form10-q.htm

10-Q 1 form10-q.htm FORM 10-Q form10-q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 1, 2010

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

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)

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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

16BClass		Outstanding at November 1, 2010

Common Stock, $.01 par value		82,746,134

URS CORPORATION AND SUBSIDIARIES

This Quarterly Report on Form 10-Q 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 other business trends; future accounting and actuarial estimates; future contract losses; future backlog and book of business conversion; future income tax payments; future stock-based compensation expenses; future bonus, pension and post-retirement expenses; future compliance with regulations; future legal proceedings and accruals; future bonding and insurance coverage; future interest and debt payments; future capital expenditures, contractual obligations and commitments; 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 client spending; changes in our book of business; our compliance with government contract procurement regulations; integration of acquisitions; employee, agent or partner misconduct; our ability to procure government contracts; liabilities for pending and future litigation; environmental liabilities; availability of bonding and insurance; our reliance on government appropriations; unilateral termination provisions in government contracts; 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; liquidated damages; 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; impairment of our goodwill; 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 our credit agreement; risks associated with international operations; business activities in high security risk countries; third-party software 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 77, 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.

PART I.	FINANCIAL INFORMATION:

Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets
	October 1, 2010 and January 1, 2010	2
	Condensed Consolidated Statements of Operations
	Three and nine months ended October 1, 2010 and October 2, 2009	3
	Condensed Consolidated Statements of Comprehensive Income
	Three and nine months ended October 1, 2010 and October 2, 2009	4
	Condensed Consolidated Statements of Changes in Stockholders’ Equity
	Nine months ended October 1, 2010 and October 2, 2009	5
	Condensed Consolidated Statements of Cash Flows
	Nine months ended October 1, 2010 and October 2, 2009	7
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	42
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	74
Item 4.	Controls and Procedures	75

PART II.	OTHER INFORMATION:

Item 1.	Legal Proceedings	77
Item 1A.	Risk Factors	77
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	95
Item 3.	Defaults Upon Senior Securities	96
Item 4.	Removed and Reserved	96
Item 5.	Other Information	96
Item 6.	Exhibits	97

PART I

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

2BURS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED

4B(In thousands, except per share data)

	October 1, 2010			January 1, 2010
ASSETS
Current assets:
Cash and cash equivalents	$	556,510		$	720,621
Short-term investments		450			30,682
Accounts receivable, including retentions of $69,399 and $41,771, respectively		1,119,263			924,271
Costs and accrued earnings in excess of billings on contracts		1,224,082			1,024,215
Less receivable allowances		(56,870	)		(47,651	)
Net accounts receivable		2,286,475			1,900,835
Deferred tax assets		64,391			98,198
Other current assets		164,879			130,484
Total current assets		3,072,705			2,880,820
Investments in and advances to unconsolidated joint ventures		54,234			93,874
Property and equipment at cost, net		275,766			258,950
Intangible assets, net		531,047			425,860
Goodwill		3,402,428			3,170,031
Other assets		90,908			74,881
Total assets	$	7,427,088		$	6,904,416
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt	$	73,115		$	115,261
Accounts payable and subcontractors payable, including retentions of $42,351 and $51,475, respectively		638,595			586,783
Accrued salaries and employee benefits		496,261			435,456
Billings in excess of costs and accrued earnings on contracts		264,111			235,268
Other current liabilities		206,152			156,746
Total current liabilities		1,678,234			1,529,514
Long-term debt		716,015			689,725
Deferred tax liabilities		325,874			324,711
Self-insurance reserves		110,629			101,338
Pension and post-retirement benefit obligations		245,628			172,248
Other long-term liabilities		159,841			136,415
Total liabilities		3,236,221			2,953,951
Commitments and contingencies (Note 14)
URS stockholders’ equity:
Preferred stock, authorized 3,000 shares; no shares outstanding		—			—
Common stock, par value $.01; authorized 200,000 shares; 86,820 and 86,071 shares issued, respectively; and 82,768 and 84,019 shares outstanding, respectively		868			860
Treasury stock, 4,052 and 2,052 shares at cost, respectively		(169,267	)		(83,810	)
Additional paid-in capital		2,910,951			2,884,941
Accumulated other comprehensive loss		(29,103	)		(49,239	)
Retained earnings		1,380,999			1,153,062
Total URS stockholders’ equity		4,094,448			3,905,814
Noncontrolling interests		96,419			44,651
Total stockholders’ equity		4,190,867			3,950,465
Total liabilities and stockholders’ equity	$	7,427,088		$	6,904,416

See Notes to Condensed Consolidated Financial Statements

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URS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED

(In thousands, except per share data)

	Three Months Ended						Nine Months Ended
	October 1, 2010			October 2, 2009			October 1, 2010			October 2, 2009
Revenues	$	2,340,084		$	2,318,525		$	6,796,947		$	7,136,771
Cost of revenues		(2,136,495	)		(2,217,054	)		(6,344,979	)		(6,765,745	)
General and administrative expenses		(21,493	)		(17,943	)		(54,929	)		(56,635	)
Acquisition-related expenses (Note 15)		(7,516	)		—			(11,629	)		—
Equity in income (loss) of unconsolidated joint ventures		(12,398	)		20,703			36,520			79,048
Operating income		162,182			104,231			421,930			393,439
Interest expense		(9,456	)		(10,994	)		(23,881	)		(37,643	)
Other income, net (Note 5)		—			—			—			47,914
Income before income taxes		152,726			93,237			398,049			403,710
Income tax expense		(64,923	)		(24,640	)		(117,352	)		(151,765	)
Net income including noncontrolling interests		87,803			68,597			280,697			251,945
Noncontrolling interests in income of consolidated subsidiaries, net of tax		(17,414	)		(3,840	)		(52,760	)		(16,580	)
Net income attributable to URS	$	70,389		$	64,757		$	227,937		$	235,365


Earnings per share (Note 3):
Basic	$	.87		$	.80		$	2.81		$	2.89
Diluted	$	.87		$	.79		$	2.79		$	2.87
Weighted-average shares outstanding (Note 3):
Basic		81,054			81,418			81,216			81,419
Diluted		81,292			81,780			81,580			81,895

See Notes to Condensed Consolidated Financial Statements

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URS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - UNAUDITED

(In thousands, except per share data)

	Three Months Ended						Nine Months Ended
	October 1, 2010			October 2, 2009			October 1, 2010			October 2, 2009
Comprehensive income (loss):
Net income including noncontrolling interests	$	87,803		$	68,597		$	280,697		$	251,945
Pension and post-retirement related adjustments, net of tax		35			(542	)		1,894			(456	)
Foreign currency translation adjustments, net of tax		21,617			(405	)		15,174			9,917
Foreign currency translation adjustment due to sale of investment in unconsolidated joint venture, net of tax		—			—			—			5,115
Reclassification of unrealized loss on investment in equity securities, net of tax		372			—			—			—
Unrealized loss on foreign currency forward contract, net of tax		—			—			—			(10,728	)
Reclassification of unrealized loss on foreign currency forward contract, net of tax		—			—			—			10,728
Unrealized gain on interest rate swaps, net of tax		988			826			3,068			3,081
Comprehensive income		110,815			68,476			300,833			269,602
Noncontrolling interests in comprehensive income of consolidated subsidiaries, net of tax		(17,414	)		(3,840	)		(52,760	)		(16,580	)
Comprehensive income attributable to URS	$	93,401		$	64,636		$	248,073		$	253,022

See Notes to Condensed Consolidated Financial Statements

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URS CORPORATION AND SUBSIDIARIES

7BCONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY – UNAUDITED

B(In thousands)

	Common Stock						Treasury Stock			Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings		Total URS Stockholders’ Equity			Noncontrolling Interests			Total Equity
	Shares			Amount			Treasury Stock			Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings		Total URS Stockholders’ Equity			Noncontrolling Interests			Total Equity
Balances, January 2, 2009		83,952		$	850		$	(42,585	)	$	2,838,290		$	(55,866	)	$	883,942	$	3,624,631		$	31,125		$	3,655,756
Employee stock purchases and exercises of stock options		321			3			—			9,862			—			—		9,865			—			9,865
Stock repurchased in connection with exercises of stock options and vesting of restricted stock awards		(211	)		(2	)		—			(8,890	)		—			—		(8,892	)		—			(8,892	)
Stock-based compensation		869			8			—			30,176			—			—		30,184			—			30,184
Excess tax benefits from stock-based compensation		—			—			—			1,983			—			—		1,983			—			1,983
Foreign currency translation adjustments, net of tax		—			—			—			—			9,917			—		9,917			—			9,917
Foreign currency translation adjustment due to sale of investment in unconsolidated joint venture, net of tax		—			—			—			—			5,115			—		5,115			—			5,115
Pension and post-retirement related adjustments, net of tax		—			—			—			—			(456	)		—		(456	)		—			(456	)
Interest rate swaps, net of tax		—			—			—			—			3,081			—		3,081			—			3,081
Repurchases of common stock		(1,000	)		—			(41,225	)		—			—			—		(41,225	)		—			(41,225	)
Unrealized loss on foreign currency forward contract, net of tax		—			—			—			—			(10,728	)		—		(10,728	)		—			(10,728	)
Reclassification of unrealized loss on foreign currency forward contract, net of tax		—			—			—			—			10,728			—		10,728			—			10,728
Distributions to noncontrolling interests		—			—			—			—			—			—		—			(22,238	)		(22,238	)
Contributions and advances from noncontrolling interests		—			—			—			—			—			—		—			16,739			16,739
Other transactions with noncontrolling interests		—			—			—			—			—			—		—			342			342
Net income including noncontrolling interests		—			—			—			—			—			235,365		235,365			16,580			251,945
Balances, October 2, 2009		83,931		$	859		$	(83,810	)	$	2,871,421		$	(38,209	)	$	1,119,307	$	3,869,568		$	42,548		$	3,912,116

See Notes to Condensed Consolidated Financial Statements

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URS CORPORATION AND SUBSIDIARIES

7BCONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY – UNAUDITED

B(In thousands)

	Common Stock						Treasury Stock			Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings		Total URS Stockholders’ Equity			Noncontrolling Interests			Total Equity
	Shares			Amount			Treasury Stock			Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings		Total URS Stockholders’ Equity			Noncontrolling Interests			Total Equity
Balances, January 1, 2010		84,019		$	860		$	(83,810	)	$	2,884,941		$	(49,239	)	$	1,153,062	$	3,905,814		$	44,651		$	3,950,465
Employee stock purchases and exercises of stock options		216			2			—			6,452			—			—		6,454			—			6,454
Stock repurchased in connection with exercises of stock options and vesting of restricted stock awards		(332	)		(3	)		—			(16,157	)		—			—		(16,160	)		—			(16,160	)
Stock-based compensation		865			9			—			32,313			—			—		32,322			—			32,322
Excess tax benefits from stock-based compensation		—			—			—			3,402			—			—		3,402			—			3,402
Foreign currency translation adjustments, net of tax		—			—			—			—			15,174			—		15,174			—			15,174
Pension and post-retirement related adjustments, net of tax		—			—			—			—			1,894			—		1,894			—			1,894
Interest rate swaps, net of tax		—			—			—			—			3,068			—		3,068			—			3,068
Repurchases of common stock		(2,000	)		—			(85,457	)		—			—			—		(85,457	)		—			(85,457	)
Newly consolidated joint ventures		—			—			—			—			—			—		—			40,975			40,975
Distributions to noncontrolling interests		—			—			—			—			—			—		—			(48,411	)		(48,411	)
Contributions and advances from noncontrolling interests		—			—			—			—			—			—		—			7,563			7,563
Other transactions with noncontrolling interests		—			—			—			—			—			—		—			(1,119	)		(1,119	)
Net income including noncontrolling interests		—			—			—			—			—			227,937		227,937			52,760			280,697
Balances, October 1, 2010		82,768		$	868		$	(169,267	)	$	2,910,951		$	(29,103	)	$	1,380,999	$	4,094,448		$	96,419		$	4,190,867

See Notes to Condensed Consolidated Financial Statements

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URS CORPORATION AND SUBSIDIARIES

5BCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

6B(In thousands)

	Nine Months Ended
	October 1, 2010			October 2, 2009
Cash flows from operating activities:
Net income including noncontrolling interests	$	280,697		$	251,945
Adjustments to reconcile net income to net cash from operating activities:
Depreciation		59,048			66,958
Amortization of intangible assets		33,980			39,619
Amortization of debt issuance costs		7,134			5,915
Loss on settlement of foreign currency forward contract		—			27,675
Net gain on sale of investment in unconsolidated joint venture		—			(75,589	)
Normal profit		(165	)		(10,895	)
Provision for doubtful accounts		1,915			6,415
Deferred income taxes		25,997			102,753
Stock-based compensation		32,322			30,184
Excess tax benefits from stock-based compensation		(3,402	)		(1,983	)
Equity in income of unconsolidated joint ventures, less dividends received		33,995			(19,723	)
Changes in operating assets, liabilities and other, net of effects of newly consolidated joint ventures:
Accounts receivable and costs and accrued earnings in excess of billings on contracts		(91,782	)		40,817
Other current assets		4,931			(998	)
Advances to unconsolidated joint ventures		(1,744	)		14,984
Accounts payable, accrued salaries and employee benefits, and other current liabilities		4,324			(23,882	)
Billings in excess of costs and accrued earnings on contracts		(42,231	)		(9,818	)
Other long-term liabilities		14,096			398
Other assets		(5,617	)		3,381
Total adjustments and changes		72,801			196,211
Net cash from operating activities		353,498			448,156
Cash flows from investing activities:
Payments for a business acquisition, net of cash acquired		(287,999	)		—
Cash related to newly consolidated joint ventures		20,696			—
Proceeds from disposal of property and equipment		4,158			53,362
Proceeds from sale of investment in unconsolidated joint venture, net of related selling costs		—			282,584
Payment in settlement of foreign currency forward contract		—			(273,773	)
Receipt in settlement of foreign currency forward contract		—			246,098
Investments in unconsolidated joint ventures		(6,036	)		(13,769	)
Changes in restricted cash		(16,468	)		(1,108	)
Capital expenditures, less equipment purchased through capital leases and equipment notes		(34,065	)		(34,455	)
Purchases of short-term investments		—			(195,562	)
Maturity of short-term investment		30,232			—
Net cash from investing activities		(289,482	)		63,377

See Notes to Condensed Consolidated Financial Statements

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URS CORPORATION AND SUBSIDIARIES

7BCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS – UNAUDITED (continued)

8B(In thousands)

	Nine Months Ended
	October 1, 2010			October 2, 2009
Cash flows from financing activities:
Payments on long-term debt		(82,389	)		(215,030	)
Net borrowings (payments) under lines of credit and short-term notes		4,014			(483	)
Net change in overdrafts		(4,549	)		3
Payments on capital lease obligations		(5,139	)		(4,771	)
Excess tax benefits from stock-based compensation		3,402			1,983
Proceeds from employee stock purchases and exercises of stock options		6,453			9,865
Net distributions to noncontrolling interests		(64,462	)		(16,216	)
Repurchases of common stock		(85,457	)		(41,225	)
Net cash from financing activities		(228,127	)		(265,874	)
Net increase (decrease) in cash and cash equivalents		(164,111	)		245,659
Cash and cash equivalents at beginning of period		720,621			223,998
Cash and cash equivalents at end of period	$	556,510		$	469,657

Supplemental information:
Interest paid	$	18,166		$	31,802
Taxes paid	$	25,405		$	56,094
Taxes refunded	$	—		$	30,565

Supplemental schedule of non-cash investing and financing activities:
Loan Notes issued and estimated consideration for vested shares exercisable in connection with an acquisition	$	34,321		$	—
Equipment acquired with capital lease obligations and equipment note obligations	$	9,999		$	5,463

See Notes to Condensed Consolidated Financial Statements

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URS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

0BNOTE 1. BUSINESS, BASIS OF PRESENTATION, AND ACCOUNTING POLICIES

1BOverview

The terms “we,” “us,” and “our” used in these financial statements refer to URS Corporation and its consolidated subsidiaries unless otherwise indicated. We are a leading international provider of engineering, construction and technical services. We offer a broad range of program management, planning, design, engineering, construction and construction management, operations and maintenance, and decommissioning and closure services to public agencies and private sector clients around the world. We also are a major United States (“U.S.”) federal government contractor in the areas of systems engineering and technical assistance, and operations and maintenance. Headquartered in San Francisco, we have more than 46,500 employees in a global network of offices and contract-specific job sites in more than 40 countries. We operate through three reporting segments: the Infrastructure & Environment business, the Federal Services business and the Energy & Construction business.

The accompanying unaudited condensed consolidated financial statements and related notes have been prepared in accordance with generally accepted accounting principles (“GAAP”) in the U.S. for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.

You should read our unaudited condensed consolidated financial statements in conjunction with the audited consolidated financial statements and related notes contained in our Annual Report on Form 10-K for the year ended January 1, 2010. The results of operations for the three and nine months ended October 1, 2010 are not indicative of the operating results for the full year or for future years.

In our opinion, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments that are necessary for a fair statement of our financial position, results of operations and cash flows for the interim periods presented.

The preparation of our unaudited condensed consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the balance sheet dates as well as the reported amounts of revenues and costs during the reporting periods. Actual results could differ from those estimates. On an ongoing basis, we review our estimates based on information that is currently available. Changes in facts and circumstances may cause us to revise our estimates.

Principles of Consolidation and Basis of Presentation

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

On September 10, 2010, we completed the acquisition of Scott Wilson Group plc. (“Scott Wilson”). The operating results of Scott Wilson from the acquisition date through October 1, 2010 are included in our condensed consolidated financial statements under the Infrastructure & Environment business. See Note 15, “Acquisition,” for more information regarding this acquisition.

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

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URS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(Continued)

Consolidation of Variable Interest Entities

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

A variable interest entity (“VIE”) is an entity with one or more of the following characteristics (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional financial support; (b) as a group, the holders of the equity investment at risk lack the ability to make certain decisions, the obligation to absorb expected losses or the right to receive expected residual returns, or (c) an equity investor has voting rights that are disproportionate to its economic interest and substantially all of the entity’s activities are on behalf of the investor.

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

If we are determined to be the primary beneficiary of the VIE, we are required to consolidate it. We are considered to be the primary beneficiary if we have the power to direct the activities that most significantly impact the VIE’s economic performance and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. In determining whether we are the primary beneficiary, our significant assumptions and judgments include the following:

·	Identifying the significant activities and the parties that have the power to direct them;

·	Reviewing the governing board composition and participation ratio;

·	Determining the equity, profit and loss ratio;

·	Determining the management-sharing ratio;

·	Reviewing employment terms, including which joint venture partner provides the project manager; and

·	Reviewing the funding and operating agreements.

Examples of significant activities include the following:

·	Engineering services;

·	Procurement services;

·	Construction;

·	Construction management; and

·	Operations and maintenance services.

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

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As required by the accounting standard, we perform a quarterly re-assessment to determine whether we are the primary beneficiary. This evaluation may result in consolidation of a previously unconsolidated joint venture or in deconsolidation of a previously consolidated joint venture. See Note 5, “Joint Ventures,” for further information on our VIEs.

Reclassifications

We made reclassifications to the prior years’ financial statements to conform them to the current period presentation. These reclassifications have no effect on consolidated net income, comprehensive income, or stockholders’ equity.

Cash and Cash Equivalents

Cash and cash equivalents include all highly liquid investments with maturities of 90 days or less at the date of purchase and include interest-bearing bank deposits and money market funds. At October 1, 2010 and January 1, 2010, restricted cash was $28.4 million and $11.9 million, respectively. These amounts were included in “Other current assets” on our Condensed Consolidated Balance Sheets. For cash held by our consolidated joint ventures, see Note 5, “Joint Ventures.”

Investments

At October 1, 2010, our short-term investments consisted of all highly liquid investments, including interest-bearing time deposits, with maturities of more than 90 days, but less than a year, at the date of purchase. The carrying values of our short-term investments approximate their fair values.

NOTE 2. ADOPTED AND OTHER RECENTLY ISSUED ACCOUNTING STANDARDS

A new accounting standard on transfers of financial assets became effective for us at the beginning of our 2010 fiscal year. This standard eliminates the concept of a qualifying special-purpose entity, limits the circumstances under which a financial asset is derecognized and requires additional disclosures concerning a transferor's continuing involvement with transferred financial assets. The adoption of this standard did not have a material impact on our condensed consolidated financial statements.

A new accounting standard on consolidation of VIEs became effective for us at the beginning of our 2010 fiscal year. This standard amends the accounting and disclosure requirements for the consolidation of a VIE. It requires additional disclosures about the significant judgments and assumptions used in determining whether to consolidate a VIE, the restrictions on a consolidated VIE’s assets and on the settlement of a VIE’s liabilities, the risk associated with involvement in a VIE, and the financial impact on a company due to its involvement with a VIE. As the standard requires ongoing quarterly evaluation of the application of the new requirements, changes in circumstances could result in the identification of additional VIEs to be consolidated or existing VIEs to be deconsolidated in any reporting period. We adopted this standard prospectively and based on the carrying values of the entities at the date of adoption. The adoption of this standard did not have a material impact on our condensed consolidated financial statements. For additional disclosure, see Note 5, “Joint Ventures.”

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An accounting standard update related to recurring and nonrecurring fair value measurements was issued. This update requires new disclosures on significant transfers of assets and liabilities between Level 1 and Level 2 of the fair value hierarchy (including the reasons for these transfers) and the reasons for any transfers in or out of Level 3. It also requires a reconciliation of recurring Level 3 measurements including purchases, sales, issuances and settlements on a gross basis. The accounting update clarifies certain existing disclosure requirements and requires fair value measurement disclosures for each class of assets and liabilities as opposed to each major category of assets and liabilities. It also clarifies that entities are required to disclose information about both the valuation techniques and inputs used in estimating Level 2 and Level 3 fair value measurements. Except for the disclosures on the reconciliation of recurring Level 3 measurements, the other new disclosures and clarifications of existing disclosures were effective for us beginning with the first quarter of our 2010 fiscal year. The adoption of this standard did not have a material impact on our condensed consolidated financial statements. See Note 8, “Fair Values of Debt Instruments, Investments and Derivative Instruments,” for our fair value measurement disclosure. The information about the activity in Level 3 fair value measurements on a gross basis will be effective for us beginning with the first quarter of our 2011 fiscal year. We currently do not expect that the adoption of this portion of the standard will have a material impact on our consolidated financial statements.

NOTE 3. EARNINGS PER SHARE

In our computation of diluted earnings per share (“EPS”), we exclude the potential shares related to stock options that are issued and unexercised where the exercise price exceeds the average market price of our common stock during the period. We also exclude nonvested restricted stock awards and units that have an anti-dilutive effect on EPS or that currently have not met performance conditions.

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

	Three Months Ended				Nine Months Ended
(In thousands)	October 1, 2010		October 2, 2009		October 1, 2010		October 2, 2009
Weighted-average common stock shares outstanding (1)		81,054		81,418		81,216		81,419
Effect of dilutive stock options, restricted stock awards and units and employee stock purchase plan shares		238		362		364		476
Weighted-average common stock outstanding – Diluted		81,292		81,780		81,580		81,895

(1)	Weighted-average common stock outstanding is net of treasury stock.

(In thousands)		October 1, 2010				October 2, 2009
Anti-dilutive equity awards not included above			895				559

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

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

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

Accounts receivable and costs and accrued earnings in excess of billings on contracts include certain amounts recognized related to unapproved change orders (amounts representing the value of proposed contract modifications, but which are unapproved as to both price and scope) and claims, (amounts in excess of agreed contract prices that we seek to collect from our clients or others) that have not been collected and, in the case of balances included in accrued earnings in excess of billings on contracts, may not be billable until an agreement, or in the case of claims, a settlement is reached. Most of those balances are not material and are typically resolved in the ordinary course of business. At October 1, 2010, significant unapproved change orders and claims collectively represented approximately 2% of our accounts receivable and accrued earnings in excess of billings on contracts.

The following table summarizes the components of our accounts receivable and costs and accrued earnings in excess of billings on contracts with the U.S. federal government and with other customers as of October 1, 2010 and January 1, 2010:

	As of
(In millions)	October 1, 2010		January 1, 2010
Accounts receivable:
U.S. federal government	$	373.8	$	330.5
Others		745.5		593.8
Total accounts receivable	$	1,119.3	$	924.3
Costs and accrued earnings in excess of billings on contracts:
U.S. federal government	$	671.3	$	557.7
Others		552.8		466.5
Total costs and accrued earnings in excess of billings on contracts	$	1,224.1	$	1,024.2

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NOTE 5. JOINT VENTURES

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

·	Engineering, procurement and construction of a concrete dam;

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

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

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

·	Procurement and construction of levee improvements.

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

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

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

During the first quarter of 2010, our review of our joint ventures resulted in the identification and consolidation of several immaterial joint ventures, which, under the previous standard, should have been consolidated.

During the third quarter of 2010, we performed an assessment of our joint ventures to determine whether there were any changes in the status of the VIEs or changes to the primary beneficiary designation of each VIE. Based on our analysis, we concluded that no unconsolidated joint ventures should be consolidated and that no consolidated joint ventures should be de-consolidated.

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

Consolidated Joint Ventures

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

(In thousands)	October 1, 2010		January 1, 2010
Cash and cash equivalents	$	84,976	$	112,424
Net accounts receivable		338,218		228,132
Other current assets		927		2,200
Non-current assets		15,742		197
Total assets	$	439,863	$	342,953

Accounts and subcontractors payable	$	186,366	$	128,073
Billings in excess of costs and accrued earnings		4,971		14,589
Accrued expenses and other		32,547		31,416
Non-current liabilities		2,993		—
Total liabilities		226,877		174,078

Total URS equity		116,567		124,224
Noncontrolling interests		96,419		44,651
Total owners’ equity		212,986		168,875
Total liabilities and owners’ equity	$	439,863	$	342,953

Total revenues of the consolidated joint ventures were $471.7 million and $333.6 million for the three months ended October 1, 2010 and October 2, 2009, respectively, and $1.3 billion and $899.6 million for the nine months ended October 1, 2010 and October 2, 2009, respectively.

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

Unconsolidated Joint Ventures

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

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

(In thousands)	Unconsolidated VIEs			MIBRAG Mining Joint Venture (1)
October 1, 2010
Current assets	$	473,552			N/A
Noncurrent assets	$	7,134			N/A
Current liabilities	$	385,611			N/A
Noncurrent liabilities	$	70			N/A

January 1, 2010
Current assets	$	574,556			N/A
Noncurrent assets	$	18,275			N/A
Current liabilities	$	442,688			N/A
Noncurrent liabilities	$	84			N/A

Three months ended October 1, 2010 (2,3)
Revenues	$	296,501			N/A
Cost of revenues	$	(309,428	)		N/A
Loss from continuing operations before tax	$	(12,927	)		N/A
Net loss	$	(16,020	)		N/A

Three months ended October 2, 2009 (2)
Revenues	$	425,389			N/A
Cost of revenues	$	(362,227	)		N/A
Income from continuing operations before tax	$	63,162			N/A
Net income	$	61,376			N/A

Nine months ended October 1, 2010 (2,3)
Revenues	$	943,685			N/A
Cost of revenues	$	(842,833	)		N/A
Income from continuing operations before tax	$	100,852			N/A
Net income	$	92,341			N/A

Nine months ended October 2, 2009 (2)
Revenues	$	1,426,963		$	219,606
Cost of revenues	$	(1,235,808	)	$	(181,770	)
Income from continuing operations before tax	$	191,155		$	37,836
Net income	$	182,730		$	37,307

(1)

During the second quarter of 2009, we sold our equity investment in the MIBRAG mbH (“MIBRAG”) mining venture.

(2)

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

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(3)

In October 2010, we received notice of a ruling on the priority of claims against the 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 or $0.18 per share on an after-tax basis in the third quarter of 2010. The remaining $3.2 million of our net investment in the joint venture reflects expected reimbursement of legal fees from an insurance provider. See Note 14, “Commitments and Contingencies,” for more information regarding this case.

We received $35.5 million and $12.3 million, respectively, of distributions from unconsolidated joint ventures for the three months ended October 1, 2010 and October 2, 2009 and $70.5 million and $59.3 million, respectively, for the nine months ended October 1, 2010 and October 2, 2009. There were no distributions from MIBRAG for the three and nine months ended October 2, 2009.

Maximum Exposure to Loss

In addition to potential losses arising out of the carrying values of the assets and liabilities of our unconsolidated joint ventures, our maximum exposure to loss also includes performance assurances and guarantees we sometimes provide to clients on behalf of joint ventures that we do not directly control. We enter into these guarantees primarily to support the contractual obligations associated with the joint ventures’ projects. The potential payment amount of an outstanding performance guarantee is typically the remaining cost of work to be performed by or on behalf of third parties under engineering and construction contracts. However, the nature of these costs are such that we are not able to estimate amounts that may be required to be paid in excess of estimated costs to complete contracts and, accordingly, the exposure to loss as a result of these performance guarantees cannot be calculated.

Sale of Equity Investment in MIBRAG

On June 10, 2009, we completed the sale of our equity investment in MIBRAG. We received €206.1 million (equivalent to U.S. $287.8 million) in cash proceeds from the sale. In addition, we settled our foreign currency forward contract, which primarily hedged our net investment in MIBRAG. (See Note 7, “Indebtedness,” for further discussion of our foreign currency loss related to the foreign currency forward contract). The following table describes the impact of these transactions for the three and nine months ended October 2, 2009:

(In millions)	Nine Months Ended October 2, 2009
Other income, net:
Sales proceeds	$	287.8
Less: carrying value		(207.0	)
sale-related costs		(5.2	)
Gain on sale		75.6
Loss on settlement of foreign currency forward contract		(27.7	)
Other income, net	$	47.9

The net after-tax impact of these two transactions resulted in an increase to net income of $30.6 million for the nine months ended October 2, 2009. It also increased diluted EPS by $0.37 for the nine months ended October 2, 2009.

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NOTE 6. PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS

Property and Equipment

Our property and equipment consisted of the following:

(In thousands)	October 1, 2010			January 1, 2010
Equipment and internal-use software	$	420,344		$	376,169
Construction and mining equipment		121,075			115,954
Furniture and fixtures		66,679			57,038
Leasehold improvements		74,890			71,037
Construction in progress		380			130
Land, buildings and improvements		8,859			584
		692,227			620,912
Accumulated depreciation and amortization		(416,461	)		(361,962	)
Property and equipment at cost, net	$	275,766		$	258,950

Our depreciation expense related to property and equipment was $19.4 million and $21.3 million for the three months ended October 1, 2010 and October 2, 2009, respectively, and $59.0 million and $67.0 million for the nine months ended October 1, 2010 and October 2, 2009, respectively.

Intangible Assets

During the third quarter of 2010, we acquired $135 million of identifiable intangible assets through our acquisition of Scott Wilson. See Note 15, “Acquisition,” for more information regarding this acquisition.

Amortization expense related to intangible assets was $11.7 million and $13.2 million for the three months ended October 1, 2010 and October 2, 2009, respectively, and $34.0 million and $39.6 million for the nine months ended October 1, 2010 and October 2, 2009, respectively.

NOTE 7. INDEBTEDNESS

Indebtedness consisted of the following:

(In thousands)	October 1, 2010		January 1, 2010
Bank term loans, net of debt issuance costs	$	693,348	$	763,858
Obligations under capital leases		20,619		16,481
Notes payable, foreign credit lines and other indebtedness		75,163		24,647
Total indebtedness		789,130		804,986
Less:
Current portion of long-term debt		73,115		115,261
Long-term debt	$	716,015	$	689,725

2007 Credit Facility

As of October 1, 2010 and January 1, 2010, the outstanding balance of term loan A was $548.8 million and $607.6 million, respectively, at interest rates of 1.27% and 1.25%, respectively. As of October 1, 2010 and January 1, 2010, the outstanding balance of term loan B was $151.2 million and $167.4 million, respectively, at interest rates of 2.52% and 2.50%, respectively.

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Under the terms of our Senior Secured Credit Facility (“2007 Credit Facility”), we are generally required to remit as debt payments any proceeds we receive from the sale of assets and the issuance of debt. On February 16, 2010, we entered into a consent agreement to our 2007 Credit Facility, which allows us to use the funds from the sale of our equity investment in MIBRAG for general operating purposes. As a result of this consent, we were no longer required to remit a payment relating to this transaction in the first quarter of 2010 and our next scheduled payment is expected to be due in March 2012.

Under our 2007 Credit Facility, we are subject to two financial covenants: 1) a maximum consolidated leverage ratio, which is calculated by dividing consolidated total debt by consolidated EBITDA, as defined below, and 2) a minimum interest coverage ratio, which is calculated by dividing consolidated cash interest expense into consolidated EBITDA. Both calculations are based on the financial data of the most recent four fiscal quarters.

For purposes of our 2007 Credit Facility, consolidated EBITDA is defined as consolidated net income attributable to URS plus interest, depreciation and amortization expense, amounts set aside for taxes, other non-cash items (including goodwill impairments) and other pro forma adjustments related to permitted acquisitions.

As of October 1, 2010, our consolidated leverage ratio was 1.2, which did not exceed the maximum consolidated leverage ratio of 2.375, and our consolidated interest coverage ratio was 19.8, which exceeded the minimum consolidated interest coverage ratio of 5.0. During the first quarter of 2010, Moody’s Investor Services upgraded our credit rating to Ba1. On April 16, 2010, Standard and Poor’s upgraded our credit rating to BB+. As a result of these upgrades in our credit ratings in the first nine months of 2010, some of our non-financial covenants, such as the ability to acquire other companies, are no longer applicable or became less restrictive. We were in compliance with the covenants of our 2007 Credit Facility as of October 1, 2010.

Revolving Line of Credit

We did not have an outstanding debt balance on our revolving line of credit as of either October 1, 2010 or January 1, 2010. As of October 1, 2010, we had issued $165.4 million of letters of credit, leaving $534.6 million available on our revolving credit facility. If we elected to borrow the remaining amounts available under our revolving line of credit as of October 1, 2010, we would remain in compliance with the covenants of our 2007 Credit Facility.

Other Indebtedness

Notes payable, foreign credit lines and other indebtedness. As of October 1, 2010 and January 1, 2010, we had outstanding amounts of $75.2 million and $24.6 million, respectively, in notes payable and foreign lines of credit. The weighted-average interest rates of the notes were approximately 2.4% and 5.6% as of October 1, 2010 and January 1, 2010, respectively. Notes payable primarily include notes used to finance the purchase of office equipment, computer equipment and furniture, and five-year loan notes (“Loan Notes”).

The Loan Notes of £17.9 million (equivalent to U.S. $28.2 million as of October 1, 2010) were issued to shareholders of Scott Wilson as an alternative to cash consideration. The Loan Notes are collateralized by cash held in trust and are redeemable at the note holder’s option in whole or in part on each of the interest payment dates falling six months after September 10, 2010, the issuance date. The Loan Notes will expire and be fully redeemed on September 10, 2015. The Loan Notes will pay interest semi-annually at the prevailing six-month pound sterling LIBOR rate less 0.25% set on each March and September 10th. See Note 15, “Acquisition,” for more information regarding this acquisition.

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We maintain foreign lines of credit, which are collateralized by the assets of our foreign subsidiaries and, in some cases, parent guarantees. As part of our acquisition of Scott Wilson, we assumed various credit lines, the largest being £40.0 million (equivalent to U.S. $62.9 million as of October 1, 2010) to allow for borrowing capacity in the U.K. and for worldwide guarantee usage for Scott Wilson legal entities.

As of October 1, 2010 and January 1, 2010, we had $89.0 million and $15.8 million in lines of credit available under all foreign facilities, respectively. As of October 1, 2010, the total outstanding balance of our credit lines was $27.6 million.

Capital Leases. As of October 1, 2010 and January 1, 2010, we had obligations under our capital leases of approximately $20.6 million and $16.5 million, respectively, consisting primarily of leases for office equipment, computer equipment and furniture.

NOTE 8. FAIR VALUES OF DEBT INSTRUMENTS, INVESTMENTS AND DERIVATIVE INSTRUMENTS

Our investments and derivative instruments were carried at their fair values as of October 1, 2010 and January 1, 2010, as presented in the following tables:

(In millions)	Carrying Value as of October 1, 2010		Fair Value Measurement as of October 1, 2010
(In millions)	Carrying Value as of October 1, 2010		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Interest rate instruments	$	3.2	$	—	$	3.2	$	—
Short-term investment	0.5		—		0.5		—

(In millions)	Carrying Value as of January 1, 2010		Fair Value Measurement as of January 1, 2010
(In millions)	Carrying Value as of January 1, 2010		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Interest rate instrument	$	7.1	$	—	$	7.1	$	—
Short-term investments	30.7		—		30.7		—

2007 Credit Facility

As of October 1, 2010 and January 1, 2010, the estimated current market values of term loans A and B, net of debt issuance costs, were approximately $7.8 million and $25.3 million less than the amount reported on our Condensed Consolidated Balance Sheets, respectively. The fair values of our term loans A and B were derived by taking the mid-point of the trading prices from an observable market input in the secondary loan market and multiplying it by the outstanding balance of our term loans. The change in the fair values of our loans from January 1, 2010 to October 1, 2010 was due to market forces and credit rating upgrades by two outside credit rating agencies.

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Interest Rate Instruments

Our 2007 Credit Facility is a floating-rate facility. To hedge against changes in floating interest rates, we have one floating-for-fixed interest rate swap with a notional amount of $200.0 million, maturing on December 31, 2010. As of October 1, 2010 and January 1, 2010, the fair value of our swap liability was $2.0 million and $7.1 million, respectively. The swap liability was recorded in “Other current liabilities” on our Condensed Consolidated Balance Sheets. The adjustments to the fair value of the swap liability were recorded in “Accumulated other comprehensive loss.” We have recorded no gain or loss on our Condensed Consolidated Statements of Operations as our interest rate swap is an effective hedge. As part of our acquisition of Scott Wilson, we assumed a three-month pound sterling LIBOR interest rate contract maturing on July 24, 2012 and recorded an immaterial adjustment related to the change in its fair value during the quarter ended October 1, 2010.

We use our derivative instruments as a risk management tool and not for trading or speculative purposes. The fair value of each derivative instrument is based on mark-to-model measurements that are interpolated from observable market data as of October 1, 2010 and January 1, 2010 and for the duration of each derivative’s terms. The fair values of our short-term investments, consisting of interest-bearing time deposits, approximate their carrying values based upon the current market rates for similar instruments.

Foreign Currency Contracts

We operate our business globally and our foreign subsidiaries conduct businesses in various foreign currencies. Therefore, we are subject to foreign currency risk. From time to time, we purchase derivative financial instruments in the form of foreign currency exchange contracts to manage specific foreign currency exposures. Currently, we have several immaterial foreign currency contracts to cover the risks associated with our international operations.

On March 4, 2009, we entered into a foreign currency forward contract with a notional amount of €196.0 million (equivalent to U.S. $246.1 million per the contract) with a maturity window from April 15, 2009 to July 31, 2009. The primary objective of the contract was to manage our exposure to foreign currency transaction risk related to the Euro proceeds we received from the sale of our equity investment in MIBRAG, which closed on June 10, 2009. We designated €128.0 million (equivalent to U.S. $160.7 million at the contractual rate) of the contract as a hedge of our net investment in MIBRAG.

We settled our foreign currency forward contract during the second quarter of 2009. For the nine months ended October 2, 2009, we recorded a loss on the settlement of this contract of $27.7 million in “Other income net” on our Condensed Consolidated Statements of Operations. The following table presents the components of our foreign currency forward contract loss:

(In millions)	Nine Months Ended October 2, 2009
Effective hedge portion of the contract	$	17.9
Unhedged portion of the contract		9.8
Loss on settlement of foreign currency forward contract	$	27.7

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NOTE 9. BILLINGS IN EXCESS OF COSTS AND ACCRUED EARNINGS ON CONTRACTS

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

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

	As of
(In millions)	October 1, 2010		January 1, 2010
Billings in excess of costs and accrued earnings on contracts	$	169.9	$	195.6
Advance payments negotiated as a contract condition		56.4		10.1
Estimated losses on uncompleted contracts		27.4		19.0
Normal profit liabilities		0.2		0.4
Project-related legal liabilities and other project-related reserves		5.7		5.9
Other		4.5		4.3
Total	$	264.1	$	235.3

NOTE 10. INCOME TAXES

Our effective income tax rates for the three months ended October 1, 2010 and October 2, 2009 were 42.5% and 26.4%, respectively. In the third quarter of 2009, we recorded a tax benefit resulting from our determination that the earnings of our foreign subsidiaries would no longer be indefinitely reinvested. No corresponding benefit was booked in the third quarter of 2010.

Our effective income tax rates for the nine months ended October 1, 2010 and October 2, 2009 were 29.5% and 37.6%, respectively. The reduction in the rate for the nine months ended October 1, 2010 was primarily due to our determination made during the first quarter of 2010 that earnings of all of our foreign subsidiaries will be indefinitely reinvested offshore, which resulted in the reversal of the net U.S. deferred tax liability on the undistributed earnings of all foreign subsidiaries. On February 16, 2010, we entered into a consent with our lenders related to our 2007 Credit Facility that permits us to utilize the funds received in June 2009 from the sale of our equity investment in MIBRAG for general operating purposes. This consent allowed these funds to be indefinitely reinvested offshore to facilitate the implementation of our strategy to expand our international business. During the first quarter of 2010, we determined that our plans to expand the scope of our international presence would require that we indefinitely reinvest the earnings of all of our foreign subsidiaries. For fiscal years 2007 and 2008, our foreign subsidiaries distributed to their U.S. shareholders $0.1 million and $8.3 million, respectively, that were taxable in the U.S. No cash distributions were made from our foreign subsidiaries to their U.S. shareholders in fiscal year 2009 or in the nine months ended October 1, 2010. In the fourth quarter of 2009 and the third quarter of 2010, some distributions were made among our foreign subsidiaries, which resulted in foreign earnings being subject to U.S. taxation of $16.0 million and $6.4 million, respectively.

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The reconciliation of our income tax expense and effective income tax rates for the nine months ended October 1, 2010 and October 2, 2009 is as follows:

	Nine Months Ended
	October 1, 2010						October 2, 2009
(In thousands, except for percentages)	Amount			Tax Rate			Amount			Tax Rate
U.S. statutory rate applied to income before taxes	$	139,317			35.0	%	$	141,299			35.0	%
State taxes, net of federal benefit		19,029			4.8	%		18,081			4.5	%
Change in indefinite reinvestment assertion		(58,176	)		(14.6	%)		(14,703	)		(3.6	%)
Adjustments to valuation allowances		14,446			3.6	%		2,099			0.5	%
Adjustments related to changing foreign tax credits to deductions		13,616			3.4	%		—			—
Foreign income taxed at rates other than 35%		(13,740	)		(3.4	%)		—			—
Other adjustments		2,860			0.7	%		4,989			1.2	%
Total income tax expense	$	117,352			29.5	%	$	151,765			37.6	%

As of October 1, 2010, our federal net operating loss (“NOL”) carryover was approximately $22.2 million. These federal NOL carryovers expire in years 2020 through 2025. In addition to the federal NOL carryovers, there are also state income tax NOL carryovers in various taxing jurisdictions of approximately $400.3 million. These state NOL carryovers expire in years 2010 through 2027. There are also foreign NOL carryovers in various taxing jurisdictions of approximately $340.1 million. The majority of the foreign NOL carryovers have no expiration date. The NOL carryovers result in a deferred tax asset of $116.5 million. A valuation allowance of $95.3 million has been established against these deferred tax assets. None of the remaining deferred tax assets related to NOL carryovers is individually material. Full recovery of our NOL carryovers will require that the appropriate legal entity generate taxable income in the future at least equal to the amount of the NOL carryovers within the applicable taxing jurisdiction.

We anticipate that cash payments for income taxes for 2010 will be substantially less than the income tax expense that will be recognized in the financial statements. This difference results from expected tax deductions for goodwill amortization. As of October 1, 2010, we have remaining tax-deductible goodwill of $356.1 million resulting from acquisitions by Washington Group International (“WGI”) before our acquisition of WGI, as well as from our other prior acquisitions. The amortization of this goodwill is deductible over various periods ranging up to 13 years. The tax deduction for goodwill for 2010 is expected to be $87.2 million. The amount of the tax deduction for goodwill is expected to decrease slightly over the next four years and will be substantially lower after five years.

NOTE 11. EMPLOYEE RETIREMENT AND POST-RETIREMENT BENEFIT PLANS

Defined Benefit Plans

We sponsor a number of pension and unfunded supplemental executive retirement plans. As part of our acquisition of Scott Wilson, we assumed two foreign defined benefit retirement plans and the net accrued benefit liabilities of these two plans were $84.0 million as of October 1, 2010. See Note 15, “Acquisition,” for more information regarding this acquisition.

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The components of our net periodic pension costs relating to our defined benefit plans for the three and nine months ended October 1, 2010 and October 2, 2009 were as follows:

	Three Months Ended
	Domestic Plans						Foreign Plans
(In thousands)	October 1, 2010			October 2, 2009			October 1, 2010			October 2, 2009
Service cost	$	1,590		$	1,660		$	79		$	—
Interest cost		4,610			4,605			1,484			197
Expected return on plan assets		(3,933	)		(3,745	)		(1,369	)		(115	)
Amortization of:
Prior service costs		(796	)		(796	)		—			—
Net loss		902			246			23			—
Net periodic pension cost	$	2,373		$	1,970		$	217		$	82

	Nine Months Ended
	Domestic Plans						Foreign Plans
(In thousands)	October 1, 2010			October 2, 2009			October 1, 2010			October 2, 2009
Service cost	$	4,770		$	4,980		$	79		$	—
Interest cost		13,830			13,815			2,027			552
Expected return on plan assets		(11,799	)		(11,235	)		(1,684	)		(322	)
Amortization of:
Prior service costs		(2,388	)		(2,388	)		—			—
Net loss		2,706			738			70			—
Net periodic pension cost	$	7,119		$	5,910		$	492		$	230

During the three and nine months ended October 1, 2010, we made cash contributions, including employer-directed benefit payments, of $4.8 million and $16.9 million, respectively, to the domestic and foreign defined benefit plans. We expect to make additional cash contributions, including estimated employer-directed benefit payments, of approximately $5.1 million for the remainder of 2010.

Post-retirement Benefit Plans

We sponsor a number of retiree health and life insurance benefit plans (“post-retirement benefit plans”). The components of our net periodic benefit cost relating to the post-retirement benefit plans for the three and nine months ended October 1, 2010 and October 2, 2009 were as follows:

	Three Months Ended						Nine Months Ended
(In thousands)	October 1, 2010			October 2, 2009			October 1, 2010			October 2, 2009
Service cost	$	17		$	16		$	51		$	48
Interest cost		562			637			1,686			1,911
Expected return on plan assets		(63	)		(53	)		(189	)		(159	)
Amortization of:
Net gain		(33	)		(36	)		(99	)		(108	)
Net periodic benefit cost	$	483		$	564		$	1,449		$	1,692

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During the three and nine months ended October 1, 2010, we made employer-directed benefit payments of $1.0 million and $2.8 million, respectively, to the post-retirement benefit plans. We expect to make cash contributions, including estimated employer-directed benefit payments, of approximately $0.9 million for the remainder of 2010.

NOTE 12. STOCKHOLDERS’ EQUITY

Equity Incentive Plans

As of October 1, 2010, approximately 2.2 million shares were issued as restricted stock awards and 0.1 million shares were issuable upon the vesting of restricted stock units under our 2008 Equity Incentive Plan (the “2008 Plan”). In addition, approximately 2.7 million shares remained reserved for future grant under the 2008 Plan. The 2008 Plan replaced our 1999 Equity Incentive Plan (the “1999 Plan”). Although our 1999 Plan became inactive, as of October 1, 2010, we still had approximately 0.7 million shares of nonvested restricted stock awards and restricted stock units and approximately 0.7 million shares of outstanding unexercised stock options that had been granted under the 1999 Plan.

Stock Repurchase Program

On September 10, 2010, the Board of Directors approved an increase and extension of the stock repurchase program that conformed to the terms of our 2007 Credit Facility, as amended. Under the modified stock repurchase program, we are authorized to repurchase, in each of the fiscal years during the period from January 2, 2010 through January 2, 2015, up to three million shares of our common stock, plus the number of shares of common stock equal to the excess, if any, of three million shares over the actual number of shares repurchased during the prior fiscal year. In addition, we are subject to covenants under our 2007 Credit Facility that may limit our ability to repurchase stock if we do not maintain various designated financial criteria.

During the three months ended October 1, 2010, we repurchased an aggregate of 1.0 million shares of our common stock at an average price of $37.04 per common share for approximately $37.0 million. During the nine months ended October 1, 2010, we repurchased an aggregate of 2.0 million shares of our common stock at an average price of $42.73 per common share for approximately $85.5 million.

During the three months ended October 2, 2009, we repurchased an aggregate of 0.4 million shares of our common stock at a weighted-average price of $47.66 per common share for approximately $17.3 million. During the nine months ended October 2, 2009, we repurchased an aggregate of one million shares of our common stock at a weighted-average price of $41.23 per common share for approximately $41.2 million.

Stock-Based Compensation

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

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The following table presents our stock-based compensation expenses related to restricted stock awards and units, our employee stock purchase plan and the related income tax benefits recognized for the three and nine months ended October 1, 2010 and October 2, 2009:

	Three Months Ended				Nine Months Ended
(In millions)	October 1, 2010		October 2, 2009		October 1, 2010		October 2, 2009
Stock-based compensation expenses:
Restricted stock awards and units	$	11.4	$	11.3	$	32.0	$	29.3
Employee stock purchase plan		0.1		0.1		0.3		0.9
Stock-based compensation expenses	$	11.5	$	11.4	$	32.3	$	30.2

Total income tax benefits recognized in our net income related to stock-based compensation expenses	$	4.4	$	4.4	$	12.4	$	11.6

Employee Stock Purchase Plan

Our 2008 Employee Stock Purchase Plan allows qualifying employees to purchase shares of our common stock through payroll deductions of up to 10% of their compensation, subject to Internal Revenue Code limitations, at a price of 95% of the fair market value as of the end of each of the six-month offering periods. The offering periods commence on January 1 and July 1 of each year.

Restricted Stock Awards and Units

Restricted stock awards and units generally vest over a four-year vesting period. Vesting of some awards is subject to both service requirements and performance conditions. Currently outstanding restricted stock awards and units with a performance condition vest upon the achievement of an annual net income target, established in the first quarter of the fiscal year preceding the vesting date. Our awards are measured based on the stock price on the date that all of the key terms and conditions related to the award are known and are expensed over their respective vesting periods. Restricted stock awards and units are expensed on a straight-line basis over their respective vesting periods subject to the probability of meeting performance and/or service requirements.

As of October 1, 2010, we had estimated unrecognized stock-based compensation expense of $95.1 million related to nonvested restricted stock awards and units. This expense is expected to be recognized over a weighted-average period of 2.6 years. The following table summarizes the total fair values of vested shares, according to their contractual terms, and the grant date fair values of restricted stock awards and units granted during the nine months ended October 1, 2010 and October 2, 2009:

(In millions)	October 1, 2010		October 2, 2009
Fair values of shares vested	$	38.2	$	22.4
Grant date fair values of restricted stock awards and units granted	$	42.3	$	50.6

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(Continued)

A summary of the status of and changes in our nonvested restricted stock awards and units, according to their contractual terms, as of and for the nine months ended October 1, 2010 is presented below:

	Nine Months Ended October 1, 2010
	Shares			Weighted-Average Grant Date Fair Value
Nonvested at January 1, 2010		2,644,571		$	42.16
Granted		968,417		$	43.67
Vested		(932,750	)	$	40.92
Forfeited		(72,421	)	$	42.21
Nonvested at October 1, 2010		2,607,817		$	43.16

Stock Options

We have not granted any stock options since September 2005. Stock options expire in ten years from the date of grant. A summary of the status and changes of the stock options, according to their contractual terms, is presented below:

	Options			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in millions)
Outstanding and exercisable at January 1, 2010		766,066		$	22.99		3.46	$	16.5
Exercised		(100,319	)	$	21.14
Forfeited/expired/cancelled		(4,834	)	$	16.51
Outstanding and exercisable at October 1, 2010		660,913		$	23.32		2.85	$	9.9

The aggregate intrinsic value in the preceding table represents the total pre-tax intrinsic value, based on our closing market price of $38.25 as of October 1, 2010, which would have been received by the option holders had all option holders exercised their options on that date.

For the nine months ended October 1, 2010 and October 2, 2009, the aggregate intrinsic value of stock options exercised, determined as of the date of option exercise, was $2.7 million and $5.1 million, respectively. Since all of our stock option awards were fully vested in fiscal year 2008, we did not have any stock-based compensation expense related to stock option awards or any unrecognized related expense.

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NOTE 13. SEGMENT AND RELATED INFORMATION

We operate our business through the following three segments:

Infrastructure & Environment business (formerly referred to as the URS Division) provides program management, planning, design, engineering, construction and construction management, operations and maintenance, and decommissioning and closure services to the U.S. federal government, state and local government agencies, and private sector clients in the U.S. and internationally.

Federal Services business (formerly referred to as the EG&G Division) provides services to various U.S. federal government agencies, primarily the Departments of Defense and Homeland Security. These services include program management, planning, design and engineering, systems engineering and technical assistance, construction and construction management, operations and maintenance, and decommissioning and closure.

Energy & Construction business (formerly referred to as the Washington Division) provides program management, planning, design, engineering, construction and construction management, operations and maintenance, and decommissioning and closure services to the U.S. federal government, state and local government agencies, and private sector clients in the U.S. and internationally.

These three segments operate under separate management groups and produce discrete financial information. Their operating results also are reviewed separately by management. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies in our Annual Report on Form 10-K for the year ended January 1, 2010. The information disclosed in our condensed consolidated financial statements is based on the three segments that comprise our current organizational structure.

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

	Three Months Ended						Nine Months Ended
(In millions)	October 1, 2010			October 2, 2009			October 1, 2010			October 2, 2009
Revenues
Infrastructure & Environment	$	818.2		$	793.0		$	2,344.4		$	2,436.7
Federal Services		645.2			653.5			1,934.8			1,940.7
Energy & Construction		898.6			886.4			2,566.2			2,810.4
Inter-segment, eliminations and other		(21.9	)		(14.4	)		(48.5	)		(51.0	)
Total revenues	$	2,340.1		$	2,318.5		$	6,796.9		$	7,136.8
Equity in income (loss) of unconsolidated joint ventures
Infrastructure & Environment	$	0.6		$	1.9		$	2.2		$	5.4
Federal Services		1.5			1.3			4.3			4.3
Energy & Construction		(14.5	)		17.5			30.0			69.3
Total equity in income (loss) of unconsolidated joint ventures	$	(12.4	)	$	20.7		$	36.5		$	79.0
Contribution (1)
Infrastructure & Environment	$	71.5		$	60.0		$	182.0		$	198.2
Federal Services		56.0			45.3			142.0			129.4
Energy & Construction		53.4			32.6			145.1			156.2
General and administrative expenses		(30.3	)		(27.1	)		(81.9	)		(78.5	)
Total contribution	$	150.6		$	110.8		$	387.2		$	405.3
Operating income
Infrastructure & Environment	$	66.4		$	56.0		$	172.3		$	189.7
Federal Services		50.5			39.4			123.8			113.4
Energy & Construction		66.8			26.7			180.7			147.0
General and administrative expenses (2)		(21.5	)		(17.9	)		(54.9	)		(56.6	)
Total operating income	$	162.2		$	104.2		$	421.9		$	393.5
Depreciation and amortization
Infrastructure & Environment	$	10.0		$	8.7		$	27.3		$	25.8
Federal Services		5.5			6.0			16.3			17.3
Energy & Construction		13.8			18.1			43.9			58.0
Corporate and other		1.8			1.8			5.5			5.5
Total depreciation and amortization	$	31.1		$	34.6		$	93.0		$	106.6

(1)

We are providing segment contribution because management uses this information to assess performance and make decisions about resource allocation. We define segment contribution as total segment operating income minus noncontrolling interests attributable to that segment, but before allocation of various segment expenses, including stock compensation expenses, impairment of intangible assets, amortization of intangible assets, and other miscellaneous unallocated expenses. Segment operating income represents net income before reductions for income taxes, noncontrolling interests and interest expense.

(2)

General and administrative expenses represent expenses related to corporate functions.

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Reconciliations of segment contribution to segment operating income for the three and nine months ended October 1, 2010 and October 2, 2009 are as follows:

	Three Months Ended October 1, 2010
(In millions)	Infrastructure & Environment			Federal Services			Energy & Construction			Corporate			Consolidated
Contribution	$	71.5		$	56.0		$	53.4		$	(30.3	)	$	150.6
Noncontrolling interests		(0.6	)		—			26.8			—			26.2
Amortization of intangible assets		(0.7	)		(4.0	)		(7.0	)		—			(11.7	)
Stock-based compensation expenses		(3.8	)		(1.5	)		(3.5	)		8.8			—
Other miscellaneous and unallocated expenses		—			—			(2.9	)		—			(2.9	)
Operating income (loss)	$	66.4		$	50.5		$	66.8		$	(21.5	)	$	162.2

	Three Months Ended October 2, 2009
(In millions)	Infrastructure & Environment			Federal Services			Energy & Construction			Corporate			Consolidated
Contribution	$	60.0		$	45.3		$	32.6		$	(27.1	)	$	110.8
Noncontrolling interests		0.1			—			6.3			—			6.4
Amortization of intangible assets		(0.1	)		(4.3	)		(8.8	)		—			(13.2	)
Stock-based compensation expenses		(4.0	)		(1.3	)		(3.5	)		8.8			—
Other miscellaneous and unallocated expenses		—			(0.3	)		0.1			0.4			0.2
Operating income (loss)	$	56.0		$	39.4		$	26.7		$	(17.9	)	$	104.2

	Nine Months Ended October 1, 2010
(In millions)	Infrastructure & Environment			Federal Services			Energy & Construction			Corporate			Consolidated
Contribution	$	182.0		$	142.0		$	145.1		$	(81.9	)	$	387.2
Noncontrolling interests		2.1			—			74.0			—			76.1
Amortization of intangible assets		(0.9	)		(11.9	)		(21.2	)		—			(34.0	)
Stock-based compensation expenses		(10.8	)		(4.1	)		(9.7	)		24.6			—
Other miscellaneous and unallocated expenses		(0.1	)		(2.2	)		(7.5	)		2.4			(7.4	)
Operating income (loss)	$	172.3		$	123.8		$	180.7		$	(54.9	)	$	421.9

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	Nine Months Ended October 2, 2009
(In millions)	Infrastructure & Environment			Federal Services			Energy & Construction			Corporate			Consolidated
Contribution	$	198.2		$	129.4		$	156.2		$	(78.5	)	$	405.3
Noncontrolling interests		2.3			—			25.4			—			27.7
Amortization of intangible assets		(0.3	)		(12.7	)		(26.6	)		—			(39.6	)
Stock-based compensation expenses		(10.3	)		(3.0	)		(7.9	)		21.2			—
Other miscellaneous and unallocated expenses		(0.2	)		(0.3	)		(0.1	)		0.7			0.1
Operating income (loss)	$	189.7		$	113.4		$	147.0		$	(56.6	)	$	393.5

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

(In millions)	October 1, 2010		January 1, 2010
Infrastructure & Environment	$	7.2	$	7.4
Federal Services		3.4		4.8
Energy & Construction		43.6		81.7
Total investments in and advances to unconsolidated joint ventures	$	54.2	$	93.9

Infrastructure & Environment	$	138.2	$	114.3
Federal Services		30.4		31.1
Energy & Construction		90.4		103.0
Corporate		16.8		10.6
Total property and equipment, net of accumulated depreciation	$	275.8	$	259.0

Total assets by segment are as follows:

(In millions)	October 1, 2010			January 1, 2010
Infrastructure & Environment	$	2,335.6		$	1,654.3
Federal Services		1,458.9			1,505.3
Energy & Construction		3,530.7			3,616.7
Corporate		5,740.6			5,377.7
Eliminations		(5,638.7	)		(5,249.6	)
Total assets	$	7,427.1		$	6,904.4

Geographic Areas

Our revenues, and property and equipment at cost, net of accumulated depreciation, by geographic areas are shown below:

	Three Months Ended						Nine Months Ended
(In millions)	October 1, 2010			October 2, 2009			October 1, 2010			October 2, 2009
Revenues
United States	$	2,160.2		$	2,133.2		$	6,300.2		$	6,527.1
International		184.2			188.6			509.6			619.8
Eliminations		(4.3	)		(3.3	)		(12.9	)		(10.1	)
Total revenues	$	2,340.1		$	2,318.5		$	6,796.9		$	7,136.8

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No individual foreign country contributed more than 10% of our consolidated revenues for the three and nine months ended October 1, 2010 and October 2, 2009.

(In millions)	October 1, 2010		January 1, 2010
Property and equipment at cost, net
United States	$	204.1	$	220.1
International		71.7		38.9
Total property and equipment at cost, net	$	275.8	$	259.0

There are no material concentrations of our net property and equipment in any individual foreign country.

Major Customers and Other

Our largest clients are from our federal market sector. Within this sector, we have multiple contracts with the U.S. Army, our largest customer, which contributed 21% of our consolidated revenues for both the three months and nine months ended October 1, 2010, respectively. We also have multiple contracts with the Department of Energy (“DOE”), which contributed 15% and 13% of our consolidated revenues for the three and nine months ended October 1, 2010, respectively. The loss of the federal government, the U.S. Army, or 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, and we believe that the loss of any single contract would not have a material adverse effect on our business.

For purposes of analyzing revenues from major customers, we do not consider the combination of all federal departments and agencies as one customer although, in the aggregate, the federal market sector contributed 50% and 49% of our consolidated revenues for the three and nine months ended October 1, 2010, respectively. The different federal agencies manage separate budgets. As such, reductions in spending by one federal agency do not affect the revenues we could earn from another federal agency. In addition, the procurement processes for separate federal agencies are not centralized and the procurement decisions are made separately by each federal agency.

Our revenues from the U.S. Army and DOE for the three and nine months ended October 1, 2010 and October 2, 2009 are presented below:

	Three Months Ended				Nine Months Ended
(In millions)	October 1, 2010		October 2, 2009		October 1, 2010		October 2, 2009
The U.S. Army (1)
Infrastructure & Environment	$	45.7	$	38.0	$	125.0	$	106.9
Federal Services		345.0		342.5		1,042.0		1,035.9
Energy & Construction		92.1		31.4		269.0		81.8
Total U.S. Army	$	482.8	$	411.9	$	1,436.0	$	1,224.6

DOE
Infrastructure & Environment	$	1.5	$	2.4	$	3.9	$	8.4
Federal Services		2.2		8.1		11.4		32.3
Energy & Construction		337.4		272.1		864.5		538.2
Total DOE	$	341.1	$	282.6	$	879.8	$	578.9

(1)

The U.S. Army includes U.S. Army Corps of Engineers.

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(Continued)

NOTE 14. COMMITMENTS AND CONTINGENCIES

In the ordinary course of business, we are subject to contractual guarantees and governmental audits or investigations. We are also involved in various legal proceedings that are pending against us and our affiliates alleging, among other things, breach of contract or tort in connection with the performance of professional services, the various outcomes of which cannot be predicted with certainty. We are including information regarding the following significant proceedings in particular:

Minneapolis Bridge: On August 1, 2007, the I-35W Bridge in Minneapolis, Minnesota collapsed resulting in 13 deaths, numerous injuries and substantial property loss. In 2003, the Minnesota Department of Transportation retained URS Corporation (Nevada), our wholly owned subsidiary, to provide specific engineering analyses of components of the I-35W Bridge. URS Corporation (Nevada) issued draft reports pursuant to this engagement. URS Corporation (Nevada)’s services to the Minnesota Department of Transportation were ongoing at the time of the collapse. The National Transportation Safety Board final report on the bridge collapse determined that the probable cause of the collapse was inadequate load capacity due to an error by the original bridge designer that resulted in gusset plate failures resulting from the increased bridge weight from previous modifications as well as increased traffic and concentrated construction loads on the bridge on the day of the collapse. URS Corporation (Nevada) was not involved in the original design or construction of the I-35W Bridge, nor was it involved in any of the maintenance and construction work being performed on the bridge when the collapse occurred.

Approximately 121 lawsuits were commenced against URS Corporation (Nevada) and other defendants in Hennepin County District Court in Minnesota. The cases include the claims of 137 injured people, the estates of 11 of the individuals who died as a result of the bridge collapse, and one separate suit for insurance subrogation. In March 2010, URS Corporation (Nevada) settled the lawsuit initiated by the State of Minnesota by agreeing to pay $5 million to the State of Minnesota. In August 2010, URS Corporation (Nevada) and its insurers settled the remaining lawsuits without any admission of liability or fault by URS Corporation (Nevada) and our insurers have paid $52.4 million to the collective group of plaintiffs and intervening insurers with subrogation claims.

URS Corporation (Nevada), in conjunction with one of its insurers, continues to pursue contribution claims against the original bridge designer for recovery of the amounts paid to settle the above referenced claims; however, we cannot provide assurance that we will be successful in these efforts. The potential range of final resolution of these matters cannot be determined at this time.

USAID Egyptian Projects: In March 2003, WGI, the parent company acquired by us on November 15, 2007 and subsequently renamed URS E&C Holdings, Inc., was notified by the Department of Justice that the federal government was considering civil litigation against WGI for potential violations of the U.S. Agency for International Development (“USAID”) source, origin, and nationality regulations in connection with five of WGI’s USAID-financed host-country projects located in Egypt beginning in the early 1990s. In November 2004, the federal government filed an action in the United States District Court for the District of Idaho against WGI and Contrack International, Inc., an Egyptian construction company, asserting violations under the Federal False Claims Act, the Federal Foreign Assistance Act of 1961, and common law theories of payment by mistake and unjust enrichment. The federal government seeks damages and civil penalties for violations of the statutes as well as a refund of all amounts paid under the specified contracts of approximately $373.0 million. WGI denies any liability in the action and contests the federal government’s damage allegations and its entitlement to any recovery. All USAID projects under the contracts have been completed and are fully operational.

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(Continued)

In March 2005, WGI filed motions in the Bankruptcy Court in Nevada and in the Idaho District Court to dismiss the federal government’s claim for failure to give appropriate notice or otherwise preserve those claims. In August 2005, the Bankruptcy Court ruled that all federal government claims were barred in a written order. The federal government appealed the Bankruptcy Court's order to the United States District Court for the District of Nevada. In March 2006, the Idaho District Court stayed that action during the pendency of the federal government's appeal of the Bankruptcy Court's ruling. In December 2006, the Nevada District Court reversed the Bankruptcy Court’s order and remanded the matter back to the Bankruptcy Court for further proceedings. In December 2007, the federal government filed a motion in Bankruptcy Court seeking an order that the Bankruptcy Court abstain from exercising jurisdiction over this matter, which WGI opposed. On February 15, 2008, the Bankruptcy Court denied the federal government’s motion preventing the Bankruptcy Court from exercising jurisdiction over WGI’s motion that the federal government’s claims in Idaho District Court were barred for failure to give appropriate notice or otherwise preserve those claims. In November 2008, the Bankruptcy Court ruled that the federal government’s common law claims of unjust enrichment and payment by mistake are barred, and may not be further pursued. WGI’s pending motion in the Bankruptcy Court covers all of the remaining federal government claims alleged in the Idaho action.

WGI’s joint venture for one of the USAID projects brought arbitration proceedings before an arbitration tribunal in Egypt in which the joint venture asserted an affirmative claim for additional compensation for the construction of water and wastewater treatment facilities in Egypt. The project owner, National Organization for Potable Water and Sanitary Drainage (“NOPWASD”), an Egyptian government agency, asserted in a counterclaim that by reason of alleged violations of the USAID source, origin and nationality regulations, and alleged violations of Egyptian law, WGI’s joint venture should forfeit its claim, pay damages of approximately $6.0 million and the owner’s costs of defending against the joint venture’s claims in arbitration. WGI denied liability on NOPWASD’s counterclaim. On April 17, 2006, the arbitration tribunal issued its award providing that the joint venture prevailed on its affirmative claims in the net amount of $8.2 million, and that NOPWASD's counterclaims were rejected. WGI’s portion of any final award received by the joint venture would be approximately 45%.

WGI intends to continue to defend these matters vigorously and to consider its affirmative claims; however, we cannot provide assurance that we will be successful in these efforts. The potential range of loss and the resolution of these matters cannot be determined at this time.

New Orleans Levee Failure Class Action Litigation: From July 1999 through May 2005, Washington Group International, Inc., an Ohio company, subsequently renamed URS Energy & Construction, Inc. (“WGI Ohio”), a wholly owned subsidiary acquired by us on November 15, 2007, performed demolition, site preparation, and environmental remediation services for the U.S. Army Corps of Engineers on the east bank of the Inner Harbor Navigation Canal (the “Industrial Canal”) in New Orleans, Louisiana. On August 29, 2005, Hurricane Katrina devastated New Orleans. The storm surge created by the hurricane overtopped the Industrial Canal levee and floodwall, flooding the Lower Ninth Ward and other parts of the city.

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Since September 2005, 59 personal injury, property damage and class action lawsuits have been filed in Louisiana State and federal court naming WGI Ohio as a defendant. Other defendants include the U.S. Army Corps of Engineers, the Board for the Orleans Parish Levee District, and its insurer, St. Paul Fire and Marine Insurance Company. Over 1,450 hurricane-related cases, including the WGI Ohio cases, have been consolidated in the United States District Court for the Eastern District of Louisiana (“District Court”). The plaintiffs claim that defendants were negligent in their design, construction and/or maintenance of the New Orleans levees. The plaintiffs are all residents and property owners who claim to have incurred damages arising out of the breach and failure of the hurricane protection levees and floodwalls in the wake of Hurricane Katrina. The allegation against us is that the work we performed adjacent to the Industrial Canal damaged the levee and floodwall and caused and/or contributed to breaches and flooding. The plaintiffs allege damages of $200 billion and demand attorneys’ fees and costs. WGI Ohio did not design, construct, repair or maintain any of the levees or the floodwalls that failed during or after Hurricane Katrina. WGI Ohio performed the work adjacent to the Industrial Canal as a contractor for the federal government and has pursued dismissal from the lawsuits on a motion for summary judgment on the basis that government contractors are immune from liability.

On December 15, 2008, the District Court granted WGI Ohio’s motion for summary judgment to dismiss the lawsuit on the basis that we performed the work adjacent to the Industrial Canal as a contractor for the federal government and are therefore immune from liability, which was appealed by a number of the plaintiffs on April 27, 2009 to the United States Fifth Circuit Court of Appeals (“Court of Appeals”). On September 14, 2010, the Court of Appeals reversed the District Court’s summary judgment decision and WGI Ohio’s dismissal, and remanded the case back to the District Court for further litigation.

WGI Ohio intends to continue to defend these matters vigorously; however, we cannot provide assurance that we will be successful in these efforts. The potential range of loss and the resolution of these matters cannot be determined at this time.

SR-125: WGI Ohio has a 50% interest in a joint venture that is performing a $401 million fixed-price highway and toll road project in California that is operational and has been open to traffic since November 2007. Prior to the acquisition of WGI, WGI recorded significant losses on the project resulting largely from developer directives to perform extra work, developer-caused delays, and unilateral deductive changes related to contested developer claims, including claims for liquidated damages. The joint venture is actively pursuing reimbursement of its losses based on claims of breach of contract, developer-directed changes, negligent acts by the developer, force majeure events and insurance occurrences. The highway claims were initiated in the Superior Court of San Diego County (“Superior Court”) in July 2006 and the toll road claims were initiated in arbitration, under JAMS arbitration rules, in March 2006.

The developer has responded with amended counterclaims, filed in October 2009, in both the toll road arbitration and highway litigation in Superior Court alleging breach of contract, indemnity for claims brought against the developer by its fixed operating equipment contractor, and fraud. The amended counterclaims in the two matters are duplicative to a degree, but in total aggregate more than $800 million in claimed damages.

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(Continued)

In May 2009, a toll road arbitration panel hearing was held to determine whether the joint venture had previously waived multiple contractual claims under its agreement with the developer. On August 5, 2009, the panel determined that the joint venture only waived approximately $14.0 million out of the $96.5 million of claims that the developer contended were previously waived under the toll road contract. In addition, the joint venture, as the prevailing party, is entitled to an award of reasonable attorney’s fees and costs attributable to the waiver hearing, which the developer is contesting. Hearings on the attorneys’ fees and costs issues were held in October 2009 and February 2010, and on February 15, 2010, the arbitration panel issued a $3.2 million award fee to the joint venture.

In December 2007, the joint venture initiated a government code claim in Superior Court against the California Department of Transportation (“Caltrans”) asserting that Caltrans failed to ensure that the developer had a statutorily required payment bond. The Superior Court granted judgment on the pleadings in favor of Caltrans in March 2009. In addition, the developer and Caltrans have prevailed on motions for summary judgment on other government code claim issues (including lack of proper licensing, lack of authority to include the toll road project in a franchise agreement between the developer and the state, and the enforceability of certain contractual limitations that would not be enforceable under the government code in California). The joint venture also recorded notices of a mechanic’s lien on the toll road properties and, on September 24, 2009, filed an action to foreclose the mechanic’s lien. The joint venture also initiated an inverse condemnation action against Caltrans relating to the fee ownership of properties acquired by Caltrans impairing the joint venture’s mechanic’s lien rights on the toll road on July 11, 2008.

In June 2008, the developer filed a complaint, as amended, against the joint venture in the Supreme Court of New York County, New York, alleging that the joint venture breached a lender agreement associated with the highway project that impaired the enforceability of the highway project contract. On October 1, 2008, a hearing was held on the joint venture’s motion to stay or dismiss this action. On August 31, 2009, Banco Bilbao Vizcaya Argentaria, S.A. (“BBVA”), the lender’s prime agent, filed a complaint on behalf of the lenders alleging breach of a lending agreement entered into during the highway and toll road contracts. The joint venture filed a motion to dismiss the BBVA complaint on October 15, 2009.

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On March 22, 2010, the developer filed a Chapter 11 bankruptcy petition in the Bankruptcy Court for the Southern District of California that effectively stayed or suspended the joint venture’s highway litigation in Superior Court and the toll road arbitration. On March 26, 2010, the joint venture filed a petition seeking to remove the previously filed foreclosure action regarding the mechanic’s lien on the toll road properties to the Bankruptcy Court. On March 31, 2010, the developer filed its own adversary proceeding seeking a declaration from the Bankruptcy Court that any mechanic’s liens filed on the toll road were invalid. (These matters and a separate foreclosure proceeding filed by another SR-125 contractor were consolidated by the Bankruptcy Court on June 10, 2010). The developer, joined by its lenders, filed a motion for summary judgment on April 26, 2010, contending that the mechanic’s liens filed by the joint venture and another contractor were invalid. A formal hearing on the motion was held on July 1, 2010. On July 28, 2010, the Bankruptcy Court denied the developer’s and lenders’ motion for summary judgment and ruled that the joint venture can assert a mechanic’s lien against the developer’s distinct private property interests in the toll road. On September 14, 2010, the joint venture filed a motion for summary judgment on the priority of the mechanic’s lien, which the Bankruptcy Court denied. On October 25, 2010, trial proceedings commenced in the Bankruptcy Court on the validity and priority of the joint venture’s mechanic’s lien. On October 28, 2010, the Bankruptcy Court ruled against the joint venture’s position, finding that the mechanic’s lien did not have priority over the lender’s position. While there was no adjudication on the merits of the joint venture’s actual claim, on November 1, we re-assessed the value of our equity investment in the joint venture and recorded a pre-tax, non-cash asset impairment charge of $25.0 million relating to our equity investment in the joint venture. The joint venture is currently considering its legal options in this matter.

On July 10, 2010, MCM Construction, a joint venture subcontractor filed a complaint in California Superior Court, San Diego County seeking damages of $7.0 million for alleged breach of contract, fraud, and misrepresentation by the joint venture.

The joint venture intends to pursue these matters vigorously and will seek to collect all claimed amounts; however, we cannot provide assurance that the joint venture will be successful in these efforts. The potential range of loss or gain and the resolution of these matters cannot be determined at this time.

Common Sulfur Project: One of our wholly owned subsidiaries, WGI – Middle East, Inc., whose parent company, WGI, was acquired by us on November 15, 2007, together with a consortium partner, have contracted under a fixed-price arrangement to engineer, procure and construct a sulfur processing facility located in Qatar. Once completed, the sulfur processing facility will gather and process sulfur produced by new liquid natural gas processing facilities, which are also under construction. The project has experienced cost increases and schedule delays. The contract gives the customer the right to assess liquidated damages of approximately $25 million against the consortium if various project milestones are not met. If liquidated damages are assessed, a significant portion may be attributable to WGI – Middle East, Inc. On November 25, 2009, the consortium filed a Notice of Arbitration in the U.K. for breach of contract and client-directed changes.

On August 23, 2010, along with our consortium partner, we settled pending change orders and claims with the project owner for three payments from the project owner totaling $100 million. We and our consortium partner have agreed that 60% of the settlement amount will be allocated to our consortium partner and 40% to us.

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(Continued)

Under the terms of the settlement, we received a complete release for all delays and liquidated damages incurred up to the settlement date. As of October 1, 2010, we had received the first of three settlement payments in the amount of $14 million and have $26 million in accounts receivable relating to this settlement. On October 7, 2010, we received the second settlement payment of $14 million; and we expect the final settlement payment of $12 million upon the completion of the project.

During the third quarter of 2010, we recognized a gain of $7.4 million on the project and also recognized estimated project costs of $2.7 million, resulting in income of $4.7 million and a loss of $1.0 million for the three and nine months ended October 1, 2010, respectively. As of October 1, 2010, the cumulative project losses were approximately $83.0 million.

The resolution of outstanding claims is subject to inherent uncertainty, and it is reasonably possible that resolution of any of the above outstanding claims or legal proceedings could have a material adverse effect on us.

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.

Guarantee Obligations and Commitments

As of October 1, 2010, we had the following guarantee obligations and commitments:

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

We have guaranteed a letter of credit issued on behalf of one of our consolidated joint ventures. The total amount of the letter of credit was $7.2 million as of October 1, 2010.

We have guaranteed several of our foreign credit facilities and bank guarantee lines. The aggregate amount of these guarantees was $16.6 million as of October 1, 2010.

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

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(Continued)

In the ordinary course of business, we may provide performance assurances and guarantees related to our services. For example, these guarantees may include surety bonds, arrangements among our client, a surety, and us to ensure we perform our contractual obligations pursuant to our client agreement. If our services under a guaranteed project are later determined to have resulted in a material defect or other material deficiency, then we may be responsible for monetary damages or other legal remedies. When sufficient information about claims on guaranteed projects is available and monetary damages or other costs or losses are determined to be probable, we recognize such guarantee losses.

NOTE 15. ACQUISITION

On September 10, 2010, we completed the acquisition of Scott Wilson, an infrastructure engineering and design firm based in the U.K. This acquisition has expanded our capabilities in the U.K. infrastructure market and in other key regions around the world.

We purchased all of the outstanding Scott Wilson shares for £2.90 per share. Scott Wilson shareholders had the option to receive their consideration in cash or Loan Notes. We also expect to purchase, for the same price, any additional Scott Wilson shares that may become issuable upon a participant’s election within the next six months under the terms of Scott Wilson's employee equity plans. The total purchase consideration related to this acquisition consisted of the following:

(In millions)	British Pound		Equivalent to USD as of September 10, 2010
Cash consideration	£	201	$	309
Loan Notes (1)		18		28
Estimated consideration for vested shares exercisable under Scott Wilson’s employee equity plans		4		6
Total purchase price consideration	£	223	$	343

(1)

We set aside £18 million (equivalent to approximately U.S. $28 million as of October 1, 2010) of cash in an escrow account, which is restricted for Loan Note repayments and other related administrative expenses. See Note 7, “Indebtedness,” for further discussion of the Loan Notes.

Prior to the completion of this acquisition, we purchased 9,656,277 shares of Scott Wilson in July 2010 for a total of $42.5 million and recorded the amount in “Other assets” on our Condensed Consolidated Balance Sheets. At the time, these shares represented approximately 13.1% of the outstanding shares of Scott Wilson. Pursuant to the accounting guidance on business combinations, we remeasured these shares to their fair value at the acquisition date, September 10, 2010. No gain or loss was recognized as the cost of these shares was the same as the fair value at the acquisition date.

In connection with this acquisition, we recognized $7.5 million and $11.6 million of expenses, respectively, for the three and nine months ended October 1, 2010 in “Acquisition-related expenses” on our Condensed Consolidated Statements of Operations. These expenses included legal fees, bank fees, consultation fees, travel expenses, and other miscellaneous direct and incremental administrative expenses associated with this acquisition.

Our condensed consolidated financial statements include the operating results of Scott Wilson from the date of acquisition through October 1, 2010, which results are included under our Infrastructure & Environment business. The operating results generated from this newly acquired business group during this period were not material to our consolidated results for the three- and nine-month periods ended October 1, 2010. Pro forma results of Scott Wilson have not been presented because the effect of this acquisition is not material to our consolidated financial results.

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(Continued)

The following presents a preliminary allocation of Scott Wilson’s identifiable assets acquired and liabilities assumed based on the estimates of their fair values as of the acquisition date. These estimates are subject to revision, which may result in adjustments to the values presented below. We expect to finalize these amounts within 12 months from the acquisition date. We do not expect any adjustments to be material.

The following table summarizes the preliminary estimates of the fair values of identifiable assets acquired and liabilities assumed in the acquisition of Scott Wilson and the resulting goodwill as of the acquisition date:

Preliminary allocation of purchase price: (In millions)	Amount			Estimated Useful Life
Identifiable assets acquired and liabilities assumed:
Cash and cash equivalents	$	15
Trade and other receivables		187
Other current assets		14
Property and equipment		35
Identifiable intangible assets:
Customer relationships, contracts and backlog		105		4 – 15 years
Trade name		28		25 years
Favorable leases and other		2		1-11 years
Total amount allocated to identifiable intangible assets		135
Current liabilities		(169	)
Net deferred tax liabilities		(8	)
Pension benefit obligations		(82	)
Long-term liabilities		(12	)
Total identifiable net assets acquired		115
Goodwill		228
Total purchase price	$	343

Intangible assets. Of the total purchase price, $135 million has been allocated to customer relationships, trade names, favorable leases and other. Customer relationships represent existing contracts and the underlying customer relationships and backlog. We will amortize the fair values of these assets based on the period over which the economic benefits of the intangible assets are expected to be realized. The Scott Wilson trade name will be amortized using the straight-line method over an estimated useful life of 25 years. Favorable leases represent the net favorable difference between market and existing lease rates. We will amortize the fair value of these assets based on the terms of the respective underlying leases. During the period from the acquisition date through October 1, 2010, we recorded $0.6 million of amortization of intangible assets related to this acquisition.

Goodwill. Goodwill represents the excess of the purchase price over the fair value of the underlying net tangible and intangible assets and is subject to adjustment as the fair value of intangible assets and net deferred tax liabilities are adjusted. The factors that contributed to the recognition of goodwill included acquiring a talented workforce, capabilities in the U.K. infrastructure market and other international markets, and cost savings opportunities. This acquisition generated $228 million of goodwill, which is included in our Infrastructure & Environment business. It is the main contributing factor to the net increase in our consolidated goodwill since the beginning of this fiscal year. None of the acquired goodwill is tax deductible.

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(Continued)

Pension benefit obligations. As part of this acquisition, we assumed two foreign defined benefit retirement plans: Scott Wilson Pension Scheme (“SWPS”) and Scott Wilson Railways Shared Cost Section of the Railways Pension Scheme (“RPS”). These two plans are now closed to new participants other than those who have an indefeasible right to join under the foreign legislation. As of October 1, 2010, the SWPS was closed to future accruals.

The funded status of the plans as of September 10, 2010 was as follows:

	At September 10, 2010
(In millions)	British Pound			USD
Benefit obligations	£	259		$	400
Fair value of plan assets		(206	)		(318	)
Underfunded status	£	53		$	82

Weighted-average assumptions used to determine benefit obligations for SWPS and RPS:
Inflation rates (Consumer Price Index and Retail Price Index)	2.50%, 3.20	%
Discount rate	5.40	%
Rate of compensation increase	3.20	%
Future pension increases to be capped at limited price indexation	3.15	%
Expected long-term rate of return on plan assets	6.75	%

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ITEM 2. 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 expressed or implied in this report. See “URS Corporation and Subsidiaries” regarding forward-looking statements on page 1. You should read this discussion in conjunction with: Part II – Item 1A, “Risk Factors,” beginning on page 77; the condensed consolidated financial statements and notes thereto contained in Part I – Item 1, “Financial Statements;” and the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended January 1, 2010, which was previously filed with the Securities and Exchange Commission.

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 major United States (“U.S.”) federal government contractor in the areas of systems engineering and technical assistance, and operations and maintenance. We have more than 46,500 employees in a global network of offices and contract-specific job sites in more than 40 countries. We provide our services through three businesses: Infrastructure & Environment, Federal Services and Energy & Construction.

We generate revenues by providing fee-based professional and technical services and by executing construction and mining contracts. Our professional and technical services are primarily labor intensive and our construction and mining 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 three reporting segments: the Infrastructure & Environment business, the Federal Services business and the Energy & Construction business.

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OVERVIEW AND BUSINESS TRENDS

Results for the Three Months Ended October 1, 2010

Consolidated revenues for the third quarter of 2010 and 2009 were both approximately $2.3 billion. During the quarter, revenues increased from our work in the federal market sector, and we continued to benefit from strong demand for the engineering and construction services we provide in the infrastructure sector. At the same time, we experienced lower demand for the services we provide to clients in our power and industrial and commercial market sectors. The revenue decrease from our power and industrial and commercial market sectors was partially offset by an increase of $80.4 million in revenues resulting from the consolidation of some joint ventures commencing in fiscal year 2010. Net income attributable to URS for the third quarter of 2010 was $70.4 million compared with $64.8 million during the third quarter of 2009, an increase of 8.7%. The increase in net income was due to a loss recognized on a common sulfur project during the same period in the previous year that did not recur in the current year, a favorable price finalization and performance on a fixed-price contract, a foreign currency gain, and a decrease in overhead costs. In addition, our net income was positively impacted by a recovery relating to legacy workers’ compensation and general liability insurance programs. The increase was partially offset by the decrease in equity in income of unconsolidated joint ventures, including a charge taken on a Southern California highway project. We also incurred additional acquisition-related expenses in connection with our acquisition of Scott Wilson and had a higher income tax rate for the quarter.

Cash Flows and Debt

During the nine months ended October 1, 2010, we generated $353.5 million in cash from operations. Cash flows from operations decreased by $94.7 million for the nine months ended October 1, 2010 compared with the same period in 2009. This decrease was primarily due to the timing of payments from clients on accounts receivable, the use of advance payments from clients as projects moved towards completion, the timing of project performance payments, the timing of payments to joint ventures, the timing of payroll payments, and the timing of payments to vendors and subcontractors. The decrease was partially offset by a decrease in interest payments.

We also had a cash outflow of $288.0 million to fund the acquisition of Scott Wilson Group plc. (“Scott Wilson”), net of cash acquired of $14.6 million.

Our ratios of debt to total capitalization (total debt divided by the sum of debt and total stockholders’ equity) were 16% and 17% as of October 1, 2010 and January 1, 2010, respectively. This financial ratio describes our leverage and financial solvency risk exposure.

Acquisition

On September 10, 2010, we completed the acquisition of Scott Wilson. The operating results of Scott Wilson from the acquisition date through October 1, 2010 are included in our condensed consolidated financial statements under the Infrastructure & Environment business. The operating results generated from this newly acquired business group during this period were not material to our consolidated results for the three- and nine-month periods ended October 1, 2010. As of October 1, 2010, the total purchase consideration for this acquisition was approximately $343 million. During the three and nine months ended October 1, 2010, we incurred acquisition-related expenses of approximately $7.5 million and $11.6 million, respectively.

Book of Business

As of October 1, 2010 and January 1, 2010, our total book of business was $29.8 billion and $29.4 billion, respectively. Please see Book of Business on page 47 for more information.

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Business Trends

Given the continuing turmoil in global financial markets and current economic uncertainty, it is difficult to predict the impact of the economic downturn on our business. For the nine months ended October 1, 2010, we experienced a decline in revenues compared to the same period in fiscal 2009. We are continuing to monitor the situation carefully to determine the potential impact on our business during our 2010 fiscal year. However, the continuing global uncertainty and challenging economic conditions may impair our ability to forecast business trends accurately.

We believe that our expectations regarding business trends are reasonable and are based on reasonable assumptions. However, such forward-looking statements, by their nature, involve risks and uncertainties and, in the current economic climate, may be subject to an unusual degree of uncertainty. You should read this discussion of business trends in conjunction with Part II, Item 1A, “Risk Factors,” of this report, which begins on page 77.

Power

We expect revenues from our power market sector to decline during our 2010 fiscal year, compared to power revenues for our 2009 fiscal year, primarily due to the timing of new emissions control projects and the delay in some projects as a result of the economic downturn. Many of our utility clients have completed or are in the final phases of projects to meet a 2010 deadline for emissions reductions mandated by the Clean Air Interstate Rule (the “Rule”), and we are experiencing a delay before utilities move forward with new emissions control projects. However, the U.S. Environmental Protection Agency recently proposed new guidelines to replace the Rule, known as the Transport Rule, which would accelerate the timeline for plants to meet stricter emission targets. If adopted, we expect the new Transport Rule will create new opportunities for our emissions control business.

We also anticipate sustained demand for engineering and construction services related to the development of new gas-fired power plants. Gas-fired power plants produce fewer emissions than coal-fired facilities and the current low cost of natural gas makes gas-fired power plants more cost-effective to operate. We also expect to continue benefiting from demand for the advanced nuclear technology services we provide to increase the generating capacity and extend the service life of existing nuclear power plants. In addition, the U.S. Administration has proposed increasing the size of the DOE’s nuclear loan guarantee program up to $54 billion to support the development of new nuclear facilities.

Infrastructure

We expect revenues from our infrastructure market sector to grow for our 2010 fiscal year given the need to rebuild and modernize aging infrastructure and the diversity of funding sources for infrastructure improvement programs. Because of the economic downturn and lower tax revenues, many state governments have reduced spending for key infrastructure programs; as a result, an increasing proportion of our infrastructure work is being funded through a variety of other sources, such as bonds, dedicated tax measures and user fees. For example, many state and local governments have continued to raise capital for infrastructure programs by issuing bonds. We expect bonds will be used by states and municipalities to fund a variety of transportation and public facilities projects. We also expect to benefit from infrastructure spending contained in the American Recovery and Reinvestment Act (“ARRA”), which includes $8 billion for the development of high-speed passenger rail programs.

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Federal

We expect revenues from our federal market sector to grow for our 2010 fiscal year based on the continued diversification of our federal business; steady demand for the types of services we provide to the Department of Defense (“DOD”), the Department of Energy (“DOE”) and other federal agencies; and stable funding for the types of programs we support. For the federal government’s 2011 fiscal year, which began October 1, the DOD’s proposed $708 billion budget includes significant funding for the types of programs that are important to our business, including operations and maintenance; research, development, test and evaluation; and chemical demilitarization.

In September, the Administration signed legislation that will fund the DOE at 2010 fiscal levels through December 3, as Congress considers the DOE’s 2011 budget request. The proposed budget contains approximately $17 billion for the types of key environmental remediation, nuclear waste disposal and operations management programs that we support. In addition, the ARRA allocates approximately $6 billion in funding to the DOE for a variety of cleanup activities, including the decontamination and decommissioning of former nuclear weapons production and testing facilities. For 2011, the DOE has allocated $500 million of these funds to the five major sites where we manage operations. We also anticipate stable funding for our work for the United Kingdom’s (“U.K.”) Nuclear Decommissioning Authority (“NDA”). The Coalition Government’s Comprehensive Review of Funding provides £3 billion (equivalent to approximately U.S. $4.6 billion) in annual funding for the NDA over the next four years. Finally, we expect to benefit from the continued diversification of our federal business. We currently support more than 25 federal agencies, including the National Aeronautics and Space Administration (“NASA”); the Departments of Health and Human Services, Homeland Security, and Veterans Affairs; and the General Services Administration.

Several factors may, however, impact our federal market sector results. First, the federal government continues to increase the use of Indefinite Delivery Contracting vehicles, in which the client qualifies multiple contractors for a specific program and then awards specific task orders or projects among the qualified contractors. As a result, new work awards tend to be smaller and of shorter duration, since they represent individual tasks rather than large, programmatic assignments. In addition, the federal government has announced its intention to reduce the outsourcing of services to outside contractors in favor of insourcing jobs to its federal employees, and we expect that some of our contracts will be impacted by this decision. While it is difficult to predict the extent to which insourcing will occur or its effect on the types of programs we support, insourcing by the current Administration could result in fewer opportunities in some components of the federal market sector.

Industrial and Commercial

We expect revenues from our industrial and commercial market sector to decline for our 2010 fiscal year, compared to our 2009 fiscal year. The economic downturn has led to reductions in spending on capital improvement projects among clients in the oil and gas, manufacturing and mining industries. As a result, we have experienced and expect to continue to experience delays, curtailments or cancellations in new capital projects for which we typically provide engineering, procurement and construction services. As a result, we are seeing fewer opportunities for growth as our clients take a cautious approach to starting large-scale capital improvement projects that require the engineering, procurement and construction services we provide.

At the same time, there are several positive developments in this market sector. For example, in the oil and gas industry, we are seeing new opportunities for the development of pipelines and storage facilities to support the development of natural gas. In addition, because of the recent stabilization of oil prices, demand has increased for the front-end engineering and design services that we provide. Based on current commodity prices, we also anticipate mining clients will accelerate mining activities and restart operations that were previously suspended, increasing demand for the services we provide. In the manufacturing sector, we are continuing to benefit from stable demand for our facilities management work as clients continue to outsource non-core functions to manage their overhead costs.

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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 our 2010 fiscal year, severe winter weather resulted in intermittent office closures and work interruptions for some of our operations on the East Coast, in the Midwest and in several southern states. Severe weather conditions also caused office closures and work interruptions for offices in the U.K., Ireland and continental Europe.

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 are experiencing an increase in the number of fixed-price contracts, particularly among clients in the federal sector. The increase in fixed-price contracting creates both additional risks and opportunities for achieving higher margins or losses on these contracts. In addition, earnings recognition on many contracts is measured based on progress achieved as a percentage of the total project effort or upon the completion of milestones or performance criteria rather than evenly or linearly over the period of performance.

We cannot determine if proposed climate change and greenhouse gas regulations would have a material impact on our business or our clients’ businesses at this time; however, any new regulations could affect demand for the services we provide to our clients. For example, 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.

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 the equity in income of unconsolidated joint ventures over the life of the contracts. 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 when future 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 segments. As a result, the amount of revenues that will be realized beyond one year also varies from segment to segment. As of January 1, 2010, we estimated that approximately 67% 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, particularly in light of the current challenging economic environment.

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 decides 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.

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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 October 1, 2010 and January 1, 2010, our total book of business was $29.8 billion and $29.4 billion, respectively. Our backlog decreased from $17.3 billion as of January 1, 2010 to $17.2 billion as of October 1, 2010 mainly due to a decrease in our federal market sector backlog, which was partially offset by an additional $0.4 billion of backlog resulting from our acquisition of Scott Wilson.

The following tables summarize our book of business:

	As of
(In billions)	October 1, 2010		January 1, 2010
Backlog by market sector:
Power	$	1.2	$	1.3
Infrastructure		2.7		2.6
Industrial and commercial		1.5		1.3
Federal		11.8		12.1
Total backlog	$	17.2	$	17.3

(In billions)	Infrastructure & Environment		Federal Services		Energy & Construction		Total
As of October 1, 2010
Backlog	$	3.4	$	6.6	$	7.2	$	17.2
Option years		0.6		2.4		2.0		5.0
Indefinite delivery contracts		3.9		2.9		0.8		7.6
Total book of business	$	7.9	$	11.9	$	10.0	$	29.8

As of January 1, 2010
Backlog	$	2.7	$	7.2	$	7.4	$	17.3
Option years		0.4		2.1		2.5		5.0
Indefinite delivery contracts		4.3		1.6		1.2		7.1
Total book of business	$	7.4	$	10.9	$	11.1	$	29.4

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RESULTS OF OPERATIONS

The Three Months Ended October 1, 2010 Compared with the Three Months Ended October 2, 2009

Consolidated

	Three Months Ended
(In millions, except percentages and per share amounts)	October 1, 2010			October 2, 2009			Increase (Decrease)			Percentage Increase (Decrease)
Revenues	$	2,340.1		$	2,318.5		$	21.6			0.9	%
Cost of revenues		(2,136.5	)		(2,217.1	)		(80.6	)		(3.6	%)
General and administrative expenses		(21.5	)		(17.9	)		3.6			19.8	%
Acquisition-related expenses		(7.5	)		—			7.5			N/M
Equity in income of unconsolidated joint ventures		(12.4	)		20.7			(33.1	)		(159.9	%)
Operating income		162.2			104.2			58.0			55.6	%
Interest expense		(9.5	)		(11.0	)		(1.5	)		(14.0	%)
Income before income taxes		152.7			93.2			59.5			63.8	%
Income tax expense		(64.9	)		(24.6	)		40.3			163.5	%
Net income including noncontrolling interests		87.8			68.6			19.2			28.0	%
Noncontrolling interest in income of consolidated subsidiaries, net of tax		(17.4	)		(3.8	)		13.6			353.5	%
Net income attributable to URS	$	70.4		$	64.8		$	5.6			8.7	%

Diluted earnings per share	$	.87		$	.79		$	.08			10.1	%

N/M = Not meaningful

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The following table presents our consolidated revenues by market sector and reporting segment for the three months ended October 1, 2010 and October 2, 2009.

	Three Months Ended
(In millions, except percentages)	October 1, 2010		October 2, 2009		Increase (Decrease)			Percentage Increase (Decrease)
Revenues
Power sector
Infrastructure & Environment	$	40.0	$	28.8	$	11.2			38.9	%
Federal Services		—		—		—			—
Energy & Construction		234.7		296.9		(62.2	)		(20.9	%)
Power Total		274.7		325.7		(51.0	)		(15.7	%)
Infrastructure sector
Infrastructure & Environment		343.0		354.4		(11.4	)		(3.2	%)
Federal Services		—		—		—			—
Energy & Construction		133.4		53.4		80.0			149.8	%
Infrastructure Total		476.4		407.8		68.6			16.8	%
Federal sector
Infrastructure & Environment		177.3		171.2		6.1			3.6	%
Federal Services		644.9		652.0		(7.1	)		(1.1	%)
Energy & Construction		356.6		301.8		54.8			18.2	%
Federal Total		1,178.8		1,125.0		53.8			4.8	%
Industrial and Commercial sector
Infrastructure & Environment		249.3		228.7		20.6			9.0	%
Federal Services		—		—		—			—
Energy & Construction		160.9		231.3		(70.4	)		(30.4	%)
Industrial and Commercial Total		410.2		460.0		(49.8	)		(10.8	%)
Total revenues, net of eliminations	$	2,340.1	$	2,318.5	$	21.6			0.9	%

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Reporting Segments

(In millions, except percentages)	Revenues			Cost of Revenues			General and Administrative Expenses			Acquisition-related Expenses			Equity in Income (Loss) of Unconsolidated Joint Ventures			Operating Income

Three months ended October 1, 2010
Infrastructure & Environment	$	818.2		$	(744.9	)	$	—		$	(7.5	)	$	0.6		$	66.4
Federal Services		645.2			(596.2	)		—			—			1.5			50.5
Energy & Construction		898.6			(817.3	)		—			—			(14.5	)		66.8
Eliminations		(21.9	)		21.9			—			—			—			—
Corporate		—			—			(21.5	)		—			—			(21.5	)
Total	$	2,340.1		$	(2,136.5	)	$	(21.5	)	$	(7.5	)	$	(12.4	)	$	162.2

Three months ended October 2, 2009
Infrastructure & Environment	$	793.0		$	(738.9	)	$	—		$	—		$	1.9		$	56.0
Federal Services		653.5			(615.4	)		—			—			1.3			39.4
Energy & Construction		886.4			(877.2	)		—			—			17.5			26.7
Eliminations		(14.4	)		14.4			—			—			—			—
Corporate		—			—			(17.9	)		—			—			(17.9	)
Total	$	2,318.5		$	(2,217.1	)	$	(17.9	)	$	—		$	20.7		$	104.2

Increase (decrease) for the three months ended October 1, 2010 and October 2, 2009
Infrastructure & Environment	$	25.2		$	6.0		$	—		$	7.5		$	(1.3	)	$	10.4
Federal Services		(8.3	)		(19.2	)		—			—			0.2			11.1
Energy & Construction		12.2			(59.9	)		—			—			(32.0	)		40.1
Eliminations		(7.5	)		(7.5	)		—			—			—			—
Corporate		—			—			3.6			—			—			(3.6	)
Total	$	21.6		$	(80.6	)	$	3.6		$	7.5		$	(33.1	)	$	58.0

Percentage increase (decrease) for the three months ended October 1, 2010 and October 2, 2009
Infrastructure & Environment		3.2	%		0.8	%		—			N/M			(68.4	%)		18.6	%
Federal Services		(1.3	%)		(3.1	%)		—			—			15.4	%		28.2	%
Energy & Construction		1.4	%		(6.8	%)		—			—			(182.9	%)		150.2	%
Eliminations		52.1	%		52.1	%		—			—			—			—
Corporate		—			—			19.8	%		—			—			19.8	%
Total		0.9	%		(3.6	%)		19.8	%		N/M			(159.9	%)		55.6	%

N/M = Not meaningful

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The Nine Months Ended October 1, 2010 Compared with the Nine Months Ended October 2, 2009

Consolidated

	Nine Months Ended
(In millions, except percentages and per share amounts)	October 1, 2010			October 2, 2009			Increase (Decrease)			Percentage Increase (Decrease)
Revenues	$	6,796.9		$	7,136.8		$	(339.9	)		(4.8	%)
Cost of revenues		(6,345.0	)		(6,765.7	)		(420.7	)		(6.2	%)
General and administrative expenses		(54.9	)		(56.6	)		(1.7	)		(3.0	%)
Acquisition-related expenses		(11.6	)		—			11.6			N/M
Equity in income of unconsolidated joint ventures		36.5			79.0			(42.5	)		(53.8	%)
Operating income		421.9			393.5			28.4			7.2	%
Interest expense		(23.9	)		(37.6	)		(13.7	)		(36.6	%)
Other income, net		—			47.9			(47.9	)		(100.0	%)
Income before income taxes		398.0			403.8			(5.8	)		(1.4	%)
Income tax expense		(117.3	)		(151.9	)		(34.6	)		(22.7	%)
Net income including noncontrolling interests		280.7			251.9			28.8			11.4	%
Noncontrolling interest in income of consolidated subsidiaries, net of tax		(52.8	)		(16.5	)		36.3			218.2	%
Net income attributable to URS	$	227.9		$	235.4		$	(7.5	)		(3.2	%)

Diluted earnings per share	$	2.79		$	2.87		$	(.08	)		(2.8	%)

N/M = Not meaningful

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The following table presents our consolidated revenues by market sector and reporting segment for the nine months ended October 1, 2010 and October 2, 2009.

	Nine Months Ended
(In millions, except percentages)	October 1, 2010		October 2, 2009		Increase (Decrease)			Percentage Increase (Decrease)
Revenues
Power sector
Infrastructure & Environment	$	108.3	$	110.6	$	(2.3	)		(2.1	%)
Federal Services		—		—		—			—
Energy & Construction		735.0		995.8		(260.8	)		(26.2	%)
Power Total		843.3		1,106.4		(263.1	)		(23.8	%)
Infrastructure sector
Infrastructure & Environment		1,033.9		1,083.2		(49.3	)		(4.6	%)
Federal Services		—		—		—			—
Energy & Construction		394.6		190.1		204.5			107.6	%
Infrastructure Total		1,428.5		1,273.3		155.2			12.2	%
Federal sector
Infrastructure & Environment		512.3		516.3		(4.0	)		(0.8	%)
Federal Services		1,933.4		1,937.9		(4.5	)		(0.2	%)
Energy & Construction		913.5		635.1		278.4			43.8	%
Federal Total		3,359.2		3,089.3		269.9			8.7	%
Industrial and Commercial sector
Infrastructure & Environment		664.5		688.1		(23.6	)		(3.4	%)
Federal Services		—		—		—			—
Energy & Construction		501.4		979.7		(478.3	)		(48.8	%)
Industrial and Commercial Total		1,165.9		1,667.8		(501.9	)		(30.1	%)
Total revenues, net of eliminations	$	6,796.9	$	7,136.8	$	(339.9	)		(4.8	%)

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Reporting Segments

(In millions, except percentages)	Revenues			Cost of Revenues			General and Administrative Expenses			Acquisition-related Expenses			Equity in Income of Unconsolidated Joint Ventures			Operating Income

Nine months ended October 1, 2010
Infrastructure & Environment	$	2,344.4		$	(2,162.7	)	$	—		$	(11.6	)	$	2.2		$	172.3
Federal Services		1,934.8			(1,815.3	)		—			—			4.3			123.8
Energy & Construction		2,566.2			(2,415.5	)		—			—			30.0			180.7
Eliminations		(48.5	)		48.5			—			—			—			—
Corporate		—			—			(54.9	)		—			—			(54.9	)
Total	$	6,796.9		$	(6,345.0	)	$	(54.9	)	$	(11.6	)	$	36.5		$	421.9

Nine months ended October 2, 2009
Infrastructure & Environment	$	2,436.7		$	(2,252.4	)	$	—		$	—		$	5.4		$	189.7
Federal Services		1,940.7			(1,831.6	)		—			—			4.3			113.4
Energy & Construction		2,810.4			(2,732.7	)		—			—			69.3			147.0
Eliminations		(51.0	)		51.0			—			—			—			—
Corporate		—			—			(56.6	)		—			—			(56.6	)
Total	$	7,136.8		$	(6,765.7	)	$	(56.6	)	$	—		$	79.0		$	393.5

Increase (decrease) for the nine months ended October 1, 2010 and October 2, 2009
Infrastructure & Environment	$	(92.3	)	$	(89.7	)	$	—		$	11.6		$	(3.2	)	$	(17.4	)
Federal Services		(5.9	)		(16.3	)		—			—			—			10.4
Energy & Construction		(244.2	)		(317.2	)		—			—			(39.3	)		33.7
Eliminations		2.5			2.5			—			—			—			—
Corporate		—			—			(1.7	)		—			—			1.7
Total	$	(339.9	)	$	(420.7	)	$	(1.7	)	$	11.6		$	(42.5	)	$	28.4

Percentage increase (decrease) for the nine months ended October 1, 2010 and October 2, 2009
Infrastructure & Environment		(3.8	%)		(4.0	%)		—			N/M			(59.3	%)		(9.2	%)
Federal Services		(0.3	%)		(0.9	%)		—			—			—			9.2	%
Energy & Construction		(8.7	%)		(11.6	%)		—			—			(56.7	%)		22.9	%
Eliminations		(4.9	%)		(4.9	%)		—			—			—			—
Corporate		—			—			(3.0	%)		—			—			(3.0	%)
Total		(4.8	%)		(6.2	%)		(3.0	%)		N/M			(53.8	%)		7.2	%

N/M = Not meaningful

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Revenues

Our consolidated revenues for the three months ended October 1, 2010 were $2.3 billion, an increase of $21.6 million, or 0.9%, compared with the three months ended October 2, 2009. Revenues from our Infrastructure & Environment business for the three months ended October 1, 2010 were $818.2 million, an increase of $25.2 million, or 3.2%, compared with the three months ended October 2, 2009. Our newly acquired business, Scott Wilson, generated $31.6 million for the Infrastructure & Environment business for the three months ended October 1, 2010. Revenues from our Federal Services business for the three months ended October 1, 2010 were $645.2 million, a decrease of $8.3 million, or 1.3%, compared with the three months ended October 2, 2009. Revenues from our Energy & Construction business for the three months ended October 1, 2010 were $898.6 million, an increase of $12.2 million, or 1.4%, compared with the three months ended October 2, 2009.

Our consolidated revenues for the nine months ended October 1, 2010 were $6.8 billion, a decrease of $339.9 million, or 4.8%, compared with the nine months ended October 2, 2009. Revenues from our Infrastructure & Environment business for the nine months ended October 1, 2010 were $2.3 billion, a decrease of $92.3 million, or 3.8%, compared with the nine months ended October 2, 2009. Our newly acquired business, Scott Wilson, generated $31.6 million for the Infrastructure & Environment business for the nine months ended October 1, 2010. Revenues from our Federal Services business for the nine months ended October 1, 2010 were $1.9 billion, a decrease of $5.9 million, or 0.3%, compared with the nine months ended October 2, 2009. Revenues from our Energy & Construction business for the nine months ended October 1, 2010 were $2.6 billion, a decrease of $244.2 million, or 8.7%, compared with the nine months ended October 2, 2009.

The revenues reported above are presented prior to the elimination of inter-segment transactions. Our analysis of the changes in revenues in each market sector is discussed below.

Power

Consolidated revenues from our power market sector for the three months ended October 1, 2010 were $274.7 million, a decrease of $51.0 million, or 15.7%, compared with the three months ended October 2, 2009. The decline in revenues in the power sector reflects the completion of several major emissions control projects that experienced high levels of activity in the comparable period in fiscal 2009, as well as the timing of mandates for further reductions in emissions. These projects involve the retrofitting of coal-fired power plants with clean air technology to reduce sulfur dioxide, mercury and other emissions. Many of our clients have completed projects to meet the Rule’s 2010 deadline for emissions reductions, and we have experienced a delay in the start-up of new emissions control projects. In addition, as a result of the economic downturn, several power clients have deferred or cancelled large capital improvement projects. This decrease in revenues was partially offset by demand for engineering and construction services we provide to develop new gas-fired power plants, which currently are less expensive to build and operate than coal-fired power plants and produce fewer emissions. We also benefited from steady demand for the nuclear technology services we provide to increase the generating capacity and extend the service life of existing nuclear power plants, as well as for the services we are providing to utilities and major technology providers for the development of new commercial nuclear power plants. In addition, the decrease in revenues was partially offset by the consolidation of various joint ventures, which were previously accounted for under the equity method of accounting.

Consolidated revenues from our power market sector for the nine months ended October 1, 2010 were $843.3 million, a decrease of $263.1 million, or 23.8%, compared with the nine months ended October 2, 2009. Revenues in the power sector declined due to the completion of several major emissions control projects that experienced high levels of activity in the comparable period in fiscal 2009. Many of our clients have completed projects to meet the Rule’s 2010 deadline for emissions reductions, and we have experienced delays in the start-up of new emissions control projects. In addition, several power clients have deferred or cancelled large capital improvement projects as a result of the economic downturn. The impact of these factors was partially offset by demand for the engineering and construction services we provide for new gas-fired power plants and for the nuclear technology services we provide at existing nuclear power plants. In addition, the decrease in revenues was partially offset by the consolidation of various joint ventures, which were previously accounted for under the equity method of accounting.

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The Infrastructure & Environment business’ revenues from our power market sector for the three months ended October 1, 2010 were $40.0 million, an increase of $11.2 million, or 38.9%, compared with the three months ended October 2, 2009. The increase in revenues was primarily due to strong demand for the services we provide to upgrade transmission and distribution systems. Many utilities have increased investment in these systems to improve the reliability of the power grid and to support the delivery of renewable energy technologies. This increase in revenues was partially offset by a decline in the activity on several emissions control projects. In the comparable period in fiscal 2009, these projects experienced higher levels of construction and procurement activity and generated higher revenues. Additionally, as we are awarded new contracts to provide emissions control services, these assignments are typically being performed within our Energy & Construction business.

The Infrastructure & Environment business’ revenues from our power market sector for the nine months ended October 1, 2010 were $108.3 million, a decrease of $2.3 million, or 2.1%, compared with the nine months ended October 2, 2009. Revenues declined due to the winding down or completion of several major emissions control projects, which experienced higher levels of activity and generated higher revenues during the comparable period in fiscal 2009. In addition, as new contracts to provide emissions control services are awarded, these assignments are typically being performed within our Energy & Construction business. This decrease was partially offset by increased demand for the services we provide to upgrade transmission and distribution systems.

The Energy & Construction business’ revenues from our power market sector for the three months ended October 1, 2010 were $234.7 million, a decrease of $62.2 million, or 20.9%, compared with the three months ended October 2, 2009. The decline in revenues was primarily due to the completion and wind down of several major projects involving the retrofit of coal-fired power plants with clean air technologies, which accounted for a decrease of $95.4 million and a decrease in various power generation projects, which accounted for a decrease of $55.8 million. This decrease was partially offset by revenue increases of $20.4 million related to a new power plant project, an increase of $8.8 million related to new nuclear projects, an increase of $22.7 million related to a clean air project, and an increase of $35.9 million resulting from a newly consolidated joint venture that provides engineering, procurement, maintenance, and construction services for large nuclear component replacement projects.

The Energy & Construction business’ revenues from our power market sector for the nine months ended October 1, 2010 were $735.0 million, a decrease of $260.8 million, or 26.2%, compared with the nine months ended October 2, 2009. The decline in revenues was primarily due to the completion of several major projects involving the retrofit of coal-fired power plants with clean air technologies, which accounted for a decrease in revenues of $379.0 million; a decrease in various power generation projects, which accounted for a decrease of $93.9 million; the completion of a project to construct a uranium enrichment facility, which accounted for a decrease of $31.6 million; and a decrease in maintenance performed at nuclear power plants, which accounted for a decrease of $16.8 million. This decrease was partially offset by a revenue increase of $45.4 million from a new power plant project, an increase of $63.4 million from a new clean air project, and an increase of $22.2 million from new nuclear projects. Revenues also increased by $125.6 million as a result of the consolidation of a joint venture that provides engineering, procurement, maintenance, and construction services for large nuclear component replacement projects.

Infrastructure

Consolidated revenues from our infrastructure market sector for the three months ended October 1, 2010 were $476.4 million, an increase of $68.6 million, or 16.8%, compared with the three months ended October 2, 2009. The increase in infrastructure revenues was primarily due to work performed on a new contract to construct a flood protection wall in Louisiana, as well as an ongoing dam construction project in Illinois. We also continued to benefit from strong demand for the program management, planning, design, engineering and construction management services we provide to expand and modernize rail/transit and high-speed rail systems and air transportation infrastructure. Although the economic downturn and lower tax revenues have led to reductions in infrastructure spending by many state and local governments, an increasing portion of our infrastructure work is being funded through a variety of other sources, such as bonds, user fees, dedicated tax measures, the ARRA and other federal governmental funding. In addition, the consolidation of various joint ventures, which were previously accounted for under the equity method of accounting, contributed to the revenue increase in our infrastructure market sector.

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Consolidated revenues from our infrastructure market sector for the nine months ended October 1, 2010 were $1.4 billion, an increase of $155.2 million, or 12.2%, compared with the nine months ended October 2, 2009. Infrastructure revenues increased as a result of work performed on a new contract to construct a flood protection wall in Louisiana and an ongoing dam construction project in Illinois. The increase also reflects strong demand for the services we provide to expand and modernize rail/transit and high-speed rail systems, as well as air transportation infrastructure. Although the economic downturn and declining tax revenues have led to reductions in infrastructure spending by many state and local governments, we continued to benefit from the availability of infrastructure funding from a variety of other sources, including bonds, user fees, dedicated tax measures, the ARRA and other federal governmental funding. In addition, the consolidation of various joint ventures, which were previously accounted for under the equity method of accounting, contributed to the revenue increase in our infrastructure market sector.

The Infrastructure & Environment business’ revenues from our infrastructure market sector for the three months ended October 1, 2010 were $343.0 million, a decrease of $11.4 million, or 3.2%, compared with the three months ended October 2, 2009. The decline in revenues was largely the result of the delays and reductions in the awards of new contracts as a result of spending reductions by state and local governments for key infrastructure programs. At the same time, we continued to benefit from a variety of other sources of infrastructure funding, including bond sales, user fees, dedicated tax measures, the ARRA and other funding by the U.S. federal government. While revenues declined from infrastructure projects involving surface transportation systems, schools, and other public facilities, we generated increased revenues from projects to modernize and expand rail/transit and high-speed rail systems, air transportation infrastructure, ports and harbors and healthcare complexes. Many of these projects are being funded through bonds, dedicated tax measures and the ARRA, helping to offset in part the declines in spending by state and local governments.

The Infrastructure & Environment business’ revenues from our infrastructure market sector for the nine months ended October 1, 2010 were $1.0 billion, a decrease of $49.3 million, or 4.6%, compared with the nine months ended October 2, 2009. The decline in revenues was largely the result of the delays and reductions in the awards of new contracts as a result of reductions in infrastructure spending by state and local governments on projects to rehabilitate and expand surface transportation systems, schools and other public facilities. By contrast, demand remained strong for the program management, planning, design, engineering and construction management services we provide to expand and modernize rail/transit and high-speed rail systems, air transportation infrastructure, ports and harbors and healthcare complexes. Many of these projects are being funded through bonds, dedicated tax measures and the ARRA, helping to offset in part the declines in spending by state and local governments.

The Energy & Construction business’ revenues from our infrastructure market sector for the three months ended October 1, 2010 were $133.4 million, an increase of $80.0 million, or 149.8%, compared with the three months ended October 2, 2009. The increase was driven by activity on a new construction project to build a flood protection wall in Louisiana, which increased revenues by $51.1 million, and on a large dam construction project on the Ohio River, which increased revenues by $9.4 million. Revenues also increased by $13.2 million as a result of the consolidation of four joint ventures that provide a variety of engineering, procurement, construction management, and operations and maintenance services. These joint ventures were previously accounted for under the equity method of accounting.

The Energy & Construction business’ revenues from our infrastructure market sector for the nine months ended October 1, 2010 were $394.6 million, an increase of $204.5 million, or 107.6%, compared with the nine months ended October 2, 2009. The increase was driven by high levels of activity on a new construction project to build a flood protection wall in Louisiana, which increased revenues by $159.2 million, and on a large dam construction project on the Ohio River, which increased revenues by $28.4 million. Revenues also increased by $41.5 million as a result of the consolidation of four joint ventures that provide a variety of engineering, procurement, construction management, and operations and maintenance services, which increased revenues. These joint ventures were previously accounted for under the equity method of accounting. This increase was partially offset by two events recorded in the comparable period in the previous year: a $21.0 million favorable settlement of subcontractor claims and close out activities for a highway construction project in California and a $7.0 million one-time award fee for a transit project in Washington, D.C.

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Federal

Consolidated revenues from our federal market sector for the three months ended October 1, 2010 were $1.2 billion, an increase of $53.8 million, or 4.8%, compared with the three months ended October 2, 2009. These results reflect growth in demand for the engineering, construction and technical services we provide to the DOD, DOE, NASA and other federal government agencies. Revenues increased from the environmental and nuclear management services we provide to the DOE involving the storage, treatment and disposal of radioactive waste. We also continued to benefit from strong demand for the systems engineering and technical assistance services we provide to the DOD to modernize aging weapons systems and develop new systems, as well as from the operations and installation management services we provide at military bases, test ranges, space flight centers and other government installations. During the quarter, revenues also increased from projects to provide engineering, construction and environmental services at military installations worldwide.

Consolidated revenues from our federal market sector for the nine months ended October 1, 2010 were $3.4 billion, an increase of $269.9 million, or 8.7%, compared with the nine months ended October 2, 2009. We continued to benefit from strong demand for the engineering, construction and technical services we provide to the DOD, DOE, NASA and other federal government agencies. Revenues increased from the environmental and nuclear management services we provide to the DOE for projects involving the storage, treatment and disposal of radioactive waste. These results also were driven by strong demand for the systems engineering and technical assistance services we provide to the DOD to modernize aging weapons systems and develop new systems. We also benefited from strong demand for the operations and installation management services we provide at military bases, test ranges, space flight centers and other government installations.

The Infrastructure & Environment business’ revenues from our federal market sector for the three months ended October 1, 2010 were $177.3 million, an increase of $6.1 million, or 3.6%, compared with the three months ended October 2, 2009. During the quarter, revenues increased from projects to provide engineering, construction and environmental services at military installations in the U.S. and internationally. These assignments typically support the DOD’s long-term Military Transformation Initiative and involve the design and construction of aircraft hangars, barracks, military hospitals, and other government buildings, as well as the environmental remediation and restoration of military installations. By contrast, demand declined for the hazard mitigation and disaster recovery services we provide to the Federal Emergency Management Agency (“FEMA”), particularly following natural disasters such as hurricanes and floods. In the comparable period last year, we experienced higher levels of activity and generated higher revenues from our work with FEMA providing disaster recovery services following major hurricanes in the Gulf Coast region.

The Infrastructure & Environment business’ revenues from our federal market sector for the nine months ended October 1, 2010 were $512.3 million, a decrease of $4.0 million, or 0.8%, compared with the nine months ended October 2, 2009. This decrease was largely the result of the completion of a design-build contract for a medical training complex in fiscal 2009, which generated significant revenues in our 2009 fiscal year and has not been replaced by a comparable project in 2010. Revenues also declined from our hazard mitigation and disaster recovery work with FEMA. In the comparable period last year, we experienced higher levels of activity and generated higher revenues from our work with FEMA providing disaster recovery services following major hurricanes in the Gulf Coast region. These decreases were partially offset by increased activity under task orders to provide engineering, construction and environmental services at military installations worldwide.

The Federal Services business’ revenues from our federal market sector for the three months ended October 1, 2010 were $644.9 million, a decrease of $7.1 million, or 1.1%, compared with the three months ended October 2, 2009. Revenues declined from the services we provide to maintain and repair aircraft, ground vehicles and other military equipment, largely due to the delay in the award of task orders under existing contracts and the decline in U.S. military activity in Iraq. This decline was largely offset by increases in revenues from the systems engineering and technical assistance services we provide to the DOD for the development, testing and evaluation of new weapons systems, including electronic warfare and unmanned aerial vehicle programs, as well as for the modernization of aging weapons systems. Revenues also increased from the operations and installation management services we provide to support complex government and military installations, such as military bases, test ranges, space flight centers and other installations. In addition, we continued to benefit from steady demand for our work managing chemical demilitarization programs to eliminate chemical and biological weapons.

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The Federal Services business’ revenues from our federal market sector for the nine months ended October 1, 2010 were $1.9 billion, a decrease of $4.5 million, or 0.2%, compared with the nine months ended October 2, 2009. Revenues declined from our work maintaining and repairing aircraft, ground vehicles and other military equipment, largely due to the delay in the award of task orders under existing contracts and the decline in U.S. military activity in Iraq. By contrast, we continued to benefit from strong demand for systems engineering and technical assistance for the development, testing and evaluation of new weapons systems and the modernization of aging weapons systems. Revenues also increased from the operations and installation management services we provide in support of complex government and military installations, such as military bases, test ranges, space flight centers and other installations. In addition, we continued to benefit from steady demand for our work managing chemical demilitarization programs to eliminate chemical and biological weapons.

The Energy & Construction business’ revenues from our federal market sector for the three months ended October 1, 2010 were $356.6 million, an increase of $54.8 million, or 18.2%, compared with the three months ended October 2, 2009. The increase was primarily driven by higher activity on a DOE contract to provide nuclear management services for the treatment and disposal of high-level liquid waste, which resulted in an increase in revenues of $14.0 million. Revenues also increased by $21.8 million from a new contract to provide management and operations services to a federal energy technology laboratory and by $6.5 million due to increased activity on a DOE nuclear waste treatment and disposal project. The remaining increase was due to increased activities on various DOE projects.

The Energy & Construction business’ revenues from our federal market sector for the nine months ended October 1, 2010 were $913.5 million, an increase of $278.4 million, or 43.8%, compared with the nine months ended October 2, 2009. The increase was primarily driven by the restructuring of a DOE contract to provide nuclear management services for the treatment and disposal of high-level liquid waste, which resulted in an increase in revenues of $222.3 million compared to the same period in fiscal year 2009. The increase resulted from a change in the structure of the rebid contract from an agency contract to an at-risk contract. Revenues also increased by $50.0 million from a new contract to provide management and operations services to a federal energy technology laboratory and by $7.2 million due to high activity on a DOE nuclear waste treatment and disposal project.

Industrial and Commercial

Consolidated revenues from our industrial and commercial market sector for the three months ended October 1, 2010 were $410.2 million, a decrease of $49.8 million, or 10.8%, compared with the three months ended October 2, 2009. The industrial and commercial market sector, which includes our work for oil and gas, manufacturing and mining clients, continues to be the most exposed to the current economic downturn. During the quarter, we continued to experience a decline in revenues, due largely to the delay or cancellation of major capital improvement projects and the completion of several large-scale contracts that have not been replaced by comparable projects. Revenues also decreased from the services we provide to develop and operate mines. During the 2009 fiscal year, many of our mining clients curtailed or suspended mining activities as a result of lower prices for metals and mineral resources; these contracts have not been replaced by comparable projects during the current fiscal year. By contrast, revenues increased from the facilities management services we provide, as manufacturing clients continued to outsource non-core functions to manage their overhead costs. We also benefited from stable demand for the environmental and engineering work we provide under long-term Master Service Agreements (“MSAs”) with multinational corporations.

Consolidated revenues from our industrial and commercial market sector for the nine months ended October 1, 2010 were $1.2 billion, a decrease of $501.9 million, or 30.1%, compared with the nine months ended October 2, 2009. The decline in revenues was due largely to the delay or deferral of major capital improvement projects, as well as the completion of several large-scale contracts. We believe the economic downturn has resulted in reductions in spending for new production facilities among clients in the oil and gas and manufacturing industries. Revenues also declined from the services we provide to develop and operate mines. During the 2009 fiscal year, many of our mining clients curtailed or suspended mining as a result of lower prices for metals and mineral resources; these contracts have not been replaced by comparable projects during the current fiscal year. By contrast, we continued to benefit from steady demand for the facilities management, engineering and environmental services we provide to industrial clients to support existing plant operations.

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The Infrastructure & Environment business’ revenues from our industrial and commercial market sector for the three months ended October 1, 2010 were $249.3 million, an increase of $20.6 million, or 9.0%, compared with the three months ended October 2, 2009. During the quarter, we benefited from steady demand for the environmental and engineering work we provide under MSAs with multinational corporations, particularly among clients in the oil and gas and mining industries. Because this work typically is driven by regulatory compliance requirements and supports existing facility operations, it tends to be less susceptible to economic downturns and reductions in capital spending. Due to the economic downturn and its effect on the businesses of our commercial clients, we experienced decreased demand for the services we provide to these clients.

The Infrastructure & Environment business’ revenues from our industrial and commercial market sector for the nine months ended October 1, 2010 were $664.5 million, a decrease of $23.6 million, or 3.4%, compared with the nine months ended October 2, 2009. Revenues declined due to decreased demand for the engineering and construction-related services we provide to industrial clients for new capital improvement projects. By contrast, we continued to benefit from stable demand for the environmental and engineering work we provide under Master Service Agreements with multinational corporations in support of our clients’ existing operations. As a result of the economic downturn, revenues also declined from the services we provide to many of our commercial clients.

The Energy & Construction business’ revenues from our industrial and commercial market sector for the three months ended October 1, 2010 were $160.9 million, a decrease of $70.4 million, or 30.4%, compared with the three months ended October 2, 2009. The decrease was primarily driven by the completion of major construction projects, including a $10.7 million decrease related to a cement manufacturing plant in Missouri and a $41.2 million decrease related to six oil and gas projects. Also, due to the economic downturn and the decline in the prices of metals and mineral resources during 2009, many of our mining clients curtailed mining operations and, in some cases, close mines. We have not replaced these contracts to develop and operate mines with comparable assignments, resulting in a $22.4 million decrease in our mining revenues compared to the same period in the prior year. These decreases were partially offset by an increase in two new oil and gas projects, which accounted for a $10.8 million increase in revenues.

The Energy & Construction business’ revenues from our industrial and commercial market sector for the nine months ended October 1, 2010 were $501.4 million, a decrease of $478.3 million, or 48.8%, compared with the nine months ended October 2, 2009. The decrease was primarily driven by the completion of major construction projects, including a $188.1 million decrease related to a cement manufacturing plant in Missouri and a $129.0 million decrease related to six oil and gas projects. Due to the economic downturn and the decline in the prices of metals and mineral resources during 2009, many of our mining clients curtailed mining operations and, in some cases, close mines. We have not replaced these contracts to develop and operate mines with comparable assignments, resulting in a $106.1 million decrease in our mining revenues compared to the same period in the prior year. The remaining decrease was primarily due to decreases in other work for clients in the oil and gas industry.

Cost of Revenues

Our consolidated cost of revenues, which consists of labor, subcontractor costs, and other expenses related to projects and services provided to our clients, decreased by 3.6% for the three months ended October 1, 2010 compared with the three months ended October 2, 2009. Our consolidated cost of revenues decreased by 6.2% for the nine months ended October 1, 2010 compared with the nine months ended October 2, 2009. Because our revenues are primarily project-based, the factors that generally caused revenues to decline also drove a corresponding decrease in our cost of revenues. Consolidated cost of revenues as a percent of revenues decreased from 95.6% for the three months ended October 2, 2009 to 91.3% for the three months ended October 1, 2010. Consolidated cost of revenues as a percent of revenues decreased from 94.8% for the nine months ended October 2, 2009 to 93.4% for the nine months ended October 1, 2010. See “Operating Income” for further discussion.

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Acquisition-related Expenses

Our consolidated acquisition-related expenses for the three and nine months ended October 1, 2010 were $7.5 million and $11.6 million, respectively. These expenses consisted of expenses related to our acquisition of Scott Wilson, which was completed on September 10, 2010. These expenses included legal fees, bank fees, consultation fees, travel expenses, and other miscellaneous direct and incremental administrative expenses associated with the acquisition.

General and Administrative Expenses

Our consolidated general and administrative (“G&A”)expenses for the three months ended October 1, 2010 increased by 19.8% compared with the three months ended October 2, 2009. Consolidated G&A expenses as a percent of revenues was 0.9% for the three months ended October 1, 2010 compared to 0.8% for the three months ended October 2, 2009. The increase was primarily caused by an increase in employee incentive expenses, as well as increases in external services related to Sarbanes-Oxley compliance and an outsourced human resource software solution and foreign currency losses.

Our consolidated general and administrative (“G&A”) expenses for the nine months ended October 1, 2010 decreased by 3.0% compared with the nine months ended October 2, 2009. Consolidated G&A expenses as a percent of revenues was 0.8% for both the nine months ended October 1, 2010 and the nine months ended October 2, 2009. The decrease was primarily caused by the reversal of a payroll tax accrual related to a prior acquisition, and reductions in stock compensation expense and severance. These decreases were partially offset by foreign currency losses and an increase in travel expenses.

Equity in Income (Loss) of Unconsolidated Joint Ventures

Our consolidated equity in income of unconsolidated joint ventures for the three months ended October 1, 2010 decreased by $33.1 million or 159.9% compared with the three months ended October 2, 2009. Our consolidated equity in income of unconsolidated joint ventures for the nine months ended October 1, 2010 decreased by $42.5 million or 53.8% compared with the nine months ended October 2, 2009. The variances for the three-month and nine-month period comparisons were attributable primarily to the Energy & Construction business’ unconsolidated joint ventures as discussed below.

The Energy & Construction business’ equity in income of unconsolidated joint ventures for the three months ended October 1, 2010 decreased by $32.0 million or 182.9% compared with the three months ended October 2, 2009. The decrease was due to:

a $25.0 million decrease due to a charge taken on a Southern California highway project;

a $5.4 million decrease due to lower earnings on a DOE nuclear clean-up project in Idaho; and

a $5.1 million decrease as a result of the consolidation of a joint venture involved in a DOE nuclear clean-up project in Washington, the consolidation of a joint venture that provides engineering, procurement, maintenance, and construction services for large nuclear component replacement projects and the consolidation of two joint ventures that provide construction management and operations and maintenance services. All of these joint ventures were not consolidated in the comparable period in fiscal year 2009.

These decreases were partially offset by:

·	a $3.1 million increase from the consolidation of a U.K. joint venture whose sole operations consist of an investment in another U.K. joint venture, which was not consolidated by the initial U.K. joint venture during the three months ended October 1, 2010.

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The Energy & Construction business’ equity in income of unconsolidated joint ventures for the nine months ended October 1, 2010 decreased by $39.3 million or 56.7% compared with the nine months ended October 2, 2009. The decrease was due to:

a $25.0 million decrease due to a charge taken on a Southern California highway project;

an $18.7 million decrease in equity in income reflecting the sale on June 10, 2009 of our equity investment in an incorporated mining joint venture in Germany – MIBRAG mbH (“MIBRAG”); and

a $23.2 million decrease as a result of the consolidation of a joint venture involved in a DOE nuclear clean-up project in Washington, the consolidation of a joint venture that provides engineering, procurement, maintenance, and construction services for large nuclear component replacement projects, and the consolidation of two joint ventures that provide construction management and operations and maintenance services. All of these joint ventures were not consolidated in the comparable period in fiscal year 2009.

These decreases were partially offset by:

a $2.1 million increase primarily driven by a change order settlement on a DOE nuclear clean-up project in Idaho;

an $18.3 million increase from the consolidation of a U.K. joint venture whose sole operations consist of an investment in another U.K. joint venture, which was not consolidated by the initial joint venture during the nine months ended October 1, 2010;

a $3.2 million increase from the consolidation of a second U.K. joint venture whose operations consist of an investment in another U.K. joint venture, which it consolidated during the nine months ended October 2, 2009 but did not consolidate during the nine months ended October 1, 2010; and

a $4.9 million increase from a joint venture light rail project in Southern California, in which we recognized a loss in the comparable period in fiscal year 2009. We began to consolidate this joint venture at the beginning of fiscal year 2010.

Operating Income

Our consolidated operating income for the three months ended October 1, 2010 increased by $58.0 million or 55.6% compared with the three months ended October 2, 2009. As a percentage of revenues, operating income was 6.9% for the three months ended October 1, 2010 compared to 4.5% for the three months ended October 2, 2009. The increase in operating income was due to various factors, including the consolidation of joint ventures at the beginning of our fiscal year 2010, a loss recognized during the same period in the previous year on a common sulfur project, favorable price finalization on a fixed-price U.S. government contract, a recovery related to legacy workers’ compensation and general liability insurance programs, foreign currency gains, as well as reductions in overhead costs.

These increases were partially offset by the decrease in equity in income of unconsolidated joint ventures described above and expenses incurred in connection with our acquisition of Scott Wilson. These factors are discussed in more detail in operating income by segment below.

Our consolidated operating income for the nine months ended October 1, 2010 increased by $28.4 million or 7.2% compared with the nine months ended October 2, 2009. As a percentage of revenues, operating income was 6.2% for the nine months ended October 1, 2010 compared to 5.5% for the nine months ended October 2, 2009. The increase in operating income was due to various factors, including the consolidation of joint ventures at the beginning of our fiscal year 2010, a loss recognized during the same period in the previous year on a common sulfur project, favorable price finalization on a fixed-price U.S. government contract, a recovery related to legacy workers’ compensation and general liability insurance programs, foreign currency gains as well as reductions in overhead costs.

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These increases were partially offset by the decreases in revenues and in equity in income of unconsolidated joint ventures described above. In addition, operating income was impacted by the completion of various projects that generated positive income in the corresponding period of 2009 and expenses incurred in connection with our acquisition of Scott Wilson. These factors are discussed in more detail in operating income by segment below.

The Infrastructure & Environment business’ operating income for the three months ended October 1, 2010 increased by $10.4 million or 18.6% compared with the three months ended October 2, 2009. The increase in operating income was caused primarily by a reduction in overhead costs, $7.4 million of foreign currency gains, and decreases in insurance expenses and sales and development expenses. The increase in operating income was partially offset by $7.5 million in expenses incurred in connection with our acquisition of Scott Wilson and increases in the use of subcontractors and purchase of project-related material that provide lower profit margins than activities performed directly by our employees. Overhead costs as a percentage of revenues, which excludes acquisition-related expenses, decreased from 31.4% for the three months ended October 2, 2009 to 29.3% for the three months ended October 1, 2010. Operating income as a percentage of revenues was 8.1% for the three months ended October 1, 2010 compared to 7.1% for the three months ended October 2, 2009.

The Infrastructure & Environment business’ operating income for the nine months ended October 1, 2010 decreased by $17.4 million or 9.2% compared with the nine months ended October 2, 2009. The decrease in operating income was caused primarily by the decrease in revenues previously described. We also incurred $11.6 million of expenses in connection with our acquisition of Scott Wilson. The decline in operating income was offset in part by reductions in the use of subcontractors and purchases of project-related materials that provide lower profit margins than activities performed directly by our employees, $8.3 million of foreign currency gains, and decreases in employee incentive expenses and legal expenses. Overhead costs as a percentage of revenues, which excludes acquisition-related expenses, increased slightly from 31.2% for the nine months ended October 2, 2009 to 31.5% for the nine months ended October 1, 2010. Operating income as a percentage of revenues was 7.3% for the nine months ended October 1, 2010 compared to 7.8% for the nine months ended October 2, 2009.

The Federal Service business’ operating income for the three months ended October 1, 2010 increased by $11.1 million or 28.2% compared with the three months ended October 2, 2009. The increase in operating income was caused primarily by favorable price finalization and performance of $10.3 million on a fixed-price U.S. government contract . Operating income as a percentage of revenues was 7.8% for the three months ended October 1, 2010 compared to 6.0% for the three months ended October 2, 2009.

The Federal Service business’ operating income for the nine months ended October 1, 2010 increased by $10.4 million or 9.2% compared with the nine months ended October 2, 2009. The increase in operating income was caused primarily by favorable price finalization and performance of $13.5 million on a fixed-price U.S. government contract . This increase was partially offset by a decrease of award fees on a chemical demilitarization contract, lower revenues from military support activities in Iraq, and delayed contract awards. Operating income as a percentage of revenues was 6.4% for the nine months ended October 1, 2010 compared to 5.8% for the nine months ended October 2, 2009.

The Energy & Construction business’ operating income for the three months ended October 1, 2010 increased by $40.1 million or 150.2% compared with the three months ended October 2, 2009. As a percentage of revenues, operating income was 7.4% for the three months ended October 1, 2010 compared to 3.0% for the three months ended October 2, 2009. The increase in operating income was primarily driven by the following factors:

a $24.7 million increase resulting from our common sulfur project where we recognized income of $4.7 million during the three months ended October 1, 2010 compared to a loss of $20.0 million during the three months ended October 2, 2009;

an $11.7 million increase resulting from the consolidation of joint ventures at the beginning of our 2010 fiscal year;

an increase of $15.3 million related to favorable performance on a clean air power project;

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· ·	increases of $17.8 million and $19.5 million from various ongoing and new projects, respectively, that were not included in the comparable period in the previous year; and a $10.9 million recovery relating to legacy workers’ compensation and general liability insurance programs.

These increases in operating income were partially offset by the following factors:

a $25.0 million charge taken on a highway project in Southern California;

the completion or termination of various contract mining projects, which resulted in a $13.5 million decrease in operating income compared to the same period in 2009; and

$26.9 million in lower earnings resulting from the wind down and completion of various projects.

The Energy & Construction business’ operating income for the nine months ended October 1, 2010 increased $33.7 million or 22.9% compared with the nine months ended October 2, 2009. As a percentage of revenues, operating income was 7.0% for the nine months ended October 1, 2010 compared to 5.2% for the nine months ended October 2, 2009. The increase in operating income was primarily driven by the following factors:

a $30.4 million increase resulting from our common sulfur project where we recognized a loss of $1.0 million during the nine months ended October 1, 2010 compared to a loss of $31.4 million during the nine months ended October 2, 2009;

a $41.6 million increase resulting from the consolidation of joint ventures during the first nine months of fiscal year 2010;

an increase of $21.3 million related to favorable performance on a clean air power contract;

an increase of $10.0 million due to the achievement and recognition of a schedule incentive on a clean air project;

a $29.4 million increase due to new projects that were not included in the comparable period in the previous year; and

a $10.9 million recovery relating to legacy workers’ compensation and general liability insurance programs.

These increases in operating income were partially offset by a $25.0 million charge taken on a highway project in Southern California and decreases in revenues in the power and industrial and commercial market sectors, as previously described. In addition, our operating income in the prior period included $18.7 million in earnings from MIBRAG, which was sold on June 10, 2009, $14.9 million from a contract to construct a cement manufacturing facility, which was completed in 2009, and $22.3 million from various contract mining projects that were completed or terminated during the prior year. Finally, the increase in operating income was partially offset by events that occurred in the nine months ended October 2, 2009, but did not recur in the comparable period in 2010. These events include:

a $16.0 million change order recovery and close out activities on a highway project;

a contract termination fee of $9.0 million on a cancelled contract mining project; and

a $7.0 million project development success fee on a transit project.

Interest Expense

Our consolidated interest expense for the three months ended October 1, 2010 decreased by $1.5 million or 14.0% compared with the three months ended October 2, 2009. Our consolidated interest expense for the nine months ended October 1, 2010 decreased by $13.7 million or 36.6% compared with the nine months ended October 2, 2009. These decreases were primarily due to lower debt balances, lower LIBOR interest rates and lower interest rate margins in 2010, and to a lesser extent, adjustments to interest expense related to our uncertain tax positions.

Other Income, net

Our consolidated other income, net for the nine months ended October 2, 2009 consisted of a $75.6 million gain associated with the sale of our equity investment in MIBRAG, net of $5.2 million of sale-related costs, that was completed during the second quarter of 2009. This gain was partially offset by a $27.7 million loss on the settlement of a foreign currency forward contract during the second quarter of 2009, which primarily hedged our net investment in MIBRAG. We did not have income of this kind in the first three quarters of 2010.

Income Tax Expense

Our effective income tax rates for the nine months ended October 1, 2010 and October 2, 2009 were 29.5% and 37.6%, respectively. The reduction in the rate for the nine months ended October 1, 2010 was primarily due to our determination made during the first quarter of 2010 that earnings of all of our foreign subsidiaries will be indefinitely reinvested offshore, which resulted in the reversal of the net U.S. deferred tax liability on the undistributed earnings of all foreign subsidiaries. On February 16, 2010, we entered into a consent with our lenders related to our Senior Secured Credit Facility (“2007 Credit Facility”) that permits us to utilize the funds received in June 2009 from the sale of our equity investment in MIBRAG for general operating purposes. This consent allowed these funds to be indefinitely reinvested offshore to facilitate the implementation of our strategy to expand our international business. During the first quarter of 2010, we determined that our plans to expand the scope of our international presence would require that we indefinitely reinvest the earnings of all of our foreign subsidiaries. For fiscal years 2007 and 2008, our foreign subsidiaries distributed to their U.S. shareholders $0.1 million and $8.3 million, respectively, that were taxable in the U.S. No cash distributions were made from our foreign subsidiaries to their U.S. shareholders in fiscal year 2009 or in the nine months ended October 1, 2010. In the fourth quarter of 2009 and the third quarter of 2010, some distributions were made among our foreign subsidiaries, which resulted in foreign earnings being subject to U.S. taxation of $16.0 million and $6.4 million, respectively.

The reconciliation of our income tax expense and effective income tax rates for the nine months ended October 1, 2010 and October 2, 2009 is as follows:

	Nine Months Ended
	October 1, 2010						October 2, 2009
(In thousands, except for percentages)	Amount			Tax Rate			Amount			Tax Rate
U.S. statutory rate applied to income before taxes	$	139,317			35.0	%	$	141,299			35.0	%
State taxes, net of federal benefit		19,029			4.8	%		18,081			4.5	%
Change in indefinite reinvestment assertion		(58,176	)		(14.6	%)		(14,703	)		(3.6	%)
Adjustments to valuation allowances		14,446			3.6	%		2,099			0.5	%
Adjustments related to changing foreign tax credits to deductions		13,616			3.4	%		—			—
Foreign income taxed at rates other than 35%		(13,740	)		(3.4	%)		—			—
Other adjustments		2,860			0.7	%		4,989			1.2	%
Total income tax expense	$	117,352			29.5	%	$	151,765			37.6	%

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LIQUIDITY AND CAPITAL RESOURCES

	Nine Months Ended
(In millions)	October 1, 2010			October 2, 2009
Cash flows from operating activities	$	353.5		$	448.2
Cash flows from investing activities		(289.5	)		63.4
Cash flows from financing activities		(228.1	)		(265.9	)

Overview

During the nine months ended October 1, 2010, our primary sources of liquidity were collections of accounts receivable from our clients, dividends from our unconsolidated joint ventures and the maturity of our short-term investment. Our primary uses of cash were to fund our working capital, capital expenditures, our acquisition of Scott Wilson, interest payments and distributions to the noncontrolling interests in our consolidated joint ventures; to invest in our unconsolidated joint ventures; and to repurchase our common stock.

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

Liquidity

Cash and cash equivalents include all highly liquid investments with maturities of 90 days or less at the date of purchase, including interest-bearing bank deposits and money market funds. At October 1, 2010 and January 1, 2010, restricted cash was $28.4 million and $11.9 million, respectively, which amounts were included in “Other current assets” on our Condensed Consolidated Balance Sheets. As of October 1, 2010 and January 1, 2010, cash and cash equivalents included $85.0 million and $112.4 million, respectively, of cash held by our consolidated joint ventures.

Accounts receivable and costs and accrued earnings in excess of billings on contracts represent our primary source of cash inflows from operations. Costs and accrued earnings in excess of billings on contracts represent amounts that will be billed to clients as soon as invoice support can be assembled, reviewed and provided to our clients, or when specific contractual billing milestones are achieved. In some cases, unbilled amounts may not be billable for periods generally extending from two to six months and, rarely, beyond a year. As of October 1, 2010 and January 1, 2010, significant unapproved change orders and claims, which are included in costs and accrued earnings in excess of billings on contracts, collectively represented approximately 2% of our gross accounts receivable and accrued earnings in excess of billings on contracts.

All accounts receivable and costs and accrued earnings in excess of billings on contracts are evaluated on a regular basis to assess the risk of collectability and allowances are provided as deemed appropriate. Based on the nature of our customer base, including U.S. federal, state and local governments and large reputable companies, and contracts, we have not historically experienced significant write-offs related to receivables and costs and accrued earnings in excess of billings. The size of our allowance for uncollectible receivables as a percentage of the combined totals of our accounts receivable and accrued earnings in excess of billings on contracts is indicative of our history of successfully billing costs and accrued earnings in excess of billings on contracts and collecting the billed amounts from our clients.

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As of October 1, 2010 and January 1, 2010, our receivable allowances represented 2.43% and 2.45%, respectively, of the combined total accounts receivable and costs and accrued earnings in excess of billings on contracts. We believe that our allowance for doubtful accounts receivable as of October 1, 2010 is adequate. We have placed significant emphasis on collection efforts and continually monitor our receivable allowance. However, future economic conditions may adversely affect the ability of some of our clients to make payments or the timeliness of their payments; consequently, it may also affect our ability to consistently collect cash from our clients and meet our operating needs. The other significant factors that typically affect our realization of our accounts receivable include the billing and payment terms of our contracts, as well as the stage of completion of our performance under the contracts. Our operating cash flows may also be affected by changes in contract terms or the timing of advance payments to our joint ventures, partnerships and partially-owned limited liability companies relative to the contract collection cycle. In addition, substantial advance payments or billings in excess of costs also have an impact on our liquidity. Billings in excess of costs as of October 1, 2010 and January 1, 2010 were $264.1 million and $235.3 million, respectively.

We use Days Sales Outstanding (“DSO”) to monitor the average time, in days, that it takes us to convert our accounts receivable into cash. DSO also is a useful tool for investors to measure our liquidity and understand our average collection period. We calculate DSO by dividing net accounts receivable less billings in excess of costs and accrued earnings on contracts as of the end of the quarter into the amount of revenues recognized during the quarter, and multiplying the result of that calculation by the number of days in that quarter. Our DSO increased from 72 days as of January 1, 2010 to 75 days as of October 1, 2010, which is primarily due to the timing of payments from clients on our accounts receivable.

We believe that we have sufficient resources to fund our operating and capital expenditure requirements, pay income taxes, as well as to service our debt, for at least the next twelve months. In the ordinary course of our business, we may experience various loss contingencies including, but not limited to, the pending legal proceedings identified in Note 14, “Commitments and Contingencies,” to our Condensed Consolidated Financial Statements included under Part 1 – Item 1 of this report, which may adversely affect our liquidity and capital resources.

Operating Activities

The decrease in cash flows from operating activities for the nine months ended October 1, 2010, compared to the nine months ended October 2, 2009, was primarily due to fluctuations in receivables and payables as a result of the payments from clients on accounts receivable, a reduction in advance payments from clients as projects moved towards completion, the timing of project performance payments, the timing of payments to joint ventures, the timing of payroll payments, and the timing of payments to vendors and subcontractors. The decrease was partially offset by a decrease in interest payments.

Investing Activities

Included in our investing activities during the nine months ended October 1, 2010 was a cash outflow of $288.0 million related to our acquisition of Scott Wilson, net of cash acquired of $14.6 million. Our capital expenditures are primarily for construction equipment and information systems to support our professional and technical services and administrative needs. During the nine months ended October 1, 2010 and October 2, 2009, capital expenditures, excluding purchases financed through capital leases and equipment notes, were $34.1 million and $34.5 million, respectively. In addition, we disbursed $6.0 million and $13.8 million in cash related to investments in and advances to unconsolidated joint ventures for the nine months ended October 1, 2010 and October 2, 2009, respectively. Furthermore, short-term investments of $30.2 million matured during the first nine months of fiscal year 2010.

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Our cash balance increased by $20.7 million at the beginning of our fiscal year 2010 as a result of newly consolidated joint ventures. In addition, our restricted cash balance increased by $16.5 million primarily due to restrictions on cash balances of $28.4 million that collateralize the five-year loan notes (“Loan Notes”) that we issued to shareholders of Scott Wilson as an alternative to cash consideration, partially offset by removal of restrictions on $11.9 million in cash held at a project.

On June 10, 2009, we completed the sale of our equity investment in MIBRAG and we received €206.1 million (equivalent to U.S. $287.8 million) in cash proceeds from the sale and incurred sale-related costs of $5.2 million. In addition, we settled our foreign currency forward contract, which primarily hedged our net investment in MIBRAG, at a loss of $27.7 million. We used $57.0 million of the net proceeds from the sale for debt payments and invested $165.0 million of the net proceeds in bank certificates of deposits as short-term investments.

For the remainder of fiscal year 2010, we expect to incur approximately $20 million in capital expenditures, a portion of which will be financed through capital leases or equipment notes.

Financing Activities

The change in net cash flows from financing activities for the nine months ended October 1, 2010, compared to the nine months ended October 2, 2009, was primarily due to the decrease in term loan payments made on our 2007 Credit Facility for the first nine months of our fiscal year 2010, partially offset by an increase in repurchases of our common stock and net distributions to noncontrolling interests.

Cash flows used for financing activities of $228.1 million during the nine months ended October 1, 2010 consisted of the following significant activities:

payments of $75.0 million on the term loans under our 2007 Credit Facility;

repurchases of our common stock of $85.5 million; and

net distributions to noncontrolling interests of $64.5 million.

Cash flows used for financing activities of $265.9 million during the nine months ended October 2, 2009 consisted of the following significant activities:

payments of $207.0 million on the term loans under our 2007 Credit Facility;

repurchases of our common stock of $41.2 million; and

net distributions to noncontrolling interests of $16.2 million.

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Contractual Obligations and Commitments

The following table contains information about our contractual obligations and commercial commitments followed by narrative descriptions as of October 1, 2010:

	Payments and Commitments Due by Period
Contractual Obligations (Debt payments include principal only) (In millions)	Total		Less Than 1 Year		1-3 Years		4-5 Years		After 5 Years		Other
As of October 1, 2010:
2007 Credit Facility (1,2)	$	700.0	$	—	$	700.0	$	—	$	—	$	—
Capital lease obligations (1)		20.6		8.6		10.3		1.7		—		—
Notes payable, foreign credit lines and other indebtedness (1)		75.2		64.5		9.0		1.7		—		—
Total debt		795.8		73.1		719.3		3.4		—		—
Operating lease obligations (3)		589.3		152.7		221.8		133.5		81.3		—
Pension and other retirement plans funding requirements (4)		370.7		41.8		65.0		52.1		211.8		—
Interest (5)		48.9		16.7		30.6		1.6		—		—
Purchase obligations (6)		3.0		2.4		0.6		—		—		—
Asset retirement obligations (7)		3.9		1.3		1.6		0.8		0.2		—
Other contractual obligations (8)		72.5		45.7		5.2		—		—		21.6
Total contractual obligations	$	1,884.1	$	333.7	$	1,044.1	$	191.4	$	293.3	$	21.6

(1)

Amounts shown exclude unamortized debt issuance costs of $6.7 million for the 2007 Credit Facility. For capital lease obligations, amounts shown exclude interest of $1.1 million.

(2)

On February 16, 2010, we entered into a consent to our 2007 Credit Facility, which allows us to utilize the funds from the sale of our equity investment in MIBRAG for general operating purposes. Accordingly, we are not required to remit $100.0 million as repayment on our 2007 Credit Facility in fiscal year 2010. Our next scheduled payment is expected to be due in March 2012.

(3)

Operating leases are predominantly real estate leases.

(4)

Amounts consist of estimated pension and other retirement plan funding requirements for various pension, post-retirement, and other retirement plans.

(5)

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

(6)

Purchase obligations consist primarily of software maintenance contracts.

(7)

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

(8)

Other contractual obligations include net liabilities for anticipated settlements and interest under our tax liabilities, accrued severance for our CEO pursuant to his employment agreement, our contractual obligations to joint ventures, and the accrual for the estimated purchase consideration of our acquisition of Scott Wilson for vested shares exercisable under Scott Wilson’s employee equity plans. Generally, it is not practicable to forecast or estimate the payment dates for the above-mentioned tax liabilities. Therefore, we included the estimated liabilities under the “Other” column above.

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Off-balance Sheet Arrangements

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

The following is a list of our off-balance sheet arrangements:

Letters of credit primarily to support project performance, insurance programs, bonding arrangements and real estate leases. As of October 1, 2010, we had $165.4 million in standby letters of credit under our 2007 Credit Facility. We are required to reimburse the issuers of letters of credit for any payments they make under the outstanding letters of credit. Our 2007 Credit Facility covers the issuance of our standby letters of credit and is critical for our normal operations. If we default on the 2007 Credit Facility, our inability to issue or renew standby letters of credit would impair our ability to maintain normal operations.

·	We have guaranteed a letter of credit issued on behalf of one of our consolidated joint ventures. The total amount of the letter of credit was $7.2 million as of October 1, 2010.

·	We have guaranteed several of our foreign credit facilities and bank guarantee lines. The aggregate amount of these guarantees was $16.6 million as of October 1, 2010.

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

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

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

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2007 Credit Facility

As of October 1, 2010 and January 1, 2010, the outstanding balance of term loan A was $548.8 million and $607.6 million, respectively, at interest rates of 1.27% and 1.25%, respectively. As of October 1, 2010 and January 2, 2009, the outstanding balance of term loan B was $151.2 million and $167.4 million, respectively, at interest rates of 2.52% and 2.50%, respectively.

Under the terms of our 2007 Credit Facility, we are generally required to remit as debt payments any proceeds we receive from the sale of assets and the issuance of debt. On February 16, 2010, we entered into a consent to our 2007 Credit Facility, which allows us to use the funds from the sale of our equity investment in MIBRAG for general operating purposes. As a result of this consent, we were not required to remit a payment relating to this transaction in the first quarter of 2010 and our next scheduled payment is expected to be due in March 2012.

As of October 1, 2010, our consolidated leverage ratio was 1.2, which did not exceed the maximum consolidated leverage ratio of 2.375, and our consolidated interest coverage ratio was 19.8, which exceeded the minimum consolidated interest coverage ratio of 5.0. During the first quarter of 2010, Moody’s Investor Services upgraded our credit rating to Ba1. On April 16, 2010, Standard and Poor’s upgraded our credit rating to BB+. As a result of these upgrades in our credit ratings in the first nine months of 2010, some of our non-financial covenants such as the ability to acquire other companies, are no longer applicable or became less restrictive. We were in compliance with the covenants of our 2007 Credit Facility as of October 1, 2010.

13BRevolving Line of Credit

We did not have an outstanding debt balance on our revolving line of credit as of either October 1, 2010 or January 1, 2010. As of October 1, 2010, we have issued $165.4 million of letters of credit, leaving $534.6 million available on our revolving credit facility. If we elected to borrow the remaining amounts available under our revolving line of credit as of October 1, 2010, we would remain in compliance with the covenants of our 2007 Credit Facility.

14BOther Indebtedness

Notes payable, foreign credit lines and other indebtedness. As of October 1, 2010 and January 1, 2010, we had outstanding amounts of $75.2 million and $24.6 million, respectively, in notes payable and foreign lines of credit. The weighted-average interest rates of the notes payable were approximately 2.4% and 5.6% as of October 1, 2010 and January 1, 2010, respectively. Notes payable primarily include notes used to finance the purchase of office equipment, computer equipment and furniture, and Loan Notes.

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As of October 1, 2010 and January 1, 2010, we had $89.0 million and $15.8 million in lines of credit available under these facilities, respectively. As of October 1, 2010, the total outstanding balance of our credit lines was $27.6 million.

Operating Leases. As of October 1, 2010 and January 1, 2010, we had obligations under our operating leases of approximately $589.3 million and $489.8 million, respectively, consisting primarily of real estate leases. We assumed various operating leases as part of our acquisition of Scott Wilson.

Other Activities

Interest Rate Instruments. Our 2007 Credit Facility is a floating-rate facility. To hedge against changes in floating interest rates, we have one floating-for-fixed interest rate swap with a notional amount of $200.0 million, maturing on December 31, 2010. As of October 1, 2010 and January 1, 2010, the fair value of our interest rate swap liability was $2.0 million and $7.1 million, respectively. The swap liability was recorded in “Other current liabilities” on our Condensed Consolidated Balance Sheets. The adjustments to fair value of the swap liability were recorded in “Accumulated other comprehensive loss.” We have recorded no gain or loss on our Condensed Consolidated Statements of Operations as our interest rate swap is an effective hedge. As part of our acquisition of Scott Wilson, we assumed a three-month pound sterling LIBOR interest rate collar maturing on July 24, 2012 and recorded an immaterial adjustment related to the change in its fair value during the quarter ended October 1, 2010.

Foreign Currency Forward Contracts. We operate our business globally and our foreign subsidiaries conduct businesses in various foreign currencies. Therefore, we are subject to foreign currency risk. From time to time, we purchase derivative financial instruments in the form of foreign currency exchange contracts to manage specific foreign currency exposures. Currently, we have several immaterial foreign currency contracts to cover the risks associated with our international operations.

On March 4, 2009, we entered into a foreign currency forward contract with a notional amount of €196.0 million (equivalent to U.S. $246.1 million per the contract) with a maturity window from April 15, 2009 to July 31, 2009. The primary objective of the contract was to manage our exposure to foreign currency transaction risk related to the Euro proceeds we received from the sale of our equity investment in MIBRAG, which was completed on June 10, 2009. We designated €128.0 million (equivalent to U.S. $160.7 million at contract rate) of the contract as a hedge of our net investment in MIBRAG.

On June 12, 2009, we settled our foreign currency forward contract. For the nine months ended October 2, 2009, we recorded a loss on the settlement of this contract of $27.7 million in “Other income, net” in our Condensed Consolidated Statements of Operations.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires us to make estimates and assumptions in the application of certain accounting policies that affect amounts reported in our consolidated financial statements and related footnotes included in Item 1 of this report. In preparing these financial statements, we have made our best estimates and judgments of certain amounts, after considering materiality. Application of these accounting policies, however, involves the exercise of judgment and the use of assumptions as to future uncertainties. Consequently, actual results could differ from our estimates, and these differences could be material.

The accounting policies that we believe are most critical to an investor’s understanding of our financial results and condition and that require complex judgments by management are included in our Annual Report on Form 10-K for the year ended January 1, 2010. There were no material changes to these critical accounting policies during the nine months ended October 1, 2010. However, we adopted two new accounting standards relating to transfers of financial assets and consolidation of VIEs. See the discussion regarding the adoption of the new accounting standards, as well as our discussion of VIEs and goodwill below.

Consolidation of Variable Interest Entities

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

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

·	Identifying the significant activities and the parties that would perform them;

·	Reviewing the governing board composition and participation ratio;

·	Determining the equity, profit and loss ratio;

·	Determining the management-sharing ratio;

·	Reviewing employment terms, including which joint venture partner provides the project manager; and

·	Reviewing the funding and operating agreements.

Examples of our significant activities include the following:

·	Engineering services;

·	Procurement services;

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·	Construction;

·	Construction management; and

·	Operations and maintenance services.

As a result of our analysis under the current accounting standard for consolidation, we determined that we were the primary beneficiary of, and therefore, must consolidate seven joint ventures in which we do not have a majority voting interest as of and for the three and nine months ended October 1, 2010. Three of these joint ventures were consolidated within our Infrastructure & Environment segment and four were consolidated within our Energy & Construction segment.

The net impact of these joint ventures on segment revenues for both the three and nine months ended October 1, 2010 was less than 10% of total segment revenues for each segment. There was no impact on our debt as a result of consolidating these joint ventures.

As required by the accounting standard, we perform a quarterly re-assessment of our status as primary beneficiary. This evaluation may result in a newly consolidated joint venture or in deconsolidating a previously consolidated joint venture. See Note 5, “Joint Ventures,” to our “Condensed Consolidated Financial Statements,” included under Part 1 – Item 1 of this report for further information on our VIEs.

During the third quarter of 2010, we performed a re-assessment of our joint ventures to determine whether there were changes in the status of the VIEs or changes to the primary beneficiary designation of each VIE. Based on our analysis, we concluded that no unconsolidated joint ventures should be consolidated and that no consolidated joint ventures should be de-consolidated.

Goodwill

Goodwill may be impaired if the estimated fair value of one or more of our reporting units’ goodwill is less than the carrying value of the unit’s goodwill. Because we have grown through acquisitions, goodwill and other intangible assets represent a substantial portion of our total assets. Goodwill and other net intangible assets were $3.9 billion as of October 1, 2010. 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: (i) continued deterioration of market and economic conditions that may adversely impact our ability to meet our projected results; (ii) declines in our stock price caused by continued volatility in the financial markets that may result in increases in our weighted-average cost of capital or other inputs to our goodwill assessment; and (iii) the occurrence of events that may reduce the fair value of a reporting unit below its carrying amount, such as the sale of a significant portion of one or more of our reporting units.

For the nine months ended October 1, 2010, no triggering events occurred that would require us to perform an interim impairment review of our goodwill.

ADOPTED AND OTHER RECENTLY ISSUED ACCOUNTING STANDARDS

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A new accounting standard on consolidation of variable interest entities (“VIEs”) became effective for us at the beginning of our 2010 fiscal year. This standard amends the accounting and disclosure requirements for the consolidation of a VIE. It requires additional disclosures about the significant judgments and assumptions used in determining whether to consolidate a VIE, the restrictions on a consolidated VIE’s assets and on the settlement of a VIE’s liabilities, the risk associated with involvement in a VIE, and the financial impact on a company due to its involvement with a VIE. As the standard requires ongoing quarterly evaluation of the application of the new requirements, changes in circumstances could result in the identification of additional VIEs to be consolidated or existing VIEs to be deconsolidated in any reporting period. We adopted this standard prospectively and based on the carrying values of the entities at the date of adoption. The adoption of this standard did not have a material impact on our condensed consolidated financial statements. For additional disclosures, see Note 5, “Joint Ventures,” to our “Condensed Consolidated Financial Statements,” included under Part 1 – Item 1 of this report.

An accounting standard update related to recurring and nonrecurring fair value measurements was issued. This update requires new disclosures on significant transfers of assets and liabilities between Level 1 and Level 2 of the fair value hierarchy (including the reasons for these transfers) and the reasons for any transfers in or out of Level 3. It also requires a reconciliation of recurring Level 3 measurements including purchases, sales, issuances and settlements on a gross basis. The accounting update clarifies certain existing disclosure requirements and requires fair value measurement disclosures for each class of assets and liabilities as opposed to each major category of assets and liabilities. It also clarifies that entities are required to disclose information about both the valuation techniques and inputs used in estimating Level 2 and Level 3 fair value measurements. Except for the disclosures on the reconciliation of recurring Level 3 measurements, the other new disclosures and clarifications of existing disclosures were effective for us beginning with the first quarter of our 2010 fiscal year. The adoption of this standard did not have a material impact on our condensed consolidated financial statements. See Note 8, “Fair Values of Debt Instruments, Investments and Derivative Instruments,” to our “Condensed Consolidated Financial Statements,” included under Part 1 – Item 1 of this report for our fair value measurement disclosure. The information about the activity in Level 3 fair value measurements on a gross basis will be effective for us beginning with the first quarter of our 2011 fiscal year. We currently do not expect that the adoption of this portion of the standard will have a material impact on our consolidated financial statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

We are exposed to changes in interest rates as a result of our borrowings under our 2007 Credit Facility. We have one floating-for-fixed interest rate swap with a notional amount of $200.0 million to hedge against changes in floating interest rates. The notional amount of the swap is less than the outstanding debt and, as such, we are exposed to increasing or decreasing market interest rates on the unhedged portion. Based on the expected outstanding indebtedness of approximately $700 million under our 2007 Credit Facility, if market rates used to calculate interest expense were to average 1% higher in the next twelve months, our net-of-tax interest expense would increase approximately $3.0 million. As market rates are at historically low levels, the index rate used to calculate our interest expense cannot drop by more than 0.29%, which would lower our net-of-tax interest expense by approximately $0.9 million. This analysis is computed by taking into account the current outstanding balances of our 2007 Credit Facility, assumed interest rates, current debt payment schedule and the existing swap. The result of this analysis would change if the underlying assumptions were modified.

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Foreign Currency Risk

The majority of our transactions are in U.S. dollars; however, our foreign subsidiaries conduct businesses in various foreign currencies. Therefore, we are subject to currency exposures and volatility because of currency fluctuations. We attempt to minimize our exposure to foreign currency fluctuations by matching our revenues and expenses in the same currency for our operating contracts. From time to time, we purchase derivative financial instruments in the form of foreign currency exchange contracts to manage specific foreign currency exposures. Currently, we have several immaterial foreign currency contracts to cover the risks associated with our international operations. We had a foreign currency translation gain, net of tax, of $21.6 million and a foreign currency translation loss, net of tax, of $0.4 million for the three months ended October 1, 2010 and October 2, 2009, respectively. We had foreign currency translation gains, net of tax, of $15.2 million and $9.9 million for the nine months ended October 1, 2010 and October 2, 2009, respectively. See Note 8, “Fair Values of Debt Instruments, Investments and Derivative Instruments,” to our “Condensed Consolidated Financial Statements,” included under Part 1 – Item 1 of this report for more information on our foreign currency contracts.

ITEM 4. CONTROLS AND PROCEDURES

Attached as exhibits to this Form 10-Q are certifications of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), which are required in accordance with Rule 13a-14 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). This “Controls and Procedures” section includes information concerning the controls and controls evaluation referred to in the certifications and should be read in conjunction with the certifications for a more complete understanding.

Evaluation of Disclosure Controls and Procedures

Based on our management’s evaluation, with the participation of our CEO and CFO, of our “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), our CEO and CFO have concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of the end of the period covered by this report, to provide reasonable assurance that the information required to be disclosed by us in the reports that we filed or submitted to the Securities and Exchange Commission (“SEC”) under the Exchange Act were (1) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including our principal executive and principal financial officers, to allow timely decisions regarding required disclosures.

Changes in Internal Control over Financial Reporting

We acquired Scott Wilson on September 10, 2010 and are currently in the process of integrating it into our existing internal controls and procedures; however, management’s evaluation of the effectiveness of our internal controls over financial reporting does not yet include Scott Wilson. Except as described above, there were no changes in our internal control over financial reporting during the quarter ended October 1, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Inherent Limitations on Effectiveness of Controls

The company’s management, including the CEO and CFO, has designed our disclosure controls and procedures and our internal control over financial reporting to provide reasonable assurances that the controls’ objectives will be met. However, management does not expect that disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any system’s design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of a system’s control effectiveness into future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

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PART II

OTHER INFORMATION

ITEM 1. 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 14, “Commitments and Contingencies,” to our “Condensed Consolidated Financial Statements” included under Part I – Item 1 of this report for a discussion of some of these recent changes in our legal proceedings, which Note is incorporated herein by reference.

ITEM 1A. RISK FACTORS

In addition to the other information included or incorporated by reference in this quarterly report on Form 10-Q, 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 remains weak or client spending declines further, then our revenues, profits and our financial condition may deteriorate.

Demand for our services is cyclical and vulnerable to economic downturns and reductions in government and private industry spending, which may result in delaying, curtailing or canceling proposed and existing projects. In fiscal years 2009 and 2010, our clients were affected by the weak economic conditions caused by the declines in the overall economy and constraints in the credit market. As a result, some clients have delayed, curtailed or cancelled proposed and existing projects and may continue to do so, thus decreasing the overall demand for our services and adversely affecting our results of operations. We experienced and expect to continue to experience delays or deferrals of existing and proposed projects. For example, for the nine months ended October 1, 2010, we experienced a decline in our revenues compared to the same period in fiscal year 2009. We also experienced a decline in our book of business compared to the end of our 2009 fiscal year. In light of current macroeconomic conditions, we expect revenues from our power and industrial and commercial market sectors will continue to decline in 2010. In addition, our clients may find it more difficult to raise capital in the future due to limitations on the availability of credit and other uncertainties in the federal, municipal and corporate credit markets. 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 collect our invoices on a timely basis may lead to an increase in our accounts receivables and potentially an increase in the 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.

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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 indefinite delivery contracts (“IDCs”). Our backlog consists of 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 when future services are performed. As of October 1, 2010, our book of business was estimated at approximately $29.8 billion, which included $17.2 billion of our backlog. Our option year contracts are multi-year contracts with base periods, plus option years that are exercisable by our clients without the need for us to go through another competitive bidding process and would be cancelled only if a client decides to end the project (a termination for convenience) or through a termination for default. Our IDCs are signed contracts under which we perform work only when our clients issue specific task orders. Our book of business estimates may not result in realized profits and revenues in any particular period because clients may delay, modify 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 the current economic conditions as the risk of contracts in backlog being delayed or cancelled is more likely to increase during periods of economic volatility. 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; a violation of 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 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 49% of our total revenues for the nine months ended October 1, 2010. 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 the Federal Acquisition Regulation (“FAR”), the Truth in Negotiations Act, Cost Accounting Standards (“CAS”), the American Recovery and Reinvestment Act (“ARRA”), the Services Contract Act and Department of Defense (“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.

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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 could reduce our profits and revenues significantly.

Our inability to successfully conduct due diligence and integrate acquisitions could impede us from realizing all of the benefits of the acquisition, which could severely weaken our results of operations.

Historically, we have used acquisitions as one way to expand our business. Our inability to successfully integrate future acquisitions could impede us from realizing all of the benefits of those acquisitions and could severely weaken our business operations. The integration process may disrupt our business and, if implemented ineffectively, may preclude realization of the full benefits expected by us and could seriously harm 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. For example, our recent acquisition of Scott Wilson has increased our business in foreign countries such as China, India, and Poland where we currently do not have a large presence, and will require considerable efforts to effectively integrate these operations. 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;

·	integrating legal and financial controls from multiple jurisdictions;

·	unanticipated legal and contingent liabilities;

·	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.

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Employee, agent or partner misconduct or our overall failure to comply with laws or 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 non-U.S. 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 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, especially if such 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 and liquidated damages as well as other claims. See Note 14, “Commitments and Contingencies,” to our “Condensed Consolidated Financial Statements” included under Part I – Item 1 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; however, insurance coverage contains exclusions and other limitations that may not cover 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 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. If we sustain liabilities that exceed or that are excluded from 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.

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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.

A portion of our environmental business involves the planning, design, program management, construction and construction management, and operation and maintenance of pollution control and nuclear facilities, hazardous waste or Superfund sites and military bases. 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 must comply with a number of governmental laws that strictly regulate the handling, removal, treatment, transportation and disposal of toxic and hazardous substances. Under Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended, (“CERCLA”) and comparable state laws, we may be required to investigate and remediate regulated hazardous materials. CERCLA and comparable state laws typically impose strict, joint and several liabilities without regard to whether a company knew of or caused the release of hazardous substances. The liability for the entire cost of clean up could be imposed upon any responsible party. Other principal 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. Our business operations may also be subject to similar state and international laws relating to environmental protection. Our past waste management practices and contract mining activities as well as our current and prior ownership of various properties may also expose us to such liabilities. 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 clean-up 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.

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 approximately 49% of our total revenues for the nine months ended October 1, 2010. 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. The increased competition, 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. The federal government has also increased its use of IDCs in which the client qualifies multiple contractors for a specific program and then awards specific task orders or projects among the qualified contractors. As a result, new work awards tend to be smaller and of shorter duration, since the orders represent individual tasks rather than large, programmatic assignments. In addition, the U.S. government has announced its intention to scale back outsourcing of services in favor of “insourcing” jobs to its employees, which could reduce our revenues. 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.

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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 only be partially funded and thus additional public funding may be required in order to complete our contract. Public funds and the timing of payment of these funds may be influenced by, among other things, the state of the economy, competing political priorities, curtailments in the use of government contracting firms, rise in raw material costs, 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.

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.

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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 GAAP, management is required to make estimates and assumptions as of the date of the financial statements, 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.

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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 a project, 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.

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. The uncertainty of the timing of a project can present difficulties in planning the amount of personnel needed for the project. If the project is delayed or canceled, we may bear the cost of an underutilized workforce that was dedicated to fulfilling the project. 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 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.

We may be required to pay liquidated damages if we fail to meet milestone requirements in some of our contracts.

We may be required to pay liquidated damages if we fail to meet milestone requirements in our contracts. Failure to meet any of the milestone requirements could result in additional costs, and the amount of such additional costs could exceed the projected profits on the project. These additional costs include liquidated damages paid under contractual penalty provisions, which can be substantial and can accrue on a regular basis.

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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 and harm our reputation.

We often partner with unaffiliated third parties, individually or via a joint venture, to jointly bid on and perform on a particular project. For example, for the three and nine months ended October 1, 2010, our equity in income (loss) of unconsolidated joint ventures amounted to $(12.4) million and $36.5 million, respectively. 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, we may 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, our ability to complete a project in a timely fashion or at a profit may be impaired. If the amount we are required to pay for these goods and services exceed our estimates, we could experience reduced profit or experience losses in the performance of these contracts. 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 in 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 project is unable to make its payments, we could incur losses including our working capital or equity investments.

The past tightening of credit could increase this risk, as more clients may be unable to secure sufficient liquidity to pay their obligations. If a client delays or defaults in making its payments on a project to which we have devoted significant resources, it could have an adverse effect on our financial position and cash flows.

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 may use 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.

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Target-price and fixed-price contracts have increased the unpredictability and volatility of our earnings.

The federal government and some clients have increased the use of target-price and fixed-price contracts. Fixed-price contracts require cost and scheduling estimates that are based on a number of assumptions, including those about future economic conditions, costs and availability of labor, equipment and materials, and other exigencies. We could experience cost overruns if these estimates are originally inaccurate as a result of errors or ambiguities in the contract specifications, or become inaccurate as a result of a change in circumstances following the submission of the estimate due to, among other things, unanticipated technical problems, difficulties in obtaining permits or approvals, changes in local laws or labor conditions, weather delays, changes in the costs of raw materials, or inability of our vendors or subcontractors to perform. If cost overruns occur, we could experience reduced profits or, in some cases, a loss for that project. For example, one of our construction projects has experienced cost increases and schedule delays and we have recorded cumulative project losses of approximately $83.0 million as of October 1, 2010. If a project is significant, or if there are one or more common issues that impact multiple projects, cost overruns could increase the unpredictability and volatility of our earnings as well as have a material adverse impact on our business and earnings.

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 customer 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.

Construction and project sites are inherently dangerous workplaces. Failure to maintain safe work sites could result in employee deaths or injuries, reduced profitability, the loss of projects or clients and possible exposure to litigation.

Construction and maintenance sites often put our employees and others in close proximity with mechanized equipment, moving vehicles, chemical and manufacturing processes, and highly regulated materials. 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 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.

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If our goodwill or intangible assets become impaired, then our profits will be reduced.

A decline in our stock price and market capitalization could result in an impairment of a material amount of our goodwill, which would reduce our earnings. Goodwill may be impaired if the estimated fair value of one or more of our reporting units’ goodwill is less than the carrying value of the unit’s goodwill. Because we have grown through acquisitions, goodwill and other intangible assets represent a substantial portion of our total assets. Goodwill and other net intangible assets were $3.9 billion as of October 1, 2010. 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: (i) continued deterioration of market and economic conditions that may adversely impact our ability to meet our projected results; (ii) declines in our stock price caused by continued volatility in the financial markets that may result in increases in our weighted-average cost of capital or other inputs to our goodwill assessment; (iii) the occurrence of events that may reduce the fair value of a reporting unit below its carrying amount, such as the sale of a significant portion of one or more of our reporting units.

We also perform an analysis of our intangible assets to test for impairment whenever events occur that indicate impairment could exist. Examples of such events are i) significant adverse changes in its market value, useful life, physical condition, or in the business climate that could affect its value; ii) a current-period operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of the intangible asset; and iii) 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.

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. For example, passage of the Clean Air Mercury environmental rules increased demand for our emission control services, and any repeal of these rules would have a negative impact on our revenues. 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 our exposure occurs outside the U.S., our business and financial condition could be adversely affected either by a refusal to retain us by new facilities operations or by our inability to obtain commercially adequate insurance and indemnification.

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We could be liable for any material misstatements in reports we produce that are disclosed in any client security offerings or public company periodic disclosures, which could be significant.

We have in the past and may in the future provide traffic and revenue studies, valuation services, natural resource verification studies and other financial or engineering-related consultancy services that may be used in a securities offering or public company periodic disclosures in the United States and foreign jurisdictions such as the United Kingdom and Canada. If such reports were disclosed in a client’s security offering documents or other documents filed with securities regulators, then we could become involved in securities litigation arising out of that offering in the event that claims relate to those reports. An unsuccessful defense or settlement of these claims could subject us to liability for significant monetary damages, including potential damages based on the actual value of the securities lost by investors. In addition, even if we are successful in the defense, litigation can be time-consuming, expensive and can divert management’s attention, which could adversely affect our business.

A decline in defense or other federal spending, or a change in budgetary priorities, could reduce our profits and revenues.

Revenues from our federal market sector represented 49% of our total revenues and contracts, of which the DOD and other defense-related clients represented approximately 33% of our total revenues for the nine months ended October 1, 2010. Past increases in spending authorization for defense-related or other federal programs and in outsourcing of federal government jobs to the private sector are not expected to be sustained on a long-term basis. For example, the DOD budget declined in the late 1980s and the early 1990s, resulting in DOD program delays and cancellations. 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.

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. design firms accounted only for approximately 40% of the total top 500 U.S. design firm revenues in 2009. The top 25 U.S. contractors accounted for approximately 50% of the top 400 U.S. contractors revenues in 2009, 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.

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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 our senior management and our professional and technical staff 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 in identifying, hiring and integrating 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 multiemployer plans we contribute to or retirement plans we manage.

We have various employee retirement plan obligations that require us to make contributions to satisfy, over time, our underfunded benefit obligations, which are determined by calculating the projected benefit obligations minus the fair value of plan assets. For example, as of January 1, 2010, our defined benefit pension and post-retirement benefit plans were underfunded by $180.4 million. In the future, our retirement 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 cash to help fund a retirement plan deficit, then our financial results could be materially and adversely affected.

We also contributed about $44.5 million for the year ended January 1, 2010 to participate in numerous construction-industry multiemployer defined benefit pension plans as required by collective bargaining agreements with unions. Under ERISA, an employer who contributes to a multiemployer plan may be liable, upon termination or withdrawal from a plan, for its proportionate share of a multiemployer plan’s underfunded vested liability. If we terminate or withdraw from a multiemployer plan, we could be required to contribute a significant amount of cash to help fund any multiemployer plan deficit that could materially and adversely affect our financial results.

Our outstanding indebtedness could adversely affect our liquidity, cash flows and financial condition.

As of October 1, 2010, our outstanding balance under the 2007 Credit Facility was $700.0 million. Our next scheduled payment of $163.8 million is due in March 2012. 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;

·	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.

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Our access to credit markets may be limited if we require an increased level of debt.

If we are required to access the corporate debt markets, we could not be assured that we would be able to finance the required amount in full or at a rate and on terms that are favorable to us. Currently, the debt markets remain volatile, and success can depend on exogenous variables that impact the overall credit markets, regardless of our inherent qualifications to secure financing.

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 2007 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 we are a holding company, we may not be able to service our debt if our subsidiaries do not make sufficient distributions to us.

We have 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. 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 in our 2007 Credit Facility may restrict our ability to pursue business strategies.

Our 2007 Credit Facility and our other outstanding indebtedness include covenants 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 2007 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 2007 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.

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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 have operations in more than 40 countries and we derived 8% of our revenues from international operations for the nine months ended October 1, 2010. Moreover, part of our strategy is to expand our international presence, which will increase our exposure to these risks. For example, our acquisition of Scott Wilson increased our business in foreign countries such as China, India, and Poland, where we did not have a large presence. Scott Wilson has joint ventures with corporations wholly or partially owned by the Chinese government that could create potential conflicts of interest and increase our exposure to government regulations.

International business is subject to a variety of risks, including:

·	lack of developed legal systems to enforce contractual rights;

·	greater risk of uncollectible accounts and longer collection cycles;

·	currency fluctuations;

·	logistical and communication challenges;

·	potentially adverse changes in laws and regulatory practices, including export license requirements, trade barriers, tariffs and tax laws;

·	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, anti-boycott rules, trade and export control rules and other international regulations, for example:

Foreign Corrupt Practices Act: Practices in the local business community outside the U.S. might not conform to international business standards and could violate anticorruption regulations, including the U.S. Foreign Corrupt Practices Act, which prohibits giving or offering to give anything of value with the intent to influence the awarding of government contracts;

Export Control Regulations: To the extent that we export products, technical data and services outside the U.S., we are subject to U.S. 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, which are administered by the Office of Foreign Assets Control within the Department of the Treasury; and

o	Corporate Manslaughter and Corporate Homicide Act: In the U.K., companies can be found guilty of corporate manslaughter as a result of serious management failures resulting in a gross breach of a duty of care.

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 ensure 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.

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, 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.

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We rely on third-party internal and outsourced software to run our critical accounting, project management and financial information systems. As a result, any sudden loss, disruption or unexpected costs to maintain these systems could significantly increase our operational expense as well as disrupt the management of our business operations.

We 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 natural and man-made disasters, as well as terrorism risks, 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 August 2005, Hurricane Katrina caused several of our Gulf Coast offices to close, interrupted a number of active client projects and forced the relocation of our employees in that region from their homes. In addition, during the September 11, 2001 terrorist attacks, 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, our operations may be affected significantly, which would have a negative impact on our financial condition, results of operations 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 October 1, 2010, approximately 14% 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 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.

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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 our competitors or us 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 condensed 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.

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MINING SAFETY INFORMATION

Section 1503 of the Dodd-Frank Wall Street Reform and Consumer Protection 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 (“MSHA”). 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 act as a lessee of such mine, a person who operates, controls or supervises such mine, or as an independent contractor performing services or construction of such mine.

The following table provides information for the three-month period ended October 1, 2010.

Mine (1)	Mine Act §104 Violations (2)		Mine Act §104(b) Orders (3)		Mine Act §104(d) Citations and Orders (4)		Mine Act §110(b)(2) Violations (5)		Mine Act §107(a) Orders (6)		Proposed Assessments from MSHA (In dollars ($))		Mining Related Fatalities		Mine Act §104(e) Notice (yes/no) (7)	Pending Legal Action before Federal Mine Safety and Health Review Commission (yes/no)
Black Thunder Project		0		0		0		0		0	$	376		0	No	No
Monsanto Quarry		1		0		0		0		0	$	100		0	No	No
Pipestone Quarry		0		0		0		0		0	$	308		0	No	Yes

(1)

United States mines.

(2)

The total number of violations received from MSHA under §104 of the Mine Act, which includes citations for health or safety standards that could significantly and substantially contribute to a serious injury if left unabated.

(3)

The total number of orders issued by MSHA under §104(b) of the Mine Act, which represents a failure to abate a citation under §104 (a) within the period of time prescribed by MSHA.

(4)

The total number of citations and orders issued by MSHA under §104 (d) of the Mine Act for unwarrantable failure to comply with mandatory health or safety standards.

(5)

The total number of flagrant violations issued by MSHA under §110(b)(2) of the Mine Act.

(6)

The total number of orders issued by MSHA under §107(a) of the Mine Act for situations in which MSHA determined an imminent danger existed.

(7)

A written notice from the MSHA regarding a pattern of violations, or a potential to have such pattern under §104 (e) of the Mine Act.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

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 third quarter of 2010:

Period (In thousands, except average price paid per share)	(a) Total Number of Shares Purchased (1)		(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)
July 3, 2010 – July 30, 2010		—	$	—		—		—
July 31, 2010 – August 27, 2010		—		—		179		—
August 28, 2010 – October 1, 2010		2		37.77		821		3,000
Total		2				1,000		3,000

(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 March 26, 2007, we announced that our Board of Directors approved a common stock repurchase program that will allow the repurchase of up to one million shares of our common stock plus additional shares issued or deemed issued under our stock incentive plans and Employee Stock Purchase Plan for the period from December 30, 2006 through January 1, 2010 (excluding shares issuable upon the exercise of options granted prior to December 30, 2006). On February 26, 2010, the Board of Directors approved an extension of the stock repurchase period from January 2, 2010 through December 28, 2012. On September 10, 2010, the Board of Directors approved an increase and extension of the stock repurchase program that conformed to the terms of our 2007 Credit Facility, as amended. Under the modified stock repurchase program, we are authorized to repurchase, in each of the fiscal years during the period from January 2, 2010 through January 2, 2015, up to three million shares of our common stock, plus the number of shares of common stock equal to the excess, if any, of three million shares over the actual number of shares repurchased during the prior fiscal year. In addition, we are subject to covenants under our 2007 Credit Facility that may limit our ability to repurchase our common stock if we do not maintain various designated financial criteria. During the nine months ended October 1, 2010, we repurchased an aggregate of 2.0 million shares of our common stock and we can repurchase up to an additional 3.0 million shares of our common stock for the remainder of the year.

We are precluded by provisions in our 2007 Credit Facility from paying cash dividends on our outstanding common stock until our Consolidated Leverage Ratio is equal to or less than 1.00:1.00.

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ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. REMOVED AND RESERVED

None.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

(a) Exhibits

Incorporated by Reference

Exhibit Number

Exhibit Description

Form

Exhibit

Filing Date

Filed Herewith

3.01

Restated Certificate of Incorporation of URS Corporation, as filed with the Secretary of State of Delaware on September 9, 2008.

8-K

3.01

9/11/2008

3.02

Bylaws of URS Corporation as amended on February 26, 2010.

10-Q

3.02

5/12/2010

4.1

Second Amendment to the Credit Agreement dated as of August 25, 2010, entered into by and among URS Corporation, a syndicate of lenders party thereto, Wells Fargo Bank, National Association, administrative agent for the lenders, and credit support parties party thereto.

8-K

4.1

8/25/2010

4.2

Revised Form of Universe Bidco Limited Loan Note Instrument constituting up to £30,000,000 Floating Range Loan Notes 2015.

10.1

Form of Officer Indemnification Agreement between URS Corporation and Hugh Blackwood.

10-Q

10.3

6/14/2004

10.2

Service Agreement between SWK Holdings Ltd. and Hugh Blackwood dated as of May 5, 1995.

10.3

Compensatory Arrangement for Hugh Blackwood.

10.4

Compensatory Arrangement for Thomas W. Bishop.

31.1

Certification of URS Corporation’s Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of URS Corporation’s Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification of URS Corporation’s Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

X**

101.INS

XBRL Instance Document.

101.SCH

XBRL Taxonomy Extension Schema Document.

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document.

101.LAB

XBRL Taxonomy Extension Label Linkbase Document.

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document.

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document.

*	Represents a management contract or compensatory plan or arrangement.

**	Document has been furnished and not filed and not to be incorporated into any of our filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, irrespective of any general incorporation language included in any such filing.

Pursuant to Rule 406T of Regulation S-T, these interactive data files (i) are not deemed filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, are not deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, irrespective of any general incorporation language included in any such filings, and otherwise are not subject to liability under these sections; and (ii) are deemed to have complied with Rule 405 of Regulation S-T (“Rule 405”) and are not subject to liability under the anti-fraud provisions of the Section 17(a)(1) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 or under any other liability provision if we have made a good faith attempt to comply with Rule 405 and, after we become aware that the interactive data files fail to comply with Rule 405, we promptly amend the interactive data files.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	URS CORPORATION

Dated: November 9, 2010	By:	/s/ Reed N. Brimhall
		Reed N. Brimhall
		Vice President, Controller and Chief Accounting Officer

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Exhibit No.		Description
4.2		Revised Form of Universe Bidco Limited Loan Note Instrument constituting up to £30,000,000 Floating Range Loan Notes 2015.
10.2		Service Agreement between SWK Holdings Ltd. and Hugh Blackwood dated as of May 5, 1995.
10.3		Compensatory Arrangement for Hugh Blackwood.
10.4		Compensatory Arrangement for Thomas W. Bishop.
31.1		Certification of URS Corporation’s Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of URS Corporation’s Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32		Certification of URS Corporation’s Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		XBRL Instance Document.
101.SCH		XBRL Taxonomy Extension Schema Document.
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB		XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document.