Urs (URS) 8-K Other Events

EXHIBIT 99.1

EXPLANATORY NOTE

Effective with the beginning of our 2014 fiscal year, we realigned our Global Management and Operations Services Group, which was a component of our Energy & Construction Division in fiscal year 2013, under the operations and management of our Federal Services Division.  The realignment of this group consolidates the majority of our business with U.S. federal government agencies and national governments outside the U.S. in our Federal Services Division.  We also realigned a portion of our facility construction, process engineering, and operations and maintenance services to the oil and gas industry among our Oil & Gas, Infrastructure & Environment, and Energy & Construction Divisions.  These changes, which restructured elements of our oil and gas business from an organization based on legacy acquisitions to one based on service, are designed to improve our ability to provide integrated services to our oil and gas clients.  These changes are collectively referred to as the “Realignments.”

On July 11, 2014, we entered into a merger agreement with AECOM Technology Corporation (“AECOM”) under which AECOM has agreed to acquire URS (the “merger”), subject to the terms and conditions of the merger agreement.  As part of that agreement, AECOM is filing a registration statement on Form S-4, which will include a joint proxy statement of AECOM and URS and a prospectus of AECOM.  The Form S-4 will incorporate by reference the attached unaudited pro forma consolidated financial information based on the combination of URS and AECOM's historical financial statements.  We are required under Securities and Exchange Commission guidance to recast or reclassify our Form 10-K for the fiscal year ended January 3, 2014 to reflect the retrospective impact of the Realignments as if they had occurred for all periods presented in the financial statements.  As a result, we are filing as Exhibit 99.1 revised sections of our Form 10-K for the fiscal year ended January 3, 2014, which recasts the following sections to reflect the Realignments for all periods presented in the financial statements:  Item 1. Business; Item 1A. Risk Factors; Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations; Item 8. Consolidated Financial Statements and Supplementary Data, Note 9, “Goodwill and Intangible Assets,” and Note 16, “Segment and Related Information.”  In addition, we have included Note 21, “Subsequent Events,” to discuss the merger.  Note 18, “Condensed Consolidating Financial Information,” included within Item 8 of the original filing, has been omitted as the information included in this disclosure is provided to comply with Rule 3-10 of Regulation S-X but is not required by U.S. generally accepted accounting principles (“GAAP”).  We have also made additional disclosures within the recast sections noted above related to the pending merger.  We have not otherwise revised our disclosures to reflect events that have occurred since the date of the Annual Report.  Accordingly, except for the items identified above, the revised sections of our Form 10-K speak as of January 3, 2014, the date of the original filing and any forward-looking statements represent management’s views as of the date of the original filing and should not be assumed to be correct as of any date thereafter.  The revised sections of our Form 10-K should be read in conjunction with our other filings made with the Securities and Exchange Commission subsequent to the date of the original filing.

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ITEM 1.  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 United States (“U.S.”) federal government contractor in the areas of systems engineering and technical assistance, operations and maintenance, management and operations, and information technology (“IT”) services.  As of January 31, 2014, we had more than 50,000 employees in a global network of offices in nearly 50 countries.

On May 14, 2012, we acquired the outstanding common shares of Flint Energy Services Ltd. (“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.  At the close of the transaction, Flint’s operations became the Oil & Gas Division, with the exception of the facility construction component that was included in the Energy & Construction Division.

Pending Merger

On July 11, 2014, we entered into an Agreement and Plan of Merger (the “merger agreement”) with AECOM Technology Corporation (“AECOM”), ACM Mountain I, LLC, a direct wholly-owned subsidiary of AECOM (“Merger Sub”), and ACM Mountain II, LLC, a direct wholly-owned subsidiary of AECOM (“Merger Sub I”).  The merger agreement provides for the merger of Merger Sub with and into our company, with our company continuing as the surviving company and a direct wholly-owned subsidiary of AECOM (the “Merger”).  Immediately thereafter, as part of a single integrated transaction with the Merger, pursuant to the merger agreement, we will merge with and into Merger Sub I, with Merger Sub I continuing as the surviving company and a direct wholly-owned subsidiary of AECOM.  Subject to the terms and conditions of the merger agreement, holders of URS common stock will receive consideration at $58.79 per share (based on the closing price of AECOM common stock on July 25, 2014).  Each outstanding share of URS common stock will be exchanged for per share consideration consisting of 0.734 shares of AECOM common stock and $33.00 in cash.  URS stockholders may elect to receive cash or stock consideration, subject to proration in the event of oversubscription for cash consideration.  The actual value of the merger consideration to be paid at the closing of the merger will depend on the average closing price of AECOM common stock in the five business days prior to closing.

Completion of the merger is subject to certain customary conditions, including approval by both the AECOM and URS stockholders, listing of the shares of AECOM common stock to be issued in the merger on the New York Stock Exchange, receipt of required regulatory approvals, effectiveness of AECOM’s registration statement on Form S-4 and receipt of customary opinions related to certain tax matters from the parties’ respective counsels.  The financial statements included in this revised Form 10-K do not reflect any adjustments or otherwise give effect to the proposed merger.

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Reporting Segments

We provide our services through four reporting segments, which we refer to as our Infrastructure & Environment, Federal Services, Energy & Construction, and Oil & Gas Divisions.  Our Infrastructure & Environment Division provides a wide range of program management, planning, design, engineering, construction and construction management, operations and maintenance and decommissioning and closure services to the U.S. federal government, state and local government agencies, and private sector clients in the U.S. and internationally.  Our Federal Services Division provides program management, planning, design, engineering, systems engineering and technical assistance, construction and construction management, operations and maintenance, management and operations, IT, and decommissioning and closure services to U.S. federal government agencies, as well as to national governments in other countries.  Our Energy & Construction Division provides program management, planning, design, engineering, construction and construction management, operations and maintenance, and decommissioning and closure services to public and private sector clients.  Our Oil & Gas Division provides oilfield services, such as rig transportation and fluid hauling; oil and gas production services, including mechanical, electrical and instrumentation services; pipeline and facility construction; module fabrication; and maintenance services for oil and gas industry clients throughout the U.S. and Canada.

Effective with the beginning of our 2014 fiscal year, we realigned our Global Management and Operations Services Group, which was previously a component of our Energy & Construction Division, under the operations and management of our Federal Services Division.  The realignment of this group consolidates the majority of our business with U.S. federal government agencies and national governments outside the U.S in our Federal Services Division.  We also realigned a portion of our facility construction, process engineering, and operations and maintenance services to the oil and gas industry among our Oil & Gas, Infrastructure & Environment, and Energy & Construction Divisions.  These changes, which restructured elements of our oil and gas business from an organization based on legacy acquisitions to one based on service, were designed to improve our ability to provide integrated services to our oil and gas clients.  These changes are collectively referred to as the “Realignments.”  As described in the “Explanatory Note” above, certain sections of this revised Form 10-K have been recast to reflect the retrospective impact of the Realignments as if they had occurred for all periods presented in the financial statements.

For information on our business by segment and geographic region, please refer to Note 16, “Segment and Related Information” to our “Consolidated Financial Statements and Supplementary Data,” which is included under Item 8 of this report and incorporated into this Item by reference.  For information on risks related to our business, segments and geographic regions, including risks related to foreign operations, please refer to Item 1A, “Risk Factors” of this report.

Clients, Market Sectors and Services

We serve public agencies and private sector companies worldwide through our global network of offices including locations in the Americas, the United Kingdom (“U.K.”), continental Europe, the Middle East, India, China, Australia and New Zealand.  Our clients include U.S. federal government agencies, national governments of other countries, state and local government agencies both in the U.S. and in other countries, and private sector clients representing a broad range of industries.  See Note 16, “Segment and Related Information,” to our “Consolidated Financial Statements and Supplementary Data” included under Item 8 of this report for financial information regarding geographic areas.

Our expertise is focused in five market sectors:  federal, infrastructure, oil and gas, power,and industrial.  Within these markets, we offer a broad range of services, including program management; planning, design and engineering; systems engineering and technical assistance; IT services; construction and construction management; operations and maintenance; and decommissioning and closure.

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The following chart and table illustrate the percentage of our revenues by market sector for the year ended January 3, 2014, and representative services we provide in each of these markets.

2013 Revenues by Market Sector

	Market Sector
Representative Services	Federal	Infrastructure	Oil & Gas	Power	Industrial
Program Management	ü	ü	ü	ü	ü
Planning, Design and Engineering	ü	ü	ü	ü	ü
Systems Engineering and Technical Assistance	ü	—	—	—	—
Information Technology Services	ü	—	—	—	—
Construction and Construction Management	ü	ü	ü	ü	ü
Operations and Maintenance	ü	ü	ü	ü	ü
Management and Operations	ü	—	—	—	—
Decommissioning and Closure	ü	—	ü	ü	ü

ü      the service is provided in the market sector.

—      the service is not provided in the market sector.

Market Sectors

The following table summarizes the primary market sectors served by our four divisions for the year ended January 3, 2014.

	Divisions
Market Sectors	Infrastructure & Environment	Federal Services	Energy & Construction	Oil & Gas
Federal	ü	ü	—	—
Infrastructure	ü	—	ü	—
Oil & Gas	ü	—	ü	ü
Power	ü	—	ü	—
Industrial	ü	—	ü	—

ü      a primary market sector for the division.

—      not a primary market sector for the division.

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Federal

As a major contractor to the U.S. federal government and national governments of other countries, we serve a wide variety of government departments and agencies, including the DOD, DHS, Department of Energy (“DOE”), as well as the General Services Administration, the Environmental Protection Agency, NASA and other federal agencies.  We also serve departments and agencies of other national governments, such as the U.K. Nuclear Decommissioning Authority (“NDA”).  Our services range from program management; planning, design and engineering; systems engineering and technical assistance; and IT services to construction and construction management; operations and maintenance; management and operations; and decommissioning and closure.

We modernize weapons systems, refurbish military vehicles and aircraft, train pilots and manage military and other government installations.  We provide logistics support for military operations and help decommission former military bases for redevelopment.  In the area of global threat reduction, we support programs to eliminate nuclear, chemical and biological weapons, and we assist the DOE and other nuclear regulatory agencies outside the U.S. in the management of complex programs and facilities.  We also provide a wide range of IT services to both defense and civilian agencies to improve the efficiency and productivity of their IT networks and systems, and to combat cyber security threats.

Our project expertise in our federal market sector encompasses the following:

·   Operation and maintenance of complex government installations, including military bases and test ranges;

·   Logistics support for government supply and distribution networks, including warehousing, packaging, delivery and traffic management;

·   Weapons system design, maintenance and modernization, including acquisition support for new defense systems, and engineering and technical assistance for the modernization of existing systems;

·   Maintenance planning to extend the service life of weapons systems and other military equipment;

·   Maintenance, modification and overhaul of military aircraft and ground vehicles;

·   Training military pilots;

·   Management and operations and maintenance services for complex DOE and NDA programs and facilities;

·   Deactivation, decommissioning and disposal of nuclear weapons stockpiles and other nuclear waste;

·   Safety analyses for high-hazard facilities and licensing for DOE sites;

·   Threat assessments of public facilities and the development of force protection and security systems;

·   Planning and conducting emergency preparedness exercises;

·   First responder training for the military and other government agencies;

·   Management and operations and maintenance of chemical agent and chemical weapon disposal facilities;

·   Installation of monitoring technology to detect the movement of nuclear and radiological materials across national borders;

·   Planning, design and construction of aircraft hangars, barracks, military hospitals and other government buildings;

·   Environmental remediation and restoration for the redevelopment of military bases and other government installations; and

·   Network and communications engineering, software engineering, IT infrastructure design and implementation, cyber defense and cloud computing technologies.

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Infrastructure

We provide a broad range of the services required to build, expand and modernize infrastructure, including surface, air and rail transportation networks; ports and harbors; water supply, treatment and conveyance systems; and many types of facilities.  We serve as the program manager, planner, architect, engineer, general contractor, constructor and/or construction manager for a wide variety of infrastructure projects, and we also provide operations and maintenance services when a project has been completed.

Our clients in our infrastructure market sector include local municipalities, community planning boards, state and municipal departments of transportation and public works, transit authorities, water and wastewater authorities, environmental protection agencies, school boards and authorities, colleges and universities, judiciary agencies, hospitals, ports and harbors authorities and owners, airport authorities and owners, and airline carriers.

Our project expertise in our infrastructure market sector encompasses services related to the following:

·   Highways, interchanges, bridges, tunnels and toll road facilities;

·   Intelligent transportation systems, such as traffic management centers;

·   Airport terminals, hangars, cargo facilities and people movers;

·   Air traffic control towers, runways, taxiways and aircraft fueling systems;

·   Baggage handling, baggage screening and other airport security systems;

·   Light rail, subways, bus rapid transit systems, commuter/intercity railroads, heavy rail and high-speed rail systems;

·   Rail transportation structures, including terminals, stations, multimodal facilities, parking facilities, bridges and tunnels;

·   Piers, wharves, seawalls, recreational marinas and small craft harbors;

·   Container terminals, liquid and dry bulk terminals and storage facilities;

·   Water supply, storage, distribution and treatment systems;

·   Municipal wastewater treatment and sewer systems;

·   Dams, levees, watershed and stormwater management, flood control systems and coastal restoration;

·   Education, judicial, correctional, healthcare, retail, sports and recreational facilities; and

·   Industrial, manufacturing, research and office facilities.

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Oil and Gas

In the oil and gas market sector, we provide a wide range of planning, design, engineering, construction, production, and operations and maintenance services across the upstream, midstream and downstream supply chain.  Our expertise supports the development of both conventional and unconventional oil and gas resources.  While our work in this sector is focused primarily in the North American oil and gas market, we also support the worldwide operations of global oil and gas clients.

For oil and gas exploration and production, we provide transportation, engineering, construction, fabrication and installation, commissioning and maintenance services for drilling and well site facilities, equipment and process modules, site infrastructure and off-site support facilities.  We also perform environmental and technology assessments for exploration and production projects to optimize recovery and minimize environmental impacts.  For downstream refining and processing operations, we design and construct gas treatment and processing, refining and petrochemical facilities, and provide maintenance services.  Our capabilities also include due diligence, permitting, compliance, environmental management, pollution control, health and safety, waste management and hazardous waste remediation.

Our project expertise in our oil and gas market sector encompasses services related to the following:

·   Environmental assessments, permitting, compliance, air quality services, waste management and hazardous waste remediation;

·   Planning, design, construction and construction management for gas treatment and processing, refining and petrochemical facilities;

·   Construction of access roads and well pads, and field production facilities, such as wellhead gas processing equipment, gas compression stations, and oil storage tanks and related facilities;

·   Pipeline planning, design, construction, installation, maintenance and repair;

·   Energy-related transportation, including rig moving and oilfield equipment hauling services, mobile pressure and vacuum services, and fluid hauling;

·   Electrical, mechanical and instrumentation services;

·   Equipment and process module fabrication, installation and maintenance;

·   Asset management and maintenance services, including routine plant maintenance, coordination of third-party services, sustaining capital projects, and shutdown turnaround services for oil sands production facilities, oil refineries and related chemical, energy, power and processing plants; and

·   Demolition, asset recovery and property redevelopment and reuse of former oilfield sites, refineries and other oil and gas facilities.

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Power

We plan, design, engineer, construct, retrofit and maintain a wide range of power-generating facilities, as well as the systems that transmit and distribute electricity.  Our services include planning, siting and licensing, permitting, engineering, procurement, construction and construction management, facility start-up, operations and maintenance, upgrades and modifications, and decommissioning and closure.  We provide these services to utilities, industrial co-generators, independent power producers, original equipment manufacturers and government utilities.  We also specialize in the development and installation of clean air technologies that reduce emissions at both new and existing fossil fuel power plants.  These technologies help power-generating facilities comply with air quality regulations.

Our project expertise in our power market sector encompasses services related to the following:

·   Fossil fuel power generating facilities;

·   Nuclear power generating facilities;

·   Hydroelectric power generating facilities;

·   Alternative and renewable energy sources, including biomass, geothermal, solar energy and wind systems;

·   Transmission and distribution systems; and

·   Emissions control systems.

Industrial

We provide a wide range of engineering, procurement and construction services for new industrial and process facilities and the expansion, modification and upgrade of existing facilities.  These services include front-end studies, engineering and process design, procurement, construction and construction management, facility management, and operations and maintenance.  Our expertise also includes due diligence, permitting, compliance, environmental management, pollution control, health and safety, waste management and hazardous waste remediation.  For facilities that are no longer in use, we provide site decommissioning and closure services.

Our industrial clients represent a broad range of industries, including automotive, chemical, consumer products, pharmaceutical, manufacturing, and mining.  Over the past several years, many of these companies have reduced the number of service providers they use, selecting larger, global multi-service contractors, like URS, in order to control costs.

Our project expertise in our industrial and commercial market sector encompasses services related to the following:

·   Biotechnology and pharmaceutical research laboratories, pilot plants and production facilities;

·   Petrochemical, specialty chemical and polymer facilities;

·   Consumer products and food and beverage production facilities;

·   Automotive and other manufacturing facilities;

·   Pulp and paper production facilities; and

·   Mines and mining facilities for base and precious metals, industrial minerals and energy fuels.

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Representative Services

We provide program management; planning, design and engineering; systems engineering and technical assistance; information technology services; construction and construction management; operations and maintenance; management and operations; and decommissioning and closure services to U.S. federal government agencies, national governments of other countries, state and local government agencies both in the U.S. and overseas, and private sector clients representing a broad range of industries.  Although we are typically the prime contractor, in some cases, we provide services as a subcontractor or through joint ventures or partnership agreements with other service providers.

The following table summarizes the services provided by our divisions for the year ended January 3, 2014.

	Divisions
Services	Infrastructure & Environment	Federal Services	Energy & Construction	Oil & Gas
Program Management	ü	ü	ü	—
Planning, Design and Engineering	ü	ü	ü	ü
Systems Engineering and Technical Assistance	—	ü	—	—
Information Technology Services	—	ü	—	—
Construction and Construction Management	ü	ü	ü	ü
Operations and Maintenance	ü	ü	ü	ü
Management and Operations	—	ü	—	—
Decommissioning and Closure	ü	ü	ü	—

ü      the division provides the listed service.

—      the division does not provide the listed service.

Program Management.  We provide the technical and administrative services required to manage, coordinate and integrate the multiple and concurrent assignments that comprise a large program – from conception through completion.  For large military programs, which typically involve naval, ground, vessel and airborne platforms, our program management services include logistics planning, acquisition management, risk management of weapons systems, safety management and subcontractor management.  We also provide program management services for large capital improvement programs, which typically involve the oversight of a wide variety of activities ranging from planning, coordination, scheduling and cost control to design, construction and commissioning.

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Planning, Design and Engineering.  The planning process is typically used to develop a blueprint or overall scheme for a project.  Based on the project requirements identified during the planning process, detailed engineering drawings and calculations are developed, which may include material specifications, construction cost estimates and schedules.  Our planning, design and engineering services include the following:

·   Master planning;

·   Land-use planning;

·   Transportation planning;

·   Technical and economic feasibility studies;

·   Environmental impact assessments;

·   Project development/design;

·   Permitting;

·   Quality assurance and validation;

·   Integrated safety management and analysis;

·   Alternative design analysis;

·   Conceptual and final design documents;

·   Technical specifications; and

·   Process engineering and design.

We provide planning, design and engineering services for the construction of new transportation projects and for the renovation and expansion of existing transportation infrastructure, including bridges, highways, roads, airports, mass transit systems and railroads, and ports and harbors.  We also plan and design many types of facilities, such as schools, courthouses and hospitals; power generation, industrial and commercial facilities; waste treatment and disposal facilities; water supply and conveyance systems and wastewater treatment plants; and corporate offices and retail outlets.  Our planning, design and engineering capabilities also support homeland security and global threat reduction programs; hazardous and radioactive waste clean-up activities at government sites and facilities; and environmental assessment, due diligence and permitting at government, commercial and industrial facilities.  We also provide planning, design and engineering support to U.S. federal government clients for major research and development projects, as well as for technology development and deployment.

Systems Engineering and Technical Assistance.  We provide a broad range of systems engineering and technical assistance to all branches of the U.S. military for the design and development of new weapons systems and the modernization of aging weapons systems.  We have the expertise to support a wide range of platforms including aircraft and helicopters, tracked and wheeled vehicles, ships and submarines, shelters and ground support equipment.  Representative systems engineering and technical assistance services include the following:

·   Defining operational requirements and developing specifications for new weapons systems;

·   Reviewing hardware and software design data; and

·   Developing engineering documentation for these systems.

We support a number of activities including technology insertion, system modification, installation of new systems/equipment, design of critical data packages, and configuration management.

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Information Technology Services.  We provide a broad range of IT services to U.S. federal government clients, including both civilian and defense agencies.  Our expertise covers network and communications engineering, software engineering, IT infrastructure design and implementation, cyber defense and cloud computing technologies.  Our services typically include:

·   Assisting government agencies in developing, implementing and managing secure, federally compliant cloud computing technologies;

·   Cyber defense services, including vulnerability assessments, policy development and management, compliance, incident response, disaster recovery and continuity of operations;

·   Engineering, procuring, installing, certifying and operating IT networks; and

·   Developing software applications for complex, multi-user, multi-platform systems.

Construction and Construction Management Services.  We provide construction contracting and construction management services for projects involving transportation infrastructure; environmental and waste management; power generation and transmission; oil and gas, industrial, manufacturing, and water resources and wastewater treatment facilities; government buildings and other facilities; and mining projects.  As a contractor, we are responsible for the construction and completion of a project in accordance with its specifications and contracting terms.  In this capacity, we often manage the procurement and/or fabrication of materials, equipment and supplies; directly supervise craft labor; and manage and coordinate subcontractors.  Our services typically include the following:

·   Procuring specified materials and equipment;

·   Work force planning and mobilization;

·   Supervising and completing physical construction;

·   Facility commissioning;

·   Managing project milestone and completion schedules;

·   Managing project cost controls and accounting;

·   Negotiating and expediting change orders;

·   Administering job site safety, security and quality control programs; and

·   Preparing and delivering construction documentation, including as-built drawings.

As a construction manager, we serve as the client’s representative to ensure compliance with design specifications and contract terms.  In performing these services, we may purchase equipment and materials on behalf of the client; monitor the progress, cost and quality of construction projects in process and oversee and coordinate the activities of construction contractors.  Our services typically include the following: 

·   Contract administration;

·   Change order management;

·   Cost and schedule management;

·   Safety program and performance monitoring;

·   Inspection;

·   Quality control and quality assurance;

·   Document control; and

·   Claims and dispute resolution. 

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Operations and Maintenance.  We provide operations and maintenance services in support of large military installations and operations, and hazardous facilities, as well as for transportation systems, oil and gas, industrial and manufacturing facilities, and mining operations.  Our services include the following:

·   Management of military base logistics, including overseeing the operation of government warehousing and distribution centers, as well as government property and asset management;

·   Maintenance, modification, overhaul and life service extension services for military vehicles, vessels and aircraft;

·   Management, maintenance and operation of chemical agent and chemical weapons disposal systems;

·   Comprehensive military flight training services;

·   Development and maintenance of high-security systems;

·   Integrated facilities and logistics management for industrial and manufacturing facilities;

·   Toll road, light rail and airport operations;

·   Operating mine and metal and mineral processing facilities;

·   Other miscellaneous services such as staffing, repair, renovation, predictive and preventive maintenance, and health and safety services;

·   Oil rig moving, setup, and removal services;

·   Pressure and vacuum services, and fluid hauling; and

·   Asset management and maintenance services for oil sands production facilities, refineries and related chemical, energy, power and processing plants.

Management and Operations. As a contractor to the U.S. DOE and the U.K. NDA, we manage and operate programs involving the cleanup of former uranium enrichment, plutonium production, nuclear research, fuel disassembly, and reprocessing sites in the U.S. and U.K.  In addition, we are part of the management and operations teams at several DOE national laboratories. Our management and operations services include the following:

·   Project and facility management;

·   Design and engineering for nuclear applications;

·   Nuclear facility construction;

·   Nuclear decontamination and decommissioning;

·   Nuclear and hazardous waste management and disposal services;

·   Safety management;

·   High-level radioactive waste-tank closure; and

·   Waste repository management.

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Decommissioning and Closure.  We provide decommissioning and closure services to government agencies and to clients in the industrial, oil and gas, power, and mining industries.  Our work involves the provision of environmental, engineering, remediation, demolition and reclamation services for military bases, chemical weapons depots, and other government installations, as well as for oil and gas, power generating, industrial and mining facilities that are no longer operational.  Our decommissioning and closure services include:

·Site assessments;

·Planning, engineering, scoping surveys and cost estimating;

·Due diligence and permitting;

·Environmental remediation;

·Hazardous chemical and waste stabilization, treatment and disposal;

·Asset recovery and evaluation;

·Pipeline removal;

·Structure and facility demolition; and

·Reclamation, redevelopment and reuse.

Major Customers

Our largest clients are from our federal market sector.  Within this sector, we have multiple contracts with our two major customers:  the U.S. Army and the DOE.  For the purpose of analyzing revenues from major customers, we do not consider the combination of all federal departments and agencies as one customer because the different federal agencies we serve manage separate budgets.  As such, reductions in spending by one federal agency do not affect the revenues we could earn from another federal agency.  In addition, the procurement processes for federal agencies are not centralized, and procurement decisions are made separately by each agency.  The loss of large federal government clients, such as the U.S. Army or the DOE, would have a material adverse effect on our business; however, we are not dependent on any single contract on an ongoing basis.  We believe that the loss of any single contract would not have a material adverse effect on our business.

Our revenues from the U.S. Army and the DOE by division for the years ended January 3, 2014, December 28, 2012, and December 30, 2011 are presented below:

	Year Ended
	January 3,			December 28,			December 30,
(In millions, except percentages)	2014			2012			2011
The U.S. Army (1)
Infrastructure & Environment	$	125.2		$	128.4		$	141.7
Federal Services		1,100.3			1,497.8			1,352.4
Energy & Construction		149.5			128.8			198.2
Total U.S. Army	$	1,375.0		$	1,755.0		$	1,692.3
Revenues from the U.S. Army as a percentage of our consolidated revenues		13	%		16	%		18	%
DOE
Infrastructure & Environment	$	4.7		$	5.6		$	5.9
Federal Services		821.9			984.0			1,260.5
Energy & Construction		4.6			0.1			2.6
Total DOE	$	831.2		$	989.7		$	1,269.0
Revenues from DOE as a percentage of our consolidated revenues		8	%		9	%		13	%
Revenues from the federal market sector as a percentage of our consolidated revenues		34	%		40	%		49	%

(1)   The U.S. Army includes U.S. Army Corps of Engineers.

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Competition

Our industry is highly fragmented and intensely competitive.  We have numerous competitors, ranging from small private firms to multi-billion dollar companies.  The technical and professional aspects of our services generally do not require large upfront capital expenditures and, therefore, provide limited barriers against new competitors.  Some of our competitors have achieved greater market penetration in some of the markets in which we compete and have substantially more financial resources and/or financial flexibility than we do.  To our knowledge, no individual company currently dominates any significant portion of our markets.

We believe that we are well positioned to compete in our markets because of our reputation, our cost effectiveness, our long-term client relationships, our extensive network of offices, our employee expertise, and our broad range of services.  In addition, as a result of our national and international network in nearly 50 countries, we are able to offer our clients localized knowledge and expertise, as well as the support of our worldwide professional staff.

Our Infrastructure & Environment, Federal Services, Energy & Construction, and Oil & Gas Divisions operate in similar competitive environments.  The divisions compete based on performance, reputation, expertise, price, technology, customer relationships and a range of service offerings.  The following is a list of primary competitors for each of our divisions:

·   The primary competitors of our Infrastructure & Environment Division include AECOM Technology Corporation, CH2M Hill Companies, Ltd., Chicago Bridge & Iron Company, Fluor Corporation, Jacobs Engineering Group Inc., and Tetra Tech, Inc.

·   The primary competitors of our Federal Services Division include AECOM Technology Corporation, BAE Systems, Booz Allen Hamilton, CACI International Inc., CH2M Hill Companies, Computer Sciences Corporation, Dyncorp International, Fluor Corporation, Jacobs Engineering Group Inc., L-3 Communications Holdings Inc., ManTech International Corporation, Parsons Corporation, SAIC, Inc., and Serco Group plc.

·   The primary competitors of our Energy & Construction Division include AMEC, Bechtel Corporation, Black & Veatch Corporation, CH2M Hill Companies, Ltd., Chicago Bridge & Iron Company, Fluor Corporation, Granite Construction Company, Jacobs Engineering Group Inc., KBR, Inc., Kiewit Corporation, Quanta Services, Inc., Skanska Group, The Babcock & Wilcox Company, and WorleyParsons, Ltd.

·   The primary competitors of our Oil & Gas Division include Aecon Group Inc., Big Country Energy Services LP, EnerMAX Services, J.V. Driver, Jacobs Engineering Group Inc., Ledcor Construction, Matrix Services, Mullen Group Ltd., Kiewit Corporation, TransForce Inc., and Willbros Group, Inc.

Book of Business

For the purpose of calculating our book of business, we determine the amounts of all contract awards that may potentially be recognized as revenues.  We also include an estimate of the equity in income of unconsolidated joint ventures over the life of the contracts in our book of business.  We categorize the amount of our book of business into backlog, option years and indefinite delivery contracts (“IDCs”), based on the nature of the award and its current status.

Backlog.  Our contract backlog represents the monetary value of signed contracts, including task orders that have been issued and funded under IDCs and, where applicable, a notice to proceed has been received from the client that is expected to be recognized as revenues or equity in income of unconsolidated joint ventures as services are performed.

The performance periods of our contracts vary widely from a few months to many years.  In addition, contract durations often differ significantly among our divisions.  As a result, the amount of revenues that will be realized beyond one year also varies from segment to segment.  As of January 3, 2014, we estimated that approximately 60% of our total backlog would not be realized within one year, based upon the timing of awards and the long-term nature of many of our contracts; however, no assurance can be given that backlog will be realized at this rate.

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Option Years.  Our option years represent the monetary value of option periods under existing contracts in backlog, which are exercisable at the option of our clients without requiring us to go through an additional competitive bidding process and would be canceled only if a client decided to end the project (a termination for convenience) or through a termination for default.  Option years are in addition to the “base periods” of these contracts.  Base periods for these contracts can vary from one to five years.

Indefinite Delivery Contracts.  IDCs represent the expected monetary value to us of signed contracts under which we perform work only when the client awards specific task orders or projects to us.  When agreements for such task orders or projects are signed and funded, we transfer their value into backlog.  Generally, the terms of these contracts exceed one year and often include a maximum term and potential value.  IDCs generally range from one to twenty years in length.

While the value of our book of business is a predictor of future revenues and equity in income of unconsolidated joint ventures, we have no assurance, nor can we provide assurance, that we will ultimately realize the maximum potential values for backlog, option years or IDCs.  Based on our historical experience, our backlog has the highest likelihood of converting into revenues or equity in income of unconsolidated joint ventures because it is based upon signed and executable contracts with our clients.  Option years are not as certain as backlog because our clients may decide not to exercise one or more option years.  Because we do not perform work under IDCs until specific task orders are issued by our clients, the value of our IDCs is not as likely to convert into revenues or equity in income of unconsolidated joint ventures as other categories of our book of business.

As of January 3, 2014 and December 28, 2012, our total book of business was $22.8 billion and $24.9 billion, respectively.  Our backlog and option years decreased primarily due to a combination of reduced funding, continuing delays in contract awards, particularly in the federal market sector, revisions to estimates of anticipated work, and de-bookings due to project cancellations.  Our IDCs increased mainly due to the continuing shift towards the use of IDCs by both private and public sector clients.

The following tables summarize our book of business:

	Infrastructure				Energy
	&		Federal		&
(In millions)	Environment		Services		Construction		Oil & Gas		Total
As of January 3, 2014
Backlog	$	2,851.0	$	4,284.4	$	3,705.0	$	462.3	$	11,302.7
Option years		146.2		3,733.6		76.5		—		3,956.3
Indefinite delivery contracts		3,081.8		3,150.2		131.0		1,186.5		7,549.5
Total book of business	$	6,079.0	$	11,168.2	$	3,912.5	$	1,648.8	$	22,808.5
As of December 28, 2012
Backlog	$	2,974.7	$	5,877.2	$	3,835.9	$	588.4	$	13,276.2
Option years		197.3		4,711.7		73.2		—		4,982.2
Indefinite delivery contracts		2,561.0		3,238.7		236.0		623.1		6,658.8
Total book of business	$	5,733.0	$	13,827.6	$	4,145.1	$	1,211.5	$	24,917.2

	January 3,		December 28,
(In millions)	2014		2012
Backlog by market sector:
Federal	$	4,891.6	$	6,546.5
Infrastructure		2,683.2		2,957.6
Oil and Gas		1,102.9		1,461.3
Power		1,338.7		1,416.1
Industrial		1,286.3		894.7
Total backlog	$	11,302.7	$	13,276.2

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History

We were originally incorporated in California on May 1, 1957, under the former name of Broadview Research Corporation.  On May 18, 1976, we re-incorporated in Delaware under the name URS Corporation.  After several additional name changes, we re-adopted the name “URS Corporation” on February 21, 1990.

Regulations

Our business is impacted by environmental, health and safety, government procurement, transportation, employment, anti-bribery and many other government regulations and requirements.  Below is a summary of some of the regulations that impact our business.  For more information on risks associated with our government regulations, please refer to Item 1A, “Risk Factors,” of this report.

Environmental, Health and Safety.  Our business involves the planning, design, program management, construction and construction management, and operations and maintenance at various sites, including but not limited to pollution control systems, nuclear facilities, hazardous waste and Superfund sites, contract mining sites, hydrocarbon production, distribution and transport sites, military bases and other infrastructure-related facilities.  We also regularly perform work, including oil field and pipeline construction services in and around sensitive environmental areas, such as rivers, lakes and wetlands.  In addition, we have contracts with U.S. federal government entities to destroy hazardous materials, including chemical agents and weapons stockpiles, as well as to decontaminate and decommission nuclear facilities.  These activities may require us to manage, handle, remove, treat, transport and dispose of toxic or hazardous substances.  We also own several properties in the U.S. and Canada that have been used for the storage and maintenance of equipment and upon which hydrocarbons or other wastes may have been disposed or released.

Significant fines, penalties and other sanctions may be imposed for non-compliance with environmental and health and safety laws and regulations, and some laws provide for joint and several strict liabilities for remediation of releases of hazardous substances, rendering a person liable for environmental damage, without regard to negligence or fault on the part of such person.  These laws and regulations may expose us to liability arising out of the conduct of operations or conditions caused by others, or for our acts that were in compliance with all applicable laws at the time these acts were performed.  For example, there are a number of governmental laws that strictly regulate the handling, removal, treatment, transportation and disposal of toxic and hazardous substances, such as the Comprehensive Environmental Response Compensation and Liability Act of 1980 (“CERCLA”), and comparable national and state laws, that impose strict, joint and several liabilities for the entire cost of cleanup, without regard to whether a company knew of or caused the release of hazardous substances.  In addition, some environmental regulations can impose liability for the entire clean-up upon owners, operators, generators, transporters and other persons arranging for the treatment or disposal of such hazardous substances costs related to contaminated facilities or project sites.  Other federal environmental, health and safety laws affecting us include, but are not limited to, the Resource Conservation and Recovery Act, the National Environmental Policy Act, the Clean Air Act, the Clean Air Mercury Rule, the Occupational Safety and Health Act, the Toxic Substances Control Act and the Superfund Amendments and Reauthorization Act, as well as other comparable national and state laws.  Liabilities related to environmental contamination or human exposure to hazardous substances, comparable national and state laws or a failure to comply with applicable regulations could result in substantial costs to us, including cleanup costs, fines and civil or criminal sanctions, third-party claims for property damage or personal injury or cessation of remediation activities.

Some of our business operations are covered by Public Law 85-804, which provides for indemnification by the U.S federal government against claims and damages arising out of unusually hazardous or nuclear activities performed at the request of the U.S. federal government.  Should public policies and laws be changed, however, U.S. federal government indemnification may not be available in the case of any future claims or liabilities relating to hazardous activities that we undertake to perform.

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Government Procurement.  The services we provide to the U.S. federal government are subject to Federal Acquisition Regulation (“FAR”), the Truth in Negotiations Act, Cost Accounting Standards (“CAS”), the Services Contract Act, export controls rules and DOD security regulations, as well as many other laws and regulations.  These laws and regulations affect how we transact business with our clients and in some instances, impose additional costs on our business operations.  A violation of specific laws and regulations could lead to fines, contract termination or suspension of future contracts.  Our government clients can also terminate, renegotiate, or modify any of their contracts with us at their convenience, and many of our government contracts are subject to renewal or extension annually.

Transportation.  We own a large fleet of trucks and other heavy vehicles to transport drilling rigs and provide fluid hauling and other oil and gas services in North America.  We are subject to national, state and Canadian provincial regulations including the permit requirements of highway and safety authorities.  These regulatory authorities exercise broad powers over our transport operations, generally governing such matters as the authorization to engage in transportation operations, safety, equipment testing and specifications and insurance requirements.  The transportation industry is also subject to regulatory and legislative changes that may impact our operations, such as by requiring changes in fuel emissions limits, vehicle air emissions, the hours of service regulations that govern the amount of time a driver may drive or work in any specific period, limits on vehicle weight and size and other matters.

Other regulations and requirements.  We provide services to the DOD and other defense-related entities that often require specialized professional qualifications and security clearances.  We are also subject to the U.S. Foreign Corrupt Practices Act and similar anti-bribery laws, which generally prohibit companies and their intermediaries from making improper payments to foreign government officials for the purpose of obtaining or retaining business.  The U.K. Bribery Act of 2010 prohibits both domestic and international bribery, as well as bribery across both private and public sectors.  In addition, an organization that “fails to prevent bribery” committed by anyone associated with the organization can be charged under the U.K. Bribery Act unless the organization can establish the defense of having implemented “adequate procedures” to prevent bribery.  To the extent we export technical services, data and products outside of the U.S., we are subject to U.S. and international laws and regulations governing international trade and exports, including but not limited to the International Traffic in Arms Regulations, the Export Administration Regulations and trade sanctions against embargoed countries.In addition, as engineering design services professionals, we are subject to a variety of local, state, federal and foreign licensing and permit requirements and ethics rules.

Sales and Marketing

Our Infrastructure & Environment Division performs business development, sales and marketing activities primarily through our network of local offices around the world.  For large, market-specific projects requiring diverse technical capabilities, we utilize the company-wide resources of specific disciplines.  This often involves coordinating marketing efforts on a regional, national or global level.  Our Federal Services Division performs business development, sales and marketing activities primarily through its management groups, which address specific markets, such as homeland security and defense systems.  In addition, our Federal Services Division coordinates national marketing efforts on large projects, which often involve a multi-segment or multi-market scope.  Our Energy & Construction Division conducts business development, sales and marketing activities at a market sector level.  Our Oil & Gas Division operates in regional markets across Canada and the U.S. to help stimulate and focus on increased sales opportunities for multiple service lines.  Personnel from these regions work collaboratively with the Oil & Gas Division’s business development group and service line specialists.  For large complex projects, markets or clients that require broad-based capabilities, business development efforts are coordinated across our divisions.  Over the past year, our divisions, including the Oil & Gas Division, have been successful in marketing their combined capabilities to win new work with clients in the various markets we serve.

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Seasonality

We experience seasonal trends in our business in connection with federal holidays.  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 may limit access to work areas in Canada and the Northern U.S.

Raw Materials

We purchase most of the raw materials and components necessary to operate our business from numerous sources.  However, the price and availability of raw materials and components may vary from year to year due to customer demand, production capacity, market conditions and material shortages.  While we do not currently foresee the lack of availability of any particular raw materials in the near term, prolonged unavailability of raw materials necessary to our projects and services or significant price increases for those raw materials could have a material adverse effect on our business in the near term.

Government Contracts

Generally, our government contracts are subject to renegotiation or termination of contracts or subcontracts at the discretion of the U.S. federal, state or local governments, and national governments of other countries.

Trade Secrets and Other Intellectual Property

We rely principally on trade secrets, confidentiality policies and other contractual arrangements to protect much of our intellectual property where we do not believe that patent or copyright protection is appropriate or obtainable.

Research and Development

We have not incurred material costs for company-sponsored research and development activities.

Insurance

Generally, our insurance program covers workers’ compensation and employer’s liability, general liability, automobile liability, professional errors and omissions liability, property, marine property and liability, and contractor’s pollution liability (in addition to other policies for specific projects).  Our insurance program includes deductibles or self-insured retentions for each covered claim.  In addition, our insurance policies contain exclusions and sublimits that insurance providers may use to deny or restrict coverage.  Excess liability, contractor’s pollution liability, and professional liability insurance policies provide for coverages on a “claims-made” basis, covering only claims actually made and reported during the policy period currently in effect.  Thus, if we do not continue to maintain these policies, we will have no coverage for claims made after the termination date even for claims based on events that occurred during the term of coverage.  While we intend to maintain these policies, we may be unable to maintain existing coverage levels.

Employees

The number of our employees varies with the volume, type and scope of our operations at any given time.  As of January 31, 2014, we had more than 50,000 employees, including part-time workers.  The Infrastructure & Environment, Federal Services, Energy & Construction, and Oil & Gas Divisions employed approximately 20,000, 10,000, 12,000, and 11,000 persons (including part-time workers), respectively.  At various times, we have employed up to several thousand workers on a part-time basis to meet our contractual obligations.  Approximately 28.5% of our employees are covered by collective bargaining agreements or by specific labor agreements, which expire upon completion of the relevant project.

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Executive Officers of the Registrant

Name	Position Held	Age
Martin M. Koffel	Chief Executive Officer (“CEO”) and Director since May 1989; President from May 1989 to October 2013; Chairman of the Board since June 1989.		74
Thomas W. Bishop	Executive Chairman, Infrastructure & Environment, U.K., Europe & India since January 2013; Senior Vice President of the Infrastructure & Environment Division since January 2011; Vice President, Strategy since July 2003; Senior Vice President, Construction Services since March 2002.		67
Reed N. Brimhall	Chief Accounting Officer since May 2005; Vice President since May 2003; Corporate Controller from May 2003 to January 2012.		60
H. Thomas Hicks	Executive Vice President and Chief Financial Officer (“CFO”) since May 2013; Vice President and CFO from March 2006 to May 2013.		63
Gary V. Jandegian	President of the Infrastructure & Environment Division and Vice President since July 2003.		61
Susan B. Kilgannon	Vice President, Communications since October 1999.		55
Joseph Masters	Secretary since March 2006; General Counsel since July 1997; Vice President since July 1994.		57
George L. Nash	President of the Energy & Construction Division and Vice President since January 2014; Chief Operating Officer of the Energy & Construction Division from July 2011 to December 2013; General Manager of the Energy & Construction Division Power Business Group from September 2008 to July 2011.		53
Randall A. Wotring	President of the Federal Services Division and Vice President since November 2004.		57

Available Information

Our Annual Reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, (“Exchange Act”) are available free of charge on our web site at www.urs.com.  These reports, and any amendments to these reports, are made available on our web site as soon as reasonably practicable after we electronically file or furnish the reports with the Securities and Exchange Commission (“SEC”).  In addition, our Corporate Governance Guidelines, the charters for our Audit, Board Affairs and Compensation Committees, and our Code of Business Conduct and Ethics are available on our web site at www.urs.com under the “Corporate Governance” section.  Any waivers or amendments to our Code of Business Conduct and Ethics will be posted on our web site.  A printed copy of this information is also available without charge by sending a written request to: Corporate Secretary, URS Corporation, 600 Montgomery Street, 26th Floor, San Francisco, CA 94111-2728.

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ITEM 1A.  RISK FACTORS

Please refer to Item 1A – Risk Factors in our Annual Report on Form 10-K for the fiscal year ended January 3, 2014 for a discussion of some of the factors that have affected our business, financial condition, and results of operations in the past and which could affect the future.  We have updated the following risk factors since our Form 10-K for the fiscal year ended January 3, 2014.  In addition to our other disclosures set forth or incorporated by reference in the Annual Report on Form 10-K for the fiscal year ended January 3, 2014, the following risk factors could also affect our financial condition and results of operations:

Because the market price of AECOM common stock will fluctuate, URS stockholders cannot be sure of the value of the merger consideration they will receive at the time of the URS special meeting or at any time prior to the closing of the merger.

Upon completion of the merger, each share of the URS common stock will be converted into the right to receive a merger consideration consisting of shares of AECOM common stock and/or cash pursuant to the terms of the merger agreement.  The value of the merger consideration to be received by URS stockholders will be based on the average five-day AECOM closing price at the time of completion of the merger.  This average price may vary from the closing price of AECOM common stock on the date we announced the merger, on the date that the joint proxy statement/prospectus was mailed to AECOM stockholders and URS stockholders and on the date of the special meetings of the AECOM and URS stockholders.  Any change in the market price of AECOM common stock prior to completion of the merger will affect the value of the merger consideration that URS stockholders will receive upon completion of the merger.  Accordingly, at the time of the URS special meeting and prior to the election deadline, URS stockholders will not necessarily know or be able to calculate the amount of the cash consideration they would receive or the exchange ratio used to determine the number of any shares of AECOM common stock they would receive upon completion of the merger.  Neither company is permitted to terminate the merger agreement or resolicit the vote of either company’s stockholders solely because of changes in the market prices of either company’s stock.  Stock price changes may result from a variety of factors, including general market and economic conditions, changes in our respective businesses, operations and prospects, and regulatory considerations.  Many of these factors are beyond our control.

The pending merger with AECOM is subject to a number of conditions, including governmental and regulatory conditions that may not be satisfied, and the merger may not be completed on a timely basis, or at all.  Failure to complete the merger could have material and adverse effects on URS.

Completion of the merger is conditioned upon, among other matters, the receipt of governmental authorizations, consents, orders or other approvals, including the expiration or termination of the waiting period under domestic and foreign antitrust regulations, and the receipt of any other consents or approvals of any governmental entity required to be obtained in connection with the merger.  In deciding whether to grant antitrust or other regulatory clearances, the relevant governmental entities will consider the effect of the merger within their relevant jurisdictions.  The governmental agencies from which we and AECOM will seek the approvals have broad discretion in administering the governing regulations.  The terms and conditions of the approvals that are granted may impose requirements, limitations, costs, or place restrictions on the conduct of the combined company after the merger.  There can be no assurance that regulators will not impose conditions, terms, obligations or restrictions and that those conditions, terms, obligations or restrictions will not have the effect of delaying the completion of the merger or imposing additional material costs on, or materially limiting the revenues of, the combined company following the merger.  In addition, we cannot provide assurances that any such conditions, terms, obligations or restrictions will not result in the delay or abandonment of the merger.

If the merger is not completed on a timely basis, or at all, our ongoing businesses may be adversely affected.  Additionally, in the event the merger is not completed, we will be subject to a number of risks without realizing any of the benefits of having completed the merger, including (i) the payment of certain fees and costs relating to the merger, such as legal, accounting, financial advisor and printing fees, (ii) the potential decline in the market price of our shares of common stock, (iii) the risk that we may not find a party willing to enter into a merger agreement on terms equivalent to or more attractive than the terms set forth in the merger agreement and (iv) the loss of time and resources.

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Uncertainties associated with the merger may cause a loss of management personnel and other key employees that could adversely affect our future business, operations and financial results following the merger.

Whether or not the merger is completed, the announcement and pendency of the merger could disrupt our business.  We are dependent on the experience and industry knowledge of our senior management and other key employees.  In addition, the combined company’s success after the merger will depend in part upon the ability of AECOM and URS to retain key management personnel and other key employees.  Current and prospective employees of AECOM and URS may experience uncertainty about their roles within the combined company following the merger, which may have an adverse effect on our ability to attract or retain key management and other key personnel.

Accordingly, no assurance can be given that we will be able to attract or retain key management personnel and other key employees.  In addition, following the merger, the combined company might not be able to locate suitable replacements for any such key employees who leave URS or offer employment to potential replacements on reasonable terms.

Lawsuits have been filed against URS challenging the merger, and an adverse ruling may prevent the merger from being completed.

URS, as well as the members of the URS Board of Directors, have been named as defendants in lawsuits brought by purported stockholders of URS challenging the URS Board of Directors’ actions in connection with the merger agreement and seeking, among other things, injunctive relief to enjoin the defendants from completing the merger on the agreed-upon terms.  One of the conditions to the closing of the merger is that no temporary restraining order, preliminary or permanent injunction or other judgment, order or decree issued by any court of competent jurisdiction or other legal restraint or prohibition shall be in effect, and no law shall have been enacted, entered, promulgated, enforced or deemed applicable by any governmental entity that, in any such case, prohibits or makes illegal the consummation of the merger.  Consequently, if a settlement or other resolution is not reached in the lawsuits referenced above and the plaintiffs secure injunctive or other relief prohibiting, delaying or otherwise adversely affecting our ability to complete the merger, then such injunctive or other relief may prevent the merger from becoming effective within the expected timeframe or at all.

The merger agreement contains provisions that could discourage a potential competing acquiror of URS.

The merger agreement contains “no shop” provisions that, subject to limited exceptions, restrict our ability to solicit, initiate or endorse, encourage or facilitate competing third-party proposals for the acquisition of our company’s shares or assets.  Further, even if our Board of Directors withdraws or changes its recommendation with respect to the merger, we will still be required to submit each of our merger-related proposals to a vote at our stockholder meeting.  In addition, AECOM generally has an opportunity to offer to modify the terms of the merger in response to any competing acquisition proposals before our Board of Directors may withdraw or change its recommendation with respect to the merger.  In certain circumstances in connection with the termination of the merger agreement, AECOM must pay to URS a termination fee equal to $140 million, or $240 million if the merger agreement is terminated by URS under circumstances where all closing conditions have been satisfied but AECOM’s debt financing is not available to complete the merger and AECOM fails to close the merger.  In certain circumstances in connection with the termination of the merger agreement, URS must pay to AECOM a termination fee equal to $140 million.  If the merger agreement is terminated by a party because of certain breaches by the other party, then the non-terminating party will be required to reimburse the terminating party for its reasonable out-of-pocket fees and expenses up to $40 million.

These provisions could discourage a potential third-party acquirer that might have an interest in acquiring all or a significant portion of URS from considering or proposing that acquisition, at a higher per share cash or market value than the market value proposed to be received or realized in the merger, or might result in a potential third-party acquirer proposing to pay a lower price to the stockholders than it might otherwise have proposed to pay because of the added expense of the termination fee and/or expense reimbursement that may become payable in certain circumstances.

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ITEM 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 H23; 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, management and operations, and IT services.  With approximately 50,000 employees, as of January 31, 2014, 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.

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 add-on acquisitions to complement our technical capabilities or enable us to serve new 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.

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Reporting Segments

We operate through four reporting segments:  the Infrastructure & Environment Division, the Federal Services Division, the Energy & Construction Division, and the Oil & Gas Division.  These segments were generally created based on the size and management structure of the businesses and the integration of acquired operating companies that address similar markets or provide similar services.  We report our financial results on both a consolidated basis and for our four reporting segments.

Effective with the beginning of our fiscal year 2014, we realigned our Global Management and Operations Services Group, which was previously a component of our Energy & Construction Division, under the operations and management of our Federal Services Division.  The realignment of this group consolidates the majority of our business with U.S. federal government agencies and national governments outside the U.S in our Federal Services Division.  We also realigned a portion of our facility construction, process engineering, and operations and maintenance services to the oil and gas industry among our Oil & Gas, Infrastructure & Environment, and Energy & Construction Divisions.  These changes, which restructured elements of our oil and gas business from an organization based on legacy acquisitions to one based on service are designed to improve our ability to provide integrated services to our oil and gas clients.  To reflect these realignments, we recast the information presented in this Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” for all periods presented.  We have not otherwise updated this Item to reflect events subsequent to the date of the original filing.

OVERVIEW AND BUSINESS TRENDS

Fiscal Year 2013 Results

Consolidated revenuesfor the year ended January 3, 2014 were $11.0 billion, an increase of $18.2 million, or 0.2%, compared to revenues for fiscal year 2012.  During the 2013 fiscal year, revenues increased from our work in the oil and gas market sector, as our results reflect a full year of Flint operations in 2013 compared with a partial year in 2012, and from our work in the infrastructure market sector.  By contrast, revenues in the industrial market sector were essentially flat, and we experienced declines in revenues from our work in the federal and power market sectors.

Net income attributable to URS for the year ended January 3, 2014 was $247.2 million compared with net income of $310.6 million for the year ended December 28, 2012, primarily due to underperformance in the Oil & Gas Division.  This decrease was partially offset by earnings from our work managing chemical demilitarization programs.

Cash Flows and Debt

During the year ended January 3, 2014, we generated $614.2 million in net cash from operations.  Cash flows from operations increased by $184.0 million for fiscal year 2013 compared with fiscal year 2012.  This increase was primarily due to the timing of billings, collections and advance payments from clients on accounts receivable, income tax payments, and dividend distributions from our unconsolidated joint ventures.  The increase was partially offset by the timing of vendor and subcontractor payments, and salary and employee benefit payments.

In addition, we had cash outflows of $184.9 million related to the redemption of the Canadian Notes, which included principal and a prepayment fee, $93.3 million related to repurchases of our common stock, and $62.2 million of cash dividends paid during the year ended January 3, 2014.

Book of Business

As of January 3, 2014 and December 28, 2012, our total book of business was $22.8 billion and $24.9 billion, respectively.  Our backlog and option years decreased primarily due to the continuing delays in contract awards and an increase in short-term extensions on existing contracts for work we perform for the U.S. federal government.  Our IDCs increased mainly due to the continuing shift towards the use of IDCs by both public and particularly, private sector clients.

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Business Trends

It is difficult to predict the impact of the continuing global economic weakness on our business or to forecast business trends accurately.  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 Item 1A, “Risk Factors,” of this report, which begins on page 20.  Government budget deficits and debt burdens, federal budget cutbacks and potential sequestration, the U.S. federal government shutdown in October 2013, slow economic growth, and efforts made to address any of these issues could negatively affect our business.  In particular, federal expenditures have been adversely affected due to the October 2013 federal government shutdown, and other federal budget issues, such as sequestration resulting from the Budget Control Act of 2011.  Federal spending cutbacks will also result from the Bipartisan Budget Act of 2013, and we could face additional government shutdowns and increasing budget cuts as a result of sequestration in the future that may impact our work for the DOD and other federal agencies.  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.

Federal Market Sector

Due to U.S. federal budget cuts and continuing budget uncertainty, we expect to continue experiencing delays in procurement decisions, project cancellations and reductions in spending on some existing contracts.  Federal spending cutbacks will also result from the Bipartisan Budget Act of 2013, and we could face additional government shutdowns and increasing budget cuts as a result of sequestration in the future, all of which could impact our work for the DOD and other federal agencies.  These budget cuts have resulted in reduced funding for some of the work we perform on behalf of the U.S. federal government.  Despite these budget challenges, we anticipate stable funding for some of the specialized technical services we provide to federal government agencies in support of programs that are vital to national security or mandated by law.  This includes support of electronic warfare, threat reduction, counter-terrorism, and cyber-security programs.

We have multiple contracts to manage the destruction of chemical agents and weapons at various DOD chemical demilitarization facilities, including at the Umatilla Chemical Depot, the Tooele Chemical Agent Disposal Facility, the Pine Bluff Arsenal, the Anniston Army Depot, the Blue Grass Army Depot and Pueblo Chemical Depot.  Revenues and operating income from the various chemical demilitarization contracts were, collectively, $648 million and $213 million, respectively, for the year ended January 3, 2014.  These amounts primarily reflect accelerated incentive awards of $143 million at several project facilities as a result of our achievement of early completion milestones, including $53 million related to the commencement of the recognition of performance-based incentive awards on one project.  Because we have met numerous early completion milestones at four of the project facilities, these sites are either in or are expected to transition to the closure phase.  While we expect to continue generating revenues and operating income from these projects in the future, we anticipate that these amounts will decline as the projects approach final completion.  We estimate that revenues and operating income from these projects will decrease by over 50% in 2014 as compared to 2013.

Infrastructure Market Sector

As a result of increased tax revenues and improved budgets, many states are moving forward with additional funding for infrastructure improvement programs, although some states continue to experience budget challenges.  Some states also have instituted alternative funding mechanisms, such as dedicated tax measures, user fees and public-private partnerships, to finance infrastructure projects.  Additionally, in February 2014, President Obama outlined a plan for a four-year, $302 billion federal transportation authorization to replace the two-year, $105 billion Moving Ahead for Progress in the 21st Century Act, which expires on September 30, 2014.  If enacted by Congress, the plan would significantly increase current levels of federal funding for highways, rail and mass transit infrastructure.

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Oil and 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.  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.  We may continue to be affected by a slowdown in project activity due to continued low natural gas prices and limited pipeline capacity for oil produced in the Canadian oil sands.

Power Market Sector

We expect that stagnant demand for power and lower plant utilization rates will continue to limit spending for new fossil and nuclear plants.  In addition, the shift from the development of coal-fired power generating facilities to natural gas, and challenges to the implementation of new emission control regulations, have resulted, and could continue to result, in lower demand for the air quality control services we provide to utilities.  By contrast, we could benefit from new investments being made in transmission and distribution systems to improve the efficiency and reliability of these systems and to accommodate the transmission of electricity from alternative and renewable energy sources.  In addition, following events at the Fukushima nuclear power plant in Japan, the U.S. Nuclear Regulatory Commission issued new safety requirements to strengthen containment structures and to improve on-site flood control and seismic safety plans, which could result in increased demand for the engineering, procurement and construction services we provide.

Industrial Market Sector

We are encouraged about signs of recovery in our industrial market sector.  If our clients experience an increase in demand for durable goods, we could see increased demand for the engineering, procurement, construction and facilities management services we provide.  In addition, we expect to continue to benefit from steady demand for the environmental and engineering services we provide to industrial clients under Master Service Agreements (“MSAs”).  These services typically support our clients’ ongoing operations and help them comply with regulatory mandates.  We also anticipate growth in our mining business in the U.S. and Australia as a result of new contract awards in 2013.

Seasonality

We experience seasonal trends in our business in connection with holidays.  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.

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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 contract opportunities, particularly among clients in the federal, power, infrastructure, and oil and gas market sectors.  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 public and private sector 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 contracts we receive are tending to include fewer base years and more option years.  These trends change the 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.

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.

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CONSOLIDATED REVENUES BY MARKET SECTOR

The Year Ended January 3, 2014 Compared with the Year Ended December 28, 2012

	Year Ended
											Percentage
	January 3,			December 28,			Increase				Increase
(In millions, except percentages)	2014			2012 (1)			(Decrease)				(Decrease)
Revenues by Market Sector:
Federal		$	3,719.5		$	4,435.0		$	(715.5	)		(16.1	%)
Infrastructure			1,936.3			1,791.4			144.9			8.1	%
Oil and Gas			3,227.2			2,310.7			916.5			39.7	%
Power			973.1			1,304.4			(331.3	)		(25.4	%)
Industrial			1,134.7			1,131.1			3.6			0.3	%
Total revenues, net of eliminations		$	10,990.8		$	10,972.6		$	18.2			0.2	%

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

Consolidated Revenues by Market Sector

Our consolidated revenues for the year ended January 3, 2014 were $11.0 billion, an increase of $18.2 million, or 0.2%, compared with the year ended December 28, 2012.

The following discussion of revenues by market sector analyzes and explains the year over year changes.

Federal

	Year Ended
											Percentage
	January 3,			December 28,			Increase				Increase
(In millions, except percentages)	2014			2012			(Decrease)				(Decrease)
Federal Market Sector:
Infrastructure & Environment		$	560.9		$	669.7		$	(108.8	)		(16.2	%)
Federal Services			3,145.0			3,749.3			(604.3	)		(16.1	%)
Energy & Construction			12.2			15.6			(3.4	)		(21.8	%)
Oil & Gas			1.4			0.4			1.0			250.0	%
Federal total		$	3,719.5		$	4,435.0		$	(715.5	)		(16.1	%)

Consolidated revenues from our federal market sector for the year ended January 3, 2014 declined compared with the year ended December 28, 2012.  During the 2013 fiscal year, revenues from many of the services we provide to federal government agencies in the U.S. declined due to continuing delays in the award of new contracts because of ongoing federal budget debate, the federal government shutdown in October 2013, and sequestration.  As a result, revenues decreased from the engineering, facility construction, systems engineering, technical assistance, and operations and maintenance services we provide to the DOD.

Revenues also declined from our work under various contracts managing the destruction of chemical weapons stockpiles at chemical agent disposal facilities in the U.S.  At many of these facilities, our work has transitioned from the operations phase to the closure phase, resulting in lower levels of activity.  Our work providing management and operations services to the DOE also was affected by lower funding and sequestration, resulting in decreased activity at the DOE sites we manage.

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Infrastructure

	Year Ended
										Percentage
	January 3,			December 28,			Increase			Increase
(In millions, except percentages)	2014			2012			(Decrease)			(Decrease)
Infrastructure Market Sector:
Infrastructure & Environment		$	1,645.8		$	1,550.1		$	95.7		6.2	%
Energy & Construction			288.9			241.3			47.6		19.7	%
Oil & Gas			1.6			—			1.6		—
Infrastructure total		$	1,936.3		$	1,791.4		$	144.9		8.1	%

Consolidated revenues from our infrastructure market sector for the year ended January 3, 2014 increased compared with the year ended December 28, 2012.  Revenues increased during the 2013 fiscal year from the planning, design, engineering, and program and construction management services we provide for the development of surface, air, rail, and mass transit transportation infrastructure.  Revenues also grew from the services we provide to expand and modernize water storage, conveyance and treatment systems.  In addition, we experienced high levels of activity on a project to construct a dam in Illinois and on a streetcar line construction project in Atlanta.  This increase was partially offset by a decline in our work modernizing and expanding educational and health care facilities due to the completion of assignments that have not been replaced by similar projects.

Oil and Gas

	Year Ended
											Percentage
	January 3,			December 28,			Increase				Increase
(In millions, except percentages)	2014			2012			(Decrease)				(Decrease)
Oil and Gas Market Sector:
Infrastructure & Environment		$	472.2		$	491.4		$	(19.2	)		(3.9	%)
Energy & Construction			886.0			617.0			269.0			43.6	%
Oil & Gas (1)			1,869.0			1,202.3			666.7			55.5	%
Oil and Gas total		$	3,227.2		$	2,310.7		$	916.5			39.7	%

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

Consolidated revenues from our oil and gas market sector for the year ended January 3, 2014 increased compared with the year ended December 28, 2012.  The growth in our oil and gas business primarily reflects the acquisition of Flint, the majority of which became our Oil & Gas Division at the completion of the acquisition on May 14, 2012.  During the 2013 fiscal year, the Oil & Gas Division generated $1.9 billion in revenues from work providing construction and maintenance services to the North American oil and gas industry.  During the 2012 fiscal year, the Oil & Gas Division generated $1.2 billion in revenues beginning May 14, 2012 through December 28, 2012.  In addition to the effects of the Flint acquisition, revenues also increased from the environmental and engineering services we provide to oil and gas clients worldwide through long-term MSAs, as well as from projects to construct natural gas production facilities.

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Power

	Year Ended
											Percentage
	January 3,			December 28,			Increase				Increase
(In millions, except percentages)	2014			2012			(Decrease)				(Decrease)
Power Market Sector:
Infrastructure & Environment		$	224.2		$	198.0		$	26.2			13.2	%
Energy & Construction			725.5			1,094.6			(369.1	)		(33.7	%)
Oil & Gas			23.4			11.8			11.6			98.3	%
Power total		$	973.1		$	1,304.4		$	(331.3	)		(25.4	%)

Consolidated revenues from our power market sector for the year ended January 3, 2014 decreased compared with the year ended December 28, 2012.  During the 2013 fiscal year, revenues decreased from our work retrofitting coal-fired power plants with air quality control systems as a result of the completion of assignments that experienced high levels of activity in 2012.  We also experienced delays and suspensions of new projects, resulting from regulatory uncertainty and stagnant demand for electricity.  Revenues also declined from projects involving the replacement of major components at nuclear power plants, due largely to the completion of two major assignments that have not been replaced by comparable projects.  By contrast, we experienced an increase in revenues from the environmental remediation services we provide for the decommissioning and closure of power generating facilities that are no longer in operation.

Industrial

	Year Ended
											Percentage
	January 3,			December 28,			Increase				Increase
(In millions, except percentages)	2014			2012			(Decrease)				(Decrease)
Industrial Market Sector:
Infrastructure & Environment		$	654.7		$	694.0		$	(39.3	)		(5.7	%)
Federal Services			7.7			22.3			(14.6	)		(65.5	%)
Energy & Construction			461.7			408.3			53.4			13.1	%
Oil & Gas			10.6			6.5			4.1			63.1	%
Industrial total		$	1,134.7		$	1,131.1		$	3.6			0.3	%

Consolidated revenues from our industrial market sector for the year ended January 3, 2014 were essentially flat compared with the year ended December 28, 2012.  In fiscal 2013, we experienced increased activity and revenues on a contract to construct a chemical production facility in Tennessee, and we benefitted from sustained demand for the environmental and engineering services we provide to manufacturing and other industrial clients worldwide through long-term MSAs.  By contrast, revenues declined from the engineering and construction services we provide to support mine expansion projects, due largely to the completion of a large project in Australia to construct a mine tailings facility, as well as the wind down of a contract to operate a phosphate mine in Canada.  These declines were partially offset by increased activity on new mining projects in Arizona and New Mexico.  Revenues also declined from our work providing facility management services to manufacturing clients, reflecting a decrease in the volume of work on existing contracts and from the planning and design services we provide to commercial clients.

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CONSOLIDATED RESULTS

The Year Ended January 3, 2014 Compared with the Year Ended December 28, 2012

	Year Ended
										Percentage
(In millions, except percentages and per share	January 3,			December 28,			Increase			Increase
amounts)	2014			2012 (1)			(Decrease)			(Decrease)
Revenues	$	10,990.7		$	10,972.5		$	18.2			0.2	%
Cost of revenues		(10,416.0	)		(10,294.5	)		121.5			1.2	%
General and administrative expenses		(77.5	)		(83.6	)		(6.1	)		(7.3	%)
Acquisition-related expenses		—			(16.1	)		(16.1	)		N/M
Equity in income of unconsolidated joint ventures		93.6			107.6			(14.0	)		(13.0	%)
Operating income		590.8			685.9			(95.1	)		(13.9	%)
Interest expense		(86.1	)		(70.7	)		15.4			21.8	%
Other income (expense), net		(7.7	)		0.5			(8.2	)		(1640.0	%)
Income before income taxes		497.0			615.7			(118.7	)		(19.3	%)
Income tax expense		(167.7	)		(189.9	)		(22.2	)		(11.7	%)
Net income including noncontrolling interests		329.3			425.8			(96.5	)		(22.7	%)
Noncontrolling interests in income of consolidated subsidiaries		(82.1	)		(115.2	)		(33.1	)		(28.7	%)
Net income attributable to URS	$	247.2		$	310.6		$	(63.4	)		(20.4	%)
Diluted earnings per share	$	3.31		$	4.17		$	(0.86	)		(20.6	%)

N/M = Not meaningful

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

CONSOLIDATED RESULTS BY DIVISION

Revenues

(In millions, except percentages)	Infrastructure & Environment			Federal Services			Energy & Construction			Oil & Gas (1)			Eliminations			Total
Year ended
January 3, 2014	$	3,634.1		$	3,157.2		$	2,417.8		$	1,941.8		$	(160.2	)	$	10,990.7
December 28, 2012		3,714.4			3,774.9			2,412.9			1,233.1			(162.8	)		10,972.5
Increase (decrease)		(80.3	)		(617.7	)		4.9			708.7			(2.6	)		18.2
Percentage increase (decrease)		(2.2	%)		(16.4	%)		0.2	%		57.5	%		(1.6	%)		0.2	%

(1)   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.

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The Infrastructure & Environment Division’s Revenues

The Infrastructure & Environment Division’s revenues decreased for the year ended January 3, 2014 compared to the year ended December 28, 2012.  During the 2013 fiscal year, decreases in federal spending, the federal government shutdown and delays in new project awards resulted in lower revenues in the federal market sector.  We also experienced a decrease in revenues from the environmental and engineering services we provide to mining clients, which was partially offset by an increase in revenues from the services we provide to chemical and other industrial clients.

By contrast, we experienced an increase in revenues from planning, design, engineering, and program and construction management services for the development of surface, air, and rail transportation infrastructure, as well as from the environmental remediation services we provide in the power market sector for the decommissioning and closure of power facilities.

The Federal Services Division’s Revenues

The Federal Services Division’s revenues decreased for the year ended January 3, 2014 compared to the year ended December 28, 2012.  Revenues associated with our chemical agent demilitarization programs declined from $814.8 million for the year ended December 28, 2012 to $648.0 million for the year ended January 3, 2014.  This decline reflects the transition at several facilities from the operations phase of the projects to the closure phase, which is characterized by lower levels of activity.  Revenues related to other services also declined as a result of delayed awards on new and existing programs, the conclusion of several task orders on large IT projects, delays in finalizing the DOD’s budget, and the effects of sequestration.  In addition, the federal government shutdown and reduced funding resulted in lower revenues from our work providing nuclear management services to the DOE.  These decreases were partially offset by higher revenues from our work supporting the DOD’s threat detection programs.

The Energy & Construction Division’s Revenues

The Energy & Construction Division’s revenues for the year ended January 3, 2014 were essentially flat compared with the year ended December 28, 2012.  Revenues increased due to the increased activity on projects involving the construction of natural gas production facilities and a chemical production facility.  Additionally, revenues from facility construction projects in Canada reflect a full year of operations in 2013 compared with a partial year in 2012.  These increases were offset by the completion of large air quality control projects and delays in new project awards in the power market sector and the timing and completion of maintenance outage work at nuclear power plants.

The Oil & Gas Division’s Revenues

The Oil & Gas Division’s revenues for the year ended January 3, 2014 increased substantially from the prior year, reflecting the May 14, 2012 acquisition of Flint.  Our results reflect a full year of Flint operations in 2013 compared with a partial year in 2012.  These revenues 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, the revenues of Flint, except for revenues from the facility construction component, have been included in our consolidated results under our Oil & Gas Division.

During fiscal year 2013, revenues were adversely affected by unusually severe weather conditions in Western Canada that disrupted activities at project sites; project deferrals due to a slowdown in activity in the natural gas market caused by continued low prices, which, in turn, resulted in reduced natural gas-related drilling activities; and limited pipeline capacity for oil produced in the Canadian oil sands.

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Cost of Revenues

(In millions, except percentages)	Infrastructure & Environment			Federal Services			Energy & Construction			Oil & Gas (1)			Eliminations			Total
Year ended
January 3, 2014	$	(3,425.8	)	$	(2,871.8	)	$	(2,354.6	)	$	(1,924.0	)	$	160.2		$	(10,416.0	)
December 28, 2012		(3,502.9	)		(3,479.4	)		(2,296.1	)		(1,178.9	)		162.8			(10,294.5	)
Increase (decrease)		(77.1	)		(607.6	)		58.5			745.1			(2.6	)		121.5
Percentage increase (decrease)		(2.2	%)		(17.5	%)		2.5	%		63.2	%		(1.6	%)		1.2	%

(1)   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 January 3, 2014 increased compared with the year ended December 28, 2012.  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.  In addition, project execution issues in the Oil & Gas and the Energy & Construction Divisions caused the percentage increase in our cost of revenues to be inconsistent with the percentage increase in our revenues.

Consolidated cost of revenues as a percent of revenues increased from 93.8% for the year ended December 28, 2012 to 94.8% for the year ended January 3, 2014.

General and Administrative Expenses

Our consolidated general and administrative (“G&A”)expenses for the year ended January 3, 2014 decreased by $6.1 million or 7.3% compared with the year ended December 28, 2012.  The decrease in G&A expenses was due primarily to reductions in employee incentive compensation expense of $10.1 million and legal expenses of $2.4 million, partially offset by increases in auditing and accounting services of $2.8 million resulting from the registration of the Senior Notes.  Consolidated G&A expenses as a percent of revenues were 0.7% for the year ended January 3, 2014 compared to 0.8% for the year ended December 28, 2012.  

Acquisition-related Expenses

Our consolidated acquisition-related expenses generally include legal fees, consultation fees, travel expenses, and other miscellaneous direct and incremental administrative expenses.  We did not incur any acquisition-related expenses for the year ended January 3, 2014.  For the year ended December 28, 2012, we recorded $16.1 million of acquisition-related expenses for our acquisition of Flint.

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Equity in Income (Loss) of Unconsolidated Joint Ventures

(In millions, except percentages)	Infrastructure & Environment			Federal Services			Energy & Construction			Oil & Gas (1)			Total
Year ended
January 3, 2014	$	2.4		$	84.9		$	8.1		$	(1.8	)	$	93.6
December 28, 2012		4.0			83.4			16.0			4.2			107.6
Increase (decrease)		(1.6	)		1.5			(7.9	)		(6.0	)		(14.0	)
Percentage increase (decrease)		(40.0	%)		1.8	%		(49.4	%)		(142.9	%)		(13.0	%)

(1)   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 January 3, 2014 decreased compared with the year ended December 28, 2012.  The decrease was primarily attributable to a $9.0 million decrease in earnings resulting from lower target-cost savings at one of the nuclear management, operations and cleanup projects in the U.K., and a $7.9 million decrease in earnings from a light rail construction project nearing completion in 2013.  These decreases were partially offset by higher earnings at another nuclear cleanup project in the U.K. as a result of new contractual earnings metrics and increased earnings from a mining joint venture in Australia.  In addition, our equity in income of unconsolidated joint ventures included $7.7 million and $4.5 million of amortization of intangible assets for a joint venture that provides services to the Canadian energy sector for the years ended January 3, 2014 and December 28, 2012, respectively.

Operating Income

(In millions, except percentages)	Infrastructure & Environment			Federal Services			Energy & Construction			Oil & Gas (1)			Corporate			Total
Year ended
January 3, 2014	$	210.7		$	370.3		$	71.3		$	16.0		$	(77.5	)	$	590.8
December 28, 2012		215.5			378.9			132.8			58.4		$	(99.7	)		685.9
Increase (decrease)		(4.8	)		(8.6	)		(61.5	)		(42.4	)	$	(22.2	)		(95.1	)
Percentage increase (decrease)		(2.2	%)		(2.3	%)		(46.3	%)		(72.6	%)		(22.3	%)		(13.9	%)

(1)   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 January 3, 2014 was 5.4% compared to 6.3% for the year ended December 28, 2012.  The decrease in operating income in fiscal year 2013 relative to the corresponding period of 2012was due to multiple factors, including lower revenues associated with work for the U.S. federal government, the completion of several large fossil and nuclear power projects, and execution issues in our Oil & Gas and Energy & Construction Divisions, which were identified in the fourth quarter and led to a significant deterioration in project earnings.  Our Oil & Gas and Energy & Construction Divisions also experienced project delays caused, in part, by the residual effects of lower than expected natural gas prices and pipeline capacity.  The decrease was partially offset by reductions in employee incentive compensation expense of $65.5 million, as well as the favorable resolution of a $23.3 million accrual associated with the estimated costs of employee benefit obligations on chemical demilitarization programs that was incurred in the prior year.  See the detailed discussion of operating income by segment below.

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The Infrastructure & Environment Division’s Operating Income

Operating income as a percentage of revenues was unchanged at 5.8% for the years ended January 3, 2014 and December 28, 2012.  The decrease in revenues drove a decrease in operating income, which was offset by lower overhead costs.  Overhead costs as a percentage of revenues decreased to 31.7% for the year ended January 3, 2014 from 31.9% for the year ended December 28, 2012.

The Federal Services Division’s Operating Income

Operating income as a percentage of revenues was 11.7% for the year ended January 3, 2014 compared to 10.0% for the year ended December 28, 2012.  Operating income decreased in fiscal year 2013 compared to fiscal year 2012.  The decrease in operating income was primarily due to the recognition of a $40.0 million programmatic schedule incentive fee related to the chemical demilitarization program in the prior year, completion in fiscal 2013 of several IT projects and projects generating lower margins caused by an increasingly competitive pricing environment, a $19.8 million decrease at a DOE nuclear clean-up project that had high target-cost savings in the previous year, and a $12.7 million decrease in earnings resulting from the completion of a DOE nuclear cleanup project.  These decreases were partially offset by the favorable resolution of a $23.3 million accrual associated with the estimated costs of employee benefit obligations incurred on chemical demilitarization programs in the prior year, the recognition of $31.1 million in performance-related incentive fees on one of our chemical demilitarization contracts, and decreased overhead costs, including employee incentive compensation. 

The Energy & Construction Division’s Operating Income

Operating income as a percentage of revenues was 2.9% for the year ended January 3, 2014 compared to 5.5% for the year ended December 28, 2012.  The decrease in operating income and operating income as a percentage of revenues was due to a $38.5 million decline in earnings as a result of the substantial completion of a power project and deceleration of another power project, both of which recognized significant target-cost savings in the prior year, a $21.0 million decrease in earnings resulting from the completion of maintenance outage work at nuclear power plants, as well as project execution issues on two projects, primarily occurring during the fourth quarter that led to a deterioration of project earnings of approximately $13 million for the 2013 fiscal year.  In addition, we incurred a charge of $7.9 million for a reduction in the market value of a real property held for sale due to a change in the zoning ordinance applicable to the property in fiscal year 2013.

These decreases were partially offset by increased earnings of $12.4 million due to the initial profit recognition of a new air quality control project and $11.9 million associated with the construction of natural gas facilities.  Additionally, reductions in employee incentive compensation expense and overhead partially offset the impact of lower revenues during the current period.

The Oil & Gas Division’s Operating Income

Operating income as a percentage of revenues was 0.8% for the year ended January 3, 2014 and included $44.1 million of amortization of intangible assets in connection with the Flint acquisition.  In comparison, operating income as a percentage of revenues was 4.7% for the year ended December 28, 2012, which reflected activities from May 14, 2012, the effective date of the Flint acquisition, and included $36.0 million of amortization of intangible assets in connection with the Flint acquisition.  The decrease in operating income was attributable to project execution issues on six projects, primarily occurring during the fourth quarter that led to a deterioration of project earnings of approximately $34 million for the 2013 fiscal year.  Additionally, operating income was impacted by approximately $20 million due to unusually severe weather conditions in Western Canada and, during the fourth quarter, by a $7.2 million write-off of an exclusive gas separation technology license as a result of the licensor filing for bankruptcy protection.  Finally, results were also adversely affected by project deferrals due to a slowdown in activity in the natural gas market and limited pipeline capacity for oil produced in the Canadian oil sands. The overall decreases in operating income were offset by a full year of Flint operations included in our 2013 results compared with a partial year in 2012.

xxxv

Interest Expense

Our consolidated interest expense for the year ended January 3, 2014 increased by $15.4 million or 21.8% compared with the year ended December 28, 2012.  Interest expense increased primarily because we incurred a full year of interest in fiscal year 2013 compared to a partial year of interest in fiscal year 2012, related to the Senior Notes issued on March 15, 2012 and the Canadian Notes acquired as part of the Flint acquisition on May 14, 2012. In addition, we paid additional interest to holders of the Senior Notes during fiscal year 2013 due to the delay in the completion of our exchange offer, in which we offered to exchange identical Senior Notes registered under the Securities Act of 1933, as amended, for unregistered Senior Notes previously issued in connection with the acquisition of Flint.

Other Income (Expense), Net

Our consolidated other income (expense), net for the year ended January 3, 2014 consists of foreign currency losses of $7.7 million recognized on an intercompany financing arrangement.  This amount compares to foreign currency gains of $0.8 million recognized on an intercompany financing arrangement and a net loss of $0.3 million recognized on foreign currency forward contracts for the year ended December 28, 2012.

Income Tax Expense

Our effective income tax rates were 33.7% and 30.8% for the years ended January 3, 2014 and December 28, 2012, respectively.  The higher rate was primarily attributable to U.S. tax on the sale of Canadian properties and dividends from a Canadian joint venture.

Noncontrolling Interests in Income of Consolidated Subsidiaries

Our noncontrolling interests in income of consolidated subsidiaries decreased by $33.1 million or 28.7% in the year ended January 3, 2014 compared with the year ended December 28, 2012.  The decrease in noncontrolling interests in income of consolidated subsidiaries, net of tax was primarily due to a reduced level of activities as a result of the completion of maintenance outage work at nuclear power plants, lower earnings from a DOE nuclear clean-up project and lower earnings from one of our U.K. joint ventures.

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CONSOLIDATED 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 and Gas (3)			2,310.7			692.1			1,618.6			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		$	10,972.6		$	9,545.0		$	1,427.6			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 and gas market sector as part of our presentation of revenues from the industrial and commercial market sector.  Effective at the beginning of our 2012 fiscal year, we revised our presentation to show our revenues from the oil and 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.

xxxvii

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		$	669.7		$	636.5		$	33.2			5.2	%
Federal Services			3,749.3			3,980.2			(230.9	)		(5.8	%)
Energy & Construction			15.6			23.0			(7.4	)		(32.2	%)
Oil & Gas			0.4			—			0.4			—
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.

xxxviii

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 and Gas

	Year Ended
											Percentage
	December 28,			December 30,			Increase				Increase
(In millions, except percentages)	2012			2011			(Decrease)				(Decrease)
Oil and Gas Market Sector: (1)
Infrastructure & Environment		$	491.4		$	529.7		$	(38.3	)		(7.2	%)
Energy & Construction			617.0			162.4			454.6			279.9	%
Oil & Gas (2)			1,202.3			—			1,202.3			N/M
Oil and Gas total		$	2,310.7		$	692.1		$	1,618.6			233.9	%

N/M = Not meaningful

(1)   Historically, we have included revenues from the oil and gas market sector as part of our presentation of revenues from the industrial and commercial market sector.  Effective at the beginning of our 2012 fiscal year, we revised our presentation to show our revenues from the oil and 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 and 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, the operations of Flint primarily 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 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.

xxxix

Power

	Year Ended
											Percentage
	December 28,			December 30,			Increase				Increase
(In millions, except percentages)	2012			2011			(Decrease)				(Decrease)
Power Market Sector:
Infrastructure & Environment		$	198.0		$	201.1		$	(3.1	)		(1.5	%)
Energy & Construction			1,094.6			925.5			169.1			18.3	%
Oil & Gas			11.8			—			11.8			—
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:
Infrastructure & Environment		$	694.0		$	763.8		$	(69.8	)		(9.1	%)
Federal Services			22.3			30.9			(8.6	)		(27.8	%)
Energy & Construction			408.3			430.6			(22.3	)		(5.2	%)
Oil & Gas			6.5			—			6.5			—
Industrial total		$	1,131.1		$	1,225.3		$	(94.2	)		(7.7	%)

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.

xxxx

CONSOLIDATED RESULTS

The Year Ended December 28, 2012 Compared with the Year Ended December 30, 2011

	Year Ended
										Percentage
(In millions, except percentages and per share amounts)	December 28,			December 30,			Increase			Increase
	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		—			(351.3	)		(351.3	)		N/M
Equity in income of unconsolidated joint ventures		107.6			132.2			(24.6	)		(18.6	%)
Operating income		685.9			251.1			434.8			173.2	%
Interest expense		(70.7	)		(22.1	)		48.6			219.9	%
Other income, net		0.5			—			0.5			N/M
Income before income taxes		615.7			229.0			386.7			168.9	%
Income tax expense		(189.9	)		(143.4	)		46.5			32.4	%
Net income including noncontrolling interests		425.8			85.6			340.2			397.4	%
Noncontrolling interests in income oF consolidated subsidiaries		(115.2	)		(128.5	)		(13.3	)		(10.4	%)
Net income (loss) attributable to URS	$	310.6		$	(42.9	)	$	353.5			824.0	%
										$
Diluted earnings (loss) per share	$	4.17		$	(0.56	)	$	4.73			844.6	%

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.

xxxxi

CONSOLIDATED RESULTS BY DIVISION

Revenues

(In millions, except percentages)	Infrastructure & Environment			Federal Services (1)			Energy & Construction			Oil & Gas (2)		Eliminations			Total
Year ended
December 28, 2012	$	3,714.4		$	3,774.9		$	2,412.9		$	1,233.1	$	(162.8	)	$	10,972.5
December 30, 2011		3,761.0			4,013.9			1,932.5			—		(162.4	)		9,545.0
Increase (decrease)		(46.6	)		(239.0	)		480.4			1,233.1		0.4			1,427.5
Percentage increase (decrease)		(1.2	%)		(6.0	%)		24.9	%		N/M		0.2	%		15.0	%

(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 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.

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 declined for the year ended December 28, 2012 compared to the year ended December 30, 2011.  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.  In addition, 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.

These decreases were partially offset by increased revenues from the IT services we provide to federal clients, as a result of our June 2011 acquisition of Apptis.

xxxxii

The Energy & Construction Division’s Revenues

The Energy & Construction Division’s revenues for the year ended December 28, 2012 increased compared with the year ended December 30, 2011.  The increase was primarily due to the inclusion of the facility construction component of the Flint acquisition into the Energy & Construction Division, which generated $352.3 million in revenues during fiscal year 2012.  Revenues also increased from 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.

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, except for revenues from the facility construction component, have been included in our consolidated results under our Oil & Gas Division.

Cost of Revenues

(In millions, except percentages)	Infrastructure & Environment			Federal Services (1)			Energy & Construction (2)			Oil & Gas (2)			Eliminations			Total
Year ended
December 28, 2012	$	(3,502.9	)	$	(3,479.4	)	$	(2,296.1	)	$	(1,178.9	)	$	162.8		$	(10,294.5	)
December 30, 2011		(3,537.3	)		(3,750.9	)		(1,863.0	)		—			162.4			(8,988.8	)
Increase (decrease)		(34.4	)		(271.5	)		433.1			1,178.9			0.4			1,305.7
Percentage increase (decrease)		(1.0	%)		(7.2	%)		23.2	%		N/M			0.2	%		14.5	%

(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.

General and Administrative Expenses

Our consolidated G&Aexpenses 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.

xxxxiii

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 impairment to our goodwill in any of our reporting units.  For the year ended December 30, 2011, we recognized an impairment charge of $351.3 million affecting one of our six reporting units.  On a net, after-tax basis, this charge resulted in decreases to net income and diluted EPS of $309.4 million and $3.99, respectively, for the year ended December 30, 2011.

Equity in Income of Unconsolidated Joint Ventures

(In millions, except percentages)	Infrastructure & Environment			Federal Services (1)			Energy & Construction			Oil & Gas (2)		Total
Year ended
December 28, 2012	$	4.0		$	83.4		$	16.0		$	4.2	$	107.6
December 30, 2011		3.9			114.7			13.6			—		132.2
Increase (decrease)		0.1			(31.3	)		2.4			4.2		(24.6	)
Percentage increase (decrease)		2.6	%		(27.3	%)		17.6	%		N/M		(18.6	%)

(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.

xxxxiv

Operating Income

(In millions, except percentages)	Infrastructure & Environment			Federal Services (1)			Energy & Construction (2)			Oil & Gas (2)		Corporate			Total
Year ended
December 28, 2012	$	215.5		$	378.9		$	132.8		$	58.4	$	(99.7	)	$	685.9
December 30, 2011		222.0			25.5			83.1			—	$	(79.5	)		251.1
Increase (decrease)		(6.5	)		353.4			49.7			58.4	$	20.2			434.8
Percentage increase (decrease)		(2.9	%)		1,385.9	%		59.8	%		N/M		25.4	%		173.2	%

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 2.6% 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 decreases in employee benefits and other indirect costs.  Overhead costs as a percentage of revenues decreased to 31.9% for the year ended December 28, 2012 from 32.0% for the year ended December 30, 2011.

The Federal Services Division’s Operating Income

Operating income as a percentage of revenues was 10.0% for the year ended December 28, 2012 compared to 0.6% for the year ended December 30, 2011.  For the year ended December 30, 2011, the decreased operating income was the result of a $351.3 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 included $40.0 million related to a programmatic schedule incentive fee achieved when multiple chemical demilitarization contracts each met its milestones in 2012.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.  The increase in operating income was also partially offset by a $27.0 million decrease in equity in income of unconsolidated joint ventures described above.

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The Energy & Construction Division’s Operating Income

Operating income as a percentage of revenues was 5.5% for the year ended December 28, 2012 compared to 4.3% for the year ended December 30, 2011.  The increase in operating income is primarily attributable to an increase of $21.9 million from projects to replace steam generators at active nuclear power plants, $20.6 million from a new air quality control project, a $3.4 million current year insurance recovery compared to a prior year loss of $19.4 million on a common sulfur project, as well as the inclusion of Flint’s facility and construction business from the acquisition date of May 14, 2012 of $9.3 million. These increases were partially offset by a $31.5 million decline resulting from the substantial completion of a levee construction project in New Orleans in the prior year.

The Oil & Gas Division’s Operating Income

The Oil & Gas Division’s operating income for the year ended December 28, 2012 was $58.4 million, which reflects activities from May 14, 2012, the effective date of the Flint acquisition and includes $36.0 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, Net

Our consolidated other income, net 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

Our effective income tax rates for the years ended December 28, 2012 and December 30, 2011 were 30.8% and 62.6%, respectively.  The change in effective income tax rates was primarily due to the non-deductibility of a substantial portion 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.

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LIQUIDITY AND CAPITAL RESOURCES

	Year Ended
	January 3,				December 28,				December 30,
(In millions)	2014				2012				2011
Cash flows from operating activities		$	614.2			$	430.2			$	505.9
Cash flows from investing activities			(13.2	)			(1,446.6	)			(348.1	)
Cash flows from financing activities			(630.5	)			892.3				(294.3	)

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 lines of credit.  Our primary uses of cash are to fund working capital, income tax payments, and capital expenditures; to service our debt; to pay dividends; to repurchase our common stock; and to make distributions to the minority owners 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.

Our future capital allocation priorities are expected to include dividend payments, share repurchases, debt pay downs, add-on acquisitions and organic growth opportunities.

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 January 3, 2014 and December 28, 2012, restricted cash was $12.8 million and $17.1 million, respectively, which amounts were included in “Other current assets” on our Consolidated Balance Sheets.

As of January 3, 2014 and December 28, 2012, we had cash and cash equivalents of $35.8 million and $116.3 million, respectively, held outside the U.S., excluding amounts in consolidated joint ventures.  We are not aware of any material restrictions on cash and cash equivalents in those countries outside the U.S where we conduct business.  If cash and cash equivalents held outside the U.S. are needed for our operations in the U.S., we may be required to accrue and pay U.S. taxes to repatriate these funds; however, our intent is to indefinitely reinvest these foreign amounts outside of the U.S., and our current plans do not demonstrate a need to repatriate these foreign amounts to fund our U.S. operations.

In addition, as of January 3, 2014 and December 28, 2012, our consolidated joint ventures held cash and cash equivalents of $89.4 million and $80.1 million, respectively.  These amounts are restricted for use by each joint venture and are not available for use in our general operations.

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Accounts receivable and costs and accrued earnings in excess of billings on contracts (also referred to as “Unbilled Accounts Receivable”)represent one of our primary sources of cash inflows from operations.  Unbilled Accounts Receivable represent 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 January 3, 2014 and December 28, 2012, $131.1 million and $264.9 million, respectively, of Unbilled Accounts Receivable were 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 January 3, 2014 and December 28, 2012, we reclassified unbilled amounts representing performance-based incentive fees from our work managing chemical demilitarization and nuclear management and decommissioning programs from “Other long-term assets” to Unbilled Accounts Receivable because we expect them to become billable within twelve months of the Balance Sheet date.  We are required contractually to share a portion of these incentive fees with our employees and subcontractors for some of our projects.  These liabilities are accrued concurrently with the related receivables and are not expected to be paid until after the fees are collected, and, as a result, are originally included as a component of “Other long-term liabilities.”  As the underlying performance-based incentive fee receivables become current, these incentive fees are reclassified from “Other long-term liabilities” to “Other current liabilities.”

The following table summarizes the activities of Unbilled Accounts Receivable included in “Other long-term assets” and the corresponding liabilities included in “Other long-term liabilities” for our fiscal years 2013 and 2012:

(In millions)	Amounts included in “Other long-term assets”			Amounts included in “Other long-term liabilities"
Balances as of December 30, 2011	$	185.0		$	105.6
Additions		209.2			38.9
Reclassification from long-term to short-term		(129.3	)		(37.5	)
Balances as of December 28, 2012		264.9			107.0
Additions		241.7			59.7
Reclassification from long-term to short-term		(375.5	)		(164.5	)
Balances as of January 3, 2014	$	131.1		$	2.2

As of January 3, 2014 and December 28, 2012, significant unapproved change orders and claims, which are included in Unbilled Accounts Receivable, collectively represented approximately 4% and 3%, 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 January 3, 2014 was $2.8 billion, essentially flat compared to the balance as of December 28, 2012.

Our 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.

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As of January 3, 2014 and December 28, 2012, our receivable allowances represented 2.23% and 2.37%, 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 January 3, 2014 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 the timing of the 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 January 3, 2014 and December 28, 2012 were $233.1 million and $289.1 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 87 days as of December 28, 2012 to 101 days as of January 3, 2014.

We also analyze the ratio of our accounts receivable to quarterly revenues (the “Ratio”), which changed from 95.7% at December 28, 2012 to 103.2% at January 3, 2014.  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, primarily with the DOD, composed 6.4% of our Ratio for the quarter ended December 28, 2012 and 10.9% of our Ratio for the quarter ended January 3, 2014.  These amounts were included in Unbilled Accounts Receivable and “Other long-term assets,” and they become billable as provided under the terms of the contracts to which they relate.  We expect to bill for these incentives beginning in 2014 and beyond.  Our Unbilled Accounts Receivable and “Other long-term assets” 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.

·   Our Ratio was also impacted by an increase in accounts receivable related to activity on a DOE deactivation, demolition, and removal project, which added 0.9% to our Ratio for the quarter ended December 28, 2012, and 3.4% to our Ratio for the quarter ended January 3, 2014.

·   Our Ratio was also impacted due to the completion of projects involving the replacement of steam generators at nuclear power plants in the fourth quarter of fiscal year 2013, whereas these projects had a favorable impact of 2.7% to the Ratio in the fourth quarter of fiscal year 2012.

Excluding the significant changes discussed above, our Ratios were 88.9% and 90.8% for the quarters ended January 3, 2014 and December 28, 2012, respectively.

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 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.

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Credit Facility, Senior Notes and Canadian Notes

On December 19, 2013, we entered into an amendment to our 2011 Credit Facility that extended the maturity date by two years to December 19, 2018, increased the sublimit for alternative currency revolving loans from $400.0 million to $500.0 million, established a $500.0 million sublimit for financial letters of credit, and increased a restricted payment basket from $150 million to $200 million in any fiscal year.

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 (collectively, the “Senior Notes”).  We used the net proceeds from the notes together with borrowings from our 2011 Credit Facility to finance our acquisition of Flint on May 14, 2012. On January 3, 2014, our exchange offer expired and we exchanged substantially all of the privately placed Senior Notes for Senior Notes that are registered with the SEC.  On December 27, 2013, Flint redeemed all of its outstanding 7.5% senior notes (“Canadian Notes”).  See Note 11, “Indebtedness,” to our Consolidated Financial Statements included under Item 8 of this report, for more information.

Dividend Program

Our Board of Directors has declared the following dividends:

Declaration Date	Dividend Per Share		Record Date	Total Maximum Payment		Payment Date
(In millions, except per share data)
February 24, 2012	$	0.20	March 16, 2012	$	15.2	April 6, 2012
May 4, 2012	$	0.20	June 15, 2012	$	15.4	July 6, 2012
August 3, 2012	$	0.20	September 14, 2012	$	15.4	October 5, 2012
November 2, 2012	$	0.20	December 14, 2012	$	15.4	January 4, 2013
February 22, 2013	$	0.21	March 15, 2013	$	16.0	April 5, 2013
May 3, 2013	$	0.21	June 14, 2013	$	16.0	July 5, 2013
August 2, 2013	$	0.21	September 13, 2013	$	16.0	October 4, 2013
November 1, 2013	$	0.21	December 13, 2013	$	16.0	January 10, 2014
February 28, 2014	$	0.22	March 21, 2014		NA	April 11, 2014

NA = Not available

On February 28, 2014, our Board of Directors approved the continuation of this program and authorized a $0.22 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 increase in cash flows from operating activities for the year ended January 3, 2014, compared to the year ended December 28, 2012, was primarily due to the timing of billing, collections and advance payments from clients on accounts receivable, income tax payments, and dividend distributions from our unconsolidated joint ventures. The increase was partially offset by the timing of vendor and subcontractor payments, and salary and employee benefit payments.

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.

During the first quarter of 2014, we expect to make estimated payments of $102 million to pension, post-retirement, defined contribution and multiemployer pension plans and incentive payments.

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Investing Activities

Cash flows used for investing activities of $13.2 million during the year ended January 3, 2014 consisted of the following significant activities:

·   capital expenditures, excluding purchases financed through capital leases and equipment notes, of $81.0 million.

These cash flows were partially offset by:

·   proceeds from disposal of property and equipment of $63.7 million, mainly resulting from the sale of equipment, land, and buildings in Canada.

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 paymentreceived 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.

For fiscal year 2014, we expect to incur approximately $75 million to $85 million in capital expenditures, a portion of which will be financed through capital leases or equipment notes.

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Financing Activities

Cash flows used for financing activities of $630.5 million during the year ended January 3, 2014 consisted of the following significant activities:

·   long-term debt payments of $220.5 million;

·   net payments to our revolving line of credit of $95.9 million;

·   repurchases of our common stock of $93.3 million;

·   distributions to noncontrolling interests of consolidated joint ventures of $79.0 million;

·   dividend payments of $62.2 million; and

·   net change in overdrafts of $54.9 million.

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 senior secured 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.

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Contractual Obligations and Commitments

The following table contains information about our contractual obligations and commercial commitments as of January 3, 2014:

Contractual Obligations	Payments and Commitments Due by Period
			Less Than						After
(In millions)	Total		1 Year		1-3 Years		4-5 Years		5 Years		Other
As of January 3, 2014:
2011 Credit Facility (1)	$	605.0	$	—	$	54.1	$	550.9	$	—	$	—
3.85% Senior Notes (2)		400.0		—		—		400.0		—		—
5.00% Senior Notes (2)		600.0		—		—		—	��	600.0		—
Capital lease obligations (3)		43.5		19.8		19.6		4.1		—		—
Notes payable, foreign credit lines and other indebtedness		67.1		25.5		23.0		12.9		5.7		—
Total debt (principal only)		1,715.6		45.3		96.7		967.9		605.7		—
Operating lease obligations (3)		742.1		187.1		276.9		162.8		115.3		—
Pension and other retirement plans funding requirements (4)		437.4		235.4		64.7		58.4		78.9		—
Interest (5)		417.7		68.3		136.1		108.3		105.0		—
Dividends payable (6)		18.3		16.7		1.5		0.1		—		—
Purchase obligations (7)		10.4		6.3		4.1		—		—		—
Asset retirement obligations (8)		14.9		3.0		2.1		3.8		6.0		—
Other contractual obligations (9)		230.4		216.8		2.2		—		—		11.4
Total contractual obligations	$	3,586.8	$	778.9	$	584.3	$	1,301.3	$	910.9	$	11.4

(1)   Amounts shown exclude unamortized debt issuance costs of $3.2 million for our 2011 Credit Facility.  For information regarding events that could accelerate the due dates of these payments, see the “2011 Credit Facility” section below.

(2)   Amounts shown exclude unamortized discount for the 3.85% and 5.00% Senior Notes of $0.9 million.  For information regarding events that could accelerate these payments, see the “Senior Notes and Canadian Notes” below.

(3)   For capital lease obligations, amounts shown exclude interest of $1.6 million.  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)   Dividends for unvested restricted stock awards and units will be paid upon vesting.

(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.

(9)   Other contractual obligations include accrued performance-based incentive fees shared with our employees and subcontractors, project and retention bonuses, 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.

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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 January 3, 2014, we had $108.3 million in standby letters of credit outstanding under our 2011 Credit Facility and $35.8 million in bank guarantees outstanding under foreign credit facilities and other banking arrangements with remaining availability of approximately $39.0 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.

·   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, the majority of the unconsolidated joint ventures in which we participate involve cost-reimbursable, level-of-effort projects that are accounted for as service-type projects, not engineering and construction projects that would follow the percentage-of-completion or completed-contract accounting method.  Revenues for service-type contracts are 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.  The services we provide on these cost-reimbursable contracts are management and operations services for government clients and operations and maintenance services for non-government clients.  We believe that, due to the continual changes we experience in client funding and scope definitions, reliable estimates of performance guarantees cannot be calculated because they cannot be reliably predicted.  In addition, the level at which we participate in joint ventures does not afford us access to those joint ventures’ estimates to complete.  The joint ventures with regard to which we perform engineering and construction contracts and where we have access to the estimates to complete, which are needed to calculate the performance guarantees, are immaterial.  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.

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·   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 January 3, 2014 and December 28, 2012, the outstanding balances of the term loan under our 2011 Credit Facility were $605.0 million and $670.0 million, respectively.  As of January 3, 2014 and December 28, 2012, the interest rates applicable to the term loan were 1.67% and 1.71%, 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.

On December 19, 2013, we entered into an amendment to our 2011 Credit Facility that extended the maturity date by two years to December 19, 2018, increased the sublimit for alternative currency revolving loans from $400.0 million to $500.0 million, established a $500.0 million sublimit for financial letters of credit, and increased a restricted payment basket from $150 million to $200 million in any fiscal year.  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 January 3, 2014.

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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.  On January 3, 2014, our exchange offer expired and we exchanged substantially all of the privately placed Senior Notes with Senior Notes that are registered with the SEC.  As of January 3, 2014, the outstanding balance of the Senior Notes was $999.1 million, net of $0.9 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, mergers and sales 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.  

On May 14, 2012, we guaranteed the Canadian Notes with an outstanding face value of C$175.0 million (US$175.0 million).  On December 27, 2013, Flint redeemed all of its outstanding Canadian Notes.  We recorded in “Interest expense” on our Consolidated Statements of Operations for the year ended January 3, 2014 a net gain of $4.1 million, comprised of premium write-off of $23.2 million that was offset by a prepayment fee of $19.1 million related to the redemption of Canadian Notes.  As of December 28, 2012, the outstanding balance of the Canadian Notes was $203.8 million, including $28.0 million of premium.

We were in compliance with the covenants of our Senior Notes as of January 3, 2014.

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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.

We had no outstanding debt balances on our revolving line of credit as of January 3, 2014.  We had outstanding debt balances of $100.5 million on our revolving line of credit as of December 28, 2012.  As of January 3, 2014, we had issued $108.3 million of letters of credit, leaving $891.7 million available under our revolving credit facility.

A summary of information regarding our revolving line of credit is set forth below:

	Year Ended
	January 3,				December 28,
(In millions, except percentages)	2014				2012
Effective average interest rates on the revolving line of credit			2.4	%			1.9	%
Average daily revolving line of credit balances		$	135.2			$	139.5
Maximum amounts outstanding at any point during the year		$	236.4			$	420.0

Other Indebtedness

Notes payable, five-year loan notes, and foreign credit lines.  As of January 3, 2014 and December 28, 2012, we had outstanding amounts of $67.1 million and $35.5 million, respectively, in notes payable, five-year loan notes, and foreign lines of credit.  The weighted-average interest rates of the notes were approximately 3.57% and 4.68% as of January 3, 2014 and December 28, 2012, respectively.  Notes payable primarily include notes used to finance the purchase of office equipment, computer equipment, furniture, vehicles and automotive equipment, and construction equipment.

As of January 3, 2014 and December 28, 2012, we maintained several foreign credit lines with aggregate borrowing capacity of $51.3 million and $50.8 million, respectively, and had remaining borrowing capacity of $49.0 and $47.7 million, respectively.

Capital Leases.  As of January 3, 2014 and December 28, 2012, we had obligations under our capital leases of approximately $43.5 million and $59.2 million, respectively, consisting primarily of leases for office equipment, computer equipment, furniture, vehicles and automotive equipment, and construction equipment.

Operating Leases.  As of January 3, 2014 and December 28, 2012, we had obligations under our operating leases of approximately $742.1 million and $706.3 million, respectively, consisting primarily of real estate leases.

Other Comprehensive Income (Loss)

Other comprehensive income (loss), net of tax for the year ended January 3, 2014 was comprised of pension and post-retirement adjustments, and foreign currency translation adjustments.  The 2013 pension and post-retirement adjustment of $17.0 million, net of tax, was caused primarily by an increase in the inflation rate assumption in the international benefit plans, which was partially offset by an increase in the discount rate assumption for the domestic benefit plans.  The 2013 foreign currency translation loss of $70.2 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 income (loss).

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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 January 3, 2014.

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 the joint venture is determined to be a variable interest entity (“VIE”) and we are determined to be the primary beneficiary.

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 have the power to direct 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 significant activities include the following:

·   Program and project management;

·   Engineering services;

·   Procurement services;

·   Construction;

·   Construction management; and

·   Operations and maintenance services.

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.

As required by the accounting standard, we perform a quarterly re-assessment to determine whether we are the primary beneficiary.  This evaluation may result in consolidation of a previously unconsolidated joint venture or in deconsolidation of a previously consolidated joint venture.  See Note 6, “Joint Ventures,” for further information on our VIEs.

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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.

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.

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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.

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.

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.

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Goodwill and Intangible Assets Impairment Review

We amortize our intangible assets based on the period over which the contractual or economic benefits of the intangible assets are expected to be realized.  We assess our intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of an intangible asset may not be recoverable.

Goodwill represents the excess of the cost of an acquired entity over the net of the amounts assigned to assets acquired and liabilities assumed.  Goodwill was allocated to the reporting units based on the respective fair values of the reporting units at the time of the various acquisitions that gave rise to the recognition of goodwill or at the time of a reorganization which impacts the composition of the reporting units. We assess our goodwill for impairment at least annually as of the end of the first month following our September reporting period or whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable.

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 both the income approach and the market approach.

The fair value measurements from the income approach are calculated using unobservable inputs to our discounted cash flows.  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 the cash flow projections used in the calculation of fair values for our goodwill impairment review, we use market participant estimates of economic and market activity for the next ten years.  The key assumptions we used to estimate the fair values of our reporting units were:

·   Revenue growth rates;

·   Operating margins;

·   Capital expenditure needs;

·   Working capital requirements;

·   Discount rates; and

·   Terminal value capitalization rate (“Capitalization Rate”)

We also make assumptions about future market conditions, market prices, interest rates, and changes in business strategies.  Changes in our assumptions or estimates could materially affect the determination of the fair value of a reporting unit and, therefore, could eliminate the excess fair value over the carrying value of a reporting unit entirely and, in some cases, could result in impairment.  Such changes in assumptions could be caused by a loss of one or more significant contracts, reductions in government and/or private industry spending, including federal government sequestration, or a decline in the demand of our services due to changing economic conditions.  Given the contractual nature of our business, if we are unable to win or renew contracts; are unable to estimate and control our contract costs; fail to adequately perform to our clients’ expectations; fail to procure third-party subcontractors, heavy equipment and materials; or fail to adequately secure funding for our projects, our profits, revenues and growth over the long-term would decline.  Such a decline could significantly affect the fair value assessment of our reporting units and cause our goodwill to become impaired.

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Of the key assumptions, the discount rates and the Capitalization Rate are market-driven.  These rates are derived from the use of market data and employment of the weighted-average cost of capital.  The key assumptions that are company-driven include the revenue growth rates and the projected operating margins.  They reflect the influence of other potential assumptions, since the assumptions we identified that affect the projected operating results may ultimately affect either the revenue growth or the profitability (operating margin) of the reporting unit.  For example, any adjustment to our assumptions regarding contract volume and pricing would have a direct impact on revenue growth, and any adjustment to our assumptions regarding the reporting unit’s cost structure or operating leverage would have a direct impact on the profitability of the reporting unit.  Actual results may differ from those assumed in our forecasts and changes in assumptions or estimates could materially affect the determination of the fair value of a reporting unit, and therefore could affect the amount of potential impairment.

We also consider indications obtained from the market approach.  We applied market multiples derived from stock market prices 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, and applied market multiples derived from transactions of significant interests in companies engaged in the same or similar lines of business as our reporting units, and a control premium is applied to arrive at the fair values.  Declines in the stock prices of other market participants in the construction and engineering industry could materially affect the determination of the fair value of a reporting unit, and therefore could affect the amount of a potential impairment.

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 the recorded goodwill, we would record an impairment charge for the difference.

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) a significant decline in our stock price; and (iii) the occurrence of events that may reduce the fair value of a reporting unit below its carrying amount, such as significant or continued operating losses at the reporting unit level.

If our goodwill were impaired, we would be required to record a non-cash charge that could have a material adverse effect on our consolidated financial statements.

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.

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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.

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 Plans

We account for our defined benefit pension plans 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 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 plans as shown in the table below.

Change in an Assumption (In millions)	Domestic Defined Benefit Plans			Foreign Defined Benefit Plans
25 basis point increase in discount rate	$	(11.5	)	$	(25.9	)
25 basis point decrease in discount rate	$	12.1		$	27.6

Hypothetical changes in all other key assumptions of 25 basis points have an immaterial impact on the benefit obligations of our defined 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 STANDARDS

See Note 2, “Adopted and Other Recently Issued Statements of Financial Accounting Standards,” to our Consolidated Financial Statements included under Item 8 of this report.

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ITEM 8.  CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of URS Corporation:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations and of comprehensive income, of changes in stockholders’ equity, and of cash flows present fairly, in all material respects, the financial position of URS Corporation and its subsidiaries at January 3, 2014 and December 28, 2012, and the results of their operations and their cash flows for each of the three years in the period ended January 3, 2014 in conformity with accounting principles generally accepted in the United States of America.  Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 3, 2014, based on criteria established in Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Annual Report on Internal Control over Financial Reporting (not presented herein) appearing under Item 9A of the Company’s 2013 Annual Report on Form 10-K.  Our responsibility is to express opinions on these financial statements and on the Company's internal control over financial reporting based on our integrated audits.  We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects.  Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation.  Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.  Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/  PricewaterhouseCoopers LLP                                                      

San Francisco, California

March 3, 2014, except with respect to our opinion on the consolidated financial statements insofar as it relates to the effects of the change in reportable segments discussed in Note 16, as to which the date is August 1, 2014

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URS CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS6

(In millions, except per share data)

	January 3, 2014			December 28, 2012
ASSETS
Current assets:
Cash and cash equivalents	$	283.7		$	314.5
Accounts receivable, including retentions of $116.6 and $114.4, respectively		1,392.6			1,554.8
Costs and accrued earnings in excess of billings on contracts		1,521.5			1,384.3
Less receivable allowances		(65.1	)		(69.7	)
Net accounts receivable		2,849.0			2,869.4
Deferred tax assets		35.6			67.6
Inventory		49.2			61.5
Other current assets		173.2			204.2
Total current assets		3,390.7			3,517.2
Investments in and advances to unconsolidated joint ventures		245.6			278.3
Property and equipment, net		608.1			687.5
Intangible assets, net		569.7			692.2
Goodwill		3,695.6			3,721.6
Other long-term assets		208.3			364.2
Total assets	$	8,718.0		$	9,261.0
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt	$	44.6		$	71.8
Accounts payable and subcontractors payable, including retentions of $29.2 and $32.3, respectively		688.3			803.5
Accrued salaries and employee benefits		507.4			558.8
Billings in excess of costs and accrued earnings on contracts		233.1			289.1
Other current liabilities		365.2			277.8
Total current liabilities		1,838.6			2,001.0
Long-term debt		1,666.9			1,992.5
Deferred tax liabilities		444.2			379.9
Self-insurance reserves		127.2			129.8
Pension and post-retirement benefit obligations		285.7			300.9
Other long-term liabilities		128.4			271.0
Total liabilities		4,491.0			5,075.1
Commitments and contingencies (Note 17)
URS stockholders’ equity:
Preferred stock, authorized 3.0 shares; no shares outstanding		—			—
Common stock, par value $.01; authorized 200.0 shares; 89.1 and 88.9 shares issued, respectively; and 75.0 and 76.8 shares outstanding, respectively		0.9			0.9
Treasury stock, 14.1 and 12.1 shares at cost, respectively		(588.2	)		(494.9	)
Additional paid-in capital		3,038.1			3,003.9
Accumulated other comprehensive loss (Note 18)		(200.3	)		(113.2	)
Retained earnings		1,830.7			1,647.3
Total URS stockholders’ equity		4,081.2			4,044.0
Noncontrolling interests		145.8			141.9
Total stockholders’ equity		4,227.0			4,185.9
Total liabilities and stockholders’ equity	$	8,718.0		$	9,261.0

See Notes to Consolidated Financial Statements

lxv

URS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share data)

	Year Ended
	January 3,			December 28,			December 30,
	2014			2012			2011
Revenues	$	10,990.7		$	10,972.5		$	9,545.0
Cost of revenues		(10,416.0	)		(10,294.5	)		(8,988.8	)
General and administrative expenses		(77.5	)		(83.6	)		(79.5	)
Acquisition-related expenses (Note 8)		—			(16.1	)		(1.0	)
Restructuring costs (Note 17)		—			—			(5.5	)
Goodwill impairment (Note 9)		—			—			(351.3	)
Equity in income of unconsolidated joint ventures		93.6			107.6			132.2
Operating income		590.8			685.9			251.1
Interest expense		(86.1	)		(70.7	)		(22.1	)
Other income (expenses)		(7.7	)		0.5			—
Income before income taxes		497.0			615.7			229.0
Income tax expense		(167.7	)		(189.9	)		(143.4	)
Net income including noncontrolling interests		329.3			425.8			85.6
Noncontrolling interests in income of consolidated subsidiaries		(82.1	)		(115.2	)		(128.5	)
Net income (loss) attributable to URS	$	247.2		$	310.6		$	(42.9	)
Earnings (loss) per share (Note 3):
Basic	$	3.35		$	4.18		$	(0.56	)
Diluted	$	3.31		$	4.17		$	(0.56	)
Weighted-average shares outstanding (Note 3):
Basic		73.9			74.3			77.3
Diluted		74.7			74.5			77.3
Cash dividends declared per share (Note 15)	$	0.84		$	0.80		$	—

See Notes to Consolidated Financial Statements

lxvi

URS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

	Year Ended
	January 3,			December 28,			December 30,
	2014			2012			2011
Comprehensive income (loss):
Net income including noncontrolling interests	$	329.3		$	425.8		$	85.6
Pension and post-retirement related adjustments, net of tax		(17.0	)		(26.6	)		(62.7	)
Foreign currency translation adjustments, net of tax		(70.2	)		24.8			(11.2	)
Loss on derivative instruments, net of tax		—			(0.6	)		—
Reclassification adjustment of prior derivative settlement, net of tax		0.1			—			—
Comprehensive income		242.2			423.4			11.7
Noncontrolling interests in comprehensive income of consolidated subsidiaries		(82.1	)		(115.2	)		(128.5	)
Comprehensive income (loss) attributable to URS	$	160.1		$	308.2		$	(116.8	)

See Notes to Consolidated Financial Statements

lxvii

URS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In millions)

												Accumulated
									Additional			Other						Total URS
	Common Stock					Treasury			Paid-in			Comprehensive			Retained			Stockholders’			Noncontrolling			Total
	Shares			Amount		Stock			Capital			Income (Loss)			Earnings			Equity			Interests			Equity
Balances, December 31, 2010		81.9		$	0.9	$	(212.1	)	$	2,924.3		$	(36.9	)	$	1,441.0		$	4,117.2		$	83.8		$	4,201.0
Employee stock purchases and exercises of stock options		0.3			—		—			11.7			—			—			11.7			—	��		11.7
Stock repurchased in connection with exercises of stock options and vesting of restricted stock awards		(0.3	)		—		—			(15.3	)		—			—			(15.3	)		—			(15.3	)
Stock-based compensation		0.8			—		—			45.3			—			—			45.3			—			45.3
Excess tax benefits from stock-based compensation		—			—		—			0.8			—			—			0.8			—			0.8
Foreign currency translation adjustments		—			—		—			—			(11.2	)		—			(11.2	)		—			(11.2	)
Pension and post-retirement related adjustments, net of tax		—			—		—			—			(62.7	)		—			(62.7	)		—			(62.7	)
Repurchases of common stock		(6.0	)		—		(242.8	)		—			—			—			(242.8	)		—			(242.8	)
Distributions to noncontrolling interests		—			—		—			—			—			—			—			(111.7	)		(111.7	)
Contributions and advances from noncontrolling interests		—			—		—			—			—			—			—			6.9			6.9
Other transactions with noncontrolling interests		—			—		—			—			—			—			—			(0.3	)		(0.3	)
Net income (loss) including noncontrolling interests		—			—		—			—			—			(42.9	)		(42.9	)		128.5			85.6
Balances, December 30, 2011		76.7		$	0.9	$	(454.9	)	$	2,966.8		$	(110.8	)	$	1,398.1		$	3,800.1		$	107.2		$	3,907.3

See Notes to Consolidated Financial Statements

lxviii

URS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Continued)

(In millions)

												Accumulated
									Additional			Other						Total URS
	Common Stock					Treasury			Paid-in			Comprehensive			Retained			Stockholders’			Noncontrolling			Total
	Shares			Amount		Stock			Capital			Income (Loss)			Earnings			Equity			Interests			Equity
Balances, December 30, 2011		76.7		$	0.9	$	(454.9	)	$	2,966.8		$	(110.8	)	$	1,398.1		$	3,800.1		$	107.2		$	3,907.3
Employee stock purchases and exercises of stock options		0.3			—		—			8.9			—			—			8.9			—			8.9
Stock repurchased in connection with exercises of stock options and vesting of restricted stock awards		(0.4	)		—		—			(15.5	)		—			—			(15.5	)		—			(15.5	)
Stock-based compensation		1.2			—		—			43.6			—			—			43.6			—			43.6
Excess tax benefits from stock-based compensation		—			—		—			0.1			—			—			0.1			—			0.1
Foreign currency translation adjustments, net of tax		—			—		—			—			24.8			—			24.8			—			24.8
Pension and post-retirement related adjustments, net of tax		—			—		—			—			(26.6	)		—			(26.6	)		—			(26.6	)
Loss on derivative instruments, net of tax		—			—		—			—			(0.6	)		—			(0.6	)		—			(0.6	)
Repurchases of common stock		(1.0	)		—		(40.0	)		—			—			—			(40.0	)		—			(40.0	)
Cash dividends declared		—			—		—			—			—			(61.4	)		(61.4	)		—			(61.4	)
Noncontrolling interests from an acquisition		—			—		—			—			—			—			—			2.0			2.0
Distributions to noncontrolling interests		—			—		—			—			—			—			—			(83.8	)		(83.8	)
Contributions and advances from noncontrolling interests		—			—		—			—			—			—			—			1.2			1.2
Other transactions with noncontrolling interests		—			—		—			—			—			—			—			0.1			0.1
Net income including noncontrolling interests		—			—		—			—			—			310.6			310.6			115.2			425.8
Balances, December 28, 2012		76.8		$	0.9	$	(494.9	)	$	3,003.9		$	(113.2	)	$	1,647.3		$	4,044.0		$	141.9		$	4,185.9

See Notes to Consolidated Financial Statements

lxix

URS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Continued)

(In millions)

												Accumulated
									Additional			Other						Total URS
	Common Stock					Treasury			Paid-in			Comprehensive			Retained			Stockholders’			Noncontrolling			Total
	Shares			Amount		Stock			Capital			Income (Loss)			Earnings			Equity			Interests			Equity
Balances, December 28, 2012		76.8		$	0.9	$	(494.9	)	$	3,003.9		$	(113.2	)	$	1,647.3		$	4,044.0		$	141.9		$	4,185.9
Employee stock purchases and exercises of stock options		0.6			—		—			20.2			—			—			20.2			—			20.2
Stock repurchased in connection with exercises of stock options and vesting of restricted stock awards		(0.4	)		—		—			(17.9	)		—			—			(17.9	)		—			(17.9	)
Stock-based compensation		—			—		—			30.4			—			—			30.4			—			30.4
Excess tax benefits from stock-based compensation		—			—		—			1.5			—			—			1.5			—			1.5
Foreign currency translation adjustments, net of tax		—			—		—			—			(70.2	)		—			(70.2	)		—			(70.2	)
Pension and post-retirement related adjustments, net of tax		—			—		—			—			(17.0	)		—			(17.0	)		—			(17.0	)
Reclassification adjustment of prior derivative settlement, net of tax		—			—		—			—			0.1			—			0.1			—			0.1
Repurchases of common stock		(2.0	)		—		(93.3	)		—			—			—			(93.3	)		—			(93.3	)
Cash dividends declared		—			—		—			—			—			(63.8	)		(63.8	)		—			(63.8	)
Distributions to noncontrolling interests		—			—		—			—			—			—			—			(79.0	)		(79.0	)
Other transactions with noncontrolling interests		—			—		—			—			—			—			—			0.8			0.8
Net income including noncontrolling interests		—			—		—			—			—			247.2			247.2			82.1			329.3
Balances, January 3, 2014		75.0		$	0.9	$	(588.2	)	$	3,038.1		$	(200.3	)	$	1,830.7		$	4,081.2		$	145.8		$	4,227.0

See Notes to Consolidated Financial Statements

lxx

URS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

	Year Ended
	January 3,			December 28,			December 30,
	2014			2012			2011
Cash flows from operating activities:
Net income including noncontrolling interests	$	329.3		$	425.8		$	85.6
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization		156.8			132.4			82.1
Amortization of intangible assets		107.4			101.2			60.6
Goodwill impairment		—			—			351.3
Write-off of Canadian Notes premium		(23.2	)		—			—
Gain on disposal of property and equipment		(25.4	)		(3.4	)		(8.9	)
Deferred income taxes		73.0			(16.6	)		28.3
Stock-based compensation		31.8			43.6			45.3
Equity in income of unconsolidated joint ventures		(93.6	)		(107.6	)		(132.2	)
Dividends received from unconsolidated joint ventures		113.0			88.7			107.3
Changes in operating assets, liabilities and other, net of effects of business acquisitions:
Accounts receivable and costs and accrued earnings in excess of billings on contracts		364.3			(92.2	)		10.6
Inventory		12.2			7.0			(11.9	)
Other current assets		36.0			(27.0	)		(7.3	)
Other long-term assets		(200.5	)		(62.2	)		(91.2	)
Accounts payable, accrued salaries and employee benefits, and other current liabilities		(219.5	)		(13.7	)		(40.5	)
Billings in excess of costs and accrued earnings on contracts		(54.5	)		(35.2	)		13.8
Other long-term liabilities		7.1			(10.6	)		13.0
Total adjustments and changes		284.9			4.4			420.3
Net cash from operating activities		614.2			430.2			505.9
Cash flows from investing activities:
Payments for business acquisitions, net of cash acquired		—			(1,345.7	)		(282.1	)
Proceeds from disposal of property and equipment		63.7			25.3			14.1
Payments in settlement of foreign currency forward contract		—			(1,260.6	)		—
Receipts in settlement of foreign currency forward contract		—			1,260.3			—
Investments in unconsolidated joint ventures		(0.2	)		(4.4	)		(19.6	)
Changes in restricted cash		4.3			3.9			7.0
Capital expenditures, less equipment purchased through capital leases and equipment notes		(81.0	)		(125.4	)		(67.5	)
Net cash from investing activities		(13.2	)		(1,446.6	)		(348.1	)

See Notes to Consolidated Financial Statements

lxxi

URS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(In millions)

	Year Ended
	January 3,			December 28,			December 30,
	2014			2012			2011
Cash flows from financing activities:
Borrowings from long-term debt		—			998.9			700.0
Payments on long-term debt		(220.5	)		(38.0	)		(632.6	)
Borrowings from revolving line of credit		1,028.2			661.6			138.6
Payments on revolving line of credit		(1,124.1	)		(583.6	)		(115.7	)
Net payments under foreign lines of credit and short-term notes		(26.6	)		(20.5	)		(16.4	)
Net change in overdrafts		(54.9	)		54.5			(18.0	)
Payments on capital lease obligations		(18.0	)		(14.6	)		(10.9	)
Payments of debt issuance costs and other financing activities		(0.8	)		(8.7	)		(3.1	)
Proceeds from employee stock purchases and exercises of stock options		20.2			8.9			11.7
Distributions to noncontrolling interests		(79.0	)		(83.8	)		(111.7	)
Contributions and advances from noncontrolling interests		0.5			2.3			6.6
Dividends paid		(62.2	)		(44.7	)		—
Repurchases of common stock		(93.3	)		(40.0	)		(242.8	)
Net cash from financing activities		(630.5	)		892.3			(294.3	)
Net change in cash and cash equivalents		(29.5	)		(124.1	)		(136.5	)
Effect of foreign exchange rate changes on cash and cash equivalents		(1.3	)		2.6			(1.3	)
Cash and cash equivalents at beginning of period		314.5			436.0			573.8
Cash and cash equivalents at end of period	$	283.7		$	314.5		$	436.0
Supplemental information:
Interest paid	$	83.9		$	64.5		$	15.2
Taxes paid	$	101.3		$	150.6		$	177.3
Supplemental schedule of non-cash investing and financing activities:
Equipment acquired with capital lease obligations and equipment note obligations	$	54.3		$	27.9		$	14.2
Purchase price adjustment and contingent consideration payable under acquisitions	$	—		$	—		$	7.9
Cash dividends declared but not paid	$	18.3		$	16.7		$	—

See Notes to Consolidated Financial Statements

lxxii

URS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.  BUSINESS, BASIS OF PRESENTATION, AND ACCOUNTING POLICIES

Overview

The terms “we,” “us,” and “our” used in these financial statements refer to URS Corporation and its consolidated subsidiaries unless otherwise indicated.  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 United States (“U.S.”) federal government contractor in the areas of systems engineering and technical assistance, operations and maintenance, and information technology (“IT”) services.  Headquartered in San Francisco, we have more than 50,000 employees in a global network of offices in nearly 50 countries as of January 31, 2014.  We operate through four reporting segments:  the Infrastructure & Environment Division, the Federal Services Division, the Energy & Construction Division and the Oil & Gas Division.

Our fiscal year is the 52/53-week period ending on the Friday closest to December 31.  Our fiscal year ended January 3, 2014 contained 53 weeks.

Principles of Consolidation and Basis of Presentation

Our consolidated financial statements include the financial position, results of operations and cash flows of URS Corporation and our majority-owned subsidiaries and joint ventures that are required to be consolidated.

We completed the acquisitions of Flint Energy Services Ltd. (“Flint”) and Apptis Holdings, Inc. (“Apptis”) on May 14, 2012 and June 1, 2011, respectively.  The operations of Flint became our Oil & Gas Division, with the exception of the facility construction component that was included in our Energy & Construction Division.  The operating results of Flint and Apptis from their acquisition dates through January 3, 2014 were included in our consolidated financial statements under the Oil & Gas and Federal Services Divisions, respectively.

Investments in unconsolidated joint ventures are accounted for using the equity method and are included as investments in and advances to unconsolidated joint ventures on our Consolidated Balance Sheets.  All significant intercompany transactions and accounts have been eliminated in consolidation.

Use of and Changes in Estimates

The preparation of our consolidated financial statements in conformity with generally accepted accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and related disclosures at the balance sheet dates, and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.  On an ongoing basis, we review our estimates based on information that is currently available.  Changes in facts and circumstances may cause us to revise our estimates.

Our business activities involve making significant estimates and assumptions in the normal course of business relating to our contracts.  We focus on evaluating the performance of contracts individually.  These estimates and assumptions can vary in the normal course of business as contracts progress, when estimated productivity assumptions change based on experience to-date and as uncertainties are resolved.  We use the cumulative catch-up method applicable to construction contract accounting to account for revisions in estimates.

For the year ended January 3, 2014, our results of operations included the recognition of a $31.1 million performance-based incentive fee from our work managing one of our chemical demilitarization programs. This change in estimate resulted in increases of $31.1 million in operating income, $18.7 million in net income, and $0.25 in diluted earnings per share (“EPS”) for the year ended January 3, 2014.

For the year ended December 28, 2012, our results of operations included the recognition of a $40.0 million programmatic schedule incentive fee achieved when multiple chemical demilitarization contracts each met its milestones during the period.  This change in estimate resulted in increases of $40.0 million in operating income, $24.0 million in net income, and $0.32 in diluted EPS for the year ended December 28, 2012.

lxxiii

URS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

For the year ended December 30, 2011, we recognized $24.8 million from our share of cost savings on an air quality control services project that was realized during the period.  This change in estimate resulted in increases of $24.8 million in operating income, $14.9 million in net income, and $0.19 in diluted EPS for the year ended December 30, 2011.

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 the joint venture is determined to be a variable interest entity (“VIE”) and we are determined to be the primary beneficiary.

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 have the power to direct 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 significant activities include the following:

·   Program and project management;

·   Engineering services;

·   Procurement services;

·   Construction;

·   Construction management; and

·   Operations and maintenance services.

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.

As required by the accounting standard, we perform a quarterly re-assessment to determine whether we are the primary beneficiary.  This evaluation may result in consolidation of a previously unconsolidated joint venture or in deconsolidation of a previously consolidated joint venture.  See Note 6, “Joint Ventures,” for further information on our VIEs.

lxxiv

URS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

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, primarily performed by our Federal Services Division, 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.

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 without adding new scope or terms.  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.

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(Continued)

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.

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 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.

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(Continued)

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 varies, 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.

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.

Segmenting and Combining Contracts

Occasionally a contract may include several elements or phases, each of which was negotiated separately with our client and agreed to be performed without regard to the performance of others.  We follow the criteria set forth in the accounting guidance when combining and segmenting contracts.  When combining contracts, revenues and profits are earned and reported uniformly over the performance of the combined contracts.  When segmenting contracts, we assign revenues and costs to the different elements or phases to achieve different rates of profitability based on the relative value of each element or phase to the estimated contract revenues.  Values assigned to the segments are based on our normal historical prices and terms of such services to other clients.  Also, a group of contracts may be so closely related that they are, in effect, part of a single project with an overall profit margin.

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(Continued)

Accounts Receivable and Costs and Accrued Earnings in Excess of Billings on Contracts

Accounts receivable in the accompanying Consolidated Balance Sheets are primarily comprised of amounts billed to clients for services already provided, but which have not yet been collected.  Occasionally, under the terms of specific contracts, we are permitted to submit invoices in advance of providing our services to our clients and, to the extent they have not been collected, these amounts are also included in accounts receivable.

Costs and accrued earnings in excess of billings on contracts (also referred to as “Unbilled Accounts Receivable”) in the accompanying Consolidated Balance Sheets represent unbilled amounts earned and reimbursable under contracts.  These amounts become billable according to the contract terms, which usually consider the passage of time, achievement of milestones or completion of the project.  Generally, such unbilled amounts will be billed and collected over the next twelve months.

Accounts receivable and costs and accrued earnings in excess of billings on contracts include certain amounts recognized related to unapproved change orders (amounts representing the value of proposed contract modifications, but which are unapproved as to either price or scope) and claims, (change orders that are unapproved as to both price and scope) that have not been collected and, in the case of balances included in costs and accrued earnings in excess of billings on contracts, may not be billable until an agreement or, in the case of claims, a settlement is reached.  Most of those balances are not material and are typically resolved in the ordinary course of business.

Billings in Excess of Costs and Accrued Earnings on Contracts

Billings in excess of costs and accrued earnings on contracts in the accompanying Consolidated Balance Sheets is comprised of cash collected from clients and billings to clients on contracts in advance of work performed, advance payments negotiated as a contract condition, estimated losses on uncompleted contracts, normal profit liabilities, project-related legal liabilities; and other project-related reserves.  The majority of the unearned project-related costs will be earned over the next twelve months.

We record provisions for estimated losses on uncompleted contracts in the period in which such losses become probable.  The cumulative effects of revisions to contract revenues and estimated completion costs are recorded in the accounting period in which the amounts become probable and can be reasonably estimated.  These revisions can include such items as the effects of change orders and claims, warranty claims, liquidated damages or other contractual penalties, adjustments for audit findings on U.S. or other government contracts and contract closeout settlements.

Receivable Allowances

We reduce our accounts receivable and costs and accrued earnings in excess of billings on contracts by estimating an allowance for amounts that may become uncollectible or unrealizable in the future.  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.

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(Continued)

Classification of Current Assets and Liabilities

Our accounts receivable include retentions associated with long-term contracts, which are generally not billable until near or at the completion of the projects or milestones and/or delivery of services.  For contracts with terms that exceed one year, retentions are generally billed beyond a year from the service date.  Our Unbilled Accounts Receivable include amounts related to milestone payment clauses, which may provide for payments to be received beyond a year from the date the Unbilled Accounts Receivable are recognized.  Unbilled Accounts Receivable related to performance-based incentives that we do not expect to bill within twelve months of the balance sheet date are included in “Other long-term assets.”  Based on our historical experience, we generally consider the collection risk related to these amounts to be low.  When events or conditions indicate that the amounts outstanding may become uncollectible, an allowance is estimated and recorded.

Subcontractor payables, subcontractor retentions, and billings in excess of costs and accrued earnings on contracts each contain amounts that, depending on contract performance, resolution of U.S. government contract audits, negotiations, change orders, claims or changes in facts and circumstances, may not require payment within one year.

Accounts receivable – retentions represent amounts billed to clients for services performed that, by the underlying contract terms, will not be paid until the projects meet contractual milestones, or are at or near completion.  Correspondingly, subcontractors payable – retentions represent amounts billed to us by subcontractors for services performed that, by their underlying contract terms, do not require payment by us until the projects are at or near completion.

Accounts payable and subcontractors payable include our estimate of incurred but unbilled subcontractor costs.

Concentrations of Credit Risk

Our accounts receivable and costs and accrued earnings in excess of billings on contracts are potentially subject to concentrations of credit risk.  Our credit risk on accounts receivable is limited due to the large number of contracts for clients that comprise our customer base and their dispersion across different business and geographic areas.  We estimate and maintain an allowance for potential uncollectible accounts, and such estimates have historically been within management’s expectations.  See Note 4, “Accounts Receivable and Costs and Accrued Earnings in Excess of Billings on Contracts” for more details.  Our cash and cash equivalents are maintained in accounts held by major banks and financial institutions located primarily in North America, Europe and Asia Pacific.

Cash and Cash Equivalents

Cash and cash equivalents include all highly liquid investments with maturities of 90 days or less at the date of purchase and include interest-bearing bank deposits and money market funds.  At January 3, 2014 and December 28, 2012, restricted cash balances were $12.8 million and $17.1 million, respectively.  These amounts were included in “Other current assets” on our Consolidated Balance Sheets.  For cash held by our consolidated joint ventures, see Note 6, “Joint Ventures.”

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(Continued)

Derivative Instruments

We are exposed to the risk of changes in interest rates on our long-term debt.  Sometimes, we manage this risk through the use of derivative instruments.  All derivative financial instruments are recorded on the balance sheet at fair value.  At dates entered into, the derivatives hedge the variability in cash flows received or paid in connection with a recorded asset or liability.

Changes in the fair value of cash flow hedges are recorded in other comprehensive income until earnings are affected by the variability of cash flows of the hedged transactions.  We would discontinue hedge accounting prospectively when the derivatives are no longer effective in offsetting changes in cash flows of the hedged items, the derivatives are sold or terminated or it is no longer probable that the forecasted transactions will occur.  Cash flows resulting from derivatives that are accounted for as hedges may be classified in the same category as the cash flows from the items being hedged.

We use derivative instruments only for risk management purposes and not for speculation or trading.  The amount, maturity, and other specifics of the hedge, if any, are determined by the specific derivative instrument.  If a derivative contract is entered into, we either determine that it is an economic hedge or we designate the derivative as a cash flow or fair value hedge.  We formally document all relationships between hedging instruments and the hedged items, as well as our risk management objectives and strategies for undertaking various hedged transactions.  For those derivatives designated as cash flow or fair value hedges, we formally assess, both at the derivatives’ inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in the hedged items.  The ineffective portion of hedging transactions is recognized in current income.

Fair Value Measurement

We determine the fair values of our financial instruments, including debt instruments and pension and post-retirement plan assets based on inputs or assumptions that market participants would use in pricing an asset or a liability.  We categorize our instruments using a valuation hierarchy for disclosure of the inputs used to measure fair value.  This hierarchy prioritizes the inputs into three broad levels as follows:  Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument; Level 3 inputs are unobservable inputs based on our own assumptions used to measure assets and liabilities at fair value.  The classification of a financial asset or liability within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

The recorded values of cash and cash equivalents, accounts receivable, and accounts payable approximate fair values based on their short-term nature.

Our long-term debt includes both floating-rate and fixed rate instruments.  See Note 12, “Fair Value of Debt Instruments and Derivative Instruments,” for additional disclosure.

Our fair value measurement methods may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values.  Although we believe our valuation methods are appropriate and consistent with those used by other market participants, the use of different methodologies or assumptions to determine fair value could result in a different fair value measurement at the reporting date.

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(Continued)

Inventory

Inventory is stated at cost (first-in, first-out or average cost), but not in excess of net realizable value.  Net realizable value represents the estimated selling price for inventory less the estimated costs of completion and the estimated costs associated with the sale.  The cost of inventory includes expenditures incurred in acquiring the inventory, production or conversion costs, and other costs incurred in bringing the inventory items to their existing location and condition.  For fabricated inventory and work in progress, cost includes overhead allocated based on normal operating capacity.  A write down for excess or inactive inventory is recorded based upon an analysis that considers current inventory levels, historical usage patterns, future sales expectations and salvage value.  See Note 5, “Inventory,” for additional disclosure.

Property and Equipment

Property and equipment are stated at cost.  In the year assets are retired or otherwise disposed of, the costs and related accumulated depreciation are removed from the accounts and any gain or loss on disposal is reflected in the Consolidated Statement of Operations.  Depreciation is provided on the straight-line and the declining methods using estimated useful lives less residual value.  Leasehold improvements are amortized over the length of the lease or estimated useful life, whichever is less.  We capitalize our repairs- and maintenance-related costs that extend the estimated useful lives of property and equipment; otherwise, repairs- and maintenance-related costs are expensed.  Whenever events or changes in circumstances indicate that the carrying amount of long-lived assets may not be recoverable, we compare the carrying value to the fair value, which is measured using the prices in active markets for similar assets, and recognize the difference as an impairment loss.  See Note 7, “Property and Equipment,” for additional disclosure.

Internal-Use Computer Software

We expense or capitalize costs associated with the development of internal-use software as follows:

Preliminary Project Stage:  Both internal and external costs incurred during this stage are expensed as incurred.

Application Development Stage:  Both internal and external costs incurred to purchase and develop computer software are capitalized after the preliminary project stage is completed and management authorizes the computer software project.  However, training costs and the process of data conversion from the old system to the new system, which includes purging or cleansing of existing data, reconciliation or balancing of old data to the converted data in the new system, are expensed as incurred.

Post-Implementation/Operation Stage:  All training costs and maintenance costs incurred during this stage are expensed as incurred.

Costs of upgrades and enhancements are capitalized if the expenditures will result in adding functionality to the software.  Capitalized software costs are depreciated using the straight-line method over the estimated useful life of the related software, which may be up to ten years.

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(Continued)

Goodwill and Intangible Assets

We amortize our intangible assets based on the period over which the contractual or economic benefits of the intangible assets are expected to be realized.  We assess our intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of an intangible asset may not be recoverable.

Goodwill represents the excess of the cost of an acquired entity over the net of the amounts assigned to assets acquired and liabilities assumed.  Goodwill is allocated to the reporting units based on the respective fair values of the reporting units at the time of the various acquisitions that gave rise to the recognition of goodwill or at the time of a reorganization which impacts the composition of the reporting units.  We assess our goodwill for impairment at least annually as of the end of the first month following our September reporting period or whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable.

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 both the income approach and the market approach.

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 the recorded goodwill, we would record an impairment charge for the difference.

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.

If our goodwill were impaired, we would be required to record a non-cash charge that could have a material adverse effect on our consolidated financial statements.

See Note 9, “Goodwill and Intangible Assets,” for more disclosure about our test for goodwill impairment.

Self-insurance Reserves

Self-insurance reserves represent reserves established as a result of insurance programs under which we self-insure 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.

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(Continued)

Foreign Currency Translation

We determine the functional currency of our international operating entities based upon the currency of the primary environment in which they operate.  Where the functional currency is not the U.S. dollar, translation of assets and liabilities to U.S. dollars is based on exchange rates at the balance sheet date.  Translation of revenue and expenses to U.S. dollars is based on the average rate during the period.  Foreign currency differences arising from transactions denominated in currencies other than the functional currency, such as selling services or purchasing materials, results in transaction gains or losses, and are generally included in results of operations.

Foreign currency differences arising from the translation of intercompany loans from a foreign currency into the functional currency of an entity, which are of a long-term investment nature (that is, settlement is not planned or anticipated in the foreseeable future) are recorded in “Accumulated other comprehensive income (loss)” on our Consolidated Balance Sheets.  Foreign currency differences arising from the translation of other intercompany loans are recorded in “Other income (expense)” on our Consolidated Statements of Operations.

Income Taxes

We use the asset and liability approach for financial accounting and reporting for income taxes.  We file income, franchise, gross receipts and similar tax returns in many jurisdictions.  Our tax returns are subject to audit by the Internal Revenue Service, most states in the U.S., and by various government agencies representing many jurisdictions outside the U.S.  We estimate and provide for additional income taxes that may be assessed by the various taxing authorities.  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.  See Note 13, “Income Taxes,” for additional disclosure.

Valuation allowances based on our judgments and estimates are established when necessary to reduce deferred tax assets to the amount expected to be realized and based on expected future operating results and available tax alternatives.  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.  Management believes that realization of deferred tax assets in excess of the valuation allowance is more likely than not.

Pension Plans and Post-retirement Benefits

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 and post-retirement benefit obligations 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.  See Note 14, “Employee Retirement and Post-Retirement Benefit Plans,” for additional disclosure.

Noncontrolling interests

Noncontrolling interests represent the equity investments of the minority owners in our joint ventures and other subsidiary entities that we consolidate in our financial statements.

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(Continued)

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 net tangible and intangible assets acquired is allocated to goodwill.  The transaction costs associated with business combinations are expensed as they are incurred.  See Note 8, “Acquisitions,” for more information.

NOTE 2.  ADOPTED AND OTHER RECENTLY ISSUED STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS

An amendment to the accounting standard related to the presentation of other comprehensive income was issued.  It requires public entities to provide information about amounts reclassified out of accumulated other comprehensive income by component.  In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income and, in some cases, cross-references to related footnote disclosures.  This portion of the standard was effective for us beginning with our first interim period in fiscal year 2013.  See Note 18, “Other Comprehensive Income (Loss) and Accumulated Other Comprehensive Income (Loss),” for more information.  The adoption of this standard did not have a material impact on our consolidated financial statements.

An accounting standard update was issued related to new disclosures on offsetting assets and liabilities of financial and derivative instruments.  The amendments require the disclosure of gross asset and liability amounts, amounts offset on the balance sheet and amounts subject to the offsetting requirements, but not offset on the balance sheet.  This standard does not amend the existing guidance on when it is appropriate to offset.  An amendment to this standard was subsequently issued to clarify the intended scope of the disclosures.  It applies to derivatives, repurchase agreements, and securities lending transactions that are either offset in accordance with Topic 815, Derivatives and Hedging, or subject to an enforceable master netting arrangement or similar agreement.  The amended standard update was effective for us beginning with our first interim period in fiscal year 2013.  The adoption of this standard did not have a material impact on our consolidated financial statements.

An accounting standard update was issued related to obligations stemming from joint and several liability arrangements.  It addresses the recognition, measurement and disclosure of obligations when multiple parties incur joint liabilities where the total amount of the obligation is fixed at the financial reporting date.  The standard requires the recognition of the total amount of the liability that the parties are obligated to pay under an arrangement, along with any additional amount the company might expect to pay on behalf of other parties to the liability.  This standard is effective for periods beginning with our first interim period in fiscal year 2014, with an option for early adoption.  The adoption of this standard did not have a material impact on our consolidated financial statements.

An accounting standard was issued related to derivatives and hedging.  Prior to this standard, the only interest rates that were permitted to be used as benchmark interest rates in a fair value or cash flow hedge were the interest rates on direct Treasury obligations of the U.S. government (UST) and the London Interbank Offered Rate (“LIBOR”) swap rate.  The new standard allows the use of the Fed Funds rate (the interest rate at which depository institutions lend balances to each other overnight) as a benchmark rate.  The standard also eliminates the need to designate the same benchmark interest rate for similar hedges.  Additionally, it removes language indicating that the use of different benchmark interest rates for similar hedges “shall be rare and shall be justified.”  The new standard was effective prospectively for qualifying new or redesignated hedging relationships entered into on or after July 17, 2013.  The adoption of this standard did not have a material impact on our consolidated financial statements.

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(Continued)

An accounting standard update was issued related to foreign currency matters.  The standard update addresses the accounting for the release of cumulative translation adjustments when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a business unit or a group of assets that do not produce a profit within a foreign entity.  Under such circumstances, a parent company is required to release any related currency adjustments to earnings.  The currency adjustment is released into earnings only if the sale or transfer results in a complete or substantially complete liquidation of the foreign entity in question.  The standard update is effective for us for periods beginning with our first interim period in fiscal year 2014.  We do not expect that the adoption of this standard will have a material impact on our consolidated financial statements.

An accounting standard was issued related to the standardization of the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists.  Under these circumstances, the standard requires that the unrecognized tax benefit, or a portion thereof, be presented in the financial statements as a reduction to a deferred tax asset.  However, if the taxpayer is unable to recognize a tax benefit at the reporting date because the carryforward is not available in the same jurisdiction or is insufficient to cover the full tax benefit, the net benefit would, instead, be presented as a liability.  This standard is effective for us beginning with our first interim reporting period in fiscal year 2014.  We do not expect that the adoption of this standard will have a material impact on our consolidated financial statements.

NOTE 3.  EARNINGS PER SHARE

In our computation of diluted EPS, we exclude the potential shares related to nonvested restricted stock awards and units that have an anti-dilutive effect on EPS or that currently have not met performance conditions.

The following table summarizes the components of weighted-average common shares outstanding for both basic and diluted EPS:

	Year Ended
	January 3,		December 28,		December 30,
(In millions)	2014		2012		2011
Weighted-average common stock shares outstanding (1)		73.9		74.3		77.3
Effect of dilutive restricted stock awards and units and employee stock purchase plan shares (2)		0.8		0.2		—
Weighted-average common stock outstanding – Diluted		74.7		74.5		77.3

(1)   Weighted-average shares of common stock outstanding is net of treasury stock and excludes nonvested restricted stock awards.

(2)   No dilution was applied to our basic weighted-average shares outstanding for the year ended December 30, 2011, due to a goodwill impairment charge that resulted in a net loss for the year.

	January 3,			December 28,		December 30,
(In millions)	2014			2012		2011
Anti-dilutive equity awards not included above		—	†		1.1		1.0

† Represents less than half a million shares.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

NOTE 4.  ACCOUNTS RECEIVABLE AND COSTS AND ACCRUED EARNINGS IN EXCESS OF BILLINGS ON CONTRACTS

The following table summarizes the components of our accounts receivable and Unbilled Accounts Receivable with the U.S. federal government and with other customers as of January 3, 2014 and December 28, 2012:

	January 3,			December 28,
(In millions)	2014			2012
Accounts receivable:
U.S. federal government	$	353.2		$	376.2
Others		1,039.4			1,178.6
Total accounts receivable	$	1,392.6		$	1,554.8
Unbilled Accounts Receivable:
U.S. federal government	$	855.7		$	892.7
Others		796.9			756.5
Total		1,652.6			1,649.2
Less:  Amounts included in Other long-term assets		(131.1	)		(264.9	)
Unbilled Accounts Receivable	$	1,521.5		$	1,384.3

As of January 3, 2014 and December 28, 2012, $131.1 million and $264.9 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 January 3, 2014 and December 28, 2012, we reclassified unbilled amounts representing performance-based incentive fee receivables from our work managing chemical demilitarization and nuclear management and decommissioning programs from “Other long-term assets” to Unbilled Accounts Receivable.

We are required contractually to share a portion of the performance-based incentive fees with our employees and subcontractors for some of our projects.  These liabilities are accrued concurrently with the related receivables and are not expected to be paid until after the fees are collected, and, as a result, are originally included as a component of “Other long-term liabilities.”  As the underlying performance-based incentive fee receivables become current and are reclassified from “Other long-term assets” to Unbilled Accounts Receivable, the corresponding liabilities are also reclassified from “Other long-term liabilities” to “Other current liabilities.”

The following table summarizes the activities of Unbilled Accounts Receivable included in “Other long-term assets” and the corresponding liabilities included in “Other long-term liabilities” for our fiscal years 2013 and 2012:

(In millions)	Amounts included in “Other long-term assets”			Amounts included in “Other long-term liabilities"
Balances as of December 30, 2011	$	185.0		$	105.6
Additions		209.2			38.9
Reclassification from long-term to short-term		(129.3	)		(37.5	)
Balances as of December 28, 2012		264.9			107.0
Additions		241.7			59.7
Reclassification from long-term to short-term		(375.5	)		(164.5	)
Balances as of January 3, 2014	$	131.1		$	2.2

As of January 3, 2014 and December 28, 2012, “Other current liabilities” included $190.4 million and $51.6 million, respectively, related to performance-based incentive fees payable to our employees and subcontractors.

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(Continued)

As of January 3, 2014 and December 28, 2012, we had one project with accounts receivable balances of $81.5 million and $32.6 million, respectively, relating to an outstanding claim.  See Note 17, “Commitments and Contingencies,” for further discussion regarding the Department of Energy (“DOE”) Deactivation, Demolition, and Removal Project.

NOTE 5.  INVENTORY

The table below presents the components of inventory:

	January 3,		December 28,
(In millions)	2014		2012
Raw materials	$	8.5	$	14.2
Work in progress		7.4		9.8
Finished goods		23.2		24.9
Supplies		10.1		12.6
Total	$	49.2	$	61.5

NOTE 6.  JOINT VENTURES

The following are examples of activities currently being performed by our significant consolidated and unconsolidated joint ventures:

·   Engineering, procurement and construction of a concrete dam;

·   Liquid waste management services, including the decontamination of a former nuclear fuel reprocessing facility and nuclear hazardous waste processing;

·   Management of ongoing tank cleanup effort, including retrieving, treating, storing and disposing of nuclear waste that is stored at tank farms;

·   Management and operation services, including commercial operations, decontamination, decommissioning, and waste management of a nuclear facility in the United Kingdom (“U.K.”); and

·   Operations, maintenance, asset management services to the Canadian energy sector.

In accordance with the current consolidation standard, we analyzed all of our joint ventures and classified them into two groups:

·   Joint ventures that must be consolidated because they are either not VIEs and we hold the majority voting interest, or because they are VIEs of which we are the primary beneficiary; and

·   Joint ventures that do not need to be consolidated because they are either not VIEs and we do not hold a majority voting interest, or because they are VIEs of which we are not the primary beneficiary.

We perform a quarterly review of our joint ventures to determine whether there were any changes in the status of the VIEs or changes to the primary beneficiary designation of each VIE.  We determined that no such changes occurred during the year ended January 3, 2014.

In the table below, we have aggregated financial information relating to our VIEs because their nature and risk and reward characteristics are similar.  None of our current joint ventures that meets the characteristics of a VIE is individually significant to our consolidated financial statements.

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(Continued)

Consolidated Joint Ventures

The following table presents the total assets and liabilities of our consolidated joint ventures:

	January 3,		December 28,
(In millions)	2014		2012
Cash and cash equivalents	$	89.4	$	80.1
Net accounts receivable		199.7		282.2
Other current assets		3.0		2.9
Noncurrent assets		143.1		143.3
Total assets	$	435.2	$	508.5
Accounts and subcontractors payable	$	94.9	$	185.0
Billings in excess of costs and accrued earnings on contracts		14.9		8.7
Accrued expenses and other		39.5		40.0
Noncurrent liabilities		11.9		22.7
Total liabilities		161.2		256.4
Total URS equity		128.2		110.2
Noncontrolling interests		145.8		141.9
Total owners’ equity		274.0		252.1
Total liabilities and owners’ equity	$	435.2	$	508.5

Total revenues of the consolidated joint ventures were $1.1 billion, $1.6 billion, and $1.7 billion for the years ended January 3, 2014, December 28, 2012, and December 30, 2011, respectively.

The assets of our consolidated joint ventures are restricted for use only by the particular joint venture and are not available for our general operations.

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(Continued)

Unconsolidated Joint Ventures

We use the equity method of accounting for our unconsolidated joint ventures.  Under the equity method, we recognize our proportionate share of the net earnings of these joint ventures as a single line item under “Equity in income of unconsolidated joint ventures” in our Consolidated Statements of Operations.

The table below presents financial information, derived from the most recent financial statements provided to us, in aggregate, for our unconsolidated joint ventures:

(In millions)	Unconsolidated VIEs
January 3, 2014
Current assets	$	615.6
Noncurrent assets	$	36.8
Current liabilities	$	433.2
Noncurrent liabilities	$	7.0
December 28, 2012
Current assets	$	594.1
Noncurrent assets	$	23.8
Current liabilities	$	372.5
Noncurrent liabilities	$	7.8
For the year ended January 3, 2014 (1)
Revenues	$	2,154.3
Cost of revenues	$	(1,909.0)
Income from continuing operations before tax	$	245.3
Net income	$	218.9
For the year ended December 28, 2012 (1)
Revenues	$	1,662.2
Cost of revenues	$	(1,440.6)
Income from continuing operations before tax	$	221.6
Net income	$	206.0
For the year ended December 30, 2011 (1)
Revenues	$	1,498.0
Cost of revenues	$	(1,201.5)
Income from continuing operations before tax	$	296.5
Net income	$	274.7

(1)   Income from unconsolidated U.S. joint ventures is generally not taxable in most tax jurisdictions in the U.S.  The tax expenses on our other unconsolidated joint ventures are primarily related to foreign taxes.

For the years ended January 3, 2014, December 28, 2012, and December 30, 2011, we received $113.0 million, $88.7 million, and $107.3 million, respectively, of distributions from unconsolidated joint ventures.

Exposure to Loss

In addition to potential losses arising out of the carrying values of the assets and liabilities of our unconsolidated joint ventures, our maximum exposure to loss also includes performance assurances and guarantees we sometimes provide to clients on behalf of joint ventures that we do not directly control.  We enter into these guarantees primarily to support the contractual obligations associated with the joint ventures’ projects.  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.

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(Continued)

However, the majority of the unconsolidated joint ventures in which we participate involve cost-reimbursable, level-of-effort projects that are accounted for as service-type projects, not engineering and construction projects that would follow the percentage-of-completion or completed-contract accounting method.  Revenues for service-type contracts are 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.  The scope of services we provide on these cost-reimbursable contracts are management and operations services for government clients and operations and maintenance services for non-government clients.  We believe that, due to the continual changes we experience in client funding and scope definitions, reliable estimates cannot be calculated because they cannot be reliably predicted.  In addition, we participate in joint ventures in which the level of our participation is so minimal that we do not have access to those joint ventures’ estimates to complete.  The joint ventures where we perform engineering and construction contracts and where we have access to the estimates to complete, which are needed to calculate the performance guarantees, are immaterial.

NOTE 7.  PROPERTY AND EQUIPMENT

Our property and equipment consisted of the following:

	January 3,			December 28,
(In millions)	2014			2012
Construction and mining equipment	$	244.4		$	266.4
Computer software		238.9			219.5
Computer hardware		216.1			198.2
Vehicles and automotive equipment		171.6			172.2
Leasehold improvements		141.9			130.1
Land and buildings		100.2			114.1
Furniture and fixtures		94.7			97.7
Other equipment		67.5			72.4
Construction in progress		9.3			15.6
		1,284.6			1,286.2
Accumulated depreciation and amortization		(676.5	)		(598.7	)
Property and equipment, net (1)	$	608.1		$	687.5

(1)   The unamortized computer software costs were $76.0 million and $71.1 million, respectively, as of January 3, 2014 and December 28, 2012.

We recorded a gain of $25.4 million on disposal of property and equipment for the year ended January 3, 2014 mainly resulting from the sale of equipment, land and buildings in Canada.  This gain was recorded in “Cost of revenues” on our Consolidated Statements of Operations.

Property and equipment was depreciated by using the following estimated useful lives:

	Estimated Useful Lives
Computer software and hardware and other    equipment	3 – 10 years
Vehicles and automotive equipment	3 – 12 years
Construction and mining equipment	3 – 15 years
Furniture and fixtures	3 – 10 years
Leasehold improvements (1)	1 – 20 years
Buildings	10 – 45 years

(1)   Leasehold improvements are amortized over the length of the lease or estimated useful life, whichever is less.

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(Continued)

NOTE 8.  ACQUISITIONS

Flint 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.  Our consolidated financial statements include the operating results of Flint after the date of acquisition, the majority of which are included as the results of our Oil & Gas Division.

The following table presents the allocation of Flint’s identifiable assets acquired and liabilities assumed based on the estimates of their fair values as of the acquisition date.

Final allocation of purchase price:
(In millions)
Identifiable assets acquired and liabilities assumed:
Cash and cash equivalents	$	4
Trade and other receivables		544
Inventory		61
Other current assets		32
Investments in and advances to unconsolidated joint ventures		147
Property and equipment		420
Other long-term assets		10
Identifiable intangible assets:
Customer relationships, contracts and backlog		163
Trade names		93
Other		10
Total amount allocated to identifiable intangible assets		266
Current liabilities		(244)
Net deferred tax liabilities		(77)
Long-term debt		(236)
Other long-term liabilities		(31)
Total identifiable net assets acquired		896
Goodwill		456
Total purchase price	$	1,352

Intangible assets.  Intangible assets include customer relationships, contracts and backlog, trade name and other intangible assets associated with the Flint acquisition.

Customer relationships represent existing contracts and the underlying customer relationships and backlog.  Customer relationships have estimated useful lives ranging from one to 13 years and are amortized based on the period over which the economic benefits of the intangible assets are expected to be realized.

Trade names represent the fair values of the acquired trade names and trademarks.  The estimated useful lives of the trade names are 20 years.  Other intangible assets represent the fair values of the existing non-compete agreements, supply contract agreement, and patents, which have estimated useful lives ranging from one to 13 years.  We amortize the fair values of these intangible assets based on the period over which the economic benefits of the intangible assets are expected to be realized.

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(Continued)

Goodwill.  Goodwill represents the excess of the purchase price over the fair value of the underlying net tangible and intangible assets.  The factors that contributed to the recognition of goodwill from the acquisition of Flint include acquiring a workforce with capabilities in the oil and gas market and cost savings opportunities.  This acquisition generated $456 million of goodwill, the majority of which is included in our Oil & Gas Division.  None of the total acquired goodwill is expected to be tax deductible.

Investments in and advances to unconsolidated joint ventures.  As a result of the Flint acquisition, we hold a 50% voting and economic interest in a joint venture which provides operations, maintenance, asset management and project management services to the Canadian energy sector.  The fair value of our investment in this joint venture at the acquisition date was higher than the underlying equity interest.  This difference of $128.5million includes $38.0 million representing intangible assets, and the remaining amount representing goodwill.  The intangible assets are being amortized, as a reduction to earnings against the equity in income of this unconsolidated joint venture, over a period ranging from three to 40 years.  For the years ended January 3, 2014 and December 28, 2012, amortization of these intangible assets was $10.3 million and $5.9 million, respectively.

Acquisition-related expenses.  In connection with the acquisition of Flint, we recognized $16.1 million for the year ended December 28, 2012 in “Acquisition-related expenses” on our Consolidated Statements of Operations.

The acquisition related expenses consisted of investment banking, legal, tax and accounting fees, and other external costs directly related to the acquisition.

Flint’s revenues and operating income included in the Consolidated Statement of Operations for the year ended December 28, 2012 from the May 14, 2012 acquisition to the end of the year amounted to $1.5 billion and $61.2 million, respectively.

Pro forma results.  The unaudited financial information in the table below summarizes the combined results of the operations of URS Corporation and Flint for the years ended December 28, 2012 and December 30, 2011, on a pro forma basis, as though the companies had been combined as of January 1, 2011, the beginning of the first period presented.  The pro forma financial information includes the accounting effects of the business combination, including adjustments to the amortization of intangible assets, depreciation of property, plant and equipment, interest expense, adjustments to conform to U.S. GAAP, new compensation agreements, and foreign currency gains or losses arising from internal financing arrangements.  The pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at January 1, 2011 nor should it be taken as indicative of our future consolidated results of operations.

	Year Ended		Year Ended
(In millions, except per share data)	December 28, 2012		December 30, 2011
Revenues	$	11,785.8	$	11,128.7
Net income (loss) including noncontrolling interests	$	409.1	$	(6.9	)
Net income (loss) attributable to URS	$	292.9	$	(135.4	)
Earnings (loss) per share:
Basic EPS	$	3.94	$	(1.75	)
Diluted EPS	$	3.93	$	(1.75	)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

The table below shows the material pre-tax, nonrecurring adjustment in the pro forma financial information for the years ended December 28, 2012 and December 30, 2011:

	Year Ended			Year Ended
Pre-tax, nonrecurring adjustment (In millions)	December 28, 2012			December 30, 2011 (1)
Acquisition-related expenses		$	27.7		$	(27.5	)

(1)   Included in the pro forma results for the year ended December 30, 2011 is a nonrecurring adjustment related to URS and Flint acquisition-related expenses.  These expenses were included in the fiscal year 2011 pro forma results as if the acquisition occurred at the beginning of that fiscal year.

NOTE 9.  GOODWILL AND INTANGIBLE ASSETS

Goodwill

The following tables present the changes in goodwill allocated to our reportable segments and reporting units from December 30, 2011 to January 3, 2014:

(In millions)	Goodwill Balance as of December 30, 2011 (1)		Acquisitions		Inter-segment Transfer (2)			Other Adjustments (3)		Goodwill Balance as of December 28, 2012
Infrastructure & Environment Operating Segment	$	758.2	$	—	$	(21.5	)	$	14.8	$	751.5
Within the Federal Services Operating Segment:
Federal Services Group		705.6		—		—			1.7		707.3
Global Management and Operations Services Group		565.4		—		—			—		565.4
Total Federal Services Operating Segment		1,271.0		—		—			1.7		1,272.7
Within the Energy & Construction Operating Segment:
Civil Construction & Mining Group		293.9		—		—			—		293.9
Industrial/Process Group		189.3		67.8		(4.2	)		—		252.9
Power Group		735.1		—		—			—		735.1
Total Energy & Construction Operating Segment		1,218.3		67.8		(4.2	)		—		1,281.9
Oil & Gas Operating Segment		—		388.5		25.7			1.3		415.5
Total	$	3,247.5	$	456.3	$	—		$	17.8	$	3,721.6

(1)   Balances as of December 30, 2011 reflect the realignment of our business as further described in Note 16, “Segment and Related Information.”  Of the goodwill, $565.4 million related to our Global Management and Operations Services Group was transferred from the Energy & Construction Division to the Federal Services Division.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

(2)   For the year ended December 28, 2012, “Inter-segment transfers” include adjustments of $21.5 million to transfer process engineering, and $4.2 million related to the realignment of operations and maintenance services to the oil and gas industry among our Oil & Gas, Infrastructure & Environment, and Energy & Construction Divisions.

(3)   For the year ended December 28, 2012, “Other adjustments” include an adjustment for foreign currency translation of $16.1 million, and an adjustment for the final allocation of our purchase price of Apptis of $1.7 million.

(In millions)	Goodwill Balance as of December 28, 2012		Acquisitions		Other Adjustments (1)			Goodwill Balance as of January 3, 2014
Infrastructure & Environment Operating Segment	$	751.5	$	—	$	(14.1	)	$	737.4
Within the Federal Services Operating Segment:
Federal Services Group		707.3		—		—			707.3
Global Management and Operations Services Group		565.4		—		—			565.4
Federal Services Operating Segment		1,272.7		—		—			1,272.7
Within the Energy & Construction Operating Segment:
Civil Construction & Mining Group		293.9		—		—			293.9
Industrial/Process Group		252.9		—		(3.2)			249.7
Power Group		735.1		—		—			735.1
Total Energy & Construction Operating Segment		1,281.9		—		(3.2)			1,278.7
Oil & Gas Operating Segment		415.5		—		(8.7	)		406.8
Total	$	3,721.6	$	—	$	(26.0	)	$	3,695.6

(1)   For the year ended January 3, 2014, “Other adjustments” include an adjustment for foreign currency translation of $26.0 million.

The net change in the carrying amount of goodwill for the year ended December 28, 2012 was primarily due to our acquisition of Flint.  See Note 8, “Acquisitions,” for more information regarding our acquisition of Flint.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

Goodwill Impairment Review

In performing our goodwill impairment test, we evaluate goodwill at the reporting unit level.  We have identified seven reporting units.  In determining our reporting units, we considered (i) whether an operating segment or a component of an operating segment is a business, (ii) whether discrete financial information is available, (iii) whether the financial information is regularly reviewed by management of the operating segment, and (iv) how the operations are managed or how an acquired entity is integrated in the business operations.  The following are our reporting units:

·   The Infrastructure & Environment Operating Segment (the “IE reporting unit”)

·   Within the Federal Services Operating Segment:

o   Federal Services Group

o   Global Management and Operations Services Group

·   Within the Energy & Construction Operating Segment:

o   Civil Construction and Mining Group

o   Industrial/Process Group

o   Power Group

·   The Oil & Gas Operating Segment

In reaching our estimate of fair 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.

The fair value measurements from the income approach were calculated using unobservable inputs to our discounted cash flows, which are classified as Level 3 within the fair value hierarchy.  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 the cash flow projections used in the calculation of fair values for our goodwill impairment review, we use market participant estimates of economic and market activity for the next ten years.  The key assumptions we used to estimate the fair values of our reporting units are:

·   Revenue growth rates;

·   Operating margins;

·   Capital expenditure needs;

·   Working capital requirements;

·   Discount rates; and

·   Terminal value capitalization rate (“Capitalization Rate”)

Of the key assumptions, the discount rates and the Capitalization Rate are market-driven.  These rates are derived from the use of market data and employment of the weighted-average cost of capital.  The key assumptions that are company-driven include the revenue growth rates and the projected operating margins.  They reflect the influence of other potential assumptions, since the assumptions we identified that affect the projected operating results would ultimately affect either the revenue growth or the profitability (operating margin) of the reporting unit.  For example, any adjustment to contract volume and pricing would have a direct impact on revenue growth, and any adjustment to the reporting unit’s cost structure or operating leverage would have a direct impact on the profitability of the reporting unit.  Actual results may differ from those assumed in our forecasts and changes in assumptions or estimates could materially affect the determination of the fair value of a reporting unit, and therefore could affect the amount of potential impairment.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

We also consider indications obtained from the market approach.  We applied market multiples derived from stock market prices 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, and applied market multiples derived from transactions of significant interests in companies engaged in the same or similar lines of business as our reporting units, and a control premium to arrive at the fair values.

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 with the external market indicators.  If our reconciliation indicates a significant difference between our external market capitalization and the sum of the fair values of our reporting units, we review and adjust the assumptions employed in our analysis, and examine if the implied control premium is reasonable in light of current market conditions.

Goodwill was allocated to the reporting units based upon the respective fair values of the reporting units at the time of the various acquisitions that gave rise to the recognition of goodwill or at the time of a reorganization which impacts the composition of the 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 2013 annual review was performed as of October 25, 2013, which indicated no impairment in any of our reporting units.  No events or changes in circumstances have occurred that would indicate any impairment of goodwill exists since our annual testing date.

During fiscal year 2011, our market capitalization was reduced due to the stock market volatility and declines in our stock price.  For the year ended December 30, 2011, we recorded a goodwill impairment charge in one of our reporting units totaling $351.3 million ($309.4 million after tax).  This non-cash charge reduced goodwill recorded in connection with a previous acquisition and did not impact our overall business operations.

Our annual impairment test indicated no impairment for any of the reporting units because the fair value of each reporting unit substantially exceeded its carrying value.

Intangible Assets

Intangible assets are comprised of customer relationships, contracts, backlog, trade name, favorable leases and other.  As of January 3, 2014 and December 28, 2012, the cost and accumulated amortization of our intangible assets were as follows:

(In millions)	Customer Relationships, Contracts, and Backlog			Trade Name			Favorable Leases and Other			Total
Balance as of December 30, 2011	$	491.1		$	25.6		$	5.3		$	522.0
Acquisitions		163.0			93.5			9.8			266.3
Amortization expense		(93.9	)		(4.8	)		(2.5	)		(101.2	)
Other adjustments and foreign currency    translation		3.3			1.7			0.1			5.1
Balance as of December 28, 2012		563.5			116.0			12.7			692.2
Amortization expense		(100.3	)		(5.5	)		(1.6	)		(107.4	)
Other adjustments and foreign currency    translation		(5.1	)		(4.6	)		(5.4	)		(15.1	)
Balance as of January 3, 2014	$	458.1		$	105.9		$	5.7		$	569.7
Estimated useful lives	1 - 16 years			1 - 20 years (1)			1 - 13 years

(1)   During the fourth quarter of 2013, we revised the estimated useful life of the Flint trade name from 40 years to 20 years due to a change in our intended use.

lxxxxvi

URS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

Our amortization expense related to intangible assets was $107.4 million, $101.2 million, and $60.6 million, respectively, for the years ended January 3, 2014, December 28, 2012, and December 30, 2011.

The following table presents the estimated future amortization expense of intangible assets:

(In millions)	Customer Relationships, Contracts, and Backlog		Trade Name		Favorable Leases and Other		Total
2014	$	87.5	$	5.9	$	1.1	$	94.5
2015		77.0		6.3		0.7		84.0
2016		71.9		6.3		0.6		78.8
2017		66.6		6.3		0.1		73.0
2018		48.2		6.3		0.4		54.9
Thereafter		106.9		74.8		2.8		184.5
	$	458.1	$	105.9	$	5.7	$	569.7

NOTE 10.  BILLINGS IN EXCESS OF COSTS AND ACCRUED EARNINGS ON CONTRACTS

The following table summarizes the components of billings in excess of costs and accrued earnings on contracts:

	January 3,		December 28,
(In millions)	2014		2012
Billings in excess of costs and accrued earnings on contracts	$	193.1	$	211.7
Project-related legal liabilities and other project-related reserves		28.0		55.2
Advance payments negotiated as a contract condition		6.4		9.8
Normal profit liabilities		0.8		4.8
Estimated losses on uncompleted contracts		4.8		7.6
Total	$	233.1	$	289.1

NOTE 11.  INDEBTEDNESS

Indebtedness consisted of the following:

	January 3,		December 28,
(In millions)	2014		2012
Term loan, net of debt issuance costs	$	601.8	$	666.3
3.85% Senior Notes (net of discount)		399.6		399.5
5.00% Senior Notes (net of discount)		599.5		599.5
7.50% Canadian Notes (including premium)		—		203.8
Revolving line of credit		—		100.5
Other indebtedness		110.6		94.7
Total indebtedness		1,711.5		2,064.3
Less:
Current portion of long-term debt		44.6		71.8
Long-term debt	$	1,666.9	$	1,992.5

lxxxxvii

URS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

2011 Credit Facility

As of January 3, 2014 and December 28, 2012, the outstanding balance of the term loan under our 2011 Credit Facility was $605.0 million and $670.0 million, respectively.  As of January 3, 2014 and December 28, 2012, the interest rates applicable to the term loan were 1.67% and 1.71%, 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.

On December 19, 2013, we entered into an amendment to our 2011 Credit Facility that extended the maturity date by two years to December 19, 2018, increased the sublimit for alternative currency revolving loans from $400.0 million to $500.0 million, established a $500.0 million sublimit for financial letters of credit, and increased a restricted payment basket from $150 million to $200 million in any fiscal year.  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 January 3, 2014.

lxxxxviii

URS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

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.  On January 3, 2014, our exchange offer expired and we exchanged substantially all of the privately placed Senior Notes with Senior Notes that are registered with the SEC.  As of January 3, 2014, the outstanding balance of the Senior Notes was $999.1 million, net of $0.9 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 merge or sell 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.

On May 14, 2012, we guaranteed the Canadian Notes with an outstanding face value of C$175.0 million (US$175.0 million).  On December 27, 2013, Flint redeemed all of its outstanding Canadian Notes.  We recorded in “Interest expense” on our Consolidated Statements of Operations for the year ended January 3, 2014 a net gain of $4.1 million, comprised of premium write-off of $23.2 million and offset by a prepayment fee of $19.1 million related to the redemption of the Canadian Notes.  As of December 28, 2012, the outstanding balance of the Canadian Notes was $203.8 million, including $28.0 million of premium.

We were in compliance with the covenants of our Senior Notes as of January 3, 2014.

lxxxxix

URS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

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.

We had no outstanding debt balances on our revolving line of credit as of January 3, 2014.  We had outstanding debt balances of $100.5 million on our revolving line of credit as of December 28, 2012.  As of January 3, 2014, we had issued $108.3 million of letters of credit, leaving $891.7 million available under our revolving credit facility.

A summary of information regarding our revolving line of credit is set forth below:

	Year Ended
	January 3,				December 28,
(In millions, except percentages)	2014				2012
Effective average interest rates on the revolving line of credit			2.4	%			1.9	%
Average daily revolving line of credit balances		$	135.2			$	139.5
Maximum amounts outstanding at any point during the year		$	236.4			$	420.0

Other Indebtedness

Notes payable, five year loan notes, and foreign credit lines.  As of January 3, 2014 and December 28, 2012, we had outstanding amounts of $67.1 million and $35.5 million, respectively, in notes payable, five-year loan notes, and foreign lines of credit.  The weighted-average interest rates of the notes were approximately 3.57% and 4.68% as of January 3, 2014 and December 28, 2012, respectively.  Notes payable primarily include notes used to finance the purchase of vehicles, construction equipment, office equipment, computer equipment and furniture.

As of January 3, 2014 and December 28, 2012, we maintained several credit lines with aggregate borrowing capacity of $51.3 million and $50.8 million, respectively, and had remaining borrowing capacity of $49.0 million and $47.7 million, respectively.

Capital Leases.  As of January 3, 2014 and December 28, 2012, we had obligations under our capital leases of approximately $43.5 million and $59.2 million, respectively, consisting primarily of leases for office equipment, computer equipment and furniture.

Foreign Currency Translation Gains (Losses) Related to Intercompany Loans. We recorded foreign currency translation losses of $7.7 million and gains of $0.8 million on intercompany loans for the years ended January 3, 2014 and December 28, 2012, respectively.  We did not have these intercompany notes in fiscal year 2011.  These gains and losses are recorded in “Other income (expenses)” on our Consolidated Statements of Operations.

c

URS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

Maturities

As of January 3, 2014, the amounts of our long-term debt outstanding (excluding capital leases) that mature in the next five years and thereafter were as follows:

(In millions)
Less than one year	$	24.8
Second year		12.6
Third year		63.2
Fourth year		456.8
Fifth year		505.4
Thereafter		605.2
Total	$	1,668.0

As of January 3, 2014, the amounts of capital leases that mature in the next five years and thereafter were as follows:

(In millions)	Capital Leases
Less than one year	$	20.6
Second year		11.1
Third year		9.2
Fourth year		4.1
Fifth year		0.1
Total minimum lease payments		45.1
Less: amounts representing interest		1.6
Present value of net minimum lease payments	$	43.5

NOTE 12.  FAIR VALUE OF DEBT INSTRUMENTS AND DERIVATIVE INSTRUMENTS

2011 Credit Facility

As of January 3, 2014 and December 28, 2012, the estimated fair market values of the term loan under our 2011 Credit Facility were approximately $603.2 million and $667.3 million, respectively.  The carrying value of this term loan on our Consolidated Balance Sheets as of January 3, 2014 and December 28, 2012 was $605.0 million and $670.0 million, respectively, excluding unamortized issuance costs.  The fair value of our term loan as of January 3, 2014 was determined to be at par less issuance fees as the agreement was amended on December 19, 2013 (Level 2).

Senior Notes and Canadian Notes

As of January 3, 2014, the estimated fair market value of the Senior Notes was approximately $983.0 million and the carrying value of these notes on our Consolidated Balance Sheets was $1.0 billion, excluding unamortized discount.  As of December 28, 2012, the estimated fair market value of the Senior Notes and Canadian Notes was approximately $1.2 billion and the carrying value of these notes on our Consolidated Balance Sheets was $1.2 billion, excluding unamortized discount and premium.  The fair value of the Senior Notes was derived by taking quoted prices of comparable bonds and making an adjustment to reflect our credit to determine the price of the Senior Notes (Level 2) in the trading market and multiplying it by the outstanding balance of the notes.

Derivative Instruments

As of January 3, 2014, there were no derivative instruments outstanding.  We have used derivative instruments as a risk management tool and not for trading or speculative purposes.  The fair value of each derivative instruments is based on mark-to-market model measurements that are interpolated from observable market data, including spot and forward rates, as of the reporting date and for the duration of each derivative’s terms.

ci

URS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

Foreign Currency Exchange Contracts

We operate our business globally and our foreign subsidiaries conduct businesses in various foreign currencies.  Therefore, we are subject to foreign currency risk.  From time to time, we may purchase derivative financial instruments in the form of foreign currency exchange contracts to manage specific foreign currency exposures.

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 as of March 30, 2012) with maturity windows ranging from March 7, 2012 to May 31, 2012.  The primary objective of the contracts was to manage our exposure to foreign currency transaction risk related to the funding of our acquisition of Flint in Canadian dollars.  These contracts settled during the second quarter of 2012.  

NOTE 13.  INCOME TAXES

The components of income tax expense were as follows:

	Year Ended
	January 3,			December 28,			December 30,
(In millions)	2014			2012			2011
Current:
Federal	$	76.1		$	152.3		$	78.3
State and local		9.8			35.9			17.6
Foreign		8.8			18.3			19.2
Subtotal		94.7			206.5			115.1
Deferred:
Federal		70.8			(10.5	)		26.2
State and local		9.7			1.0			5.6
Foreign		(7.5	)		(7.1	)		(3.5	)
Subtotal		73.0			(16.6	)		28.3
Total income tax expense	$	167.7		$	189.9		$	143.4

The difference between total tax expense and the amount computed by applying the U.S. statutory federal income tax rate to income before taxes was as follows:

	Year Ended
	January 3, 2014			December 28, 2012			December 30, 2011
(In millions, except for percentages)	Amount		Tax Rate	Amount		Tax Rate	Amount		Tax Rate
U.S. statutory rate applied to income (loss) before taxes	$	174.0	35.0%	$	215.5	35.0%	$	80.1	35.0%
State taxes, net of federal benefit		13.7	2.8%		26.3	4.3%		17.7	7.7%
Adjustments to valuation allowances		4.4	0.9%		4.0	0.6%		19.6	8.5%
Foreign income taxed at rates other than 35%		(10.2)	(2.1%)		(24.4)	(4.1%)		(27.2)	(11.9%)
Goodwill impairment		—	—		—	—		86.3	37.7%
Exclusion of tax on noncontrolling interests		(19.8)	(4.0%)		(29.9)	(4.9%)		(30.1)	(13.2%)
Other adjustments		5.6	1.1%		(1.6)	(0.1%)		(3.0)	(1.2%)
Total income tax expense	$	167.7	33.7%	$	189.9	30.8%	$	143.4	62.6%

cii

URS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

The significant components of our deferred tax assets and liabilities were as follows:

	Year Ended
	January 3,			December 28,			December 30,
(In millions)	2014			2012			2011
Deferred tax assets:
Accrued employee benefits	$	230.7		$	237.6		$	200.0
Net operating losses		129.9			132.2			108.4
Accrued liabilities		59.7			71.9			60.6
Insurance reserves		15.9			38.2			40.3
Tax credits		13.0			15.1			10.5
Other		20.6			23.1			19.6
Total deferred tax assets		469.8			518.1			439.4
Valuation allowance on deferred tax assets		(145.0	)		(137.6	)		(124.0	)
Net deferred tax assets	$	324.8		$	380.5		$	315.4
Deferred tax liabilities:
Depreciation and amortization	$	(456.4	)	$	(466.1	)	$	(360.8	)
Contract revenue and costs		(126.9	)		(79.9	)		(74.2	)
Subsidiary basis difference		(150.1	)		(146.8	)		(145.5	)
Total deferred tax liabilities		(733.4	)		(692.8	)		(580.5	)
Deferred tax liabilities, net of deferred tax assets	$	(408.6	)	$	(312.3	)	$	(265.1	)

We have indefinitely reinvested $431.9 million of undistributed earnings of our foreign operations outside of our U.S. tax jurisdiction as of January 3, 2014.  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 is made to repatriate the earnings.  Some of our foreign earnings are indefinitely reinvested between other foreign countries.  No cash distributions were made from our foreign subsidiaries in fiscal year 2011, 2012 or 2013.

As of January 3, 2014, our federal net operating loss (“NOL”) carryovers were approximately $29.1 million.  These federal NOL carryovers expire in years 2020 through 2032.  In addition to the federal NOL carryovers, there are also state income tax NOL carryovers in various taxing jurisdictions of approximately $257.2 million.  These state NOL carryovers expire in years 2014 through 2032.  There are also foreign NOL carryovers in various jurisdictions of approximately $535.3 million.  The majority of the foreign NOL carryovers have no expiration date.  At January 3, 2014, the federal, state and foreign NOL carryovers resulted in a deferred tax asset of $129.9 million with a valuation allowance of $96.7 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 January 3, 2014 and December 28, 2012, we have remaining tax-deductible goodwill of $142.0 million and $223.2 million, respectively, resulting from acquisitions.  The amortization of this goodwill is deductible over various periods ranging up to 13 years.  The tax deduction for goodwill for 2014 is expected to be approximately $72.5 million and is expected to be substantially lower beginning in 2015.

ciii

URS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

As of January 3, 2014, December 28, 2012 and December 30, 2011, we had $14.0 million, $15.4 million and $16.7 million of unrecognized tax benefits, respectively.  Included in the balance of unrecognized tax benefits at the end of fiscal year 2013 were $9.8 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
	January 3,			December 28,			December 30,
(In millions)	2014			2012			2011
Unrecognized tax benefits beginning balance	$	15.4		$	16.7		$	21.5
Gross increase – tax positions in prior years		1.7			1.2			2.7
Gross decrease – tax positions in prior years		(0.2	)		(1.2	)		(3.6	)
Gross increase – current period tax positions		—			1.2			—
Settlements		(1.4	)		(0.2	)		(0.2	)
Lapse of statute of limitations		(1.5	)		(2.4	)		(3.7	)
Unrecognized tax benefits acquired in current year		—			0.1			—
Unrecognized tax benefits ending balance	$	14.0		$	15.4		$	16.7

We recognize accrued interest related to unrecognized tax benefits in interest expense and penalties as a component of tax expense.  During the years ended January 3, 2014, December 28, 2012 and December 30, 2011, we recognized $0.5 million, $(1.4) million and $(1.4) million, respectively, in interest and penalties.  We have accrued approximately $5.8 million, $5.3 million and $6.7 million in interest and penalties as of January 3, 2014, December 28, 2012 and December 30, 2011, 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.

The income before income taxes, by geographic area, was as follows:

	Year Ended
	January 3,			December 28,			December 30,
(In millions)	2014			2012			2011
Income before income taxes and noncontrolling interests:
United States		$	445.2		$	534.9		$	158.3
International			51.8			80.8			70.7
Total income before income taxes and noncontrolling interests		$	497.0		$	615.7		$	229.0

NOTE 14.  EMPLOYEE RETIREMENT AND POST-RETIREMENT BENEFIT PLANS

Defined Contribution Plans

We made contributions of $90.4 million, $91.0 million and $48.1 million to our defined contribution plans during the years ended January 3, 2014, December 28, 2012, and December 30, 2011, respectively.  Full- and part-time employees, and employees covered by collective bargaining agreements are generally able to participate in one of our defined contribution plans.  Cash contributions to these defined contribution plans are based on either a percentage of employee contributions or on a specified amount per hour depending on the provisions of each plan.

In addition to the above, some of our foreign subsidiaries have contributory trustee retirement plans covering substantially all of their employees.  We made contributions to our foreign plans in the amounts of approximately $45.6 million, $35.9 million, and $20.2 million for the years ended January 3, 2014, December 28, 2012, and December 30, 2011, respectively.

civ

URS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

Deferred Compensation Plans

We maintain various deferred compensation plans, including a restoration plan for some executives of the Energy & Construction Division.  The URS E&C Holdings, Inc. Voluntary Deferred Compensation Plan allows for deferral of salary and incentive compensation.  The URS E&C Holdings, Inc. Restoration Plan provides matching contributions on compensation not eligible for matching contributions under the URS Corporation, Inc. 401(k) Plan.  As of January 3, 2014 and December 28, 2012, the accrued benefit amounts for our deferred compensation plans were $22.6 million and $23.2 million, respectively, and are included in “Other long-term liabilities” on our Consolidated Balance Sheets.

Defined Benefit Plans

We sponsor a number of pension and unfunded supplemental executive retirement plans, including the following significant plans.

We provide a defined benefit plan, the URS Federal Technical Services, Inc. Employees' Retirement Plan, to cover some of the Federal Services Division’s hourly and salaried employees as well as our employees of a joint venture in which this business group participates.  This pension plan provides retirement benefit payments for the life of participating retired employees.  It was closed to new participants on June 30, 2003, but active participants continue to accrue benefits.  All participants are fully vested in their benefits.

We also provide various defined benefit pension plans and unfunded supplemental retirement plans, including the URS Government Services Group Pension Plan, the Washington Government Services Group Executive Pension Plan, and the URS Professional Solutions LLC Pension Plan, which primarily cover groups of current and former employees of the Federal Services Division.  These plans were closed to future accruals after December 31, 2005.

In addition, as part of our acquisition of Scott Wilson Group plc (“Scott Wilson”), there are two foreign defined benefit retirement plans, the Scott Wilson Pension Scheme (“SWPS”) and the Scott Wilson Railways Shared Cost Section of the Railways Pension Scheme (“RPS”).  The SWPS is closed to new participants and was closed to future accruals on October 1, 2010.  The RPS is closed to new participants other than those who have an indefeasible right to join under U.K. law.

Consistent with foreign laws, we may also contribute funds into foreign government-managed accounts or insurance companies for our foreign employees.

Valuation

We measure our pension costs according to actuarial valuations and the projected unit credit method is used to determine pension costs for financial accounting purposes.

The discount rates for our defined benefit plans were derived using an actuarial “bond model.”  The models for domestic and foreign plans assume that we purchase bonds with a credit rating of AA or better by a single bond rating agency, at prices based on a current bond yield and bond quality.  The model develops the yield on this portfolio of bonds as of the measurement date.  The cash flows from the bonds selected for the portfolio generally match our expected benefit payments in future years.

For our domestic plans, the Citigroup High Grade Credit Index (AAA/AA 10+ Year) or Citigroup Pension Discount Curve was used to determine the yield differential for cash flow streams from appropriate quality bonds as of the measurement date.  For our foreign plans, the iBoxx GBP Corporate Bond Index (AA 15+ Year) was used to determine the yield differential for cash flow streams from appropriate quality bonds as of the measurement date.

The weighted average of the bond yields is determined based upon the estimated retirement payments in order to derive the discount rate used in calculating the present value of the pension plan obligations.

cv

URS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

Our estimates of benefit obligations and assumptions used to measure those obligations for the defined benefit plans as of January 3, 2014 and December 28, 2012, were as follows:

	Domestic Plans						Foreign Plans
	January 3,			December 28,			January 3,			December 28,
(In millions, except percentages)	2014			2012			2014			2012
Change in benefit obligation:
Benefit obligation at beginning of year	$	443.4		$	383.3		$	485.9		$	447.9
Service cost		7.5			7.5			0.5			0.6
Interest cost		17.6			18.9			22.2			22.6
Employee contributions		—			—			0.4			0.4
Plan amendment		2.7			—			—			—
Benefits paid and expenses		(21.6	)		(16.6	)		(15.4	)		(14.9	)
Exchange rate changes		—			—			13.2			20.8
Actuarial (gain) loss		(34.4	)		50.3			49.8			8.5
Benefit obligation at end of year	$	415.2		$	443.4		$	556.6		$	485.9
Change in plan assets:
Fair value of plan assets at beginning of year	$	274.2		$	236.4		$	370.8		$	334.3
Actual gain (loss) on plan assets		28.3			31.4			22.2			25.6
Employer contributions		16.0			18.4			9.1			9.7
Employer direct benefit payments		5.1			4.6			—			—
Employee contributions		—			—			0.4			0.4
Exchange rate changes		—			—			8.6			15.7
Benefits paid and expenses		(21.6	)		(16.6	)		(15.4	)		(14.9	)
Fair value of plan assets at end of year	$	302.0		$	274.2		$	395.7		$	370.8
Underfunded status reconciliation:
Underfunded status	$	113.2		$	169.2		$	160.9		$	115.1
Net amount recognized	$	113.2		$	169.2		$	160.9		$	115.1
Amounts recognized in our Consolidated Balance Sheets consist of:
Accrued benefit liability included in current liabilities	$	20.9		$	5.1		$	—		$	—
Accrued benefit liability included in other long-term liabilities		92.3			164.1			160.9			115.1
Net amount recognized	$	113.2		$	169.2		$	160.9		$	115.1

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(Continued)

	Domestic Plans						Foreign Plans
	January 3,			December 28,			January 3,			December 28,
(In millions, except percentages)	2014			2012			2014			2012
Amounts recognized in accumulated other comprehensive income consist of:
Prior service income	$	0.2		$	0.6		$	—		$	—
Net gain (loss)		(80.8	)		(140.5	)		(96.1	)		(41.6	)
Net amount recognized	$	(80.6	)	$	(139.9	)	$	(96.1	)	$	(41.6	)
Additional information:
Accumulated benefit obligation	$	409.7		$	437.6		$	545.1		$	470.7
Weighted-average assumptions used to determine benefit obligations at year end:
Discount rate		4.97	%		4.02	%		4.70	%		4.80	%
Rate of compensation increase		4.50	%		4.50	%		3.30	%		2.80	%

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(Continued)

Net periodic pension costs and other comprehensive income included the following components for the years ended January 3, 2014, December 28, 2012, and December 30, 2011:

	Years Ended
	Domestic Plans									Foreign Plans
	January 3,			December 28,			December 30,			January 3,			December 28,			December 30,
(In millions, except percentages)	2014			2012			2011			2014			2012			2011
Net periodic pension costs:
Service cost	$	7.5		$	7.5		$	6.8		$	0.5		$	0.6		$	0.6
Interest cost		17.6			18.9			19.0			22.2			22.6			24.4
Expected return on plan assets		(19.2	)		(17.7	)		(16.4	)		(23.2	)		(22.2	)		(22.9	)
Amortization or curtailment recognition of prior service cost		2.3			(3.0	)		(3.2	)		—			—			—
Recognized actuarial loss		16.2			9.8			7.4			—			—			—
Total net periodic pension costs	$	24.4		$	15.5		$	13.6		$	(0.5	)	$	1.0		$	2.1
Other changes in plan assets and benefit obligations recognized in other comprehensive income:
Prior service cost	$	2.7		$	—		$	(1.1	)	$	—		$	—		$	—
Net loss (gain)		(43.5	)		36.7			27.3			50.9			5.1			48.6
Effect of exchange rate changes on amounts included in accumulated other comprehensive income		—			—			—			3.6			1.7			(1.9	)
Amortization or curtailment recognition of prior service cost		(2.3	)		3.0			3.2			—			—			—
Amortization or settlement recognition of net loss		(16.2	)		(9.8	)		(7.4	)		—			—			—
Total recognized in other comprehensive loss (income)	$	(59.3	)	$	29.9		$	22.0		$	54.5		$	6.8		$	46.7
Total recognized in net periodic pension costs and other comprehensive loss (income)	$	(34.9	)	$	45.4		$	35.6		$	54.0		$	7.8		$	48.8
Weighted-average assumptions used to determine net periodic cost for years ended:
Discount rate		4.02	%		5.05	%		5.55	%		4.80	%		5.00	%		5.70	%
Rate of compensation increase		4.50	%		4.50	%		4.50	%		2.80	%		3.00	%		3.45	%
Expected long-term rate of return on plan assets		7.35	%		7.34	%		7.44	%		7.00	%		7.00	%		6.96	%
Measurement dates	12/28/2012			12/30/2011			12/31/2010			12/28/2012			12/30/2011			12/31/2010

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(Continued)

Investment policies & strategies

Our investment policies and strategies are to seek a competitive rate of return relative to an appropriate level of risk depending on the funded status and obligations of each plan.  The plans' investment managers employ both active and passive investment management strategies with the goal of matching or outperforming the broad markets in which they invest.  Our risk management practices include diversification across asset classes and investment styles and periodic rebalancing toward asset allocation targets.  The target asset allocation selected for each domestic plan reflects a risk/return profile that we believe is appropriate relative to each plan's liability structure and return goals.  We conduct periodic asset-liability studies for domestic plan assets in order to model various potential asset allocations in comparison to each plan's forecasted liabilities and liquidity needs.  For the foreign plans, asset allocation decisions are generally made by an independent board of trustees, or similar governing body.

For our domestic and foreign plans, investment objectives are aligned to generate returns that will enable the plans to meet their future obligations.  

The assumptions we use in determining the expected long-term rate of return on plan assets are based on an actuarial analysis.  This analysis includes a review of anticipated future long-term performance of individual asset classes and consideration of the appropriate asset allocation strategy, given the anticipated requirements of the plan, to determine the average rate of earnings expected on the funds invested to provide for the pension plan benefits.  While the study gives appropriate consideration to recent fund performance and historical returns, the assumption is primarily a long-term, prospective rate.

Our weighted-average target asset allocation for the defined benefit plans is as follows:

	Current Target Asset Allocation
	Domestic Plans		Foreign Plans
Equity securities		45%	30%
Debt securities		55%	36%
Real estate		—	6%
Hedge fund		—	25%
Other		—	3%
Total		100%	100%

During 2014, we expect to make cash contributions, including estimated employer-directed benefit payments, of between $45 million and $50 million, to the domestic and foreign defined benefit plans.

As of January 3, 2014, the estimated portions of the net loss and the prior service cost in accumulated other comprehensive income that will be recognized as components of net periodic benefit cost over the next fiscal year are $8.9 million and $0.2 million, respectively.  In addition, the estimated future benefit payments to be paid out in the next ten years under our defined benefit plans are as follows:

For the Fiscal Year:	Estimated Future Benefit Payments
(In millions)	Domestic Plans		Foreign Plans
2014	$	38.0	$	17.0
2015		23.0		17.0
2016		23.0		18.0
2017		24.0		18.0
2018		25.0		19.0
Next five fiscal years thereafter		130.0		103.0
Total	$	263.0	$	192.0

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(Continued)

Fair Values of Defined Benefit Plans Assets

As of January 3, 2014 and December 28, 2012, the fair values of our defined benefit plan assets by the major asset categories are as follows:

		Total		Fair Value Measurement as of January 3, 2014
		Carrying						Significant
		Value as of		Quoted Prices in		Significant Other		Unobservable
		January 3,		Active Markets		Observable Inputs		Inputs
(In millions)		2014		(Level 1)		(Level 2)		(Level 3)
Cash and cash equivalents		$	15.7	$	5.1	$	10.6	$	—
U.S. equity funds			78.1		—		78.1		—
International equity funds			95.6		—		95.6		—
Global equity funds			82.4		—		82.4		—
Fixed income securities			304.4		—		294.5		9.9
International property funds			121.5		—		42.7		78.8
	Total	$	697.7	$	5.1	$	603.9	$	88.7

		Total		Fair Value Measurement as of December 28, 2012
		Carrying						Significant
		Value as of		Quoted Prices in		Significant Other		Unobservable
		December 28,		Active Markets		Observable Inputs		Inputs
(In millions)		2012		(Level 1)		(Level 2)		(Level 3)
Cash and cash equivalents		$	21.0	$	8.0	$	13.0	$	—
U.S. equity funds			74.4		—		74.4		—
International equity funds			94.6		—		94.6		—
Global equity funds			72.2		—		72.2		—
Fixed income securities			264.9		—		264.9		—
International property funds			117.9		—		43.8		74.1
	Total	$	645.0	$	8.0	$	562.9	$	74.1

The following table presents a reconciliation of the beginning and ending balances of the fair value measurements using significant unobservable inputs (Level 3):

(In millions)	Level 3 Fair Value Measurement Rollforward
Balance as of December 30, 2011	$	47.9
Unrealized gains (losses)		4.4
Purchases, sales, issuances and settlements, net		21.8
Balance as of December 28, 2012	$	74.1
Realized gains (losses)		0.1
Unrealized gains (losses)		6.3
Purchases, sales, issuances and settlements, net		8.2
Balance as of January 3, 2014	$	88.7

Level 1:  The fair values of the plan assets in this category are the plans’ interest in cash and cash equivalents.

Level 2:  The fair values of the plans’ interest in common collective trust funds are based on quoted prices in inactive markets, inputs other than quoted prices that are observable for the asset, net asset values as reported by the issuer and/or inputs that are derived principally from or corroborated by observable market data by correlation or other means.  If the asset has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset.

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Level 3:  The fair values of the plan assets in this category are initially based on net asset values as reported by the issuer.  Restrictions on the redemption of the investments and delays in settlement are taken into consideration.  The values cannot be readily derived from or corroborated by observable market data and generally require additional time to liquate in an orderly manner.

Post-retirement Benefit Plans

We sponsor a number of retiree health and life insurance benefit plans (post-retirement benefit plans) for our Energy & Construction and Federal Services Divisions.  The post-retirement benefits provided under company sponsored health care and life insurance plans of the Energy & Construction Division were frozen prior to the Washington Group International, Inc. (“WGI”) acquisition.  The Federal Services plan was closed to new participants in 2003.

Accumulated post-retirement benefit obligations for the post-retirement benefit plans as of January 3, 2014 and December 28, 2012 were $38.9 million and $43.6 million, respectively.  The discount rates used to compute the benefit obligations at January 3, 2014 and December 28, 2012 were 4.61% and 3.48%, respectively.  As of January 3, 2014 and December 28, 2012, the fair values of the plan assets were $3.5 million and $3.1 million, respectively.

Net periodic post-retirement benefit costs for the post-retirement benefit plans for the years ended January 3, 2014, December 28, 2012, and December 30, 2011 were $1.8 million, $2.5 million and $1.8 million, respectively.  The measurement date used for the post-retirement benefit plans was the beginning of each fiscal year.  The weighted-average discount rates used to determine net periodic costs were 3.48%, 4.69%, and 5.23%, respectively, and the expected long-term rates of return on plan assets were 7.50%, 7.50%, and 7.50%, respectively, for the years ended January 3, 2014, December 28, 2012, and December 30, 2011.

The assumptions used related to health care cost trend rates for the years ended January 3, 2014 and December 28, 2012 were as follows:

	January 3,		December 28,
	2014		2012
Assumed blended health care cost trend rates at year-end:
Health care cost trend rate assumed for next year		7.92%	7.94%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)		4.94%	4.94%
Years that the rates reach the ultimate trend rate		2020/2024	2020/2024

We currently expect to make cash contributions, including estimated employer direct benefit payments, of between $3 million and $4 million to the post-retirement benefit plans for 2014.

Multiemployer Pension Plans

We participate in approximately 200 construction-industry multiemployer pension plans.  Generally, the plans provide defined benefits to substantially all employees covered by collective bargaining agreements.  Under the Employee Retirement Income Security Act, a contributor to a multiemployer plan is liable, upon termination or withdrawal from a plan, for its proportionate share of a plan’s unfunded vested liability.

Our aggregate contributions to these plans were $49.7 million, $48.2 million, and $40.7 million for the years ended January 3, 2014, December 28, 2012, and December 30, 2011, respectively.  At January 3, 2014, none of the plans in which we participate are individually significant to our consolidated financial statements.

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(Continued)

NOTE 15.  STOCKHOLDERS' EQUITY

Dividend Program

Our Board of Directors declared the following dividends:

Declaration Date	Dividend Per Share		Record Date	Total Maximum Payment		Payment Date
(In millions, except per share data)
February 24, 2012	$	0.20	March 16, 2012	$	15.2	April 6, 2012
May 4, 2012	$	0.20	June 15, 2012	$	15.4	July 6, 2012
August 3, 2012	$	0.20	September 14, 2012	$	15.4	October 5, 2012
November 2, 2012	$	0.20	December 14, 2012	$	15.4	January 4, 2013
February 22, 2013	$	0.21	March 15, 2013	$	16.0	April 5, 2013
May 3, 2013	$	0.21	June 14, 2013	$	16.0	July 5, 2013
August 2, 2013	$	0.21	September 13, 2013	$	16.0	October 4, 2013
November 1, 2013	$	0.21	December 13, 2013	$	16.0	January 10, 2014
February 28, 2014	$	0.22	March 21, 2014	$	NA	April 11, 2014

NA = Not available

Equity Incentive Plans

On March 28, 2013, the Board adopted, and on May 23, 2013, the stockholders approved, an amendment and restatement of our 2008 Equity Incentive Plan (“2008 Plan”).  Among other provisions, the amendment and restatement increased the aggregate number of shares of common stock authorized for issuance under the 2008 Plan by 1.5 million shares to a total of 6.5 million shares and extended the term of the 2008 Plan until May 23, 2018.  As of January 3, 2014, approximately 3.0 million shares had been issued as restricted stock awards and 1.7 million shares of restricted stock units were issuable upon the vesting under our 2008 Plan.  In addition, approximately 1.8 million shares remained reserved for future grant under the 2008 Plan.

Employee Stock Purchase Plan

Our Employee Stock Purchase Plan (“ESPP”) allows qualifying employees to purchase shares of our common stock through payroll deductions of up to 10% of their compensation, subject to Internal Revenue Code limitations, at a price of 95% of the fair market value as of the end of each of the six-month offering periods.  The offering periods commence on January 1 and July 1 of each year.

For the years ended January 3, 2014, December 28, 2012, and December 30, 2011, employees participating in our ESPP purchased approximately 0.4 million shares, 0.1 million shares, and 0.2 million shares, respectively.  Cash proceeds generated from employee stock option exercises and purchases by employees under our ESPP for the years ended January 3, 2014, December 28, 2012, and December 30, 2011 were $20.2 million, $8.9 million, and $11.7 million, respectively.

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(Continued)

Restricted Stock Awards and Units

We have issued restricted stock awards and units from the 2008 Plan that may contain time-based or time- and performance-based vesting over multiple years.  Some awards are subject to the following time- and performance-based vesting conditions:

Single-Performance Criteria

Upon the achievement of an annual net income target generally established in the first quarter of the fiscal year preceding the vesting date.

Multi-Performance Criteria

In March 2013, pursuant to our long-term equity incentive program, we issued performance-based restricted stock unit awards to senior executives that vest at the end of a three-year vesting period with multi-performance criteria.  One criterion is the extent to which we achieve a net income performance condition measured on a cumulative basis over a two-year performance period.  In addition, there is a market condition based on meeting or exceeding the total stockholder return of the Russell 3000 Index, measured over a three-year performance period.  At vesting, these performance-based awards may convert to common stock up to 200% of the targeted amounts, based on achievement of performance targets.

In November 2013, we redesigned our long-term equity incentive program and issued performance-based restricted stock unit awards to senior executives that vest at the end of a three-year vesting period with three performance criteria.  Two criteria consist of a net income performance condition measured on a cumulative basis over a three-year performance period and a return on invested capital performance condition measured on an annual basis averaged over a three-year performance period.  In addition, there is a market condition based on meeting or exceeding the total stockholder return of the Russell 3000 Index, measured over a three-year performance period.  At vesting, these performance-based awards may convert to common stock up to 200% of the targeted amounts, based on achievement of performance targets.

Our restricted stock awards and units are measured based on the stock price on the date that all of the key terms and conditions related to the award are known.  Restricted stock awards and units are expensed on a straight-line basis over their respective vesting periods subject to the probability of meeting performance requirements and adjusted for the number of shares expected to be issued.

The grant date fair value for restricted stock awards and units with multi-performance criteria was determined using a Monte Carlo simulation model with the following weighted-average assumptions:

	Fiscal year ended
	January 3, 2014
Stock price (1)	$	47.00
Expected volatility factor (2)		31.30%
Risk-free interest rate (3)		0.33%
Expected annual dividend yield (4)		0%

(1)   The stock price is the closing price of our common stock on the date of when all of the key terms and conditions related to the award are known.

(2)   The stock volatility for each grant was determined based on the historical volatility for the Russell 3000 Index and in correlation to our common stock for a period equal to the estimated performance period.

(3)   The risk-free interest rate for periods equal to the performance period is based on the U.S. Treasury yield curve in effect at the date of grant.

(4)   Dividends are reinvested for purposes of calculating total stockholder return.  For purposes of the fair value model, the dividend yield is therefore considered to be 0%.

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(Continued)

As of January 3, 2014, we had estimated unrecognized stock-based compensation expense of $46.2 million related to nonvested restricted stock awards and units for which vesting is probable.  This expense is expected to be recognized over a weighted-average period of 2.4 years.  The following table summarizes the total fair value of vested shares, according to their contractual terms, and the grant date fair value of restricted stock awards and units granted during the years ended January 3, 2014 and December 28, 2012:

	January 3,		December 28,
(In millions)	2014		2012
Fair value of shares vested	$	43.9	$	42.0
Grant date fair value of restricted stock awards and units granted	$	69.2	$	54.3

A summary of the status of and changes in our nonvested restricted stock awards and units, according to their contractual terms, as of and for the year ended January 3, 2014, is presented below:

	Year Ended
	January 3, 2014
		Weighted-
	Shares	Average Grant
	(in millions)	Date Fair Value
Nonvested at December 31, 2010	2.5	$	42.92
Granted	1.0	$	42.39
Vested	(1.0)	$	42.47
Forfeited	(0.1)	$	43.46
Nonvested at December 31, 2011	2.4	$	42.86
Granted	1.4	$	36.79
Vested	(1.0)	$	41.69
Forfeited	(0.1)	$	42.44
Nonvested at December 28, 2012	2.7	$	40.03
Granted	1.4	$	48.66
Vested	(1.0)	$	41.45
Forfeited	(0.3)	$	41.90
Nonvested at January 3, 2014	2.8	$	43.66

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(Continued)

Stock-Based Compensation

We recognize stock-based compensation expense, net of estimated forfeitures, over the vesting periods in “General and administrative expenses” and “Cost of revenues” in our Consolidated Statements of Operations.

The following table presents our stock-based compensation expense related to restricted stock awards and units, our employee stock purchase plan and the related income tax benefits recognized for the years ended January 3, 2014, December 28, 2012, and December 30, 2011:

	Year Ended
	January 3,		December 28,		December 30,
(In millions)	2014		2012		2011
Stock-based compensation expense:
Restricted stock awards and units	$	31.2	$	43.1	$	44.8
Employee stock purchase plan		0.6		0.5		0.5
Stock-based compensation expense	$	31.8	$	43.6	$	45.3
Stock-based compensation expense included in:
Cost of revenues	$	23.5	$	33.2	$	35.1
General and administrative expenses		8.3		10.4		10.2
Stock-based compensation expense	$	31.8	$	43.6	$	45.3
Total income tax benefits recognized in our net income related to stock-based compensation expense	$	11.6	$	16.0	$	17.3

Stock Repurchase Program

For fiscal years 2012 and 2013, the number of shares authorized under the repurchase program were 3.0 million shares, plus the number of shares equal to the difference between the number of shares authorized to be repurchased in the prior year and the actual number of shares repurchased during the prior year, not to exceed 6.0 million shares in aggregate.  In February 2014, our Board of Directors approved a modification of our stock repurchase program to allow for the repurchase of up to 12.0 million shares of our common stock in fiscal year 2014.  The Board of Directors may modify, suspend, extend or terminate the program at any time.

The following table summarizes our stock repurchase activities for the years ended January 3, 2014, December 28, 2012, and December 30, 2011:

	Year Ended
	January 3,			December 28,			December 30,
(In millions, except average price paid per share)	2014			2012			2011
Shares of common stock repurchased			2.0			1.0			6.0
Average price paid per share		$	45.55		$	40.00		$	40.47
Cost of common stock repurchased		$	93.3		$	40.0		$	242.8

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(Continued)

NOTE 16.  SEGMENT AND RELATED INFORMATION

We operate our business through the following four segments:

·   Our Infrastructure & Environment Division provides program management, planning, design, engineering, construction and construction management, operations and maintenance, and decommissioning and closure services to the U.S. federal government, state and local government agencies, and private sector clients in the U.S. and internationally.

·   Our Federal Services Division provides services to a wide variety of U.S. federal government agencies, as well as to national governments in other countries.  This includes program management, planning, design and engineering, systems engineering and technical assistance, construction and construction management, operations and maintenance, management and operations, IT, and decommissioning and closure services.

·   Our Energy & Construction Division provides program management, planning, design, engineering, construction and construction management, operations and maintenance, and decommissioning and closure services to private sector clients as well as federal, state and local government agencies.

·   Our Oil & Gas Division provides services to oil and gas industry clients throughout the U.S. and Canada.  This includes oilfield services, such as rig transportation and fluid hauling, oil and gas production services, including mechanical, electrical and instrumentation services; pipeline and facility construction, module fabrication; and maintenance services.

These four segments operate under separate management groups and produce discrete financial information.  Their operating results also are reviewed separately by management.  The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies.  The information disclosed in our consolidated financial statements is based on the four segments that comprise our current organizational structure.

Effective with the beginning of our fiscal year 2014, we realigned our Global Management and Operations Services Group, which was previously a component of our Energy & Construction Division, under the operations and management of our Federal Services Division.  The realignment of this group consolidates the majority of our business with U.S. federal government agencies and national governments outside the U.S in our Federal Services Division.  We also realigned a portion of our facility construction, process engineering, and operations and maintenance services to the oil and gas industry among our Oil & Gas, Infrastructure & Environment, and Energy & Construction Divisions.  These changes, which restructured elements of our oil and gas business from an organization based on legacy acquisitions to one based on service, are designed to improve our ability to provide integrated services to our oil and gas clients.  To reflect these realignments, we have revised the prior year amounts to conform to our current year presentation.

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(Continued)

The following table presents summarized financial information for our reportable segments.  “Inter-segment, eliminations and other” in the following table includes eliminations of inter-segment sales and investments in subsidiaries.  The segment balance sheet information presented below is included for informational purposes only.  We do not allocate resources based upon the balance sheet amounts of individual segments.  Our long-lived assets consist primarily of property and equipment.

	Year Ended
	January 3,			December 28,			December 30,
(In millions)	2014			2012			2011
Revenues
Infrastructure & Environment	$	3,634.1		$	3,714.4		$	3,761.0
Federal Services (1)		3,157.2			3,774.9			4,013.9
Energy & Construction (2)		2,417.8			2,412.9			1,932.5
Oil & Gas (2)		1,941.8			1,233.1			—
Inter-segment, eliminations and other		(160.2	)		(162.8	)		(162.4	)
Total revenues	$	10,990.7		$	10,972.5		$	9,545.0
Equity in income (loss) of unconsolidated joint ventures
Infrastructure & Environment	$	2.4		$	4.0		$	3.9
Federal Services (1)		84.9			83.4			114.7
Energy & Construction (2)		8.1			16.0			13.6
Oil & Gas (2)		(1.8	)		4.2			—
Total equity in income of unconsolidated joint ventures	$	93.6		$	107.6		$	132.2
URS operating income (loss) (3)
Infrastructure & Environment	$	209.0		$	213.4		$	222.0
Federal Services (1)		307.8			300.9			276.8
Energy & Construction (2)		52.4			96.7			54.6
Oil & Gas (2)		17.0			59.4			—
Corporate (4)		(77.5	)		(99.7	)		(79.5	)
Total URS operating income	$	508.7		$	570.7		$	473.9
Operating income (loss) (5)
Infrastructure & Environment	$	210.7		$	215.5		$	222.0
Federal Services (1,5)		370.3			378.9			25.5
Energy & Construction (2)		71.3			132.8			83.1
Oil & Gas (2)		16.0			58.4			—
Corporate (4)		(77.5	)		(99.7	)		(79.5	)
Total operating income	$	590.8		$	685.9		$	251.1
Capital expenditures
Infrastructure & Environment	$	36.9		$	42.5		$	51.2
Federal Services (1)		13.0			5.9			5.8
Energy & Construction (2)		16.8			18.4			13.8
Oil & Gas (2)		57.1			73.2			—
Corporate		12.6			13.2			10.9
Total capital expenditures	$	136.4		$	153.2		$	81.7
Depreciation and amortization
Infrastructure & Environment	$	50.0		$	56.0		$	55.0
Federal Services (1)		47.8			45.3			36.3
Energy & Construction (2)		40.7			49.2			45.1
Oil & Gas (2)		116.9			76.5			—
Corporate		8.8			6.6			6.3
Total depreciation and amortization	$	264.2		$	233.6		$	142.7

(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.

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(Continued)

(3)   We are providing information regarding URS operating income (loss) by segment because management uses this information to assess performance and make decisions about resource allocation.

(4)   Corporate includes expenses related to corporate functions and acquisition-related expenses.

(5)   The operating income for the year ended December 30, 2011 included a $351.3 million goodwill impairment charge.  See Note 9, “Goodwill and Intangible Assets,” for more information.

Reconciliations of segment contribution to segment operating income (loss) for the years ended January 3, 2014, December 28, 2012, and December 30, 2011 are as follows:

	Year Ended January 3, 2014
	Infrastructure							Energy			Oil
	&			Federal				&			&
(In millions)	Environment			Services				Construction			Gas				Corporate				Consolidated
URS operating income		$	209.0		$	307.8			$	52.4		$	17.0			$	(77.5	)		$	508.7
Noncontrolling interests			1.7			62.5				18.9			(1.0	)			—				82.1
Operating income (loss)		$	210.7		$	370.3			$	71.3		$	16.0			$	(77.5	)		$	590.8
	Year Ended December 28, 2012
	Infrastructure							Energy			Oil
	&			Federal				&			&
(In millions)	Environment			Services				Construction			Gas				Corporate				Consolidated
URS operating income		$	213.4		$	300.9			$	96.7		$	59.4			$	(99.7	)		$	570.7
Noncontrolling interests			2.1			78.0				36.1			(1.0	)			—				115.2
Operating income (loss)		$	215.5		$	378.9			$	132.8		$	58.4			$	(99.7	)		$	685.9
	Year Ended December 30, 2011
	Infrastructure							Energy			Oil
	&			Federal				&			&
(In millions)	Environment			Services				Construction			Gas				Corporate				Consolidated
URS operating income		$	222.0		$	276.8			$	54.6		$	—			$	(79.5	)		$	473.9
Noncontrolling interests			—			100.0				28.5			—				—				128.5
Goodwill impairment			—			(351.3	)			—			—				—				(351.3	)
Operating income (loss)		$	222.0		$	25.5			$	83.1		$	—			$	(79.5	)		$	251.1

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(Continued)

Total investments in and advances to unconsolidated joint ventures and property and equipment, net of accumulated depreciation, are as follows:

	January 3,		December 28,
(In millions)	2014		2012
Infrastructure & Environment	$	8.0	$	8.2
Federal Services		95.4		111.0
Energy & Construction		21.3		19.1
Oil & Gas		120.9		140.0
Total investments in and advances to unconsolidated joint ventures	$	245.6	$	278.3
Infrastructure & Environment	$	135.9	$	138.7
Federal Services		38.8		41.6
Energy & Construction		52.7		55.4
Oil & Gas		351.6		424.9
Corporate		29.1		26.9
Total property and equipment, net of accumulated depreciation	$	608.1	$	687.5

Total assets by segment are as follows:

	January 3,		December 28,
(In millions)	2014		2012
Infrastructure & Environment	$	2,119.5	$	2,222.1
Federal Services		2,727.6		2,911.6
Energy & Construction		2,117.6		2,195.9
Oil & Gas		1,495.6		1,739.3
Corporate		257.7		192.1
Total assets	$	8,718.0	$	9,261.0

Geographic Areas

We provide services in many parts of the world.  Some of our services are provided to companies in other countries, but are served by our offices located in the U.S.  Generally, revenues related to such services are classified within the geographic area where the services are performed, rather than where the client is located.  Our revenues and net property and equipment at cost by geographic area are shown below:

	Years Ended
	January 3,			December 28,			December 30,
(In millions)	2014			2012			2011
Revenues
United States	$	8,136.7		$	8,640.2		$	8,329.7
Canada (1)		1,879.5			1,304.0			180.3
Other countries		1,001.8			1,056.0			1,065.3
Eliminations		(27.3	)		(27.7	)		(30.3	)
Total revenues	$	10,990.7		$	10,972.5		$	9,545.0

(1)   Revenues from Canada exceeded 10% of our consolidated revenues for the years ended January 3, 2014 and December 28, 2012 due to our acquisition of Flint in fiscal year 2012.

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(Continued)

	January 3,		December 28,
(In millions)	2014		2012
Property and equipment, net (1)
United States	$	313.6	$	320.4
International:
Canada		249.9		313.2
Other countries		44.6		53.9
Total international		294.5		367.1
Total property and equipment, net	$	608.1	$	687.5

(1)   Property and equipment, net is categorized by the location of incorporation of the legal entities.

Major Customers and Other

Our largest clients are from our federal market sector.  Within this sector, we have multiple contracts with our two major customers:  the U.S. Army and the DOE.  For the purpose of analyzing revenues from major customers, we do not consider the combination of all federal departments and agencies as one customer.  The different federal agencies manage separate budgets.  As such, reductions in spending by one federal agency do not affect the revenues we could earn from another federal agency.  In addition, the procurement processes for federal agencies are not centralized, and procurement decisions are made separately by each federal agency.  The loss of the federal government, the U.S. Army, or the DOE as clients, would have a material adverse effect on our business; however, we are not dependent on any single contract on an ongoing basis.  We believe that the loss of any single contract would not have a material adverse effect on our business.

Our revenues from the U.S. Army and the DOE by division for the years ended January 3, 2014, December 28, 2012, and December 30, 2011 are presented below:

	Year Ended
	January 3,			December 28,			December 30,
(In millions, except percentages)	2014			2012			2011
The U.S. Army (1)
Infrastructure & Environment	$	125.2		$	128.4		$	141.7
Federal Services		1,100.3			1,497.8			1,352.4
Energy & Construction		149.5			128.8			198.2
Total U.S. Army	$	1,375.0		$	1,755.0		$	1,692.3
Revenues from the U.S. Army as a percentage of our consolidated revenues		13	%		16	%		18	%
DOE
Infrastructure & Environment	$	4.7		$	5.6		$	5.9
Federal Services		821.9			984.0			1,260.5
Energy & Construction		4.6			0.1			2.6
Total DOE	$	831.2		$	989.7		$	1,269.0
Revenues from DOE as a percentage of our consolidated revenues		8	%		9	%		13	%
Revenues from the federal market sector as a percentage of our consolidated revenues		34	%		40	%		49	%

(1)   The U.S. Army includes U.S. Army Corps of Engineers.

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(Continued)

NOTE 17.  COMMITMENTS AND CONTINGENCIES

In the ordinary course of business, we and our affiliates are subject to various disputes, audits, investigations and legal proceedings.  Additionally, as a government contractor, we are subject to audits, investigations, and claims with respect to our contract performance, pricing, costs, cost allocations, and procurement practices.  The final outcomes of these various matters cannot be predicted or estimated with certainty.  We are including information regarding the following matters:

·   USAID Egyptian Projects:  In March 2003, Washington Group International, Inc., a Delaware company (“WGI Delaware”), our wholly owned subsidiary, was notified by the Department of Justice that the federal government was considering civil litigation against WGI Delaware for potential violations of the U.S. Agency for International Development (“USAID”) source, origin, and nationality regulations in connection with five of WGI Delaware’s USAID-financed host-country projects located in Egypt beginning in the early 1990s.  In November 2004, the federal government filed an action in the United States District Court for the District of Idaho against WGI Delaware, Contrack International, Inc., and MISR Sons Development S.A.E., an Egyptian construction company, asserting violations under the Federal False Claims Act, the Federal Foreign Assistance Act of 1961, as well as common law theories of payment by mistake and unjust enrichment.  The federal government seeks damages and civil penalties (including doubling and trebling of damages) for violations of the statutes as well as a refund of the approximately $373.0 million paid to WGI Delaware under the specified contracts.  WGI Delaware has denied any liability in the action and contests the federal government’s damage allegations and its entitlement to recovery.  All USAID projects under the contracts have been completed and are fully operational.

In March 2005, WGI Delaware filed motions in Idaho District Court and the United States Bankruptcy Court in Nevada contending that the federal government’s Idaho action is barred under the plan of reorganization approved by the Bankruptcy Court in 2002 when WGI Delaware emerged from bankruptcy protection.  In 2006, the Idaho action was stayed pending the bankruptcy-related proceedings.  On April 24, 2012, the Bankruptcy Court ruled that the bulk of the federal government’s claims under the False Claims and the Federal Foreign Assistance Acts are not barred.  On November 7, 2012, WGI Delaware appealed the Bankruptcy Court’s decision to the Ninth Circuit Bankruptcy Appellate Panel.  On August 2, 2013, the Appellate Panel affirmed the Bankruptcy Court’s decision.  On September 26, 2013, WGI Delaware appealed the Appellate Panel’s decision to the United States Ninth Circuit Court of Appeals.

WGI Delaware intends to continue to defend this matter vigorously; however, WGI Delaware cannot provide assurance that it will be successful in these efforts.  The potential range of loss and the resolution of these matters cannot be determined at this time primarily due to the very limited factual record that exists in light of the limited discovery that has been conducted to-date in the Idaho litigation; the fact that the matter involves unique and complex bankruptcy, international, and federal regulatory legal issues; the uncertainty concerning legal theories and their potential resolution by the courts; and the overall age of this matter, as well as a number of additional factors.  Accordingly, no amounts have been accrued for the federal government claims in the Idaho action.

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(Continued)

·   New Orleans Levee Failure Class Action Litigation:  From July 1999 through May 2005, Washington Group International, Inc., an Ohio company (“WGI Ohio”), a wholly owned subsidiary acquired by us on November 15, 2007, performed demolition, site preparation, and environmental remediation services for the U.S. Army Corps of Engineers on the east bank of the Inner Harbor Navigation Canal (the “Industrial Canal”) in New Orleans, Louisiana.  On August 29, 2005, Hurricane Katrina devastated New Orleans.  The storm surge created by the hurricane overtopped the Industrial Canal levee and floodwall, flooding the Lower Ninth Ward and other parts of the city.  Fifty-nine personal injury and property damage class action lawsuits were filed in Louisiana State and federal court against several defendants, including WGI Ohio, seeking $200.0 billion in damages plus attorneys’ fees and costs.  Plaintiffs are residents and property owners who claim to have incurred damages from the breach and failure of the hurricane protection levees and floodwalls in the wake of Hurricane Katrina.

All 59 lawsuits were pleaded as class actions but none have yet been certified as class actions.  Along with WGI Ohio, the U.S. Army Corps of Engineers, the Board for the Orleans Levee District, and its insurer, St. Paul Fire and Marine Insurance Company were also named as defendants.  At this time WGI Ohio and the Army Corps of Engineers are the remaining defendants.  These 59 lawsuits, along with other hurricane-related cases not involving WGI Ohio, were consolidated in the United States District Court for the Eastern District of Louisiana (“District Court”).

Plaintiffs allege that defendants were negligent in their design, construction and/or maintenance of the New Orleans levees.  Specifically, as to WGI Ohio, plaintiffs allege that work WGI Ohio performed adjacent to the Industrial Canal damaged the levee and floodwall, causing or contributing to breaches and flooding.  WGI Ohio did not design, construct, repair or maintain any of the levees or the floodwalls that failed during or after Hurricane Katrina.  Rather, WGI Ohio performed work adjacent to the Industrial Canal as a contractor for the federal government.

WGI Ohio filed a motion for summary judgment, seeking dismissal on grounds that government contractors are immune from liability.  On December 15, 2008, the District Court granted WGI Ohio’s motion for summary judgment, but several plaintiffs appealed that decision to the United States Fifth Circuit Court of Appeals on April 27, 2009.  On September 14, 2010, the Court of Appeals reversed the District Court’s summary judgment decision and WGI Ohio’s dismissal, and remanded the case back to the District Court for further litigation.  On August 1, 2011, the District Court decided that the government contractor immunity defense would not be available to WGI Ohio at trial, but would be an issue for appeal.  Five of the cases were tried in District Court from September 12, 2012 through October 3, 2012.  On April 12, 2013, the District Court ruled in favor of WGI Ohio and the Army Corps of Engineers, finding that the five plaintiffs failed to prove that WGI Ohio’s or the Army Corps of Engineers’ actions caused the failure of the Industrial Canal floodwall during Hurricane Katrina.  On July 1, 2013, WGI Ohio filed a motion for summary judgment in District Court to dismiss all other related cases as a result of the District Court’s April 2013 decision.  On December 20, 2013, the District Court dismissed the majority of the lawsuits and the remainder of the outstanding claims are being transferred to the District Court for final judgment of dismissal.

WGI Ohio intends to continue to defend these matters vigorously until all claims are dismissed; however, WGI Ohio cannot provide assurance that it will be successful in these efforts.  The potential range of loss and the resolution of these matters cannot be determined at this time primarily due to the likelihood of an appeal, the unknown number of individual plaintiffs who are actually asserting claims against WGI Ohio; the uncertainty regarding the nature and amount of each individual plaintiff’s damage claims; uncertainty concerning legal theories and factual bases that plaintiffs may present and their resolution by courts or regulators; and uncertainty about the plaintiffs’ claims, if any, that might survive certain key motions of our affiliate, as well as a number of additional factors.

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(Continued)

·   DOE Deactivation, Demolition, and Removal Project:  WGI Ohio executed a cost-reimbursable task order with the DOE in 2007 to provide deactivation, demolition and removal services at a New York State project site that, during 2010, experienced contamination and performance issues.  In February 2011, WGI Ohio and the DOE executed a Task Order Modification that changed some cost-reimbursable contract provisions to at-risk.  The Task Order Modification, including subsequent amendments, requires the DOE to pay all project costs up to $105.9 million, requires WGI Ohio and the DOE to equally share in all project costs incurred from $105.9 million to $145.9 million, and requires WGI Ohio to pay all project costs exceeding $145.9 million.  In addition, in September 2011, WGI Ohio voluntarily paid a civil penalty related to the contamination incident.  Through January 3, 2014, WGI Ohio has incurred total project costs of $261.3 million.

Due to unanticipated requirements and permitting delays by federal and state agencies, as well as delays and related ground stabilization activities caused by Hurricane Irene, WGI Ohio has been required to perform work outside the scope of the Task Order Modification.  Based on the changes and delays, requests for equitable adjustment (“REA”) amounting to $47.1 million and proposals related to the hurricane-caused impacts and other directed changes in the amount of $118.0 million were initially submitted to the DOE for approval.  Through January 3, 2014, the DOE has approved one of the REAs for $0.9 million and has authorized $31.9 million of additional funding primarily related to the hurricane-caused impacts.  Because WGI Ohio and the DOE were unsuccessful in settling the REAs and proposals, during 2013, WGI Ohio submitted several certified claims against the DOE pursuant to the Contracts Disputes Acts seeking recovery of $112.5 million of the above unfunded REA and proposal costs incurred through April 2013 and $5.0 million in fees on the expanded work scope.  As of January 3, 2014, WGI Ohio has recorded $81.5 million in accounts receivable for project costs incurred to date in excess of the DOE contracted amount that may not be collected unless and until the claims are favorably resolved.  The final project completion costs are not currently estimable due to continuing delays in permitting, other delays, and approval of a final project plan.  WGI Ohio can provide no certainty that it will recover the $112.5 million in submitted DOE claims for costs incurred through April 2013 related to REAs, hurricane-caused work or other directed changes, as well as any other project costs after April 2013 that WGI Ohio is obligated to incur to finalize and complete this project including the accounts receivable, any of which could negatively impact URS’ future results of operations.

·   Bolivian Mine Services Agreement:  In 2009, a mine service agreement performed by our wholly owned subsidiary, Washington Group Bolivia, was unilaterally terminated for convenience by the mine owner.  The mine owner disputed the fair market value of mining equipment it was required to repurchase under the terms of the mine services agreement.  Subsequently, on November 16, 2010, Washington Group Bolivia received a formal claim asserting breaches of contractual obligations and warranties, including the failure to adhere to the requisite professional standard of care while performing the mine services agreement.  On June 17, 2011, Washington Group Bolivia received a formal demand for arbitration pursuant to the Rules of Arbitration of the International Chamber of Commerce (“ICC”) asserting claims up to $52.6 million.  Washington Group Bolivia brought a $50 million counterclaim on August 3, 2012 against the mine owner asserting claims of wrongful termination and lost productivity.  Arbitration on the mine owner’s claims and Washington Group Bolivia’s counterclaims commenced before the ICC.  In the course of the arbitration proceedings, the mine owner has reduced its claims to approximately $32.2 million, while Washington Group Bolivia has refined its counterclaim amount to not more than $62.9 million.  On August 9, 2013, a $10.5 million ICC arbitration tribunal award was issued against Washington Group Bolivia and, on September 5, 2013, the mine owner petitioned the United States District Court of Colorado to confirm the ICC arbitration award.  On October 1, 2013, Washington Group Bolivia filed a cross motion to partially vacate the ICC arbitration award in the District Court of Colorado.  On February 3, 2014, the District Court of Colorado entered judgment confirming the ICC arbitration award and denied Washington Group Bolivia’s motion to partially vacate the award.

We have accrued an estimated probable loss of $10.5 million related to this matter; however, we expect the loss to be recoverable under our insurance program.

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(Continued)

·   Canadian Pipeline Contract:  In January 2010, a pipeline owner filed an action in the Court of Queen’s Bench of Alberta, Canada against Flint, a company we acquired in May 2012, as well as against a number of other defendants, alleging that the defendants negligently provided pipe coating and insulation system services, engineering, design services, construction services, and other work, causing damage to and abandonment of the line.  The pipeline owner alleges it has suffered approximately C$85.0 million in damages in connection with the abandonment and replacement of the pipeline.  Flint was the construction contractor on the pipeline project.  Other defendants were responsible for engineering and design-services and for specifying and providing the actual pipe, insulation and coating materials used in the line.  In January 2011, the pipeline owner served a Statement of Claim on Flint and, in September 2011, Flint filed a Statement of Defense denying that the damages to the coating system of the pipeline were caused by any negligence or breach of contract of Flint.  Flint believes the damages were caused or contributed to by the negligence of one or more of the co-defendants and/or by the negligent operation of the pipeline owner.

Flint intends to continue to defend this matter vigorously; however, it cannot provide assurance that it will be successful, in whole or in part, in these efforts.  The potential range of loss and the resolution of this matter cannot be determined at this time primarily due to the early stage of the discovery; the substantial uncertainty regarding the actual cause of the damage to or loss of the line; the nature and amount of each individual damage claim against the various defendants; and the uncertainty concerning legal theories and factual bases that the customer may present against all or some of the defendants.

·   U.K. Joint Venture:  On April 12, 2010, one of our U.K. joint ventures sent several bags of low level non-exempt radioactive waste to a waste disposal facility that was not licensed to handle such waste.  On November 15, 2012, the U.K. Environment Agency and the U.K. Department for Transport initiated environmental regulatory proceedings against our U.K. joint venture in the Workington Magistrates’ Court under the U.K. Environmental Permitting Regulations 2010, the Radioactive Substances Act 1993, the Carriage of Dangerous Goods and the use of Transportable Pressure Equipment Regulations 2009.  On February 7, 2013, our U.K. joint venture entered a plea of guilty before the Magistrates’ Court and the matter was referred to the Carlisle Crown Court (the “Crown Court”) for sentencing.  On June 14, 2013, the Crown Court issued a fine equivalent to approximately $1.2 million.  On July 9, 2013, our U.K. joint venture appealed the Crown Court’s decision to the Court of Appeal Criminal Division.  On January 17, 2014, the Court of Appeal dismissed the appeal and the fine was not reduced.

The resolution of outstanding claims and legal proceedings is subject to inherent uncertainty, and it is reasonably possible that any resolution of these claims and legal proceedings could have a material adverse effect on us, including a substantial charge to our earnings and operating results for that period; however, an estimate of all the reasonably possible losses cannot be determined at this time.

Insurance

Generally, our insurance program covers workers’ compensation and employer’s liability, general liability, automobile liability, professional errors and omissions liability, property, marine property and liability, and contractor’s pollution liability (in addition to other policies for specific projects).  We have also elected to retain a portion of the losses that occur through the use of various deductibles, limits, and self-insured retentions under our insurance programs.  In addition, our insurance policies contain exclusions and sublimits that insurance providers may use to deny or restrict coverage.  Excess liability, contractor’s pollution liability, and professional liability insurance policies provide for coverages on a “claims-made” basis, covering only claims actually made and reported during the policy period currently in effect.  Thus, if we do not continue to maintain these policies, we will have no coverage for claims made after the termination date even for claims based on events that occurred during the term of coverage.  While we intend to maintain these policies, we may be unable to maintain existing coverage levels.

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(Continued)

Guarantee Obligations and Commitments

As of January 3, 2014, we had the following guarantee obligations and commitments:

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.

As of January 3, 2014, we had $35.8 million in bank guarantees outstanding under foreign credit facilities and other banking arrangements.

We also maintain a variety of commercial commitments that are generally made to support provisions of our contracts.  In addition, in the ordinary course of business, we provide letters of credit to clients and others against advance payments and to support other business arrangements.  We are required to reimburse the issuers of letters of credit for any payments they make under the letters of credit.

In the ordinary course of business, we may provide performance assurances and guarantees related to our services.  For example, these guarantees may include surety bonds, arrangements among our client, a surety, and us to ensure we perform our contractual obligations pursuant to our client agreement.  If our services under a guaranteed 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 projects is available and monetary damages or other costs or losses are determined to be probable, we recognize such guarantee losses.

Lease Obligations

Total rental expense included in operations for operating leases for the years ended January 3, 2014, December 28, 2012, and December 30, 2011, totaled $236.7 million, $210.0 million, and $188.5 million, respectively.  Some of the operating leases are subject to renewal options and escalation based upon property taxes and operating expenses.  These operating lease agreements expire at varying dates through 2026.  Obligations under operating leases include office and other equipment rentals.

Obligations under non-cancelable operating lease agreements were as follows:

(In millions)	Operating Leases
2014	$	187.1
2015		153.7
2016		123.2
2017		92.1
2018		70.7
Thereafter		115.3
Total minimum lease payments	$	742.1

Restructuring Costs

For the years ended January 3, 2014 and December 28, 2012, we did not incur restructuring charges.  For the year ended December 30, 2011, we recorded restructuring charges of $5.5 million in our Consolidated Statement of Operations, which consisted primarily of costs for severance and associated benefits and the cost of facility closures.  The majority of the restructuring costs resulted from the integration of Scott Wilson into our existing Infrastructure & Environment’s U.K. and European business and necessary responses to reductions in market opportunities in Europe.

During fiscal year 2011, we made $12.9 million of payments related to these restructuring plans.  As of December 30, 2011, our restructuring reserves were $3.8 million.  As of December 28, 2012, no amounts remain outstanding.

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(Continued)

NOTE 18.  OTHER COMPREHENSIVE INCOME (LOSS) AND ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The accumulated balances and reporting period activities, including reclassifications out of accumulated other comprehensive income (loss), are summarized as follows:

(In millions)	Pension and Post-retirement Related Adjustments (1)			Foreign Currency Translation Adjustments			Loss on Derivative Instruments		Accumulated Other Comprehensive Income (Loss)
Balances at December 31, 2010	$	(46.1	)	$	9.2		$	—	$	(36.9	)
Amounts reclassified from accumulated other comprehensive income:
Prior service costs (2)		(3.2	)		—			—		(3.2	)
Actuarial gains (losses) (2)		7.3			—			—		7.3
Total pre-tax amounts reclassified from accumulated other comprehensive income		4.1			—			—		4.1
Tax benefit (expense) (3)		10.7			—			—		10.7
Other comprehensive income before reclassification		(77.5	)		(11.2	)		—		(88.7	)
Net current-period other comprehensive income		(62.7	)		(11.2	)		—		(73.9	)
Balances at December 30, 2011	$	(108.8	)	$	(2.0	)	$	—	$	(110.8	)

(1)   For fiscal year 2011, pension and post-retirement-related adjustments, before-tax, in other comprehensive income included $80.9 million of net loss arising during the year, $4.1 million of amortization of prior service cost and net loss, and $1.9 million of before-tax effect of changes in foreign currency exchange rates.

(2)   These accumulated other comprehensive income components are included in the computation of net periodic pension costs, which were recorded in “Cost of revenues” and “General and administrative expenses” in our Consolidated Statements of Operations.  See Note 14, “Employee Retirement and Post-Retirement Benefit Plans,” for more information.

(3)   The tax benefit has been reduced by a valuation allowance of $11.6 million in 2011.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

(In millions)	Pension and Post-retirement Related Adjustments (1)			Foreign Currency Translation Adjustments			Loss on Derivative Instruments			Accumulated Other Comprehensive Income (Loss)
Balances at December 30, 2011	$	(108.8	)	$	(2.0	)	$	—		$	(110.8	)
Amounts reclassified from accumulated other comprehensive income:
Prior service costs (2)		(3.0	)		—			—			(3.0	)
Actuarial (gains) losses (2)		10.4			—			—			10.4
Reclassification adjustment of prior derivative settlement		—			—			0.1			0.1
Translation adjustment realized upon liquidation of foreign subsidiaries (3)		—			(0.1	)		—			(0.1	)
Total pre-tax amounts reclassified from accumulated other comprehensive income		7.4			(0.1	)		0.1			7.4
Tax benefit (expense) (4)		13.3			—			0.4			13.7
Other comprehensive income before reclassification		(47.3	)		24.9			(1.1	)		(23.5	)
Net current-period other comprehensive income		(26.6	)		24.8			(0.6	)		(2.4	)
Balances at December 28, 2012	$	(135.4	)	$	22.8		$	(0.6	)	$	(113.2	)

(1)   For fiscal year 2012, pension and post-retirement-related adjustments, before-tax, in other comprehensive income included $45.6 million of net loss arising during the year, $7.4 million of amortization of prior service cost and net loss, and $1.7 million of before-tax effect of changes in foreign currency exchange rates.

(2)   These accumulated other comprehensive income components are included in the computation of net periodic pension costs, which were recorded in “Cost of revenues” and “General and administrative expenses” in our Consolidated Statements of Operations.  See Note 14, “Employee Retirement and Post-Retirement Benefit Plans,” for more information.

(3)   This accumulated other comprehensive income component is reclassified into “Cost of revenues” in our Condensed Consolidated Statements of Operations.

(4)   The tax benefit has been reduced by a valuation allowance of $4.9 million in 2012.

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(Continued)

(In millions)	Pension and Post-retirement Related Adjustments (1)			Foreign Currency Translation Adjustments			Loss on Derivative Instruments			Accumulated Other Comprehensive Income (Loss)
Balances at December 28, 2012	$	(135.4	)	$	22.8		$	(0.6	)	$	(113.2	)
Amounts reclassified from accumulated other comprehensive income:
Prior service costs (2)		2.3			—			—			2.3
Actuarial (gains) losses (2)		16.7			—			—			16.7
Reclassification adjustment of prior derivative settlement		—			—			0.1			0.1
Translation adjustment realized upon liquidation of foreign subsidiaries (3)		—			1.9			—			1.9
Total pre-tax amounts reclassified from accumulated other comprehensive income		19.0			1.9			0.1			21.0
Tax benefit (expense) (4)		(24.5	)		(0.2	)		—			(24.7	)
Other comprehensive income before reclassification		(11.5	)		(71.9	)		—			(83.4	)
Net current-period other comprehensive income		(17.0	)		(70.2	)		0.1			(87.1	)
Balances at January 3, 2014	$	(152.4	)	$	(47.4	)	$	(0.5	)	$	(200.3	)

(1)   For fiscal year 2013, pension and post-retirement-related adjustments, before-tax, in other comprehensive income included $5.5 million of net loss arising during the year, $19.0 million of amortization of prior service costand net loss, and $3.6 million of before-tax effect of changes in foreign currency exchange rates.

(2)   These accumulated other comprehensive income components are included in the computation of net periodic pension costs, which were recorded in “Cost of revenues” and “General and administrative expenses” in our Consolidated Statements of Operations.  See Note 14, “Employee Retirement and Post-Retirement Benefit Plans,” for more information.

(3)   This accumulated other comprehensive income component is reclassified into “Cost of revenues” in our Consolidated Statements of Operations.

(4)   The tax benefit has been reduced by a valuation allowance of $17.9 million in 2013.

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(Continued)

NOTE 19.  RECEIVABLE AND DEFERRED INCOME TAX VALUATION ALLOWANCES

Receivable allowances are comprised of allowances for amounts that may become uncollectable or unrealizable in the future.  We determine these amounts based on historical experience and other currently available information.  A valuation allowance for deferred income taxes is established when it is more likely than not that net deferred tax assets will not be realized.

The following table summarizes the activities in the receivable allowances and the deferred income tax valuation allowance from the beginning of the periods to the end of the periods.

(In millions)	Balance at the Beginning of the Period			Additions (Charged to Bad Debt Expense)			Additions (Charged to Other Accounts) (1)			Deductions (2)				Other (3)			Balance at the End of the Period
Year ended January 3, 2014
Receivable allowances		$	69.7		$	7.4		$	7.7		$	(19.7	)		$	—		$	65.1
Deferred income tax valuation allowance		$	137.6		$	—		$	12.7		$	(23.2	)		$	17.9		$	145.0
Year ended December 28, 2012
Receivable allowances		$	43.1		$	6.6		$	27.4		$	(7.4	)		$	—		$	69.7
Deferred income tax valuation allowance		$	124.0		$	—		$	12.3		$	(14.7	)		$	16.0		$	137.6
Year ended December 30, 2011
Receivable allowances		$	42.8		$	2.8		$	16.1		$	(18.6	)		$	—		$	43.1
Deferred income tax valuation allowance		$	104.2		$	—		$	23.5		$	(15.3	)		$	11.6		$	124.0

(1)   These additions were primarily charged to revenues or income tax expense.

(2)   Deductions to the deferred income tax valuation allowance were primarily attributed to foreign and state NOL expirations, change in tax rates and the use of federal and state NOLs.

(3)   Other adjustments to the deferred income tax valuation allowance during the year ended December 28, 2012 were attributable to acquired deferred taxes through the Flint acquisition and items charged to other comprehensive income.  For the years ended January 3, 2014 and December 30, 2011, other adjustments to the deferred income tax valuation allowance were charged to other comprehensive income.

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(Continued)

NOTE 20.  SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

The following table sets forth selected quarterly financial data for the years ended January 3, 2014 and December 28, 2012.  The selected quarterly financial data presented below should be read in conjunction with the rest of the information in this report.

	2013 Quarters Ended
(In millions, except per share data)	March 29				June 28				September 27				January 3
Revenues		$	2,802.5			$	2,792.0			$	2,735.5			$	2,660.7
Cost of revenues			(2,651.3	)			(2,641.6	)			(2,559.0	)			(2,564.1	)
Operating income			152.6				145.4				179.3				113.5
Other income (expense) (1)			(2.5	)			(3.3	)			1.6				(3.5	)
Income tax expense (2)			(42.2	)			(38.9	)			(42.3	)			(44.3	)
Net income including noncontrolling interests			86.8				81.7				115.4				45.4
Noncontrolling interests in income of consolidated subsidiaries			(14.9	)			(14.4	)			(26.6	)			(26.2	)
Net income attributable to URS			71.9				67.3				88.8				19.2
Earnings per share:
Basic		$	0.97			$	0.91			$	1.21			$	0.26
Diluted		$	0.96			$	0.91			$	1.20			$	0.26
Weighted-average shares outstanding:
Basic			74.4				73.8				73.6				73.6
Diluted			74.9				74.0				73.9				74.2
	2012 Quarters Ended
(In millions, except per share data)	March 30				June 29				September 28				December 28
Revenues		$	2,361.5			$	2,690.7			$	2,947.6			$	2,972.7
Cost of revenues			(2,203.2	)			(2,527.5	)			(2,753.3	)			(2,810.5	)
Acquisition-related expenses (3)			(5.6	)			(11.3	)			0.8				—
Operating income			161.4				149.5				203.6				171.4
Other income (expense) (1)			2.5				(9.2	)			10.8				(3.6	)
Income tax expense			(48.6	)			(40.5	)			(66.1	)			(34.7	)
Net income including noncontrolling interests			105.5				79.1				127.8				113.4
Noncontrolling interests in income of consolidated    subsidiaries			(25.8	)			(25.5	)			(21.1	)			(42.8	)
Net income attributable to URS			79.7				53.6				106.7				70.6
Earnings per share:
Basic		$	1.08			$	0.72			$	1.43			$	0.95
Diluted		$	1.07			$	0.72			$	1.43			$	0.95
Weighted-average shares outstanding:
Basic			74.0				74.2				74.5				74.5
Diluted			74.3				74.6				74.6				74.6

(1)   During fiscal 2013, “Other income (expenses)” represents foreign currency gains (losses) recognized on intercompany financing arrangements.  During fiscal 2012, “Other income (expenses)” represents foreign currency gains (losses) recognized on intercompany financing arrangements and foreign currency forward contracts.  See further discussion in Note 11, “Indebtedness.”

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(Continued)

(2)   During the fourth quarter of 2013, we recorded income tax expense of $10.0 million related to prior quarters.  This included U.S. tax on the sale of Canadian properties of $6.4 million and dividends from a Canadian joint venture of $3.6 million.  This amount recorded in the fourth quarter was not material to prior quarters and, accordingly, the prior quarters have not been revised.  On an after-tax basis, these items resulted in decreases to net income and diluted EPS of $10.0 million and $0.15, respectively.

(3)   For the year ended December 28, 2012, we recorded acquisition-related expenses in connection with our acquisition of Flint.  See further discussion in Note 8, “Acquisitions.”

NOTE 21.  SUBSEQUENT EVENTS (UNAUDITED)

On July 11, 2014, we entered into an Agreement and Plan of Merger (the “merger agreement”) with AECOM Technology Corporation (“AECOM”), ACM Mountain I, LLC, a direct wholly-owned subsidiary of AECOM (“Merger Sub”), and ACM Mountain II, LLC, a direct wholly-owned subsidiary of AECOM (“Merger Sub I”).  The merger agreement provides for the merger of Merger Sub with and into our company, with our company continuing as the surviving company and a direct wholly-owned subsidiary of AECOM (the “Merger”).  Immediately thereafter, as part of a single integrated transaction with the Merger, pursuant to the merger agreement, we will merge with and into Merger Sub I, with Merger Sub I continuing as the surviving company and a direct wholly-owned subsidiary of AECOM.  Subject to the terms and conditions of the merger agreement, holders of URS common stock will receive consideration at $58.79 per share (based on the closing price of AECOM common stock on July 25, 2014).  Each outstanding share of URS common stock will be exchanged for per share consideration consisting of 0.734 shares of AECOM common stock and $33.00 in cash.  URS stockholders may elect to receive cash or stock consideration, subject to proration in the event of oversubscription for cash consideration.  The actual value of the merger consideration to be paid at the closing of the merger will depend on the average closing price of AECOM common stock in the five business days prior to closing.

Completion of the merger is subject to certain customary conditions, including approval by both the AECOM and URS stockholders, listing of the shares of AECOM common stock to be issued in the merger on the New York Stock Exchange, receipt of required regulatory approvals, effectiveness of AECOM’s registration statement on Form S-4 and receipt of customary opinions related to certain tax matters from the parties’ respective counsels.  The financial statements included in this revised Form 10-K do not reflect any adjustments or otherwise give effect to the proposed merger.

Based on the implied value of this potential merger to URS Stockholders, we performed an interim goodwill impairment test as of July 4, 2014 for all of our seven reporting units.  Goodwill impairment reviews involved a two-step process.  The first step is a comparison of each reporting unit’s fair value to its carrying value.  If the carrying value of the reporting units 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 the impairment.  We performed the first step of the analysis to compare the fair values of each reporting unit to its carrying amount.  Based on the analysis performed, the fair values of all of our reporting units exceeded their carrying values indicating that no impairment exists, and therefore, the second step of the analysis was not deemed necessary.

Within the Energy & Construction operating segment, the Civil Construction and Mining Group, the Industrial/Process Group and the Power Group reporting unit fair values exceeded their carrying values by approximately 8%, 6% and 6%, respectively.  Our Oil & Gas reporting unit’s fair value exceeded its carrying value by 5%.  The remaining three reporting units’ fair values substantially exceeded their carrying values.

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