Exhibit 99.1

Explanatory Note

CH2M HILL Companies, Ltd. and subsidiaries (“We”, “Our”, “CH2M” or the “Company”) is filing this Exhibit 99.1 of our Current Report on Form 8-K to retrospectively revise and reclass certain previously reported financial information included in our Annual Report on Form 10-K for the fiscal year ended December 30, 2016, which was filed with the Securities and Exchange Commission on March 7, 2017 (“Original Filing”), to reflect the subsequent changes in reportable operating segments resulting from the implementation of a new organizational structure and the presentation of our fixed-price Power Engineering-Procurement-Construction (“EPC”) business as discontinued operations.

In the first quarter of 2017, we implemented a new organizational structure to more fully align global operations with our client-centric strategy, resulting in three sectors: National Governments, Private, and State & Local Governments. Each of these sectors has been identified in 2017 as a reportable operating segment. Additionally, the termination on January 24, 2017 of the Australian fixed-price Power EPC contract in the first quarter of 2017 resulted in the substantial completion and discontinuation of our former Power EPC business, which was previously a stand-alone reportable operating segment. As a result, in 2017 the financial position and results of operations from this former segment are reflected within our consolidated financial statements as amounts attributable to discontinued operations and are excluded from the amounts attributable to continuing operations.

As previously disclosed, on August 1, 2017, we entered into an Agreement and Plan of Merger (the “Merger Agreement”), among CH2M, Jacobs Engineering Group Inc. (“Jacobs”) and Basketball Merger Sub Inc., pursuant to which Jacobs has agreed to acquire CH2M, subject to the terms and conditions of the Merger Agreement. As provided in the Merger Agreement, Jacobs is filing a registration statement on Form S-4, which will include a proxy statement of CH2M and a prospectus of Jacobs. The Form S-4 will include and incorporate by reference certain financial information of CH2M and Jacobs, as applicable, based on the combination of CH2M and Jacobs’ historical financial statements.

The rules of the Securities and Exchange Commission require that when a registrant prepares a new registration or proxy statement that includes or incorporates by reference financial statements on or after the date a registrant reports an accounting change such as the changes noted above, the registrant must reissue the prior period financial statements included or incorporated by reference in the registration or proxy statement to retrospectively revise and reclass such pre-event financial statements to reflect these types of changes. Accordingly, we are filing this Exhibit 99.1 of our Current Report on Form 8-K to revise our consolidated balance sheets as of December 30, 2016 and December 25, 2015, and the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the three year period ended December 30, 2016 to reflect the subsequent changes in reportable operating segments and the presentation of discontinued operations as described above. Additionally, we are revising certain related Items within the Original Filing to reflect the subsequent changes in reportable operating segments and the presentation of discontinued operations.

The information included in this Exhibit 99.1 of our Current Report on Form 8-K is presented in connection with the reporting changes described above and does not otherwise amend or restate our audited consolidated financial statements, which were included in our Original Filing. This Current Report does not reflect events occurring after we filed our Original Filing and does not modify or update the disclosures therein in any way, other than to reflect the subsequent changes in reportable operating segments and the presentation of our fixed-price Power EPC business as discontinued operations as described above. Therefore, this Exhibit 99.1 of our Current Report on Form 8-K should be read in conjunction with our other filings made with the Securities and Exchange Commission, including, and subsequent to the date of the Original Filing.

We have revised the following portions of the Original Filing to reflect the revised reportable operating segments and the presentation of discontinued operations:

PART I

Item 1. Business

PART II

Item 6. Selected Financial Data

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

PART IV

Item 15. Exhibits and Financial Statement Schedules

Cautionary Note Regarding Forward Looking Statements

This Current Report on Form 8-K contains various “forward looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward‑ looking statements represent our expectations and beliefs concerning future events, based on information available to us on the date of the filing of our 2016 Annual Report on Form 10-K, as filed on March 7, 2017, updated only to the extent necessary to reflect the retrospective revisions described in the Explanatory Note to this Current Report on Form 8-K, and are subject to various risks and uncertainties. Such forward looking statements are and will be subject to many risks and uncertainties relating to our operations and business environment that may cause actual results to differ materially from any future results expressed or implied in such forward looking statements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Words such as “believes,” “anticipates,” “expects,” “will,” “plans” and similar expressions are intended to identify forward looking statements. Additionally, forward looking statements include statements that do not relate solely to historical facts, such as statements which identify uncertainties or trends, discuss the possible future effects of current known trends or uncertainties, or which indicate that the future effects of known trends or uncertainties cannot be predicted, guaranteed or assured. We undertake no obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events, changed circumstances or otherwise, except as required by applicable law. Factors that could cause actual results to differ materially from those referenced in the forward‑looking statements are listed in Item 1A, Risk Factors in our Annual Report on Form 10-K for the year ended December 30, 2016 and updated in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2017.

PART I

Item 1. Business

Description of the Business

CH2M HILL Companies, Ltd. and subsidiaries (“We”, “Our”, “CH2M” or the “Company”) is a large employee‑controlled professional engineering services firm, founded in 1946, providing engineering, construction, consulting, design, design‑build, procurement, engineering‑procurement‑construction (“EPC”), operations and maintenance, program management and technical services to United States (“U.S.”) federal, state, municipal and local government agencies, national governments, as well as private industry and utilities, around the world. A substantial portion of our professional fees are derived from projects that are funded directly or indirectly by government entities. We have approximately 20,000 employees worldwide inclusive of craft and hourly employees as well as employees in our consolidated joint ventures.

Our strategy is to deliver valued solutions to our chosen clients in selective geographies that align to our core service capabilities. We differentiate through client centricity, our focused approach to developing and delivering innovative solutions, and the values and culture of our firm that are embedded in how we serve our clients and communities. Since our founding in 1946, CH2M has grown through organic growth which has been augmented with acquisitions that expand our portfolio of services and geographic reach to further enhance our value proposition to our clients. We believe this strategy results in deep long-term client relationships, rewarding growth opportunities for our employees and profitable growth for our stockholders long-term. Below is a discussion of our significant developments and key acquisitions occurring over the past five years.

Discontinued Operations

In connection with our 2014 Restructuring Plan, we elected to exit the fixed-price Power EPC business, which was a stand-alone operating segment. We intended to complete our remaining contracted fixed-price Power EPC contracts, the largest of which was a project in Australia through a consolidated joint venture partnership with an Australian construction contractor and a major U.S.-based gas power technology manufacturer (the “Consortium”) to engineer, procure, construct and start-up a combined cycle power plant that will supply power to a large liquefied natural gas facility in Australia. However, on January 24, 2017, the Consortium terminated its contract with its client, JKC Australia LNG Pty (the “Contractor”) on the grounds that the Contractor had by its actions repudiated the contract. As a result of the termination of the contract, we substantially completed all of our operations in the fixed-price Power EPC business, and, therefore, have presented the results of operations, financial position, cash flows and disclosures related to the fixed-price Power EPC business as discontinued operations in our consolidated financial statements.

Preferred Stock Issuance

On June 24, 2015, the Company sold and issued an aggregate of 3,214,400 shares of Series A Preferred Stock for an aggregate purchase price of $200.0 million in a private placement to a subsidiary owned by investment funds affiliated with Apollo Global Management, LLC (together with its subsidiaries, “Apollo”). The sale occurred in connection with the initial closing pursuant to the Subscription Agreement entered into by the Company and Apollo on May 27, 2015 (“Subscription Agreement”). On April 11, 2016, the Company sold and issued an additional 1,607,200 shares of Series A Preferred Stock for an aggregate purchase price of approximately $100.0 million in a second closing to Apollo pursuant to the conditions of the Subscription Agreement.

Restructuring

During the third quarter of 2016, the Company began a process to review the structure and resources within its business segments and formulate a restructuring plan to more fully align global operations with the Company’s client-centric strategy, including a simplified organization structure and streamlined delivery model to achieve higher levels of profitable growth (“2016 Restructuring Plan”). The restructuring activities include such items as workforce reductions and facilities consolidations. We expect the 2016 Restructuring Plan to be completed in the first half of 2017.

In September 2014, the Company commenced certain restructuring activities in order to achieve important business objectives, including reducing overhead costs, improving efficiency, and reducing risk (“2014 Restructuring Plan”). These restructuring activities, which continued into 2015, included such items as a voluntary retirement program, workforce reductions, facilities consolidations and closures, and evaluation of certain lines of business. The restructuring activities under the 2014 Restructuring Plan were substantially complete as of December 25, 2015.

Halcrow Pension Scheme Restructuring

On October 4, 2016, Halcrow Group Limited (“HGL”), a subsidiary of CH2M, effected a transaction to restructure the benefits provided to members of the Halcrow Pension Scheme (“HPS”), a defined benefit plan sponsored by HGL, by providing each member with the option to transfer his or her benefits in the HPS to a new pension scheme, which is also sponsored by HGL (“HPS2”). Alternatively, members had the option to remain in the HPS which will enter the Pension Protection Fund (“PPF”) under a regulated apportionment arrangement. The new scheme, HPS2, provides benefits that are better than the compensation that would otherwise be paid by the PPF if a member chose to join the PPF rather than the HPS2. The PPF was created by the United Kingdom Pensions Act 2004 to provide compensation to members of eligible defined benefit pension schemes when an employer of the scheme can no longer support the pension scheme. A member that transferred to the HPS2 will receive substantially similar benefits to those in the HPS, except that annual increases and revaluation of benefits are reduced to statutory levels. A pension scheme member of the HPS that elected to transfer to the new scheme also received a one-time uplift to benefits of either 1.0% or 2.5%. The Pension Regulator, which is the United Kingdom’s executive body that regulates work-based pension schemes, and the PPF provided necessary regulatory approvals for the transaction to restructure the HPS benefits.

As a result of the transaction described above, HGL ceased to have any further obligations to the HPS on October 4, 2016. All members who consented to transfer to HPS2 were transferred on October 5, 2016. Members who agreed to transfer to the new scheme account for 96.6% of the HPS’ liabilities and a broadly equivalent proportion of the HPS’ assets have transferred to the new scheme, as well as 20% of HGL’s equity issued as part of the transaction. As a result of the restructured benefits for those members transferring to the HPS2, the projected benefit obligation was reduced by $362.3 million. Those members who remained in the HPS began the process of transferring to the PPF during the fourth quarter of 2016 along with the assets that remain in the HPS, as well as 5% of HGL’s equity issued as part of the transaction, resulting in a settlement of $28.4 million and an actuarial gain of $16.2 million within the projected benefit obligation. We did not incur a gain or loss on settlement as a result of the transaction as the settlement cost related to the members who remained in HPS was less than the service and interest cost components of net periodic pension expense for 2016.

Acquisitions

On April 4, 2014, we acquired certain assets and liabilities of TERA Environmental Consultants (“TERA”). TERA was an employee-owned environmental consulting firm headquartered in Canada specializing in environmental assessment, planning, siting, permitting, licensing, and related services for the pipeline, electrical transmission, and oil and gas industries. Additionally, on September 6, 2016, we acquired a controlling interest in one of our joint ventures which primarily operates within our State & Local Governments sector.

Our Clients, Key Segments, and Geographic Areas

Clients

We provide services to a broad range of U.S. domestic and international clients, including federal, state, municipal and local government agencies, national governments, as well as private industry and utilities. We perform services as the prime contractor, a subcontractor, or through joint ventures or partnership agreements with other service providers. The demand for our services generally comes from capital spending decisions made by our clients.

The following table summarizes our primary client types served and revenue earned by each of our three operating segments during 2016:


	% of 2016
Segments	Revenue		Client Type
National Governments	37.7	%	•	U.S. federal government agencies
			•	U.S. civilian agencies
			•	International governments

Private	25.2	%	•	Oil and gas companies
			•	Chemicals and life sciences companies
			•	Manufacturing, industrial, and electronics companies

State & Local Governments	37.1	%	•	State and provincial governments and agencies
			•	Local and municipal governments and agencies

The following table provides a listing of representative clients of our three operating segments:


Public Sector Clients				Private Sector Clients
•	U.S. Department of Energy	•	Canadian Nuclear Laboratories	•	Major oil and gas companies, refiners
•	U.S. Department of Defense	•	Atomic Energy of Canada Limited		and pipeline operators
•	U.S. Department of the Interior	•	U.K. Environment Agency	•	Utilities
•	U.S. Air Force	•	U.K. Department for Transport	•	Chemicals companies
•	U.S. Navy	•	U.K. Nuclear Decommissioning	•	Metals and mining companies
•	U.S. Army		Authority	•	Advanced technology manufacturers
•	U.S. Army Corps of Engineers	•	U.K. Ministry of Defence	•	Pharmaceutical and biotechnology
•	U.S. Federal Emergency	•	Panama Canal Authority		companies
	Management Agency	•	Qatar Public Works Authority	•	Aerospace companies
•	U.S. Agency for International		(ASHGHAL)	•	General manufacturing companies
	Development	•	Qatar 2022 Supreme Committee	•	Renewable energy companies
•	U.S. Environmental Protection	•	Highways England	•	Universities
	Agency	•	Transport for London	•	Private seaports and airports
•	U.S. Department of Homeland	•	Transport Scotland
	Security	•	State and provincial governments
•	U.S. Department of Transportation		and agencies
•	U.S. National Aeronautics and Space	•	Local and municipal governments
	Administration		and agencies

In 2016, across all segments, we derived approximately 21% of our total revenue from contracts with the U.S. federal government and the agencies regulated by the U.S. federal government. Additionally, we derived approximately 12% of our total revenue from our consolidated joint venture consulting contract with Canadian Nuclear Laboratories within the National Governments segment.

Key Segments

The following is a description of each of our key segments, which consist of our three sectors, and the services we provide. Operating information by segment is set forth in Note 17 - Segment Information of the Notes to Consolidated Financial Statements in Item 15 of this Exhibit 99.1 of our Current Report on Form 8‑K.

National Governments

Our National Governments sector partners with governments around the world, as well as contractors who support government agencies and departments, to advance their nuclear, defense, environmental, infrastructure, social and economic missions. The portfolio of services includes consulting, planning, design, engineering, operations and maintenance, construction management, program management, and full service decontamination, remediation and waste management.

Within our nuclear business, we provide project management, decommissioning, environmental remediation, waste and nuclear material management, nuclear operations, consulting, and engineering and construction services for government and

associated private clients. We specialize in the management of complex nuclear programs and projects around the world. Our experience includes managing and operating nuclear facilities and providing innovative and time-sensitive cleanup and environmental remediation for government facilities and sites worldwide. We provide program management and program advisory services to national defense and commercial nuclear clients, as well as planning, permitting, and licensing of new nuclear energy generating stations. The U.S. Department of Energy, Atomic Energy of Canada Limited and the U.K. Nuclear Decommissioning Authority are our primary liabilities management clients. However, we have also decommissioned reactors for utilities and research reactors for universities, and we have worked in the commercial nuclear power sector in countries outside the U.S., including the United Arab Emirates.

In our defense and national security business, we serve the U.S. Department of Defense and associated agencies such as the U.S. Army, the U.S. Air Force, the U.S. Navy and the Defense Threat Reduction Agency, sustaining U.S. Department of Defense’s mission around the world. Internationally, we support the defense mission in the United Kingdom with the U.K. Ministry of Defence, as well as contractors like Lockheed Martin, BAE System and Rolls Royce. Additionally, we serve civilian agencies charged with improving environmental, social and economic well-being, such as the U.S. Environmental Protection Agency, U.S. Department of Homeland Security, U.S. Federal Emergency Management Agency and the U.S. Agency for International Development.

Within our environmental services business, we provide national governments with technology-focused solutions for protecting human health, preserving the environment and restoring impacted natural resources. We achieve this mission through our global practices which include environmental planning, environmental asset services, environmental health and safety compliance, geospatial and environmental data management, nuclear liabilities management, threat reduction and public health security. We excel at effectively and consistently deploying our systems and processes throughout the world, while addressing the unique local stakeholder and regulatory needs of each client and project.

Through our government facilities and operations services, we plan, design, construct, operate and maintain various categories of facilities, installations, and infrastructure at all types of government and military locations. We offer contingency and logistics, planning and consulting, energy efficiency consulting, engineering and design, climate adaption and resilience, operations and maintenance, and program management services worldwide.

Private

Our Private sector serves many of the world’s leading global and large private companies, spanning the oil and gas, chemicals, manufacturing, electronics, process, advanced facilities and life sciences industries. The portfolio of services includes consulting, planning, design, engineering, operations and maintenance, environmental health and safety (“EHS”), construction management and program management.

Within our oil and gas business, we serve the upstream, pipelines and terminals, and refining and marketing sectors of the oil and gas industry. For the upstream sector, we perform engineering, modular fabrication, erection, construction, and operations and maintenance services for oil and gas fields. We deliver compression and dehydration facilities, drilling and well support services, enhanced oil recovery infrastructure, field development, fleet support, natural gas gathering and processing, conventional oil production, sulfur recovery, acid gas treating, and heavy oil and steam‑assisted gravity drainage facilities. In our pipelines and terminals sector, we focus on infrastructure projects that gather, store, and transport oil, natural gas, refined products, carbon dioxide, and other related hydrocarbons, liquids, and gases. These projects include pipelines, compression, pump stations, metering, tank farms, terminals, and related facilities for midstream (wellhead to central processing) and downstream (cross‑country transportation) systems. Within our refining sector, we provide conceptual and preliminary engineering, front‑end and detail design, procurement, construction, and operations and maintenance services. Our refining experience includes technology evaluation and feasibility studies; design and construction of refinery units, terminals, pipelines, pump stations, and cogeneration facilities; design, fabrication, and installation of modules and pipe racks; turnarounds and revamps; effluent treatment; refinery conversion to heavy crude oil processing; and process safety management. Our oil and gas business serves clients in the U.S., Canada, Mexico, South America, the Middle East, Asia and Russia, including conducting comprehensive activities in rough terrain and severe climatic conditions.

Our chemicals business serves various sectors of the industry, including petrochemicals and derivatives, inorganics, specialties and agricultural chemicals. We have substantial experience in polysilicon, chemicals from alternative feedstock, bioprocess, alkalis and chlorine, pigments and coating, monomers and polymers, resins and plastics and synthetic performance fibers. This group also serves the biofuels market where we specialize in advanced fuel sources for biofuels development in the U.S., Canada, and Latin America. Our chemicals business serves clients in North and South America, Asia, Europe and the Middle East.

In our manufacturing, advanced facilities and life sciences business, we provide program management, consulting, planning, design, EHS and construction management services to clients in the semiconductor, wafers, nanotechnology, photo voltaic, data centers, flat panel displays, pharmaceuticals, automotive, food and beverage, building materials, metals and consumer products industries. Our clients typically require integrated design, engineering and construction services for complex manufacturing systems, including clean rooms, ultrapure water and wastewater systems, chemical and gas systems and production tools. We also provide specialized consulting services to optimize the operating efficiency and return on investment for complex manufacturing facilities. We leverage our strategic business planning capabilities to help clients structure and plan their high‑volume manufacturing projects, and to provide follow‑on design and construction services. manufacturing, advanced facilities and life sciences business serves clients in the U.S., Asia, Mexico, South America, Europe, and the Middle East.

Additionally, we leverage our leading position in water and environmental services to provide our private sector clients with solutions for reducing the amount of freshwater being used for industrial applications; comprehensive contaminated site investigation, remediation and revitalization services; environmental health and safety regulatory compliance and auditing, management systems and sustainability consulting; siting studies, feasibility studies, and environmental permitting and licensing, as well as climate adaptation and resiliency for facilities around the world.

State & Local Governments

Our State & Local Governments sector helps cities, counties, states, local authorities and provinces transform the way citizens and businesses interact with their infrastructure and their environment through our water, transportation, and urban environments services. The portfolio of services includes consulting, design and engineering, program management, operations and maintenance, design build, and construction management.

Within our water business, we provide integrated, sustainable solutions serving the wastewater, drinking water, conveyance and storage, water resources and ecosystem management, and intelligent water solutions industries. Our services include consulting, design and engineering, program management, design-build, and operations and maintenance. Our broad portfolio of water solutions help clients address all water challenges created by extreme climate events, population growth, decaying and aging infrastructure, water supply uncertainty, global climate resiliency, regulatory changes, and increasing demand. We also work with clients to identify solutions for water and energy conservation, and to reevaluate processes to achieve cost savings and reduce environmental impacts. Our water business serves clients throughout Asia, Australia, Europe, India, Latin America, South America, the Middle East and North America.

Our transportation business provides horizontal and vertical infrastructure development services for the aviation, highway and bridge, ports and maritime, and transit and rail markets. Working with clients around the world, our services support urbanization and population growth; the safe and efficient movement of people and goods; serviceability of aging infrastructure; resource extraction; infrastructure resilience to climatic change/dramatic weather events; and signature infrastructure to stimulate regional economic growth. We offer a broad portfolio of services, including procurement and technical advisory, transportation planning, environmental studies and documentation, design engineering, design for design-build, project/program management, construction management, operations and asset management services, and climate adaptation and resiliency. In the aviation industry, we deliver airside and landside services to commercial and general aviation airports. For our municipal and state highway and bridge clients, we specialize in motorways, freeways and complex interchanges; toll roads/HOT/HOV lanes; highway structures and footbridges; signature bridges and major crossings; highway tunnels; and bike and pedestrian facilities. In the ports and maritime market, we serve clients developing cargo terminals, intermodal facilities, ferry terminals, urban waterfronts and cruise line terminals. Our transit and rail services encompass high-speed rail; metros and urban transit; commuter rail; light rail, trolleys and streetcars; bus rapid transit; freight rail; and intermodal facilities. Our transportation business delivers projects in Asia, Europe, Latin America, the Middle East and North America.

Our urban environments business helps city leaders meet the demands of growth and enhance quality of life for their urban constituents by providing master planning and consulting, economic development planning, project development, land development, program management operations and maintenance and solid waste management services. We help cities create and implement sustainable development strategies to achieve social, environmental and economic progress and prosperity. Our urban environments business serves clients in the U.S., Canada, Latin America, Europe, Asia and the Middle East.

Geographic Areas

We provide services to clients located in numerous countries across the globe. Internally, we divide our operations into six geographic regions: Asia Pacific; Canada; Europe; Central and South America; Middle East, North Africa, and India; and the United States. Although the majority of our consolidated revenue is generated from our domestic operations, we provide services in numerous countries, including Canada which accounted for 17% of our total consolidated revenue from continuing operations in 2016 and was primarily related to operations within our National Governments segment. The United Kingdom accounted for 10%, 11% and 10% of our total consolidated revenue in 2016, 2015 and 2014, respectively. Total U.S. and international revenue for the years ended were as follows:


	December 30,		December 25,		December 31,
($ in thousands)	2016		2015		2014
U.S.	$	3,304,752	$	3,589,928	$	3,806,935
International		1,890,915		1,559,853		1,409,589
Total	$	5,195,667	$	5,149,781	$	5,216,524

The fixed assets to support our continuing business operations and our clients are located both domestically and internationally. Total U.S. and international net property, plant and equipment for the years ended were as follows:


	December 30,		December 25,		December 31,
($ in thousands)	2016		2015		2014
U.S.	$	225,929	$	179,436	$	215,689
International		20,667		20,029		42,471
Total	$	246,596	$	199,465	$	258,160

Competition

The market for design, consulting, engineering, construction, design‑build, EPC, operations and maintenance, and program management services is highly competitive, fragmented, consolidating and to some extent becoming commoditized. We compete primarily with large multinational firms and also with smaller firms on contracts within the private industry, national, and state and local government sectors. In addition, some of our clients, including government agencies, occasionally utilize their own internal resources to perform design, engineering and construction services where we might have been the service provider.

Numerous mergers and acquisitions in the engineering services industry have resulted in a group of large firms that offer a full complement of single‑source services including studies, designs, construction, design‑build, EPC, operation and maintenance and in some instances, facility ownership. Included in the current trend is movement towards larger program and contract awards and longer‑term contract periods for a full suite of services, (e.g., 5 to 20 year full‑service contracts). These larger, longer, more comprehensive contracts require substantially greater financial and human capital than in the past. We believe we can compete effectively for these full service programs.

To our knowledge, no single company or group of companies currently dominates any significant portion of the engineering services markets. As such, the industry is highly fragmented. Competition in the engineering services industry is based on quality of performance, reputation, expertise, price, technology, customer relationships, range of service offerings and domestic and international geographic deployment capabilities.

Backlog

Backlog represents the total dollar amount of revenue we expect to earn as a result of performing work under contracts that have been awarded. Our backlog also reflects the future activities related to consolidated joint ventures. Many of our contracts require us to provide services that span over a number of fiscal years. U.S. government agencies operate under annual fiscal appropriations by the U.S. Congress and fund various federal contracts only on an incremental basis. The same is true of many state, local and foreign contracts. Our policy is to include in backlog the full contract award, whether funded or unfunded. Unexercised options under any contract are not included in our backlog. In accordance with industry practice, substantially all of our contracts are subject to cancellation, termination, or suspension at the discretion of the client.

The following table provides backlog revenue by our three operating segments for the years ended December 30, 2016 and December 25, 2015:


($ in millions)	2016		2015
National Governments	$	4,431	$	5,754
Private		822		1,072
State & Local Governments		2,919		3,312
Total backlog revenue	$	8,172	$	10,138

The decrease in our backlog revenue as of December 30, 2016 as compared to December 25, 2015 was primarily related to the realization of revenue in 2016 as operations on a large nuclear project in a consolidated Canadian joint venture began late in 2015. Additionally, several large design-build-operate water projects approached completion in 2016. The majority of our current backlog will be performed in 2017 and 2018.

EXECUTIVE OFFICERS OF CH2M

The executive officers of CH2M are listed below, along with their ages, tenure as officer and business background for at least the last five years.

Ryan L. Beckman. Age 47. Mr. Beckman is Vice President, Chief Accounting Officer and Controller of CH2M since March 1, 2015. He previously served as Assistant Controller from May 2004 to February 2015. Prior to joining CH2M, Mr. Beckman served in various auditing positions with Ernst & Young LLP from September 1991 to May 2004.

Lisa Glatch. Age 54. Ms. Glatch is the Executive Vice President of Growth and Sales of CH2M since November 2016 and was the Executive Vice President of Client Solutions and Sales of CH2M from April 2014 to November 2016. She previously served as Senior Vice President of Global Sales and Vice President of Denver Operations Upstream Oil and Gas Region for Jacobs Engineering Group Inc. (engineering company) from April 2012 through March 2014. From 1986 to 2010, Ms. Glatch was with Fluor Corporation (engineering company) serving in various capacities from 1986 through 2010 including the Senior Vice President of Energy and Chemicals from 2009 to 2010. Ms. Glatch is a member of the Board of Directors of CH2M.

Shelette M. Gustafson. Age 52. Ms. Gustafson is the Chief Human Resources Officer of CH2M since January 2016. She joined CH2M in 2007 as a Human Resources Director and served as the Vice President, Global Human Resources Delivery from 2011 to 2015. Ms. Gustafson came to CH2M from McDATA Corporation (technology company) where she was Director Human Resources from 2002 to 2007.

Jacqueline C. Hinman. Age 55. Ms. Hinman is the Chairman of the Board of Directors of CH2M since September 2014 and has been the President and Chief Executive Officer of CH2M since January 2014. She previously served as the Senior Vice President and President of the International Division of CH2M from 2012 to 2014, the President of the Facilities and Infrastructure Division from 2011 until 2012, and the Vice President, Major Programs and Executive Director for Mergers and Acquisitions between 2009 and 2010.

Gary L. McArthur. Age 56. Mr. McArthur is the Executive Vice President and Chief Financial Officer of CH2M since August 2014. Prior to joining CH2M, he served as the Chief Financial Officer of Harris Corporation (international communications and information technology company) since 2006, and in various other financial positions since 1997.

Thomas M. McCoy. Age 66. Mr. McCoy is the Executive Vice President, General Counsel and Corporate Secretary of CH2M since September 2014. Prior to joining CH2M, he was a partner in the law firm of O’Melveny & Myers since 2011 and from 1977 to 1995. From 1995 through 2010, Mr. McCoy served first as the Senior Vice President, General Counsel and Secretary of Advanced Micro Devices, Inc. (semiconductor company) and then as the Executive Vice President, Chief Legal and Administrative Officer of Advanced Micro Devices, Inc.

Gregory T. McIntyre. Age 58. Mr. McIntyre is the President of the State & Local Governments Client Sector of CH2M since November 2016 and was the President of the Global Business Groups from January 1, 2015 to November 2016. He previously was the Corporate Vice President and Global Market President, Water Business Group in 2014 and 2015, concurrently with the President, Global Business Groups role. He previously served as the Managing Director of CH2M’s International Infrastructure business from 2012 to 2014. Prior to that role, Mr. McIntyre served as the Managing Director of Halcrow (engineering company), acquired by CH2M in 2011, and a member of its board of directors, and oversaw the integration of the Halcrow operations into CH2M. He was the Deputy Program Manager and CH2M Managing Director for CLM Delivery Partner, the delivery partner to the Olympic Delivery

Authority for the London 2012 Olympics and Paralympic Games, between 2010 and 2011. Mr. McIntyre is a member of the Board of Directors of CH2M.

Carlo Orsenigo. Age 56. Mr. Orsenigo is the Executive Vice President for Global Project Services of CH2M since November 2016 and was the Regional Managing Director for Latin America from January 2016 to November 2016. Prior to that, he was the Regional Energy Manager in Latin America from December 2012 to January 2016 and the Mexico Country Manager beginning in January 2011. Mr. Orsenigo joined CH2M in August 2010.

Terry Ruhl. Age 50. Mr. Ruhl is the President of the National Governments Client Sector of CH2M since November 2016 and was the President of the Transportation Business Group from July 2012 to November 2016. Prior to that, he served as the Senior Vice President of the Transportation Business Group and Director of Consulting and International Operations from June 2009 to July 2012, the Global Market Sector Director from June 2008 to June 2009 and the Aviation Market Sector Director from August 2006 to June 2008. Mr. Ruhl’s tenure with CH2M spans twenty-four years. Mr. Ruhl is a member of the Board of Directors of CH2M.

Matthew Sutton. Age 57. Mr. Sutton is the President of the Private Client Sector of CH2M since November 2016 and was the President of the Environment and Nuclear Business Group from March 2016 to November 2016. He previously served as President of Aecom’s (engineering company) environmental business from 2011 to 2016 and as Executive Vice President and Director of Operations of Arcadis (engineering company) from 2008 to 2011.

There are no family relationships among the executive officers or directors of CH2M. The executive officers are elected by the Board of Directors each year and hold office until the organizational meeting of the Board in the next subsequent year and until his or her successor is chosen or until his or her earlier death, resignation or removal.

Available Information

For information regarding our company, including free copies of filings with the Securities and Exchange Commission (“SEC”), please visit our web site at ir.ch2m.com. The SEC filings, which include our Annual Reports on Form 10‑K, Quarterly Reports on Form 10‑Q, and Current Reports on Form 8‑K are made available as soon as practicable after they are filed with the SEC. The information on our website is not, and shall not be deemed to be, a part hereof or incorporated into this or any of our other filings with the SEC.

PART II

Item 6. Selected Financial Data

The selected financial data presented below under the captions “Selected Statement of Operations Data” and “Selected Balance Sheet Data” for, and as of the end of, each of the years in the five‑year period ended December 30, 2016, have been revised to reflect the presentation of our fixed-price Power EPC business as discontinued operations. The selected financial data as of December 30, 2016 and December 25, 2015, and for each of the years in the three year period ended December 30, 2016, were derived from the consolidated financial statements which have been audited by KPMG LLP, an independent registered public accounting firm. The report thereon of KPMG LLP is included in Item 15 of this Exhibit 99.1 of our Current Report on Form 8‑K. The selected financial data as of December 31, 2014, 2013 and 2012 and for the years ended December 31, 2013 and 2012 are unaudited. The following information should be read in conjunction with Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and related notes thereto contained elsewhere in this Exhibit 99.1 of our Current Report on Form 8-K.


	Years Ended
	December 30,			December 25,		December 31,			December 31,		December 31,
($ in millions, except per share data)	2016			2015		2014			2013		2012
Selected Statement of Operations Data:
Revenue	$	5,195.7		$	5,149.8	$	5,216.5		$	5,378.6	$	5,577.1
Operating income		50.0			128.0		55.3			216.9		163.2
Net income (loss) from continuing operations		121.5			84.9		(5.8)	(e)		143.7		100.6
Net (loss) income from discontinued operations		(245.7)	(b)		7.3		(312.8)	(f)		(12.5)		(2.3)
Net income (loss) attributable to CH2M	$	15.0	(c)	$	80.4	$	(181.5)		$	118.3	$	93.0
Net income (loss) from continuing operations attributable to CH2M per common share:
Basic	$	0.26		$	2.64	$	(0.44)		$	4.62	$	3.10
Diluted	$	0.26		$	2.63	$	(0.44)		$	4.58	$	3.06
Net income (loss) attributable to CH2M per common share:
Basic	$	0.03		$	2.62	$	(6.42)		$	4.00	$	2.99
Diluted	$	0.03		$	2.61	$	(6.42)		$	3.96	$	2.95
Selected Balance Sheet Data:
Total assets	$	2,670.5		$	2,861.3	$	2,941.3		$	3,056.4	$	3,114.6
Long-term debt, including current maturities (a)		497.9			301.7		513.0			391.1		252.3
Total CH2M common stockholders’ equity	$	546.7	(d)		412.2	$	212.8	(g)		624.4	$	603.7

(a)

Substantially all of our long‑term debt relates to our revolving credit facility. Borrowings on this facility are primarily used for working capital needs, required pension contributions and funds to repurchase shares on our internal market.

(b)

The net loss from discontinued operations was primarily caused by estimated project losses related to an Australian fixed-price Power EPC contract within our discontinued fixed-price Power EPC business.

(c)

The net income (loss) attributable to CH2M included estimated project losses and costs incurred for restructuring activities in 2016. These losses were offset by the release of a significant tax valuation allowance for an existing deferred tax asset related to the Halcrow Pension Scheme benefit restructuring as well as project losses attributable to noncontrolling interests resulting in net income attributable to CH2M.

(d)

The increase in stockholders’ equity primarily relates to the change in accumulated other comprehensive income due to the Halcrow Pension Scheme benefit restructuring.

(e)

The primary cause for the net loss from continuing operations relates to estimated project losses within our State & Local Governments sector, impairment charges within our Private sector, and costs incurred for restructuring activities in 2014.

(f)

The net loss from discontinued operations was primarily caused by estimated project losses related to an Australian fixed-price Power EPC contract and a fixed-price Power contract to design and construct a new power generation facility in the northeastern United States as well as impairment charges within our discontinued fixed-price Power EPC business.

(g)

The decrease in stockholders’ equity is related to the consolidated net loss incurred in 2014, shares repurchases and changes in assumptions that increased pension liabilities that are included in accumulated other comprehensive income.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read together with the financial statements, including the related notes and the other financial information, contained in this Exhibit 99.1 of our Current Report on Form 8-K.

Business Summary

Founded in 1946, we are a large employee-controlled professional engineering services firm providing engineering, construction, consulting, design, design-build, procurement, operations and maintenance, EPC, program management and technical services around the world. We have approximately 20,000 employees worldwide inclusive of craft and hourly employees as well as employees in our consolidated joint ventures.

We provide services to a diverse customer base including the U.S. federal and foreign governments and governmental authorities; provincial, state and local municipal governments and agencies; universities; and private sector industries. We believe we provide our clients with innovative project delivery using cost-effective approaches and advanced technologies.

Our revenue is 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.

Private Equity Investor

On June 22, 2015, the Company designated 10,000,000 shares as Series A Preferred Stock with an original issue price of $62.22 under the Certificate of Designation. On June 24, 2015, the Company sold and issued an aggregate of 3,214,400 shares of Series A Preferred Stock for an aggregate purchase price of $200.0 million in a private placement to a subsidiary owned by investment funds affiliated with Apollo Global Management, LLC (together with its subsidiaries, “Apollo”). Total proceeds from the preferred stock offering were $191.7 million, net of issuance costs of $8.3 million. The sale occurred in connection with the initial closing pursuant to the Subscription Agreement entered into by the Company and Apollo on May 27, 2015 (“Subscription Agreement”).

On April 11, 2016, pursuant to the Subscription Agreement, we sold and issued in a second closing an aggregate of 1,607,200 shares of Series A Preferred Stock to Apollo at a price of $62.22 per share for an aggregate purchase price of approximately $100.0 million in a private placement. Total proceeds from the preferred stock offering were $99.8 million, net of issuance costs of $0.2 million.

Under our agreement with Apollo, the Company’s maximum consolidated leverage ratio is 3.00x for 2016 and beyond, consistent with our Amended Credit Agreement. As of December 30, 2016, we were in compliance with this covenant. Management continually assesses its potential future compliance with the consolidated leverage ratio covenant based on estimates of future earnings and cash flows. If there is an expected possibility on non-compliance, we will discuss possibilities with Apollo to modify the covenant consistent with discussions with the Company’s lenders or utilize other means of capitalizing the Company to anticipate or remedy any non-compliance. The expected cash outflows required to fund the project losses discussed in Note 2 – Changes in Project-Related Estimates of the Notes to Consolidated Financial Statements in Item 15 of this Exhibit 99.1 of our Current Report on Form 8‑K and the related impact on earnings will put a financial strain on the Company that may require an amendment or other remedies to be pursued by management if certain earnings estimates or cash flow improvement initiatives are not achieved or if required to facilitate restructuring plans.

Additionally, the Certificate of Designation for the Series A Preferred Stock prohibits the repurchase by the Company of shares of our common stock in excess of negotiated pre-approved amounts in 2015 and 2016, and in excess of amounts determined by a negotiated formula in 2017 and beyond. In 2017, the Certificate of Designation for the Series A Preferred Stock prohibits the repurchase by the Company of shares of our common stock in excess of negotiated pre-approved amounts determined by a formula based upon our “Free Cash Flow” or our cash flow from operations, minus capital expenditures, for fiscal year 2016. Our Free Cash Flow was negative for the year ended December 30, 2016, and as a result, other than certain specified exemptions, the Company is prohibited from repurchasing shares of common stock in the internal market, except as legally required, in the year ending December 29, 2017 unless it is able to obtain the consent of the holders of at least a majority of the Series A Preferred Stock. On January 17, 2017, the Company received from the Series A Preferred Stock holder, an acknowledgment and consent permitting the Company to spend up to $25.0 million, in the aggregate, to repurchase shares of common stock in the first trade of 2017. No assurance can be given that in the future the Company will be able to obtain an acknowledgment and consent from the Series A Preferred Stockholder permitting the Company to repurchase common stock in the internal market.

For a summary of the terms and conditions of the Series A Preferred Stock, see Note 3 – Preferred Stock Issuance of the Notes to Consolidated Financial Statements in Item 15 of this Exhibit 99.1 of our Current Report on Form 8‑K.

Defined Benefit Plans

During the year ended December 30, 2016, the Company adopted an amendment for one of our United States defined benefit plans, the CH2M HILL OMI Retirement Plan, to freeze future pay and benefit service accruals beginning in 2017 for non-union participants, resulting a gain on curtailment of $4.6 million. There was also an additional gain of $1.2 million due to settlements within several small defined benefit pension plans in the Middle East during the year ended December 30, 2016.

On October 4, 2016, Halcrow Group Limited (“HGL”), a subsidiary of CH2M, effected a transaction to restructure the benefits provided to members of the Halcrow Pension Scheme (“HPS”), a defined benefit plan sponsored by HGL, by providing each member with the option to transfer his or her benefits in the HPS to a new pension scheme, which is also sponsored by HGL (“HPS2”). Alternatively, members had the option to remain in the HPS which will enter the Pension Protection Fund (“PPF”) under a regulated apportionment arrangement. The new scheme, HPS2, provides benefits that are better than the compensation that would otherwise be paid by the PPF if a member chose to join the PPF rather than HPS2. The PPF was created by the United Kingdom Pensions Act 2004 to provide compensation to members of eligible defined benefit pension schemes when an employer of the scheme can no longer support the pension scheme. A member that transferred to HPS2 will receive substantially similar benefits to those in the HPS, except that annual increases and revaluation of benefits are reduced to statutory levels. A pension scheme member of the HPS that elected to transfer to the new scheme also received a one-time uplift to benefits of either 1.0% or 2.5%. The Pension Regulator, which is the United Kingdom’s executive body that regulates work-based pension schemes, and the PPF provided necessary regulatory approvals for the transaction to restructure the HPS benefits.

Additionally, in connection with the transaction, CH2M issued a £50.0 million, approximately $65.0 million, parent company guarantee to support HPS2 and funded £80.0 million, approximately $104.0 million, to be allocated between HPS2 and the PPF based on the proportion of the HPS’ members that transferred to HPS2. As discussed in more detail in the Income Taxes section below, we also removed a HGL valuation allowance, generating a benefit of approximately $65.0 million in the year ended December 30, 2016. As a result of the transaction on October 4, 2016, our overall pension liability was reduced by approximately $228.9 million.

For additional details regarding our defined benefit pension plans, see Note 16 – Employee Retirement Plans of the Notes to Consolidated Financial Statements in Item 15 of this Exhibit 99.1 of our Current Report on Form 8-K.

Restructuring Plans

2016 Restructuring Plan. During the third quarter of 2016, the Company began a process to review the structure and resources within its business segments and formulate a restructuring plan to more fully align global operations with the Company’s client-centric strategy, including a simplified organization structure and streamlined delivery model to achieve higher levels of profitable growth (“2016 Restructuring Plan”). The restructuring activities include such items as workforce reductions and facilities consolidations. During the year ended December 30, 2016, we incurred $42.2 million of costs for these restructuring activities related to the 2016 Restructuring Plan, which have been included in selling, general and administration expense on the consolidated statements of operations. Overall, we expect to incur up to approximately $50.0 million to $70.0 million in total restructuring charges under the 2016 Restructuring Plan, primarily related to employee severance and termination benefits and facilities consolidation costs. We expect the 2016 Restructuring Plan to be completed in the first half of 2017 and to result in aggregate annual cost savings of approximately $100.0 million.

2014 Restructuring Plan. During the third quarter of 2014, the Company commenced certain restructuring activities in order to achieve important business objectives, including reducing overhead costs, improving efficiency, and reducing risk (“2014 Restructuring Plan”). These restructuring activities, which continued into 2015, included such items as a voluntary retirement program, workforce reductions, facilities consolidations and closures, and evaluation of certain lines of business. For the years ended December 25, 2015 and December 31, 2014, we incurred $60.6 million and $70.4 million, respectively, of costs for these restructuring

activities which have been included in selling, general and administration expense on the consolidated statements of operations. The restructuring activities under the 2014 Restructuring Plan were substantially complete as of December 25, 2015.

The Company’s overall overhead cost structure has benefited from the restructuring activities as described in the Results of Operations section below through the reduction of costs within the corporate overhead functions as well as overhead costs within the business segments themselves. A portion of these costs savings has been offset by the charges incurred in the years ended December 30, 2016 and December 25, 2015.

Acquisitions

We continuously monitor acquisition and investment opportunities that will expand our portfolio of services, provide local resources internationally to serve our customers, and add value to the projects undertaken for clients. On September 6, 2016, we acquired a controlling interest in one of our joint ventures for consideration of $6.3 million, $2.1 million net of cash acquired, resulting in a gain of $15.0 million on the fair value remeasurement of the original equity method investment recorded in equity in earnings of joint ventures and affiliated companies and $31.3 million of goodwill.

On April 4, 2014, we acquired certain agreed upon assets and liabilities of TERA Environmental Consultants (“TERA”) for consideration of $119.6 million. TERA was an employee-owned environmental consulting firm headquartered in Canada specializing in providing environmental assessment, planning, siting, permitting, licensing, and related services for the pipeline, electrical transmission, and oil and gas industries.

Summary of Operations

Costs for corporate general and administrative expenses, restructuring costs and amortization expense related to intangible assets have been allocated to each segment based on the estimated benefits provided by corporate functions. This allocation was primarily based upon metrics that reflect the proportionate volume of project-related activity and employee labor costs within each segment. Prior year amounts have been revised to conform to the current presentation.

Results of Operations for the Year Ended December 30, 2016 Compared to December 25, 2015

On a consolidated basis, our gross revenue increased by $45.9 million, or 1%, for the year ended December 30, 2016 as compared to the year ended December 25, 2015. Our consolidated operating income decreased $78.0 million, or 61%, for the year ended December 30, 2016 as compared to the year ended December 25, 2015. The following table summarizes our results of operations by segment for the year ended December 30, 2016 as compared to the year ended December 25, 2015:


	Years Ended
	December 30, 2016				December 25, 2015				Change
($ in thousands)	Gross Revenue		Operating Income (Loss)		Gross Revenue		Operating Income (Loss)		Gross Revenue		Operating Income (Loss)
National Governments	$	1,960,439	$	5,641	$	1,378,478	$	11,945	$	581,961	$	(6,304)
Private		1,309,876		51,062		1,661,163		100,863		(351,287)		(49,801)
State & Local Governments		1,925,352		(6,741)		2,110,140		15,144		(184,788)		(21,885)
Total	$	5,195,667	$	49,962	$	5,149,781	$	127,952	$	45,886	$	(77,990)

National Governments

Our National Governments sector had a $582.0 million, or 42%, increase in revenue for the year ended December 30, 2016 as compared to the year ended December 25, 2015. Revenue increased by approximately $475.3 million due to a large nuclear project in

a consolidated Canadian joint venture which began operations in late 2015. Of this increase, approximately $51.7 million was a result of the nuclear project eliminating a previously existing one-month reporting lag during the third quarter of 2016, which had been required to achieve a timely consolidation. Additionally, there was an increase in revenue of approximately $29.0 million related to a large nuclear remediation project in the U.S. which ramped up in the fourth quarter of 2016. The remaining increase in revenue was driven by higher volumes of environmental activity within the U.S federal business sector and overall higher volumes of nuclear projects. These increases in revenue were partially offset by approximately $16.9 million related to reduced activity on a large program management project in the Middle East within the urban environments and sports industry.

National Governments operating income decreased by $6.3 million, or 53%, for the year ended December 30, 2016 as compared to the year ended December 25, 2015. The decrease in operating income was primarily driven by the $10.8 million decrease in equity in earnings of joint ventures and affiliated companies as a result of the winding down of a domestic nuclear remediation program management project executed through an unconsolidated joint venture as well as the reduced activity on the large program management project in the Middle East within the urban environments and sports industry as discussed above. The decrease was partially offset by improvements in overhead costs as a result of efficiencies gained from the various restructuring plans, decreased business development costs, and increased earnings related to the consolidated Canadian joint venture.

Private

Private sector revenue decreased $351.3 million, or 21%, for the year ended December 30, 2016 as compared to the year ended December 25, 2015. The decline in revenue was predominantly caused by continued commodity pricing pressures within the oil and gas industry, resulting in reduced volume and client concessions on direct hire construction, operations and maintenance, program management and professional services projects primarily within the U.S., United Arab Emirates and Mexico. Additionally, revenue decreased $82.9 million due to the substantial completion of a large construction project in Alaska in the second quarter of 2016, which was not replaced with a similar project due to the continued pricing pressures within the oil and gas industry. Within our industrial and advanced technology business, gross revenue decreased by approximately $26.2 million due to scope reductions and lower activity in 2016 on several large, domestic operations and maintenance projects, which was partially offset by increased volume of consulting services.

Private operating income decreased $49.8 million, or 49%, for the year ended December 30, 2016 as compared to the year ended December 25, 2015. The decrease in operating income was primarily related to the reduction in project volumes and client concessions due to the pressures in the oil and gas industry as well as the scope reductions and lower activity on several large, domestic operations and maintenance projects within the industrial and advanced technology business as discussed above. The decreased results from operations were partially offset by reduced selling, general and administrative costs for the year ended December 30, 2016 as compared to the year ended December 25, 2015 due to efficiencies gained from the various restructuring plans and continuing efforts to reduce overhead as well as reduced business development costs consistent with reduced opportunities in the depressed oil and gas industry as well as additional earnings from the increased volume of consulting services within the industrial and advanced technology business.

State & Local Governments

Our State & Local Governments sector’s revenue decreased $184.8 million, or 9%, in the year ended December 30, 2016 as compared to the year ended December 25, 2015. The decrease was primarily caused by lower revenue on a fixed-price transportation contract to design and construct roadway improvements on an expressway in the southwestern United States and decreased activity on two design-build-operate contracts for water treatment facilities in the western United States as the projects approach completion. Additionally, revenue declined as a result of reserving approximately $6.3 million against outstanding accounts receivable on a firm-fixed price roadway project in Latin America during the year ended December 30, 2016 as well as the negative effects of a weaker British Pound related to our transportation consulting business in the United Kingdom.

State & Local Governments income from operations decreased $21.9 million for the year ended December 30, 2016 as compared to the year ended December 25, 2015. The decrease was predominantly caused by cost growth resulting in changes in estimated costs to complete a fixed-price transportation contract to design and construct roadway improvements on an expressway in the southwestern United States of $121.3 million in the year ended December 30, 2016 as compared to the $93.6 million cost growth in the year ended December 25, 2015. Refer to Note 2 – Changes in Project-Related Estimates of the Notes to Consolidated Financial Statements in Item 15 of this Exhibit 99.1 of our Current Report on Form 8‑K for additional detail. While management believes that it has recorded an appropriate provision to complete this project, we may incur additional costs and losses if our cost estimation processes identify new costs not previously included in our total estimated loss. These possible cost increases include extensions of the schedule to complete the job, lower than expected productivity levels, and performance issues with our subcontractors. These potential changes in estimates could be materially adverse to the Company’s results of operations, cash flow or liquidity. Income from

operations also decreased as a result of reduced activity on two design-build-operate contracts for water treatment facilities in the western United States, the negative effects of the weaker British Pound related to our transportation consulting business in the United Kingdom, and the $6.3 million reserve against outstanding accounts receivable on the firm-fixed price roadway project in Latin America in 2016 as discussed above. These declines in income from operations were partially offset as a result of an acquisition of the controlling interest in one of our joint ventures which primarily operates in the water and urban environment and sports businesses, resulting in a fair value remeasurement gain of $15.0 million of the original equity method investment, of which $12.3 million was included within State & Local Governments’ equity in earnings of joint ventures and affiliated companies.

Results of Operations for the Year Ended December 25, 2015 Compared to December 31, 2014

On a consolidated basis, our gross revenue decreased by $66.7 million, or 1%, for the year ended December 25, 2015 as compared to the year ended December 31, 2014. Our consolidated operating income increased $72.6 million for the year ended December 25, 2015 as compared to the year ended December 31, 2014. The following table summarizes our results of operation by segment for the year ended December 25, 2015 as compared to the year ended December 31, 2014:


	Years Ended
	December 25, 2015				December 31, 2014				Change
($ in thousands)	Gross Revenue		Operating Income (Loss)		Gross Revenue		Operating Income (Loss)		Gross Revenue		Operating Income (Loss)
National Governments	$	1,378,478	$	11,945	$	1,369,805	$	13,745	$	8,673	$	(1,800)
Private		1,661,163		100,863		1,747,027		15,820		(85,864)		85,043
State & Local Governments		2,110,140		15,144		2,099,692		25,781		10,448		(10,637)
Total	$	5,149,781	$	127,952	$	5,216,524	$	55,346	$	(66,743)	$	72,606

National Governments

National Governments had an $8.7 million, or 1%, increase in gross revenue for the year ended December 25, 2015 as compared to the year ended December 31, 2014. Revenue increased by approximately $108.0 million due to the ramping up of a large nuclear project in a consolidated Canadian joint venture which began operations in late 2015. This increase in revenue was partially offset by a $57.1 million decrease in volumes on a domestic design-build facility renovation project as the project approached substantial completion in 2015. Additionally, National Governments revenue was negatively impacted by reduced project volume in our urban environments and sports business primarily due to reduced deliverables required during 2015 as compared to 2014 on a large program management project in the Middle East as well as project delays on a federal contract in the western United States in 2015.

National Governments operating income decreased $1.8 million, or 13%, for the year ended December 25, 2015 as compared to the year ended December 31, 2014. Operating income decreased primarily as a result of the decrease in project volumes on the domestic design-build facility renovation project, the large program management project in the Middle East within the urban environments and sports business, and the project delays on a federal contract in the western United States as discussed above. These decreases in operating income were partially offset by reduced costs from restructuring efficiencies in 2015, as well as lower business development spending.

Private

Our Private sector gross revenue decreased $85.9 million, or 5%, for the year ended December 25, 2015 as compared to the year ended December 31, 2014. Primarily as a result of sustained pricing pressures within the oil and gas industry, gross revenue declined due to reduced volume and client concessions on consulting, professional services, and operations and maintenance contracts largely within the U.S., Canada, and the Middle East. Additionally, gross revenue decreased due to the substantial completion of several U.S. and Asia-Pacific consulting projects within the industrial and advanced technology business which were not replaced with similar large scale projects in 2015. These reductions in gross revenue were partially offset by significant increased construction activity on a gas construction contract in Alaska.

For the year ended December 25, 2015 as compared to the year ended December 31, 2014, our Private sector’s operating income increased $85.0 million. Operations improved primarily due to cost efficiencies from restructuring activities, reduced business development costs consistent with reduced opportunities in the depressed oil and gas industry, and higher margin operations and maintenance projects within the electronics industry. Additionally, during the year ended December 31, 2014, our industrial and advanced technology business had an operating charge of approximately $17.8 million related to increased estimated costs to complete a communications installation project in our Europe region as well as a $27.8 million goodwill and intangibles impairment charge.

These increases in operating income were partially offset by the reduced volume in our oil and gas business and our industrial and advanced technology business as discussed above as well as a $5.3 million unfavorable claim settlement during the year ended December 25, 2015.

TERA, which was acquired in the second quarter of 2014 and primarily provides environmental services to private sector businesses, contributed approximately $69.2 million of revenue and $9.2 million of operating income for the year ended December 25, 2015 and approximately $84.6 million of revenue and $10.6 million of operating income for the year ended December 31, 2014. The decrease in TERA revenues and earnings were a result of lower capital spending on environmental projects for oil and gas clients in Canada.

State & Local Governments

Our State & Local Governments sector’s gross revenue increased $10.4 million for the year ended December 25, 2015 as compared to the year ended December 31, 2014 primarily due to increased construction activity in 2015 on a fixed-price transportation contract to design and construct roadway improvements on an expressway in the southwestern United States, increased activity on a design-build-operate contract for a water treatment facility in the western United States, and strong organic growth on various consulting projects in Europe. These increases were partially offset by the substantial completion of two large domestic water contracts in 2015 and reduced revenue generated by our operations in Canada and Europe due to foreign currency fluctuations caused by the strengthening of the U.S. dollar.

State & Local Governments operating income decreased $10.6 million for the year ended December 25, 2015 as compared to the year ended December 31, 2014. The decrease in operating income was primarily caused by an estimated additional cost growth resulting in changes in estimated costs of $93.6 million to complete a fixed-price transportation contract to design and construct roadway improvements on an expressway in the southwestern United States in the year ended December 25, 2015 as compared to the $38.7 million cost growth in the year ended December 31, 2014. Refer to Note 2 – Changes in Project-Related Estimates of the Notes to Consolidated Financial Statements in Item 15 of this Exhibit 99.1 of our Current Report on Form 8‑K for additional detail. The decrease in operating income was partially offset by cost improvements from restructuring initiatives and approximately $23.0 million of additional operating income from strong organic growth in the European consulting business.

Income Taxes

The income tax (benefit) provisions related to continuing operations for the years ended December 30, 2016, December 25, 2015 and December 31, 2014 are as follows:


	Income Tax		Effective
($ in millions)	Provision (Benefit)		Tax Rate
2016	$	(87.1)	(280.8)	%
2015	$	28.8	26.2	%
2014	$	47.0	136.0	%

After adjusting for the impact of loss attributable to noncontrolling interests, the effective tax rate related to continuing operations on the profit attributable to CH2M for the year ended December 30, 2016 was a benefit of 280.8% compared to an expense of 26.2% for the same period in the prior year. The effective tax rate in 2016 resulted primarily due to the favorable impacts associated with the release of the valuation allowances resulting from the Halcrow Group Limited restructure of the Halcrow Pension Scheme, as discussed below, the release of the valuation allowances resulting from foreign net operating losses due to the implementation of a new transfer pricing strategy and the remeasurement related to an acquisition of a controlling interest. Our effective tax rate continues to be negatively impacted by the effects of state income taxes, non-deductible foreign net operating losses, the disallowed portion of executive compensation and the disallowed portions of meals and entertainment expenses.

CH2M is required to record all deferred tax assets or liabilities for temporary differences, net operating loss carryforwards, and tax credit carryforwards. A deferred tax asset valuation allowance is established when it is more likely than not that all or some portion of the deferred tax assets will not be realized in future periods. As of December 30, 2016 and December 25, 2015, we reported a valuation allowance of $48.0 million and $210.4 million, respectively, related primarily to the reserve of certain foreign net loss carryforwards and the foreign tax credit carryforward. The drop in valuation allowance is primarily related to the restructure of the Halcrow Pension Scheme, as discussed below, and the implementation of the new transfer pricing strategy.

Halcrow Group Limited (“HGL”) has substantial deferred tax assets, primarily related to the Halcrow Pension Scheme (“HPS). These deferred tax assets represented future deductions available to HGL. When HGL was acquired in 2011, it was determined a full valuation allowance was required on these assets as there was uncertainty regarding the ability to realize these assets in the future. On October 4, 2016 Halcrow Group Limited (“HGL”) completed a transaction to restructure the Halcrow Pension Scheme. As a result of the transaction, we reduced our overall pension liability and related future funding obligations. For additional information regarding the Halcrow Pension Scheme and changes to the defined benefit plan effective October 4, 2016, refer to Note 16 – Employee Retirement Plans of the Notes to Consolidated Financial Statements in Item 15 of this Exhibit 99.1 of our Current Report on Form 8‑K for additional details. Consequently, we feel that the deferred tax assets of HGL will now more likely than not be realized and therefore the valuation allowance has been removed. This generated a benefit of approximately $65.0 million for the year ended December 30, 2016.

Discontinued Operations

The majority of the financial information presented in our discontinued operations in the consolidated financial statements for the three years ended December 30, 2016, December 25, 2015, and December 31, 2014 relate to the Australian fixed-price Power EPC contract the Consortium terminated with the Contractor on January 24, 2017. The Contractor has claimed that the Consortium’s termination was not valid. The Consortium, which includes the consolidated Australian joint venture partnership, expects to file arbitration claims against the Contractor during the first half of 2017, and anticipates that the Contractor will file counter claims. We expect a lengthy, multi-year arbitration process and at this time we are unable to predict the timing of resolution or the outcome of disputes. While we continue to assess the possible impacts to our financial statements, the ultimate outcome of the dispute will depend upon contested issues of fact and law.

Due to a variety of issues, the joint venture partnership had experienced increases in its estimated costs to complete the project which resulted in losses of $280.0 million in 2014, of which our portion of the loss was $140.0 million, and $301.5 million in 2016, of which our portion of the loss was $154.1 million. These contract losses were accrued and recognized in the periods when known and estimable. As a result of the contract termination, we evaluated the potential future costs as of December 30, 2016 in accordance with the accounting standards applicable to contingent liabilities. The joint venture has incurred costs totaling approximately $20.0 million in 2017 to demobilize from the site and expects to continue to incur significant legal and other costs until the dispute is resolved. The Consortium is also in the process of determining the required costs to close out and terminate its current subcontractor obligations. These costs, which we expect will be incurred in 2017, have been accrued within our provision for loss accrual in our consolidated financial statements as of December 30, 2016 based upon our best estimate from the information currently available. It is possible that certain subcontractors could file claims against the Consortium as a result of our termination of their subcontract which could be material to our consolidated financial statements. Additionally, the joint venture’s performance on the project is secured by certain bonds totaling approximately $50.0 million which could potentially be called by our client at some time in the future. If we are ultimately unsuccessful in our claim that the contract was repudiated by our client, the Consortium could be liable for the completion of the project by a separate contractor and other related damages. These additional costs could be materially adverse to our results of operations, cash flow and financial condition in the future.

Liquidity and Capital Resources

Our primary sources of liquidity are cash flows from operations and borrowings under our secured revolving line of credit. Our primary uses of cash are working capital, acquisitions, capital expenditures and purchases of stock in our internal market. Changes in our working capital requirements can vary significantly from period to period based primarily on the mix of our projects underway and the percentage of work completed during the period. We maintain a domestic cash management system which provides

for cash sufficient to satisfy financial obligations as they are submitted for payment and any excess cash in domestic bank accounts is applied against any outstanding debt held under our credit facility described below. We maintain entities to do business in countries around the world and as a result hold cash in international bank accounts to fund the working capital requirements of those operations. At December 30, 2016 and December 25, 2015, cash totaling $108.7 million and $152.0 million, respectively, was held in foreign bank accounts, which included $9.7 million and $48.0 million as of December 30, 2016 and December 25, 2015, respectively, related to an Australian fixed-price Power EPC joint venture, which is presented within current assets of discontinued operations in our consolidated financial statements.

In addition, as is common within our industry, we partner with other engineering and construction firms on specific projects to leverage the skills of the respective partners and decrease our risk of loss. Often projects of this nature require significant cash contributions and the joint ventures created may retain cash earned while the project is being completed. Cash and cash equivalents on our consolidated balance sheets include cash held within these consolidated joint venture entities which is used for operating activities of those joint ventures. As of December 30, 2016 and December 25, 2015, cash and cash equivalents held in our consolidated joint ventures and reflected on the consolidated balance sheets totaled $46.6 million and $95.4 million, respectively, which included $9.7 million and $48.0 million as of December 30, 2016 and December 25, 2015, respectively, related to an Australian fixed-price Power EPC joint venture, which is presented within current assets of discontinued operations in our consolidated financial statements.

During the year ended December 30, 2016, cash used in operations was $245.5 million, which was a decrease of $348.7 million as compared to cash provided by operations of $103.2 million in the year ended December 25, 2015. The decrease in cash flows from operations primarily resulted from a decrease in earnings of $216.4 million, as discussed above, as well as negative changes in working capital of $117.5 million and a $46.4 million increase in cash used in operating activities from discontinued operations. Additionally, we made contributions of $154.0 million to our defined benefit plans in the year ended December 30, 2016, which was an increase of $116.9 million as compared to the year ended December 25, 2015 primarily due to the $104.0 million payment made in connection with the restructuring of the HPS defined benefit plan, as discussed above.

For the year ended December 30, 2016, changes in working capital improved primarily due to an increase in collections on our receivables and unbilled revenue totaling $183.8 million. This was offset by higher volumes of payments on accounts payable and accrued subcontractor costs of $80.1 million, primarily caused by the payment of subcontractor costs on our fixed-price contract to design and construct roadway improvements on an expressway in the southwestern United States. Additionally, cash used to fund accrued payroll and employee related liabilities increased by $49.7 million due to the timing of our payroll cycles, reducing our cash generated by operations. We also made payments of $38.2 million for restructuring costs related to the 2016 Restructuring Plan and 2014 Restructuring Plan. Cash used in operating activities from discontinued operations increased by $46.4 million primarily due to an increase of payments to sub-contractors on our Australian fixed-price Power EPC project.

Cash used in investing activities was $112.3 million for the year ended December 30, 2016 as compared to cash provided by investing activities of $8.6 million for the year ended December 25, 2015. A significant factor contributing to cash used in investing activities was the $72.1 million increase in capital expenditures in the year ended December 30, 2016 as compared to the year ended December 25, 2015. This was due primarily to the construction of employee housing units for oilfield workers in Alaska to support our oil and gas operations. Additionally, due to the sale of previously owned land during 2015, proceeds from the sale of operating assets decreased by $37.9 million for the year ended December 30, 2016 as compared to the year ended December 25, 2015. Cash used in investing activities also increased $18.0 million due to $15.9 million of deferred acquisitions payments made during the year ended December 30, 2016 related to acquisitions completed in prior years as well as a $2.1 million acquisition payment, net of cash acquired, of controlling interest in one of our joint ventures. There were no acquisition related payments made during the year ended December 25, 2015. Furthermore, we periodically make working capital advances to certain of our unconsolidated joint ventures; these advances are repaid to us from the joint ventures in the normal course of the joint venture activities. During the year ended December 30, 2016, we received working capital repayments from our unconsolidated joint ventures of $17.5 million as compared to $31.4 million for the year ended December 25, 2015. These repayments are offset by additional investments made in our unconsolidated joint ventures, which were $15.8 million and $30.4 million for the year ended December 30, 2016 and December 25, 2015, respectively.

Cash provided by financing activities was $276.2 million in the year ended December 30, 2016 as compared to cash used in financing activities of $42.4 million for the year ended December 25, 2015. The change in financing cash flows was primarily caused by the net borrowings on long-term debt of $193.7 million for the year ended December 30, 2016 as compared to the net payments of $211.5 million for the year ended December 25, 2015, which were largely driven from the negative operating and investing cash flows discussed above. The Company also received $99.8 million in net proceeds from the second preferred stock issuance in the second

quarter of 2016 as compared to $191.2 million in proceeds received in the second quarter of 2015. Cash provided by financing activities was offset by an $8.5 million increase in cash used for repurchases of common stock during the year ended December 30, 2016 as compared to the year ended December 25, 2015. Additionally, net cash provided by financing activities from discontinued operations increased $15.8 million in the year ended December 30, 2016 as compared to the year ended December 25, 2015 due to increased contributions by the noncontrolling interest partner in the Australian fixed-price Power EPC joint venture which is presented as discontinued operations in our consolidated financial statements.

On September 30, 2016, we entered into a Third Amendment to our Amended and Restated Credit Agreement (“Amended Credit Agreement”), to provide us with additional financial and operational flexibility, particularly by modifying the definition of consolidated adjusted EBITDA to allow for the exclusion of expected cash restructuring charges and cash payments on the project losses attributable to ongoing fixed-price contacts for purposes of determining the consolidated leverage ratio, which remained at 3.00x for 2016 and beyond. In addition, the Amended Credit Agreement lowered our maximum available revolving credit facility to $925.0 million from $1.1 billion. The credit facility matures on March 28, 2019 and includes a subfacility for the issuance of standby letters of credit in a face amount up to $500.0 million, a subfacility up to $300.0 million for multicurrency borrowings, and a subfacility of up to $50.0 million for swingline loans. Under the terms of the Amended Credit Agreement, we may be able to invite existing and new lenders to increase the amount available to be borrowed by up to $200.0 million. Other technical and operating changes to the Amended Credit Agreement specifically achieved the following:

Increased the margins used to determine the interest rates of revolving loans under the Amended Credit Agreement and the commitment fees payable by CH2M;

Limited the amount CH2M may spend to repurchase its common stock in connection with its employee stock ownership program up to $75.0 million during the three quarter period ending March 31, 2017 and, thereafter, up to $100.0 million during a rolling four quarter period less the amount of any legally required repurchases of common stock held in benefit plans;

Limited CH2M’s ability to pay cash dividends on preferred stock until no more than 10% of our consolidated adjusted EBITDA consists of the cash and non-cash charges related to restructuring charges and project costs and losses in any rolling four quarter period and subject to minimum pro forma leverage ratio;

Disallows the use of proceeds from asset sales to repurchase common or preferred stock; and,

Granted security interests to the lenders in substantially all of the assets of CH2M and CH2M’s subsidiaries, subject to certain carve-outs.

At December 30, 2016, we had $487.0 million in outstanding borrowings on the credit facility, compared to $292.8 million at December 25, 2015. The average rate of interest charged on that balance was 3.73% as of December 30, 2016. At December 30, 2016, company-wide issued and outstanding letters of credit, and bank guarantee facilities of $134.2 million were outstanding, compared to $145.5 million at December 25, 2015. Our borrowing capacity under the credit facility is limited by a maximum consolidated leverage ratio, which is based on a multiple of an adjusted earnings before interest, taxes, depreciation and amortization calculation, and other outstanding obligations of the Company. As of December 30, 2016, the remaining unused borrowing capacity under the credit facility was approximately $107.4 million.

On November 23, 2016, December 28, 2016 and January 10, 2017, we received from the lenders under the Amended Credit Agreement consents permitting our delayed compliance with respect to the certifications to the lenders relating to our unaudited consolidated financial statements as of and for the quarters ended June 26, 2015, September 25, 2015 and December 25, 2015 and confirming that a determination that a material weakness exists in our internal controls over financial accounting would not constitute a default under the terms of the Amended Credit Agreement. The consents ensured that no event of default existed under the Amended Credit Agreement as a result of the restatement, and we could request the issuance of new loan advances and letters of credit under the Amended Credit Agreement in accordance with its terms.

As of December 30, 2016, we were in compliance with the covenants required by the Amended Credit Agreement. Management continually assesses it potential future compliance with the Amended Credit Agreement covenants based upon estimates of future earnings and cash flows. If there is an expected possibility of non-compliance, we will discuss possibilities with the Company’s lenders or utilize other means of capitalizing the Company to remedy any non-compliance. The expected cash outflows required to fund the project losses discussed in Note 2 – Changes in Project-Related Estimates and Note 18 – Discontinued Operations of the Notes to Consolidated Financial Statements in Item 15 of this Exhibit 99.1 of our Current Report on Form 8‑K and the related impact on earnings will put a financial strain on the Company that may require an amendment or other remedies to be pursued by management if certain earnings estimates or cash flow improvement initiatives are not achieved. We may from time to time refinance amounts outstanding under our Amended Credit Agreement with other loans, debt securities or other debt. The timing of any such refinancing will depend on many factors, including market conditions and contractual restrictions. In the context of our

current debt structure and projected cash needs, there can be no assurance that the capacity under our Amended Credit Agreement will be adequate to fund future operations, to restructure operations, or to allow the Company to repurchase stock in our internal market in any significant amount or at all.

Additionally, the Certificate of Designation for the Series A Preferred Stock prohibits the repurchase by the Company of shares of our common stock in excess of negotiated pre-approved amounts in 2015 and 2016, and in excess of amounts determined by a negotiated formula in 2017 and beyond. In 2017, the Certificate of Designation for the Series A Preferred Stock prohibits the repurchase by the Company of shares of our common stock in excess of negotiated pre-approved amounts determined by a formula based upon our “Free Cash Flow” or our cash flow from operations, minus capital expenditures, for fiscal year 2016. Our Free Cash Flow was negative for the year ended December 30, 2016, and as a result, other than specified exemptions, the Company is prohibited from repurchasing shares of common stock in the internal market, except as legally required, unless it is able to obtain the consent of the holders of at least a majority of the Series A Preferred Stock. On January 17, 2017, the Company received from the Series A Preferred Stock holder, an acknowledgment and consent permitting the Company to spend up to $25.0 million, in the aggregate, to repurchase shares of common stock in the first trade of 2017. No assurance can be given that in the future the Company will be able to obtain an acknowledgment and consent from the Series A Preferred Stockholder permitting the Company to repurchase common stock in the internal market.

Based on fourth quarter results of operations and our current business outlook, we believe that our sources of liquidity, including bank facility credit capacity and issuances of debt, equity or other securities, will satisfy our working capital needs, capital expenditures, investment requirements, contractual obligations, commitments, principal and interest payments on our debt and other liquidity requirements for the next 12 months. However, we cannot be certain that we will generate improved cash flows or that we will be able to obtain additional financing or investment on satisfactory terms. In addition, our liquidity is constrained due to 2016 results of operations and in the event our liquidity is insufficient, we may be required to curtail spending and implement additional cost saving measures and restructuring actions or enter into new financing arrangements.

Off‑Balance Sheet Arrangements

We have interests in multiple joint ventures, some of which are unconsolidated variable interest entities, to facilitate the completion of contracts that are jointly performed with our joint venture partners. These joint ventures are formed to leverage the skills of the respective partners and include consulting, construction, design, project management and operations and maintenance contracts. Our risk of loss on joint ventures is similar to what the risk of loss would be if the project was self‑performed, other than the fact that the risk is shared with our partners. See further discussion in Note 4—Variable Interest Entities and Equity Method Investments of the Notes to the Consolidated Financial Statements in Item 15, of this Exhibit 99.1 of our Current Report on Form 8‑K.

There were no substantial changes to other off‑balance sheet arrangements or contractual commitments during the year ended December 30, 2016.

Aggregate Commercial Commitments

We maintain a variety of commercial commitments that are generally made available to provide support for various provisions in engineering and construction contracts. Letters of credit are provided to clients in the ordinary course of the contracting business in lieu of retention or for performance and completion guarantees on engineering and construction contracts. We post bid bonds and performance and payment bonds, which are contractual agreements issued by a surety, for the purpose of guaranteeing our performance on contracts and to protect owners and are subject to full or partial forfeiture for failure to perform obligations arising from a successful bid. We also carry substantial premium paid, traditional insurance for our business risks including professional liability and general casualty insurance and other coverage which is customary in our industry.

We believe that we will be able to continue to have access to professional liability and general casualty insurance, as well as bonds, with sufficient coverage limits, and on acceptable financial terms necessary to support our business. The cost of such coverage has remained stable during 2016, but there are no guarantees that the cost of such coverage will remain stable in future periods.

Our risk management personnel continuously monitor the developments in the insurance market. The financial stability of the insurance and surety providers is one of the major factors that we take into account when buying our insurance coverage. Currently our insurance and bonds are purchased from several of the world’s leading and financially stable providers often in layered insurance or co‑surety arrangements. The built‑in redundancy of such arrangements usually enables us to call upon existing insurance and surety suppliers to fill gaps that may arise if other such suppliers become financially unstable.

Contractual obligations outstanding as of December 30, 2016 are summarized below:


	Amount of Commitment Expiration Per Period
	Less than								Total Amount
($ in millions)	1 Year		1‑3 Years		4‑5 Years		Over 5 Years		Committed
Letters of credit	$	47.8	$	44.1	$	6.2	$	27.7	$	125.8
Bank guarantees		7.7		0.6		0.1		—		8.4
Long-term debt		2.2		493.5		2.2		—		497.9
Interest payments1		18.5		36.7		18.2		—		73.4
Operating lease obligations		82.2		135.0		92.5		230.8		540.5
Surety and bid bonds		765.2		35.4		0.1		—		800.7
Total	$	923.6	$	745.3	$	119.3	$	258.5	$	2,046.7

1The interest payments on the revolving credit facility are based on the borrowings outstanding as of December 30, 2016 at the expected interest rate over the period outstanding.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect both the results of operations as well as the carrying values of our assets and liabilities. Some of our accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. We base estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities as of the date of the financial statements that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Although our significant accounting policies are described in the Notes to Consolidated Financial Statements in Item 15 of this Exhibit 99.1 of our Current Report on Form 8‑K, the accounting policies that we believe are most critical to the understanding of our financial condition and results of operations and require complex management judgment are summarized below:

Revenue Recognition

We earn revenue from different types of services performed under various types of contracts, including cost-plus, fixed-price and time-and-materials. We evaluate contractual arrangements to determine how to recognize revenue. We primarily perform engineering and construction related services and recognize revenue for these contracts on the percentage-of-completion method where progress towards completion is measured by relating the actual cost of work performed to date to the current estimated total cost of the respective contract. In making such estimates, judgments are required to evaluate potential variances in schedule, the cost of materials and labor, productivity, subcontractor costs, liability claims, contract disputes, and achievement of contract performance standards. We record the cumulative effect of changes in contract revenue and cost at completion in the period in which the changed estimates are determined to be reliably estimable.

Below is a description of the four basic types of contracts from which we may earn revenue:

Cost Plus Contracts. Cost plus contracts can be cost plus a fixed fee or rate, or cost plus an award fee. Under these types of contracts, we charge our clients for our costs, including both direct and indirect costs, plus a fixed fee or an award fee. We generally recognize revenue based on the labor and non-labor costs we incur, plus the portion of the fixed fee or award fee we have earned to date.

Included in the total contract value for cost-plus fee arrangements is the portion of the fee for which receipt is determined to be probable. Award fees are influenced by the achievement of contract milestones, cost savings and other factors.

Fixed-Price Contracts. Under fixed-price contracts, our clients pay us an agreed amount negotiated in advance for a specified scope of work. For engineering and construction contracts, we recognize revenue on fixed-price contracts using the percentage-of-completion method where direct costs incurred to date are compared to total projected direct costs at contract completion. Prior to completion, our recognized profit margins on any fixed-price contract depend on the accuracy of our estimates and will increase to the extent that our actual costs are below the original estimated amounts. Conversely, if our costs exceed these estimates, our profit margins will decrease, and we may realize a loss on a project. The significance of these estimates varies with the complexity of the underlying project, with our large, fixed-price EPC projects being most significant.

Time and Materials Contracts. Under our time-and-materials contracts, we negotiate hourly billing rates and charge our clients based on the actual time that we expend on a project. In addition, clients reimburse us for our actual out of pocket costs of materials and other direct expenditures that we incur in connection with our performance under the contract. Our profit margins on time-and-materials contracts fluctuate based on actual labor and overhead costs that we directly charge or allocate to contracts compared with the negotiated billing rate and markup on other direct costs. Some of our time-and-materials contracts are subject to maximum contract values, and accordingly, revenue under these contracts is recognized under the percentage-of-completion method where costs incurred to date are compared to total projected costs at contract completion. Revenue on contracts that is not subject to maximum contract values is recognized based on the actual number of hours we spend on the projects plus any actual out of pocket costs of materials and other direct expenditures that we incur on the projects.

Operations and Maintenance Contracts. A portion of our contracts are operations and maintenance type contracts. Revenue is recognized on operations and maintenance contracts on a straight-line basis over the life of the contract once we have an arrangement, service has begun, the price is fixed or determinable and collectability is reasonably assured.

For all contract types noted above, change orders are included in total estimated contract revenue when it is probable that the change order will result in an addition to contract value and when the change order can be estimated. Management evaluates when a change order is probable based upon its experience in negotiating change orders, the customer’s written approval of such changes or separate documentation of change order costs that are identifiable. Additional contract revenue related to claims is included in total estimated contract revenue when the amount can be reliably estimated, which is typically evidenced by a contract or other evidence providing a legal basis for the claim.

Losses on construction and engineering contracts in process are recognized in their entirety when the loss becomes evident and the amount of loss can be reasonably estimated.

Income Taxes

In determining net income for financial statement purposes, we must make estimates and judgments in the calculation of tax assets and liabilities and in the determination of the recoverability of the deferred tax assets. We account for income taxes utilizing an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax effects of events that have been recognized in the financial statements or tax returns. In estimating future tax consequences, we generally consider all expected future events other than enactment of changes in the tax laws or rates. Deferred tax assets and liabilities are determined based on the difference between the tax basis of assets and liabilities and their reported amounts using enacted tax rates in effect for the year in which differences are expected to reverse. We must assess the likelihood that we will be able to recover our deferred tax assets. A valuation allowance is provided for deferred tax assets if it is more likely than not that these items will not be realized. Annually, we determine the amount of undistributed foreign earnings invested indefinitely in our foreign operations. Deferred taxes are not provided on those earnings.

In addition, the calculation of our income tax provision and tax assets and liabilities involves uncertainties in the application of complex tax regulations. For income tax benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. We record reserves for uncertain tax positions that do not meet these criteria

Goodwill

Goodwill represents the excess of costs over fair value of the assets of businesses we have acquired. Goodwill acquired in a purchase business combination is not amortized, but instead, is tested for impairment at least annually in accordance with the provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 350, Intangibles-Goodwill and Other (“ASC 350”), as amended. Our annual goodwill impairment test is conducted as of the first day of the fourth quarter of each year, however, upon the occurrence of certain triggering events, we are also required to test for impairment at dates other than the annual impairment testing date. In performing the impairment test, we evaluate our goodwill at the reporting unit level. Under the guidance of ASC 350, we have the option to assess either quantitative or qualitative factors to determine whether it is more likely than not that the fair values of our reporting units are less than their carrying amounts. If after assessing the totality of events or circumstances, we determine that it is not more likely than not that the fair values of our reporting units are less than their carrying amounts, then the next step of the impairment test is unnecessary. If we conclude otherwise, then we are required to test goodwill for impairment under the two-step process. The two-step process involves comparing the estimated fair value of each reporting unit to the unit’s carrying value, including goodwill. If the carrying value of a reporting unit does not exceed its fair value, the goodwill of the reporting unit is not considered impaired; therefore, the second step of the impairment test is unnecessary. If the carrying amount of a reporting unit exceeds its estimated fair value, we would then perform a second step to measure the amount of goodwill impairment loss to be recorded.

We determine the fair value of our reporting units using a combination of the income approach, the market approach, and the cost approach. The income approach calculates the present value of future cash flows based on assumptions and estimates derived from a review of our expected revenue growth rates, profit margins, business plans, cost of capital and tax rates for the reporting units. Our market based valuation method estimates the fair value of our reporting units by the application of a multiple to our estimate of a cash flow metric for each business unit. The cost approach estimates the fair value of a reporting unit as the net replacement cost using current market quotes.

Pension and Postretirement Employee Benefits

The unfunded or overfunded projected benefit obligation of our defined benefit pension plans and other postretirement benefits are recorded in our consolidated financial statements using actuarial valuations that are based on many assumptions. These assumptions primarily include discount rates, rates of compensation increases for participants, mortality rates, and long‑term rates of return on plan assets. We use judgment in selecting these assumptions each year because we have to consider not only the current economic environment in each host country, but also future market trends, changes in interest rates and equity market performance. Our plan liabilities are most sensitive to changes in the discount rates, which if reduced by 25 basis points, plan liabilities for the U.S. and non‑U.S. plans would increase by approximately $8.0 million and $35.0 million, respectively. For the year ended December 30, 2016, the combined U.S. and non-U.S. pension plan benefit obligation decreased by $293.5 million primarily due to the transaction by HGL which restructured benefits for those members transferring to HPS2 as well as settled the obligation related to the members who remained in the HPS, as previously discussed, and changes in the foreign currency translation. These reductions in the pension plan benefit obligations were partially offset by changes in actuarial assumptions primarily caused by decreased discount rates for both the U.S and non-U.S. pension plans. As a result of the restructured benefit transaction and actuarial assumption changes, accumulated other comprehensive income within consolidated equity increased by $92.9 million. Changes in these assumptions have an immaterial impact on our net periodic pension costs as most of our defined benefit arrangements have been closed to new entrants and ceased future accruals. Under current accounting guidance, any increase in expense resulting from changes in assumptions is recognized over time.

Recent Accounting Standards

Refer to Recent Accounting Standards in Note 1- Summary of Business and Significant Accounting Policies within our Notes to Consolidated Financial Statements in Item 15 of this Exhibit 99.1 of our Current Report on Form 8‑K.

Commitments and Contingencies

Refer to Note 19 – Commitments and Contingencies within our Notes to Consolidated Financial Statements in Item 15 of this Exhibit 99.1 of our Current Report on Form 8‑K.

PART IV

Item 15. Exhibits and Financial Statement Schedules

The following consolidated financial statements are included in this Exhibit 99.1 of our Current Report on Form 8-K:



Report of Independent Registered Public Accounting Firm		26
Consolidated Balance Sheets at December 30, 2016 and December 25, 2015		27
Consolidated Statements of Operations for the Years Ended December 30, 2016, December 25, 2015, and December 31, 2014		28
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 30, 2016, December 25, 2015, and December 31, 2014		29
Consolidated Statements of Stockholders’ Equity for the Years Ended December 30, 2016, December 25, 2015, and December 31, 2014		30
Consolidated Statements of Cash Flows for the Years Ended December 30, 2016, December 25, 2015, and December 31, 2014		31
Notes to Consolidated Financial Statements		32

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

CH2M HILL Companies, Ltd.:

We have audited the accompanying consolidated balance sheets of CH2M HILL Companies, Ltd. and subsidiaries (the Company) as of December 30, 2016 and December 25, 2015, and the related consolidated statements of operations, comprehensive (loss) income, stockholders’ equity, and cash flows for each of the years in the three year period ended December 30, 2016. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of CH2M HILL Companies, Ltd. and its subsidiaries as of December 30, 2016 and December 25, 2015, and the results of their operations and their cash flows for each of the years in the three year period ended December 30, 2016, in conformity with U.S. generally accepted accounting principles.

/s/ KPMG LLP

Denver, Colorado

March 7, 2017

except for the effects of changes in reportable operating segments, as discussed in Notes 1, 8 and 17, and discontinued operations, as discussed in Notes 1, 2, 4, 5, 8, 12, 13, 17, 18 and 20, as to which the date is September 19, 2017

CH2M HILL COMPANIES, LTD. AND SUBSIDIARIES

Consolidated Balance Sheet

(Dollars in thousands)


	December 30,		December 25,
	2016		2015
ASSETS
Current assets:
Cash and cash equivalents	$	121,365	$	148,979
Receivables, net—
Client accounts		602,363		717,337
Unbilled revenue		529,779		600,988
Other		11,469		17,209
Income tax receivable		18,375		19,800
Prepaid expenses and other current assets		92,097		91,585
Current assets of discontinued operations		14,449		75,293
Total current assets		1,389,897		1,671,191
Investments in unconsolidated affiliates		66,329		84,296
Property, plant and equipment, net		246,596		199,465
Goodwill		477,752		510,985
Intangible assets, net		38,024		59,011
Deferred income taxes		363,251		255,385
Employee benefit plan assets and other		86,777		76,765
Long-term assets of discontinued operations		1,836		4,201
Total assets	$	2,670,462	$	2,861,299
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	2,242	$	2,069
Accounts payable and accrued subcontractor costs		394,934		453,797
Billings in excess of revenue		227,501		265,000
Accrued payroll and employee related liabilities		272,458		328,585
Other accrued liabilities		210,121		244,918
Current liabilities of discontinued operations		208,105		181,956
Total current liabilities		1,315,361		1,476,325
Long-term employee related liabilities		308,118		599,033
Long-term debt		495,632		299,593
Other long-term liabilities		105,813		109,017
Total liabilities		2,224,924		2,483,968
Commitments and contingencies (Note 19)
Stockholders’ equity:
Preferred stock, $0.01 par value, 50,000,000 shares authorized of which 10,000,000 are designated as Series A; 4,821,600 and 3,214,400 issued and outstanding at December 30, 2016 and as of December 25, 2015, respectively		48		32
Common stock, $0.01 par value, 100,000,000 shares authorized; 25,148,399 and 26,282,913 issued and outstanding at December 30, 2016 and December 25, 2015, respectively		251		263
Additional paid‑in capital		169,573		125,381
Retained earnings		586,252		561,213
Accumulated other comprehensive loss		(209,408)		(274,704)
Total CH2M common stockholders’ equity		546,716		412,185
Noncontrolling interests - continuing operations		(8,643)		11,942
Noncontrolling interests - discontinued operations		(92,535)		(46,796)
Total stockholders' equity		445,538		377,331
Total liabilities and stockholders’ equity	$	2,670,462	$	2,861,299

The accompanying notes are an integral part of these consolidated financial statements.

CH2M HILL COMPANIES, LTD. AND SUBSIDIARIES

Consolidated Statements of Operations

(Dollars in thousands except per share amounts)


	For the years ended
	December 30,		December 25,		December 31,
	2016		2015		2014
Gross revenue	$	5,195,667	$	5,149,781	$	5,216,524
Equity in earnings of joint ventures and affiliated companies		51,957		46,765		54,918
Operating expenses:
Direct cost of services		(4,288,408)		(4,144,293)		(4,112,330)
Selling, general and administrative		(909,254)		(924,301)		(1,076,000)
Impairment losses on goodwill and intangibles		—		—		(27,766)
Operating income		49,962		127,952		55,346
Other income (expense):
Interest income		544		211		704
Interest expense		(16,183)		(14,551)		(14,926)
Income from continuing operations before provision for income taxes		34,323		113,612		41,124
Benefit (provision) for income taxes from continuing operations		87,148		(28,762)		(46,958)
Net income (loss) from continuing operations		121,471		84,850		(5,834)
Net (loss) income from discontinued operations		(245,725)		7,267		(312,768)
Net (loss) income		(124,254)		92,117		(318,602)
Less: income attributable to noncontrolling interests from continuing operations		(4,611)		(3,830)		(6,606)
Less: loss (income) attributable to noncontrolling interests from discontinued operations		143,903		(7,884)		143,671
Net income (loss) attributable to CH2M	$	15,038	$	80,403	$	(181,537)

Net income (loss) attributable to CH2M per common share1:
Basic net income (loss) from continuing operations per common share	$	0.26	$	2.64	$	(0.44)
Basic net loss from discontinued operations per common share		(0.23)		(0.02)		(5.98)
Basic net income (loss) per common share	$	0.03	$	2.62	$	(6.42)

Diluted net income (loss) from continuing operations per common share	$	0.26	$	2.63	$	(0.44)
Diluted net loss from discontinued operations per common share		(0.23)		(0.02)		(5.98)
Diluted net income (loss) per common share	$	0.03	$	2.61	$	(6.42)

Basic weighted average number of common shares		25,648,091		27,119,498		28,256,864
Diluted weighted average number of common shares		25,732,114		27,181,179		28,256,864

1 Represents net (loss) income attributable to CH2M less (i) income allocated to preferred stockholders of $152 for the year ended December 30, 2016 and $4,279 for the year ended December 25, 2015, respectively, and (ii) accrued dividends attributable to preferred stockholders of $14,006 and $5,088 for the years ended December 30, 2016 and December 25, 2015, respectively.

The accompanying notes are an integral part of these consolidated financial statements.

CH2M HILL COMPANIES, LTD. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Loss)

(Dollars in thousands)


	December 30,		December 25,		December 31,
	2016		2015		2014
Net (loss) income	$	(124,254)	$	92,117	$	(318,602)
Other comprehensive income (loss):
Foreign currency translation adjustments		(27,141)		(32,181)		(23,903)
Benefit plan adjustments, net of tax		92,437		29,834		(109,279)
Unrealized loss on available-for-sale securities:
Loss on available-for-sale securities and other, net of tax		—		—		(27)
Less: reclassification adjustment for gains included in net income, net of tax		—		—		(185)
Other comprehensive income (loss)		65,296		(2,347)		(133,394)
Comprehensive (loss) income		(58,958)		89,770		(451,996)
Less: income attributable to noncontrolling interests from continuing operations		17,501		3,830		6,606
Less: (loss) income attributable to noncontrolling interests from discontinued operations		(143,903)		7,884		(143,671)
Comprehensive income (loss) attributable to CH2M	$	67,444	$	78,056	$	(314,931)

The accompanying notes are an integral part of these consolidated financial statements.

CH2M HILL COMPANIES, LTD. AND SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity

(Dollars in thousands)


											Accumulated
							Additional				Other				Total
	Preferred Stock			Common Stock			Paid-In		Retained		Comprehensive		Noncontrolling		Stockholders’
	Shares	Amount		Shares	Amount		Capital		Earnings		Loss		Interest1		Equity
Balance at December 31, 2013	—	$	—	28,782,277	$	288	$	—	$	763,095	$	(138,963)	$	18,164	$	642,584
Net loss attributable to CH2M	—		—	—		—		—		(181,537)		—		—		(181,537)
Income attributable to noncontrolling interests from continuing operations	—		—	—		—		—		—		—		6,606		6,606
Loss attributable to noncontrolling interests from discontinued operations	—		—	—		—		—		—		—		(143,671)		(143,671)
Other comprehensive (loss) income:
Foreign currency translation adjustments	—		—	—		—		—		—		(23,903)		—		(23,903)
Benefit plan adjustments, net of tax	—		—	—		—		—		—		(109,279)		—		(109,279)
Unrealized loss on equity investments, net of tax	—		—	—		—		—		—		(27)		—		(27)
Reclassification adjustment for gains included in net income, net of tax	—		—	—		—		—		—		(185)		—		(185)
Distributions to affiliates, net - continuing operations	—		—	—		—		—		—		—		(6,289)		(6,289)
Shares issued in connection with stock based compensation and employee benefit plans	—		—	934,514		9		48,949		—		—		—		48,958
Shares issued in connection with purchase of TERA	—		—	170,088		2		10,829		—		—		—		10,831
Shares purchased and retired	—		—	(2,563,309)		(26)		(59,778)		(96,716)		—		—		(156,520)
Balance at December 31, 2014	—	$	—	27,323,570	$	273	$	—	$	484,842	$	(272,357)	$	(125,190)	$	87,568
Net income attributable to CH2M	—		—	—		—		—		80,403		—		—		80,403
Income attributable to noncontrolling interests from continuing operations	—		—	—		—		—		—		—		3,830		3,830
Income attributable to noncontrolling interests from discontinued operations	—		—	—		—		—		—		—		7,884		7,884
Other comprehensive (loss) income:
Foreign currency translation adjustments	—		—	—		—		—		—		(32,181)		—		(32,181)
Benefit plan adjustments, net of tax	—		—	—		—		—		—		29,834		—		29,834
Distributions to affiliates, net - continuing operations	—		—	—		—		—		—		—		(3,732)		(3,732)
Investments in affiliates, net - discontinued operations	—		—	—		—		—		—		—		82,354		82,354
Shares issued in connection with stock based compensation and employee benefit plans	—		—	607,846		6		32,968		—		—		—		32,974
Series A Preferred Stock issued for cash	3,214,400		32	—		—		191,645		—		—		—		191,677
Shares purchased and retired	—		—	(1,648,503)		(16)		(99,232)		(4,032)		—		—		(103,280)
Balance at December 25, 2015	3,214,400		32	26,282,913		263		125,381		561,213		(274,704)		(34,854)		377,331
Cumulative retained earnings adjustment due to ASU 2016-09										11,078						11,078
Balance at December 26, 2015	3,214,400		32	26,282,913		263		125,381		572,291		(274,704)		(34,854)		388,409
Net income attributable to CH2M	—		—	—		—		—		15,038		—		—		15,038
Income attributable to noncontrolling interests from continuing operations	—		—	—		—		—		—		—		4,611		4,611
Loss attributable to noncontrolling interests from discontinued operations	—		—	—		—		—		—		—		(143,903)		(143,903)
Other comprehensive (loss) income:
Foreign currency translation adjustments	—		—	—		—		—		—		(27,141)		—		(27,141)
Benefit plan adjustments, net of tax	—		—	—		—		—		—		79,547		—		79,547
Shares issued to noncontrolling interest in Halcrow Group Limited	—		—	—		—		11,838

CH2M HILL COMPANIES LTD 8-K