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 July 1, 2011

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.

Class		Outstanding at August 1, 2011

Common Stock, $.01 par value		79,603,214

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 business trends; future accounting, goodwill and actuarial estimates; future contract gains or losses; future backlog and book of business conversion; future income tax payments and deductions; 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 debt payments; future capital expenditures 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 the economy or 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; information technology risks; natural and man-made disaster risks; our relationships with labor unions; our ability to protect our intellectual property rights; anti-takeover risks and other factors discussed more fully in Management’s Discussion and Analysis of Financial Condition and Results of Operations beginning on page 32, Risk Factors beginning on page 63, 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
	July 1, 2011 and December 31, 2010	2
	Condensed Consolidated Statements of Operations
	Three and six months ended July 1, 2011 and July 2, 2010	3
	Condensed Consolidated Statements of Comprehensive Income
	Three and six months ended July 1, 2011 and July 2, 2010	4
	Condensed Consolidated Statements of Changes in Stockholders’ Equity
	Six months ended July 1, 2011 and July 2, 2010	5
	Condensed Consolidated Statements of Cash Flows
	Six months ended July 1, 2011 and July 2, 2010	7
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	61
Item 4.	Controls and Procedures	62

PART II.	OTHER INFORMATION:

Item 1.	Legal Proceedings	63
Item 1A.	Risk Factors	63
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	80
Item 3.	Defaults Upon Senior Securities	80
Item 4.	Removed and Reserved	80
Item 5.	Other Information	80
Item 6.	Exhibits	81

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PART I

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

URS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED

(In millions, except per share data)

	July 1, 2011			December 31, 2010
ASSETS
Current assets:
Cash and cash equivalents	$	433.8		$	573.8
Accounts receivable, including retentions of $65.2 and $69.1, respectively		1,018.0			1,102.8
Costs and accrued earnings in excess of billings on contracts		1,250.8			1,157.1
Less receivable allowances		(40.5	)		(42.8	)
Net accounts receivable		2,228.3			2,217.1
Deferred tax assets		70.6			83.3
Other current assets		171.3			134.8
Total current assets		2,904.0			3,009.0
Investments in and advances to unconsolidated joint ventures		116.6			65.5
Property and equipment at cost, net		270.8			266.1
Intangible assets, net		557.1			514.1
Goodwill		3,599.8			3,393.2
Other assets		157.5			103.5
Total assets	$	7,605.8		$	7,351.4
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt	$	361.8		$	60.5
Accounts payable and subcontractors payable, including retentions of $38.4 and $46.5, respectively		702.6			673.9
Accrued salaries and employee benefits		498.2			441.6
Billings in excess of costs and accrued earnings on contracts		319.0			275.8
Other current liabilities		229.4			213.3
Total current liabilities		2,111.0			1,665.1
Long-term debt		395.9			641.3
Deferred tax liabilities		346.0			326.9
Self-insurance reserves		104.5			105.9
Pension and post-retirement benefit obligations		213.3			230.8
Other long-term liabilities		180.2			180.4
Total liabilities		3,350.9			3,150.4
Commitments and contingencies (Note 15)
URS stockholders’ equity:
Preferred stock, authorized 3.0 shares; no shares outstanding		—			—
Common stock, par value $.01; authorized 200.0 shares; 87.7 and 86.9 shares issued, respectively; and 79.7 and 81.9 shares outstanding, respectively		0.9			0.9
Treasury stock, 8.0 and 5.0 shares at cost, respectively		(348.8	)		(212.1	)
Additional paid-in capital		2,939.3			2,924.3
Accumulated other comprehensive loss		(17.0	)		(36.9	)
Retained earnings		1,569.9			1,441.0
Total URS stockholders’ equity		4,144.3			4,117.2
Noncontrolling interests		110.6			83.8
Total stockholders’ equity		4,254.9			4,201.0
Total liabilities and stockholders’ equity	$	7,605.8		$	7,351.4

See Notes to Condensed Consolidated Financial Statements

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URS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED

(In millions, except per share data)

	Three Months Ended						Six Months Ended
	July 1,			July 2,			July 1,			July 2,
	2011			2010			2011			2010
Revenues	$	2,360.3		$	2,249.4		$	4,680.1		$	4,456.9
Cost of revenues		(2,228.3	)		(2,121.7	)		(4,431.1	)		(4,208.5	)
General and administrative expenses		(19.0	)		(13.3	)		(41.4	)		(33.4	)
Acquisition-related expenses (Note 7)		(1.0	)		(4.1	)		(1.0	)		(4.1	)
Equity in income of unconsolidated joint ventures		38.6			24.3			76.0			48.9
Operating income		150.6			134.6			282.6			259.8
Interest expense		(5.1	)		(5.1	)		(10.2	)		(14.4	)
Income before income taxes		145.5			129.5			272.4			245.4
Income tax expense		(54.9	)		(50.3	)		(98.9	)		(52.5	)
Net income including noncontrolling interests		90.6			79.2			173.5			192.9
Noncontrolling interests in income of consolidated subsidiaries, net of tax		(23.8	)		(17.3	)		(44.6	)		(35.4	)
Net income attributable to URS	$	66.8		$	61.9		$	128.9		$	157.5


Earnings per share (Note 3):
Basic	$	0.87		$	0.76		$	1.66		$	1.94
Diluted	$	0.86		$	0.76		$	1.65		$	1.93
Weighted-average shares outstanding (Note 3):
Basic		77.2			81.2			77.8			81.3
Diluted		77.7			81.5			78.2			81.7

See Notes to Condensed Consolidated Financial Statements

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URS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - UNAUDITED

(In millions)

	Three Months Ended						Six Months Ended
	July 1,			July 2,			July 1,			July 2,
	2011			2010			2011			2010
Comprehensive income:
Net income including noncontrolling interests	$	90.6		$	79.2		$	173.5		$	192.9
Pension and post-retirement related adjustments, net of tax		0.6			0.2			1.2			1.9
Foreign currency translation adjustments		5.6			(7.6	)		18.7			(6.4	)
Reclassification of unrealized loss on investment in equity securities, net of tax		—			(0.4	)		—			(0.4	)
Unrealized gain on interest rate swap, net of tax		—			1.2			—			2.1
Comprehensive income		96.8			72.6			193.4			190.1
Noncontrolling interests in comprehensive income of consolidated subsidiaries, net of tax		(23.8	)		(17.3	)		(44.6	)		(35.4	)
Comprehensive income attributable to URS	$	73.0		$	55.3		$	148.8		$	154.7

See Notes to Condensed Consolidated Financial Statements

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URS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY – UNAUDITED

(In millions)

												Accumulated
									Additional			Other					Total URS
	Common Stock					Treasury			Paid-in			Comprehensive			Retained		Stockholders’			Noncontrolling			Total
	Shares			Amount		Stock			Capital			Income (Loss)			Earnings		Equity			Interests			Equity
Balances, January 1, 2010		84.0		$	0.9	$	(83.8	)	$	2,884.9		$	(49.2	)	$	1,153.1	$	3,905.9		$	44.6		$	3,950.5
Employee stock purchases and exercises of stock options		0.2			—		—			6.3			—			—		6.3			—			6.3
Stock repurchased in connection with exercises of stock options and vesting of restricted stock awards		(0.3	)		—		—			(16.1	)		—			—		(16.1	)		—			(16.1	)
Stock-based compensation		0.9			—		—			20.8			—			—		20.8			—			20.8
Excess tax benefits from stock-based compensation		—			—		—			3.3			—			—		3.3			—			3.3
Foreign currency translation adjustments		—			—		—			—			(6.4	)		—		(6.4	)		—			(6.4	)
Pension and post-retirement related adjustments, net of tax		—			—		—			—			1.9			—		1.9			—			1.9
Unrealized loss on investment in equity securities, net of tax		—			—		—			—			(0.4	)		—		(0.4	)		—			(0.4	)
Interest rate swap, net of tax		—			—		—			—			2.1			—		2.1			—			2.1
Repurchases of common stock		(1.0	)		—		(48.4	)		—			—			—		(48.4	)		—			(48.4	)
Newly consolidated joint ventures		—			—		—			—			—			—		—			41.0			41.0
Distributions to noncontrolling interests, net of tax		—			—		—			—			—			—		—			(23.3	)		(23.3	)
Contributions and advances from noncontrolling interests		—			—		—			—			—			—		—			7.3			7.3
Other transactions with noncontrolling interests		—			—		—			—			—			—		—			(2.1	)		(2.1	)
Net income including noncontrolling interests		—			—		—			—			—			157.5		157.5			35.4			192.9
Balances, July 2, 2010		83.8		$	0.9	$	(132.2	)	$	2,899.2		$	(52.0	)	$	1,310.6	$	4,026.5		$	102.9		$	4,129.4

See Notes to Condensed Consolidated Financial Statements

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URS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY – UNAUDITED (continued)

(In millions)

												Accumulated
									Additional			Other					Total URS
	Common Stock					Treasury			Paid-in			Comprehensive			Retained		Stockholders’			Noncontrolling			Total
	Shares			Amount		Stock			Capital			Income (Loss)			Earnings		Equity			Interests			Equity
Balances, December 31, 2010		81.9		$	0.9	$	(212.1	)	$	2,924.3		$	(36.9	)	$	1,441.0	$	4,117.2		$	83.8		$	4,201.0
Employee stock purchases and exercises of stock options		0.2			—		—			6.1			—			—		6.1			—			6.1
Stock repurchased in connection with exercises of stock options and vesting of restricted stock awards		(0.3	)		—		—			(14.3	)		—			—		(14.3	)		—			(14.3	)
Stock-based compensation		0.9			—		—			22.4			—			—		22.4			—			22.4
Excess tax benefits from stock-based compensation		—			—		—			0.8			—			—		0.8			—			0.8
Foreign currency translation adjustments		—			—		—			—			18.7			—		18.7			—			18.7
Pension and post-retirement related adjustments, net of tax		—			—		—			—			1.2			—		1.2			—			1.2
Repurchases of common stock		(3.0	)		—		(136.7	)		—			—			—		(136.7	)		—			(136.7	)
Distributions to noncontrolling interests, net of tax		—			—		—			—			—			—		—			(24.2	)		(24.2	)
Contributions and advances from noncontrolling interests		—			—		—			—			—			—		—			5.7			5.7
Other transactions with noncontrolling interests		—			—		—			—			—			—		—			0.7			0.7
Net income including noncontrolling interests		—			—		—			—			—			128.9		128.9			44.6			173.5
Balances, July 1, 2011		79.7		$	0.9	$	(348.8	)	$	2,939.3		$	(17.0	)	$	1,569.9	$	4,144.3		$	110.6		$	4,254.9

See Notes to Condensed Consolidated Financial Statements

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URS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

(In millions)

	Six Months Ended
	July 1,			July 2,
	2011			2010
Cash flows from operating activities:
Net income including noncontrolling interests	$	173.5		$	192.9
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization		40.8			39.7
Amortization of intangible assets		28.2			22.2
Amortization of debt issuance costs		3.2			5.0
Normal profit		3.4			—
Provision for doubtful accounts		6.6			1.9
Deferred income taxes		24.8			28.3
Stock-based compensation		22.4			20.8
Excess tax benefits from stock-based compensation		(0.8	)		(3.3	)
Equity in income of unconsolidated joint ventures		(76.0	)		(48.9	)
Dividends received from unconsolidated joint ventures		41.4			35.0
Changes in operating assets, liabilities and other, net of effects of consolidation and/or deconsolidation of joint ventures and business acquisitions:
Accounts receivable and costs and accrued earnings in excess of billings on contracts		23.3			9.2
Other current assets		(13.2	)		(19.2	)
Advances to unconsolidated joint ventures		(3.8	)		(1.5	)
Accounts payable, accrued salaries and employee benefits, and other current liabilities		(30.0	)		(131.0	)
Billings in excess of costs and accrued earnings on contracts		19.2			(31.3	)
Other long-term liabilities		(2.2	)		7.9
Other assets		2.1			(7.6	)
Total adjustments and changes		89.4			(72.8	)
Net cash from operating activities		262.9			120.1
Cash flows from investing activities:
Payments for business acquisitions, net of cash acquired, and for exercised shares in connection with a prior business acquisition		(278.8	)		—
Changes in cash related to consolidation and/or deconsolidation of joint ventures		—			20.7
Proceeds from disposal of property and equipment		2.2			3.4
Investments in unconsolidated joint ventures		(12.0	)		(4.5	)
Changes in restricted cash		(0.3	)		(0.2	)
Capital expenditures, less equipment purchased through capital leases and equipment notes		(31.3	)		(18.8	)
Maturity of short-term investment		—			30.2
Net cash from investing activities		(320.2	)		30.8

See Notes to Condensed Consolidated Financial Statements

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URS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS – UNAUDITED (continued)

(In millions)

	Six Months Ended
	July 1,			July 2,
	2011			2010
Cash flows from financing activities:
Borrowing from revolving line of credit		100.0			—
Payments on revolving line of credit and long-term debt		(54.4	)		(5.1	)
Net borrowings (payments) under lines of credit and short-term notes		5.8			(0.6	)
Net change in overdrafts		32.3			(3.5	)
Payments on capital lease obligations		(4.1	)		(3.4	)
Excess tax benefits from stock-based compensation		0.8			3.3
Proceeds from employee stock purchases and exercises of stock options		6.1			6.3
Distributions to noncontrolling interests		(38.6	)		(40.0	)
Contributions and advances from noncontrolling interests		6.1			9.0
Repurchases of common stock		(136.7	)		(48.4	)
Net cash from financing activities		(82.7	)		(82.4	)
Net change in cash and cash equivalents		(140.0	)		68.5
Cash and cash equivalents at beginning of period		573.8			720.6
Cash and cash equivalents at end of period	$	433.8		$	789.1

Supplemental information:
Interest paid	$	7.8		$	12.2
Taxes paid	$	92.6		$	6.6

Supplemental schedule of non-cash investing and financing activities:
Equipment acquired with capital lease obligations and equipment note obligations	$	5.1		$	3.4
Purchase of equity securities unsettled as of July 2, 2010	$	—		$	42.5

See Notes to Condensed Consolidated Financial Statements

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URS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

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

Overview

The terms “we,” “us,” and “our” used in these financial statements refer to URS Corporation and its consolidated subsidiaries unless otherwise indicated. We are a leading international provider of engineering, construction and technical services. We offer a broad range of program management, planning, design, engineering, construction and construction management, operations and maintenance, and decommissioning and closure services to public agencies and private sector clients around the world. We also are a United States (“U.S.”) federal government contractor in the areas of systems engineering and technical assistance, operations and maintenance, and information technology (“IT”) services. Headquartered in San Francisco, we have more than 48,000 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, as amended, for the year ended December 31, 2010. The results of operations for the three and six months ended July 1, 2011 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 June 1, 2011, we completed the acquisition of Apptis Holdings, Inc. (“Apptis”). The operating results of Apptis from the acquisition date through July 1, 2011 are included in our condensed consolidated financial statements under the Federal Services business. See Note 7, “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.

Reclassifications

We made reclassifications to the prior year’s financial statements to conform them to the current period’s presentation. These reclassifications have no effect on our consolidated net assets or net cash flows.

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URS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

(continued)

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 July 1, 2011 and December 31, 2010, restricted cash balances were $28.3 million and $28.0 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.”

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

An accounting standard update related to new disclosures about fair value measurements was issued. Part of the standard was effective for us in the first quarter of our 2010 fiscal year. The additional requirement to reconcile recurring Level 3 measurements, including purchases, sales, issuances and settlements on a gross basis, became effective for us beginning with the first quarter of our 2011 fiscal year. The adoption of the final part of the standard did not have a material impact on our condensed consolidated financial statements.

An accounting standard update related to the way companies test for impairment of goodwill was issued. Pursuant to this accounting update, goodwill of the reporting unit is not impaired if the carrying amount of a reporting unit is greater than zero and its fair value exceeds its carrying amount. In that event, the second step of the impairment test is not required. However, if the carrying amount of a reporting unit is zero or negative, the second step of the impairment test is required to be performed to measure the amount of impairment loss, if any, when it is more likely than not that goodwill impairment exists. In considering whether it is more likely than not that goodwill impairment exists, a company must evaluate whether there are qualitative factors that could adversely affect goodwill. Consistent with the prior requirements, this test must be performed annually or, if an event occurs or circumstances exist that indicate that it is more likely than not that goodwill impairment exists, in the interim. This standard became effective for us beginning in the first quarter of our 2011 fiscal year. The adoption of this standard did not have a material impact on our condensed 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				Six Months Ended
	July 1,		July 2,		July 1,		July 2,
	2011		2010		2011		2010

Weighted-average common stock shares outstanding (1)		77.2		81.2		77.8		81.3
Effect of dilutive stock options, restricted stock awards and units and employee stock purchase plan shares		0.5		0.3		0.4		0.4
Weighted-average common stock outstanding – Diluted		77.7		81.5		78.2		81.7

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

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	July 1,		July 2,
(In millions)	2011		2010
Anti-dilutive equity awards not included above		0.3		0.4

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.

Our accounts receivable include retentions associated with long-term contracts, which are generally not billable until near or at the completion of the projects or milestones and/or delivery of services. As such, these amounts will generally be billed for contracts with terms in excess of one year from the service date. Our costs and accrued earnings in excess of billings on contracts include amounts related to milestone payment clauses, which provide for payments to be received beyond a year from the date service occurs. Based on our historical experience, we generally consider the collection risk related to these amounts to be low. When events or conditions indicate that the amounts outstanding may become uncollectible, an allowance is estimated and recorded. As of July 1, 2011 and December 31, 2010, we had receivables with contractual terms in excess of one year of $146.2 million and $146.8 million, respectively.

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 July 1, 2011 and December 31, 2010:

	July 1,		December 31,
(In millions)	2011		2010
Accounts receivable:
U.S. federal government	$	338.6	$	398.8
Others		679.4		704.0
Total accounts receivable	$	1,018.0	$	1,102.8
Costs and accrued earnings in excess of billings on contracts:
U.S. federal government	$	684.1	$	662.4
Others		566.7		494.7
Total costs and accrued earnings in excess of billings on contracts	$	1,250.8	$	1,157.1

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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 nuclear facility 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 variable interest entities (“VIEs”) and we hold the majority voting interest, or because they are VIEs of which we are the primary beneficiary; and

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

We perform a quarterly review of our joint ventures to determine whether there were any changes in the status of the VIEs or changes to the primary beneficiary designation of each VIE. We determined that no such changes occurred during the six months ended July 1, 2011.

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

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Consolidated Joint Ventures

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

(In millions)	July 1,		December 31,
(In millions)	2011		2010
Cash and cash equivalents	$	147.0	$	85.6
Net accounts receivable		295.9		322.1
Other current assets		0.7		1.1
Noncurrent assets		62.9		36.2
Total assets	$	506.5	$	445.0

Accounts and subcontractors payable	$	189.4	$	214.8
Billings in excess of costs and accrued earnings on contracts		37.9		7.5
Accrued expenses and other		37.7		34.9
Noncurrent liabilities		3.7		3.2
Total liabilities		268.7		260.4

Total URS equity		127.2		100.8
Noncontrolling interests		110.6		83.8
Total owners’ equity		237.8		184.6
Total liabilities and owners’ equity	$	506.5	$	445.0

Total revenues of the consolidated joint ventures were $426.5 million and $418.6 million for the three months ended July 1, 2011 and July 2, 2010, respectively, and $870.9 million and $782.7 million for the six months ended July 1, 2011 and July 2, 2010, respectively.

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

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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.

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

	Unconsolidated
(In millions)	VIEs
July 1, 2011
Current assets	$	488.1
Noncurrent assets	$	6.0
Current liabilities	$	292.5
Noncurrent liabilities	$	0.1

December 31, 2010
Current assets	$	423.6
Noncurrent assets	$	7.0
Current liabilities	$	340.5
Noncurrent liabilities	$	0.1

Three months ended July 1, 2011 (1)
Revenues	$	337.3
Cost of revenues	$	(254.1)
Income from continuing operations before tax	$	83.2
Net income	$	79.5

Three months ended July 2, 2010 (1)
Revenues	$	322.5
Cost of revenues	$	(263.3)
Income from continuing operations before tax	$	59.2
Net income	$	58.6

Six months ended July 1, 2011 (1)
Revenues	$	669.6
Cost of revenues	$	(510.1)
Income from continuing operations before tax	$	159.5
Net income	$	146.9

Six months ended July 2, 2010 (1)
Revenues	$	647.2
Cost of revenues	$	(533.4)
Income from continuing operations before tax	$	113.8
Net income	$	108.4

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

We received $29.5 million and $17.7 million, respectively, of distributions from unconsolidated joint ventures for the three months ended July 1, 2011 and July 2, 2010 and $41.4 million and $35.0 million, respectively, for the six months ended July 1, 2011 and July 2, 2010.

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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.

NOTE 6. PROPERTY AND EQUIPMENT

Our property and equipment consisted of the following:

(In millions)		July 1,		December 31,
(In millions)		2011		2010
Computer software		$	180.7	$	174.8
Computer hardware			159.4		148.8
Construction and mining equipment			118.8		119.5
Other equipment			94.8		98.0
Furniture and fixtures			73.8		67.0
Leasehold improvements			97.4		74.6
Land and buildings			9.4		9.4
Construction in progress			1.4		3.8
			735.7		695.9
Accumulated depreciation and amortization			(464.9)		(429.8)
	Property and equipment at cost, net (1)	$	270.8	$	266.1

(1)	The unamortized computer software costs were $64.1 million and $68.4 million, respectively, as of July 1, 2011 and December 31, 2010.

Our depreciation and amortization expense related to property and equipment was $20.6 million and $19.8 million for the three months ended July 1, 2011 and July 2, 2010, respectively, and $40.8 million and $39.7 million for the six months ended July 1, 2011 and July 2, 2010, respectively.

NOTE 7. ACQUISITION

On June 1, 2011, we acquired Apptis, for a purchase price of approximately $259 million, net of cash acquired. Apptis provides IT services to the U.S. federal government. The addition of Apptis expands our capabilities in the federal IT market.

Our condensed consolidated financial statements include the operating results of Apptis after the date of acquisition, which results are included under our Federal Services business. Pro forma results of Apptis have not been presented because the effect of this acquisition is not material to our consolidated financial results.

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The following table presents a preliminary allocation of Apptis’ 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.

Preliminary allocation of purchase price:
			Estimated
(In millions)	Amount		Useful Life
Identifiable assets acquired and liabilities assumed:
Cash and cash equivalents	$	18
Trade and other receivables		58
Other current assets		2
Property and equipment		10
Other assets		10
Identifiable intangible assets:
Customer relationships, contracts and backlog		60	10 years
Trade name and other		4	2 - 3 years
Total amount allocated to identifiable intangible assets		64
Current liabilities		(67)
Net deferred tax liabilities		(5)
Long-term liabilities		(7)
Total identifiable net assets acquired		83
Goodwill		194
Total purchase price	$	277

Intangible assets. Of the total purchase price, $64 million has been allocated to customer relationships, contracts and backlog, trade name and other. Customer relationships represent existing contracts and the underlying customer relationships and backlog. We 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 Apptis trade name and other intangible assets are amortized using the straight-line method over their estimated useful lives. During the period from the acquisition date through July 1, 2011, we recorded $0.7 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. The factors that contributed to the recognition of goodwill included acquiring a talented workforce, capabilities in the federal IT market, and cost savings opportunities. This acquisition generated $194 million of goodwill, which is included in our Federal Services business. It is the main contributing factor to the net increase in our consolidated goodwill since the beginning of this fiscal year. Of the total acquired goodwill, approximately $64 million is expected to be tax deductible.

NOTE 8. INDEBTEDNESS

Indebtedness consisted of the following:

(In millions)		July 1,		December 31,
(In millions)		2011		2010
Bank term loans, net of debt issuance costs		$	621.2	$	619.6
Revolving line of credit			50.0		—
Obligations under capital leases			18.6		19.4
Notes payable, Loan Notes, and foreign credit lines			67.9		62.8
	Total indebtedness		757.7		701.8
Less:
Current portion of long-term debt			361.8		60.5
	Long-term debt	$	395.9	$	641.3

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2007 Credit Facility

As of both July 1, 2011 and December 31, 2010, the outstanding balance of term loan A was $490.0 million at interest rates of 1.19% and 1.26%, respectively. As of both July 1, 2011 and December 31, 2010, the outstanding balance of term loan B was $135.0 million at interest rates of 2.44% and 2.51%, respectively.

Under the terms of our Senior Secured Credit Facility (“2007 Credit Facility”), our next scheduled payment is expected to be due in March 2012. We were in compliance with the covenants of our 2007 Credit Facility as of July 1, 2011.

Revolving Line of Credit

We had an outstanding debt balance of $50.0 million on our revolving line of credit with an interest rate of 1.19% as of July 1, 2011, but did not have a balance as of December 31, 2010. As of July 1, 2011, we had issued $119.6 million of letters of credit, leaving $530.4 million available on our revolving credit facility. If we elected to borrow the remaining amounts available under our revolving line of credit as of July 1, 2011, we would remain in compliance with the covenants of our 2007 Credit Facility.

Other Indebtedness

Notes payable, Loan Notes, and foreign credit line. As of July 1, 2011 and December 31, 2010, we had outstanding amounts of $67.9 million and $62.8 million, respectively, in notes payable, five-year loan notes (“Loan Notes”), and foreign lines of credit. The weighted-average interest rates of the notes were approximately 2.28% and 2.32% as of July 1, 2011 and December 31, 2010, respectively. Notes payable primarily include notes used to finance the purchase of office equipment, computer equipment and furniture. Loan Notes were issued to shareholders of the Scott Wilson Group plc (“Scott Wilson”) as an alternative to cash consideration in connection with our acquisition of Scott Wilson in September 2010.

As of July 1, 2011 and December 31, 2010, we had $62.2 million and $62.8 million in lines of credit available under all foreign facilities, respectively. As of July 1, 2011 and December 31, 2010, the total outstanding debt balance of our foreign credit lines was $26.5 million and $16.1 million, respectively.

Capital Leases. As of July 1, 2011 and December 31, 2010, we had obligations under our capital leases of approximately $18.6 million and $19.4 million, respectively, consisting primarily of leases for office equipment, computer equipment and furniture.

NOTE 9. FAIR VALUE OF DEBT INSTRUMENTS

2007 Credit Facility

As of July 1, 2011 and December 31, 2010, the estimated market values of term loans A and B were approximately $622.1 million and $621.7 million, respectively. As of both July 1, 2011 and December 31, 2010, the carrying value of term loans A and B on our Condensed Consolidated Balance Sheets was $625.0 million. 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.

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NOTE 10. 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 unearned project-related costs will be earned over the next twelve months or over the duration of the contracts.

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

(In millions)		July 1,		December 31,
(In millions)		2011		2010
Billings in excess of costs and accrued earnings on contracts		$	208.3	$	167.8
Advance payments negotiated as a contract condition			38.7		57.9
Estimated losses on uncompleted contracts			27.4		27.4
Normal profit liabilities			17.4		0.2
Project-related legal liabilities and other project-related reserves			27.2		22.5
	Total	$	319.0	$	275.8

NOTE 11. INCOME TAXES

Our effective income tax rates for the three months ended July 1, 2011 and July 2, 2010 were 37.7% and 38.8%, respectively. Our effective income tax rates for the six months ended July 1, 2011 and July 2, 2010 were 36.3% and 21.4%, respectively. The 2010 reduction in the effective income tax rate resulted from our decision to indefinitely reinvest the earnings of all of our foreign subsidiaries, as part of our strategy to expand our business globally, resulting in a decrease to income tax expense of $42.1 million. No corresponding reduction was recorded in 2011.

The reconciliation of our income tax expense and effective income tax rates for the six months ended July 1, 2011 and July 2, 2010 is as follows:

	Six Months Ended
	July 1, 2011			July 2, 2010
(In millions, except for percentages)	Amount		Tax Rate	Amount		Tax Rate
U.S. statutory rate applied to income before taxes	$	95.3	35.0%	$	85.9	35.0%
State taxes, net of federal benefit		11.8	4.4%		11.3	4.6%
Change in indefinite reinvestment assertion		—	—		(61.8)	(25.2%)
Adjustments to valuation allowances		7.0	2.5%		9.6	3.9%
Adjustments related to changing foreign tax credits to deductions		—	—		13.6	5.6%
Foreign income taxed at rates other than 35%		(15.2)	(5.6%)		(7.9)	(3.2%)
Other adjustments		—	—		1.8	0.7%
Total income tax expense	$	98.9	36.3%	$	52.5	21.4%

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As of July 1, 2011, 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 $379.0 million. These state NOL carryovers expire in years 2011 through 2027. There are also foreign NOL carryovers in various jurisdictions of approximately $403.4 million. The majority of the foreign NOL carryovers have no expiration date. At July 1, 2011, the federal, state and foreign NOL carryovers resulted in a deferred tax asset of $117.9 million with a valuation allowance of $103.4 million established against this tax asset. 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.

As of July 1, 2011, we have remaining tax-deductible goodwill of $359.1 million resulting from acquisitions. The amortization of this goodwill is deductible over various periods ranging up to 12 years. The tax deduction for goodwill for 2011 is expected to be approximately $89.4 million and is expected to be substantially lower beginning in 2015.

NOTE 12. EMPLOYEE RETIREMENT AND POST-RETIREMENT BENEFIT PLANS

Defined Benefit Plans

We sponsor a number of pension and unfunded supplemental executive retirement plans.

The components of our net periodic pension costs relating to our defined benefit plans for the three and six months ended July 1, 2011 and July 2, 2010 were as follows:

			Three Months Ended
			Domestic Plans				Foreign Plans
(In millions)			July 1,		July 2,		July 1,		July 2,
(In millions)			2011		2010		2011		2010
Service cost			$	1.7	$	1.6	$	0.1	$	—
Interest cost				4.7		4.6		6.2		0.3
Expected return on plan assets				(4.1)		(3.9)		(5.8)		(0.2)
Amortization of:
	Prior service costs			(0.8)		(0.8)		—		—
	Net loss			1.8		0.9		—		—
		Net periodic pension costs	$	3.3	$	2.4	$	0.5	$	0.1

			Six Months Ended
			Domestic Plans				Foreign Plans
(In millions)			July 1,		July 2,		July 1,		July 2,
(In millions)			2011		2010		2011		2010
Service cost			$	3.4	$	3.2	$	0.2	$	—
Interest cost				9.4		9.2		12.2		0.6
Expected return on plan assets				(8.2)		(7.9)		(11.4)		(0.3)
Amortization of:
	Prior service costs			(1.6)		(1.6)		—		—
	Net loss			3.6		1.8		—		—
		Net periodic pension costs	$	6.6	$	4.7	$	1.0	$	0.3

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During the three and six months ended July 1, 2011, we made cash contributions, including employer-directed benefit payments, of $5.4 million and $24.9 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 $15.8 million for the remainder of our 2011 fiscal year.

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 six months ended July 1, 2011 and July 2, 2010 were as follows:

	Three Months Ended						Six Months Ended
(In millions)	July 1,			July 2,			July 1,			July 2,
(In millions)	2011			2010			2011			2010
Interest cost	$	0.5		$	0.6		$	1.0		$	1.1
Expected return on plan assets		(0.1	)		(0.1	)		(0.2	)		(0.1	)
Net periodic benefit costs	$	0.4		$	0.5		$	0.8		$	1.0

During the three and six months ended July 1, 2011, we made employer-directed benefit payments of $1.0 million and $2.1 million, respectively, to the post-retirement benefit plans. We expect to make cash contributions, including estimated employer-directed benefit payments, of approximately $1.4 million for the remainder of our 2011 fiscal year.

The information provided above does not include multi-employer plans in which we participate.

NOTE 13. STOCKHOLDERS' EQUITY

Equity Incentive Plans

As of July 1, 2011, approximately 3.0 million shares had been issued as restricted stock awards and 0.2 million shares were issuable upon the vesting of restricted stock units under our 2008 Equity Incentive Plan (the “2008 Plan”). In addition, approximately 1.8 million shares remained reserved for future grant under the 2008 Plan.

Stock Repurchase Program

The following table summarizes our stock repurchase activities for the three and six months ended July 1, 2011 and July 2, 2010:

	Three Months Ended						Six Months Ended
	July 1,			July 2,			July 1,			July 2,
(In millions, except average price paid per share)	2011			2010			2011			2010
Common stock repurchase shares			—			—			3.0			1.0
Average price paid per share		$	—		$	—		$	45.58		$	48.41
Common stock repurchase		$	—		$	—		$	136.7		$	48.4

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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.

The following table presents our stock-based compensation expense related to restricted stock awards and units, our employee stock purchase plan and the related income tax benefits recognized for the three and six months ended July 1, 2011 and July 2, 2010:

	Three Months Ended				Six Months Ended
(In millions)	July 1,		July 2,		July 1,		July 2,
(In millions)	2011		2010		2011		2010
Stock-based compensation expense:
Restricted stock awards and units	$	10.4	$	10.2	$	22.2	$	20.6
Employee stock purchase plan		0.1		0.1		0.2		0.2
Stock-based compensation expense	$	10.5	$	10.3	$	22.4	$	20.8

Total income tax benefits recognized in our net income related to stock-based compensation expense	$	4.0	$	4.0	$	8.6	$	8.0

Restricted Stock Awards and Units

Restricted stock awards and units generally vest over four years. 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. 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 July 1, 2011, we had estimated unrecognized stock-based compensation expense of $104.0 million related to nonvested restricted stock awards and units. This expense is expected to be recognized over a weighted-average period of 2.8 years. The following table summarizes the total fair value of vested shares, according to their contractual terms, and the grant date fair value of restricted stock awards and units granted during the six months ended July 1, 2011 and July 2, 2010:

	July 1,		July 2,
(In millions)	2011		2010
Fair value of shares vested	$	37.6	$	37.6
Grant date fair value of restricted stock awards and units granted	$	41.5	$	41.0

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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 six months ended July 1, 2011, is presented below:

	Six Months Ended
	July 1, 2011
		Weighted-
	Shares	Average Grant
	(in millions)	Date Fair Value
Nonvested at December 31, 2010	2.5	$	42.92
Granted	1.0	$	42.51
Vested	(0.9)	$	41.87
Forfeited	(0.1)	$	43.50
Nonvested at July 1, 2011	2.5	$	43.13

Stock Options

A summary of the status and changes of the stock options, according to their contractual terms, is presented below:

							Weighted-
							Average
				Weighted-			Remaining		Aggregate
	Options			Average			Contractual		Intrinsic Value
	(in millions)			Exercise Price			Term (in years)		(in millions)

Outstanding and exercisable at December 31, 2010		0.6			$	23.38		2.62		$	11.7
Exercised		—	†		$	22.44
Forfeited/expired/cancelled		—	†		$	18.77
Outstanding and exercisable at July 1, 2011		0.6			$	23.53		2.18		$	12.2

† Represents fewer than fifty thousand shares.

The aggregate intrinsic value as of July 1, 2011 in the preceding table represents the total pre-tax intrinsic value, based on our closing market price of $45.12, which would have been received by the option holders had all option holders exercised their options on that date.

For the six months ended July 1, 2011 and July 2, 2010, the aggregate intrinsic value of stock options exercised, determined as of the date of option exercise, was $1.8 million and $2.5 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 14. SEGMENT AND RELATED INFORMATION

We operate our business through the following three segments:

Infrastructure & Environment business 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 provides services to various U.S. federal government agencies, primarily the Department of Defense. These services include program management, planning, design and engineering, systems engineering and technical assistance, construction and construction management, operations and maintenance, IT services, and decommissioning and closure. The results for Apptis, which we acquired on June 1, 2011, are reported under the Federal Services business.

Energy & Construction business 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, as amended, for the year ended December 31, 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						Six Months Ended
(In millions)	July 1,			July 2,			July 1,			July 2,
(In millions)	2011			2010			2011			2010
Revenues
Infrastructure & Environment (1)	$	929.5		$	751.1		$	1,839.4		$	1,526.2
Federal Services (2)		668.6			652.0			1,249.8			1,289.6
Energy & Construction		810.5			859.7			1,676.8			1,667.7
Inter-segment, eliminations and other		(48.3	)		(13.4	)		(85.9	)		(26.6	)
Total revenues	$	2,360.3		$	2,249.4		$	4,680.1		$	4,456.9
Equity in income of unconsolidated
joint ventures
Infrastructure & Environment (1)	$	1.1		$	0.8		$	2.1		$	1.6
Federal Services (2)		1.6			1.4			3.1			2.9
Energy & Construction		35.9			22.1			70.8			44.4
Total equity in income (loss) of unconsolidated joint ventures	$	38.6		$	24.3		$	76.0		$	48.9
Contribution (3)
Infrastructure & Environment (1)	$	57.6		$	56.6		$	118.4		$	110.5
Federal Services (2)		51.1			44.8			92.4			86.1
Energy & Construction		50.4			47.1			101.7			91.7
General and administrative expenses (4)		(27.5	)		(26.2	)		(59.3	)		(51.6	)
Total contribution	$	131.6		$	122.3		$	253.2		$	236.7
Operating income
Infrastructure & Environment (1)	$	54.3		$	54.6		$	109.9		$	105.9
Federal Services (2)		45.8			37.6			81.6			73.4
Energy & Construction		69.5			55.7			132.5			113.9
General and administrative expenses (4)		(19.0	)		(13.3	)		(41.4	)		(33.4	)
Total operating income	$	150.6		$	134.6		$	282.6		$	259.8
Depreciation and amortization
Infrastructure & Environment (1)	$	14.3		$	8.6		$	26.5		$	17.3
Federal Services (2)		6.1			5.4			11.5			10.8
Energy & Construction		13.8			15.1			27.6			30.2
Corporate and other		1.5			1.8			3.4			3.6
Total depreciation and amortization	$	35.7		$	30.9		$	69.0		$	61.9

(1)	The operating results of Scott Wilson were included in the three and six months ended July 1, 2011, but not in the three and six months ended July 2, 2010, as we completed the acquisition in September 2010.

(2)	The operating results of Apptis were included in the three and six months ended July 1, 2011, but not in the three and six months ended July 2, 2010, as we completed the acquisition in June 2011.

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(3)

We are providing information regarding 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, amortization of some, but not all, intangible assets, and other miscellaneous unallocated expenses. Segment operating income represents net income before reductions for income taxes, noncontrolling interests and interest expense.

(4)	General and administrative expenses represent expenses related to corporate functions.

Reconciliations of segment contribution to segment operating income for the three and six months ended July 1, 2011 and July 2, 2010 are as follows:

	Three Months Ended July 1, 2011
	Infrastructure								Energy
	&				Federal				&
(In millions)	Environment				Services				Construction				Corporate				Consolidated
Contribution		$	57.6			$	51.1			$	50.4			$	(27.5	)		$	131.6
Noncontrolling interests			0.4				—				32.7				—				33.1
Amortization of intangible assets			—				(3.9	)			(7.1	)			—				(11.0	)
Stock-based compensation expense			(3.0	)			(1.3	)			(3.4	)			7.7				—
Other miscellaneous and unallocated expenses			(0.7	)			(0.1	)			(3.1	)			0.8				(3.1	)
Operating income (loss)		$	54.3			$	45.8			$	69.5			$	(19.0	)		$	150.6

	Three Months Ended July 2, 2010
	Infrastructure								Energy
	&				Federal				&
(In millions)	Environment				Services				Construction				Corporate				Consolidated
Contribution		$	56.6			$	44.8			$	47.1			$	(26.2	)		$	122.3
Noncontrolling interests			1.6				—				24.0				—				25.6
Amortization of intangible assets			(0.1	)			(3.9	)			(7.2	)			—				(11.2	)
Stock-based compensation expense			(3.4	)			(1.3	)			(3.1	)			7.8				—
Other miscellaneous and unallocated expenses			(0.1	)			(2.0	)			(5.1	)			5.1				(2.1	)
Operating income (loss)		$	54.6			$	37.6			$	55.7			$	(13.3	)		$	134.6

	Six Months Ended July 1, 2011
	Infrastructure								Energy
	&				Federal				&
(In millions)	Environment				Services				Construction				Corporate				Consolidated
Contribution		$	118.4			$	92.4			$	101.7			$	(59.3	)		$	253.2
Noncontrolling interests			(0.8	)			—				59.7				—				58.9
Amortization of intangible assets			—				(7.9	)			(14.1	)			—				(22.0	)
Stock-based compensation expense			(6.5	)			(2.8	)			(7.1	)			16.4				—
Other miscellaneous and unallocated expenses			(1.2	)			(0.1	)			(7.7	)			1.5				(7.5	)
Operating income (loss)		$	109.9			$	81.6			$	132.5			$	(41.4	)		$	282.6

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	Six Months Ended July 2, 2010
	Infrastructure								Energy
	&				Federal				&
(In millions)	Environment				Services				Construction				Corporate				Consolidated
Contribution		$	110.5			$	86.1			$	91.7			$	(51.6	)		$	236.7
Noncontrolling interests			2.7				—				47.2				—				49.9
Amortization of intangible assets			(0.2	)			(7.9	)			(14.2	)			—				(22.3	)
Stock-based compensation expense			(7.0	)			(2.6	)			(6.2	)			15.8				—
Other miscellaneous and unallocated expenses			(0.1	)			(2.2	)			(4.6	)			2.4				(4.5	)
Operating income (loss)		$	105.9			$	73.4			$	113.9			$	(33.4	)		$	259.8

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

	July 1,		December 31,
(In millions)	2011		2010
Infrastructure & Environment	$	4.7	$	3.8
Federal Services		4.7		4.8
Energy & Construction		107.2		56.9
Total investments in and advances to unconsolidated joint ventures	$	116.6	$	65.5

Infrastructure & Environment	$	138.4	$	136.1
Federal Services		38.3		30.4
Energy & Construction		75.7		83.3
Corporate		18.4		16.3
Total property and equipment, net of accumulated depreciation	$	270.8	$	266.1

Total assets by segment are as follows:

	July 1,			December 31,
(In millions)	2011			2010
Infrastructure & Environment	$	2,277.7		$	2,272.3
Federal Services		1,837.7			1,488.7
Energy & Construction		3,450.4			3,424.6
Corporate		6,201.2			5,589.7
Eliminations		(6,161.2	)		(5,423.9	)
Total assets	$	7,605.8		$	7,351.4

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Geographic Areas

Our revenues by geographic areas are shown below:

	Three Months Ended								Six Months Ended
(In millions)	July 1,				July 2,				July 1,				July 2,
(In millions)	2011				2010				2011				2010
Revenues
United States		$	2,040.6			$	2,093.1			$	4,068.5			$	4,140.1
International			326.9				161.1				624.9				325.4
Eliminations			(7.2	)			(4.8	)			(13.3	)			(8.6	)
Total revenues		$	2,360.3			$	2,249.4			$	4,680.1			$	4,456.9

Major Customers and Other

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

Our revenues from the U.S. Army and DOE for the three and six months ended July 1, 2011 and July 2, 2010 are presented below:

	Three Months Ended						Six Months Ended
(In millions, except percentages)	July 1,			July 2,			July 1,			July 2,
(In millions, except percentages)	2011			2010			2011			2010
The U.S. Army (1)
Infrastructure & Environment	$	33.9		$	39.3		$	72.5		$	79.3
Federal Services		344.5			349.3			650.3			697.0
Energy & Construction		58.4			99.3			119.3			176.9
Total U.S. Army	$	436.8		$	487.9		$	842.1		$	953.2
Revenues from the U.S. Army as a percentage of our consolidated revenues		19	%		22	%		18	%		21	%

DOE
Infrastructure & Environment	$	1.8		$	1.3		$	3.4		$	2.4
Federal Services		5.6			22.9			9.2			29.5
Energy & Construction		324.2			281.8			626.9			527.1
Total DOE	$	331.6		$	306.0		$	639.5		$	559.0
Revenues from DOE as a percentage of our consolidated revenues		14	%		14	%		14	%		13	%

Revenues from the federal market sector as a percentage of our consolidated revenues		49	%		49	%		48	%		49	%

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

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NOTE 15. 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:

USAID Egyptian Projects: In March 2003, Washington Group International, Inc. (“WGI”) 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, Contrack International, Inc., and MISR Sons Development S.A.E., an Egyptian construction company, asserting violations under the Federal False Claims Act, the Federal Foreign Assistance Act of 1961, 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 has denied any liability in the action and contested 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.

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 further pursuit of 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.

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

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 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. On August 1, 2011, the District Court held that the defense of government contractor immunity is not available to WGI Ohio at trial, but would be an issue for appeal.

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.

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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, 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.

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 July 1, 2011, we had received $28 million of settlement payments and we expect to receive the final settlement payment of $12 million upon the completion of the project.

We are currently completing the final start up and commissioning of the facility and addressing customer warranty claims related to the facility’s steam, fire protection, conveyor and backup electrical supply systems that were excluded from the August 23, 2010 settlement agreement. Although we continue to pursue resolution, as a result of extended project delays, we are experiencing higher than expected warranty costs as a result of equipment suppliers disputing their warranty obligations.

During the three and six months ended July 1, 2011, in connection with the start up and commissioning activities and the warranty claims, we recognized losses of $10.8 million and $19.4 million, respectively. As of July 1, 2011, the cumulative losses were approximately $107.1 million.

DOE Deactivation, Demolition, and Removal Project: In December 2007, the DOE awarded WGI Ohio a cost-reimbursable task order to perform deactivation, demolition and removal of U.S. government nuclear research laboratory testing facilities at a site in New York State. During 2010, the project experienced contamination and performance incidents. In February 2011, WGI Ohio and the DOE executed a task order modification that changed the contractual terms from cost-reimbursable to at-risk. Through July 1, 2011, WGI Ohio has recorded net charges related to this project of $11.5 million, including an $11.1 million charge during the fiscal year ended December 31, 2010, and charges of $2.2 million and $4.2 million in the quarter and six months ended July 1, 2011, respectively.

Due to unanticipated regulatory requirements and permitting delays by federal and state agencies, as well as other reasons, WGI Ohio may be required to perform work outside the scope of the February 2011 task order modification. Additionally, a significant portion of the work on the project continues to be delayed. Based on changes and delays to date, the project completion costs continue to increase beyond the previous estimate by at least $45 million; however, since the project continues to be delayed and the final project plan has not been approved, the final project completion costs are not currently estimable. WGI Ohio believes that the expected project cost increases will be caused by additional work scope, delays and other factors beyond its control that will constitute changes for which it should be compensated. Nonetheless, WGI Ohio can give no assurance that it will not be obligated to pay some or all of the expected project cost increases, which would negatively impact future results of operations.

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.

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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 July 1, 2011, 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 July 1, 2011.

We have guaranteed several of our foreign credit facilities and bank guarantee lines. The aggregate amount of these guarantees was $22.6 million as of July 1, 2011.

As of July 1, 2011, we had $34.9 million in bank guarantees outstanding under foreign credit facilities and other banking arrangements.

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

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

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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 H63; 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, as amended, for the fiscal year ended December 31, 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 United States (“U.S.”) federal government contractor in the areas of systems engineering and technical assistance, operations and maintenance, and information technology (“IT”) services. We have more than 48,000 employees in a global network of offices and contract-specific job sites in more than 40 countries. We provide our services through three reporting segments, which we refer to as our Infrastructure & Environment, Federal Services and Energy & Construction businesses.

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

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

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

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

OVERVIEW AND BUSINESS TRENDS

Results for the Three Months Ended July 1, 2011

Consolidated revenues for the second quarter of 2011 were $2.4 billion, an increase of $110.9 million, or 4.9%, compared to the same period in 2010. For the three months ended July 1, 2011, Scott Wilson Group plc (“Scott Wilson”), which we acquired in September 2010, generated $115.0 million in revenues, and Apptis Holdings, Inc. (“Apptis”), which we acquired in June 2011, generated $27.6 million in revenues. By comparison, neither of the acquired companies contributed to our consolidated revenues during the second quarter of fiscal year 2010. During the quarter, revenues increased from our work in the federal and industrial and commercial market sectors, while we experienced a decline in revenues from our work in the power and infrastructure market sectors. Net income attributable to URS for the second quarter of 2011 was $66.8 million compared with $61.9 million during the second quarter of 2010, an increase of 7.9%.

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Cash Flows

During the six months ended July 1, 2011, we generated $262.9 million in cash from operations. Cash flows from operations increased by $142.8 million for the six months ended July 1, 2011 compared with the same period in 2010. This increase was primarily due to the timing of payments from clients on accounts receivable, project performance payments and vendor and subcontractor payments. The increase was partially offset by higher income tax payments and higher defined benefit plan contributions.

On June 1, 2011, we acquired Apptis for a purchase price of approximately $259 million, net of cash acquired.

In addition, we had cash outflows of $136.7 million related to repurchases of common stock for the six months ended July 1, 2011. During the first six months of fiscal year 2011, we had a net borrowing of $50.0 million under our revolving line of credit.

Acquisition

On June 1, 2011, we completed the acquisition of Apptis. The operating results of Apptis after the acquisition date are included in our condensed consolidated financial statements under the Federal Services business. The operating results generated from this newly acquired business during this period were not material to our consolidated results for the three- and six-month periods ended July 1, 2011.

Book of Business

As of July 1, 2011 and December 31, 2010, our total book of business was $28.7 billion and $29.1 billion, respectively. The decrease in our book of business in the first six months of fiscal year 2011 occurred primarily in our federal market sector. This decrease was partially offset by an addition of $0.8 billion to our book of business resulting from our acquisition of Apptis. Please see Book of Business on page 36 for more information.

Business Trends

Given the current economic uncertainty, it is difficult to predict the impact of the continuing global economic weakness on our business or to forecast business trends accurately. In addition, on August 2, 2011, the federal government approved an increase in the federal debt ceiling, and, on August 5, 2011, U.S. sovereign debt was downgraded by Standard & Poor's. However, at this time, we do not know whether the past inaction of the federal government, the U.S. sovereign debt downgrade, or the new or future legislation will delay collections or result in reduced future demand for the services we provide to government agencies.

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 63.

Power

We expect revenues from our power market sector to increase during our 2011 fiscal year, compared to power revenues for our 2010 fiscal year, based on increased procurement activity and recent contract awards in a number of markets. For example, as a result of regulatory mandates and consent decrees, we are seeing strong demand for our air quality control services, which involve the retrofit of coal-fired power plants with clean air technology to reduce sulfur dioxide, mercury and other emissions. In addition, in July 2011, the U.S. Environmental Protection Agency issued new guidelines, known as the Cross-State Air Pollution Rule, which shortens the timeline previously established by the Clean Air Interstate Rule for utilities in 27 states to comply with more stringent emission control mandates.

We also anticipate sustained demand for engineering and construction services related to the development of new gas-fired power plants because gas-fired power plants produce fewer emissions than coal-fired facilities and natural gas prices are low by historical standards.

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In the nuclear power market, we expect utilities and regulators will take a more cautious approach to the development of new nuclear power plants following the event at the Fukushima Daiichi power plant in Japan. At the same time, we anticipate sustained demand for the types of services we provide to retrofit and upgrade existing nuclear power plants to increase the generating capacity and extend the service life of these facilities. In addition, the Nuclear Regulatory Commission has issued recommendations for improving plant safety, which we expect will increase demand for the types of nuclear services we provide.

Infrastructure

We expect revenues from our infrastructure market sector to grow in our 2011 fiscal year. In the U.S., as a result of increasing state tax revenues, 47 states now have approved budgets in place for fiscal 2012. In addition, in May 2011, legislation was introduced in both the House of Representatives and the U.S. Senate to reauthorize the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users. While funding in the reauthorization bill will likely be at lower levels than the original legislation, we expect that the eventual passage of a multi-year federal funding program will provide state transportation agencies with greater confidence to move forward with larger, long-term infrastructure projects.

In addition, the acquisition of Scott Wilson has enhanced our infrastructure capabilities outside the U.S., which we anticipate will create new opportunities within the infrastructure market sector. For example, in the United Kingdom (“U.K.”) where Scott Wilson has a major presence, the coalition government has adopted a five-year National Infrastructure Plan, which includes investments of more than $320 billion for infrastructure projects from 2011 through 2015.

Federal

We expect revenues from our federal market sector to increase during our 2011 fiscal year. In May 2011, the House of Representatives approved a $649 billion Department of Defense (“DOD”) spending bill, which includes stable funding for many of the budget line items that support the types of work we perform. This funding is consistent with the DOD’s practice of outsourcing the types of specialized engineering and technical services we provide. As a result of our acquisition of Apptis, we also expect to benefit from growing demand among our federal clients for outsourced IT services.

We also anticipate sustained funding for the types of environmental and nuclear management services we provide to the Department of Energy (“DOE”) and U.K.’s Nuclear Decommissioning Authority (“NDA”). The DOE’s fiscal 2012 budget request includes $6.1 billion for environmental management programs, a $132 million increase from the fiscal 2011 continuing resolution funding level and an increase of $124 million from fiscal 2010. In the U.K., we also expect to continue to benefit from stable funding for the work we perform for the NDA. Despite budget cuts for many agencies, the coalition government has provided $4.6 billion in annual funding for the NDA over the next four years.

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Industrial and Commercial

We expect revenues from our industrial and commercial market sector to grow significantly during our 2011 fiscal year, as a result of increased procurement activity and potential contract awards, particularly in the oil and gas, manufacturing and mining markets. Due to the past increase in oil prices, many of our clients in the oil & gas industry are moving forward with capital expenditure programs. As a result, we are beginning to provide preliminary engineering and design services for new projects and projects that had previously been postponed. We believe our ability to support the initial phases of these projects positions us well to capture larger assignments as they move into the engineering and construction phases. In the manufacturing market, we continue to benefit from sustained demand for the facilities management services we provide as clients continue to outsource these services to increase cost savings and maximize efficiency.

In the mining market, rising commodity prices for base and precious metals, largely driven by demand from India and China, are creating new opportunities for our mining business, most notably in Australia. In addition, we expect revenues will continue to grow from the environmental and engineering work we perform under our long-term Master Service Agreements (“MSAs”) with multinational clients. The acquisition of Scott Wilson in September 2010 provides us with additional resources to support our MSA clients outside the U.S.

Seasonality

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

Other Business Trends

The diversification of our business and changes in the mix and timing of our fixed-cost, target-price and other contracts can cause earnings and profit margins to vary between periods. For example, we have, for some time, experienced an increase in the number of fixed-price contracts we are awarded, particularly among clients in the federal sector. The increase in fixed-price contracting creates additional risks of incurring losses and opportunities for achieving higher margins on these contracts. 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. Also, our government clients are increasingly using indefinite delivery contracts (“IDCs”) that require us to engage in a competitive procurement process before any task orders are issued as compared to traditional award contracts. Additionally, the traditional award contracts we receive are tending to include fewer base years and more option years. These trends change the relationship between backlog and revenues, resulting in smaller, shorter term increments moving from IDCs and option years into backlog and then potentially realized as revenues. Ultimately, however, revenues from IDC task orders and option years will typically lower our reported backlog and increase our reported IDC and option years in our book of business.

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

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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 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 businesses. As a result, the amount of revenues that will be realized beyond one year also varies from segment to segment. As of December 31, 2010, we estimated that approximately 63% of our total backlog would not be realized within one year based upon the timing of awards and the long-term nature of many of our contracts; however, no assurance can be given that backlog will be realized at this rate.

Option Years. Our option years represent the monetary value of option periods under existing contracts in backlog, which are exercisable at the option of our clients without requiring us to go through an additional competitive bidding process and would be canceled only if a client 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.

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 July 1, 2011 and December 31, 2010, our total book of business was $28.7 billion and $29.1 billion, respectively. The decrease was due primarily to reductions in our federal market sector backlog, which was partially offset by an addition of $0.8 billion to our book of business resulting from our acquisition of Apptis.

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The following tables summarize our book of business:

	Infrastructure				Energy
	&		Federal		&
(In billions)	Environment		Services		Construction		Total
As of July 1, 2011
Backlog	$	3.4	$	5.4	$	7.3	$	16.1
Option years		0.3		2.8		2.0		5.1
Indefinite delivery contracts		2.9		3.4		1.2		7.5
Total book of business	$	6.6	$	11.6	$	10.5	$	28.7

As of December 31, 2010
Backlog	$	3.3	$	6.0	$	7.3	$	16.6
Option years		0.4		2.3		2.1		4.8
Indefinite delivery contracts		3.4		3.2		1.1		7.7
Total book of business	$	7.1	$	11.5	$	10.5	$	29.1

Our backlog decreased from $16.6 billion as of December 31, 2010 to $16.1 billion as of July 1, 2011 mainly due to a decrease in our federal market sector backlog.

	July 1,		December 31,
(In billions)	2011		2010
Backlog by market sector:
Power	$	1.3	$	1.4
Infrastructure		3.0		2.6
Industrial and commercial		1.6		1.3
Federal		10.2		11.3
Total backlog	$	16.1	$	16.6

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RESULTS OF OPERATIONS

The Three Months Ended July 1, 2011 Compared with the Three Months Ended July 2, 2010

Consolidated

	Three Months Ended
										Percentage
(In millions, except percentages and per share amounts)	July 1,			July 2,			Increase			Increase
(In millions, except percentages and per share amounts)	2011			2010			(Decrease)			(Decrease)
Revenues	$	2,360.3		$	2,249.4		$	110.9			4.9	%
Cost of revenues		(2,228.3	)		(2,121.7	)		106.6			5.0	%
General and administrative expenses		(19.0	)		(13.3	)		5.7			42.9	%
Acquisition-related expenses		(1.0	)		(4.1	)		(3.1	)		(75.6	%)
Equity in income of unconsolidated joint ventures		38.6			24.3			14.3			58.8	%
Operating income		150.6			134.6			16.0			11.9	%
Interest expense		(5.1	)		(5.1	)		—			—
Income before income taxes		145.5			129.5			16.0			12.4	%
Income tax expense		(54.9	)		(50.3	)		4.6			9.1	%
Net income including noncontrolling interests		90.6			79.2			11.4			14.4	%
Noncontrolling interests in income of consolidated subsidiaries, net of tax		(23.8	)		(17.3	)		6.5			37.6	%
Net income attributable to URS	$	66.8		$	61.9		$	4.9			7.9	%

Diluted earnings per share	$	0.86		$	0.76		$	0.10			13.2	%

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The following table presents our consolidated revenues by market sector and reporting segment for the three months ended July 1, 2011 and July 2, 2010.

	Three Months Ended
								Percentage
	July 1,		July 2,		Increase			Increase
(In millions, except percentages)	2011		2010		(Decrease)			(Decrease)
Revenues
Power sector
Infrastructure & Environment	$	48.4	$	36.6	$	11.8			32.2	%
Federal Services		—		—		—			—
Energy & Construction		207.9		241.9		(34.0	)		(14.1	%)
Power Total		256.3		278.5		(22.2	)		(8.0	%)
Infrastructure sector
Infrastructure & Environment		396.1		333.7		62.4			18.7	%
Federal Services		—		—		—			—
Energy & Construction		82.5		147.2		(64.7	)		(44.0	%)
Infrastructure Total		478.6		480.9		(2.3	)		(0.5	%)
Federal sector
Infrastructure & Environment		150.2		160.0		(9.8	)		(6.1	%)
Federal Services		668.4		651.8		16.6			2.5	%
Energy & Construction		341.3		296.1		45.2			15.3	%
Federal Total		1,159.9		1,107.9		52.0			4.7	%
Industrial and Commercial sector
Infrastructure & Environment		316.9		212.4		104.5			49.2	%
Federal Services		—		—		—			—
Energy & Construction		148.6		169.7		(21.1	)		(12.4	%)
Industrial and Commercial Total		465.5		382.1		83.4			21.8	%
Total revenues, net of eliminations	$	2,360.3	$	2,249.4	$	110.9			4.9	%

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Reporting Segments

	Infrastructure
(In millions, except percentages)	&				Federal				Energy &
(In millions, except percentages)	Environment (1)				Services (2)				Construction				Eliminations				Corporate				Total

Three months ended July 1, 2011
Revenues		$	929.5			$	668.6			$	810.5			$	(48.3	)		$	—			$	2,360.3
Cost of revenues			(876.2	)			(623.5	)			(776.9	)			48.3				—				(2,228.3	)
General and administrative expenses			—				—				—				—				(19.0	)			(19.0	)
Acquisition-related expenses			(0.1	)			(0.9	)			—				—				—				(1.0	)
Equity in income of unconsolidated joint ventures			1.1				1.6				35.9				—				—				38.6
Operating income (loss)		$	54.3			$	45.8			$	69.5			$	—			$	(19.0	)		$	150.6

Three months ended July 2, 2010
Revenues		$	751.1			$	652.0			$	859.7			$	(13.4	)		$	—			$	2,249.4
Cost of revenues			(693.2	)			(615.8	)			(826.1	)			13.4				—				(2,121.7	)
General and administrative expenses			—				—				—				—				(13.3	)			(13.3	)
Acquisition-related expenses			(4.1	)			—				—				—				—				(4.1	)
Equity in income of unconsolidated joint ventures			0.8				1.4				22.1				—				—				24.3
Operating income (loss)		$	54.6			$	37.6			$	55.7			$	—			$	(13.3	)		$	134.6

Increase (decrease) for the three months ended July 1, 2011 and July 2, 2010
Revenues		$	178.4			$	16.6			$	(49.2	)		$	34.9			$	—			$	110.9
Cost of revenues			183.0				7.7				(49.2	)			34.9				—				106.6
General and administrative expenses			—				—				—				—				5.7				5.7
Acquisition-related expenses			(4.0	)			0.9				—				—				—				(3.1	)
Equity in income of unconsolidated joint ventures			0.3				0.2				13.8				—				—				14.3
Operating income (loss)		$	(0.3	)		$	8.2			$	13.8			$	—			$	5.7			$	16.0

Percentage increase (decrease) for the three months ended July 1, 2011 and July 2, 2010
Revenues			23.8	%			2.5	%			(5.7	%)			260.4	%			—				4.9	%
Cost of revenues			26.4	%			1.3	%			(6.0	%)			260.4	%			—				5.0	%
General and administrative expenses			—				—				—				—				42.9	%			42.9	%
Acquisition-related expenses			(97.6	%)			N/M				—				—				—				(75.6	%)
Equity in income of unconsolidated joint ventures			37.5	%			14.3	%			62.4	%			—				—				58.8	%
Operating income (loss)			(0.5	%)			21.8	%			24.8	%			—				42.9	%			11.9	%

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N/M = Not meaningful

(1)	The operating results of Scott Wilson were included in the three months ended July 1, 2011, but not in the three months ended July 2, 2010, as we completed the acquisition in September 2010.

(2)	The operating results of Apptis were included in the three months ended July 1, 2011, but not in the three months ended July 2, 2010, as we completed the acquisition in June 2011.

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The Six Months Ended July 1, 2011 Compared with the Six Months Ended July 2, 2010

Consolidated

	Six Months Ended
										Percentage
(In millions, except percentages and per share amounts)	July 1,			July 2,			Increase			Increase
(In millions, except percentages and per share amounts)	2011			2010			(Decrease)			(Decrease)
Revenues	$	4,680.1		$	4,456.9		$	223.2			5.0	%
Cost of revenues		(4,431.1	)		(4,208.5	)		222.6			5.3	%
General and administrative expenses		(41.4	)		(33.4	)		8.0			24.0	%
Acquisition-related expenses		(1.0	)		(4.1	)		(3.1	)		(75.6	%)
Equity in income (loss) of unconsolidated joint ventures		76.0			48.9			27.1			55.4	%
Operating income		282.6			259.8			22.8			8.8	%
Interest expense		(10.2	)		(14.4	)		(4.2	)		(29.2	%)
Income before income taxes		272.4			245.4			27.0			11.0	%
Income tax expense		(98.9	)		(52.5	)		46.4			88.4	%
Net income including noncontrolling interests		173.5			192.9			(19.4	)		(10.1	%)
Noncontrolling interests in income of consolidated subsidiaries, net of tax		(44.6	)		(35.4	)		9.2			26.0	%
Net income attributable to URS	$	128.9		$	157.5		$	(28.6	)		(18.2	%)

Diluted earnings per share	$	1.65		$	1.93		$	(0.28	)		(14.5	%)

The following table presents our consolidated revenues by market sector and reporting segment for the six months ended July 1, 2011 and July 2, 2010.

	Six Months Ended
								Percentage
	July 1,		July 2,		Increase			Increase
(In millions, except percentages)	2011		2010		(Decrease)			(Decrease)
Revenues
Power sector
Infrastructure & Environment	$	101.2	$	68.3	$	32.9			48.2	%
Federal Services		—		—		—			—
Energy & Construction		455.4		500.3		(44.9	)		(9.0	%)
Power Total		556.6		568.6		(12.0	)		(2.1	%)
Infrastructure sector
Infrastructure & Environment		790.2		690.9		99.3			14.4	%
Federal Services		—		—		—			—
Energy & Construction		188.5		261.2		(72.7	)		(27.8	%)
Infrastructure Total		978.7		952.1		26.6			2.8	%
Federal sector
Infrastructure & Environment		310.3		335.0		(24.7	)		(7.4	%)
Federal Services		1,249.3		1,288.5		(39.2	)		(3.0	%)
Energy & Construction		664.8		556.9		107.9			19.4	%
Federal Total		2,224.4		2,180.4		44.0			2.0	%
Industrial and Commercial sector
Infrastructure & Environment		607.5		415.3		192.2			46.3	%
Federal Services		—		—		—			—
Energy & Construction		312.9		340.5		(27.6	)		(8.1	%)
Industrial and Commercial Total		920.4		755.8		164.6			21.8	%
Total revenues, net of eliminations	$	4,680.1	$	4,456.9	$	223.2			5.0	%

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Reporting Segments

	Infrastructure
(In millions, except percentages)	&				Federal				Energy &
(In millions, except percentages)	Environment (1)				Services (2)				Construction				Eliminations				Corporate				Total

Six months ended July 1, 2011
Revenues		$	1,839.4			$	1,249.8			$	1,676.8			$	(85.9	)		$	—			$	4,680.1
Cost of revenues			(1,731.5	)			(1,170.4	)			(1,615.1	)			85.9				—				(4,431.1	)
General and administrative expenses			—				—				—				—				(41.4	)			(41.4	)
Acquisition-related expenses			(0.1	)			(0.9	)			—				—				—				(1.0	)
Equity in income of unconsolidated joint ventures			2.1				3.1				70.8				—				—				76.0
Operating income (loss)		$	109.9			$	81.6			$	132.5			$	—			$	(41.4	)		$	282.6

Six months ended July 2, 2010
Revenues		$	1,526.2			$	1,289.6			$	1,667.7			$	(26.6	)		$	—			$	4,456.9
Cost of revenues			(1,417.8	)			(1,219.1	)			(1,598.2	)			26.6				—				(4,208.5	)
General and administrative expenses			—				—				—				—				(33.4	)			(33.4	)
Acquisition-related expenses			(4.1	)			—				—				—				—				(4.1	)
Equity in income of unconsolidated joint ventures			1.6				2.9				44.4				—				—				48.9
Operating income (loss)		$	105.9			$	73.4			$	113.9			$	—			$	(33.4	)		$	259.8

Increase (decrease) for the six months ended July 1, 2011 and July 2, 2010
Revenues		$	313.2			$	(39.8	)		$	9.1			$	59.3			$	—			$	223.2
Cost of revenues			313.7				(48.7	)			16.9				59.3				—				222.6
General and administrative expenses			—				—				—				—				8.0				8.0
Acquisition-related expenses			(4.0	)			0.9				—				—				—				(3.1	)
Equity in income of unconsolidated joint ventures			0.5				0.2				26.4				—				—				27.1
Operating income (loss)		$	4.0			$	8.2			$	18.6			$	—			$	8.0			$	22.8

Percentage increase (decrease) for the six months ended July 1, 2011 and July 2, 2010
Revenues			20.5	%			(3.1	%)			0.5	%			222.9	%			—				5.0	%
Cost of revenues			22.1	%			(4.0	%)			1.1	%			222.9	%			—				5.3	%
General and administrative expenses			—				—				—				—				24.0	%			24.0	%
Acquisition-related expenses			(97.6	%)			N/M				—				—				—				(75.6	%)
Equity in income of unconsolidated joint ventures			31.3	%			6.9	%			59.5	%			—				—				55.4	%
Operating income (loss)			3.8	%			11.2	%			16.3	%			—				24.0	%			8.8	%

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N/M = Not meaningful

(1)	The operating results of Scott Wilson were included in the six months ended July 1, 2011, but not in the six months ended July 2, 2010, as we completed the acquisition in September 2010.

(2)	The operating results of Apptis were included in the six months ended July 1, 2011, but not in the six months ended July 2, 2010, as we completed the acquisition in June 2011.

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Revenues

Our consolidated revenues for the three months ended July 1, 2011 were $2.4 billion, an increase of $110.9 million, or 4.9%, compared with the three months ended July 2, 2010. Revenues from our Infrastructure & Environment business for the three months ended July 1, 2011 were $929.5 million, an increase of $178.4 million, or 23.8%, compared with the three months ended July 2, 2010. Scott Wilson, which we acquired in September 2010, generated $115.0 million for the Infrastructure & Environment business for the three months ended July 1, 2011. Revenues from our Federal Services business for the three months ended July 1, 2011 were $668.6 million, an increase of $16.6 million, or 2.5%, compared with the three months ended July 2, 2010. Apptis, which we acquired in June 2011, generated $27.6 million for the Federal Services business for the three months ended July 1, 2011. Revenues from our Energy & Construction business for the three months ended July 1, 2011 were $810.5 million, a decrease of $49.2 million, or 5.7%, compared with the three months ended July 2, 2010.

Our consolidated revenues for the six months ended July 1, 2011 were $4.7 billion, an increase of $223.2 million, or 5.0%, compared with the six months ended July 2, 2010. Revenues from our Infrastructure & Environment business for the six months ended July 1, 2011 were $1.8 billion, an increase of $313.2 million, or 20.5%, compared with the six months ended July 2, 2010. Scott Wilson generated $225.6 million for the Infrastructure & Environment business for the six months ended July 1, 2011. Revenues from our Federal Services business for the six months ended July 1, 2011 were $1.2 billion, a decrease of $39.8 million, or 3.1%, compared with the six months ended July 2, 2010. Apptis generated $27.6 million for the Federal Services business for the six months ended July 1, 2011. Revenues from our Energy & Construction business for the six months ended July 1, 2011 were $1.7 billion, an increase of $9.1 million, or 0.5%, compared with the six months ended July 2, 2010.

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 July 1, 2011 were $256.3 million, a decrease of $22.2 million, or 8.0%, compared with the three months ended July 2, 2010. The decline in revenues in the power sector reflects the completion of major emissions control projects that experienced high levels of activity and generated significant revenues in the comparable period in fiscal 2010. These projects involved the retrofit of coal-fired power plants with clean air technology to meet the Clean Air Interstate Rule’s 2010 deadline for more stringent emissions reductions. Recently awarded emissions control projects are in early design stages, which are typically characterized by lower levels of activity and generate lower revenues. During the quarter, revenues also declined from the nuclear technology services we provide for the replacement of major components at existing nuclear power plants due to the completion of several projects that experienced high levels of activity in the comparable period in fiscal 2010. These declines were partially offset by increased revenues from the services we are providing for the development of new commercial nuclear power plants. We also benefited from strong demand for the engineering, procurement and construction services we provide for the development of natural-gas power plants, as well as program management services for the upgrade of transmission and distribution. In addition, revenues increased from the compliance, permitting and remediation services we provide to utilities to meet regulatory requirements and mitigate the environmental impact of their operations.

Consolidated revenues from our power market sector for the six months ended July 1, 2011 were $556.6 million, a decrease of $12.0 million, or 2.1%, compared with the six months ended July 2, 2010. Revenues in the power sector declined due to the completion of several major emissions control projects that experienced high levels of activity and generated significant revenues in the comparable period in fiscal 2010. Recently awarded emissions control projects are in early design stages, which are typically characterized by lower levels of activity and generate lower revenues. We also experienced a decline in revenues from projects involving the replacement of major components at existing nuclear power plants due to the completion of several projects that experienced high levels of activity in the comparable period in fiscal 2010. The impact of these factors was partially offset by an increase in demand for the services we provide for the development of new gas-fired and nuclear power plants, as well as for the upgrade of transmission and distribution systems. Revenues also increased from the compliance, permitting and remediation services we provide to utilities to meet regulatory requirements and mitigate the environmental impact of their operations.

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The Infrastructure & Environment business’ revenues from our power market sector for the three months ended July 1, 2011 were $48.4 million, an increase of $11.8 million, or 32.2%, compared with the three months ended July 2, 2010. Scott Wilson generated $7.8 million in power market sector revenues during the three months ended July 1, 2011. Revenues also increased as a result of increased demand for the engineering, compliance, permitting and decommissioning services we provide to utilities.

The Infrastructure & Environment business’ revenues from our power market sector for the six months ended July 1, 2011 were $101.2 million, an increase of $32.9 million, or 48.2%, compared with the six months ended July 2, 2010. Scott Wilson generated $13.1 million in power market sector revenues during the six months ended July 1, 2011. Revenues also increased as a result of increased demand for the engineering, compliance, permitting and decommissioning services we provide to utilities.

The Energy & Construction business’ revenues from our power market sector for the three months ended July 1, 2011 were $207.9 million, a decrease of $34.0 million, or 14.1%, compared with the three months ended July 2, 2010. The decline in revenues was primarily due to the completion of new fossil power generation projects, which accounted for a decrease of $42.6 million; a decrease in major component replacement projects performed at nuclear power plants, which accounted for a decrease of $21.4 million; and a $17.2 million decrease resulting from the completion of projects involving the retrofit of coal-fired power plants with clean air technologies. These decreases were partially offset by revenue increases of $38.2 million from new projects and $13.5 million from increased activity on a nuclear power generation project.

The Energy & Construction business’ revenues from our power market sector for the six months ended July 1, 2011 were $455.4 million, a decrease of $44.9 million, or 9.0%, compared with the six months ended July 2, 2010. The decline in revenues was primarily due to the completion of new fossil power generation projects, which accounted for a decrease of $96.6 million; a decrease in major component replacement projects performed at nuclear power plants, which accounted for a decrease of $29.0 million; and a $45.8 million decrease due to the completion of projects involving the retrofit of coal-fired power plants with clean air technologies. These decreases were partially offset by revenue increases of $70.5 million from new projects and increases due to higher activity at a nuclear power generation project and a new gas power generation project of $28.9 million and $22.0 million, respectively.

Infrastructure

Consolidated revenues from our infrastructure market sector for the three months ended July 1, 2011 were $478.6 million, a decrease of $2.3 million, or 0.5%, compared with the three months ended July 2, 2010. The decline in infrastructure revenues was primarily due to the winding down of a levee construction project in Louisiana, which is nearing completion, as well as decreased activity on a light rail and dam construction project. This decrease was offset in part by the growth of our infrastructure business outside of North America as a result of the acquisition of Scott Wilson, which generated $71.9 million in revenues from the infrastructure market sector. We benefitted from strong demand for the services we provide to expand and modernize surface transportation, rail transportation, ports and harbors, and water and wastewater infrastructure.

Consolidated revenues from our infrastructure market sector for the six months ended July 1, 2011 were $978.7 million, an increase of $26.6 million, or 2.8%, compared with the six months ended July 2, 2010. The increase in revenues was primarily due to the growth of our infrastructure business outside of North America as a result of the acquisition of Scott Wilson, which generated $143.3 million in revenues from the infrastructure market sector. We benefited from strong demand for the services we provide to expand and modernize surface transportation, rail transportation, ports and harbors, and water and wastewater infrastructure. These increases were partially offset by the winding down of a levee construction project in Louisiana, which is nearing completion, as well as decreased activity on a light rail project and a dam construction project.

The Infrastructure & Environment business’ revenues from our infrastructure market sector for the three months ended July 1, 2011 were $396.1 million, an increase of $62.4 million, or 18.7%, compared with the three months ended July 2, 2010. The increase in revenues was primarily due to revenues of $71.9 million generated by Scott Wilson. During the quarter, we benefitted from strong demand for the services we provide to expand and modernize surface transportation, rail transportation, ports and harbors, and water and wastewater infrastructure. By contrast, revenues declined from projects to expand and modernize air transportation infrastructure and health care and educational facilities.

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The Infrastructure & Environment business’ revenues from our infrastructure market sector for the six months ended July 1, 2011 were $790.2 million, an increase of $99.3 million, or 14.4%, compared with the six months ended July 2, 2010. The increase in revenues was primarily due to revenues of $143.3 million generated by Scott Wilson. For the six months ended July 1, 2011, we benefitted from strong demand for the engineering and construction services we provide to expand and modernize surface transportation, rail transportation, ports and harbors, and water and wastewater infrastructure. By contrast, revenues declined from projects involving improvements to air transportation infrastructure and health care and educational facilities.

The Energy & Construction business’ revenues from our infrastructure market sector for the three months ended July 1, 2011 were $82.5 million, a decrease of $64.7 million, or 44.0%, compared with the three months ended July 2, 2010. The decline in revenues was primarily due to a $38.2 million decrease on a levee construction project, which is nearing completion, as well as the completion of other projects, which accounted for a decrease of $7.3 million. We also experienced decreased activity at a project to operate and maintain a light rail system and an ongoing dam construction project in Illinois, which decreased revenues by $7.5 million and $4.5 million, respectively.

The Energy & Construction business’ revenues from our infrastructure market sector for the six months ended July 1, 2011 were $188.5 million, a decrease of $72.7 million, or 27.8%, compared with the six months ended July 2, 2010. The decline in revenues was primarily due to a $52.3 million decrease on a levee construction project, which is nearing completion, as well as the completion of other projects, which accounted for a decrease of $19.3 million. We also experienced lower activity at an ongoing dam construction project, which decreased revenues by $8.0 million; a decrease of $5.7 million related to market sector reclassifications from infrastructure to federal and decreases in various other projects. These decreases were partially offset by an increase of $21.1 million due to a settlement agreement reached on a light rail construction project.

Federal

Consolidated revenues from our federal market sector for the three months ended July 1, 2011 were $1.2 billion, an increase of $52.0 million, or 4.7%, compared with the three months ended July 2, 2010. Apptis generated $27.6 million for the Federal Services business for the three months ended July 1, 2011. The increase also reflects stable demand for the engineering, construction and technical services we provide to clients in the federal market sector. 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 benefited from strong demand for our work managing chemical weapons demilitarization programs, as well as the global threat reduction services we provide to secure, dismantle and eliminate weapons of mass destruction. By contrast, revenues declined from services we provide to the DOD to modernize aging weapons systems, develop new systems, and maintain and repair military vehicles and aircraft. The decline in revenues from these activities was primarily due to delays in the award of new contracts and task orders under existing contracts. During the quarter, revenues also decreased from projects to provide engineering and construction services for the development of military infrastructure, compared to the same period in fiscal 2010.

Consolidated revenues from our federal market sector for the six months ended July 1, 2011 were $2.2 billion, an increase of $44.0 million, or 2.0%, compared with the six months ended July 2, 2010. Apptis generated $27.6 million for the Federal Services business for the six months ended July 1, 2011. For the six months ended July 1, 2011, we also continued to benefit from strong demand for the environmental and nuclear management services we provide to the DOE involving the storage, treatment and disposal of radioactive waste. Revenues also increased from our work managing chemical demilitarization programs, and from the global threat reduction services we provide to secure, dismantle and eliminate weapons of mass destruction. By contrast, revenues declined from the services we provide to the DOD to modernize aging weapons systems, develop new systems, and maintain and repair military vehicles and aircraft, primarily as a result of delays in the awards of new contracts and task orders under existing contracts. The decrease in these activities was largely the result of delays in the award of new contracts and task orders under existing contracts. Revenues also decreased from projects to provide engineering and construction services for the development of military infrastructure, compared to the same period in fiscal 2010.

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The Infrastructure & Environment business’ revenues from our federal market sector for the three months ended July 1, 2011 were $150.2 million, a decrease of $9.8 million, or 6.1%, compared with the three months ended July 2, 2010. The decline in revenues was primarily due to the completion of large task orders under existing DOD contracts for the design and construction of military infrastructure at installations in the U.S. and overseas, which experienced high levels of activity and generated higher revenues during the comparable period in 2010. While these task orders have been replaced by similar design-build projects, the newly awarded projects are in early design stages, which are typically characterized by lower levels of activity and generate lower revenues. Revenues also decreased from contracts with the Federal Emergency Management Agency (“FEMA”), which typically involve hazard mitigation, disaster response and other engineering services. By contrast, we continued to benefit from strong demand for the engineering, construction and environmental services we provide to other U.S. federal government agencies, including the General Services Administration, the Department of State, the Department of the Interior and the U.S. Postal Service.

The Infrastructure & Environment business’ revenues from our federal market sector for the six months ended July 1, 2011 were $310.3 million, a decrease of $24.7 million, or 7.4%, compared with the six months ended July 2, 2010. The decline in revenues was primarily due to the completion of large engineering and construction task orders under existing DOD contracts for the design and construction of military infrastructure at installations in the U.S. and overseas, which experienced high levels of activity and generated higher revenues during the comparable period in 2010. While these task orders have been replaced by similar design-build projects, the newly awarded projects are in early design stages, which are typically characterized by lower levels of activity and generate lower revenues. Revenues also decreased from contracts with FEMA, which typically involve hazard mitigation, disaster response and other engineering services. By contrast, revenues increased from the engineering, construction and environmental services we provide to other U.S. federal government agencies, including the General Services Administration, the Department of State, the Department of the Interior and the U.S. Postal Service.

The Federal Services business’ revenues from our federal market sector for the three months ended July 1, 2011 were $668.4 million, an increase of $16.6 million, or 2.5%, compared with the three months ended July 2, 2010. The increase in revenues during the three months ended July 1, 2011 was due to the growth of our federal IT business as a result of the acquisition of Apptis, which generated $27.6 million for the Federal Services business for the quarter. We also benefited from strong demand for our work managing chemical weapons demilitarization programs, as well as for the global threat reduction services we provide to secure, dismantle and eliminate weapons of mass destruction in countries worldwide. By contrast, revenues declined from the services we provide to the DOD to modernize aging weapons systems, develop new systems, and maintain and repair military aircraft, ground vehicles and other equipment. The decline in revenues from these activities was primarily due to delays in the award of new contracts and task orders under existing contracts.

The Federal Services business’ revenues from our federal market sector for the six months ended July 1, 2011 were $1.2 billion, a decrease of $39.2 million, or 3.0%, compared with the six months ended July 2, 2010. Revenues declined from the services we provide to maintain and repair aircraft, ground vehicles and other military equipment. We also experienced a decline 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 and the modernization of aging weapons systems. The decline in revenues from these activities was largely due to delays in the award of new contracts and task orders under existing contracts. Apptis generated $27.6 million for the Federal Services business for the six months ended July 1, 2011. In addition, we continued to benefit from strong demand for our work managing chemical weapons demilitarization programs, as well as for the global threat reduction services we provide to secure, dismantle and eliminate weapons of mass destruction in countries worldwide. Revenues also increased from the operations and installations management support we provide at space flight centers.

The Energy & Construction business’ revenues from our federal market sector for the three months ended July 1, 2011 were $341.3 million, an increase of $45.2 million, or 15.3%, compared with the three months ended July 2, 2010. The increase was primarily driven by higher revenue on a DOE contract to provide nuclear management services for the treatment and disposal of high-level liquid waste, which accounted for an increase of $22.1 million. Revenues also increased by $10.2 million, $9.0 million and $8.7 million, respectively, due to increased activity on a DOE deactivation, demolition and removal project, a federal energy technology laboratory project and a DOE nuclear waste treatment and processing project.

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The Energy & Construction business’ revenues from our federal market sector for the six months ended July 1, 2011 were $664.8 million, an increase of $107.9 million, or 19.4%, compared with the six months ended July 2, 2010. The increase was primarily driven by higher revenue on a DOE contract to provide nuclear management services for the treatment and disposal of high-level liquid waste, which accounted for an increase of $71.4 million. Revenues also increased by $15.2 million, $12.2 million and $7.9 million, respectively, due to increased activity on a DOE deactivation, demolition and removal project, a federal energy technology laboratory project and a DOE nuclear waste treatment and processing project. Additionally, market sector reclassifications from infrastructure to federal increased revenues by $5.7 million.

Industrial and Commercial

Consolidated revenues from our industrial and commercial market sector for the three months ended July 1, 2011 were $465.5 million, an increase of $83.4 million, or 21.8%, compared with the three months ended July 2, 2010. Scott Wilson generated $35.3 million in revenues from the industrial and commercial market sector during the three months ended July 1, 2011. During the quarter, revenues also increased from the engineering and environmental services we provide under MSAs to multinational corporations, particularly among clients in the oil and gas industry. We also benefited from sustained demand for the facilities management services we provide to our clients in the manufacturing industry as they continued to outsource these services to help save cost and maximize the efficiency of their operations. Revenues also increased from the engineering, environmental and construction services we provide to clients in the mining industry. By contrast, we experienced a decline in revenues from the completion of several large-scale contracts that have not been replaced by comparable projects.

Consolidated revenues from our industrial and commercial market sector for the six months ended July 1, 2011 were $920.4 million, an increase of $164.6 million, or 21.8%, compared with the six months ended July 2, 2010. Scott Wilson generated $69.2 million in revenues from the industrial and commercial market sector during the six months ended July 1, 2011. We also continued to benefit from the strong demand for the engineering and environmental services we provide under MSAs to multinational corporations, particularly among clients in the oil and gas industry. In the manufacturing industry, we also benefited from sustained demand for the facilities management services we provide as our clients continued to outsource these services. Revenues also increased from the engineering, environmental and construction services we provide to clients in the mining industry. By contrast, we experienced a decline in revenues from the completion of several large-scale contracts that have not been replaced by comparable projects.

The Infrastructure & Environment business’ revenues from our industrial and commercial market sector for the three months ended July 1, 2011 were $316.9 million, an increase of $104.5 million, or 49.2%, compared with the three months ended July 2, 2010. Scott Wilson generated $35.3 million in revenues from the industrial and commercial market sector during the three months ended July 1, 2011. During the quarter, revenues increased from the engineering, environmental and construction services we provide to mining clients. As a result of higher commodity prices for metals and mineral resources, many of our mining clients are expanding their operations to meet growing demand. We also benefited from increased demand for the environmental and engineering work we provide under MSAs with multinational corporations, particularly among clients in the oil and gas industries. The past increase in oil prices is causing many of these clients to increase capital spending and move forward with projects that had previously been deferred.

The Infrastructure & Environment business’ revenues from our industrial and commercial market sector for the six months ended July 1, 2011 were $607.5 million, an increase of $192.2 million, or 46.3%, compared with the six months ended July 2, 2010. Scott Wilson generated $69.2 million in revenues from the industrial and commercial market sector during the six months ended July 1, 2011. We benefitted from strong demand for the engineering, environmental and construction services we provide to mining clients. As a result of higher commodity prices for metals and mineral resources, many of our mining clients are expanding their operations to meet growing demand. Revenues also increased from the environmental and engineering work we provide under MSAs with multinational corporations, particularly among clients in the oil and gas industries, as a result of the past increase in oil prices, which is causing many of these clients to increase capital spending.

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The Energy & Construction business’ revenues from our industrial and commercial market sector for the three months ended July 1, 2011 were $148.6 million, a decrease of $21.1 million, or 12.4%, compared with the three months ended July 2, 2010. The decrease was primarily due to the completion and wind down of oil and gas and mining projects, which accounted for $25.3 million of the decrease. These decreases were partially offset by increases in our facilities maintenance services.

The Energy & Construction business’ revenues from our industrial and commercial market sector for the six months ended July 1, 2011 were $312.9 million, a decrease of $27.6 million, or 8.1%, compared with the six months ended July 2, 2010. The decrease was primarily due to the completion and wind down of oil and gas and mining projects, which accounted for $38.9 million of the decrease. These decreases were partially offset by increases of $7.1 million from continuing projects to provide facilities maintenance services.

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, increased by 5.0% for the three months ended July 1, 2011 compared with the three months ended July 2, 2010. Our consolidated cost of revenues increased by 5.3% for the six months ended July 1, 2011 compared with the six months ended July 2, 2010. Because our revenues are primarily project-based, the factors that generally caused revenues to increase also drove a corresponding increase in our cost of revenues. Consolidated cost of revenues as a percent of revenues increased from 94.3% for the three months ended July 2, 2010 to 94.4% for the three months ended July 1, 2011. Consolidated cost of revenues as a percent of revenues increased from 94.4% for the six months ended July 2, 2010 to 94.7% for the six months ended July 1, 2011. See “Operating Income” for further discussion.

Acquisition-related Expenses

Our consolidated acquisition-related expenses for both the three and six months ended July 1, 2011 were $1.0 million, which include legal fees, consultation fees, travel expenses, and other miscellaneous direct and incremental administrative expenses. Our acquisition-related expenses for both the three and six months ended July 1, 2011 were primarily related to our acquisition of Apptis, which was completed on June 1, 2011. Our consolidated acquisition-related expenses for both the three and six months ended July 2, 2010 were $4.1 million, which related to our acquisition of Scott Wilson in 2010.

General and Administrative Expenses

Our consolidated general and administrative (“G&A”)expenses for the three months ended July 1, 2011 increased by 42.9% compared with the three months ended July 2, 2010. Consolidated G&A expenses as a percent of revenues was 0.8% for the three months ended July 1, 2011, compared to 0.6% for the three months ended July 2, 2010. The increase was primarily due to the reversal, in the second quarter of fiscal year 2010, of a payroll tax accrual related to a prior acquisition and net foreign currency gains recorded in the prior year. In addition, there was an increase in audit fees resulting from the addition of Scott Wilson, an increase in legal fees, an increase in IT consulting services and an increase in tax consulting fees.

Our consolidated G&A expenses for the six months ended July 1, 2011 increased by 24.0% compared with the six months ended July 2, 2010. Consolidated G&A expenses as a percent of revenues was 0.9% for the six months ended July 1, 2011 compared to 0.7% for the six months ended July 2, 2010. The increase in G&A expenses was primarily due to an increase in expenses for employee bonuses and benefits, and the reversal, in the second quarter of fiscal year 2010, of a payroll tax accrual related to a prior acquisition. In addition, there was an increase in audit fees resulting from the addition of Scott Wilson, an increase in legal fees, an increase in IT consulting services and an increase in tax consulting fees. These increases were partially offset by net foreign currency gains recorded in the first six months of fiscal 2011.

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Equity in Income of Unconsolidated Joint Ventures

Our consolidated equity in income of unconsolidated joint ventures for the three months ended July 1, 2011 increased by $14.3 million or 58.8% compared with the three months ended July 2, 2010. Our consolidated equity in income of unconsolidated joint ventures for the six months ended July 1, 2011 increased by $27.1 million or 55.4% compared with the six months ended July 2, 2010. The variances for the three-month and six-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 July 1, 2011 increased by $13.8 million or 62.4% compared with the three months ended July 2, 2010. The increase was due primarily to:

·	a $9.5 million increase resulting from a claim settlement on a Southern California highway project; and

·	an $8.9 million increase resulting from higher earnings on our nuclear maintenance, operations and clean-up projects in the U.K.

These increases were partially offset by:

·	a $7.2 million decrease from a DOE nuclear clean-up project, in which we recognized a favorable change order settlement in the comparable period in fiscal 2010.

The Energy & Construction business’ equity in income of unconsolidated joint ventures for the six months ended July 1, 2011 increased by $26.4 million or 59.5% compared with the six months ended July 2, 2010. The increase was due primarily to:

·	a $19.4 million increase resulting from higher earnings on our nuclear maintenance, operations and clean-up projects in the U.K.; and

·	a $9.5 million increase resulting from a settlement claim on a Southern California highway project.

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Operating Income

Our consolidated operating income for the three months ended July 1, 2011 increased by $16.0 million or 11.9% compared with the three months ended July 2, 2010. As a percentage of revenues, operating income was 6.4% for the three months ended July 1, 2011 compared to 6.0% for the three months ended July 2, 2010.

Our consolidated operating income for the six months ended July 1, 2011 increased by $22.8 million or 8.8% compared with the six months ended July 2, 2010. As a percentage of revenues, operating income was 6.0% for the six months ended July 1, 2011 compared to 5.8% for the six months ended July 2, 2010.

The increase in operating income was due to various factors, including increases in revenues and equity in income of unconsolidated joint ventures described above. See the detailed discussion in operating income by segment below.

The Infrastructure & Environment business’ operating income for the three months ended July 1, 2011 decreased by $0.3 million or 0.5% compared with the three months ended July 2, 2010. The decrease in operating income was caused by increases in the use of subcontractors and purchase of project-related material that provide lower profit margins than activities performed directly by our employees. In addition, slow economic activity and systems integration-related costs in the U.K., led to an increase in overhead costs as a percentage of revenues (excluding acquisition-related expenses) from 32.5% to 34.2% for the three months ended July 2, 2010 and July 1, 2011, respectively. These decreases were partially offset by a reduction in acquisition expenses of $4.1 million that we incurred during the corresponding period last year related to our acquisition of Scott Wilson. Operating income as a percentage of revenues was 5.8% for the three months ended July 1, 2011 compared to 7.3% for the three months ended July 2, 2010.

The Infrastructure & Environment business’ operating income for the six months ended July 1, 2011 increased by $4.0 million or 3.8% compared with the six months ended July 2, 2010. The increase in operating income was caused primarily by the increase in revenues previously described. In addition, there was a reduction in acquisition expenses of $4.1 million that we incurred during the corresponding period last year related to our acquisition of Scott Wilson. These increases were partially offset by slow economic activity and systems integration-related costs in the U.K. which led to an increase in overhead costs as a percentage of revenues (excluding acquisition-related expenses) from 32.7% to 33.8% for the six months ended July 2, 2010 and July 1, 2011, respectively. Operating income as a percentage of revenues was 6.0% for the six months ended July 1, 2011 compared to 6.9% for the six months ended July 2, 2010.

The Federal Service business’ operating income for the three months ended July 1, 2011 increased by $8.2 million or 21.8% compared with the three months ended July 2, 2010. The increase in operating income was caused primarily by a $21.5 million performance-based incentive fee earned on a contract. The increase was partially offset by delayed contract awards and lower revenues from military support activities in the Middle East. Operating income as a percentage of revenues was 6.9% for the three months ended July 1, 2011 compared to 5.8% for the three months ended July 2, 2010.

The Federal Service business’ operating income for the six months ended July 1, 2011 increased by $8.2 million or 11.2% compared with the six months ended July 2, 2010. Although revenues declined during the six months ended July 1, 2011 compared with the corresponding period in the prior year, operating income increased. The increase was caused primarily by a $21.5 million performance-based incentive fee earned on a contract. The increase was partially offset by delayed contract awards and lower revenues from military support activities in the Middle East. Operating income as a percentage of revenues was 6.5% for the six months ended July 1, 2011 compared to 5.7% for the six months ended July 2, 2010.

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The Energy & Construction business’ operating income for the three months ended July 1, 2011 increased by $13.8 million or 24.8% compared with the three months ended July 2, 2010. As a percentage of revenues, operating income was 8.6% for the three months ended July 1, 2011 compared to 6.5% for the three months ended July 2, 2010. The increase in operating income was primarily due to:

·	an $11.1 million increase resulting from favorable contract negotiations on a levee construction project;

·	a $9.5 million increase resulting from a claim settlement on a Southern California highway project; and

·	an $8.9 million increase resulting from higher earnings on our nuclear maintenance, operations and clean-up projects in the U.K.

These increases were partially offset by:

·	a $7.2 million decrease from a DOE nuclear clean-up project, at which we recognized a favorable change order settlement in the comparable period in fiscal year 2010;

·	a $5.7 million decrease due to a higher loss recorded in the current year compared to the prior year on a common sulfur project; and

·	a $2.2 million charge recorded in the current quarter on a DOE deactivation, demolition and removal project.

The Energy & Construction business’ operating income for the six months ended July 1, 2011 increased $18.6 million or 16.3% compared with the six months ended July 2, 2010. As a percentage of revenues, operating income was 7.9% for the six months ended July 1, 2011 compared to 6.8% for the six months ended July 2, 2010. The increase in operating income was primarily due to:

·	a $19.7 million increase resulting from cost savings on an air quality control services project;

·	a $19.4 million increase resulting from higher earnings on two nuclear maintenance, operations and clean-up projects in the U.K.;

·	a $10.0 million net increase resulting from favorable contract negotiations on a levee construction project; and

·	a $9.5 million increase resulting from a claim settlement on a Southern California highway project.

These increases were partially offset by:

·	an $11.8 million decrease due to a higher loss recorded in the current year compared to the prior year on a common sulfur project;

·	a $10.0 million decrease due to a one-time schedule incentive recognized in the six months ended July 2, 2010 on a clean air project;

·	a $9.2 million decrease due to a decrease in major component replacement projects performed at nuclear power plants; and

·	a $4.2 million charge recorded in the current year on a DOE deactivation, demolition and removal project.

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Interest Expense

Our consolidated interest expense remained the same for both the three months ended July 1, 2011 and the three months ended July 2, 2010. Our consolidated interest expense for the six months ended July 1, 2011 decreased by $4.2 million or 29.2% compared with the six months ended July 2, 2010. This decrease was primarily due to lower debt balances in fiscal 2011 and was partially offset by adjustments to interest expense related to our uncertain tax positions in 2010.

Income Tax Expense

The reconciliation of our income tax expense and effective income tax rates for the six months ended July 1, 2011 and July 2, 2010 is as follows:

	Six Months Ended
	July 1, 2011			July 2, 2010
(In millions, except for percentages)	Amount		Tax Rate	Amount		Tax Rate
U.S. statutory rate applied to income before taxes	$	95.3	35.0%	$	85.9	35.0%
State taxes, net of federal benefit		11.8	4.4%		11.3	4.6%
Change in indefinite reinvestment assertion		—	—		(61.8)	(25.2%)
Adjustments to valuation allowances		7.0	2.5%		9.6	3.9%
Adjustments related to changing foreign tax credits to deductions		—	—		13.6	5.6%
Foreign income taxed at rates other than 35%		(15.2)	(5.6%)		(7.9)	(3.2%)
Other adjustments		—	—		1.8	0.7%
Total income tax expense	$	98.9	36.3%	$	52.5	21.4%

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LIQUIDITY AND CAPITAL RESOURCES

	Six Months Ended
	July 1,				July 2,
(In millions)	2011				2010
Cash flows from operating activities		$	262.9			$	120.1
Cash flows from investing activities			(320.2	)			30.8
Cash flows from financing activities			(82.7	)			(82.4	)

Overview

During the six months ended July 1, 2011, our primary sources of liquidity were collections of accounts receivable from our clients, dividends from our unconsolidated joint ventures and borrowings from lines of credit. Our primary uses of cash were to fund business acquisitions, working capital, income tax payments, and capital expenditures; to service our debt; to repurchase our common stock; and to make distributions to the noncontrolling interests in our consolidated joint ventures.

Our cash flows from operations are primarily impacted by fluctuations in working capital, 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 July 1, 2011 and December 31, 2010, restricted cash was $28.3 million and $28.0 million, respectively, which amounts were included in “Other current assets” on our Condensed Consolidated Balance Sheets. As of July 1, 2011 and December 31, 2010, cash and cash equivalents included $147.0 million and $85.6 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 sources 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 July 1, 2011 and December 31, 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 July 1, 2011 and December 31, 2010, our receivable allowances represented 1.79% and 1.89%, 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 July 1, 2011 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 July 1, 2011 and December 31, 2010 were $319.0 million and $275.8 million, respectively.

We use Days Sales Outstanding (“DSO”) to monitor the average time, in days, that it takes us to convert our accounts receivable into cash. DSO also is a useful tool for investors to measure our liquidity and understand our average collection period. We calculate DSO by dividing net accounts receivable less billings in excess of costs and accrued earnings on contracts as of the end of the quarter 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 decreased from 74 days as of December 31, 2010 to 72 days as of July 1, 2011, 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 15, “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.

We expect to refinance the outstanding debt balances under our Senior Secured Credit Facility (“2007 Credit Facility”) within the next twelve months.

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Operating Activities

The increase in cash flows from operating activities for the six months ended July 1, 2011, compared to the six months ended July 2, 2010, was primarily due to the timing of payments from clients on accounts receivable, project performance payments, and vendor and subcontractor payments. The increase was partially offset by higher income tax payments and higher defined benefit plan contributions.

Investing Activities

Cash flows used for investing activities of $320.2 million during the six months ended July 1, 2011 consisted of the following significant activities:

·	payments for business acquisitions, net of cash acquired, and for exercised shares in connection with a prior business acquisition, of $278.8 million;

·	capital expenditures, excluding purchases financed through capital leases and equipment notes, of $31.3 million; and

·	disbursements related to advances to unconsolidated joint ventures of $12.0 million.

Cash flows generated from investing activities of $30.8 million during the six months ended July 2, 2010 consisted of the following significant activities:

·	maturity of short-term investments of $30.2 million;

·	consolidation of joint ventures, which resulted in a $20.7 million increase to the cash balance at the beginning of our fiscal year 2010; and

·	partially offset by capital expenditures, excluding purchases financed through capital leases and equipment notes, of $18.8 million.

For the remainder of fiscal year 2011, we expect to incur approximately $25 million in capital expenditures, a portion of which will be financed through capital leases or equipment notes.

Financing Activities

Cash flows used for financing activities of $82.7 million during the six months ended July 1, 2011 consisted of the following significant activities:

·	repurchases of our common stock of $136.7 million;

·	net borrowing from revolving line of credit of $50.0 million;

·	net borrowings under lines of credit and short-term notes of $5.8 million;

·	net change in overdrafts of $32.3 million; and

·	distributions to noncontrolling interests of $38.6 million.

Cash flows used for financing activities of $82.4 million during the six months ended July 2, 2010 consisted of the following significant activities:

·	repurchases of our common stock of $48.4 million; and

·	distributions to noncontrolling interests of $40.0 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 July 1, 2011:

Contractual Obligations	Payments and Commitments Due by Period
(Debt payments include principal only)			Less Than						After
(In millions)	Total		1 Year		1-3 Years		4-5 Years		5 Years		Other
As of July 1, 2011:
2007 Credit Facility (1)	$	625.0	$	297.5	$	327.5	$	—	$	—	$	—
Revolving line of credit		50.0		—		50.0		—		—		—
Capital lease obligations (1)		18.6		7.3		7.4		3.7		0.2		—
Notes payable, foreign credit lines and other indebtedness		67.9		59.4		6.4		2.1		—		—
Total debt		761.5		364.2		391.3		5.8		0.2		—
Operating lease obligations (2)		619.9		150.9		220.7		135.0		113.3		—
Pension and other retirement plans funding requirements (3)		461.6		71.8		71.8		80.1		237.9		—
Interest (4)		18.0		11.3		6.2		0.5		—		—
Purchase obligations (5)		17.6		7.6		10.0		—		—		—
Asset retirement obligations (6)		4.7		1.7		2.3		0.2		0.5		—
Other contractual obligations (7)		34.8		11.1		—		—		—		23.7
Total contractual obligations	$	1,918.1	$	618.6	$	702.3	$	221.6	$	351.9	$	23.7

(1)	Amounts shown exclude unamortized debt issuance costs of $3.8 million for the 2007 Credit Facility. For capital lease obligations, amounts shown exclude interest of $1.4 million.

(2)	Operating leases are predominantly real estate leases.

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

(4)	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.

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

(6)	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.

(7)

Other contractual obligations include net liabilities for anticipated settlements and interest under our tax liabilities, accrued benefit for our executives pursuant to their employment agreements, and our contractual obligations to joint ventures. Generally, it is not practicable to forecast or estimate the payment dates for the above-mentioned tax liabilities. Therefore, we included the estimated liabilities under 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 and bank guarantees are used primarily to support project performance, insurance programs, bonding arrangements and real estate leases. We are required to reimburse the issuers of letters of credit and bank guarantees for any payments they make under the outstanding letters of credit or bank guarantees. Our 2007 Credit Facility and our international credit facilities cover the issuance of our standby letters of credit and bank guarantees and are critical for our normal operations. If we default on the 2007 Credit Facility or international credit facilities, our ability to issue or renew standby letters of credit and bank guarantees would impair our ability to maintain normal operations. As of July 1, 2011, we had $119.6 million in standby letters of credit outstanding under our 2007 Credit Facility and $34.9 million in bank guarantees outstanding under foreign credit facilities and other banking arrangements.

·	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 July 1, 2011.

·	We have guaranteed several of our foreign credit facilities and bank guarantee lines. The aggregate amount of these guarantees was $22.6 million as of July 1, 2011.

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

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

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

Under the terms of our 2007 Credit Facility, our next scheduled payment is expected to be due in March 2012. As of July 1, 2011, our consolidated leverage ratio was 1.1, which did not exceed the maximum consolidated leverage ratio of 2.0, and our consolidated interest coverage ratio was 33.3, which exceeded the minimum consolidated interest coverage ratio of 5.5. We were in compliance with the covenants of our 2007 Credit Facility as of July 1, 2011. We intend to refinance our 2007 Credit Facility within the next 12 months.

Revolving Line of Credit

Other Indebtedness

Notes payable, five-year loan notes (“Loan Notes”), and foreign credit lines. As of July 1, 2011 and December 31, 2010, we had outstanding amounts of $67.9 million and $62.8 million, respectively, in notes payable, Loan Notes and foreign lines of credit. The weighted-average interest rates of the notes payable were approximately 2.28% and 2.32% as of July 1, 2011 and December 31, 2010, respectively. Notes payable primarily include notes used to finance the purchase of office equipment, computer equipment and furniture. Loan Notes were issued to shareholders of Scott Wilson as an alternative to cash consideration in connection with our acquisition of Scott Wilson in September 2010.

As of July 1, 2011 and December 31, 2010, we had $62.2 million and $62.8 million in lines of credit available under these facilities, respectively. As of July 1, 2011 and December 31, 2010, the total outstanding debt balance of our foreign credit lines was $26.5 million and $16.1 million, respectively.

Operating Leases. As of July 1, 2011 and December 31, 2010, we had obligations under our operating leases of approximately $619.9 million and $600.3 million, respectively, consisting primarily of real estate leases.

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, as amended, for the year ended December 31, 2010. There were no material changes to these critical accounting policies during the six months ended July 1, 2011.

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ADOPTED AND OTHER RECENTLY ISSUED ACCOUNTING STANDARDS

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. Based on the outstanding indebtedness of $625.0 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 by approximately $3.1 million. As market rates are at historically low levels, the index rate used to calculate our interest expense cannot drop by the full 1% as our current variable index is 0.19%, which would lower our net-of-tax interest expense by approximately $0.6 million. This analysis is computed taking into account the current outstanding balances of our 2007 Credit Facility, assumed interest rates and current debt payment schedule. The result of this analysis would change if the underlying assumptions were modified.

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 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 of $5.6 million and a foreign currency translation loss of $7.6 million for the three months ended July 1, 2011 and July 2, 2010, respectively. We had a foreign currency translation gain of $18.7 million and a foreign currency translation loss of $6.4 million for the six months ended July 1, 2011 and July 2, 2010, respectively.

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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

There were no changes in our internal control over financial reporting during the quarter ended July 1, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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 15, “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 has resulted and may continue to result in delaying, curtailing or canceling proposed and existing projects. In fiscal years 2010 and 2011, our clients were affected by the weak economic conditions caused by the declines in the global overall economy and constraints in the credit market. As a result, some clients delayed, curtailed or cancelled proposed and existing projects and may continue to do so. For example, as of July 1, 2011, our book of business declined compared to the end of our fiscal year 2010, particularly in our backlog from our federal market sector. 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, particularly in light of the recent downgrade by Standard & Poor's of U.S. sovereign debt. Also, our clients may demand more favorable pricing terms and find it increasingly difficult to timely pay invoices for our services, which would impact our future cash flows and liquidity. In addition, any rapid changes in the prices of commodities make it difficult for our clients and us to forecast future capital expenditures. Inflation or significant changes in interest rates could reduce the demand for our services. Any inability to timely collect our invoices may lead to an increase in our accounts receivables and potentially to increased write-offs of uncollectible invoices. If the economy remains weak or uncertain, or client spending declines further, then our revenues, book of business, net income and overall financial condition could deteriorate.

The recently approved federal debt ceiling legislation and past inaction by the federal government could significantly delay payment or reduce government demand for the services we provide.

On August 2, 2011, the federal government approved an increase of the federal debt ceiling that allows it to continue to meet its obligations and debts. We, however, do not know whether past inaction by the federal government leading up to the recently approved legislation will result in significant delays in the timely billing and collection of our contractual payments. Our federal contracts typically require us to continue to perform the contract even if the federal government is unable to make timely payments. Otherwise, we may risk a termination for default. In addition, we do not know whether the recently approved federal debt ceiling legislation will significantly impact future government expenditure and demand for the services we provide. Any significant reduction in federal government expenditures or significant delays in the timely payment of billings may have a material adverse effect on our financial condition and results of operation.

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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”). As of July 1, 2011, our book of business was estimated at approximately $28.7 billion, which included $16.1 billion of our backlog. Our book of business estimates may not result in realized profits and revenues in any particular period because clients may delay, modify terms or terminate projects and contracts and may decide not to exercise contract options or issue task orders. This uncertainty is particularly acute in light of current economic conditions as the risk of contracts in backlog being delayed 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; failure to comply with any of these laws and regulations could result in sanctions, contract termination, forfeiture of profit, harm to our reputation or loss of our status as an eligible government contractor. Any interruption or termination of our government contractor status 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 48% of our total revenues for the six months ended July 1, 2011. 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, export controls rules 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.

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.

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Employee, agent or partner misconduct or failure to comply with anti-bribery and other government laws and regulations could harm our reputation, reduce our revenues and profits, and subject us to criminal and civil enforcement actions.

Misconduct, fraud, non-compliance with applicable laws and regulations, or other improper activities by one of our employees, agents or partners could have a significant negative impact on our business and reputation. Such misconduct could include the failure to comply with government procurement regulations, regulations regarding the protection of classified information, regulations prohibiting bribery and other foreign corrupt practices, regulations regarding the pricing of labor and other costs in government contracts, regulations on lobbying or similar activities, regulations pertaining to the internal controls over financial reporting, environmental laws and any other applicable laws or regulations. For example, the United States Foreign Corrupt Practices Act and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to foreign officials for the purpose of obtaining or retaining business. In addition, we regularly provide services that may be highly sensitive or that relate to critical national security matters; if a security breach were to occur, our ability to procure future government contracts could be severely limited.

Our policies mandate compliance with these regulations and laws, and we take precautions intended to prevent and detect misconduct. However, since our internal controls are subject to inherent limitations, including human error, it is possible that these controls could be intentionally circumvented or become inadequate because of changed conditions. As a result, we cannot assure that our controls will protect us from reckless or criminal acts committed by our employees and agents. Failure to comply with applicable laws or regulations or acts of misconduct could subject us to fines and penalties, loss of security clearances, and suspension or debarment from contracting, any or all of which could harm our reputation, reduce our revenues and profits and subject us to criminal and civil enforcement actions.

Legal proceedings, investigations and disputes could result in substantial monetary penalties and damages, which could affect us adversely, especially if these penalties and damages exceed or are excluded from existing insurance coverage.

We engage in engineering, construction and technical services that can result in substantial injury or damages that may expose us to legal proceedings, investigations and disputes. For example, in the ordinary course of our business, we may be involved in legal disputes regarding personal injury and wrongful death claims, employee or labor disputes, professional liability claims, and general commercial disputes involving project cost overruns and liquidated damages as well as other claims. See Note 15, “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. Generally, our insurance program covers workers’ compensation and employer’s liability, general liability, automobile liability, professional errors and omissions liability, property, marine property and liability, and contractor’s pollution liability (in addition to other policies for specific projects). Our insurance program includes deductibles or self-insured retentions for each covered claim. In addition, our insurance policies contain exclusions and sublimits that insurance providers may use to deny us insurance coverage. Excess liability, contractor’s pollution liability, and professional liability insurance policies provide for coverages on a “claims-made” basis, covering only claims actually made and reported during the policy period currently in effect. If we sustain liabilities that exceed our insurance coverage or for which we are not insured, it could have a material adverse impact on our results of operations and financial condition, including our profits and revenues.

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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 cleanup 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.

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Our failure to conduct due diligence effectively or our inability to integrate acquisitions successfully 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. If we fail to conduct due diligence on our potential targets effectively, we may, for example, not identify problems at target companies or fail to recognize incompatibilities or other obstacles to successful integration. Our inability to successfully integrate future acquisitions could 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. The difficulties of integrating an acquisition include, among others:

·	unanticipated issues in integrating information, communications and other systems;

·	unanticipated incompatibility of logistics, marketing and administration methods;

·	maintaining employee morale and retaining key employees;

·	integrating the business cultures of both companies;

·	preserving important strategic and customer relationships;

·	consolidating corporate and administrative infrastructures and eliminating duplicative operations;

·	the diversion of management’s attention from ongoing business concerns; and

·	integrating geographically separate organizations.

In addition, even if the operations of an acquisition are integrated successfully, we may not realize the full benefits of the acquisition, including the synergies, cost savings, or sales or growth opportunities that we expect. These benefits may not be achieved within the anticipated time frame, or at all.

Our inability to win or renew government contracts during regulated procurement processes could harm our operations and reduce our profits and revenues.

Revenues from our federal market sector represented approximately 48% of our total revenues for the six months ended July 1, 2011. 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. 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. The outcome of ongoing political debate in Congress regarding cuts to government spending could result in reductions in the funding proposed by the Administration for infrastructure, defense-related or other projects. The new legislation passed in August 2011 includes significant reductions in federal government spending over a ten-year period. Similarly, the impact of the economic downturn on state and local governments may make it more difficult for them to fund infrastructure projects. In addition to the state of the economy and competing political priorities, public funds and the timing of payment of these funds may also be influenced by, among other things, curtailments in the use of government contractors, a rise in the cost of raw materials, delays associated with a lack of a sufficient number of government staff to oversee contracts, budget constraints, the timing and amount of tax receipts and the overall level of government expenditures. If adequate public funding is not available or is delayed, then our profits and revenues could decline.

Our government contracts may give government agencies the right to modify, delay, curtail, renegotiate or terminate existing contracts at their convenience at any time prior to their completion, which may result in a decline in our profits and revenues.

Government projects in which we participate as a contractor or subcontractor may extend for several years. Generally, government contracts include the right for government agencies to modify, delay, curtail, renegotiate or terminate contracts and subcontracts at their convenience any time prior to their completion. Any decision by a government client to modify, delay, curtail, renegotiate or terminate our contracts at their convenience may result in a decline in our profits and revenues.

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, which affect the reported values of assets and liabilities, revenues and expenses, and disclosures of contingent assets and liabilities. For example, we may recognize revenue over the life of a contract based on the proportion of costs incurred to date compared to the total costs estimated to be incurred for the entire project. Areas requiring significant estimates by our management include:

·	the application of the percentage-of-completion method of revenue recognition on contracts, change orders and contract claims;

·	provisions for uncollectible receivables and customer claims and recoveries of costs from subcontractors, vendors and others;

·	provisions for income taxes and related valuation allowances;

·	impairment of goodwill and recoverability of other intangible assets;

·	valuation of assets acquired and liabilities assumed in connection with business combinations;

·	valuation of defined benefit pension plans and other employee benefit plans;

·	valuation of stock-based compensation expense; and

·	accruals for estimated liabilities, including litigation and insurance reserves.

Our actual business and financial results could differ from those estimates, which may reduce our profits.

Our profitability could suffer if we are not able to maintain adequate utilization of our workforce.

The cost of providing our services, including the extent to which we utilize our workforce, affects our profitability. The rate at which we utilize our workforce is affected by a number of factors, including:

·	our ability to transition employees from completed projects to new assignments and to hire and assimilate new employees;

·	our ability to forecast demand for our services and thereby maintain an appropriate headcount in each of our geographies and workforces;

·	our ability to manage attrition;

·	our need to devote time and resources to training, business development, professional development and other non-chargeable activities; and

·	our ability to match the skill sets of our employees to the needs of the marketplace.

If we overutilize our workforce, our employees may become disengaged, which will impact employee attrition. If we underutilize our workforce, our profit margin and profitability could suffer.

Our use of the percentage-of-completion method of revenue recognition could result in a reduction or reversal of previously recorded revenues and profits.

A substantial portion of our revenues and profits are measured and recognized using the percentage-of-completion method of revenue recognition. Our use of this accounting method results in recognition of revenues and profits ratably over the life of a contract, based generally on the proportion of costs incurred to date to total costs expected to be incurred for the entire project. The effects of revisions to revenues and estimated costs are recorded when the amounts are known or can be reasonably estimated. Such revisions could occur in any period and their effects could be material. Although we have historically made reasonably reliable estimates of the progress towards completion of long-term engineering, program management, construction management or construction contracts, the uncertainties inherent in the estimating process make it possible for actual costs to vary materially from estimates, including reductions or reversals of previously recorded revenues and profits.

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Our failure to successfully bid on new contracts and renew existing contracts could reduce our profits.

Our business depends on our ability to successfully bid on new contracts and renew existing contracts with private and public sector clients. Contract proposals and negotiations are complex and frequently involve a lengthy bidding and selection process, which are affected by a number of factors, such as market conditions, financing arrangements and required governmental approvals. For example, a client may require us to provide a surety bond or letter of credit to protect the client should we fail to perform under the terms of the contract. If negative market conditions arise, or if we fail to secure adequate financial arrangements or the required governmental approval, we may not be able to pursue particular projects, which could adversely reduce or eliminate our profitability.

If we fail to timely complete, miss a required performance standard or otherwise fail to adequately perform on a project, then we may incur a loss on that project, which may reduce or eliminate our overall profitability and harm our reputation.

We may commit to a client that we will complete a project by a scheduled date. We may also commit that a project, when completed, will achieve specified performance standards. If the project is not completed by the scheduled date or fails to meet required performance standards, we may either incur significant additional costs or be held responsible for the costs incurred by the client to rectify damages due to late completion or failure to achieve the required performance standards. In addition, performance of projects can be affected by a number of factors beyond our control, including unavoidable delays from governmental inaction, public opposition, inability to obtain financing, weather conditions, unavailability of vendor materials, changes in the project scope of services requested by our clients, industrial accidents, environmental hazards, labor disruptions and other factors. In some cases, should we fail to meet required performance standards, we may also be subject to agreed-upon financial damages, which are determined by the contract. To the extent that these events occur, the total costs of the project could exceed our estimates and we could experience reduced profits or, in some cases, incur a loss on a project, which may reduce or eliminate our overall profitability. Failure to meet performance standards or complete performance on a timely basis could also adversely affect our reputation.

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

If our partners fail to perform their contractual obligations on a project, we could be exposed to substantial joint and several liability and financial penalties that could reduce our profits and revenues.

We often partner with unaffiliated third parties, individually or via a joint venture, to jointly bid on and perform a particular project. For example, for the six months ended July 1, 2011, our equity in income of unconsolidated joint ventures amounted to $76.0 million. The success of our partnerships and joint ventures depends, in large part, on the satisfactory performance of contractual obligations by each member. In addition, when we operate through a joint venture in which we are a minority holder, we have limited control over many project decisions, including decisions related to the joint venture’s internal controls, which may not be subject to the same internal control procedures that we employ. If these unaffiliated third parties do not fulfill their contract obligations, the partnerships or joint ventures may be unable to adequately perform and deliver their contracted services. Under these circumstances, we may be obligated to pay financial penalties, provide additional services to ensure the adequate performance and delivery of the contracted services and may be jointly and severally liable for the other’s actions or contract performance. These additional obligations could result in reduced profits and revenues or, in some cases, significant losses for us with respect to the joint venture, which could also affect our reputation in the industries we serve.

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Our dependence on third-party subcontractors and equipment and material providers could reduce our profits or result in project losses.

We rely on third-party subcontractors and equipment and material providers. For example, we procure heavy equipment and construction materials as needed when performing large construction and contract mining projects. To the extent that we cannot engage subcontractors or acquire equipment and materials at reasonable costs or if the amount we are required to pay exceeds our estimates, our ability to complete a project in a timely fashion or at a profit may be impaired. In addition, if a subcontractor or a manufacturer is unable to deliver its services, equipment or materials according to the negotiated terms for any reason, including the deterioration of its financial condition, we may be required to purchase the services, equipment or materials from another source at a higher price. This may reduce the profit to be realized or result in a loss on a project for which the services, equipment or materials are needed.

If we experience delays and/or defaults in client payments, we could suffer liquidity problems or we may be unable to recover all working capital or equity investments.

Because of the nature of our contracts, at times we may commit resources to a client’s projects before receiving payments to cover our expenditures. Sometimes, we incur and record expenditures for a client project before receiving any payment to cover our expenses. In addition, we may make equity investments in majority or minority controlled large-scale client projects and other long-term capital projects before the project completes operational status or completes its project financing. If a client is delayed or defaults in making its payments on a project, it could have an adverse effect on our financial position and cash flows and we could incur losses, including in our working capital or equity investments.

Our failure to adequately recover on claims brought by us against project owners for additional contract costs could have a negative impact on our liquidity and profitability.

We have brought claims against project owners for additional costs exceeding the contract price or for amounts not included in the original contract price. These types of claims occur due to matters such as owner-caused delays or changes from the initial project scope, both of which may result in additional cost. Often, these claims can be the subject of lengthy arbitration or litigation proceedings, and it is difficult to accurately predict when these claims will be fully resolved. When these types of events occur and unresolved claims are pending, we have used working capital in projects to cover cost overruns pending the resolution of the relevant claims. A failure to promptly recover on these types of claims could have a negative impact on our liquidity and profitability.

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 losses of approximately $107.1 million as of July 1, 2011. If a project is significant, or if there are one or more common issues that impact multiple projects, costs overruns could increase the unpredictability and volatility of our earnings as well as have a material adverse impact on our business and earnings.

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Maintaining adequate bonding capacity is necessary for us to successfully bid on and win fixed-price contracts.

In line with industry practice, we are often required to provide performance or payment bonds to clients under fixed-price contracts. These bonds indemnify the client should we fail to perform our obligations under the contract. If a bond is required for a particular project and we are unable to obtain an appropriate bond, we cannot pursue that project. We have bonding capacity but, as is typically the case, the issuance of a bond is at the surety’s sole discretion. Moreover, due to events that affect the insurance and bonding markets generally, bonding may be more difficult to obtain in the future or may only be available at significantly higher costs. There can be no assurance that our bonding capacity will continue to be available to us on reasonable terms. Our inability to obtain adequate bonding and, as a result, to bid on new fixed-price contracts could have a material adverse effect on our business, financial condition, results of operations and cash flows.

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.

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 in part through acquisitions, goodwill and other intangible assets represent a substantial portion of our assets. Goodwill and other net intangible assets were $4.2 billion as of July 1, 2011. 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 the intangible asset’s market value, useful life, or in the business climate that could affect its value; ii) a current-period operating or cash flow loss or a projection or forecast that demonstrates continuing losses associated with the use of the intangible asset; and 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, the July 2011 issuance of the Cross-State Air Pollution Rules is expected to increase demand for our air quality and emissions control services. 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.

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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 our client’s refusal to retain us, by our inability to obtain commercially adequate insurance and indemnification, or by significant monetary damages.

If our reports and opinions are not in compliance with professional standards and other regulations, we could be subject to monetary damages and penalties.

We issue reports and opinions to clients based on our professional engineering expertise, as well as our other professional credentials. Our reports and opinions may need to comply with professional standards, licensing requirements, securities regulations and other laws and rules governing the performance of professional services in the jurisdiction where the services are performed. In addition, we could be liable to third parties who use or rely upon our reports or opinions even if we are not contractually bound to those third parties. For example, if we deliver an inaccurate report or one that is not in compliance with the relevant standards, and that report is made available to a third party, we could be subject to third-party liability resulting in monetary damages and penalties.

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

Revenues from our federal market sector represented 48% of our total revenues and contracts, of which the DOD and other defense-related clients represented approximately 28% of our total revenues for the six months ended July 1, 2011. The new legislation passed in August 2011 includes significant reductions in federal government spending over a ten-year period. 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. engineering design firms accounted only for approximately 41% of the total top 500 U.S. design firm revenues in 2010. The top 25 U.S. contractors accounted for approximately 50% of the top 400 U.S. contractors’ total 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 to identify, hire and integrate new employees. In addition, the failure to attract and retain key individuals could impair our ability to provide services to our clients and conduct our business effectively.

We may be required to contribute additional cash to meet any underfunded benefit obligations associated with retirement and post-retirement benefit plans we manage or multi-employer pension plans we participate in.

We have various employee benefit plan obligations that require us to make contributions to satisfy, over time, our underfunded benefit obligations, which are generally determined by calculating the projected benefit obligations minus the fair value of plan assets. For example, as of December 31, 2010, our defined benefit pension and post-retirement benefit plans were projected to be underfunded by $254.1 million. See Note 12, “Employee Retirement and Post-Retirement Benefit Plans,” to our “Condensed Consolidated Financial Statements” included under Part I – Item 1 for additional disclosure. This amount does not include any potential obligations we may owe under a multi-employer plan. In the future, our benefit plan obligations may increase or decrease depending on changes in the levels of interest rates, pension plan asset performance and other factors. If we are required to contribute a significant amount of the deficit for underfunded benefit plans, our cash flows could be materially and adversely affected.

A multi-employer pension plan is typically established under a collective bargaining agreement with a union to cover the union-represented workers of various unrelated companies. Our collective bargaining agreements with unions typically require us to contribute to many multi-employer pension plans. For the year ended December 31, 2010, we contributed approximately $46.5 million to participate in multi-employer pension plans. Under the Employee Retirement Income Security Act, an employer who contributes to a multi-employer pension plan, absent an applicable exemption, may also be liable, upon termination or withdrawal from the plan, for its proportionate share of the multi-employer pension plan’s unfunded vested benefit. If we terminate or withdraw from a multi-employer plan, absent an applicable exemption (such as for some plans in the building and construction industry), we could be required to contribute a significant amount of cash to fund that plan’s unfunded vested benefit, which could materially and adversely affect our financial results. However, we are unable to estimate any potential amounts, if any.

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

As of July 1, 2011, our outstanding balance under the 2007 Credit Facility was $625.0 million. Our next scheduled payment of $105.0 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.

We expect to refinance our 2007 Credit Facility within twelve months, which is prior to its earliest maturity date. Depending on variables that impact the overall credit markets, we may not be able to refinance our 2007 Credit Facility at rates and on terms that are favorable to us.

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 URS Corporation is a holding company, it may not be able to service its debt if its subsidiaries do not make sufficient distributions to it.

URS Corporation has no direct operations and no significant assets other than investments in the stock of its subsidiaries. Because it conducts its business operations through its operating subsidiaries, it depends on those entities for payments and dividends to generate the funds necessary to meet its financial obligations. Legal restrictions, including state and local tax regulations and other contractual obligations could restrict or impair its subsidiaries’ ability to pay dividends or make loans or other distributions to it. The earnings from, or other available assets of, these operating subsidiaries may not be sufficient to make distributions to enable it to pay interest on its 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 13% of our revenues from international operations for the six months ended July 1, 2011. 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;

·	foreign currency exchange volatility;

·	uncertain and changing tax rules, regulations and rates;

·	logistical and communication challenges;

·	potentially adverse changes in laws and regulatory practices;

·	changes in labor conditions;

·	general economic, political and financial conditions in foreign markets; and

·	exposure to civil or criminal liability under the Foreign Corrupt Practices Act, anti-boycott rules, trade and export control regulations, and the Corporate Manslaughter and Corporate Homicide Act as well as other international regulations.

International risks and violations of international regulations may significantly reduce our profits and revenues and subject us to criminal or civil enforcement actions, including fines, suspensions or disqualification from future U.S. federal procurement contracting. Although we have policies and procedures to monitor legal and regulatory compliance, our employees, subcontractors and agents could take actions that violate these requirements. As a result, our international risk exposure may be more or less than the percentage of revenues attributed to our international operations.

We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act of 2010 and similar worldwide anti-bribery laws.

The U.S. Foreign Corrupt Practices Act and similar anti-bribery laws generally prohibit companies and their intermediaries from making improper payments to foreign government officials for the purpose of obtaining or retaining business. The recently enacted U.K. Bribery Act of 2010 prohibits both domestic and international bribery, as well as bribery across both private and public sectors. In addition, an organization that “fails to prevent bribery” by anyone associated with the organization can be charged under the U.K. Bribery Act unless the organization can establish the defense of having implement “adequate procedures” to prevent bribery. Practices in the local business community of many countries outside the U.S. have a level of government corruption that is greater than that found in the developed world. Our policies mandate compliance with these anti-bribery laws and we have established policies and procedures designed to monitor compliance with these anti-bribery law requirements; however we cannot assure that our policies and procedures will protect us from potential reckless or criminal acts committed by individual employees or agents. If we are found to be liable for anti-bribery law violations we could suffer from criminal or civil penalties or other sanctions that could have a material adverse effect on our business.

We could be adversely impacted if we fail to comply with domestic and international export laws.

To the extent we export technical services, data and products outside of the United States, we are subject to U.S. and international laws and regulations governing international trade and exports, including but not limited to the International Traffic in Arms Regulations, the Export Administration Regulations and trade sanctions against embargoed countries. A failure to comply with these laws and regulations could result in civil or criminal sanctions, including the imposition of fines, the denial of export privileges and suspension or debarment from participation in U.S. government contracts, which could have a material adverse effect on our business.

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Our international operations may require our employees to travel to and work in high security risk countries, which may result in employee death or injury, repatriation costs or other unforeseen costs.

As a multinational company, some of our employees often travel to and work in high security risk countries around the world that are undergoing political, social and economic upheavals resulting in war, civil unrest, criminal activity, acts of terrorism, or public health crises. For example, we have employees working in high security risk countries located in the Middle East and Southwest Asia. As a result, we risk loss of or injury to our employees and may be subject to costs related to employee death or injury, repatriation or other unforeseen circumstances.

We develop, install and maintain information technology systems for ourselves, as well as for various customers. Any breach of security, disruption or unexpected data or vendor loss could result in business interruptions, remediation costs, legal claims and significant damage to our reputation.

We develop, install and maintain information technology systems for ourselves, as well as for customers. For example, our June 2011 acquisition of Apptis significantly increased our network management, software engineering, and information technology infrastructure design services to the DOD and other federal agencies. Client contracts for the performance of IT services, as well as various privacy and securities laws, require us to manage and protect sensitive and confidential information from disclosure. We also need to protect our own internal trade secret and other business-confidential information from disclosure. Regardless of the countermeasures we may establish, we may be subject to network, software or hardware failures, whether caused by us, third-party service providers, intruders or hackers, computer viruses, natural disasters, power shortages or terrorist attacks. Any breach of security, disruption or unexpected data loss could result in business interruptions, remediation costs, legal claims and significant damage to our reputation.

We also rely on third-party internal and outsourced software to run our critical accounting, project management and financial information systems. For example, we rely on one software vendor’s products to process a majority of our total revenues. We also depend on our software vendors to provide long-term software maintenance support for our information systems. Software vendors may decide to discontinue further development, integration or long-term software maintenance support for our information systems, in which case we may need to abandon one or more of our current information systems and migrate some or all of our accounting, project management and financial information to other systems, thus increasing our operational expense, as well as disrupting the management of our business operations.

Force majeure events, including disasters and terrorists’ actions, have negatively impacted and could further negatively impact our business, which may affect our financial condition, results of operations or cash flows.

Force majeure or extraordinary events beyond the control of the contracting parties, such as natural and man-made disasters, as well as terrorist actions, could negatively impact the economies in which we operate. For example, in 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 events, our operations may be affected significantly, which would have a negative impact on our financial condition, results of operations and/or cash flows.

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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 July 1, 2011, approximately 12% 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.

Delaware law and our charter documents may impede or discourage a merger, takeover or other business combination even if the business combination would have been in the best interests of our stockholders.

We are a Delaware corporation and the anti-takeover provisions of Delaware law impose various impediments to the ability of a third party to acquire control of us, even if a change in control would be beneficial to our stockholders. In addition, our Board of Directors has the power, without stockholder approval, to designate the terms of one or more series of preferred stock and issue shares of preferred stock, which could be used defensively if a takeover is threatened. Our incorporation under Delaware law, the ability of our Board of Directors to create and issue a new series of preferred stock and provisions in our certificate of incorporation and bylaws, such as those relating to advance notice of certain stockholder proposals and nominations, could impede a merger, takeover or other business combination involving us or discourage a potential acquirer from making a tender offer for our common stock, even if the business combination would have been in the best interests of our current stockholders.

Our stock price could become more volatile and stockholders’ investments could lose value.

In addition to the macroeconomic factors that have recently affected the prices of many securities generally, all of the factors discussed in this section could affect our stock price. The timing of announcements in the public markets regarding new services or potential problems with the performance of services by us or our competitors or any other material announcements could affect our stock price. Speculation in the media and analyst community, changes in recommendations or earnings estimates by financial analysts, changes in investors’ or analysts’ valuation measures for our stock and market trends unrelated to our stock can cause the price of our stock to change. Continued volatility in the financial markets could also cause further declines in our stock price, which could trigger an impairment of the goodwill of our individual reporting units that could be material to our 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 be a lessee of a 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 months ended July 1, 2011.

Pending

Legal

Action

before

Federal

Mine

Act

Proposed

Act

Safety

Mine Act

§104(d)

Mine Act

Mine

Assessments

§104(e)

and Health

§104

Mine Act

Citations

§110(b)(2)

Act

from MSHA

Mining

Notice

Review

Violations

§104(b)

and

Violations

§107(a)

(In dollars

(yes/no)

Commission

Mine (1)

(2)

Orders (3)

Orders (4)

(5)

Orders (6)

($))

Fatalities

(7)

(yes/no)

Black Thunder Project

100

Monsanto Quarry

Pipestone Quarry

338

(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 second quarter of 2011:

					(c) Total Number	(d) Maximum
					of Shares	Number of Shares
			(b)		Purchased as Part	that May Yet be
		(a) Total Number	Average		of Publicly	Purchased Under
		of Shares	Price Paid		Announced Plans	the Plans or
		Purchased (1)	per Share		or Programs (2)	Programs (2)
		(In millions, except average price paid per share)
April 2, 2011 – April 29, 2011		—	$	—	—	—
April 30, 2011 – May 27, 2011		—		—	—	—
May 28, 2011 – July 1, 2011		—		—	—	5.0
	Total	—			—	5.0

(1)

Reflects purchases of shares previously issued pursuant to awards issued under our equity incentive plans, which allow our employees to surrender shares of our common stock as payment toward the exercise cost and tax withholding obligations associated with the exercise of stock options or the vesting of restricted or deferred stock.

(2)

On February 25, 2011, our Board of Directors authorized an increase in the number of our common shares that we may repurchase in fiscal year 2011 from 3.0 million shares to 8.0 million shares, which was reflected in our third amendment to the 2007 Credit Facility. For fiscal years 2012, 2013 and 2014, the authorized shares under the repurchase program will revert back to 3.0 million shares, plus the number of shares equal to the excess, if any, of the 3.0 million shares over the actual numbers of shares repurchased during the prior year. The repurchase program expires at the end of fiscal 2014. During the six months ended July 1, 2011, we repurchased an aggregate of 3.0 million shares of our common stock.

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.

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				Filing	Filed
Number	Exhibit Description	Form	Exhibit	Date	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	11/9/2008
3.02	Bylaws of URS Corporation as amended on February 26, 2010.	10-Q	3.02	12/5/2010
10.1 *	URS Corporation 2008 Equity Incentive Plan, as amended on May 26, 2011.	8-K	10.1	5/31/2011
10.2 *	Amended and Restated Employment Agreement between URS Corporation, a Nevada corporation and Thomas W. Bishop, dated as of June 1, 2011.				X
10.3 *	Revised Compensatory Arrangement for Robert W. Zaist.				X
31.1	Certification of URS Corporation’s Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				X
31.2	Certification of URS Corporation’s Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				X
32	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.				X#
101.SCH	XBRL Taxonomy Extension Schema Document.				X#
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.				X#
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.				X#
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.				X#
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.				X#

*	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: August 9, 2011	By:	/s/ Reed N. Brimhall
		Reed N. Brimhall
		Vice President, Controller and Chief Accounting Officer

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Exhibit No.		Description
10.2		Amended and Restated Employment Agreement between URS Corporation, a Nevada corporation and Thomas W. Bishop, dated as of June 1, 2011.
10.3		Revised Compensatory Arrangement for Robert W. Zaist.
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.