of our 2011 Credit Facility as of December 28, 2012.

77-------------------------------------------------------------------------------- Table of Contents Senior Notes and Canadian Notes On March 15, 2012, we issued in a private placement $400.0 million aggregate principal amount of 3.85% Senior Notes due on April 1, 2017 and $600.0 million aggregate principal amount of 5.00% Senior Notes due on April 1, 2022. As of December 28, 2012, the outstanding balance of the Senior Notes was $999.0 million, net of $1.0 million of discount.

Interest on the Senior Notes is payable semi-annually on April 1 and October 1 of each year beginning on October 1, 2012. The net proceeds of the Senior Notes were used to fund the acquisition of Flint. We may redeem the Senior Notes, in whole or in part, at any time and from time to time, at a price equal to 100% of the principal amount, plus a "make-whole" premium and accrued and unpaid interest as described in the indenture. In addition, we may redeem all or a portion of the 5.00% Senior Notes at any time on or after the date that is three months prior to the maturity date of those 5.00% Senior Notes, at a redemption price equal to 100% of the principal amount of the 5.00% Senior Notes to be redeemed. We may also, at our option, redeem the Senior Notes, in whole, at 100% of the principal amount and accrued and unpaid interest upon the occurrence of certain events that result in an obligation to pay additional amounts as a result of certain specified changes in tax law described in the indenture. Additionally, if a change of control triggering event occurs, as defined by the terms of the indenture, we will be required to offer to purchase the Senior Notes at a purchase price equal to 101% of the principal amount, plus accrued and unpaid interest, if any, to the date of the purchase. We are generally not limited under the indenture governing the Senior Notes in our ability to incur additional indebtedness provided we are in compliance with certain restrictive covenants, including restrictions on liens and restrictions on sale and leaseback transactions, and merger or sale of substantially all of our property and assets.

The Senior Notes are our general unsecured senior obligations and rank equally with our other existing and future unsecured senior indebtedness. The Senior Notes are fully and unconditionally guaranteed (the "Guarantees") by each of our current and future domestic subsidiaries that are guarantors under our 2011 Credit Facility or that are wholly owned domestic obligors or wholly owned domestic guarantors, individually or collectively, under any future indebtedness of our subsidiaries in excess of $100.0 million (the "Guarantors"). The Guarantees are the Guarantors' unsecured senior obligations and rank equally with the Guarantors' other existing and future unsecured senior indebtedness.

In connection with the sale of the Senior Notes, we entered into a registration rights agreement under which we agreed to file a registration statement with the SEC offering to exchange any privately placed Senior Notes with substantially similar notes, except that the newly exchanged notes will be unrestricted and freely tradable securities. We have agreed to use commercially reasonable efforts to cause the registration statement to be declared effective by the SEC and complete the exchange offer no later than March 15, 2013. We do not expect to complete our exchange offer until after March 15, 2013. After that date, we will be required to pay additional interest up to a maximum of 50 basis points to the holders of the Senior Notes until the exchange offer is completed.

On May 14, 2012, we guaranteed the Canadian Notes with an outstanding face value of C$175.0 million (US$175.0 million). The Canadian Notes mature on June 15, 2019 and bear interest at 7.5% per year, payable in equal installments semi-annually in arrears on June 15 and December 15 of each year. As of December 28, 2012, the outstanding balance of the Canadian Notes was $203.8 million, including $28.0 million of premium.

The Canadian Notes are Flint's direct senior unsecured obligations and rank pari passu, subject to statutory preferred exceptions, with URS' guarantee of that debt. Prior to June 15, 2014, we may redeem up to 35.0% of the principal amount of the outstanding Canadian Notes with the net cash proceeds of one or more qualified equity offerings at a redemption price equal to 107.5% of the principal amount of the Canadian Notes, provided that at least 65.0% of the aggregate principal amount of the Canadian Notes remain outstanding. We may also redeem the Canadian Notes prior to June 15, 2015 at a redemption price equal to 100.0% of the principal amount of the Canadian Notes plus an applicable premium. We may also redeem the Canadian Notes on or after June 15, 2015 at a redemption price equal to 103.8% of the principal amount if redeemed in the twelve-month period beginning June 15, 2015; at a redemption price equal to 101.9% of the principal amount if redeemed in the twelve-month period beginning June 15, 2016 and at a redemption price equal to 100.0% of the principal amount if redeemed in the period beginning June 15, 2017 before maturity.

78-------------------------------------------------------------------------------- Table of Contents Upon the occurrence of a change in control, Canadian Notes holders have a right to require that their Notes be redeemed at a cash price equal to 101.0% of the principal amount of the Canadian Notes. Our acquisition of Flint constituted a change in control under the Canadian Note indenture and, as a result, the holders of the Canadian Notes had the right to require that their Notes be redeemed. The Canadian Notes also contain covenants limiting our and some of our subsidiaries' ability to create liens and restricting them from amalgamating, consolidating or merging with or into or winding up or dissolving into another person or selling, leasing, transferring, conveying or otherwise disposing of or assigning all or substantially all of their assets. The Canadian Notes also contain covenants, which are suspended as long as the Canadian Notes have investment grade ratings, that would restrict us and some of our subsidiaries from making restricted payments, incurring indebtedness, selling assets and entering into transactions with affiliates. As of December 28, 2012, the Canadian Notes carried investment grade ratings.

We were in compliance with the covenants of our Senior Notes and Canadian Notes as of December 28, 2012.

Revolving Line of Credit Our revolving line of credit is used to fund daily operating cash needs and to support our standby letters of credit. In the ordinary course of business, the use of our revolving line of credit is a function of collection and disbursement activities. Our daily cash needs generally follow a predictable pattern that parallels our payroll cycles, which dictate, as necessary, our short-term borrowing requirements.

As of December 28, 2012 and December 30, 2011, we had outstanding balances of $100.5 million and $23.0 million, respectively, on our revolving line of credit. As of December 28, 2012, we had issued $132.0 million of letters of credit, leaving $767.5 million available under our revolving credit facility.

Year Ended December 28, December 30, December 31, (In millions, except percentages) 2012 2011 2010 Effective average interest rates paid on the revolving line of credit 1.9 % 1.3 % 3.0 % Average daily revolving line of credit balances $ 139.5 $ 25.9 $ 0.3 Maximum amounts outstanding at any point during the year $ 420.0 $ 104.6 $ 12.1 Other Indebtedness Notes payable, five-year loan notes, and foreign credit lines. As of December 28, 2012 and December 30, 2011, we had outstanding amounts of $35.5 million and $53.1 million, respectively, in notes payable, five-year loan notes, and foreign lines of credit. The weighted-average interest rates of the notes were approximately 4.68% and 4.04% as of December 28, 2012 and December 30, 2011, respectively. Notes payable primarily include notes used to finance the purchase of office equipment, computer equipment and furniture.

As of December 28, 2012 and December 30, 2011, we maintained several foreign credit lines with aggregate borrowing capacity of $50.8 million and $33.7 million, respectively, and had remaining borrowing capacity of $47.7 million and $23.2 million, respectively.

Capital Leases. As of December 28, 2012 and December 30, 2011, we had obligations under our capital leases of approximately $59.2 million and $27.3 million, respectively, consisting primarily of leases for office equipment, computer equipment, furniture, vehicles and automotive equipment, and construction equipment.

Operating Leases. As of December 28, 2012 and December 30, 2011, we had obligations under our operating leases of approximately $801.0 million and $650.2 million, respectively, consisting primarily of real estate leases.

79-------------------------------------------------------------------------------- Table of Contents Income Tax Expense As of December 28, 2012, our federal net operating loss ("NOL") carryovers were approximately $15.9 million. These federal NOL carryovers expire in years 2021 through 2025. In addition to the federal NOL carryovers, there are also state income tax NOL carryovers in various taxing jurisdictions of approximately $297.0 million. These state NOL carryovers expire in years 2013 through 2031. There are also foreign NOL carryovers in various jurisdictions of approximately $544.4 million. The majority of the foreign NOL carryovers have no expiration date. At December 28, 2012, the federal, state and foreign NOL carryovers resulted in a deferred tax asset of $132.2 million with a valuation allowance of $106.0 million established against this deferred tax asset. None of the remaining net deferred tax assets related to NOL carryovers is individually material and management believes that it is more likely than not they will be realized. Full recovery of our NOL carryovers will require that the appropriate legal entity generate taxable income in the future at least equal to the amount of the NOL carryovers within the applicable taxing jurisdiction.

As of December 28, 2012 and December 30, 2011, we have remaining tax-deductible goodwill of $223.2 million and $316.5 million, respectively, resulting from acquisitions. The amortization of this goodwill is deductible over various periods ranging up to 14 years. The tax deduction for goodwill for 2013 is expected to be approximately $85.5 million and is expected to be substantially lower beginning in 2015.

Valuation allowances for deferred tax assets are established when necessary to reduce deferred income tax assets to the amount expected to be realized. Based on expected future operating results, we believe that realization of deferred tax assets in excess of our valuation allowances is more likely than not.

We have indefinitely reinvested $499.1 million of undistributed earnings of our foreign operations outside of our U.S. tax jurisdiction as of December 28, 2012. No deferred tax liability has been recognized for the remittance of such earnings to the U.S. since it is our intention to utilize these earnings in our foreign operations. The determination of the amount of deferred taxes on these earnings is not practicable since the computation would depend on a number of factors that cannot be known unless a decision to repatriate the earnings is made.

The effective income tax rates for the years ended December 28, 2012, December 30, 2011, and December 31, 2010 are as follows: Year Ended Effective Income Tax Rates December 28, 2012 30.8 % December 30, 2011 (37.4) % December 31, 2010 24.8 % The 37.4% negative effective tax rate for the year ended December 30, 2011 differs from the statutory rate of 35% primarily due to the goodwill impairment charge taken during the year, a substantial portion of which is not deductible for tax purposes.

The effective income tax rate for the year ended December 31, 2010 is less than the statutory rate of 35% primarily due to a change in our indefinite reinvestment assertion during the year. During our fiscal year 2010, we determined that our plans to expand our international presence would require that we indefinitely reinvest the earnings of all of our foreign subsidiaries offshore, which resulted in the reversal of the net U.S. deferred tax liability on the undistributed earnings of all foreign subsidiaries. This benefit increased net income attributable to URS by $42.1 million.

On January 2, 2013, the American Taxpayer Relief Act of 2012 ("Act") was enacted. The Act provided tax relief for businesses by reinstating certain tax benefits and credits retroactively to January 1, 2012. There are several provisions of the Act that impact us, but not significantly. Income tax accounting rules require tax law changes to be recognized in the period of enactment; as such, the associated tax benefits of the Act will be recognized in our provision for income taxes in the first quarter of 2013.

80-------------------------------------------------------------------------------- Table of Contents No cash distributions were made from our foreign subsidiaries to their U.S.

shareholders in fiscal years 2010, 2011 or 2012.

As of December 28, 2012, December 30, 2011 and December 31, 2010, we had $15.4 million, $16.7 million and $21.5 million of unrecognized tax benefits, respectively. Included in the balance of unrecognized tax benefits at the end of fiscal year 2012 were $11.4 million of tax benefits, which, if recognized, would affect our effective tax rate. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: Year Ended December 28, December 30, December 31, (In millions) 2012 2011 2010Unrecognized tax benefits beginning balance $ 16.7 $ 21.5 $ 25.2 Gross increase - tax positions in prior years 1.2 2.7 1.1 Gross decrease - tax positions in prior years (1.2 ) (3.6 ) (1.5 ) Gross increase - current period tax positions 1.2 - 1.4 Settlements (0.2 ) (0.2 ) (0.2 ) Lapse of statute of limitations (2.4 ) (3.7 ) (5.3 ) Unrecognized tax benefits acquired in current year 0.1 - 0.8 Unrecognized tax benefits ending balance $ 15.4 $ 16.7 $ 21.5 We recognize accrued interest related to unrecognized tax benefits in interest expense and penalties as a component of tax expense. During the years ended December 28, 2012, December 30, 2011 and December 31, 2010, we recognized $(1.4) million, $(1.4) million and $1.5 million, respectively, in interest and penalties. We have accrued approximately $5.3 million, $6.7 million and $8.1 million in interest and penalties as of December 28, 2012, December 30, 2011 and December 31, 2010, respectively. With a few exceptions, in jurisdictions where our tax liability is immaterial, we are no longer subject to U.S. federal, state, local or foreign examinations by tax authorities for years before 2008.

It is reasonably possible that unrecognized tax benefits will decrease up to $2.7 million within the next twelve months as a result of the settlement of tax audits. The timing and amounts of these audit settlements are uncertain, but we do not expect any of these settlements to have a significant impact on our financial position or results of operations.

Other Comprehensive Income (Loss) Our other comprehensive income (loss), net of tax for the year ended December 28, 2012 was comprised of pension and post-retirement adjustments, and foreign currency translation adjustments. The 2012 pension and post-retirement adjustment of $26.6 million, net of tax, was caused primarily by a decrease in the discount rate employed in the actuarial assumptions. The 2012 foreign currency translation gain of $24.8 million resulted from the strengthening of the U.S. dollar against foreign currencies. See Note 18, "Other Comprehensive Income (Loss) and Accumulated Other Comprehensive Income (Loss)" to our "Consolidated Financial Statements and Supplementary Data" included under Item 8 of this report for more disclosure about our other comprehensive loss.

81-------------------------------------------------------------------------------- Table of Contents CRITICAL ACCOUNTING POLICIES AND ESTIMATES The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires us to make estimates and assumptions in the application of certain accounting policies that affect amounts reported in our consolidated financial statements and related footnotes included in Item 8 of this report. In preparing these financial statements, we have made our best estimates and judgments of certain amounts, after considering materiality. Application of these accounting policies, however, involves the exercise of judgment and the use of assumptions as to future uncertainties. Consequently, actual results could differ from our estimates, and these differences could be material.

The following are the accounting policies that we believe are most critical to an investor's understanding of our financial results and condition and that require complex judgments by management. There were no material changes to these critical accounting policies during the year ended December 28, 2012.

Consolidation of Variable Interest Entities We participate in joint ventures, which include partnerships and partially-owned limited liability companies to bid, negotiate and complete specific projects. We are required to consolidate these joint ventures if we hold the majority voting interest or if we meet the criteria under the variable interest model as described below.

A variable interest entity ("VIE") is an entity with one or more of the following characteristics (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional financial support; (b) as a group, the holders of the equity investment at risk lack the ability to make certain decisions, the obligation to absorb expected losses or the right to receive expected residual returns; or (c) the equity investors have voting rights that are not proportional to their economic interests.

Our VIEs may be funded through contributions, loans and/or advances from the joint venture partners or by advances and/or letters of credit provided by our clients. Our VIEs may be directly governed, managed, operated and administered by the joint venture partners. Others have no employees and, although these entities own and hold the contracts with the clients, the services required by the contracts are typically performed by the joint venture partners or by other subcontractors.

If we are determined to be the primary beneficiary of the VIE, we are required to consolidate it. We are considered to be the primary beneficiary if we have the power to direct the activities that most significantly impact the VIE's economic performance and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. In determining whether we are the primary beneficiary, we take into consideration the following: · Identifying the significant activities and the parties that would perform them; · Reviewing the governing board composition and participation ratio; · Determining the equity, profit and loss ratio; · Determining the management-sharing ratio; · Reviewing employment terms, including which joint venture partner provides the project manager; and · Reviewing the funding and operating agreements.

Examples of our significant activities include the following: · Engineering services; · Procurement services; · Construction; · Construction management; and · Operations and maintenance services.

82-------------------------------------------------------------------------------- Table of Contents Based on the above, if we determine that the power to direct the significant activities is shared by two or more joint venture parties, then there is no primary beneficiary and no party consolidates the VIE. In making the shared-power determination, we analyze the key contractual terms, governance, related party and de facto agency as they are defined in the accounting standard, and other arrangements to determine if the shared power exists.

We determined that we were the primary beneficiary of, and therefore, must consolidate 11 joint ventures in which we did not have a majority voting interest as of and for the year ended December 28, 2012.

Total revenues of these joint ventures for the year ended December 28, 2012 were less than 10% of our total consolidated revenues. The net impact of these joint ventures on segment revenues for the year ended December 28, 2012 was less than 15% of total segment revenues for each segment. There was no impact on our debt as a result of consolidating these joint ventures.

We perform a quarterly re-assessment of our status as primary beneficiary. This evaluation may result in a newly consolidated joint venture or in deconsolidating a previously consolidated joint venture. See Note 6, "Joint Ventures" to our "Consolidated Financial Statements and Supplementary Data" included under Item 8 of this report for further information on our VIEs.

Revenue Recognition We recognize revenues from engineering, construction and construction-related contracts using the percentage-of-completion method as project progress occurs. Service-related contracts, including operations and maintenance services and a variety of technical assistance services, are accounted for using the proportionate performance method as project progress occurs.

Percentage of Completion. Under the percentage-of-completion method, revenue is recognized as contract performance progresses. We estimate the progress towards completion to determine the amount of revenue and profit to recognize. We generally utilize a cost-to-cost approach in applying the percentage-of-completion method, where revenue is earned in proportion to total costs incurred, divided by total costs expected to be incurred. Costs are generally determined from actual hours of labor effort expended at per-hour labor rates calculated using a labor dollar multiplier that includes direct labor costs and allocable overhead costs. Direct non-labor costs are charged as incurred plus any mark-up permitted under the contract.

Under the percentage-of-completion method, recognition of profit is dependent upon the accuracy of a variety of estimates, including engineering progress, materials quantities, and achievement of milestones, incentives, penalty provisions, labor productivity, cost estimates and others. Such estimates are based on various professional judgments we make with respect to those factors and are subject to change as the project proceeds and new information becomes available.

Proportional Performance. Our service contracts are accounted for using the proportional performance method, under which revenue is recognized in proportion to the number of service activities performed, in proportion to the direct costs of performing the service activities, or evenly across the period of performance depending upon the nature of the services provided.

Revenues from all contracts may vary based on the actual number of labor hours worked and other actual contract costs incurred. If actual labor hours and other contract costs exceed the original estimate agreed to by our client, we generally obtain a change order, contract modification or successfully prevail in a claim in order to receive and recognize additional revenues relating to the additional costs (see "Change Orders and Claims" below).

If estimated total costs on any contract indicate a loss, we charge the entire estimated loss to operations in the period the loss becomes known. The cumulative effect of revisions to revenue, estimated costs to complete contracts, including penalties, incentive awards, change orders, claims, anticipated losses, and others are recorded in the accounting period in which the events indicating a loss or change in estimates are known and the loss can be reasonably estimated. Such revisions could occur at any time and the effects may be material.

83-------------------------------------------------------------------------------- Table of Contents We have a history of making reasonably dependable estimates of the extent of progress towards completion, contract revenue and contract completion costs on our long-term engineering and construction contracts. However, due to uncertainties inherent in the estimation process, it is possible that actual completion costs may vary from estimates.

Change Orders and Claims. Change orders and/or claims occur when changes are experienced once contract performance is underway, and may arise under any of the contract types described below.

Change orders are modifications of an original contract that effectively change the existing provisions of the contract. Change orders may include changes in specifications or designs, manner of performance, facilities, equipment, materials, sites and period of completion of the work. Either we or our clients may initiate change orders. Client agreement as to the terms of change orders is, in many cases, reached prior to work commencing; however, sometimes circumstances require that work progress without obtaining client agreement. Costs related to change orders are recognized as incurred. Revenues attributable to change orders that are unapproved as to price or scope are recognized to the extent that costs have been incurred if the amounts can be reliably estimated and their realization is probable. Revenues in excess of the costs attributable to change orders that are unapproved as to price or scope are recognized only when realization is assured beyond a reasonable doubt. Change orders that are unapproved as to both price and scope are evaluated as claims.

Claims are amounts in excess of agreed contract prices that we seek to collect from our clients or others for customer-caused delays, errors in specifications and designs, contract terminations, change orders that are either in dispute or are unapproved as to both scope and price, or other causes of unanticipated additional contract costs. Claims are included in total estimated contract revenues when the contract or other evidence provides a legal basis for the claim, when the additional costs are caused by circumstances that were unforeseen at the contract date and are not the result of the deficiencies in the contract performance, when the costs associated with the claim are identifiable, and when the evidence supporting the claim is objective and verifiable. Revenue on claims is recognized only to the extent that contract costs related to the claims have been incurred and when it is probable that the claim will result in a bona fide addition to contract value which can be reliably estimated. No profit is recognized on claims until final settlement occurs. As a result, costs may be recognized in one period while revenues may be recognized when client agreement is obtained or claims resolution occurs, which can be in subsequent periods.

"At-risk" and "Agency" Contracts. The amount of revenues we recognize also depends on whether the contract or project represents an at-risk or an agency relationship between the client and us. Determination of the relationship is based on characteristics of the contract or the relationship with the client. For at-risk relationships where we act as the principal to the transaction, the revenue and the costs of materials, services, payroll, benefits, and other costs are recognized at gross amounts. For agency relationships, where we act as an agent for our client, only the fee revenue is recognized, meaning that direct project costs and the related reimbursement from the client are netted. Revenues from agency contracts and collaborative arrangements were not a material part of revenues for any period presented.

In classifying contracts or projects as either at-risk or agency, we consider the following primary characteristics to be indicative of at-risk relationships: (i) we acquire the related goods and services using our procurement resources, (ii) we assume the risk of loss under the contract and (iii) we are responsible for insurance coverage, employee-related liabilities and the performance of subcontractors.

We consider the following primary characteristics to be indicative of agency relationships: (i) our client owns the work facilities utilized under the contract, (ii) we act as a procurement agent for goods and services acquired with client funds, (iii) our client is invoiced for our fees, (iv) our client is exposed to the risk of loss and maintains insurance coverage, and (v) our client is responsible for employee-related benefit plan liabilities and any remaining liabilities at the end of the contract.

84-------------------------------------------------------------------------------- Table of Contents Contract Types Our contract types include cost-plus, target-price, fixed-price, and time-and-materials contracts. Revenue recognition is determined based on the nature of the service provided, irrespective of the contract type, with engineering, construction and construction-related contracts accounted for under the percentage-of-completion method and service-related contracts accounted for under the proportional performance method.

Cost-Plus Contracts. We enter into four major types of cost-plus contracts. Revenue for the majority of our cost-plus contracts is recognized using the percentage-of-completion method: Cost-Plus Fixed Fee. Under cost-plus fixed fee contracts, we charge our clients for our costs, including both direct and indirect costs, plus a fixed negotiated fee.

Cost-Plus Fixed Rate. Under our cost-plus fixed rate contracts, we charge clients for our direct costs plus negotiated rates based on our indirect costs.

Cost-Plus Award Fee. Some cost-plus contracts provide for award fees or penalties based on performance criteria in lieu of a fixed fee or fixed rate. Other contracts include a base fee component plus a performance-based award fee. In addition, we may share award fees with subcontractors and/or our employees. We accrue fee sharing on a monthly basis as related award fee revenue is earned. We take into consideration the award fee or penalty on contracts when estimating revenues and profit rates, and we record revenues related to the award fees when there is sufficient information to assess anticipated contract performance. On contracts that represent higher than normal risk or technical difficulty, we defer all award fees until an award fee letter is received. Once an award fee letter is received, the estimated or accrued fees are adjusted to the actual award amount.

Cost-Plus Incentive Fee. Some of our cost-plus contracts provide for incentive fees based on performance against contractual milestones. The amount of the incentive fees vary, depending on whether we achieve above-, at- or below-target results. We recognize incentive fees revenues as milestones are achieved, assuming that we will achieve at-target results, unless our estimates indicate our cost at completion to be significantly above or below target.

Target-Price Contracts. Under our target-price contracts, project costs are reimbursable. Our fee is established against a target budget that is subject to changes in project circumstances and scope. Should the project costs exceed the target budget within the agreed-upon scope, we generally degrade a portion of our fee or profit to mitigate the excess cost; however, the customer reimburses us for the costs that we incur if costs continue to escalate beyond our expected fee. If the project costs are less than the target budget, we generally recover a portion of the project cost savings as additional fee or profit. We recognize revenues on target-price contracts using the percentage-of-completion method.

Fixed-Price Contracts. We enter into two major types of fixed-price contracts: Firm Fixed-Price ("FFP"). Under FFP contracts, our clients pay us an agreed fixed-amount negotiated in advance for a specified scope of work. We generally recognize revenues on FFP contracts using the percentage-of-completion method. If the nature or circumstances of the contract prevent us from preparing a reliable estimate at completion, we will delay profit recognition until adequate information about the contract's progress becomes available. Prior to completion, our recognized profit margins on any FFP contract depend on the accuracy of our estimates and will increase to the extent that our current estimates of aggregate actual costs are below amounts previously estimated. Conversely, if our current estimated costs exceed prior estimates, our profit margins will decrease and we may realize a loss on a project.

Fixed-Price Per Unit ("FPPU"). Under our FPPU contracts, clients pay us a set fee for each service or production transaction that we complete. We recognize revenues under FPPU contracts as we complete the related service or production transactions for our clients generally using the proportional performance method. Some of our FPPU contracts are subject to maximum contract values.

85-------------------------------------------------------------------------------- Table of Contents Time-and-Materials Contracts. Under our time-and-materials contracts, we negotiate hourly billing rates and charge our clients based on the actual time that we spend on a project. In addition, clients reimburse us for our actual out-of-pocket costs of materials and other direct incidental expenditures that we incur in connection with our performance under the contract. The majority of our time-and-material contracts are subject to maximum contract values and, accordingly, revenues under these contracts are generally recognized under the percentage-of-completion method. However, time and materials contracts that are service-related contracts are accounted for utilizing the proportional performance method. Revenues on contracts that are not subject to maximum contract values are recognized based on the actual number of hours we spend on the projects plus any actual out-of-pocket costs of materials and other direct incidental expenditures that we incur on the projects. Our time-and-materials contracts also generally include annual billing rate adjustment provisions.

Goodwill and Intangible Assets Impairment Review Goodwill may be impaired if the estimated fair value of one or more of our reporting units' goodwill is less than the carrying value of the unit's goodwill. Because we have grown through acquisitions, goodwill and other net intangible assets were $3.9 billion as of December 28, 2012. We perform an analysis on our goodwill balances to test for impairment on an annual basis and whenever events occur or circumstances change that indicate impairment could exist. There are several instances that may cause us to further test our goodwill for impairment between the annual testing periods including: (i) continued deterioration of market and economic conditions that may adversely impact our ability to meet our projected results; (ii) declines in our stock price caused by continued volatility in the financial markets that may result in increases in our weighted-average cost of capital or other inputs to our goodwill assessment; and (iii) the occurrence of events that may reduce the fair value of a reporting unit below its carrying amount, such as the sale of a significant portion of one or more of our reporting units.

We perform our annual goodwill impairment review as of the end of the first month following our September reporting period and also perform interim impairment reviews if triggering events occur. Our 2012 annual review, performed as of October 26, 2012, did not indicate any further adjustment to our goodwill. No events or changes in circumstances have occurred that would indicate any additional impairment adjustment of goodwill since our annual testing date. We continue to monitor the recoverability of our goodwill.

During fiscal year 2011, our market capitalization was reduced due to stock market volatility and declines in our stock price. For the year ended December 30, 2011, we recorded goodwill impairment charges in five of our reporting units totaling $825.8 million ($732.2 million after tax). These non-cash charges reduced goodwill recorded in connection with previous acquisitions and did not impact our overall business operations. There was no goodwill impairment for any of our reporting units during the years ended December 28, 2012 and December 31, 2010.

We believe the methodology that we use to review impairment of goodwill, which includes a significant amount of judgment and estimates, provides us with a reasonable basis to determine whether impairment has occurred. However, many of the factors employed in determining whether our goodwill is impaired are outside of our control, and it is reasonably likely that assumptions and estimates will change in future periods. These changes could result in future impairments.

Goodwill impairment reviews involve a two-step process. The first step is a comparison of each reporting unit's fair value to its carrying value. We estimate fair value using discounted cash flow analyses, referred to as the income approach. The income approach uses a reporting unit's projection of estimated cash flows and discounts those back to the present using a weighted-average cost of capital that reflects current market conditions. To arrive at our cash flow projections, we consider estimates of economic and market activity over a projection period of ten years, management's expectation of growth rates in revenues, costs, and estimates of future expected changes in operating margins and capital expenditures. Other significant estimates and assumptions include long-term growth rates and changes in future working capital requirements.

86-------------------------------------------------------------------------------- Table of Contents We also consider indications obtained from the market approach. We applied market multiples derived from market prices of stocks of companies that are engaged in the same or similar lines of business as our reporting units and that are actively traded on a free and open market, or applied market multiples derived from transactions of significant interests in companies engaged in the same or similar lines of business as our reporting units, to the corresponding measure of financial performance for our reporting units that produces estimates of value at the noncontrolling marketable level.

In reaching our final estimate of value, we considered the fair values derived from using both the income and market approaches. We gave primary weight to the income approach because it was deemed to be the most applicable.

When performing our impairment analysis, we also reconcile the sum of the fair values of our reporting units with our market capitalization to determine if the sum reasonably reconciles to the external market indicators. If our reconciliation indicates a significant difference between our external market capitalization and the fair values of our reporting units, we review and adjust, if appropriate, our weighted-average cost of capital and examine whether the implied control premium is reasonable in light of current market conditions.

If the carrying value of the reporting unit is higher than its fair value, there is an indication that impairment may exist and the second step must be performed to measure the amount of impairment. The amount of impairment is determined by comparing the implied fair value of the reporting unit's goodwill to the carrying value of the goodwill calculated in the same manner as if the reporting unit were being acquired in a business combination. If the implied fair value of goodwill is less than its carrying value, we would record an impairment charge for the difference.

We also perform an analysis on our intangible assets to test for impairment whenever events occur that indicate impairment could exist.

See Note 9, "Goodwill and Intangible Assets" to our "Consolidated Financial Statements and Supplementary Data" included under Item 8 of this report for more disclosure about our goodwill impairment reviews.

Receivable Allowances We reduce our accounts receivable and costs and accrued earnings in excess of billings on contracts by establishing an allowance for amounts that, in the future, may become uncollectible or unrealizable, respectively. We determine our estimated allowance for uncollectible amounts based on management's judgments regarding our operating performance related to the adequacy of the services performed or products delivered, the status of change orders and claims, our experience settling change orders and claims and the financial condition of our clients, which may be dependent on the type of client and current economic conditions to which the client may be subject.

Deferred Income Taxes We use the asset and liability approach for financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances based on our judgments and estimates are established when necessary to reduce deferred tax assets to the amount expected to be realized in future operating results. Management believes that realization of deferred tax assets in excess of the valuation allowance is more likely than not. Our estimates are based on facts and circumstances in existence as well as interpretations of existing tax regulations and laws applied to the facts and circumstances, with the help of professional tax advisors. Therefore, we estimate and provide for amounts of additional income taxes that may be assessed by the various taxing authorities.

87-------------------------------------------------------------------------------- Table of Contents Self-insurance Reserves Self-insurance reserves represent reserves established as a result of insurance programs under which we have self-insured portions of our business risks. We carry substantial premium-paid, traditional risk transfer insurance for our various business risks; however, we self-insure and establish reserves for the retentions on workers' compensation insurance, general liability, automobile liability, and professional errors and omissions liability.

Defined Benefit and Post-retirement Benefit Plans We account for our defined benefit pension plans and post-retirement benefits using actuarial valuations that are based on assumptions, including discount rates, long-term rates of return on plan assets, and rates of change in participant compensation levels. We evaluate the funded status of each of our defined benefit pension plans and post-retirement benefit plans using these assumptions, consider applicable regulatory requirements, tax deductibility, reporting considerations and other relevant factors, and thereby determine the appropriate funding level for each period. The discount rate used to calculate the present value of the pension benefit obligation is assessed at least annually. The discount rate represents the rate inherent in the price at which the plans' obligations are intended to be settled at the measurement date.

Holding all other assumptions constant, changes in the discount rate assumption that we used in our annual analysis would have the following estimated effect on the benefit obligations of our defined benefit and post-retirement benefit plans as shown in the table below.

Domestic Foreign Change in an Assumption Defined Defined Post-retirement (In millions) Benefit Plans Benefit Plans Benefit Plans 25 basis point increase in discount rate $ (13.2 ) $ (22.2 ) $ (0.8 ) 25 basis point decrease in discount rate $ 14.2 $ 23.6 $ 0.9 Hypothetical changes in all other key assumptions of 25 basis points have an immaterial impact on the benefit obligations of our defined benefit and post-retirement benefit plans. Hypothetical changes in key assumptions of 25 basis points also have an immaterial impact on net periodic pension costs of these plans.

Business Combinations We account for business combinations under the purchase accounting method. The cost of an acquired company is assigned to the tangible and intangible assets purchased and the liabilities assumed on the basis of their fair values at the date of acquisition. The determination of fair values of assets and liabilities acquired requires us to make estimates and use valuation techniques when market value is not readily available. Any excess of purchase price over the fair value of the tangible and intangible assets acquired is allocated to goodwill. The transaction costs associated with business combinations are expensed as they are incurred.

ADOPTED AND OTHER RECENTLY ISSUED ACCOUNTING STANDARDSSee Note 2, "Adopted and Other Recently Issued Statements of Financial Accounting Standards," to our "Consolidated Financial Statements and Supplementary Data" included under Item 8 of this report.

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