10-K 1 form10-k.htm FORM 10-K form10-k.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________


FORM 10-K
___________________


  x
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 28, 2012
   
OR
 
  o
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the Transition Period from ____________ to _____________


Commission file number 1-7567
___________________


Logo
URS CORPORATION
(Exact name of registrant as specified in its charter)


Delaware
94-1381538
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
   
600 Montgomery Street, 26th Floor
 
San Francisco, California
94111-2728
(Address of principal executive offices)
(Zip Code)
   
(415) 774-2700
(Registrant’s telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class:
 
Name of each exchange on which registered:
     
Common Shares, par value $.01 per share
 
New York Stock Exchange
 
Securities registered pursuant to Section 12(g) of the Act: None
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes x No o
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.  Yes o No x
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x No o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x No o
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):  Large accelerated filer x Accelerated filer o Non-accelerated filer o Smaller reporting company o
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o No x
 
The aggregate market value of the common stock of the registrant held by non-affiliates on February 18, 2013 and June 29, 2012 (the last business day of the registrant’s most recently completed second fiscal quarter) was $3,142.4 million and $2,630.1 million, respectively, based upon the closing sales price of the registrant’s common stock on such dates as reported in the consolidated transaction reporting system.  On February 18, 2013 and June 29, 2012, there were 77,021,153 shares and 76,815,737 shares of the registrant’s common stock outstanding, respectively.
 
Documents Incorporated by Reference
 
Part III incorporates information by reference from the registrant’s definitive proxy statement for its 2013 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission.
 










 
 
 
 

URS CORPORATION AND SUBSIDIARIES
 
This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements may be identified by words such as “anticipate,” “believe,” “estimate,” “expect,” “potential,” “intend,” “may,” “plan,” “predict,” “project,” “will,” and similar terms used in reference to our future revenues, services, project awards and business trends; future accounting, goodwill and actuarial estimates; future contract gains or losses; future backlog and book of business conversion and debookings; future account receivable and days sales outstanding; future completion of our Form S-4 exchange offer; future tax deductions and expenses; future stock-based compensation expenses; future dividends; future bonus, pension and post-retirement expenses; future compliance with regulations; future legal proceedings and accruals; future bonding and insurance coverage; future debt payments and capital expenditures; future changes in foreign currency; future effectiveness of our disclosure and internal controls over financial reporting and future economic and industry conditions.  We believe that our expectations are reasonable and are based on reasonable assumptions, however, we caution against relying on any of our forward-looking statements as such forward-looking statements by their nature involve risks and uncertainties.  A variety of factors, including but not limited to the following, could cause our business and financial results, as well as the timing of events, to differ materially from those expressed or implied in our forward-looking statements:  declines in the economy or client spending; federal sequestration; changes in our book of business; our compliance with government regulations; integration of acquisitions; employee, agent or partner misconduct; our ability to procure government contracts; liabilities for pending and future litigation; environmental liabilities; changes in oil, natural gas and other commodity prices; availability of bonding and insurance; our reliance on government appropriations; unilateral termination provisions in government contracts; impairment of our goodwill; our ability to make accurate estimates and assumptions; our accounting policies; workforce utilization; our and our partners’ ability to bid on, win, perform and renew contracts and projects; our dependence on partners, subcontractors and suppliers; customer payment defaults; our ability to recover on claims; impact of target and fixed-priced contracts on earnings; the inherent dangers at our project sites; the impact of changes in laws and regulations; nuclear indemnifications and insurance; misstatements in expert reports; a decline in defense spending; industry competition; our ability to attract and retain key individuals; retirement plan obligations; our leveraged position and the ability to service our debt; restrictive covenants in finance arrangements; risks associated with international operations; business activities in high security risk countries; information technology risks; natural and man-made disaster risks; our relationships with labor unions; our ability to protect our intellectual property rights; anti-takeover risks and other factors discussed more fully in Management’s Discussion and Analysis of Financial Condition and Results of Operations beginning on page 42, Risk Factors beginning on page 20, as well as in other reports subsequently filed from time to time with the United States Securities and Exchange Commission.  We assume no obligation to revise or update any forward-looking statements.
 
 
         
Item 1.
    3  
Item 1A.
    20  
Item 1B.
    37  
Item 2.
    37  
Item 3.
    37  
Item 4.
    37  
           
PART II
 
           
Item 5.
    38  
Item 6.
    40  
Item 7.
    42  
Item 7A.
    89  




 
1

 
 
Item 8.
    90  
         
 
December 28, 2012 and December 30, 2011
    92  
         
 
Years ended December 28, 2012, December 30, 2011, and December 31, 2010
    93  
         
 
Years ended December 28, 2012, December 30, 2011, and December 31, 2010
    94  
         
 
Years ended December 28, 2012, December 30, 2011, and December 31, 2010
    95  
         
 
Years ended December 28, 2012, December 30, 2011, and December 31, 2010
    98  
      100  
Item 9.
    162  
Item 9A.
    162  
Item 9B.
    163  
           
PART III
 
           
Item 10.
    164  
Item 11.
    164  
Item 12.
    164  
Item 13.
    164  
Item 14.
    164  
           
PART IV
 
           
Item 15.
    165  




 
2

 

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, and information technology (“IT”) services.  As of January 25, 2013, we had more than 54,000 employees in a global network of offices and contract-specific job sites in more than 50 countries.
 
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, and operations and maintenance services to a variety of U.S. and international government agencies and departments, as well as to private sector clients.  Our Federal Services Division provides program management, planning, systems engineering and technical assistance, construction and construction management, operations and maintenance, and decommissioning and closure services to U.S. federal government agencies, primarily the Department of Defense (“DOD”), the National Aeronautics and Space Administration (“NASA”), and the Department of Homeland Security (“DHS”).  Our Energy & Construction Division provides program management, planning, design, engineering, construction and construction management, operations and maintenance, and decommissioning and closure services to U.S. and international government agencies and departments, as well as to private sector clients.  Our Oil & Gas Division provides construction and construction management, and operations and maintenance services for oil and gas clients in North America across the upstream and midstream supply chain.
 
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.
 
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 & 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.
 



The following chart and table illustrate the percentage of our revenues by market sector for the year ended December 28, 2012, and representative services we provide in each of these markets.
 
2012 Revenues by Market Sector
 
Pie Chart Graphic
Representative Services
 
Market Sector
 
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
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 December 28, 2012.
 
Market Sectors
 
Divisions
 
Infrastructure &
Environment
 
Federal Services
 
Energy &
Construction
 
Oil & Gas
Federal
 
ü
 
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.
 



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 (“EPA”), 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; 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.
 



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.
 


 
Oil & Gas
 
In the oil & gas market sector, we provide a wide range of design, 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 & 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, refiners and other oil and gas facilities.
 



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 overhead 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.
 



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; 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 December 28, 2012.
 
Services
 
Divisions
 
Infrastructure & Environment
 
Federal Services
 
Energy & Construction
 
Oil & Gas
Program Management
 
ü
 
ü
 
ü
 
Planning, Design and Engineering
 
ü
 
ü
 
ü
 
Systems Engineering and Technical Assistance
 
 
ü
 
 
Information Technology Services
 
ü
 
ü
 
 
Construction and Construction Management
 
ü
 
ü
 
ü
 
ü
Operations and Maintenance
 
ü
 
ü
 
ü
 
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.
 


 
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.
 


 
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 and manufacturing facilities, water resources and wastewater treatment; 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. 
 



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;
 
·  
Management of high-risk, technically complex chemical and nuclear processing facilities;
 
·  
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.
 
Decommissioning and Closure.  We provide decommissioning and closure services for nuclear power plants, nuclear research and test facilities, production sites and laboratories.  Many of these facilities have been highly contaminated and contain significant inventories of chemical and nuclear materials.  We also provide decommissioning and closure services for the DOD at chemical weapons depots and for military installations under the DOD’s Base Realignment and Closure program, as well as for industrial facilities and mining operations.  Our services include the following:
 
·  
Planning, scoping surveys and cost estimating;
 
·  
Due diligence and permitting;
 
·  
Environmental remediation;
 
·  
Hazardous chemical and nuclear waste stabilization treatment and disposition;
 
·  
Construction/demolition management; and
 
·  
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 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 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 DOE by division for the years ended December 28, 2012, December 30, 2011, and December 31, 2010 are presented below:
 
   
Year Ended
 
   
December 28,
   
December 30,
   
December 31,
 
(In millions, except percentages)
 
2012
   
2011
   
2010
 
The U.S. Army (1)
                 
Infrastructure & Environment
  $ 128.4     $ 141.7     $ 167.0  
Federal Services
    1,495.8       1,351.1       1,408.7  
Energy & Construction
    130.8       199.5       346.6  
Total U.S. Army
  $ 1,755.0     $ 1,692.3     $ 1,922.3  
Revenues from the U.S. Army as a percentage of our consolidated revenues
    16 %     18 %     21 %
                         
DOE
                       
Infrastructure & Environment
  $ 5.6     $ 5.9     $ 7.2  
Federal Services
    27.7       26.8       13.7  
Energy & Construction
    956.4       1,236.3       1,182.6  
Total DOE
  $ 989.7     $ 1,269.0     $ 1,203.5  
Revenues from DOE as a percentage of our consolidated revenues
    9 %     13 %     13 %
                         
Revenues from the federal market sector as a percentage of our consolidated revenues
    40 %     49 %     49 %
 
(1)  
The U.S. Army includes U.S. Army Corps of Engineers.
 
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 of offices and contract-specific job sites in more than 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 NV, 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, Jacobs Engineering Group Inc., L-3 Communications Holdings Inc., ManTech International Corporation, Raytheon Company, and SAIC, Inc.
 



·  
The primary competitors of our Energy & Construction Division include AMEC, Bechtel Corporation, Black & Veatch Corporation, CH2M Hill Companies, Ltd., Chicago Bridge & Iron Company NV, 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 December 28, 2012, we estimated that approximately 55% 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.
 
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 December 28, 2012 and December 30, 2011, our total book of business was $24.9 billion and $27.0 billion, respectively.  Our backlog decreased primarily due to reductions resulting from the recognition of revenues and equity in earnings of unconsolidated joint ventures, and from the removal of $560 million from federal backlog resulting from a decision by the DOE to remove funding of pension obligations from the scope of one of our contracts, which otherwise would have resulted in recognition of revenues as reimbursement for offsetting pension expenses on that contract.  Additional decreases in backlog and IDCs were caused primarily by lower than expected activity on an IDC contract with the DOD, and reductions in project scope and project cancellations by a power client.
 
These decreases were partially offset by additions of $1.4 billion to our book of business resulting from our acquisition of Flint.  The following tables summarize our book of business:
 
   
Infrastructure
         
Energy
             
   
&
   
Federal
   
&
             
(In millions)
 
Environment
   
Services
   
Construction
   
Oil & Gas
   
Total
 
As of December 28, 2012
                             
Backlog
  $ 3,028.4     $ 3,476.9     $ 5,947.1     $ 823.8     $ 13,276.2  
Option years
    197.3       2,728.1       2,056.8             4,982.2  
Indefinite delivery contracts
    2,572.4       3,238.7       236.0       611.7       6,658.8  
Total book of business
  $ 5,798.1     $ 9,443.7     $ 8,239.9     $ 1,435.5     $ 24,917.2  
                                         
As of December 30, 2011
                                       
Backlog
  $ 2,993.1     $ 4,141.8     $ 7,124.7     $     $ 14,259.6  
Option years
    316.6       2,370.1       2,026.2             4,712.9  
Indefinite delivery contracts
    2,806.5       3,304.0       1,948.0             8,058.5  
Total book of business
  $ 6,116.2     $ 9,815.9     $ 11,098.9     $     $ 27,031.0  
 
   
December 28,
   
December 30,
 
(In millions)
 
2012
   
2011
 
Backlog by market sector:
           
Federal
  $ 6,546.5     $ 8,542.4  
Infrastructure
    2,957.6       3,011.0  
Oil & Gas
    1,461.3       383.4  
Power
    1,416.1       1,623.8  
Industrial
    894.7       699.0  
Total backlog
  $ 13,276.2     $ 14,259.6  
 
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, 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.
 
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.
 
Seasonality
 
We experience seasonal trends in our business in connection with federal holidays, such as Memorial Day, Independence Day, Labor Day, Thanksgiving, Christmas and New Year’s Day.  Our revenues typically are lower during these times of the year because many of our clients’ employees, as well as our own employees, do not work during these holidays, resulting in fewer billable hours charged to projects and thus, lower revenues recognized.  In addition to holidays, our business also is affected by seasonal bad weather conditions, such as hurricanes, floods, snowstorms or other inclement weather, which may cause some of our offices and projects to close or reduce activities temporarily.  For example, in the first quarter of the year, winter weather sometimes results in intermittent office closures and work interruptions.  In our Oil & Gas Division, winter weather enables increased access to remote work areas in Northern Canada, while spring road bans limit access to work areas in Canada and the Northern U.S.
 
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 25, 2013, we had more than 54,000 employees, including part-time workers.  The Infrastructure & Environment, Federal Services, Energy & Construction, and Oil & Gas Divisions employed approximately 21,000, 13,000, 9,000, 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 25% of our employees are covered by collective bargaining agreements or by specific labor agreements, which expire upon completion of the relevant project.
 



 
Name
 
Position Held
 
Age
         
Martin M. Koffel                                                
 
Chief Executive Officer (“CEO”), President and Director since May 1989; Chairman of the Board since June 1989.
 
73
Thomas W. Bishop                                                
 
Executive Chairman, 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.
 
66
Reed N. Brimhall                                                
 
Chief Accounting Officer since May 2005; Vice President since May 2003; Corporate Controller from May 2003 to January 2012.
 
59
H. Thomas Hicks                                                
 
Vice President and Chief Financial Officer (“CFO”) since March 2006.
 
62
Gary V. Jandegian                                                
 
President of the Infrastructure & Environment Division and Vice President since July 2003.
 
60
Susan B. Kilgannon                                                
 
Vice President, Communications since October 1999.
 
54
William J. Lingard                                                
 
President, Oil & Gas Division and Vice President since May 2012; President and CEO of Flint from 2005 to May 2012.
 
53
Joseph Masters                                                
 
Secretary since March 2006; General Counsel since July 1997; and Vice President since July 1994.
 
56
Randall A. Wotring                                                
 
President of the Federal Services Division and Vice President since November 2004.
 
56
Robert W. Zaist                                                
 
President of the Energy & Construction Division since July 2011 and Vice President since May 2012; Senior Executive Vice President Business Development of Energy & Construction Division from January 2008 to July 2011; President of Mining Business Unit for Washington Group International, Inc. (“WGI”) from April 2005 to January 2008.
 
64
 
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, 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.
 



ITEM 1A.  RISK FACTORS
 
In addition to our other disclosures set forth or incorporated by reference in this annual report on Form 10-K, the following risk factors could also affect our financial condition and results of operations:
 
Demand for our services is cyclical and vulnerable to economic downturns and reductions in government and private industry spending.  If the economy weakens or client spending declines further, then our revenues, book of business, profits and our financial condition may deteriorate.
 
Demand for our services is cyclical and vulnerable to economic downturns and reductions in government spending, such as reductions resulting from uncertainties regarding potential federal sequestration.  Such downturns or reductions could delay, curtail or cancel proposed and existing projects.  Over the past several years, weak economic conditions and volatility in global financial markets have impacted our client spending.
 
As a result of these unstable economic conditions, some clients delayed, curtailed or cancelled proposed and existing projects and may continue to do so.  For example, our book of business has declined from $27.0 billion as of December 30, 2011 to $24.9 billion as of December 28, 2012.  Also, our clients may demand more favorable pricing terms and find it increasingly difficult to timely pay invoices for our services, which would impact our future cash flows and liquidity.  In addition, any rapid changes in the prices of commodities make it difficult for our clients and us to forecast future capital expenditures.  Inflation or significant changes in interest rates could reduce the demand for our services.  Any inability to timely collect our invoices may lead to an increase in our accounts receivable and potentially to increased write-offs of uncollectible invoices.  If the economy remains weak or uncertain, or client spending declines further, then our revenues, book of business, net income and overall financial condition could deteriorate.
 
Federal sequestration could significantly reduce government spending for the services we provide.
 
On August 2, 2011, the Budget Control Act of 2011 was enacted, which could impose an estimated $1.2 trillion in future federal spending cuts, a large portion of which relates to defense spending, if no budget resolution is achieved by March 1, 2013.  If the federal government does not meet the budget deficit targets or does not otherwise delay or change this legislation, then automatic across-the-board budget cuts, or sequestrations, will be mandated across the federal budget in fiscal year 2013 and beyond.  Any significant reduction in federal government spending could reduce demand for our overall services, could cancel or delay existing projects as well as potential projects in our book of business and could lead us to reduce our workforce, which could have a material adverse effect on our results of operation and financial condition.
 
We may not realize the full amount of revenues reflected in our book of business, particularly in light of the current economic conditions, which could harm our operations and could significantly reduce our expected profits and revenues.
 
We account for all contract awards that may eventually be recognized as revenues or equity in income of unconsolidated joint ventures as our “book of business,” which includes backlog, option years and IDCs.  As of December 28, 2012, our book of business was estimated at approximately $24.9 billion, which included $13.3 billion of backlog.  Our book of business estimates may not result in realized profits and revenues in any particular period because clients may delay, modify terms or terminate projects and contracts and may decide not to exercise contract options or issue task orders.  This uncertainty is particularly acute in light of current economic conditions as the risk of contracts in backlog being delayed, adjusted in scope or cancelled is more likely to increase during periods of economic uncertainty.  In addition, our government contracts or subcontracts are subject to renegotiation or termination at the convenience of the applicable U.S. federal, state or local governments, as well as national governments of other countries.  Accordingly, if we do not realize a substantial amount of our book of business, our operations could be harmed and our expected profits and revenues could be significantly reduced.
 



As a government contractor, we must comply with various procurement laws and regulations and are subject to regular government audits; failure to comply with any of these laws and regulations could result in sanctions, contract termination, forfeiture of profit, harm to our reputation or loss of our status as an eligible government contractor.  Any interruption or termination of our government contractor status, or a loss of our government business, could reduce our profits and revenues significantly.
 
As a government contractor, we enter into many contracts with federal, state and local government clients.  For example, revenues from our federal market sector represented 40% of our total revenues for the year ended December 28, 2012.  We are affected by and must comply with federal, state, local and foreign laws and regulations relating to the formation, administration and performance of government contracts.  For example, we must comply with FAR, the Truth in Negotiations Act, CAS, American Recovery and Reinstatement Act (“ARRA”), the Services Contract Act, export controls rules and DOD security regulations, as well as many other laws and regulations.  In addition, we must also comply with other government regulations related to employment practices, environmental protection, health and safety, tax, accounting and anti-fraud, as well as many others in order to maintain our government contractor status.  These laws and regulations affect how we transact business with our clients and in some instances, impose additional costs on our business operations.  Even though we take precautions to prevent and deter fraud, misconduct and non-compliance, we face the risk that our employees or outside partners may engage in misconduct, fraud or other improper activities.
 
Government agencies, such as the U.S. Defense Contract Audit Agency (“DCAA”), routinely audit and investigate government contractors.  These government agencies review and audit a government contractor’s performance under its contracts, a government contractor’s direct and indirect cost structure, and a government contractor’s compliance with applicable laws, regulations and standards.  For example, during the course of its audits, the DCAA may question our incurred project costs and, if the DCAA believes we have accounted for these costs in a manner inconsistent with the requirements for the FAR or CAS, the DCAA auditor may recommend to our U.S. government corporate administrative contracting officer to disallow such costs.  We can provide no assurance that the DCAA or other government audits will not result in material disallowances for incurred costs in the future.  In addition, government contracts are subject to a variety of other socioeconomic requirements relating to the formation, administration, performance and accounting for these contracts.  We may also be subject to qui tam litigation brought by private individuals on behalf of the government under the Federal Civil False Claims Act, which could include claims for treble damages.  Government contract violations could result in the imposition of civil and criminal penalties or sanctions, contract termination, forfeiture of profit, and/or suspension of payment, any of which could make us lose our status as an eligible government contractor.  We could also suffer serious harm to our reputation.  Any interruption or termination of our government contractor status, or a loss of our government business, could reduce our profits and revenues significantly.
 



Employee, agent or partner misconduct or failure to comply with anti-bribery and other government laws and regulations could harm our reputation, reduce our revenues and profits, and subject us to criminal and civil enforcement actions.
 
Misconduct, fraud, non-compliance with applicable laws and regulations, or other improper activities by one of our employees, agents or partners could have a significant negative impact on our business and reputation.  Such misconduct could include the failure to comply with government procurement regulations, regulations regarding the protection of classified information, regulations prohibiting bribery and other foreign corrupt practices, regulations regarding the pricing of labor and other costs in government contracts, regulations on lobbying or similar activities, regulations pertaining to the internal controls over financial reporting, environmental laws and any other applicable laws or regulations.  For example, the United States Foreign Corrupt Practices Act and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to foreign officials for the purpose of obtaining or retaining business.  In addition, we regularly provide services that may be highly sensitive or that relate to critical national security matters; if a security breach were to occur, our ability to procure future government contracts could be severely limited.
 
Our policies mandate compliance with these regulations and laws, and we take precautions intended to prevent and detect misconduct.  However, since our internal controls are subject to inherent limitations, including human error, it is possible that these controls could be intentionally circumvented or become inadequate because of changed conditions.  As a result, we cannot assure that our controls will protect us from reckless or criminal acts committed by our employees and agents.  Failure to comply with applicable laws or regulations or acts of misconduct could subject us to fines and penalties, loss of security clearances, and suspension or debarment from contracting, any or all of which could harm our reputation, reduce our revenues and profits and subject us to criminal and civil enforcement actions.
 
Legal proceedings, investigations and disputes could result in substantial monetary penalties and damages, which could affect us adversely, especially if these penalties and damages exceed or are excluded from existing insurance coverage.
 
We engage in engineering, construction and technical services that can result in substantial injury or damages that may expose us to legal proceedings, investigations and disputes.  For example, in the ordinary course of our business, we may be involved in legal disputes regarding personal injury and wrongful death claims, employee or labor disputes, professional liability claims, and general commercial disputes involving project cost overruns, indemnification claims and liquidated damages as well as other claims.  See Note 17, “Commitments and Contingencies,” to our “Consolidated Financial Statements” included under Item 8 of this report for a discussion of some of our legal proceedings.  In addition, in the ordinary course of our business, we frequently make professional judgments and recommendations about environmental and engineering conditions of project sites for our clients.  We may be deemed to be responsible for these judgments and recommendations if they are later determined to be inaccurate.  Any unfavorable legal ruling against us could result in substantial monetary damages or even criminal violations.  We maintain insurance coverage as part of our overall legal and risk management strategy to minimize our potential liabilities.  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 us insurance 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.  If we sustain liabilities that exceed our insurance coverage or for which we are not insured, it could have a material adverse impact on our results of operations and financial condition, including our profits and revenues.
 



Unavailability or cancellation of third-party insurance coverage would increase our overall risk exposure as well as disrupt the management of our business operations.
 
We maintain insurance coverage from third-party insurers as part of our overall risk management strategy and because some of our contracts require us to maintain specific insurance coverage limits.  If any of our third-party insurers fail, suddenly cancel our coverage or otherwise are unable to provide us with adequate insurance coverage then our overall risk exposure and our operational expenses would increase and the management of our business operations would be disrupted.  In addition, there can be no assurance that any of our existing insurance coverage will be renewable upon the expiration of the coverage period or that future coverage will be affordable at the required limits.
 
We may be subject to substantial liabilities under environmental laws and regulations.
 
Our services are subject to numerous environmental protection laws and regulations that are complex and stringent.  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 and operate 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.  Past business practices at companies that we have acquired may also expose us to future unknown environmental liabilities.
 
Significant fines, penalties and other sanctions may be imposed for non-compliance with environmental laws and regulations, and some environmental 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 CERCLA, and comparable 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 cleanup upon owners, operators, generators, transporters and other persons arranging for the treatment or disposal of such hazardous substances 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, 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.  Our continuing work in the areas governed by these laws and regulations exposes us to the risk of substantial liability.
 



Changes in transportation regulations and other factors may increase our costs and negatively impact our profit margins.
 
We have 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.  Changes in regulation may increase costs related to truck purchases and maintenance, impair equipment productivity, decrease the residual value of these vehicles and increase operating expenses.
 
In addition, our transport business is impacted by weather conditions that can restrict our ability to deliver services.  For example, Canadian municipalities and provincial transportation departments enforce seasonal road bans each spring that limit the movement of heavy vehicles and equipment.  Additionally, some Canadian oil and natural gas producing areas are only accessible in the winter months when the ground or waterways are frozen and susceptible to increased risk of accidents.
 
Proposals to increase taxes, including taxes on motor fuels, are also made from time to time, and any such increase would increase our operating costs.  Also fluctuating fuel prices may negatively affect our profit margins.  We cannot predict whether, or in what form, any legislative or regulatory changes applicable to our trucking operations will be enacted and to what extent any such legislation or regulations could increase our costs or otherwise adversely affect our profit margin and overall business.
 
Demand for our oil and gas services fluctuates.
 
In May 2012, we completed our acquisition of Flint, significantly increasing our oil and gas services in North America, particularly to the unconventional segments of this market.  Demand for our oil and gas services fluctuates, and we depend on our customers’ willingness to make future expenditures to explore for, develop and produce oil and natural gas in the U.S. and Canada.  Our customers’ willingness to undertake these activities depends largely upon prevailing industry conditions that are influenced by numerous factors over which we have no control, including:
 
·  
prices, and expectations about future prices, of oil and natural gas;
 
·  
domestic and foreign supply of and demand for oil and natural gas;
 
·  
the cost of exploring for, developing, producing and delivering oil and natural gas;
 
·  
available pipeline, storage and other transportation capacity;
 
·  
availability of qualified personnel and lead times associated with acquiring equipment and products;
 
·  
federal, state and local regulation of oilfield activities;
 
·  
environmental concerns regarding the methods our customers use to extract natural gas;
 
·  
the availability of water resources and the cost of disposal and recycling services; and
 
·  
seasonal limitations on access to work locations.
 
Anticipated future prices for natural gas and crude oil are a primary factor affecting spending and drilling activity by our customers.  Lower prices or volatility in prices for oil and natural gas typically decrease spending and drilling activity, which can cause rapid and material declines in demand for our services and in the prices we are able to charge for our services.  In addition, should the proposed Keystone XL pipeline project application be denied or delayed by the federal government, then there may be a slowing of spending in the development of the Canadian oil sands.  Worldwide political, economic, military and terrorist events, as well as natural disasters and other factors beyond our control contribute to oil and natural gas price levels and volatility and are likely to continue to do so in the future.
 



Our failure to conduct due diligence effectively or our inability to integrate acquisitions successfully could impede us from realizing all of the anticipated benefits of future acquisitions, which could severely weaken our results of operations.
 
Historically, we have used acquisitions to help expand our business.  If we fail to conduct due diligence on our potential targets effectively, we may, for example, not identify problems at target companies or fail to recognize incompatibilities or other obstacles to successful integration.  Our inability to successfully integrate future acquisitions could disrupt our business and impede us from realizing all of the anticipated benefits of those acquisitions, severely weakening our business operations and adversely impacting our results of operations.  In addition, the overall integration of two combining companies may result in unanticipated problems, expenses, liabilities, competitive responses, loss of customer relationships, and diversion of management’s attention, and may cause our stock price to decline.  The difficulties of integrating an acquisition include, among others:
 
·  
unanticipated issues in integrating information, communications and other systems;
 
·  
unanticipated incompatibility of logistics, marketing and administration methods;
 
·  
maintaining employee morale and retaining key employees;
 
·  
integrating the business cultures of both companies;
 
·  
preserving important strategic and customer relationships;
 
·  
consolidating corporate and administrative infrastructures and eliminating duplicative operations;
 
·  
the diversion of management’s attention from ongoing business concerns; and
 
·  
integrating geographically separate organizations.
 
In addition, even if the operations of an acquisition are integrated successfully, we may not realize the full benefits of the acquisition, including the synergies, cost savings, or sales or growth opportunities that we expect.  These benefits may not be achieved within the anticipated time frame, or at all.
 
Our inability to win or renew government contracts during regulated procurement processes could harm our operations and reduce our profits and revenues.
 
Revenues from our federal market sector represented 40% of our total revenues for the year ended December 28, 2012.  Government contracts are awarded through a regulated procurement process.  The federal government has increasingly relied upon multi-year contracts with pre-established terms and conditions, such as IDCs, that generally require those contractors that have previously been awarded the IDC to engage in an additional competitive bidding process before a task order is issued.  In addition, we believe that there has been 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.  The increased competition and pricing pressure, in turn, may require us to make sustained efforts to reduce costs in order to realize revenues and profits under government contracts.  If we are not successful in reducing the amount of costs we incur, our profitability on government contracts will be negatively impacted.  In addition, the U.S. government has scaled back outsourcing of some types of services in favor of “insourcing” jobs to its employees.  Moreover, even if we are qualified to work on a government contract, we may not be awarded the contract because of existing government policies designed to protect small businesses and under-represented minority contractors.  Our inability to win or renew government contracts during regulated procurement processes could harm our operations and reduce our profits and revenues.
 



Each year, client funding for some of our government contracts may rely on government appropriations or public-supported financing.  If adequate public funding is delayed or is not available, then our profits and revenues could decline.
 
Each year, client funding for some of our government contracts may directly or indirectly rely on government appropriations or public-supported financing such as the ARRA, which provides funding for various clients’ state transportation projects.  Legislatures may appropriate funds for a given project on a year-by-year basis, even though the project may take more than one year to perform.  In addition, public-supported financing such as state and local municipal bonds, may be only partially raised to support existing infrastructure projects.  As a result, a project we are currently working on may be only partially funded and thus additional public funding may be required in order to complete our contract.  On August 2, 2011, the Budget Control Act of 2011 was enacted, which could impose an estimated $1.2 trillion in future federal spending cuts (a large portion of which is defense-related) if no budget resolution is achieved by March 1, 2013.  If the federal government does not meet the budget deficit targets or does not otherwise delay or change this legislation, then automatic across-the-board budget cuts, or sequestrations, will be mandated across the federal budget in fiscal year 2013 and beyond that could result in reductions in the funding proposed by the Administration for infrastructure, defense and other projects.  Similarly, the impact of the economic downturn on state and local governments may make it more difficult for them to fund infrastructure projects.  In addition to the state of the economy and competing political priorities, public funding and the timing of payment of these funds may also be influenced by, among other things, curtailments in the use of government contractors, a rise in the cost of raw materials, delays associated with a lack of a sufficient number of government staff to oversee contracts, budget constraints, the timing and amount of tax receipts and the overall level of government expenditures.  If adequate public funding is not available or is delayed, then our profits and revenues could decline.
 
Our government contracts may give government agencies the right to modify, delay, curtail, renegotiate or terminate existing contracts at their convenience at any time prior to their completion, which may result in a decline in our profits and revenues.
 
Government projects in which we participate as a contractor or subcontractor may extend for several years.  Generally, government contracts include the right for government agencies to modify, delay, curtail, renegotiate or terminate contracts and subcontracts at their convenience any time prior to their completion.  Any decision by a government client to modify, delay, curtail, renegotiate or terminate our contracts at their convenience may result in a decline in our profits and revenues.
 
A decline in defense or other federal government spending, or a change in budgetary priorities, could reduce our profits and revenues.
 
Revenues from our federal market sector represented 40% of our total revenues and contracts, of which the DOD and other defense-related clients represented approximately 26% of our total revenues for the year ended December 28, 2012.  On August 2, 2011, the Budget Control Act of 2011 was enacted, which could impose an estimated $1.2 trillion in future federal spending cuts (a large portion of which is defense-related) if no budget resolution is achieved by March 1, 2013.  If the federal government does not meet the budget deficit targets or does not otherwise delay or change this legislation, then automatic across-the-board budget cuts, or sequestrations, will be mandated across the federal budget in fiscal year 2013 and beyond that could result in reductions in the funding proposed by the Administration for infrastructure, defense and other projects.  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. Future levels of expenditures and authorizations for defense-related or other federal programs, including foreign military commitments, may decrease, remain constant or shift to programs in areas where we do not currently provide services.  As a result, a general decline in defense or other federal spending or a change in budgetary priorities could reduce our profits and revenues.
 



If our goodwill or intangible assets become impaired, then our profits will be reduced.
 
If our goodwill or intangible assets become impaired, then our profits will be reduced.  For example, during the quarter ended September 30, 2011, a decline in our stock price and market capitalization triggered an interim impairment test, which resulted in a goodwill impairment charge of $825.8 million for the year ended December 30, 2011.  Goodwill may be impaired if the estimated fair value of one or more of our reporting units is less than the carrying value of the respective reporting unit.  Because we have grown in part through acquisitions, goodwill and other intangible assets represent a substantial portion of our assets.  Goodwill and other net intangible assets were $3.9 billion as of December 28, 2012.  We perform an analysis on our goodwill balances to test for impairment on an annual basis and whenever events occur that indicate impairment could exist.  There are several instances that may cause us to further test our goodwill for impairment between the annual testing periods including the following:
 
·  
continued deterioration of market and economic conditions that may adversely impact our ability to meet our projected results;
 
·  
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;
 
·  
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; and
 
·  
automatic across-the-board budget cuts, or sequestrations mandated by the federal government that could result in the reductions in the funding proposed by the Administration for our infrastructure, defense and other projects.
 
We also perform an analysis of our intangible assets to test for impairment whenever events occur that indicate impairment could exist.  The following are examples of such events:
 
·  
significant adverse changes in the intangible asset’s market value, useful life, or in the business climate that could affect its value;
 
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a current-period operating or cash flow loss or a projection or forecast that demonstrates continuing losses associated with the use of the intangible asset; and
 
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a current expectation that, more likely than not, the intangible asset will be sold or otherwise disposed of before the end of its previously estimated useful life.
 
If we are unable to accurately estimate and control our contract costs, then we may incur losses on our contracts, which could decrease our operating margins and reduce our profits.
 
It is important for us to accurately estimate and control our contract costs so that we can maintain positive operating margins and profitability.  We generally enter into four principal types of contracts with our clients:  cost-plus, fixed-price, target-price and time-and-materials.
 
Under cost-plus contracts, which may be subject to contract ceiling amounts, we are reimbursed for allowable costs and fees, which may be fixed or performance-based.  If our costs exceed the contract ceiling or are not allowable under the provisions of the contract or any applicable regulations, we may not be reimbursed for all of the costs we incur.  Under fixed-price contracts, we receive a fixed price regardless of what our actual costs will be.  Consequently, we realize a profit on fixed-price contracts only if we can control our costs and prevent cost over-runs on our contracts.  Under target-price contracts, project costs are reimbursable and our fee is established against a target budget that is subject to changes in project circumstances and scope.  Under time-and-materials contracts, we are paid for labor at negotiated hourly billing rates and for other expenses.
 
If we are unable to accurately estimate and manage our costs, we may incur losses on our contracts, which could decrease our operating margins and significantly reduce or eliminate our profits.  Many of our contracts require us to satisfy specified design, engineering, procurement or construction milestones in order to receive payment for the work completed or equipment or supplies procured prior to achieving the applicable milestone.  As a result, under these types of arrangements, we may incur significant costs or perform significant amounts of work prior to receipt of payment.  If the customer determines not to proceed with the completion of the project or if the customer defaults on its payment obligations, we may encounter difficulties in collecting payment of amounts due to us for the costs previously incurred or for the amounts previously expended to purchase equipment or supplies.
 



Our actual business and financial results could differ from the estimates and assumptions that we use to prepare our financial statements, which may reduce our profits.
 
To prepare financial statements in conformity with generally accepted accounting principles (“GAAP”), management is required to make estimates and assumptions, which affect the reported values of assets and liabilities, revenues and expenses, and disclosures of contingent assets and liabilities.  For example, we may recognize revenues over the life of a contract based on the proportion of costs incurred to date compared to the total costs estimated to be incurred for the entire project.  Areas requiring significant estimates by our management include:
 
·  
the application of the percentage-of-completion method of revenue recognition on contracts, change orders and contract claims;
 
·  
provisions for uncollectible receivables and customer claims and recoveries of costs from subcontractors, vendors and others;
 
·  
provisions for income taxes and related valuation allowances;
 
·  
impairment of goodwill and recoverability of other intangible assets;
 
·  
valuation of assets acquired and liabilities assumed in connection with business combinations;
 
·  
valuation of defined benefit pension plans and other employee benefit plans;
 
·  
valuation of stock-based compensation expense; and
 
·  
accruals for estimated liabilities, including litigation and insurance reserves.
 
Our actual business and financial results could differ from those estimates, which may reduce our profits.
 
Our profitability could suffer if we are not able to maintain adequate utilization of our workforce.
 
The cost of providing our services, including the extent to which we utilize our workforce, affects our profitability.  The rate at which we utilize our workforce is affected by a number of factors, including:
 
·  
our ability to transition employees from completed projects to new assignments and to hire and assimilate new employees;
 
·  
our ability to forecast demand for our services and thereby maintain an appropriate headcount in each of our geographies and workforces;
 
·  
our ability to manage attrition;
 
·  
our need to devote time and resources to training, business development, professional development and other non-chargeable activities; and
 
·  
our ability to match the skill sets of our employees to the needs of the marketplace.
 
If we overutilize our workforce, our employees may become disengaged, which will impact employee attrition.  If we underutilize our workforce, our profit margin and profitability could suffer.
 
Our use of the percentage-of-completion method of revenue recognition could result in a reduction or reversal of previously recorded revenues and profits.
 
A substantial portion of our revenues and profits are measured and recognized using the percentage-of-completion method of revenue recognition.  Our use of this accounting method results in recognition of revenues and profits ratably over the life of a contract, based generally on the proportion of costs incurred to date to total costs expected to be incurred for the entire project.  The effects of revisions to revenues and estimated costs are recorded when the amounts are known or can be reasonably estimated.  Such revisions could occur in any period and their effects could be material.  Although we have historically made reasonably reliable estimates of the progress towards completion of long-term engineering, program management, construction management or construction contracts, the uncertainties inherent in the estimating process make it possible for actual costs to vary materially from estimates, including reductions or reversals of previously recorded revenues and profits.
 



Our failure to successfully bid on new contracts and renew existing contracts could reduce our profits.
 
Our business depends on our ability to successfully bid on new contracts and renew existing contracts with private and public sector clients.  Contract proposals and negotiations are complex and frequently involve a lengthy bidding and selection process, which are affected by a number of factors, such as market conditions, financing arrangements and required governmental approvals.  For example, a client may require us to provide a surety bond or letter of credit to protect the client should we fail to perform under the terms of the contract.  If negative market conditions arise, or if we fail to secure adequate financial arrangements or the required governmental approval, we may not be able to pursue particular projects, which could adversely reduce or eliminate our profitability.
 
If we fail to timely complete, miss a required performance standard or otherwise fail to adequately perform on a project, then we may incur a loss on that project, which may reduce or eliminate our overall profitability and harm our reputation.
 
We may commit to a client that we will complete a project by a scheduled date.  We may also commit that a project, when completed, will achieve specified performance standards.  If the project is not completed by the scheduled date or fails to meet required performance standards, we may either incur significant additional costs or be held responsible for the costs incurred by the client to rectify damages due to late completion or failure to achieve the required performance standards.  In addition, performance of projects can be affected by a number of factors beyond our control, including unavoidable delays from governmental inaction, public opposition, inability to obtain financing, weather conditions, unavailability of vendor materials, changes in the project scope of services requested by our clients, industrial accidents, environmental hazards, labor disruptions and other factors.  In some cases, should we fail to meet required performance standards, we may also be subject to agreed-upon financial and liquidated damages, which are determined by the contract.  To the extent that these events occur, the total costs of the project could exceed our estimates and we could experience reduced profits or, in some cases, incur a loss on a project, which may reduce or eliminate our overall profitability.  Failure to meet performance standards or complete performance on a timely basis could also adversely affect our reputation.
 
If our partners fail to perform their contractual obligations on a project, we could be exposed to substantial joint and several liability and financial penalties that could reduce our profits and revenues.
 
We often partner with unaffiliated third parties, individually or via a joint venture, to jointly bid on and perform a particular project.  For example, for the year ended December 28, 2012, our equity in income of unconsolidated joint ventures amounted to $107.6 million.  The success of our partnerships and joint ventures depends, in large part, on the satisfactory performance of contractual obligations by each member.  In addition, when we operate through a joint venture in which we are a minority holder, we have limited control over many project decisions, including decisions related to the joint venture’s internal controls, which may not be subject to the same internal control procedures that we employ.  If these unaffiliated third parties do not fulfill their contract obligations, the partnerships or joint ventures may be unable to adequately perform and deliver their contracted services.  Under these circumstances, we may be obligated to pay financial penalties, provide additional services to ensure the adequate performance and delivery of the contracted services and may be jointly and severally liable for the other’s actions or contract performance.  These additional obligations could result in reduced profits and revenues or, in some cases, significant losses for us with respect to the joint venture, which could also affect our reputation in the industries we serve.
 
Our dependence on third-party subcontractors and equipment and material providers could reduce our profits or result in project losses.
 
We rely on third-party subcontractors and equipment and material providers.  For example, we procure heavy equipment and construction materials as needed when performing large construction and contract mining projects.  To the extent that we cannot engage subcontractors or acquire equipment and materials at reasonable costs or if the amount we are required to pay exceeds our estimates, our ability to complete a project in a timely fashion or at a profit may be impaired.  In addition, if a subcontractor or a manufacturer is unable to deliver its services, equipment or materials according to the negotiated terms for any reason, including the deterioration of its financial condition, we may be required to purchase the services, equipment or materials from another source at a higher price.  This may reduce the profit to be realized or result in a loss on a project for which the services, equipment or materials are needed.
 



If we experience delays and/or defaults in client payments, we could suffer liquidity problems or we may be unable to recover all working capital or equity investments.
 
Because of the nature of our contracts, at times we may commit resources to a client’s projects before receiving payments to cover our expenditures.  Sometimes, we incur and record expenditures for a client project before receiving any payment to cover our expenses.  In addition, we may make equity investments in majority or minority controlled large-scale client projects and other long-term capital projects before the project completes operational status or completes its project financing.  If a client delays or defaults in making its payments on a project, it could have an adverse effect on our financial position and cash flows, and we could incur losses, including losses in our working capital or equity investments.
 
Our failure to adequately recover on claims brought by us against project owners for additional contract costs could have a negative impact on our liquidity and profitability.
 
We have brought claims against project owners for additional costs exceeding the contract price or for amounts not included in the original contract price.  These types of claims occur due to matters such as owner-caused delays or changes from the initial project scope, both of which may result in additional cost.  Often, these claims can be the subject of lengthy arbitration or litigation proceedings, and it is difficult to accurately predict when these claims will be fully resolved.  When these types of events occur and unresolved claims are pending, we have used working capital in projects to cover cost overruns pending the resolution of the relevant claims.  A failure to promptly recover on these types of claims could have a negative impact on our liquidity and profitability.
 
Maintaining adequate bonding capacity is necessary for us to successfully bid on and win fixed-price contracts.
 
In line with industry practice, we are often required to provide performance or payment bonds to clients under fixed-price contracts.  These bonds indemnify the client should we fail to perform our obligations under the contract.  If a bond is required for a particular project and we are unable to obtain an appropriate bond, we cannot pursue that project.  We have bonding capacity but, as is typically the case, the issuance of a bond is at the surety’s sole discretion.  Moreover, due to events that affect the insurance and bonding markets generally, bonding may be more difficult to obtain in the future or may only be available at significantly higher costs.  There can be no assurance that our bonding capacity will continue to be available to us on reasonable terms.  Our inability to obtain adequate bonding and, as a result, to bid on new fixed-price contracts could have a material adverse effect on our business, financial condition, results of operations and cash flows.
 
Our project sites are inherently dangerous workplaces.  Failure to maintain safe work sites and equipment could result in environmental disasters, employee deaths or injuries, reduced profitability, the loss of projects or clients and possible exposure to litigation.
 
Our project sites often put our employees and others in close proximity with mechanized equipment, moving vehicles, chemical and manufacturing processes, and highly regulated materials.  For example, our Oil & Gas Division manages flammable hydrocarbons and, as a result, any service issues or equipment failures could result in uncontrolled flows of oil, gas, or well fluids, fires, spills and explosions.  On many sites, we are responsible for safety and, accordingly, must implement safety procedures.  If we fail to implement these procedures or if the procedures we implement are ineffective, we may suffer the loss of or injury to our employees, as well as expose ourselves to possible litigation.  As a result, our failure to maintain adequate safety standards and equipment could result in reduced profitability or the loss of projects or clients, and could have a material adverse impact on our business, financial condition, and results of operations.
 
Changes in environmental, defense, or infrastructure industry laws could directly or indirectly reduce the demand for our services, which could in turn negatively impact our revenues.
 
Some of our services are directly or indirectly impacted by changes in federal, state, local or foreign laws and regulations pertaining to the environmental, defense or infrastructure industries.  Proposed climate change and greenhouse gas regulations, if adopted, could impact the services we provide to our clients, including services related to fossil fuel and industrial projects.  Relaxation or repeal of laws and regulations, or changes in governmental policies regarding the environmental, defense or infrastructure industries could result in a decline in demand for our services, which could in turn negatively impact our revenues.
 



If we do not have adequate indemnification for our services related to nuclear materials, it could adversely affect our business and financial condition.
 
We provide services to the DOE relating to its nuclear weapons facilities and the nuclear energy industry in the ongoing maintenance and modification, as well as the decontamination and decommissioning, of its nuclear energy plants.  Indemnification provisions under the Price-Anderson Act (“PAA”) available to nuclear energy plant operators and DOE contractors, do not apply to all liabilities that we might incur while performing services as a radioactive materials cleanup contractor for the DOE and the nuclear energy industry.  If the PAA’s indemnification protection does not apply to our services or if our exposure occurs outside the U.S., our business and financial condition could be adversely affected either by our client’s refusal to retain us, by our inability to obtain commercially adequate insurance and indemnification, or by potentially significant monetary damages we may incur.
 
If our reports and opinions are not in compliance with professional standards and other regulations, we could be subject to monetary damages and penalties.
 
We issue reports and opinions to clients based on our professional engineering expertise, as well as our other professional credentials.  Our reports and opinions may need to comply with professional standards, licensing requirements, securities regulations and other laws and rules governing the performance of professional services in the jurisdiction where the services are performed.  In addition, we could be liable to third parties who use or rely upon our reports or opinions even if we are not contractually bound to those third parties.  For example, if we deliver an inaccurate report or one that is not in compliance with the relevant standards, and that report is made available to a third party, we could be subject to third-party liability, resulting in monetary damages and penalties.
 
Our overall market share and profits will decline if we are unable to compete successfully in our industry.
 
Our industry is highly fragmented and intensely competitive.  For example, according to the publication Engineering News-Record, based on voluntarily reported information, the top ten U.S. engineering design firms accounted for approximately only 43% of the total top 500 U.S. design firm revenues in 2011.  The top 25 U.S. contractors accounted for approximately 48% of the top 400 U.S. contractors’ total revenues in 2011, as reported by the Engineering News-Record.  Our competitors are numerous, ranging from small private firms to multi-billion dollar companies.  In addition, the technical and professional aspects of some of our services generally do not require large upfront capital expenditures and 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.  As a result of the number of competitors in the industry, our clients may select one of our competitors on a project due to competitive pricing or a specific skill set.  If we are unable to maintain our competitiveness, our market share, revenues and profits will decline.  If we are unable to meet these competitive challenges, we could lose market share to our competitors and experience an overall reduction in our profits.
 
Our failure to attract and retain key employees could impair our ability to provide services to our clients and otherwise conduct our business effectively.
 
As a professional and technical services company, we are labor intensive, and, therefore, our ability to attract, retain and expand the number of key employees is an important factor in determining our future success.  From time to time, it may be difficult to attract and retain qualified individuals with the expertise and in the timeframe demanded by our clients.  For example, some of our government contracts may require us to employ only individuals who have particular government security clearance levels.  We may occasionally enter into contracts before we have hired or retained appropriate staffing for that project.  In addition, we rely heavily upon the expertise and leadership of our senior management.  If we are unable to retain executives and other key personnel, the roles and responsibilities of those employees will need to be filled, which may require that we devote time and resources to identify, hire and integrate new employees.  In addition, the failure to attract and retain key individuals could impair our ability to provide services to our clients and conduct our business effectively.
 



We may be required to contribute additional cash to meet any underfunded benefit obligations associated with retirement and post-retirement benefit plans we manage or multiemployer pension plans we participate in.
 
We have various employee benefit plan obligations that require us to make contributions to satisfy, over time, our underfunded benefit obligations, which are generally determined by calculating the projected benefit obligations minus the fair value of plan assets.  For example, as of December 28, 2012, our defined benefit pension and post-retirement benefit plans were projected to be underfunded by $324.8 million.  See Note 14, “Employee Retirement and Post-Retirement Benefit Plans,” to our “Consolidated Financial Statements and Supplementary Data” included under Item 8 of this report for additional disclosure.  This amount does not include any potential obligations we may owe under various third-party multiemployer plans.  In the future, our benefit plan obligations may increase or decrease depending on changes in the levels of interest rates, pension plan asset performance and other factors.  If we are required to contribute a significant amount of the deficit for underfunded benefit plans, our cash flows could be materially and adversely affected.
 
A multiemployer pension plan is typically established under a collective bargaining agreement with a union to cover the union-represented workers of various unrelated companies.  Our collective bargaining agreements with unions typically require us to contribute to various multiemployer pension plans; however, we do not control or manage these plans.  For the year ended December 28, 2012, we contributed $48.2 million to multiemployer pension plans.  Under the Employee Retirement Income Security Act, an employer who contributes to a multiemployer pension plan, absent an applicable exemption, may also be liable, upon termination or withdrawal from the plan, for its proportionate share of the multiemployer pension plan’s unfunded vested benefit.  If we terminate or withdraw from a multiemployer plan, absent an applicable exemption (such as for some plans in the building and construction industry), we could be required to contribute a significant amount of cash to fund the multiemployer plan’s unfunded vested benefit, which could materially and adversely affect our financial results; however, since we do not control the multiemployer plans, we are unable to estimate any potential contributions that could be required.
 
Our outstanding indebtedness could adversely affect our liquidity, cash flows and financial condition.
 
As of December 28, 2012, the outstanding balance of the term loan under our 2011 Credit Facility was $670.0 million.  We had an outstanding balance of $100.5 million under our revolving line of credit as of December 28, 2012.  In addition, in March 2012, we issued $1.0 billion of Senior Notes in connection with the acquisition of Flint.  As part of the acquisition, we also guaranteed Canadian Notes (previously issued by Flint) with outstanding face values of $175.8 million maturing on June 15, 2019, accruing interest at a rate of 7.5% per annum and payable semi-annually.  This level of debt might:
 
·  
increase our vulnerability to, and limit flexibility in planning for, adverse economic and industry conditions;
 
·  
adversely affect our ability to obtain surety bonds;
 
·  
affect our credit rating;
 
·  
limit our ability to obtain additional financing to fund future working capital, capital expenditures, additional acquisitions and other general corporate initiatives; and
 
·  
limit our ability to apply proceeds from an asset sale to purposes other than the servicing and repayment of debt.
 
 



We may not be able to generate or borrow enough cash to service our indebtedness, which could result in bankruptcy or otherwise impair our ability to maintain sufficient liquidity to continue our operations.
 
We rely primarily on our ability to generate cash from operations to service our indebtedness in the future.  If we do not generate sufficient cash flows to meet our debt service and working capital requirements, we may need to seek additional financing.  If we are unable to obtain financing on terms that are acceptable to us, we could be forced to sell our assets or those of our subsidiaries to make up for any shortfall in our payment obligations under unfavorable circumstances.  Our 2011 Credit Facility limits our ability to sell assets and also restricts our use of the proceeds from any such sale.  If we default on our debt obligations, our lenders could require immediate repayment of our entire outstanding debt.  If our lenders require immediate repayment on the entire principal amount, we will not be able to repay them in full, and our inability to meet our debt obligations could result in bankruptcy or otherwise impair our ability to maintain sufficient liquidity to continue our operations.
 
Because URS Corporation, the parent company, is a holding company, we may not be able to service our debt if our subsidiaries do not make sufficient distributions to us.
 
Our parent company has no direct operations and no significant assets other than investments in the stock of our subsidiaries.  Because we conduct our business operations through our operating subsidiaries, we depend on those entities for payments and dividends to generate the funds necessary to meet our financial obligations.  Although there are currently no material legal restrictions on our operating subsidiaries’ ability to distribute assets to us, legal restrictions, including governmental regulations and contractual obligations, could restrict or impair our operating subsidiaries’ ability to pay dividends or make loans or other distributions to us in the future.  Legal restrictions, including state and local tax regulations and other contractual obligations could restrict or impair our subsidiaries’ ability to pay dividends or make loans or other distributions to us.  The earnings from, or other available assets of, these operating subsidiaries may not be sufficient to make distributions to enable us to pay interest on our debt obligations when due or to pay the principal of such debt at maturity.
 
Restrictive covenants and other restrictions in our credit and debt arrangements may restrict our ability to pursue business strategies.
 
Our 2011 Credit Facility, Senior Notes, Canadian Notes, and our other outstanding indebtedness include covenants and restrictions potentially limiting our ability to, among other things:
 
·  
incur additional indebtedness;
 
·  
pay dividends to our stockholders;
 
·  
repurchase or redeem our stock;
 
·  
repay indebtedness that is junior to our 2011 Credit Facility;
 
·  
make investments and other restricted payments;
 
·  
create liens securing debt or other encumbrances on our assets;
 
·  
enter into sale-leaseback transactions;
 
·  
enter into transactions with our stockholders and affiliates; and
 
·  
sell or exchange assets.
 
Our 2011 Credit Facility also requires that we maintain various financial ratios, which we may not be able to achieve.  The covenants may impair our ability to finance future operations or capital needs or to engage in other favorable business activities.
 



Our international operations are subject to a number of risks that could significantly reduce our profits and revenues or subject us to criminal and civil enforcement actions.
 
As a multinational company, we derived approximately 20% of our revenues from international operations for the year ended December 28, 2012.  International business is subject to a variety of potential risks, including:
 
·  
lack of developed legal systems to enforce contractual rights;
 
·  
greater risk of uncollectible accounts and longer collection cycles;
 
·  
foreign currency exchange volatility;
 
·  
uncertain and changing tax rules, regulations and rates;
 
·  
logistical and communication challenges;
 
·  
potentially adverse changes in laws and regulatory practices;
 
·  
changes in labor conditions;
 
·  
general economic, political and financial conditions in foreign markets; and
 
·  
exposure to civil or criminal liability under the Foreign Corrupt Practices Act, the U.K. Bribery Act, the Canadian Corruption of Foreign Public Officials Act, the Corporate Manslaughter and Corporate Homicide Act, the anti-boycott rules, trade and export control regulations, as well as other international regulations.
 
International risks and violations of international regulations may significantly reduce our profits and revenues and subject us to criminal or civil enforcement actions, including fines, suspensions or disqualification from future U.S. federal procurement contracting.  Although we have policies and procedures to monitor legal and regulatory compliance, our employees, subcontractors and agents could take actions that violate these requirements.  As a result, our international risk exposure may be more or less than the percentage of revenues attributed to our international operations.
 
We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act of 2010 and similar worldwide anti-bribery laws.
 
The U.S. Foreign Corrupt Practices Act and similar anti-bribery laws 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” 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.  Our policies mandate compliance with these anti-bribery laws, and we have established policies and procedures designed to monitor compliance with these anti-bribery law requirements; however we cannot ensure that our policies and procedures will protect us from potential reckless or criminal acts committed by individual employees or agents.  If we are found to be liable for anti-bribery law violations, we could suffer from criminal or civil penalties or other sanctions that could have a material adverse effect on our business.
 
We could be adversely impacted if we fail to comply with domestic and international export laws.
 
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.  A failure to comply with these laws and regulations could result in civil or criminal sanctions, including the imposition of fines, the denial of export privileges and suspension or debarment from participation in U.S. government contracts, which could have a material adverse effect on our business.
 



Our international operations may require our employees to travel to and work in high security risk countries, which may result in employee death or injury, repatriation costs or other unforeseen costs.
 
As a multinational company, some of our employees often travel to and work in high security risk countries around the world that are undergoing political, social and economic upheavals resulting in war, civil unrest, criminal activity, acts of terrorism, or public health crises.  For example, we have employees working in high security risk countries located in the Middle East and Southwest Asia.  As a result, we risk loss of or injury to our employees and may be subject to costs related to employee death or injury, repatriation or other unforeseen circumstances.
 
We develop, install and maintain IT systems for ourselves, as well as for various customers.  Any breach of security, disruption, or unexpected data or vendor loss could result in business interruptions, remediation costs, legal claims and significant damage to our reputation.
 
We develop, install and maintain IT systems for ourselves, as well as for customers.  For example, our June 2011 acquisition of Apptis Holdings, Inc. (“Apptis”) significantly increased our network management, software engineering, and information technology infrastructure design services to the DOD and other federal agencies.  Client contracts for the performance of IT services, as well as various privacy and securities laws, require us to manage and protect sensitive and confidential information from disclosure.  We also need to protect our own internal trade secrets and other business confidential information from disclosure.  Regardless of the countermeasures we may establish, we may be subject to network, software or hardware failures, whether caused by us, third-party service providers, intruders or hackers, computer viruses, natural disasters, power shortages or terrorist attacks.  Any breach of security, disruption or unexpected data loss could result in business interruptions, remediation costs, legal claims and significant damage to our reputation.
 
We also rely on third-party internal and outsourced software to run our critical accounting, project management and financial information systems.  For example, we rely on one software vendor’s products to process a majority of our total revenues.  We also depend on our software vendors to provide long-term software maintenance support for our information systems.  Software vendors may decide to discontinue further development, integration or long-term software maintenance support for our information systems, in which case we may need to abandon one or more of our current information systems and migrate some or all of our accounting, project management and financial information to other systems, thus increasing our operational expense, as well as disrupting the management of our business operations.
 
Force majeure events, including disasters and terrorists’ actions, have negatively impacted and could further negatively impact our business, which may affect our financial condition, results of operations or cash flows.
 
Force majeure or extraordinary events beyond the control of the contracting parties, such as natural and man-made disasters, as well as terrorist actions, could negatively impact the economies in which we operate.  For example, in 2012, Superstorm Sandy caused severe floods on the East Coast, closing several offices and interrupting a number of active client projects.  In addition, during the September 11, 2001 terrorist attacks, a number of employees lost their lives and many client records were destroyed when our office at the World Trade Center was destroyed.
 
We typically remain obligated to perform our services after such extraordinary events unless the contract contains a force majeure clause relieving us of our contractual obligations in such an extraordinary event.  If we are not able to react quickly to force majeure events, our operations may be affected significantly, which would have a negative impact on our financial condition, results of operations and/or cash flows.
 



Negotiations with labor unions and possible work actions could divert management attention and disrupt operations.  In addition, new collective bargaining agreements or amendments to agreements could increase our labor costs and operating expenses.
 
As of December 28, 2012, approximately 25% of our employees were covered by collective bargaining agreements.  The outcome of any future negotiations relating to union representation or collective bargaining agreements may not be favorable to us.  We may reach agreements in collective bargaining that increase our operating expenses and lower our net income as a result of higher wages or benefit expenses.  In addition, negotiations with unions could divert management attention and disrupt operations, which may adversely affect our results of operations.  If we are unable to negotiate acceptable collective bargaining agreements, we may have to address the threat of union-initiated work actions, including strikes.  Depending on the nature of the threat or the type and duration of any work action, these actions could disrupt our operations and adversely affect our operating results.
 
We have a limited ability to protect our intellectual property rights, which are important to our success.  Our failure to protect our intellectual property rights could adversely affect our competitive position.
 
Our success depends, in part, upon our ability to protect our proprietary information and other intellectual property.  We rely principally on a combination of trademark, copyright, trade secrets, confidentiality policies and other contractual arrangements to protect much of our intellectual property.  Trade secrets are generally difficult to protect.  Although our employees are subject to confidentiality obligations, this protection may be inadequate to deter or prevent misappropriation of our confidential information.  In addition, we may be unable to detect unauthorized use of our intellectual property or otherwise take appropriate steps to enforce our rights.  Failure to obtain or maintain our intellectual property rights would adversely affect our competitive business position.  In addition, if we are unable to prevent third parties from infringing or misappropriating our intellectual property, our competitive position could be adversely affected.
 
Delaware law and our charter documents may impede or discourage a merger, takeover or other business combination even if the business combination would have been in the best interests of our stockholders.
 
We are a Delaware corporation and the anti-takeover provisions of Delaware law impose various impediments to the ability of a third party to acquire control of us, even if a change in control would be beneficial to our stockholders.  In addition, our Board of Directors has the power, without stockholder approval, to designate the terms of one or more series of preferred stock and issue shares of preferred stock, which could be used defensively if a takeover is threatened.  Our incorporation under Delaware law, the ability of our Board of Directors to create and issue a new series of preferred stock and provisions in our certificate of incorporation and bylaws, such as those relating to advance notice of certain stockholder proposals and nominations, could impede a merger, takeover or other business combination involving us or discourage a potential acquirer from making a tender offer for our common stock, even if the business combination would have been in the best interests of our current stockholders.
 
Our stock price could become more volatile and stockholders’ investments could lose value.
 
In addition to the macroeconomic factors that have recently affected the prices of many securities generally, all of the factors discussed in this section could affect our stock price.  The timing of announcements in the public markets regarding new services or potential problems with the performance of services by us or our competitors or any other material announcements could affect our stock price.  Speculation in the media and analyst community, changes in recommendations or earnings estimates by financial analysts, changes in investors’ or analysts’ valuation measures for our stock and market trends unrelated to our stock can cause the price of our stock to change.  Continued volatility in the financial markets could also cause further declines in our stock price, which could trigger an impairment of the goodwill of our individual reporting units that could be material to our consolidated financial statements.  A significant drop in the price of our stock could also expose us to the risk of securities class action lawsuits, which could result in substantial costs and divert managements’ attention and resources, which could adversely affect our business.
 



ITEM 1B.  UNRESOLVED STAFF COMMENTS
 
None.
 
ITEM 2.  PROPERTIES
 
As of December 28, 2012, we owned 43 properties and had approximately 850 facility leases in locations throughout the world.  The lease terms range from a minimum of month-to-month to a maximum of 27 years from inception with indefinite options for renewal, expansions, contraction and termination, sublease rights and allowances for improvements.  Our significant lease agreements expire at various dates through the year 2026.  We believe that our current facilities are sufficient for the operation of our business and that suitable additional space in various local markets is available to accommodate any reasonable foreseeable needs that may arise.  The following table summarizes our ten most significant leased properties by location based on annual rental expenses:
 
Property Location
 
Reporting Segment
Princeton, NJ
 
Energy & Construction
Tampa, FL
 
Infrastructure & Environment
Chantilly, VA
 
Federal Services
Denver, CO
 
Infrastructure & Environment
Denver, CO
 
Energy & Construction
Oak Ridge, TN
 
Energy & Construction
Germantown, MD
 
Infrastructure & Environment / Federal Services
San Francisco, CA
 
Corporate / Infrastructure & Environment
Boise, ID
 
Energy & Construction
Calgary, AB
 
Oil & Gas
 
ITEM 3.  LEGAL PROCEEDINGS
 
Various legal proceedings are pending against our subsidiaries and us.  The resolution of outstanding claims and litigation is subject to inherent uncertainty, and it is reasonably possible that resolution of any of the outstanding claims or litigation matters could have a material adverse effect on us.  See Note 17, “Commitments and Contingencies,” to our “Consolidated Financial Statements and Supplementary Data” included under Item 8 of this report for a discussion of our legal proceedings, which is incorporated herein by reference.
 
ITEM 4.  MINE SAFETY DISCLOSURE
 
Section 1503 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) requires domestic mine operators to disclose violations and orders issued under the Federal Mine Safety and Health Act of 1977 (the “Mine Act”) by the federal Mine Safety and Health Administration.  We do not act as the owner of any mines, but we may act as a mining operator as defined under the Mine Act where we may be a lessee of a mine, a person who operates, controls or supervises such mine, or an independent contractor performing services or construction of such mine.
 
Information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Act and Item 104 of Regulation S-K is included in Exhibit 95.
 



PART II
 
ITEM 5.  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
 
Market information
 
Our common stock is listed on the New York Stock Exchange under the symbol “URS.”  As of February 18, 2013, we had 2,625 stockholders of record.  The following table sets forth the high and low sale prices of our common stock, as well as dividend information, for the periods indicated.
 
   
Sales Price per Share
       
   
Low
   
High
   
Dividends Declared per Share
 
2012 
                 
First Quarter
  $ 35.40     $ 47.16     $ 0.20  
Second Quarter
  $ 32.13     $ 43.64     $ 0.20  
Third Quarter
  $ 32.76     $ 38.88     $ 0.20  
Fourth Quarter
  $ 33.20     $ 40.27     $ 0.20  
                         
2011 
                       
First Quarter
  $ 39.61     $ 48.32     $  
Second Quarter
  $ 41.48     $ 47.12     $  
Third Quarter
  $ 28.46     $ 46.18     $  
Fourth Quarter
  $ 27.93     $ 37.60     $  
 
On February 22, 2013, our Board of Directors approved the continuation of this program and authorized a $0.21 per share quarterly dividend.  Future dividends are subject to approval by our Board of Directors or the Audit Committee of the Board of Directors.





Stock Purchases
 
The following table sets forth all purchases made by us or any “affiliated purchaser” as defined in Rule 10b-18(a)(3) of the Securities Exchange Act of 1934, as amended, of our common shares during the three monthly periods that comprise our fourth quarter of 2012:
 
   
(a) Total Number of Shares Purchased (1,2)
   
(b) Average Price Paid per Share
   
(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)
   
(d) Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs (2)
 
   
(In millions, except average price paid per share)
 
                         
September 29, 2012 – October 26, 2012
        $             4.0  
October 27, 2012 – November 23, 2012
        34.88             4.0  
November 24, 2012 – December 28, 2012
        39.50             4.0  
Total
                           
 
(1)  
Reflects purchases of shares previously issued pursuant to awards issued under our equity incentive plans, which allow our employees to surrender shares of our common stock as payment toward the exercise cost and tax withholding obligations associated with the exercise of stock options or the vesting of restricted or deferred stock.
 
(2)  
On February 25, 2011, our Board of Directors authorized the repurchase of 8.0 million shares, of which we repurchased 1.0 million shares of our common stock during 2012.  For each of fiscal years 2012, 2013 and 2014, the number of shares authorized for repurchase under the program is 3.0 million shares, plus the number of shares equal to the difference between the number of shares authorized to be purchased in the prior year and the actual number of shares repurchased during the prior year, not to exceed 6.0 million shares in aggregate.  The repurchase program will expire at the end of our 2014 fiscal year.  The Board of Directors may modify, suspend, extend or terminate the program at any time.
 
 
Represents less than half a million shares.
 
Our 2011 Credit Facility permits unlimited dividend payments and stock repurchases if no default has occurred and our Consolidated Leverage Ratio is equal to or less than 1.50:1.00.  However, if no default has occurred and the Consolidated Leverage Ratio is below the threshold indication above, then our dividend payments and stock repurchases are limited to $150 million per fiscal year and the sum of 50% of our cumulative net income and net cash proceeds from the issuance of equity securities to third parties after October 19, 2011.
 



ITEM 6.  SELECTED FINANCIAL DATA
 
The following selected financial data was derived from our consolidated financial statements.  You should read the selected financial data presented below in conjunction with the information contained in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our consolidated financial statements and the notes thereto contained in Item 8, “Consolidated Financial Statements and Supplementary Data,” of this report.
 
   
Year Ended
   
Year Ended
   
Year Ended
   
Year Ended
   
Year Ended
 
   
December 28,
   
December 30,
   
December 31,
   
January 1,
   
January 2,
 
(In millions, except per share data)
    2012 (1,2)       2011 (1,2)       2010 (1,2)       2010 (1)       2009 (1)  
Income Statement Data:
                                       
Revenues
  $ 10,972.5     $ 9,545.0     $ 9,177.1     $ 9,249.1     $ 10,086.3  
Cost of revenues
    (10,294.5 )     (8,988.8 )     (8,609.5 )     (8,772.4 )     (9,608.8 )
General and administrative expenses
    (83.6 )     (79.5 )     (71.0 )     (75.8 )     (78.7 )
Goodwill impairment (3) 
          (825.8 )                  
Acquisition-related expenses (2) 
    (16.1 )     (1.0 )     (11.9 )            
Restructuring costs (4) 
          (5.5 )     (10.6 )            
Impairment of an intangible asset (5) 
                      (32.8 )      
Equity in income of unconsolidated joint ventures (6) 
    107.6       132.2       70.3       100.9       106.3  
Operating income (loss)
    685.9       (223.4 )     544.4       469.0       505.1  
Other income (expenses) (7) 
    0.5                   47.9        
Net income (loss) attributable to URS
    310.6       (465.8 )     287.9       269.1       219.8  
                                         
Earnings (loss) per share:
                                       
Basic
  $ 4.18     $ (6.03 )   $ 3.56     $ 3.31     $ 2.61  
Diluted
  $ 4.17     $ (6.03 )   $ 3.54     $ 3.29     $ 2.59  
                                         
Cash dividends declared per share (8) 
  $ 0.80     $     $     $     $  
                                         
Balance Sheet Data (As of the end of the period):
                                       
Total assets
  $ 8,786.5     $ 6,862.6     $ 7,351.4     $ 6,904.4     $ 7,001.2  
Total long-term debt (9) 
  $ 1,992.5     $ 737.0     $ 641.3     $ 689.7     $ 1,091.5  
Total URS stockholders’ equity (8) 
  $ 3,621.1     $ 3,377.2     $ 4,117.2     $ 3,905.8     $ 3,624.6  
Total noncontrolling interests
  $ 141.9     $ 107.2     $ 83.8     $ 44.7     $ 31.3  
Total stockholders’ equity
  $ 3,763.0     $ 3,484.4     $ 4,201.0     $ 3,950.5     $ 3,655.8  
 
(1)  
Our fiscal year is the 52/53-week period ending on the Friday closest to December 31.  Our fiscal year ended January 2, 2009 contained 53 weeks.
 
(2)  
We completed the acquisitions of Flint, Apptis and Scott Wilson Group plc (“Scott Wilson”)  in May 2012, June 2011 and September 2010, respectively.  The operating results of Flint, Apptis and Scott Wilson since their respective acquisition dates are included in our consolidated financial statements under the Oil & Gas Division, Federal Services Division and the Infrastructure & Environment Division, respectively.
 
(3)  
During the year ended December 30, 2011, we recorded a goodwill impairment charge of $825.8 million.  On a net, after-tax basis, this resulted in decreases to net income and diluted earnings per share (“EPS”) of $732.2 million and $9.46, respectively, for the year ended December 30, 2011.  For further discussion, see Note 9, “Goodwill and Intangible Assets” to our “Consolidated Financial Statements and Supplementary Data” included under Item 8 of this annual report.
 
(4)  
For the years ended December 30, 2011 and December 31, 2010, we recorded restructuring costs in our international businesses.  For further discussion, see Note 17, “Commitments and Contingencies,” to our “Consolidated Financial Statements and Supplementary Data” included under Item 8 of this annual report.
 



(5)  
During fiscal year 2009, we recorded a $32.8 million charge for the impairment of our intangible asset related to the “Washington” trade name.  On a net, after-tax basis, this transaction resulted in decreases to net income and EPS of $19.6 million and $0.24, respectively, for the year ended January 1, 2010.
 
(6)  
In October 2010, we received notice of a ruling on the priority of claims against a bankrupt client made by one of our unconsolidated joint ventures related to the SR-125 road project in California.  The judge ruled against our joint venture’s position, finding that its mechanic’s lien did not have priority over the senior lenders.  As a result of the court’s decision, we recorded a pre-tax non-cash asset impairment charge of $25.0 million during fiscal year 2010.  During the second quarter of 2011, we recognized a pre-tax favorable claim settlement of $9.5 million on this project.
 
(7)  
During fiscal year 2009, we recorded $47.9 million of other income (expenses), consisting of a $75.6 million gain associated with the sale of our equity investment in MIBRAG mbH (“MIBRAG”), net of $5.2 million of sale-related costs.  This gain was partially offset by a $27.7 million loss on the settlement of a foreign currency forward contract, which primarily hedged our net investment in MIBRAG.  On a net, after-tax basis, these two transactions resulted in increases to net income and diluted EPS of $30.6 million and $0.37, respectively, for the year ended January 1, 2010.
 
(8)  
On February 24, 2012, our Board of Directors approved the initiation of a regular quarterly cash dividend program and authorized a $0.20 per share quarterly dividend.
 
(9)  
During fiscal year 2012, we issued $1.0 billion of Senior Notes in connection with the acquisition of Flint.  As part of the acquisition, we also guaranteed the Canadian Notes with outstanding face values of $175.8 million.  During fiscal year 2011, we entered into our 2011 Credit Facility, which replaced our 2007 Credit Facility.  This new senior credit facility provides a term loan facility of $700.0 million and revolving credit facilities of $1.0 billion.  For further discussion, see Note 10, “Indebtedness” to our “Consolidated Financial Statements and Supplementary Data” included under Item 8 of this annual report.
 


 
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 H20; the consolidated financial statements and notes thereto contained in Item 8, “Consolidated Financial Statements and Supplementary Data,” of this report.
 
BUSINESS SUMMARY
 
We are a leading international provider of engineering, construction and technical services.  We offer a broad range of program management, planning, design, engineering, construction and construction management, operations and maintenance, and decommissioning and closure services to public agencies and private sector clients around the world.  We also are a U.S. federal government contractor in the areas of systems engineering and technical assistance, operations and maintenance, and IT services.  With approximately 54,000 employees, as of January 25, 2013, in a global network of offices and contract-specific job sites in nearly 50 countries, we provide services for federal, infrastructure, oil and gas, power and industrial programs and projects.  On May 14, 2012, we completed the acquisition of Flint, a provider of construction and maintenance services to clients in the oil and gas industry, expanding our presence in the oil and gas market sector in North America.  At the close of the acquisition, the operations of Flint became our new Oil & Gas Division.
 
Our strategy is to maintain a balanced portfolio of diversified businesses that serve a variety of markets worldwide.  We believe that this strategy helps to mitigate our exposure to industrial, technological, environmental, financial, economic and political risks that may affect a particular market or geographic region.  Our growth strategy involves both organic growth as well as expansion through acquisitions of other companies that complement or enhance our technical capabilities or enable us to address new markets or geographic regions.
 
We generate revenues by providing fee-based professional and technical services and by executing construction contracts.  As a result, our professional and technical services are primarily labor intensive and our construction projects are labor and capital intensive.  To derive income from our revenues, we must effectively manage our costs.
 
Our revenues are dependent upon our ability to attract and retain qualified and productive employees, identify business opportunities, allocate our labor resources to profitable markets, secure new contracts, execute existing contracts, and maintain existing client relationships.  Moreover, as a professional services company, the quality of the work generated by our employees is integral to our revenue generation.
 
Our cost of revenues is comprised of the compensation we pay to our employees, including fringe benefits; the cost of subcontractors, construction materials and other project-related expenses; and segment administrative, marketing, sales, bid and proposal, rental and other overhead costs.
 
We report our financial results on a consolidated basis and for our four reporting segments:  the Infrastructure & Environment Division, the Federal Services Division, the Energy & Construction Division and the Oil & Gas Division.
 



OVERVIEW AND BUSINESS TRENDS
 
Fiscal Year 2012 Results
 
Consolidated revenues for the year ended December 28, 2012 were $11.0 billion, an increase of $1.4 billion, or 15.0%, compared to revenues for fiscal year 2011.  Our results for the 2012 fiscal year include revenues resulting from the acquisition of Flint in May 2012.  Flint generated $1.5 billion in revenues from the completion of the acquisition on May 14, 2012, through the end of our fiscal year on December 28, 2012.  During the 2012 fiscal year, revenues increased significantly from our work in the oil and gas market sector, as a result of the Flint acquisition, and from our work in the power market sector.  By contrast, we experienced a decline in revenues from our work in the industrial, federal and infrastructure market sectors.
 
Net income attributable to URS for the year ended December 28, 2012 was $310.6 million compared with a net loss of $465.8 million for the year ended December 30, 2011.  Included in the fiscal year 2011 net loss attributable to URS was an after-tax goodwill impairment charge of $732.2 million.
 
Cash Flows and Debt
 
During the year ended December 28, 2012, we generated $430.2 million in net cash from operations.  (See “Consolidated Statements of Cash Flows” to our “Consolidated Financial Statements and Supplementary Data” included under Item 8 of this report.)  Cash flows from operations decreased by $75.7 million for fiscal year 2012 compared with fiscal year 2011.  This decrease was primarily due to the timing of:  collections from clients on accounts receivable, advance project payments from clients, project performance payments, vendor and subcontractor payments, employer contribution payments to our retirement plans, and dividend distributions from our unconsolidated joint ventures.  In addition, our interest payments were higher due to increased debt.
 
On March 15, 2012, in a private placement, we issued $400.0 million in 3.85% Senior Notes due on April 1, 2017 and $600.0 million in 5.00% Senior Notes due on April 1, 2022 (collectively, the “Senior Notes”).  We used the net proceeds from the notes together with borrowings from our senior credit facility (“2011 Credit Facility”) to finance our acquisition of Flint.
 
During March and April 2012, we entered into various foreign currency forward contracts with an aggregate notional amount of C$1.25 billion (equivalent to US$1.25 billion), which settled during the second quarter of 2012.
 
In addition, we had cash outflows of $44.7 million of cash dividends and $40.0 million related to repurchases of our common stock for the year ended December 28, 2012.
 
Acquisitions
 
On May 14, 2012, we acquired the outstanding common shares of Flint for C$25.00 per share in cash, or C$1.24 billion (US$1.24 billion based on the exchange rate on the date of acquisition) and paid $110.3 million of Flint’s debt prior to the closing of the transaction in exchange for a promissory note from Flint.  The operating results of Flint from the acquisition date through December 28, 2012 are included in our consolidated financial statements under the Oil & Gas Division.
 
On June 1, 2011, we completed the acquisition of Apptis for a total purchase consideration of $283.0 million.  Since the acquisition date, the operating results of Apptis have been included in our consolidated financial statements under the Federal Services Division.
 
On September 10, 2010, we completed the acquisition of Scott Wilson for a total purchase consideration of $343.0 million.  Since the acquisition date, the operating results of Scott Wilson have been included in our consolidated financial statements under the Infrastructure & Environment Division.
 



Dividend Program
 
On February 24, 2012, our Board of Directors authorized the implementation of a dividend program and authorized a $0.20 per share quarterly dividend.  On February 22, 2013, our Board of Directors approved the continuation of this program and authorized a $0.21 per share quarterly dividend.  Future dividends are subject to approval by our Board of Directors or the Audit Committee of the Board of Directors.
 
Book of Business
 
As of December 28, 2012 and December 30, 2011, our total book of business was $24.9 billion and $27.0 billion, respectively.  Our backlog decreased primarily due to reductions resulting from the recognition of revenues and equity in earnings of unconsolidated joint ventures, and from the removal of $560 million from federal backlog resulting from a decision by the DOE to remove funding of pension obligations from the scope of one of our contracts, which otherwise would have resulted in recognition of revenues as reimbursement for offsetting pension expenses on that contract.  Additional decreases in backlog and IDCs were caused primarily by lower than expected activity on an IDC contract with the DOD, and reductions in project scope and project cancellations by a power client.  These decreases were partially offset by additions of $1.4 billion to our book of business resulting from our acquisition of Flint.
 
Business Trends
 
Given the current economic uncertainty, it is difficult to predict the impact of the continuing global economic weakness on our business or to forecast business trends accurately.  Federal deficits, weak state budgets, the national debt, the potential budgetary sequestration, economic disruption in Europe, a relatively anemic recovery in the U.S., and efforts made to address any of these issues, could negatively affect our business.  In particular, federal expenditures on defense, as well as expenditures, both private and public, on other programs that we support or in markets that we participate in, could be adversely affected.  For example, the Budget Control Act of 2011 could impose an estimated $1.2 trillion in automatic federal budget cuts, or sequestrations, beginning in fiscal year 2013.  These budget cuts are in addition to the $917 billion in budget cuts required over the next 10 years, and would severely impact our defense and other federal services, unless Congress acts to resolve the budget issues or postpone the expected cuts.  Any significant reduction in federal government spending could reduce the demand for our overall services, and result in the cancellation or delay of existing projects as well as potential projects in our book of business.  It is also difficult to determine the extent to which concerns over the public debt of, and recessionary conditions in, the U.K. and various European countries could affect demand for, and spending on, the services we provide to our clients.  Many of these uncertainties are difficult to predict and are beyond our control.
 
We believe that our expectations regarding business trends are reasonable and are based on reasonable assumptions.  However, such forward-looking statements, by their nature, involve risks and uncertainties and, in the current economic climate, may be subject to an unusual degree of uncertainty.  You should read this discussion of business trends in conjunction with Part II, Item 1A, “Risk Factors,” of this report, which begins on page 20.
 
Federal Market Sector
 
Due to federal budget uncertainty, we expect to continue to experience delays and cancellations in procurement decisions and reductions in spending on some existing contracts.  The Budget Control Act of 2011 could impose significant and automatic federal budget cuts, or sequestrations, beginning in fiscal year 2013, if Congress fails to pass a budget reduction bill.  A large portion of these budget cuts would affect defense spending.  Although we expect that we will continue to be adversely affected by these budget challenges, some of the specialized technical services we provide and programs we support are vital to national security or mandated by law, and may have more predictable funding.  As a result, we expect that many of these services and programs, including the management of chemical demilitarization sites; the provision of nuclear management services; and the support of unmanned aerial vehicles, electronic warfare, threat reduction, and cyber-security programs would be more likely to continue receiving stable funding, if automatic federal budget cuts are imposed.
 



Infrastructure Market Sector
 
We anticipate that the passage in 2012 of the two-year, $105 billion federal transportation funding bill, Moving Ahead for Progress in the 21st Century Act (“MAP-21”), will provide states and municipalities with stable funding for highway and transit projects.  In addition, the $50.5 billion Hurricane Sandy federal aid package includes $13 billion to repair roads and transit systems damaged by the storm, as well as $1.7 billion to the State of New York and $1.8 billion to New York City in block grants to address other public infrastructure needs.
 
Oil & Gas Market Sector
 
During the second quarter of the 2012 fiscal year, we acquired Flint, a provider of construction and maintenance services to clients in the North American oil and gas industry.  The acquisition significantly expanded our presence in the North American oil and gas market sector, which we anticipate will create new opportunities for our business in 2013.  As a result of the acquisition, we expect that any increase in capital spending to develop North American oil and gas resources could lead to increased demand for the engineering, construction and operations and maintenance services that we provide to clients in the oil and gas market sector.
 
Power Market Sector
 
For the 2013 fiscal year, we expect steady demand for our air quality control services, which involve the retrofit of coal-fired power plants with clean air technology to reduce sulfur dioxide, mercury and other emissions.  We are currently working on 18 retrofit projects to help utilities comply with state consent decrees and federal regulatory mandates.  Following events at the Fukushima nuclear power plant in Japan, the Nuclear Regulatory Commission issued new safety requirements to strengthen containment structures and to improve on-site flood control and seismic safety plans.  We also expect to benefit from new investments being made in transmission and distribution systems to improve the efficiency and reliability of these systems and accommodate the transmission of electricity from alternative and renewable energy sources.
 
Industrial Market Sector
 
For the 2013 fiscal year, we expect our industrial clients to continue to experience challenges as a result of economic conditions.  However, if our clients experience increased demand for durable goods, we may see increased demand for the engineering, construction and facilities management services we provide.  We also anticipate growth in our mining business in the U.S. and Australia, as a result of new contract awards in 2012.
 
Seasonality
 
We experience seasonal trends in our business in connection with federal holidays, such as Memorial Day, Independence Day, Labor Day, Thanksgiving, Christmas and New Year’s Day.  Our revenues typically are lower during these times of the year because many of our clients’ employees, as well as our own employees, do not work during these holidays, resulting in fewer billable hours charged to projects and thus, lower revenues recognized.  In addition to holidays, our business also is affected by seasonal bad weather conditions, such as hurricanes, floods, snowstorms or other inclement weather, which may cause some of our offices and projects to close or reduce activities temporarily.  For example, in the first quarter of the year, winter weather sometimes results in intermittent office closures and work interruptions.  In our Oil & Gas Division, winter weather enables increased access to remote work areas in Northern Canada, while spring road bans limit access to work areas in Canada and the Northern U.S.
 



Other Business Trends
 
The diversification of our business and changes in the mix and timing of our fixed-cost, target-price and other contracts can cause earnings and profit margins to vary between periods.  For example, we have, for some time, experienced an increase in the number of fixed-price contracts we are awarded, particularly among clients in the federal sector.  The increase in fixed-price contracting creates additional risks of incurring losses and opportunities for achieving higher margins on these contracts.  There is also an increase in the award of federal contracts based on a low-price, technically acceptable criteria emphasizing price over qualitative factors, such as past performance.  As a result, pricing pressure may reduce our profit margins on future federal contracts.  Also, our government clients are increasingly using IDCs that require us to engage in a competitive procurement process before any task orders are issued as compared to traditional award contracts.  Additionally, the traditional award relationship between backlog and revenues, resulting in smaller, shorter term increments moving from IDCs and option years into backlog and then potentially realized as revenues.  Ultimately, however, revenues from IDC task orders and option years will typically lower our reported backlog and increase our reported IDC and option years in our book of business.  In addition, earnings recognition on many contracts is measured based on progress achieved as a percentage of the total project effort or upon the completion of milestones or performance criteria rather than evenly or linearly over the period of performance.
 
The achievement of early completion milestones on several chemical weapons stockpile processing projects indicates that those projects are approaching the end of their contract life cycle.  We expect to continue to generate revenues and operating income at these sites and other sites over the next several years, but in declining amounts as the projects approach final completion.
 
We cannot determine if proposed climate change and greenhouse gas regulations would have a material impact on our business or our clients’ businesses at this time; however, any new regulations could affect demand for the services we provide to our clients.  For example, depending on legislation enacted, we could see reduced client demand for our services related to fossil fuel and industrial projects, and increased demand for services related to environmental, infrastructure and nuclear and alternative energy.
 


 
REVENUES BY MARKET SECTOR
 
The Year Ended December 28, 2012 Compared with the Year Ended December 30, 2011
 
 
Year Ended
 
                     
Percentage
 
 
December 28,
 
December 30,
 
Increase
   
Increase
 
(In millions, except percentages)
2012  (1)
 
2011  (2)
 
(Decrease)
   
(Decrease)
 
Revenues by Market Sector:
                       
Federal
  $ 4,435.0     $ 4,639.7     $ (204.7 )     (4.4 %)
Infrastructure
    1,791.4       1,861.3       (69.9 )     (3.8 %)
Oil & Gas (3) 
    2,310.6       692.1       1,618.5       233.9 %
Power
    1,304.4       1,126.6       177.8       15.8 %
Industrial (3) 
    1,131.1       1,225.3       (94.2 )     (7.7 %)
Total revenues, net of eliminations
  $ 10,972.5     $ 9,545.0     $ 1,427.5       15.0 %
 
(1)  
The operating results of Flint have been included in our consolidated results since the acquisition on May 14, 2012.
 
(2)  
The operating results of Apptis have been included in our consolidated results since the acquisition on June 1, 2011.
 
(3)  
Historically, we have included revenues from the oil & gas market sector as part of our industrial & commercial market sector.  Effective at the beginning of our 2012 fiscal year, we revised our presentation to show our revenues from the oil & gas market sector separately.  In addition, we changed the name of our “industrial and commercial” market sector to the “industrial” market sector.  For comparative purposes, we reclassified the prior period’s data to conform them to the current period’s presentation.
 



Consolidated Revenues by Market Sector
 
Our consolidated revenues for the year ended December 28, 2012 were $11.0 billion, an increase of $1.4 billion, or 15.0%, compared with the year ended December 30, 2011.
 
See the discussion of revenues by market sector below for more detail.
 
Federal
 
 
Year Ended
 
                     
Percentage
 
 
December 28,
 
December 30,
 
Increase
   
Increase
 
(In millions, except percentages)
2012
 
2011
 
(Decrease)
   
(Decrease)
 
Federal Market Sector:
                       
Infrastructure & Environment
  $ 670.1     $ 636.5     $ 33.6       5.3 %
Federal Services
    2,720.8       2,694.3       26.5       1.0 %
Energy & Construction
    1,044.1       1,308.9       (264.8 )     (20.2 %)
Federal total
  $ 4,435.0     $ 4,639.7     $ (204.7 )     (4.4 %)
 
Consolidated revenues from our federal market sector for the year ended December 28, 2012 declined compared with the year ended December 30, 2011.  During the 2012 fiscal year, revenues declined from the nuclear management services we provide to the DOE, due largely to the completion of ARRA stimulus-funded projects, the completion of a cleanup and closure project at a former nuclear fuel reprocessing/treatment facility, as well as lower activity on on-going DOE contracts.  In addition, we experienced decreased demand for the systems engineering and technical assistance services we provide to the DOD for the development, testing and evaluation of new weapons systems and the modernization of aging weapons systems.  The decrease in revenues from these activities was largely the result of delays in the award of new contracts and task orders under existing contracts.  Revenues also declined from our work managing the destruction of chemical weapons stockpiles at chemical agent disposal facilities throughout the U.S.  This decline reflects the transition at several facilities from the operations phase of the project to the closure phase, which is characterized by lower levels of activity.
 
By contrast, revenues increased from the federal IT market as a result of the acquisition of Apptis in June 2011.  In addition, revenues grew from the services we provide to the DOD to maintain, repair and overhaul aircraft, ground vehicles and other equipment returning from military operations, as well as from increased activity on a contract to provide operations and installations management support at a space flight center.  We also experienced increased demand for the design and construction services we provide to the DOD for the development of military facilities and related infrastructure.
 



Infrastructure
 
 
Year Ended
 
                     
Percentage
 
 
December 28,
 
December 30,
 
Increase
   
Increase
 
(In millions, except percentages)
2012
 
2011
 
(Decrease)
   
(Decrease)
 
Infrastructure Market Sector:
                       
Infrastructure & Environment
  $ 1,550.1     $ 1,544.0     $ 6.1       0.4 %
Energy & Construction
    241.3       317.3       (76.0 )     (24.0 %)
Infrastructure total
  $ 1,791.4     $ 1,861.3     $ (69.9 )     (3.8 %)
 
Consolidated revenues from our infrastructure market sector for the year ended December 28, 2012 decreased compared with the year ended December 30, 2011.  The decline in infrastructure revenues was primarily due to the completion early in the 2012 fiscal year of a levee construction project in New Orleans, which experienced higher levels of activity and generated significant revenues during the 2011 fiscal year.  The revenue decline also reflects a close-out and settlement agreement reached on a light rail project and a toll road project. In addition, demand decreased for the services we provide to modernize and expand airports and educational facilities.
 
By contrast, revenues increased from the planning, design, engineering, program and construction management services we provide to develop surface and rail transportation infrastructure, and water storage, conveyance and treatment systems.  We also benefited from higher demand for our work providing program management services to international agencies in support of economic development efforts.
 
Oil & Gas
 
 
Year Ended
 
                     
Percentage
 
 
December 28,
 
December 30,
 
Increase
   
Increase
 
(In millions, except percentages)
2012
 
2011
 
(Decrease)
   
(Decrease)
 
Oil & Gas Market Sector: (1)
                       
Infrastructure & Environment
  $ 552.5     $ 529.7     $ 22.8       4.3 %
Energy & Construction
    288.9       162.4       126.5       77.9 %
Oil & Gas (2) 
    1,469.2             1,469.2       N/M  
Oil & Gas total
  $ 2,310.6     $ 692.1     $ 1,618.5       233.9 %
 
N/M = Not meaningful
 
(1)  
Historically, we have included revenues from the oil & gas market sector as part of our presentation of revenues from the industrial & commercial market sector.  Effective at the beginning of our 2012 fiscal year, we revised our presentation to show our revenues from the oil & gas market sector separately.  In addition, we changed the name of our “industrial and commercial” market sector to the “industrial” market sector.  For comparative purposes, we reclassified the prior period’s data to conform them to the current period’s presentation.
 
(2)  
The operating results of Flint have been included in our consolidated results since the acquisition on May 14, 2012.
 
Consolidated revenues from our oil & gas market sector for the year ended December 28, 2012 increased compared with the year ended December 30, 2011.  Our results reflect the acquisition of Flint on May 14, 2012.  At the completion of the acquisition, Flint became our new Oil & Gas Division.  For the fiscal year ended December 28, 2012, the Oil & Gas Division generated revenues of $1.5 billion from work providing construction and maintenance services to the North American oil and gas industry.  We also benefited from strong demand for the environmental and engineering services we provide to multinational oil and gas clients at facilities worldwide through long-term master service agreements (“MSAs”), as well as from increased activity on contracts to provide construction, facility management, and operations and maintenance services at refineries and other oil and gas facilities.
 



Power
 
 
Year Ended
 
                     
Percentage
 
 
December 28,
 
December 30,
 
Increase
   
Increase
 
(In millions, except percentages)
2012
 
2011
 
(Decrease)
   
(Decrease)
 
Power Market Sector:
                       
Infrastructure & Environment
  $ 209.8     $ 201.1     $ 8.7       4.3 %
Energy & Construction
    1,094.6       925.5       169.1       18.3 %
Power total
  $ 1,304.4     $ 1,126.6     $ 177.8       15.8 %
 
Consolidated revenues from our power market sector for the year ended December 28, 2012 increased compared with the year ended December 30, 2011.  During the 2012 fiscal year, revenues increased from services we provide to retrofit and upgrade existing nuclear power plants to increase the generating capacity and extend the service life of these facilities.  We also continued to experience a steady demand for our work in retrofitting coal-fired power plants with air quality control systems that reduce emissions and help utilities comply with regulatory mandates, as well as from the compliance, permitting and remediation services we provide to mitigate the environmental impact of their operations.  By contrast, revenues declined from the engineering, procurement and construction services we provide for the development of new fossil fuel and nuclear power-generating facilities.
 
Industrial
 
 
Year Ended
 
                     
Percentage
 
 
December 28,
 
December 30,
 
Increase
   
Increase
 
(In millions, except percentages)
2012
 
2011
 
(Decrease)
   
(Decrease)
 
Industrial Market Sector: (1)
                       
Infrastructure & Environment
  $ 700.5     $ 763.8     $ (63.3 )     (8.3 %)
Energy & Construction
    430.6       461.5       (30.9 )     (6.7 %)
Industrial total
  $ 1,131.1     $ 1,225.3     $ (94.2 )     (7.7 %)
 
(1)  
Historically, we have included revenues from the oil & gas market sector as part of our presentation of revenues from the industrial & commercial market sector.  Effective at the beginning of our 2012 fiscal year, we revised our presentation to show our revenues from the oil & gas market sector separately.  In addition, we changed the name of our “industrial and commercial” market sector to the “industrial” market sector.  For comparative purposes, we reclassified the prior period’s data to conform them to the current period’s presentation.
 
Consolidated revenues from our industrial market sector for the year ended December 28, 2012 declined compared with the year ended December 30, 2011.  The decline in revenues was largely driven by decreased demand for the environmental, engineering and construction services we provide to mining clients.  During the 2011 fiscal year, we experienced high levels of activity and generated significant revenues from an engineering and construction mining project in Australia; the project has not been replaced by a comparable assignment.  The decrease was partially offset by a moderate increase in revenues from the facilities management services we provide to manufacturing clients, resulting from increased activity on ongoing contracts and increased activities with other mining clients.
 


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



Revenues
 
(In millions, except percentages)
 
Infrastructure & Environment
 
Federal Services (1)
 
Energy & Construction
 
Oil & Gas (2)
 
Eliminations
 
Total
Year ended
                                   
                                         
December 28, 2012
 
$
3,792.1 
 
$
2,721.6 
 
$
3,138.1 
 
$
1,475.1 
 
$
(154.4)
 
$
10,972.5 
December 30, 2011
   
3,760.9 
   
2,695.4 
   
3,251.1 
   
— 
   
(162.4)
   
9,545.0 
Increase (decrease)
   
31.2 
   
26.2 
   
(113.0)
   
1,475.1 
   
(8.0)
   
1,427.5 
Percentage increase (decrease)
   
0.8%
   
1.0%
   
(3.5%)
   
N/M
   
N/M
   
15.0%
 
N/M = Not meaningful
 
(1)  
The operating results of Apptis have been included in our consolidated results since the acquisition on June 1, 2011.
 
(2)  
The operating results of Flint have been included in our consolidated results since the acquisition on May 14, 2012.
 
The revenues reported are presented prior to the elimination of inter-segment transactions.  Our analysis of the changes in revenues by reporting segment is discussed below.
 
The Infrastructure & Environment Division’s Revenues
 
The Infrastructure & Environment Division’s revenues were essentially flat for the year ended December 28, 2012 compared to the year ended December 30, 2011.  During the 2012 fiscal year, revenues increased from the services we provide to expand and modernize surface and rail transportation infrastructure, as well as from our work providing program management services to international aid agencies in support of economic development efforts.  We also benefited from strong demand for our work providing engineering and construction services to the DOD for the development of military facilities and related infrastructure.  In addition, demand grew for the compliance, permitting and remediation services we perform in the power sector to assist utilities in meeting regulatory requirements and mitigating the environmental impact of their operations.
 
By contrast, we experienced a decline in revenues from the environmental and engineering services we provide to industrial and mining clients.  The results in our mining market reflect the completion of an engineering and construction assignment, which generated significant revenues in the comparable period last year and was not replaced by a similar project.  In the oil and gas sector, revenues declined from our work supporting a major pipeline project in Alaska, due to the postponement of the project, while we continued to benefit from strong demand for the environmental and engineering services we provide to multinational oil and gas clients at facilities worldwide through long-term MSAs.
 
The Federal Services Division’s Revenues
 
The Federal Services Division’s revenues were essentially flat for the year ended December 28, 2012 compared to the year ended December 30, 2011.  Revenues increased from the IT services we now provide to federal clients, as a result of our June 2011 acquisition of Apptis.  Revenues from the services we provide to the DOD to maintain, repair and overhaul aircraft, ground vehicles and other equipment were essentially flat.
 
Revenues from our work managing the destruction of chemical weapons stockpiles at chemical agent disposal facilities declined.  This decline reflects the transition at several facilities from the operations phase of the project to the closure phase, which is characterized by lower levels of activity.
 



The Energy & Construction Division’s Revenues
 
The Energy & Construction Division’s revenues for the year ended December 28, 2012 decreased compared with the year ended December 30, 2011.  The decrease was primarily due to the completion of a large power project and a large levee construction project in the prior year.  In addition, revenues declined from our work providing nuclear management services to the DOE, as a result of completing ARRA stimulus-funded projects and lower activity on ongoing DOE projects compared to the same period last year.
 
These decreases were partially offset by the start-up of new projects, including a new air quality control project at a coal-fired power plant and projects to replace steam generators at nuclear power plants.  However, revenues during the engineering and early construction phases associated with the start-up of projects tend to be lower than revenues during the active construction phases.  During the year ended December 30, 2011, there were more projects in active construction compared to the year ended December 28, 2012.  As a result, revenues for the year ended December 28, 2012 were relatively lower than for the year ended December 30, 2011.
 
The Oil & Gas Division’s Revenues
 
The Oil & Gas Division’s revenues for the year ended December 28, 2012 were derived from the construction and construction management, and operations and maintenance services that we provide, including facility and pipeline construction, transportation, and asset management and maintenance services, for the North American oil and gas industry.  Since the acquisition on May 14, 2012, the revenues of Flint have been included in our consolidated results under our Oil & Gas Division.
 
Cost of Revenues
 
(In millions, except percentages)
 
Infrastructure & Environment
 
Federal Services (1)
 
Energy & Construction
 
Oil & Gas (2)