Are

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-Q

(Mark One)

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March~~June 3130, 2017

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 000-27261

CH2M HILL Companies, Ltd.

(Exact name of registrant as specified in its charter)


Delaware		93-0549963
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)


9191 South Jamaica Street,
Englewood, CO		80112-5946
(Address of principal executive offices)		(Zip Code)

(303) 771-0900

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

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


Large accelerated filer ☐		Accelerated filer ☐

Non-accelerated filer ☒		Smaller reporting company ☐
(Do not check if a
smaller reporting company)		Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of the registrant’s common stock as of ~~April~~August 273, 2017 was 24,~~769~~591,~~261~~691.

Table of Contents

CH2M HILL COMPANIES, LTD.

TABLE OF CONTENTS

	PART I. FINANCIAL INFORMATION
Item 1.	FINANCIAL STATEMENTS
	Consolidated Balance Sheets as of March 31, 2017 and December 30, 2016 (unaudited)	3
	Consolidated Balance Sheets as of June 30, 2017 and December 30, 2016 (unaudited)	3
	Consolidated Statements of Income for the Three Months Ended March 31, 2017 and March 25, 2016 (unaudited)	4
	Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2017 and June 24, 2016 (unaudited)	4
	Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2017 and March 25, 2016 (unaudited)	5
	Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2017 and June 24, 2016 (unaudited)	5
	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2017 and March 25, 2016 (unaudited)	6
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2017 and June 24, 2016 (unaudited)	6
	Notes to Consolidated Financial Statements (unaudited)	7
Item 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	2526
Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	3335
Item 4.	CONTROLS AND PROCEDURES	3336
	PART II. OTHER INFORMATION
Item 1.	LEGAL PROCEEDINGS	3537
Item 1A.	RISK FACTORS	3639
Item 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	3640
Item 6.	EXHIBITS	3741
SIGNATURES		3842

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CH2M HILL COMPANIES, LTD. AND SUBSIDIARIES

Consolidated Balance Sheets

(Unaudited)

(Dollars in thousands)

	March 31,		December 30,
	June 30,		December 30,
	2017		2016
ASSETS
Current assets:
Cash and cash equivalents	$	94112,~~560~~400	$	121,365
Receivables, net—
Client accounts		~~550~~568,~~024~~386		602,363
Unbilled revenue		~~562~~573,~~317~~162		529,779
Other		913,~~713~~678		11,469
Income tax receivable		2225,~~526~~031		18,375
Prepaid expenses and other current assets		86103,~~454~~899		92,097
Current assets of discontinued operations		~~1,244~~827		14,449
Total current assets		1,~~326~~397,~~838~~383		1,389,897
Investments in unconsolidated affiliates		6573,~~666~~626		66,329
Property, plant and equipment, net		~~239~~233,~~569~~536		246,596
Goodwill		~~484~~499,~~161~~221		477,752
Intangible assets, net		3430,~~369~~496		38,024
Deferred income taxes		~~362~~348,~~328~~446		363,251
Employee benefit plan assets and other		8593,~~730~~594		86,777
Long-term assets of discontinued operations		—		1,836
Total assets	$	2,~~598~~676,~~661~~302	$	2,670,462
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	2,~~233~~231	$	2,242
Accounts payable and accrued subcontractor costs		~~349~~369,~~457~~515		394,934
Billings in excess of revenue		~~213~~211,~~062~~141		227,501
Accrued payroll and employee related liabilities		~~252~~290,~~338~~407		272,458
Other accrued liabilities		~~225~~194,~~286~~668		210,121
Current liabilites of discontinued operations		753		208,105
Current liabilities of discontinued operations		1,239		208,105
Total current liabilities		1,~~043~~069,~~129~~201		1,315,361
Long-term employee related liabilities		~~296~~294,~~415~~643		308,118
Long-term debt		~~515~~520,~~899~~234		495,632
Other long-term liabilities		~~108~~102,~~469~~216		105,813
Long-term liabilites of discontinued operations		83,403		—
Long-term liabilities of discontinued operations		77,920		—
Total liabilities		2,~~047~~064,~~315~~214		2,224,924
Commitments and contingencies (Note 15)
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 issued and outstanding at March 31, 2017 and as of December 30, 2016		48		48
Preferred stock, $0.01 par value, 50,000,000 shares authorized of which 10,000,000 are designated as Series A; 4,821,600 issued and outstanding at June 30, 2017 and as of December 30, 2016		48		48
Common stock, $0.01 par value, 100,000,000 shares authorized; 24,769,196 and 25,148,399 issued and outstanding at March 31, 2017 and December 30, 2016, respectively		248		251
Common stock, $0.01 par value, 100,000,000 shares authorized; 24,580,276 and 25,148,399 issued and outstanding at June 30, 2017 and December 30, 2016, respectively		246		251
Additional paid-in capital		~~151~~144,~~136~~197		169,573
Retained earnings		~~600~~642,~~211~~504		586,252
Accumulated other comprehensive loss		(~~193~~171,~~823~~234)		(209,408)
Total CH2M common stockholders’ equity		~~557~~615,~~820~~761		546,716
Noncontrolling interests of continuing operations		(63,~~474~~673)		(8,643)
Noncontrolling interests of discontinued operations		—		(92,535)
Total stockholders' equity		~~551~~612,~~346~~088		445,538
Total liabilities and stockholders’ equity	$	2,~~598~~676,~~661~~302	$	2,670,462

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

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CH2M HILL COMPANIES, LTD. AND SUBSIDIARIES

Consolidated Statements of ~~Income~~Operations

(Unaudited)

(Dollars in thousands, except per share data)

	Three Months Ended				Six Months Ended
	March 31,		March 25,
	June 30,		June 24,		June 30,		June 24
	2017		2016		2017		2016
Gross revenue	$	1,~~240~~284,~~433~~859	$	1,~~287~~290,~~010~~965	$	2,525,292	$	2,577,975
Equity in earnings of joint ventures and affiliated companies		715,~~361~~378		98,~~053~~717		22,739		17,770
Operating expenses:
Direct cost of services		(1,~~028~~022,~~687~~267)		(1,~~024~~078,~~993~~582)		(2,050,954)		(2,103,575)
Selling, general and administrative		(~~189~~205,~~656~~342)		(~~230~~235,~~048~~151)		(394,998)		(465,199)
Operating income		29,451		41,022
Operating income (loss)		72,628		(14,051)		102,079		26,971
Other income (expense):
Interest income		~~100~~108		60110		208		170
Interest expense		(69,~~573~~837)		(32,~~267~~879)		(16,410)		(6,146)
Income from continuing operations before provision for income taxes		22,978		37,815
Income (loss) from continuing operations before provision for income taxes		62,899		(16,820)		85,877		20,995
Provision for income taxes from continuing operations		(5,212)		(13,970)
(Provision) benefit for income taxes from continuing operations		(15,739)		11,162		(20,951)		(2,808)
Net income from continuing operations		17,766		23,845
Net income (loss) from continuing operations		47,160		(5,658)		64,926		18,187
Net income (loss) from discontinued operations		390		(121)
Net loss from discontinued operations		(531)		(148,532)		(141)		(148,653)
Net income		18,156		23,724
Net income (loss)		46,629		(154,190)		64,785		(130,466)
Less: income attributable to noncontrolling interests from continuing operations		(4,~~257~~336)		(~~471~~4,348)		(8,593)		(4,819)
Less: loss attributable to noncontrolling interests from discontinued operations		60—		196,~~326~~496		60		97,822
Net income attributable to CH2M	$	13,959	$	24,579
Net income (loss) attributable to CH2M	$	42,293	$	(62,042)	$	56,252	$	(37,463)
Net income attributable to CH2M per common share1:
Net income (loss) attributable to CH2M per common share1:
Basic net income from continuing operations per common share	$	0.32	$	0.70
Basic net income (loss) from continuing operations per common share	$	1.24	$	(0.41)	$	1.55	$	0.60
Basic net income from discontinued operations per common share		0.01		0.04
Basic net loss from discontinued operations per common share		(0.01)		(2.12)		—		(2.27)
Basic net income per common share	$	0.33	$	0.74
Basic net income (loss) per common share	$	1.23	$	(2.53)	$	1.55	$	(1.67)
Diluted net income from continuing operations per common share	$	0.32	$	0.70
Diluted net income (loss) from continuing operations per common share	$	1.24	$	(0.41)	$	1.55	$	0.60
Diluted net income from discontinued operations per common share		0.01		0.04
Diluted net loss from discontinued operations per common share		(0.01)		(2.12)		—		(2.27)
Diluted net income per common share	$	0.33	$	0.74
Diluted net income (loss) per common share	$	1.23	$	(2.53)	$	1.55	$	(1.67)
Basic weighted average number of common shares		24,~~955~~663,~~713~~914		2625,~~305~~993,~~098~~448		24,809,814		26,064,581
Diluted weighted average number of common shares		24,~~958~~666,~~734~~714		2625,~~506~~993,~~923~~448		24,814,363		26,064,581

1 Represents net income (loss) attributable to CH2M less (i) income allocated to preferred stockholders of $16,~~700~~372 and $8,106 for the three and six months ended ~~March~~June 3130, 2017, respectively, and $~~2,451~~0 for the three and six months ended ~~March 25~~June 24, 2016, and (ii) accrued dividends attributable to preferred stockholders of $35,~~989~~654 and $9,643 for the three and six months ended ~~March 31~~June 30, 2017, and $23,~~564~~612 and $6,176 for the three and six months ended ~~March 25~~June 24, 2016.

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

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CH2M HILL COMPANIES, LTD.

Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

(Dollars in thousands)

	Three Months Ended				Six Months Ended
	March 31,		March 25,
	June 30,		June 24,		June 30,		June 24
	2017		2016		2017		2016
Net income	$	18,156	$	23,724
Net income (loss)	$	46,629	$	(154,190)	$	64,785	$	(130,466)
Other comprehensive income:
Foreign currency translation adjustments		1320,~~608~~332		110,~~166~~599		33,940		11,765
Benefit plan adjustments, net of tax		12,~~977~~257		21,~~120~~950		4,234		4,070
Other comprehensive income		1522,~~585~~589		312,~~286~~549		38,174		15,835
Comprehensive income		33,741		27,010
Comprehensive income (loss)		69,218		(141,641)		102,959		(114,631)
Less: income attributable to noncontrolling interests from continuing operations		4,~~393~~742		~~471~~4,348		9,135		4,819
Less: loss attributable to noncontrolling interests from discontinued operations		~~(60)~~—		(196,~~326~~496)		(60)		(97,822)
Comprehensive income attributable to CH2M	$	29,408	$	27,865
Comprehensive income (loss) attributable to CH2M	$	64,476	$	(49,493)	$	93,884	$	(21,628)

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

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CH2M HILL COMPANIES, LTD. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited, Dollars in thousands)

(Dollars in thousands)


	Six Months Ended
	June 30,		June 24,
	2017		2016
Cash flows from operating activities:
Net income (loss)	$	64,785	$	(130,466)
Adjustments to reconcile net income to net cash provided by (used in) continuing operating activities:
Net loss from discontinued operations		141		148,653
Depreciation and amortization		29,994		30,944
Stock-based employee compensation		17,302		18,277
Loss on disposal of property, plant and equipment		852		202
Amortization of debt issuance costs		289		—
Allowance for uncollectible accounts		2,366		347
Deferred income taxes		19,005		(82,022)
Undistributed earnings and gains from unconsolidated affiliates		(22,739)		(17,770)
Distributions of income from unconsolidated affiliates		29,061		27,203
Contributions to defined benefit pension plans		(12,781)		(19,026)
Excess tax benefits from stock-based compensation		1,368		2,502
Change in assets and liabilities of continuing operations:
Receivables and unbilled revenue		934		28,518
Prepaid expenses and other		(16,112)		(11,778)
Accounts payable and accrued subcontractor costs		(31,027)		(47,696)
Billings in excess of revenue		(19,326)		37,625
Accrued payroll and employee related liabilities		17,936		(18,095)
Other accrued liabilities		(19,830)		(17,336)
Income tax receivable		(6,723)		20,606
Long-term employee related liabilities and other		(8,265)		30,559
Net cash provided by operating activities from continuing operations		47,230		1,247
Net cash used in operating activities from discontinued operations		(14,215)		(113,692)
Net cash provided by (used in) operating activities		33,015		(112,445)
Cash flows from investing activities:
Capital expenditures		(9,006)		(67,357)
Acquisition related payments		(213)		(15,788)
Investments in unconsolidated affiliates		(13,866)		(12,315)
Distributions of capital from unconsolidated affiliates		875		6,663
Proceeds from sale of operating assets		1,485		815
Net cash used in investing activities from continuing operations		(20,725)		(87,982)
Net cash used in investing activities from discontinued operations		(8,109)		(169)
Net cash used in investing activities		(28,834)		(88,151)
Cash flows from financing activities:
Borrowings on long-term debt		1,118,126		1,235,328
Payments on long-term debt		(1,093,833)		(1,142,074)
Repurchases and retirements of common stock		(42,683)		(76,387)
Proceeds from the issuance of preferred stock, net of issuance costs		—		99,800
Settlement of tax-withholding obligation on stock-based compensation		(2,407)		(2,607)
Net distributions to noncontrolling interests for continuing operations		(2,847)		(2,860)
Net cash (used in) provided by financing activities from continuing operations		(23,644)		111,200
Net cash provided by financing activities from discontinued operations		4,635		48,739
Net cash (used in) provided by financing activities		(19,009)		159,939
Effect of deconsolidation of a joint venture partnership on cash		(13,011)		—
Effect of exchange rate changes on cash		9,210		1,019
Decrease in cash and cash equivalents	$	(18,629)	$	(39,638)

Cash and cash equivalents from continuing operations, beginning of period	$	121,365	$	148,979
Cash and cash equivalents from discontinued operations, beginning of period		9,664		48,042
Cash and cash equivalents, beginning of period	$	131,029	$	197,021

Cash and cash equivalents from continuing operations, end of period	$	112,400	$	149,737
Cash and cash equivalents from discontinued operations, end of period		—		7,646
Cash and cash equivalents, end of period	$	112,400	$	157,383
Supplemental disclosures:
Cash paid for interest	$	13,658	$	5,860
Cash paid for income taxes	$	4,686	$	10,347

	Three Months Ended
	March 31,		March 25,
	2017		2016
Cash flows from operating activities:
Net income	$	18,156	$	23,724
Adjustments to reconcile net income to net cash provided by (used in) continuing operating activities:
Net (income) loss from discontinued operations		(390)		121
Depreciation and amortization		14,870		15,531
Stock-based employee compensation		5,587		9,124
Loss on disposal of property, plant and equipment		1,250		296
Allowance for uncollectible accounts		1,253		215
Deferred income taxes		2,910		(13,483)
Undistributed earnings and gains from unconsolidated affiliates		(7,361)		(9,053)
Distributions of income from unconsolidated affiliates		13,757		18,170
Contributions to defined benefit pension plans		(5,040)		(8,376)
Excess tax benefits from stock-based compensation		1,324		2,068
Change in assets and liabilities of continuing operations:
Receivables and unbilled revenue		26,696		34,917
Prepaid expenses and other		7,701		205
Accounts payable and accrued subcontractor costs		(46,193)		(30,421)
Billings in excess of revenue		(15,845)		(28,595)
Accrued payroll and employee related liabilities		(19,329)		5,137
Other accrued liabilities		13,444		(36,047)
Income tax receivable		(4,753)		19,757
Long-term employee related liabilities and other		(4,312)		11,202
Net cash provided by operating activities from continuing operations		3,725		14,492
Net cash used in operating activities from discontinued operations		(14,587)		(29,742)
Net cash used in operating activities		(10,862)		(15,250)
Cash flows from investing activities:
Capital expenditures		(4,294)		(36,828)
Investments in unconsolidated affiliates		(5,682)		(8,235)
Distributions of capital from unconsolidated affiliates		494		2,621
Proceeds from sale of operating assets		177		533
Net cash used in investing activities from continuing operations		(9,305)		(41,909)
Net cash used in investing activities from discontinued operations		(2,571)		(169)
Net cash used in investing activities		(11,876)		(42,078)
Cash flows from financing activities:
Borrowings on long-term debt		457,457		573,662
Payments on long-term debt		(437,203)		(490,110)
Repurchases and retirements of common stock		(24,028)		(38,130)
Settlement of tax-withholding obligation on stock-based compensation		(1,902)		(1,983)
Net distributions to noncontrolling interests for continuing operations		(1,700)		(624)
Net cash (used in) provided by financing activities from continuing operations		(7,376)		42,815
Net cash provided by financing activities from discontinued operations		4,635		19,032
Net cash (used in) provided by financing activities		(2,741)		61,847
Effect of deconsolidation of a joint venture partnership on cash		(13,011)		—
Effect of exchange rate changes on cash		2,021		(1,880)
(Decrease) increase in cash and cash equivalents	$	(36,469)	$	2,639
Cash and cash equivalents from continuing operations, beginning of period	$	121,365	$	148,979
Cash and cash equivalents from discontinued operations, beginning of period		9,664		48,042
Cash and cash equivalents, beginning of period	$	131,029	$	197,021
Cash and cash equivalents from continuing operations, end of period	$	94,560	$	185,699
Cash and cash equivalents from discontinued operations, end of period		—		13,961
Cash and cash equivalents, end of period	$	94,560	$	199,660
Supplemental disclosures:
Cash paid for interest	$	6,476	$	3,075
Cash paid for income taxes	$	6,837	$	3,730

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

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CH2M HILL COMPANIES, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~March~~June 3130, 2017

(Unaudited)

(1) Summary of Business and Significant Accounting Policies

Summary of 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.

Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and according to instructions to Form 10-Q and the provisions of Article 10 of Regulation S-X that are applicable to interim financial statements. Accordingly, these statements do not include all of the information required by GAAP or the Securities and Exchange Commission (“SEC”) rules and regulations for annual audited financial statements. The preparation of financial statements, in conformity with GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Estimates and assumptions have been prepared on the basis of the most current and best available information. Actual results could differ from those estimates.

In the opinion of management, the accompanying unaudited interim consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the results for the interim periods presented. The results of operations for any interim period are not necessarily indicative of results for the full year. These unaudited interim consolidated financial statements should be read in conjunction with our consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 30, 2016.

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.

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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.

Accounts Receivable

We reduce accounts receivable by estimating an allowance for amounts that may become uncollectible in the future. Management determines the estimated allowance for uncollectible amounts based on their judgments in evaluating the aging of the receivables and the financial condition of our clients, which may be dependent on the type of client and the client’s current financial condition.

Unbilled Revenue and Billings in Excess of Revenue

Unbilled revenue represents the excess of contract revenue recognized over billings to date on contracts in process. These amounts become billable according to the contract terms, which usually consider the passage of time, achievement of certain milestones or completion of the project.

Billings in excess of revenue represent the excess of billings to date, per the contract terms, over work performed and revenue recognized on contracts in process using the percentage-of-completion method.

Fair Value Measurements

Fair value represents the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Assets and liabilities are valued based upon observable and non-observable inputs. Valuations using Level 1 inputs are based on unadjusted quoted prices that are available in active markets for the identical assets or liabilities at the measurement date. Level 2 inputs utilize significant other observable inputs available at the measurement date, other than quoted prices included in Level 1, either directly or indirectly; and valuations using Level 3 inputs are based on significant unobservable inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment. There were no significant transfers between levels during any period presented.

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Restructuring and Related Charges

An exit activity includes but is not limited to a restructuring, such as a sale or termination of a line of business, the closure of business activities in a particular location, the relocation of business activities from one location to another, changes in management structure, and a fundamental reorganization that affects the nature and focus of operations. The Company recognizes a current and long-term liability, within other accrued liabilities and other long term liabilities, respectively, and the related expense, within selling, general and administrative expense, for restructuring costs when the liability is incurred and can be measured. Restructuring accruals are based upon management estimates at the time they are recorded and can change depending upon changes in facts and circumstances subsequent to the date the original liability was recorded. Nonretirement postemployment benefits offered as special termination benefits to employees, such as a voluntary early retirement program, are recognized as a liability and a loss when the employee accepts the offer and the amount can be reasonably estimated.

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. 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. 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 by 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. If the carrying amount of a reporting unit exceeds its estimated fair value, we would recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.

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.

Intangible Assets

We may acquire other intangible assets in business combinations. Intangible assets are stated at fair value as of the date they are acquired in a business combination. We amortize intangible assets with finite lives on a straight-line basis over their expected useful lives, currently up to ten years. We test our intangible assets for impairment in the period in which a triggering event or change in circumstance indicates that the carrying amount of the intangible asset may not be recoverable. If the carrying amount of the intangible asset exceeds the fair value, an impairment loss will be recognized in the amount of the excess. We determine the fair value of the intangible assets using a discounted cash flow approach.

Derivative Instruments

We primarily enter into derivative financial instruments to mitigate exposures to changing foreign currency exchange rates on our earnings and cash flows. We are primarily subject to this risk on long-term projects whereby the currency being paid by our client differs from the currency in which we incurred our costs, as well as intercompany trade balances among entities with differing currencies. We do not enter into derivative transactions for speculative or trading purposes. All derivatives are carried at fair value on the consolidated balance sheets in other receivables or other accrued liabilities as applicable. The periodic change in the fair value of the derivative instruments related to our business group operations is recognized in earnings within direct costs. The periodic change in the fair value of the derivative instruments related to our general corporate foreign currency exposure is recognized within selling, general and administrative expense.

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Retirement and Tax-Deferred Savings Plan

The Retirement and Tax Deferred Savings Plan is a retirement plan that includes a cash or deferred arrangement that is intended to qualify under Sections 401(a) and 401(k) of the Internal Revenue Code and provides benefits to eligible employees upon retirement. The 401(k) Plan allows for matching contributions up to 58.33% of the first 6% of elective deferrals up to 3.5% of the employee’s quarterly base compensation, although specific subsidiaries may have different limits on employer matching. The matching contributions may be made in both cash and/or stock. Expenses related to matching contributions made in common stock for the 401(k) Plan for the three and six months ended ~~March~~June 3130, 2017 were $28.6 million and $11.2 million, respectively, as compared to $57.54 million and $12.9 million for the three and six months ended ~~March~~June 2524, 2016, respectively.

Recently Adopted Accounting Standards

In ~~March~~May 2017, the FASB issued Accounting Standards Update ("ASU") 2017-0709, Compensation-~~Retirement~~ ~~Benefits~~Stock Compensation (Topic ~~715~~718): ~~Improving~~Scope ~~the Presentation~~ of ~~Net~~Modification ~~Periodic Pension Cost and Net Periodic Postretirement Benefit Cost~~Accounting. ~~The~~ amendments in this ASU require that an employer disaggregate the service cost component from the other components of net benefit cost and report the service cost component in the same statement of income line item as other compensation costs for the relevant employees. Additionally, only the service cost component of net benefit cost would be eligible for capitalization. The ~~ASU requires that the other components of net benefit cost be presented outside of income or loss from operations on the statement of income, separate from the service cost component. The~~ amendments in this update ~~should~~provide beguidance ~~applied~~about ~~retrospectively~~which ~~for~~changes ~~the~~to ~~presentation of~~ the ~~service~~terms ~~cost~~or ~~component~~conditions ~~and the other components~~ of ~~net~~a ~~periodic~~share-based ~~pension~~payment ~~cost~~award inrequire ~~the~~an ~~income~~entity ~~statement~~to ~~and~~apply ~~prospectively,~~modification onaccounting ~~and after the effective date, for the capitalization of the service cost component of net periodic benefit cost and net periodic postretirement benefit~~ in ~~assets~~Topic 718. This ~~guidance~~ASU is effective for ~~fiscal~~annual ~~years~~periods beginning after December 15, 2017, and interim periods within those ~~years~~annual periods, and early adoption is permitted. ~~Currently,~~The ~~the~~amendments ~~net~~in ~~periodic~~this ~~pension~~update ~~expense~~should orbe ~~income~~applied ~~related~~prospectively to ~~our~~an ~~defined~~award ~~pension~~modified ~~benefit~~on ~~plans~~or inafter the Uadoption date.S. Once ~~and internationally is presented within selling~~effective, ~~general and administrative expense. Therefore,~~ we ~~anticipate~~will ~~the~~apply ~~adoption of~~ this ~~ASU~~guidance to ~~impact~~future ~~the~~changes ~~presentation~~to ofterms ~~our~~or ~~statement~~conditions of ~~operations,~~our ~~including~~stock-based ~~the~~payment ~~subtotal~~awards ~~of income or loss from operations. Refer~~ to ~~Note~~determine 13if –it ~~Defined~~triggers ~~Benefit~~modification ~~Plans~~accounting, ~~and~~but ~~Other~~we ~~Postretirement~~do ~~Benefits~~not ~~for~~believe ~~detail~~this ofASU ~~our~~will ~~net~~materially ~~periodic~~change ~~pension~~how ~~expense~~we orcurrently ~~income~~evaluate bysimilar ~~component~~occurrences.

In ~~January~~March 2017, the FASB issued ~~Accounting Standard Update ("~~ASU") 2017-0407, ~~Intangibles~~Compensation-~~Goodwill~~Retirement ~~and~~Benefits ~~Other~~ (Topic ~~350~~715): ~~Simplifying~~Improving the ~~Test~~Presentation of ~~Goodwill~~Net ~~Impairment~~Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. ~~This~~ The amendments in this ASU ~~was~~require ~~issued~~that ~~with~~an employer disaggregate the ~~objective~~service cost component from the other components of ~~simplifying~~net benefit cost and report the ~~subsequent~~service ~~measurement~~cost component in the same statement of ~~goodwill~~income ~~for~~line ~~public~~item ~~business~~as ~~entities~~other ~~and~~compensation ~~not-~~costs for~~-profit~~ ~~entities~~the byrelevant ~~eliminating~~employees. Additionally, only the ~~second~~service ~~step~~cost component of ~~the~~net ~~goodwill~~benefit ~~impairment~~cost ~~test~~would be eligible for capitalization. AsThe aASU ~~result,~~requires anthat ~~entity~~the ~~would~~other ~~perform~~components ~~its~~of ~~annual,~~net orbenefit ~~interim,~~cost ~~goodwill~~be ~~impairment~~presented ~~test~~outside byof ~~comparing~~income ~~the~~or ~~fair~~loss ~~value~~from operations on the statement of aincome, ~~reporting~~separate ~~unit~~from ~~with~~the ~~its~~service ~~carrying~~cost ~~amount~~component. The ~~and~~amendments ~~recognize~~in anthis ~~impairment~~update ~~charge~~should be applied retrospectively for the ~~amount~~presentation byof ~~which~~the service cost component and the ~~carrying~~other ~~amount~~components ~~exceeds~~of net periodic pension cost in the ~~reporting~~income ~~unit’s~~statement ~~fair~~and ~~value. The~~prospectively, ~~loss~~on ~~recognized~~and ~~should~~after ~~not~~the ~~exceed~~effective date, for the ~~total~~capitalization ~~amount~~of the service cost component of ~~goodwill~~net ~~allocated~~periodic tobenefit ~~that~~cost ~~reporting~~and ~~unit~~net periodic postretirement benefit in assets. ~~During~~ This ~~the~~guidance ~~three~~is ~~months~~effective ~~ended~~for ~~March~~fiscal years beginning after December 3115, 2017, weand interim periods within those years, and early ~~adopted~~adoption ~~this~~is ~~standard~~permitted. Currently, ~~which~~the ~~will~~net beperiodic ~~effective~~pension ~~for~~expense or income related to our ~~annual~~defined ~~goodwill~~pension ~~impairment~~benefit ~~test~~plans toin bethe ~~conducted~~U.S. asand internationally is presented within selling, general and administrative expense. Therefore, we anticipate the adoption of this ASU to impact the ~~first~~presentation ~~day~~of our statement of ~~the~~operations, ~~fourth~~including ~~quarter~~the subtotal of ~~2017~~income or loss from operations. WeRefer doto ~~not~~Note ~~believe~~13 ~~this~~– ~~ASU~~Defined ~~will~~Benefit ~~have~~Plans aand ~~material~~Other ~~impact~~Postretirement onBenefits for detail of our ~~financial~~net ~~statements~~periodic pension expense or income by component.

In January 2017, the FASB issued ~~Accounting Standard Update ("~~ASU") 2017-0104, ~~Business~~Intangibles-Goodwill ~~Combinations~~and Other (Topic ~~805~~350): ~~Clarifying~~Simplifying the ~~Definition~~Test of aGoodwill ~~Business)~~Impairment. This ASU ~~clarifies~~was issued with the ~~definition~~objective of asimplifying the subsequent measurement of goodwill for public business ~~with~~entities and not-for-profit entities by eliminating the ~~objective~~second step of ~~adding~~the ~~guidance~~goodwill toimpairment ~~assist~~test. As ~~entities~~a result, an entity would perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with ~~evaluating~~its ~~whether~~carrying ~~transactions~~amount ~~should~~and berecognize ~~accounted~~an impairment charge for asthe ~~acquisitions~~amount ~~(or~~by ~~disposals)~~which ofthe ~~assets~~carrying oramount ~~businesses~~exceeds the reporting unit’s fair value. ~~This~~The ~~ASU~~loss ~~will~~recognized beshould ~~effective~~not ~~for~~exceed ~~fiscal~~the ~~years~~total ~~beginning~~amount ~~after~~of ~~December~~goodwill allocated to that reporting unit. During the three months ended March 1531, 2017, ~~and~~we ~~should~~early beadopted ~~applied~~this ~~prospectively. Once~~standard which will be effective, wefor ~~will~~our ~~apply~~annual ~~this~~goodwill ~~guidance~~impairment test to ~~determine~~be ifconducted ~~certain~~as ~~transactions~~of ~~are~~the ~~acquisitions~~first ~~(or~~day ~~disposals)~~ of ~~assets~~the orfourth ~~businesses,~~quarter ~~but~~of we2017. We do not believe this ASU will ~~materially~~have ~~change~~a ~~how~~material weimpact ~~currently~~on ~~evaluate~~our ~~similar~~financial ~~transactions~~statements.

In October 2016, the FASB issued ~~Accounting Standard Update ("~~ASU") 2016-17, Consolidation (Topic 810): Interests Held through Related Parties That Are under Common Control. This standard amends the guidance issued with ASU 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis in order to make it less likely that a single decision maker would individually meet the characteristics to be the primary beneficiary of a Variable Interest Entity ("VIE"). When a decision maker or service provider considers indirect interests held through related parties under common control, they perform two steps. The second step was amended with this ASU to say that the decision maker should consider interests held by these related parties on a proportionate basis when determining the primary beneficiary of the VIE rather than in their entirety as was called for in the previous guidance. The adoption of this standard in the current reporting period did not have a material impact on our consolidated financial statements.

In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. This ASU was issued with the objective to improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. The new standard will require companies to recognize the income tax consequences of an intra-entity transfer of non-inventory assets when the transfer occurs. This ASU will be effective for fiscal years beginning after

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~~intra-entity transfer of non-inventory assets when the transfer occurs. This ASU will be effective for fiscal years beginning after~~ December 15, 2017, and early adoption is permitted. We are currently evaluating the impact of the adoption of this ASU on our financial position and results of operations.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This ASU provides guidance for eight specific changes with respect to how certain cash receipts and cash payments are classified within the statement of cash flows in order to reduce existing diversity in practice. This ASU will be effective for fiscal years beginning after December 15, 2017, and early adoption is permitted, and it should be applied using a retroactive transition method to each period presented. We are currently evaluating the impacts the adoption of this standard will have on our consolidated statements of cash flows, focusing on the impact our cash flows related to distributions received from equity method investees and contingent consideration payments made subsequent to business combinations. We anticipate that approximately $150.92 million ofand ~~the~~$15.8 million of acquisition related payments within our investing cash flows for the ~~year~~six months ended ~~December~~June 30, ~~2016,~~2017 ofand ~~which zero occurred in the three months ended March~~June 2524, 2016, respectively, will be reclassified to financing cash flows as a result of adopting this ASU.

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payments Accounting. During the three months ended September 30, 2016, the Company elected to early adopt ASU 2016-09 with an effective date of December 26, 2015. As a result, the Company recognized the excess tax benefit of $1.34 million within income tax benefit on the consolidated statements of income for the ~~three~~six months ended ~~March~~June 3130, 2017, and, upon adoption, previously unrecognized excess tax benefits of $11.1 million resulted in a cumulative-effect adjustment to retained earnings for the year ended December 30, 2016. The adoption did not impact the existing classification of awards. Excess tax benefits from stock-based compensation of $2.15 million for the ~~three~~six months ended ~~March~~June 2524, 2016 were restated into cash flows from operating activities from cash flows from financing activity. Additionally, adopted retrospectively, the Company reclassified $12.94 million and $2.06 million of employee withholding taxes paid from operating activities into financing activities for the ~~three~~six months ended ~~March~~June 3130, 2017 and ~~March~~June 2524, 2016, respectively. Following the adoption of the standard, the Company elected to continue estimating the number of awards expected to be forfeited and adjust its estimate on an ongoing basis.

In February 2016, the FASB issued ASU 2016-02, Leases. This ASU is a comprehensive new leases standard that was issued to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We continue to assess the impact of adopting ASU 2016-02, but expect to record a significant amount of right-of-use assets and corresponding liabilities. Based upon our operating leases as of December 30, 2016, we expect to have in excess of $500.0 million of undiscounted future minimum lease payments upon adoption of this standard.

In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments issued with this ASU require equity securities (including other ownership interests, such as partnerships, unincorporated joint ventures, and limited liability companies) to be measured at fair value with changes in the fair value recognized through net income. An entity’s equity investments that are accounted for under the equity method of accounting or result in consolidation of an investee are not included within the scope of this update. This ASU will be effective for annual reporting periods beginning after December 15, 2017 and interim periods within those annual periods, with early adoption permitted. We believe this standard’s impact on CH2M will be limited to equity securities currently accounted for under the cost method of accounting, which as of ~~March~~June 3130, 2017 are valued at $3.45 million within investments in unconsolidated affiliates on the consolidated balance sheet. We do not expect the adoption of this standard to have a material impact on our consolidated statements of operations.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers and subsequently modified with various amendments and clarifications. This ASU is a comprehensive new revenue recognition model that is based on the principle that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The ASU also requires additional quantitative and qualitative disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. This ASU, as amended, is effective for annual reporting periods beginning after December 15, 2017 and interim periods within those annual periods. Companies may use either a full retrospective or a modified retrospective approach to adopt this ASU. CH2M is currently evaluating the impact of this ASU, the subsequently issued amendments, and the transition alternatives on its financial position and results of operations. Currently, we have identified various revenue streams by contract billing type, client type, and type of contracted services. We are in the process of reviewing our contracts in the various revenue streams in order to isolate those that will be significantly impacted as well as to identify the relevant revenue streams for disaggregated disclosure. ~~After~~From our initial assessment, we do not anticipate the new revenue recognition standard to, in substance, change our current process of recognizing revenue on a substantial portion of our portfolio of contracts. For example, we currently estimate variable consideration in relation to total contract revenue in a manner consistent with the new model, and our initial

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evaluation of performance obligations coincides with our current contract segmentation policies. After our assessment is complete, we can begin estimating the potential financial impacts of the new standard as well as identify necessary controls, processes and information system changes.

(2) Changes in Project-Related Estimates

We have a fixed-price Transportation contract to design and construct roadway improvements on an expressway in the southwestern United States. The project is approximately 7585% complete as of ~~March~~June 3130, 2017. In the ~~year~~three and six months ended ~~December~~June 3024, 2016, we experienced cost growth resulting in total changes in estimated costs of approximately $~~121~~60.30 million~~, none of which occurred during the three months ended March 25, 2016~~. ~~The~~This ~~2016~~ cost growth was primarily a result of survey engineering and design challenges, rework of previously installed work and client-caused delays, including limited daytime access to portions of the site, greater than expected subcontractor costs, subcontracting work previously planned to be self-performed, the sum of which resulted in increased material quantities and work and delivery schedule extensions. We also had severe weather including record rainfall, and production shortfalls resulting from differing site conditions and engineering rework.

In the first quarter ~~ended~~of ~~March 31,~~ 2017, the project team increased the overall estimated costs for labor and materials by a total of $23.5 million. The cost growth was predominately related to unanticipated field conditions and labor resource restraints, some of which costs are being included in claims submitted to the client. We did not incur additional cost growth during the three months ended June 30, 2017. While the project team believes that the increase in costs during the six months ended June 30, 2017 is sufficient to cover known issues, additional design, fabrication, construction or labor resource issues could be encountered resulting in further cost growth. Certain of these additional costs are believed to be the result of ~~construction~~noise barrier fabrication errors incurred by a subcontractor, sound wall design issues, as well as specifications provided by the client that were determined to be incorrect.

We expect to seek resolution of these first quarter 2017 issues from the fabrication/installation subcontractor in addition to seeking resolution of the outstanding change orders and claims through a combination of submissions to the Disputes Board under the terms of the contract and direct negotiations with the client. Change orders and claims totaling approximately $~~100~~110.0 million have been submitted to the client. We have received favorable, non-binding recommendations from the Disputes Board on some of the claims. We ~~have~~are ~~not~~in ~~been~~the ~~able~~process of trying to reach a mutual resolution with the client on these claims orand the other submitted change orders ~~submitted~~. CH2M will continue to aggressively pursue its entitlements based on claims and change orders, including litigation if it cannot reach resolution with the client. Accordingly, we cannot currently estimate the timing or amounts of recoveries or costs that may be achieved or incurred through these resolution processes, and as such, we have not included any recoveries from these change orders and claims in our current estimated project loss.

While management believes that it has recorded an appropriate provision to complete the 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.

All reserves for project related losses for projects related to our continuing operations are included in other accrued liabilities and totaled $7147.1 6 million and $71.2 million as of ~~March~~June 3130, 2017 and December 30, 2016, respectively. Refer to Note 14 – Discontinued Operations for additional details regarding projects reported within discontinued operations.

(3) Segment Information

Costs for corporate selling, 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 is primarily based upon metrics that reflect the proportionate volume of project-related activity and employee labor costs within each segment.

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Certain financial information relating to the three and six months ended ~~March~~June 3130, 2017 and ~~March~~June 3024, 2016 for each segment is provided below. Prior year amounts have been revised to conform to the current year presentation. Costs for corporate selling, 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 is primarily based upon metrics that reflect the proportionate volume of project-related activity and employee labor costs within each segment.

Three Months Ended March 31, 2017

Three Months Ended March 25, 2016

Three Months Ended June 30, 2017

Three Months Ended June 24, 2016

Gross

Equity in

Operating

Gross

Equity in

Operating

($ in thousands)

Revenue

Earnings

Income

Revenue

Earnings

Income (Loss)

National Governments

~~475~~481,~~679~~484

411,~~494~~153

1014,~~666~~903

~~446~~482,~~724~~186

64,~~308~~931

~~763~~7,011

Private

~~289~~302,~~280~~923

~~(131)~~454

910,~~271~~150

~~348~~330,~~097~~441

~~287~~307

1412,~~496~~883

State & Local Governments

~~475~~500,~~474~~452

23,~~998~~771

947,~~514~~575

~~492~~478,~~189~~338

23,~~458~~479

25(33,~~763~~945)

Total

1,~~240~~284,~~433~~859

715,~~361~~378

2972,~~451~~628

1,~~287~~290,~~010~~965

98,~~053~~717

41(14,~~022~~051)


	Six Months Ended June 30, 2017						Six Months Ended June 24, 2016
	Gross		Equity in		Operating		Gross		Equity in		Operating
($ in thousands)	Revenue		Earnings		Income		Revenue		Earnings		Income (Loss)
National Governments	$	957,163	$	15,646	$	25,569	$	928,909	$	11,240	$	7,774
Private		592,203		324		19,420		678,539		594		27,380
State & Local Governments		975,926		6,769		57,090		970,527		5,936		(8,183)
Total	$	2,525,292	$	22,739	$	102,079	$	2,577,975	$	17,770	$	26,971

(4) Stockholders’ Equity

The changes in stockholders’ equity for the ~~three~~six months ended ~~March~~June 3130, 2017 are as follows:

	Common	Preferred
(in thousands)	Shares	Shares	Amount
Stockholders’ equity, December 30, 2016	25,148	4,822	$	445,538
Shares purchased and retired	(~~512~~880)	—		(2442,~~028~~683)
Shares issued in connection with stock-based compensation and employee benefit plans	~~133~~312	—		517,~~587~~302
Net income attributable to CH2M	—	—		1356,~~959~~252
Other comprehensive income, net of tax	—	—		1538,~~585~~174
Other comprehensive income attributable to noncontrolling interest, net of tax				(~~136~~542)
Deconsolidation of a subsidiary's noncontrolling interest	—	—		87,838
Income attributable to noncontrolling interests from continuing operations	—	—		48,~~257~~593
Loss attributable to noncontrolling interests from discontinued operations				(60)
Investment in affiliates, net	—	—		21,~~806~~676
Stockholders’ equity, March 31, 2017	24,769	4,822	$	551,346
Stockholders’ equity, June 30, 2017	24,580	4,822	$	612,088

Preferred Stock

As of ~~March~~June 3130, 2017, the Company had 50,000,000 shares of preferred stock, $0.01 par value, authorized. 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, Apollo purchased 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 subject to the conditions within the Subscription Agreement. Total proceeds from the preferred stock offering were $99.8 million, net of issuance costs of $0.2 million.

~~Under~~In ~~our~~connection ~~agreement~~ with ~~Apollo,~~ the ~~maximum~~issuance ~~consolidated~~of ~~leverage~~the ~~ratio~~Second isLien ~~3.00x~~Notes ~~for 2016~~ and ~~beyond,~~the ~~consistent~~Fourth ~~with our Third~~ Amendment to our Amended and Restated Credit Agreement~~. As~~ ofon ~~March~~April 3128, 2017, weas ~~were~~discussed in ~~compliance~~Note 10 ~~with~~– ~~this~~Long-Term ~~covenant. Management~~Debt, we ~~continually~~obtained ~~assesses~~consent ~~its~~from ~~potential~~our ~~future~~Series A ~~compliance~~Preferred Stockholder with ~~the~~respect ~~consolidated~~to ~~leverage~~the ~~ratio~~incurrence ~~covenant based on estimates~~ of ~~future~~the ~~earnings~~notes and ~~cash~~filed ~~flows. If~~a ~~there~~Certificate isof anAmendment ~~expected~~to ~~possibility~~the Certificate of ~~non-compliance,~~Designation weof ~~will~~Series ~~discuss~~A ~~possibilities~~Preferred ~~with~~Stock ~~Apollo~~which toincreases ~~modify~~ the ~~covenant~~annual ~~consistent~~rate ~~with~~at ~~discussions~~which ~~with~~dividends ~~the~~accrue ~~Company’s~~on ~~lenders~~the orSeries A ~~utilize~~Preferred ~~other~~Stock ~~means~~from of5% ~~capitalizing the Company~~ to ~~anticipate~~7% orbeginning ~~remedy~~April 1, ~~any non-compliance~~2017. ~~The~~Dividends ~~expected~~on ~~cash outflows required to fund~~ the ~~project~~Series A ~~losses~~Preferred ~~discussed~~Stock inare ~~Note~~cumulative 2and –accrue ~~Changes~~quarterly in ~~Project-Related~~arrears ~~Estimates~~on ~~and~~ the ~~related~~sum ~~impact~~of ~~on earnings will put a financial strain on~~ the ~~Company~~original ~~that~~issue ~~may~~price ~~require~~of an$62.22 per ~~amendment~~share orplus ~~other~~all ~~remedies~~accumulated toand beunpaid ~~pursued~~accruing bydividends, ~~management~~regardless ifof ~~certain~~whether ~~earnings estimates~~ or ~~cash flow improvement initiatives are~~ not ~~achieved~~declared orby ~~if required to facilitate restructuring plans.~~

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Onthe ~~April~~Board. The ~~28,~~other ~~2017,~~terms weand ~~filed~~conditions ~~a Certificate~~ of ~~Amendment to~~ the ~~Certificate of Designation of~~ Series A Preferred Stock ~~which~~set ~~increased~~forth in the ~~annual~~Certificate ~~rate~~of atDesignation, ~~which~~as ~~dividends~~summarized ~~accrue~~in onour ~~the~~Annual ~~Series A~~Report ~~Preferred~~on ~~Stock~~Form ~~from~~10-K 5%for tothe 7%year ~~beginning~~ended ~~April~~December 130, ~~2017. Refer~~2016, toremain ~~Note 16 – Subsequent Events for additional details regarding the amendment~~unchanged.

~~For~~Under aour ~~summary~~agreement ofwith Apollo, the ~~terms~~maximum consolidated leverage ratio is 4.00x for 2017 and ~~conditions~~beyond, ~~related~~consistent towith the ~~Subscription~~Fourth Amendment to our Amended and Restated Credit Agreement. As of June 30, ~~refer~~2017, towe ~~our~~were ~~Annual~~in ~~Report~~compliance with this covenant. Management continually assesses its potential future compliance with the consolidated leverage ratio covenant based on ~~Form~~estimates 10of future earnings and cash flows. If there is an expected possibility of non-Kcompliance, ~~for~~we will discuss possibilities with Apollo to modify the ~~year~~covenant ~~ended~~consistent ~~December 30,~~with ~~2016~~discussions with the Company’s lenders or utilize other means of capitalizing the Company to anticipate or remedy any non-compliance.

(5) Earnings Per Share

Basic earnings per share (“EPS”) is calculated using the weighted-average number of common shares outstanding during the period and income available to common stockholders, which is calculated by deducting the dividends accumulated for the period on cumulative preferred stock (whether or not earned) and income allocated to preferred stockholders as calculated under the two-class method. In the event the Company has a net loss, the net loss is not allocated to preferred stockholders as the holders do not have a contractual obligation to share in the Company’s losses. The Company considers all of the Series A Preferred Stock to be participating securities as the holders of the preferred stock are entitled contractually to receive a cumulative dividend.

Diluted EPS under the two-class method is computed by giving effect to all potential shares of common stock including common stock issuable upon conversion of the convertible preferred stock, the related convertible dividends for the aggregate five year contractual obligation, and stock options. The denominator is calculated by using the weighted-average number of common shares and common stock equivalents outstanding during the period, assuming conversion at the beginning of the period or at the time of issuance if later. Additionally, when calculating diluted EPS, the Company analyzes the potential dilutive effect of the outstanding preferred stock under the if-converted method, in which it is assumed that the outstanding preferred stock convert to common stock at the beginning of the period. In the event that the if-converted method is more dilutive than the two-class method, the if-converted diluted EPS will be reflected in our financial statements. Common stock equivalents are only included in the diluted EPS calculation when their effect is dilutive.

The table below presents the reconciliations of basic and diluted EPS for the three months ended March 31, 2017 and March 25, 2016:

	Three Months Ended
	March 31,		March 25,
(in thousands, except per share amounts)	2017		2016
Numerator - basic and diluted:
Net income from continuing operations	$	17,766	$	23,845
Net income (loss) from discontinued operations		390		(121)
Net income		18,156		23,724
Less: income attributable to noncontrolling interests from continuing operations		(4,257)		(471)
Less: loss attributable to noncontrolling interests from discontinued operations		60		1,326
Net income attributable to CH2M		13,959		24,579
Less: accrued dividends attributable to preferred stockholders		3,989		2,564
Less: income allocated to preferred stockholders - basic		1,700		2,451
Income available to common stockholders - basic and diluted	$	8,270	$	19,564
Denominators:
Weighted-average common shares outstanding - basic		24,956		26,305
Dilutive effect of common stock equivalents		3		202
Diluted adjusted weighted-average common shares outstanding, assuming conversion of common stock equivalents		24,959		26,507
Basic net income from continuing operations per common share	$	0.32	$	0.70
Basic net income from discontinued operations per common share		0.01		0.04
Basic net income per common share	$	0.33	$	0.74
Diluted net income from continuing operations per common share	$	0.32	$	0.70
Diluted net income from discontinued operations per common share		0.01		0.04
Diluted net income per common share	$	0.33	$	0.74

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~~For~~The ~~the~~table ~~three~~below ~~months~~presents ~~ended~~the ~~March 31,~~reconciliations ~~2017~~of basic and ~~March 25,~~diluted ~~2016,~~EPS ~~options~~for tothe ~~purchase~~three ~~2.1 million~~ and ~~0.5 million~~six ofmonths ~~common~~ended ~~stock~~June 30, ~~respectively,~~2017 and ~~5.2~~June ~~million and 3.3 million shares of preferred stock and accumulated preferred stock dividends~~24, ~~respectively, were excluded from the dilutive EPS calculation because including them would have been antidilutive.~~ 2016:


	Three Months Ended				Six Months Ended
	June 30,		June 24,		June 30,		June 24,
(in thousands, except per share amounts)	2017		2016		2017		2016
Numerator - basic and diluted:
Net income (loss) from continuing operations	$	47,160	$	(5,658)	$	64,926	$	18,187
Net loss from discontinued operations		(531)		(148,532)		(141)		(148,653)
Net income (loss)		46,629		(154,190)		64,785		(130,466)
Less: income attributable to noncontrolling interests from continuing operations		(4,336)		(4,348)		(8,593)		(4,819)
Less: loss attributable to noncontrolling interests from discontinued operations		—		96,496		60		97,822
Net income (loss) attributable to CH2M		42,293		(62,042)		56,252		(37,463)
Less: accrued dividends attributable to preferred stockholders		5,654		3,612		9,643		6,176
Less: income allocated to preferred stockholders - basic		6,372		—		8,106		—
Income (loss) available to common stockholders - basic and diluted	$	30,267	$	(65,654)	$	38,503	$	(43,639)

Denominators:
Weighted-average common shares outstanding - basic		24,664		25,993		24,810		26,065
Dilutive effect of common stock equivalents		3		—		5		—
Diluted adjusted weighted-average common shares outstanding, assuming conversion of common stock equivalents		24,667		25,993		24,815		26,065

Basic net income (loss) from continuing operations per common share	$	1.24	$	(0.41)	$	1.55	$	0.60
Basic net loss from discontinued operations per common share		(0.01)		(2.12)		—		(2.27)
Basic net income (loss) per common share	$	1.23	$	(2.53)	$	1.55	$	(1.67)

Diluted net income (loss) from continuing operations per common share	$	1.24	$	(0.41)	$	1.55	$	0.60
Diluted net loss from discontinued operations per common share		(0.01)		(2.12)		—		(2.27)
Diluted net income (loss) per common share	$	1.23	$	(2.53)	$	1.55	$	(1.67)

For the three and six months ended June 30, 2017, options to purchase 1.8 million shares of common stock and 5.2 million shares of preferred stock and accumulated preferred stock dividends were excluded from the dilutive EPS calculation because including them would have been antidilutive. Due to the existence of net losses for the three and six months ended June 24, 2016, basic and diluted EPS were the same as the effect of potentially dilutive common stock equivalents, including options to purchase 2.6 million shares of common stock and 5.0 million shares of preferred stock and accumulated preferred stock dividends, would have been antidilutive.

(6) Variable Interest Entities and Equity Method Investments

We routinely enter into teaming arrangements, in the form of joint ventures, to perform projects for our clients. Such arrangements are customary in the engineering and construction industry and generally are project specific. The arrangements facilitate the completion of projects that are jointly contracted with our partners. These arrangements are formed to leverage the skills of the respective partners and include consulting, construction, design, design-build, program management and operations and maintenance contracts. The assets of a joint venture are restricted for use only for the particular joint venture and are not available for general operations of the Company. Our risk of loss on these arrangements is usually shared with our partners. The liability of each partner is usually joint and several, which means that each partner may become liable for the entire risk of loss on the project. Furthermore, on some of our projects, CH2M has granted guarantees which may encumber both our contracting subsidiary company and CH2M for the entire risk of loss on the project.

Our financial statements include the accounts of our joint ventures when the joint ventures are variable interest entities (“VIE”) and we are the primary beneficiary or those joint ventures that are not VIEs yet we have a controlling interest. We perform a qualitative assessment to determine whether our company is the primary beneficiary once an entity is identified as a VIE. A qualitative assessment begins with an understanding of the nature of the risks associated with the entity as well as the nature of the entity’s activities including terms of the contracts entered into by the entity, ownership interests issued by the entity and how they were marketed, and the parties involved in the design of the entity. All of the variable interests held by parties involved with the VIE are identified and a determination is made of which activities are most significant to the economic performance of the entity and which variable interest holder has the power to direct those activities. In determining whether we have a controlling interest in a joint venture that is not a VIE and the requirement to consolidate the accounts of the entity, we consider factors such as ownership interest, board representation, management representation, authority to make decisions, and contractual and substantive participating rights of the partnership/members. Most of the VIEs with which our Company is involved have relatively few variable interests and are primarily related to our equity investments, subordinated financial support, and subcontracting arrangements. We consolidate those VIEs in which we have both the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses or the right to receive the benefits from the VIE that could potentially be significant to the VIE. As of March 31, 2017 and December 30, 2016, total assets of VIEs that were consolidated were $211.9 million and $220.3 million, respectively, and liabilities were $191.6 million and $385.9 million, respectively. As of December 30, 2016, $19.0 million of the consolidated assets and $203.9 million of consolidated liabilities were related to an Australian fixed-price Power EPC joint venture which was deconsolidated upon termination of the underlying contract on January 24, 2017. Refer to Note 14 - Discontinued Operations for additional details.

We held investments in unconsolidated VIEs and equity method investments related to continuing operations of $65.7 million and $66.3 million at March 31, 2017 and December 30, 2016, respectively. As of March 31, 2017, as a result of deconsolidating the Australian joint venture during the three months ended March 31, 2017 as discussed above, we held a negative investment in unconsolidated VIE related to discontinued operations of $83.4 million. Our proportionate share of net income or loss is included as equity in earnings of joint ventures and affiliated companies in the consolidated statements of operations. In general, the equity investment in our unconsolidated affiliates is equal to our current equity investment plus our portion of the entities’ undistributed earnings. We provide certain services, including engineering, construction management and computer and telecommunications support, to these unconsolidated entities. These services are billed to the joint ventures in accordance with the provisions of the agreements.

As of March 31, 2017 and December 30, 2016, the total assets of VIEs related to continuing operations that were not consolidated were $391.5 million and $479.2 million, respectively, and total liabilities were $302.2 million and $304.9 million, respectively. As of March 31, 2017, total assets and liabilities of the unconsolidated VIE related to the Australian fixed-price Power EPC joint venture included in discontinued operations were $6.1 million and $181.2 million, respectively. These assets and liabilities consist almost entirely of working capital accounts associated with the performance of single contracts. The maximum exposure to losses is limited to the funding of any future losses incurred by those entities under their respective contracts with the project company.

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qualitative assessment begins with an understanding of the nature of the risks associated with the entity as well as the nature of the entity’s activities including terms of the contracts entered into by the entity, ownership interests issued by the entity and how they were marketed, and the parties involved in the design of the entity. All of the variable interests held by parties involved with the VIE are identified and a determination is made of which activities are most significant to the economic performance of the entity and which variable interest holder has the power to direct those activities. In determining whether we have a controlling interest in a joint venture that is not a VIE and the requirement to consolidate the accounts of the entity, we consider factors such as ownership interest, board representation, management representation, authority to make decisions, and contractual and substantive participating rights of the partnership/members. Most of the VIEs with which our Company is involved have relatively few variable interests and are primarily related to our equity investments, subordinated financial support, and subcontracting arrangements. We consolidate those VIEs in which we have both the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses or the right to receive the benefits from the VIE that could potentially be significant to the VIE. As of June 30, 2017 and December 30, 2016, total assets of VIEs that were consolidated were $319.8 million and $220.3 million, respectively, and liabilities were $293.7 million and $385.9 million, respectively. As of December 30, 2016, $19.0 million of the consolidated assets and $203.9 million of consolidated liabilities were related to an Australian fixed-price Power EPC joint venture which was deconsolidated upon termination of the underlying contract on January 24, 2017. Refer to Note 14 - Discontinued Operations for additional details. Additionally, on July 3, 2017, because of the closing of the SNC-Lavalin Group Inc. acquisition of WS Atkins plc., both of whom were partners with CH2M in a joint venture through which we are executing a large Canadian nuclear project, we determined that we no longer were the primary beneficiary of a joint venture and deconsolidated the partnership from our consolidated financial statements. Refer to Note 16 – Subsequent Events for additional details.

We held investments in unconsolidated VIEs and equity method investments related to continuing operations of $73.6 million and $66.3 million at June 30, 2017 and December 30, 2016, respectively. As of June 30, 2017, as a result of deconsolidating the Australian joint venture during the first quarter of 2017 as discussed above, we held a negative investment in unconsolidated VIE related to discontinued operations of $77.9 million. Our proportionate share of net income or loss is included as equity in earnings of joint ventures and affiliated companies in the consolidated statements of operations. In general, the equity investment in our unconsolidated affiliates is equal to our current equity investment plus our portion of the entities’ undistributed earnings. We provide certain services, including engineering, construction management and computer and telecommunications support, to these unconsolidated entities. These services are billed to the joint ventures in accordance with the provisions of the agreements.

As of June 30, 2017 and December 30, 2016, the total assets of VIEs related to continuing operations that were not consolidated were $433.6 million and $479.2 million, respectively, and total liabilities were $340.9 million and $304.9 million, respectively. As of June 30, 2017, total assets and liabilities of the unconsolidated VIE related to the Australian fixed-price Power EPC joint venture included in discontinued operations were $8.3 million and $175.2 million, respectively. These assets and liabilities consist almost entirely of working capital accounts associated with the performance of single contracts. The maximum exposure to losses is limited to the funding of any future losses incurred by those entities under their respective contracts with the project company.

(7) Goodwill and Intangible Assets

The following table presents the changes in goodwill by segment during the ~~three~~six months ended ~~March~~June 3130, 2017:

($ in thousands)	National Governments		Private		State & Local Governments		Consolidated Total
Balance as of December 30, 2016	$	12,753	$	146,913	$	318,086	$	477,752
Foreign currency translation		~~225~~773		~~906~~2,623		518,~~278~~073		621,~~409~~469
Balance as of March 31, 2017	$	12,978	$	147,819	$	323,364	$	484,161
Balance as of June 30, 2017	$	13,526	$	149,536	$	336,159	$	499,221

The following table presents the changes in intangible assets by segment during the ~~three~~six months ended ~~March~~June 3130, 2017:

($ in thousands)	National Governments		Private		State & Local Governments		Consolidated Total
Balance as of December 30, 2016	$	433	$	23,988	$	13,603	$	38,024
Amortization		(~~121~~261)		(~~621~~1,958)		(36,~~474~~687)		(48,~~216~~906)
Foreign currency translation		718		17887		~~537~~473		~~561~~1,378
Balance as of March 31, 2017	$	319	$	23,384	$	10,666	$	34,369
Balance as of June 30, 2017	$	190	$	22,917	$	7,389	$	30,496

Intangible assets with finite lives consist of the following:

			Accumulated		Net finite-lived
($ in thousands)	Cost		Amortization		intangible assets
March 31, 2017
Customer relationships	$	174,641	$	(140,272)	$	34,369
Total finite-lived intangible assets	$	174,641	$	(140,272)	$	34,369
December 30, 2016
Customer relationships	$	172,880	$	(134,856)	$	38,024
Total finite-lived intangible assets	$	172,880	$	(134,856)	$	38,024

All intangible assets are being amortized over their expected lives of between two years and ten years. The amortization expense reflected in the consolidated statements of operations for the three months ended March 31, 2017 and March 25, 2016 totaled $4.2 million and $4.7 million, respectively. All intangible assets are expected to be fully amortized in 2024.

At March 31, 2017, the future estimated amortization expense related to these intangible assets is:

	Amortization
($ in thousands)	Expense
2017 (nine months remaining)	$	11,559
2018		4,251
2019		3,518
2020		3,518
2021		3,518
2022		3,518
Thereafter		4,487
	$	34,369

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Intangible assets with finite lives consist of the following:


			Accumulated		Net finite-lived
($ in thousands)	Cost		Amortization		intangible assets
June 30, 2017
Customer relationships	$	178,462	$	(147,966)	$	30,496
Total finite-lived intangible assets	$	178,462	$	(147,966)	$	30,496
December 30, 2016
Customer relationships	$	172,880	$	(134,856)	$	38,024
Total finite-lived intangible assets	$	172,880	$	(134,856)	$	38,024

All intangible assets are being amortized over their expected lives of between two years and ten years. The amortization expense reflected in the consolidated statements of operations totaled $4.7 million and $4.7 million for the three months ended June 30, 2017 and June 24, 2016, respectively, and $8.9 million and $9.5 million for the six months ended June 30, 2017 and June 24, 2016, respectively. All intangible assets are expected to be fully amortized in 2024.

As of June 30, 2017, the future estimated amortization expense related to these intangible assets was:


	Amortization
($ in thousands)	Expense
2017 (six months remaining)	$	7,176
2018		4,332
2019		3,599
2020		3,599
2021		3,599
2022		3,599
Thereafter		4,592
	$	30,496

(8) Property, Plant and Equipment

Property, plant and equipment consists of the following:

	March 31,		December 30,
	June 30,		December 30,
($ in thousands)	2017		2016
Land	$	5,021	$	5,021
Building and land improvements		~~106~~105,~~354~~817		107,140
Furniture and fixtures		25,~~586~~044		26,009
Computer and office equipment		~~158~~160,~~441~~257		157,542
Field equipment		~~130~~127,~~616~~378		130,681
Leasehold improvements		7677,~~803~~283		75,492
		502,821		501,885
		500,800		501,885
Less: Accumulated depreciation		(~~263~~267,~~252~~264)		(255,289)
Net property, plant and equipment	$	~~239~~233,~~569~~536	$	246,596

Depreciation expense from continuing operations reflected in the consolidated statements of operations was $10.73 million and $10.87 million for the three months ended ~~March~~June 3130, 2017 and ~~March~~June 2524, 2016, respectively, and $21.1 million and $21.5 million for the six months ended June 30, 2017 and June 24, 2016, respectively.

(9) Fair Value of Financial Instruments

Cash and cash equivalents, client accounts receivable, unbilled revenue, accounts payable and accrued subcontractor costs and billings in excess of revenue are carried at cost, which approximates fair value due to their short maturities. Fair value of long‑term debt, including the current portion, is estimated based on Level 2 inputs, except the amount outstanding on the revolving credit facility for which the carrying value approximates fair value. Fair value is determined by discounting future cash flows using interest ~~rates available for issues with similar terms and average maturities. The estimated fair values of our financial instruments where carrying values do not approximate fair value are as follows:~~

	March 31, 2017				December 30, 2016
	Carrying		Fair		Carrying		Fair
($ in thousands)	Amount		Value		Amount		Value
Equipment financing	$	7,631	$	7,195	$	8,152	$	7,662
Note payable by consolidated joint venture	$	2,485	$	2,295	$	2,483	$	2,284

We primarily enter into derivative financial instruments to mitigate exposures to changing foreign currency exchange rates. These currency derivative instruments are carried on the balance sheet at fair value and are typically based upon Level 2 inputs including third-party quotes. At March 31, 2017 and March 25, 2016, we had forward foreign exchange contracts on major world currencies with varying durations, none of which extend beyond one year. As of March 31, 2017 and December 30, 2016, we had $0.8 million and $1.2 million of derivative liabilities, respectively.

The unrealized and realized gains and losses due to changes in derivative fair values included in selling, general and administrative expense are as follows:

	Three Months Ended
	March 31,		March 25,
(in thousands)	2017		2016
Unrealized gain (loss) from changes in derivative fair values	$	394	$	(598)
Realized loss from changes in derivative fair values	$	(1,705)	$	(774)

(10) Line of Credit and Long-Term Debt

On September 30, 2016, we entered into a Third Amendment to our Second Amended and Restated Credit Agreement (“Credit Agreement”). The Credit Agreement provides for a revolving credit facility of $925.0 million (“Credit Facility”) which matures on March 28, 2019. Under the terms of the 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. Additionally, the Credit Agreement has a subfacility for the issuance of standby letters of credit up to $500.0 million, a subfacility of up to $300.0 million for multicurrency borrowings, and a subfacility of up to $50.0 million for swingline loans.

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~~Certain~~rates available for issues with similar terms and ~~conditions~~average maturities. The estimated fair values of our ~~Amended~~financial ~~Credit~~instruments ~~Agreement~~where ascarrying ofvalues ~~March~~do ~~31,~~not ~~2017~~approximate fair value are as follows:

· The maximum consolidated leverage ratio is 3.00x for 2017 and beyond;


	June 30, 2017				December 30, 2016
	Carrying		Fair		Carrying		Fair
($ in thousands)	Amount		Value		Amount		Value
Second Lien Notes	$	200,000	$	151,451	$	—	$	—
Equipment financing		7,105		6,737		8,152		7,662
Note payable by consolidated joint venture	$	2,486	$	2,329	$	2,483	$	2,284

· We ~~For~~primarily ~~the~~enter ~~three~~into ~~quarter~~derivative ~~period~~financial ~~ending~~instruments ~~March~~to ~~31,~~mitigate ~~2017,~~exposures ~~the~~to ~~amount~~changing ~~the~~foreign ~~Company~~currency ~~was~~exchange ~~able~~rates. toThese ~~spend~~currency toderivative ~~repurchase~~instruments ~~its~~are ~~common~~carried ~~stock~~on inthe ~~connection~~balance ~~with~~sheet ~~its~~at ~~employee~~fair ~~stock~~value ~~ownership~~and ~~program~~are ~~was~~typically ~~limited~~based toupon ~~$75~~Level 2 inputs including third-party quotes.0 As ~~million,~~of ~~and~~June 30, ~~thereafter~~2017, upwe tohad ~~$100.0~~forward ~~million~~foreign ~~during~~exchange acontracts ~~rolling~~on ~~four~~major ~~quarter~~world ~~period~~currencies ~~less~~with ~~the~~varying ~~amount~~durations, none of ~~any~~which ~~legally~~extend ~~required~~beyond ~~repurchases~~one year. As of ~~common~~June 30, ~~stock~~2017 ~~held~~and inDecember ~~benefit~~30, ~~plans;~~2016, we had $2.0 million and $1.2 million of derivative liabilities, respectively.

· The ~~CH2M’s~~unrealized ~~ability~~and torealized ~~pay~~gains ~~cash dividends on preferred stock is limited until no more than 10% of our consolidated adjusted EBITDA consists of the cash~~ and ~~non-cash~~losses ~~charges~~due ~~related~~ to ~~restructuring~~changes ~~charges~~in ~~and~~derivative ~~project~~fair ~~costs~~values ~~and~~included ~~losses~~ in ~~any~~selling, ~~rolling~~general ~~four quarter period~~ and ~~subject~~administrative toexpense ~~minimum~~are ~~pro~~as ~~forma leverage ratio;~~follows:

· No proceeds from asset sales can be used to repurchase common or preferred stock; and,


	Three Months Ended				Six Months Ended
	June 30,		June 24,		June 30,		June 24,
(in thousands)	2017		2016		2017		2016
Unrealized (loss) gain from changes in derivative fair values	$	(1,259)	$	(775)	$	(865)	$	177
Realized gain (loss) from changes in derivative fair values	$	854	$	(2,001)	$	(852)	$	(2,775)

~~· No large acquisition until no more than~~ (10~~% of our consolidated adjusted EBITDA consists of the cash and non~~) Long-~~cash~~Term ~~charges related to restructuring charges and project costs and losses in any rolling four quarter period.~~Debt

All other terms of the Credit Agreement are consistent with those of the previous amended credit agreement entered into on March 30, 2015, and are disclosed in the Annual Report on Form 10-K for the year ended December 30, 2016. The Credit Agreement contains customary representations, warranties and conditions to borrowing including customary affirmative and negative covenants, which include covenants that limit or restrict our ability to incur indebtedness and other obligations, grant liens to secure their obligations, make investments, merge or consolidate, and dispose of assets outside the ordinary course of business, in each case subject to customary exceptions for credit facilities of this size and type.

As of March 31, 2017, we were in compliance with the covenants required by the Credit Agreement. Management continually assesses its potential future compliance with the 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 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 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.

On April 28, 2017, we entered into a Second Lien Indenture through which we issued Senior Second Lien Notes due 2020 with an aggregate principal amount of $200.0 million and an annual interest rate of 10%. Refer to Note 16 – Subsequent Events for additional details regarding the terms and conditions of these agreements.

Our nonrecourse and other long-term debt consist of the following:

	March 31,		December 30,
	June 30,		December 30,
($ in thousands)	2017		2016
Revolving Credit Facility, average rate of interest of 3.7%	$	507,822	$	487,009
Revolving Credit Facility, average rate of interest of 4.33%	$	317,609	$	487,009
Equipment financing, due in monthly installments to September 2021, secured by equipment. These notes bear interest ranging from 0.22% to 3.29%		7,631		8,152
Second Lien Notes, net of $4.9 million of debt issuance costs. These notes bear interest of 10% due May 1 and November 1 annually		195,089		—
Note payable by consolidated joint venture, due July 2019. This note bears interest at 6-month LIBOR plus 2.5%		2,485		2,483
Equipment financing, due in monthly installments to September 2021, secured by equipment. These notes bear interest ranging from 0.22% to 3.29%		7,105		8,152
Other notes payable		194		230
Note payable by consolidated joint venture, due July 2019. This note bears interest at 6-month LIBOR plus 2.5%		2,486		2,483
Total debt		518,132		497,874
Other notes payable		176		230
Less: current portion of debt		2,233		2,242
Total debt		522,465		497,874
Total long-term portion of debt	$	515,899	$	495,632
Less: current portion of debt		2,231		2,242
Total long-term portion of debt	$	520,234	$	495,632

AtAs ~~March~~of June 3130, 2017 and December 30, 2016, company-wide issued and outstanding letters of credit and bank guarantee facilities were $~~130~~129.0 million and $134.2 million, respectively.

~~(11)~~Revolving ~~Income~~Credit ~~Taxes~~Facility

~~After~~On ~~adjusting~~April 28, ~~for~~2017, ~~the~~we ~~impact~~entered ofinto ~~income~~a ~~attributable~~Fourth Amendment to ~~noncontrolling~~our ~~interests,~~Amended ~~the~~and ~~effective~~Restated ~~tax~~Credit ~~rate~~Agreement ~~related~~(“Credit toAgreement”). The ~~continuing~~Fourth ~~operations~~Amendment onallowed for the ~~income~~issuance ~~attributable~~and tosale ~~CH2M~~of ~~for~~ the ~~three~~Second ~~months~~Lien ~~ended March 31~~Notes, ~~2017~~as ~~was~~discussed ~~27.8%~~below, ~~compared~~and tolowered ~~36.1%~~our onmaximum ~~the~~revolving ~~income~~credit ~~for~~facility ~~the~~to ~~same~~$875.0 million ~~period~~from ~~in the prior year~~$925.0 million. The ~~effective~~credit ~~tax~~facility ~~rate~~matures ~~attributable~~on ~~to CH2M for the three months ended~~ March 3128, ~~2017~~2019 ~~was~~and ~~lower~~includes ~~compared~~a tosubfacility for the ~~same~~issuance ~~period~~of instandby ~~the~~letters ~~prior~~of ~~year~~credit ~~primarily~~up ~~due~~ to ~~the~~$450.0 million, ~~favorable~~a ~~impacts~~subfacility ~~associated~~of ~~with~~up ~~increased~~to ~~foreign~~$300.0 million ~~earnings~~for asmulticurrency aborrowings, ~~result of transfer pricing~~ and ~~favorable~~a ~~investment~~subfacility ~~results~~of ~~related~~up to ~~key~~$50.0 million ~~employee~~for ~~life~~swingline ~~assets~~loans. ~~Recent~~Other ~~discussions~~technical ~~regarding~~and ~~tax~~operating ~~reform may result in~~ changes to ~~long-standing~~the ~~tax~~Credit ~~principles~~Agreement ~~which~~specifically ~~could~~achieved ~~adversely~~the ~~affect~~following: ~~our effective tax rate or result~~

Increased the maximum consolidated leverage ratio to 4.00x from 3.00x;

Modified the definition of adjusted EBITDA as used in the financial covenant calculation;

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in· ~~higher~~Required ~~cash~~CH2M ~~tax~~to ~~liabilities. These~~maintain, ~~discussions~~on ~~include~~ a ~~reduced~~consolidated ~~corporate tax rate~~basis, ~~repatriation~~a ofmaximum ~~foreign~~consolidated ~~earnings,~~first ~~cash,~~lien ~~and~~leverage ~~cash~~ratio ~~equivalents,~~no ~~and~~greater ~~cross~~than ~~border adjustability~~3. ~~Additionally, our effective tax rate continues to be negatively impacted by the effect of disallowed portions of meals and entertainment expenses.~~ 00x;

As· ofRequired ~~March 31,~~CH2M ~~2017~~to ~~and~~maintain ~~December 30, 2016, we had $6.5 million and $8.0 million, respectively, recorded as~~ a ~~liability~~minimum ~~for~~consolidated ~~uncertain~~fixed ~~tax~~charge ~~positions,~~coverage ~~included~~ratio inno ~~which~~less ~~was~~than ~~approximately $~~1.~~7 million and $2.6 million, respectively, of interest and penalties. We recognize interest and penalties related to unrecognized tax benefits in income tax expense or benefit.~~ 50x;

Restricts CH2M’s ability to repurchase its common or preferred stock, pay cash dividends on or make certain other distributions on its common or preferred stock, and requires compliance with the terms of the Second Lien Indenture, which also limits certain restricted payment and participation in the employee stock ownership program as described below.

The Credit Agreement contains customary representations, warranties and conditions to borrowing including customary affirmative and negative covenants, which include covenants that limit or restrict our ability to incur indebtedness and other obligations, grant liens to secure their obligations, make investments, merge or consolidate, and dispose of assets, in each case subject to customary exceptions for credit facilities of this size and type. Additionally, the obligations of CH2M and its subsidiaries that are either borrowers or guarantors under the Credit Facility are secured by first-priority security interests in substantially all of the domestic assets of CH2M and such subsidiaries.

As of June 30, 2017, we were in compliance with the covenants required by the Credit Agreement. Management continually assesses its potential future compliance with the 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 waive or remedy any non-compliance.

Second Lien Indenture

On April 28, 2017, we entered into a Second Lien Indenture through which we issued Senior Second Lien Notes with an aggregate principal amount of $200.0 million at an annual interest rate of 10% (the “Second Lien Notes”). The Second Lien Notes mature on April 28, 2020, and interest is payable on May 1 and November 1 of each year, commencing on November 1, 2017. The net proceeds of the Second Lien Notes were used to repay a portion of the outstanding revolving credit loans under our credit facility. The Second Lien Notes are unsubordinated, senior obligations of CH2M and are secured by second-priority liens on substantially all of CH2M’s and certain CH2M subsidiaries’ domestic assets.

The Second Lien Indenture contains financial covenants that require CH2M to maintain a consolidated leverage ratio no greater than 4.50x and restricts CH2M’s ability to repurchase its common or preferred stock, pay cash dividends on or make certain other distributions on its common or preferred stock. Specifically, while the Second Lien Notes are outstanding, the amount CH2M may spend to repurchase its common stock in connection with its employee stock ownership program, other than legally required repurchases of common stock held in benefit plans, which are not restricted, will be limited to an aggregate of $75.0 million during the term of the Second Lien Notes plus a cumulative amount equal to 50% of CH2M’s consolidated net income, or minus 100% of any net loss, from April 1, 2017 to the date on which any such repurchase is to be made. The amount available to make repurchases of our common stock shall also be reduced to the extent that CH2M makes legally required repurchases of common stock held in benefit plans in excess of $50.0 million in any period of four consecutive quarters and that CH2M makes certain payments on subordinated indebtedness in accordance with the terms of the Second Lien Indenture.

The Second Lien Indenture contains affirmative and negative covenants and other terms that are customary for obligations similar to the Second Lien Notes, which include covenants that limit or restrict our ability to incur additional indebtedness, grant liens to secure their obligations, make certain kinds of investments, dispose of assets outside the ordinary course of business, create contractual restrictions on the ability to pay dividends or make certain other payments, merge or consolidate, sell all or substantially all of our assets, and enter into certain transactions with affiliates unless the transaction is comparable to an arm’s length transaction with a non-affiliate.

CH2M may, at its option, redeem the Second Lien Notes in whole at any time or from time to time in part, upon notice at a premium on the principal amount plus any accrued and unpaid interest to the date of redemption as shown below:



Redemption Period	Redemption Price
From April 28, 2017 (issue date) through April 28, 2018	110.0	%
From April 29, 2018 through April 28, 2019	103.0	%
From April 29, 2019 through October 28, 2019	101.5	%
From October 29, 2019 through April 28, 2020 (maturity date)	100.0	%

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Upon the occurrence of a change of control, any holder of Second Lien Notes will have the right to require CH2M to repurchase all or any portion of the holder’s Second Lien Notes at a purchase price in cash equal to 101% of the outstanding principal and accrued and unpaid interest, if any, through the date of repurchase.

The Second Lien Indenture also contains customary events of default. If an event of default occurs, the holders of the Second Lien Notes may declare any outstanding principal, accrued and unpaid interest, and premium to be immediately due and payable. Additionally, certain events of bankruptcy or insolvency are events of default which shall result in the Second Lien Notes being due and payable immediately upon the occurrence of such events of default.

Furthermore, on April 28, 2017, we entered into an Intercreditor Agreement with the agents of the Second Lien Notes and the lenders of the Fourth Amendment to our Credit Agreement that states that the liens on common collateral securing the claims of the Credit Agreement have priority over, and are senior to, the liens on the common collateral securing Second Lien Notes. The senior claims are defined in the Intercreditor Agreement to include, among other things, the principal amount of all indebtedness incurred under the Fourth Amendment to our Credit Agreement and certain additional senior indebtedness permitted under the Intercreditor Agreement.

(11) Income Taxes

After adjusting for the impact of income attributable to noncontrolling interests, the effective tax rate related to continuing operations on the income attributable to CH2M for the three months ended June 30, 2017 was 26.9% compared to 52.7% on the loss for the same period in the prior year, and the effective tax rate related to continuing operations on the income attributable to CH2M for the six months ended June 30, 2017 was 27.1% compared to 16.0% on the loss for the same period in the prior year. The effective tax rate attributable to CH2M for the three months ended June 30, 2017 was lower compared to the same period in the prior year and higher for the six months ended June 30, 2017 compared to the same period in the prior year primarily due to large losses in the prior period and the favorable impacts associated with the release of valuation allowances due to transfer pricing in the prior year period. In addition, the lower rate is partially attributable to the current year’s favorable impacts associated with increased foreign earnings and favorable investment results related to key employee life assets. Recent discussions regarding tax reform may result in changes to long-standing tax principles which could adversely affect our effective tax rate or result in higher cash tax liabilities. These discussions include a reduced corporate tax rate, repatriation of foreign earnings, cash, and cash equivalents, and cross border adjustability. Additionally, our effective tax rate continues to be negatively impacted by the effect of disallowed portions of meals and entertainment expenses.

As of June 30, 2017 and December 30, 2016, we had $6.1 million and $8.0 million, respectively, recorded as a liability for uncertain tax positions, included in which was approximately $1.7 million and $2.6 million, respectively, of interest and penalties. We recognize interest and penalties related to unrecognized tax benefits in income tax expense or benefit.

We file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business, we are subject to examination by taxing authorities throughout the world, including such major jurisdictions as the United States, United Kingdom and Canada. With few exceptions, we are no longer subject to U.S. federal, state and local or non-U.S. income tax examinations by tax authorities in major tax jurisdictions.

(12) Restructuring and Related Charges

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 primarily ~~include~~included workforce reductions and facilities consolidations. ~~During~~For the ~~three~~six months ended ~~March~~June 3130, 2017, we incurred $13.1 million of costs for ~~these~~ restructuring activities related to the 2016 Restructuring Plan, which have been included in selling, general and administrative expense on the consolidated statements of operations. The restructuring activities under the 2016 Restructuring Plan were substantially complete in the first quarter of 2017, and, as such, no restructuring costs were incurred during the three months ended June 30, 2017. Overall, as of ~~March~~June 3130, 2017, we ~~have~~ incurred aggregate costs of $55.3 million in total restructuring charges under the 2016 Restructuring Plan~~. We completed the 2016 Restructuring Plan in the first quarter of 2017~~, and we expect aggregate annual cost savings of approximately $100.0 million.

2014 Restructuring Plan. 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, and as such no restructuring costs were incurred during the three months ended March 25, 2016.~~

~~The changes in the provision for the restructuring activities for the three months ended March 31, 2017 are as follows:~~20

	2014 Restructuring Plan				2016 Restructuring Plan
($ in thousands)	Employee Severance		Facilities Cost		Employee Severance		Facilities Cost		Other		Consolidated Total
Balance, December 30, 2016	$	1,015	$	13,995	$	6,041	$	15,090	$	30	$	36,171
Provision		—		—		4,353		8,401		382		13,136
Cash payments		—		(820)		(8,607)		(2,756)		(412)		(12,595)
Non-cash settlements		—		—		—		(453)		—		(453)
Balance, March 31, 2017	$	1,015	$	13,175	$	1,787	$	20,282	$	—	$	36,259

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~~The~~2014 ~~remaining~~Restructuring ~~provisions~~Plan ~~for~~were ~~employee~~substantially ~~severance~~complete ~~and~~as ~~termination~~of ~~benefits~~December 25, ~~will be paid primarily over the next twelve months~~2015, and ~~accruals~~as ~~for~~such ~~facilities~~no restructuring costs ~~will~~were beincurred ~~paid~~during ~~over~~ the ~~remaining~~three ~~term~~and ofsix ~~the~~months ~~exited~~ended ~~leases~~June ~~which~~24, ~~extend through 2032~~2016.

The changes in the provision for the restructuring activities for the six months ended June 30, 2017 are as follows:


	2014 Restructuring Plan				2016 Restructuring Plan
($ in thousands)	Employee Severance		Facilities Cost		Employee Severance		Facilities Cost		Other		Consolidated Total
Balance, December 30, 2016	$	1,015	$	13,995	$	6,041	$	15,090	$	30	$	36,171
Provision		—		—		4,353		8,401		382		13,136
Cash payments		—		(1,958)		(9,482)		(4,262)		(412)		(16,114)
Non-cash settlements		—		—		—		(453)		—		(453)
Balance, June 30, 2017	$	1,015	$	12,037	$	912	$	18,776	$	—	$	32,740

The remaining provisions for employee severance and termination benefits will be paid before year-end, and accruals for facilities costs will be paid over the remaining term of the exited leases which extend through 2032.

(13) Defined Benefit Plans and Other Postretirement Benefits

We sponsor several defined benefit pension plans primarily in the U.S. and the United Kingdom (“U.K.”). In the U.S., we have three noncontributory defined benefit pension plans. Plan benefits are generally based on years of service and compensation during the span of employment. Benefits in two of the plans are frozen while one plan remains active, the CH2M HILL OMI Retirement Plan (“OMI Plan”). During the year ended December 30, 2016, the Company adopted an amendment to freeze future pay and benefit service accruals beginning in 2017 for non-union participants within the OMI Plan ~~resulting in a gain on curtailment and a reduction in our projected benefit obligation~~.

In the U.K., we assumed several defined benefit plans as part of our acquisition of Halcrow on November 10, 2011, of which the largest is the Halcrow Pension Scheme. These Halcrow defined benefit plans have been closed to new entrants for many years. The information related to these plans is presented in the Non‑U.S. Pension Plans columns of the tables below. During the year ended December 30, 2016, a subsidiary of CH2M, effected a transaction to restructure the benefits provided to members of the Halcrow Pension Scheme which significantly reduced the Company’s projected benefit obligation under the scheme as well as improved our net periodic benefit through the recognition of prior service credits.

19The components of the net periodic pension expense (income) for the three and six months ended June 30, 2017 and June 24, 2016 are detailed below:


	Three Months Ended
	June 30, 2017				June 24, 2016
	U.S.		Non-U.S.		U.S.		Non-U.S.
($ in thousands)	Pension Plans		Pension Plans		Pension Plans		Pension Plans
Service cost	$	88	$	1,079	$	671	$	1,378
Interest cost		2,734		6,236		2,954		10,487
Expected return on plan assets		(3,016)		(9,807)		(2,921)		(8,822)
Amortization of prior service credits		(14)		(2,555)		(188)		—
Recognized net actuarial loss		1,907		2,676		1,629		693
Net expense (income) included in current income	$	1,699	$	(2,371)	$	2,145	$	3,736


	Six Months Ended
	June 30, 2017				June 24, 2016
	U.S.		Non-U.S.		U.S.		Non-U.S.
($ in thousands)	Pension Plans		Pension Plans		Pension Plans		Pension Plans
Service cost	$	177	$	2,153	$	1,342	$	2,755
Interest cost		5,467		12,295		5,908		20,964
Expected return on plan assets		(6,033)		(19,322)		(5,842)		(17,636)
Amortization of prior service credits		(27)		(5,034)		(376)		—
Recognized net actuarial loss		3,815		5,270		3,258		1,386
Net expense (income) included in current income	$	3,399	$	(4,638)	$	4,290	$	7,469

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~~December 30,~~postretirement ~~2016,~~medical abenefits ~~subsidiary~~on ~~of CH2M, effected~~ a ~~transaction~~pay‑as‑you‑go tobasis. Additionally, ~~restructure~~we ~~the~~have ~~benefits~~a ~~provided~~frozen tonon-qualified ~~members~~pension ofplan ~~the~~that ~~Halcrow~~provides ~~Pension~~additional ~~Scheme~~retirement ~~which~~benefits ~~significantly~~to ~~reduced~~certain ~~the~~senior ~~Company’s~~executives ~~projected~~who ~~benefit~~remained ~~obligation~~employed ~~under~~and ~~the~~retired ~~scheme~~from asCH2M ~~well~~on asor ~~improved~~after ~~our~~age ~~net periodic benefit through the recognition of prior service credits~~65.

The components of the ~~net~~non-qualified ~~periodic~~ pension benefit expense ~~(income)~~and postretirement benefit expense for the three and six months ended ~~March~~June 3130, 2017 and ~~March~~June 2524, 2016 are detailed below:

	Three Months Ended
	March 31, 2017				March 25, 2016
	June 30, 2017				June 24, 2016
	U.S.		Non-U.S.		U.S.		Non-U.S.
	Non-Qualified		Postretirement		Non-Qualified		Postretirement
($ in thousands)	Pension ~~Plans~~Plan		~~Pension~~Benefit Plans		Pension ~~Plans~~Plan		~~Pension~~Benefit Plans
Service cost	$	89—	$	~~1,074~~162	$	~~671~~—	$	~~1,377~~206
Interest cost		~~2,733~~9		~~6,059~~406		~~2,954~~13		~~10,477~~497
Expected return on plan assets		(3,017)		(9,515)		(2,921)		(8,814)
Amortization of prior service credits		—		(95)		—		(96)
Amortization of prior service credits		(13)		(2,479)		(188)		—
Recognized net actuarial gain		—		(72)		—		(3)
Recognized net actuarial loss		1,908		2,594		1,629		693
Net expense included in current income	$	9	$	401	$	13	$	604
Net expense (income) included in current income	$	1,700	$	(2,267)	$	2,145	$	3,733

We sponsor a medical benefit plan for retired employees of certain subsidiaries. The plan is contributory, and retiree premiums are based on years of service at retirement. The benefits contain limitations and a cap on future cost increases. We fund postretirement medical benefits on a pay‑as‑you‑go basis. Additionally, we have a frozen non‑qualified pension plan that provides additional retirement benefits to certain senior executives who remained employed and retired from CH2M on or after age 65.


	Six Months Ended
	June 30, 2017				June 24, 2016
	Non-Qualified		Postretirement		Non-Qualified		Postretirement
($ in thousands)	Pension Plan		Benefit Plans		Pension Plan		Benefit Plans
Service cost	$	—	$	325	$	—	$	413
Interest cost		19		811		27		994
Amortization of prior service credits		—		(191)		—		(192)
Recognized net actuarial gain		—		(143)		—		(6)
Net expense included in current income	$	19	$	802	$	27	$	1,209

The components of the non-qualified pension benefit expense and postretirement benefit expense for the three months ended March 31, 2017 and March 25, 2016 are detailed below:

	Three Months Ended
	March 31, 2017				March 25, 2016
	Non-Qualified		Postretirement		Non-Qualified		Postretirement
($ in thousands)	Pension Plan		Benefit Plans		Pension Plan		Benefit Plans
Service cost	$	—	$	163	$	—	$	206
Interest cost		10		405		13		497
Amortization of prior service (credits) costs		—		(96)		—		(96)
Recognized net actuarial loss (gain)		—		(71)		—		(3)
Net expense included in current income	$	10	$	401	$	13	$	604

(14) 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. On January 24, 2017, the Consortium terminated its contract with its client ~~the general contractor~~, 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. The majority of the financial information presented in our discontinued operations in the consolidated financial statements for the ~~first~~three ~~quarters~~and ofsix months ended June 30, 2017 and June 24, 2016 relate to the Australian fixed-price Power EPC contract.

Additionally, because the substantive engineering and construction operations ceased on January 24, 2017 as a result of the contract termination, we determined that we were no longer ~~controlled~~ the ~~operations~~primary beneficiary of the joint venture and deconsolidated the partnership from our consolidated financial statements. The negative book value of our 50% retained interest in the noncontrolling investment in the joint venture partnership as of January 24, 2017 was approximately $86.0 million~~, which approximated our evaluation of the potential future costs~~.

InDue ~~connection~~to ~~with~~a variety of issues, the ~~contract~~joint ~~termination~~venture partnership experienced project losses of $280.0 million in 2014, of which our portion of the ~~Consortium~~loss was $140.0 million, and $301.5 million in 2016, of which ~~includes~~our portion of the ~~consolidated~~loss ~~Australian~~was $154.1 million. These contract losses were previously accrued and recognized in the periods when known and estimable. The joint venture ~~partnership,~~has demobilized from the site in the first quarter of 2017 and expects to ~~file~~continue ~~arbitration~~to incur legal costs until the dispute is resolved. The Consortium continues to assess the expected future costs to close out the contract and terminate its current subcontractor obligations. It is possible that certain subcontractors could file claims against the ~~Contractor~~Consortium ~~during~~as a result of our termination of their subcontract which could be material to our consolidated financial statements. Additionally, the ~~first~~joint ~~half~~venture’s performance on the project is secured by certain bonds totaling approximately $50.0 million, of ~~2017~~which our portion is approximately $25. ~~The~~0 million, ~~Contractor~~which ~~has~~could ~~claimed~~potentially ~~that~~be called by our client at some time in the future.

20 The Consortium and the Contractor are currently in dispute over the termination, materials and equipment used in the work, and the Contractor’s right to call the bonds issued on behalf of the individual Consortium members. In connection with the parties’ primary dispute over the contract termination, in August 2017, the Consortium filed a Request for Arbitration against the Contractor with the International Chamber of Commerce, seeking that the Contractor pay the Consortium for its claims based on the difference in

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~~Consortium’s termination was not valid, and we anticipate that~~ the ~~Contractor~~amount ~~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~~Consortium’s ofcontract ~~disputes. Due~~and ~~to a variety of issues,~~ the ~~joint~~amount ~~venture~~actually ~~partnership experienced project losses of $280.0 million in 2014~~spent, of which ~~our~~the ~~portion~~Consortium ofalleges ~~the~~is ~~loss~~likely ~~was $140.0 million,~~to ~~and~~exceed $~~301~~665.5 million. In inthe ~~2016~~alternative, ofthe ~~which~~Consortium ~~our~~also ~~portion~~asserts ofthat the ~~loss~~Contractor ~~was~~owes ~~$154.1 million. These~~for certain contract ~~losses~~claims, ~~were~~in ~~previously~~amounts ~~accrued~~to ~~and~~be ~~recognized~~determined inthrough the ~~periods when known and estimable~~arbitration. ~~The~~If ~~joint~~we ~~venture~~are ~~has~~ultimately ~~demobilized~~unsuccessful ~~from~~in ~~the~~our ~~site~~claim inthat the ~~first~~contract ~~quarter~~was ofrepudiated ~~2017~~by ~~and~~our ~~expects~~client, tothe ~~continue~~Consortium tocould ~~incur~~be ~~legal~~liable ~~and~~for ~~other costs until~~ the ~~dispute~~completion isof ~~resolved. The Consortium continues to assess~~ the ~~expected~~project ~~future~~by ~~costs~~a toseparate ~~close~~contractor ~~out the contract~~ and ~~terminate~~other ~~its~~related ~~current subcontractor obligations~~damages. It The isContractor ~~possible~~has claimed that ~~certain subcontractors could file claims against~~ the Consortium’s ~~as a result of our~~ termination ofwas ~~their~~not ~~subcontract which could be material to our consolidated financial statements. Additionally~~valid, ~~the~~and ~~joint~~we ~~venture’s~~anticipate ~~performance~~that on the ~~project~~Contractor iswill ~~secured~~file bycounter ~~certain bonds totaling approximately $50~~claims.~~0 million,~~ We ofexpect ~~which~~a ~~our portion is approximately $25.0 million~~lengthy, ~~which~~multi-year ~~could~~arbitration ~~potentially~~process beand ~~called by our client~~ at ~~some~~this time ~~in the future. If~~ we are ~~ultimately~~unable ~~unsuccessful~~to inpredict ~~our claim that~~ the ~~contract~~timing ~~was~~of ~~repudiated~~resolution byor ~~our client,~~ the ~~Consortium~~outcome ~~could be liable for the completion~~ of ~~the project by a separate contractor and other related damages~~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. These additional costs could be materially adverse to our results of operations, cash flow and financial condition in the future. Management believes the existing accruals will be sufficient for any known or expected costs which can be estimated at this time.

The following table presents a reconciliation of the major classes of line items constituting the net income (loss) from discontinued operations related the fixed-price Power EPC business:

	Three Months Ended				Six Months Ended
	March 31,		March 25,
	June 30,		June 24,		June 30,		June 24,
($ in thousands)	2017		2016		2017		2016
Gross revenue	$	71,~~836~~368	$	56(40,~~398~~682)	$	9,204	$	15,716
Operating expenses:
Direct cost of services		(41,~~476~~889)		(55149,~~327~~188)		(6,365)		(204,515)
Selling, general and administrative		(~~2,807~~243)		(1,~~227~~199)		(3,050)		(2,426)
Income (loss) from discontinued operations before provision for income taxes		553		(156)
Loss from discontinued operations before provision for income taxes		(764)		(191,069)		(211)		(191,225)
Provision (benefit) for income taxes related to discontinued operations		(163)		35
Benefit for income taxes related to discontinued operations		233		42,537		70		42,572
Net income (loss) from discontinued operations	$	390	$	(121)
Net loss from discontinued operations	$	(531)	$	(148,532)	$	(141)	$	(148,653)

The following table presents a reconciliation of the carrying amounts of the major classes of assets and liabilities included in discontinued operations related the fixed-price Power EPC business:

	March 31,		December 30,
	June 30,		December 30,
($ in thousands)	2017		2016
Current assets:
Cash and cash equivalents	$	—	$	9,664
Client accounts		~~1,020~~753		1,787
Unbilled revenue		~~224~~74		972
Other receivables, net		—		16
Prepaid expenses and other current assets		—		2,010
Current assets of discontinued operations		~~1,244~~827		14,449
Property, plant and equipment, net		—		1,836
Total assets of discontinued operations	$	~~1,244~~827	$	16,285
Current liabilities:
Accounts payable and accrued subcontractor costs	$	—	$	20,317
Billings in excess of revenue		~~753~~1,239		(933)
Other accrued liabilities		—		188,721
Current liabilities of discontinued operations		~~753~~1,239		208,105
Investments in unconsolidated affiliates		8377,~~403~~920		—
Total liabilities of discontinued operations	$	8479,~~156~~159	$	208,105

(15) Commitments and Contingencies

We are party to various legal actions arising in the normal course of business. Because a large portion of our business comes from U.S. federal, state and municipal sources, our procurement and certain other practices at times are subject to review and investigation by various agencies of the U.S. government and state attorneys’ offices. Such state and U.S. government investigations, whether relating to government contracts or conducted for other reasons, could result in administrative, civil or criminal liabilities, including repayments, fines or penalties or could lead to suspension or debarment from future U.S. government contracting. These investigations often take years to complete and many result in no adverse action or alternatively could result in settlement. Damages assessed in connection with and the cost of defending any such actions could be substantial. While the outcomes of pending proceedings and legal actions are often difficult to predict, management believes that proceedings and legal actions that have not yet

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whether relating to government contracts or conducted for other reasons, could result in administrative, civil or criminal liabilities, including repayments, fines or penalties or could lead to suspension or debarment from future U.S. government contracting. These investigations often take years to complete and many result in no adverse action or alternatively could result in settlement. Damages assessed in connection with and the cost of defending any such actions could be substantial. While the outcomes of pending proceedings and legal actions are often difficult to predict, management believes that proceedings and legal actions that have not yet been terminated through settlement would not result in a material adverse effect on our results of operations or financial condition even if the final outcome is adverse to the Company.

Many claims that are currently pending against us are covered by our professional liability insurance after we have exhausted our self-insurance requirement. Management estimates that the levels of insurance coverage (after retentions and deductibles) are generally adequate to cover our liabilities, if any, with regard to such claims. Any amounts that are probable of payment are accrued when such amounts are estimable. As of March 31, 2017 and December 30, 2016, accruals for potential estimated claim liabilities were $6.6 million and $8.9 million, respectively.

CH2M-WG Idaho, LLC (“CWI”), owned 50.5% by CH2M HILL Constructors, Inc., a wholly owned subsidiary of CH2M HILL Companies, Ltd., is a remediation contractor for the U.S. Department of Energy (“DOE”) at the Idaho National Laboratory site. The original remediation contract was to run from May 2005 through September 2012, and was extended through September 2015. CWI currently has a disagreement with DOE concerning what CWI’s final fee should be for the base contract period from May 2005 through September 2012. In December 2013, the DOE issued a final determination that was approximately $30.0 million less than CWI expected to receive in the fee determination. On March 6, 2014, CWI filed a Certified Claim with the Contracting Officer for a total fee owed of $40.1 million. Certified Claim was rejected through a Contracting Officer’s Final Decision in May 2014, and CWI filed its appeal to the Civilian Board of Contract Appeals on May 30, 2014. The trial was held on April 12 through 28, 2016, and the post-trial briefing phase is now complete. We are awaiting the decision from the Board. Based on information presently known to management, we believe that the outcome of this dispute will not have a material adverse effect on our financial condition, cash flows or results of operations.

In 2006, Halcrow Consulting Engineers & Architects, Ltd., Qatar Branch (“Halcrow”) entered into a Consulting Services Agreement with Qatari Diar Real Estate Investment Company (“QD”) to perform Pre and Post Contract Consultancy and Quantity Surveying Services for Lusail Development Primary Infrastructure, Marine, Earthworks, and Site Preparation Works (the “Project”) in Lusail, Qatar. The detailed design portion of the contract was extended from ten months to over seven years due primarily to employer delays and added scope, which were the responsibility of QD. On March 9, 2017, QD called Halcrow’s letter of credit for $6.7 million. On April 12, 2017, QD filed court proceedings in Qatari court (State of Qatar, Court of First Instance) against Halcrow. According to the court papers, QD’s claims are for (1) damages for loss and costs incurred resulting from the alleged negligent design of Bridges 8 and 9 on the Project (which bridge was designed by COWI – Halcrow’s subconsultant); and (2) compensation for alleged breach of contract relating to as yet unspecified infrastructure works. Further according to the court papers, the damages asserted by QD against Halcrow are as high as QAR 680.8 million, which is approximately $186.8 million. QD’s alternative damage amount for decennial liability under Qatari law (a form of strict liability) is for QAR 480.8 million, approximately $131.9 million. We intend to vigorously defend against QD’s claims, and to assert counterclaims against QD, including without limitation counterclaims for Halcrow’s entitlement to certified receivables of $4.0 million, delay claims of a minimum of approximately $20.0 million, and the wrongful calling of the letter of credit of $6.7 million. We will also assert the defense that the Agreement contains a limitation of liability provision capping any negligence damages against Halcrow at QAR 36.5 million, approximately $10.0 million.

(16) Subsequent Events

Second Lien Indenture

On April 28, 2017, we entered into a Second Lien Indenture through which we issued Senior Second Lien Notes with an aggregate principal amount of $200.0 million at an annual interest rate of 10% (the “Second Lien Notes”). The Second Lien Notes mature on April 28, 2020, and interest is payable on May 1 and November 1 of each year, commencing on November 1, 2017. The net proceeds of the Second Lien Notes are to be used to repay a portion of the outstanding revolving credit loans under our Credit Facility. The Second Lien Notes are unsubordinated, senior obligations of CH2M and are secured by second-priority liens on substantially all of CH2M’s and certain CH2M subsidiaries’ domestic assets.

The Second Lien Indenture also contains financial covenants that require CH2M to maintain a consolidated leverage ratio no greater than 4.50x and restricts CH2M’s ability to repurchase its common or preferred stock, pay cash dividends on or make certain other distributions on its common or preferred stock. Specifically, while the Second Lien Notes are outstanding, the amount CH2M may spend to repurchase its common stock in connection with its employee stock ownership program, other than legally required repurchases of common stock held in benefit plans, which are not restricted, will be limited to an aggregate of $75.0 million during the

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term of the Second Lien Notes plus a cumulative amount equal to 50% of CH2M’s consolidated net income, or minus 100% of any net loss, from April 1, 2017 to the date on which any such repurchase is to be made. The amount available to make repurchases of our common stock shall also be reduced to the extent that CH2M makes legally required repurchases of common stock held in benefit plans in excess of $50.0 million in any period of four consecutive quarters and that CH2M makes certain payments on subordinated indebtedness in accordance with the terms of the Second Lien Indenture.

Redemption Period	Redemption Price
From April 28, 2017 (issue date) through April 28, 2018	110.0	%
From April 29, 2018 through April 28, 2019	103.0	%
From April 29, 2019 through October 28, 2019	101.5	%
From October 29, 2019 through April 28, 2020 (maturity date)	100.0	%

Fourth Amendment to Our Credit Agreement

In connection with the issuance of the Second Lien Notes, on April 28, 2017 we entered into the Fourth Amendment (“Fourth Amendment”) to our Credit Agreement. The Fourth Amendment allows for the issuance and sale of the Second Lien Notes, as discussed above, lowers our maximum revolving credit facility to $875.0 million from $925.0 million, increases the maximum consolidated leverage ratio, as defined by the Fourth Amendment, to 4.00x from 3.00x, and modifies the definition of adjusted EBIDTA as used in the financial covenant calculation. Additionally, the Fourth Amendment requires that CH2M maintain, on a consolidated basis, a maximum consolidated first lien leverage ratio, as defined in the Fourth Amendment, no greater than 3.00x as well as maintain a minimum consolidated fixed charge coverage ratio, as defined in the Fourth Amendment, no less than 1.50x. The Fourth Amendment also requires that CH2M comply with the terms of the Second Lien Indenture limiting certain restricted payment and participation in the employee stock ownership program as described above.

The Fourth Amendment to our Credit Agreement continues to contain customary representations, warranties and conditions to borrowing including customary affirmative and negative covenants, which include covenants that limit or restrict our ability to incur indebtedness and other obligations, grant liens to secure their obligations, make investments, merge or consolidate, and dispose of assets, in each case subject to customary exceptions for credit facilities of this size and type. Additionally, the Fourth Amendment also makes other technical and operating changes.

The obligations of CH2M and its subsidiaries that are either borrowers or guarantors under the Fourth Amendment are secured by first-priority security interests in substantially all of the domestic assets of CH2M and such subsidiaries pursuant to Amended Credit Agreement dated as of September 30, 2016 and discussed in Note 10 – Line of Credit and Long-Term Debt. As a result of the Second Lien Notes and the Fourth Amendment, our remaining unused borrowing capacity under the Credit Facility was over $300.0 million as of March 31, 2017.

Intercreditor Agreement

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~~Furthermore,~~been onterminated ~~April 28,~~through ~~2017~~settlement wewould ~~entered~~not ~~into~~result anin ~~Intercreditor~~a ~~Agreement~~material ~~with~~adverse ~~the~~effect ~~agents~~on ~~of the Second Lien Notes and the lenders of the Fourth Amendment to~~ our ~~Credit~~results ~~Agreement that states that the liens on common collateral securing the claims~~ of ~~the~~operations ~~Credit~~or ~~Agreement~~financial ~~have~~condition ~~priority~~even ~~over,~~if ~~and are senior to,~~ the ~~liens~~final onoutcome ~~the~~is ~~common~~adverse ~~collateral securing Second Lien Notes. The senior claims are defined in the Intercreditor Agreement~~ to ~~include, among other things,~~ the ~~principal amount of all indebtedness incurred under the Fourth Amendment and certain additional senior indebtedness permitted under the Intercreditor Agreement~~Company.

~~Amendment~~Many claims that are currently pending against us are covered by our professional liability insurance after we have exhausted our self-insurance requirement. Management estimates that the levels of insurance coverage (after retentions and deductibles) are generally adequate to ~~Certificate~~cover our liabilities, if any, with regard to such claims. Any amounts that are probable of ~~Designation~~payment are accrued when such amounts are estimable. As of ~~Series~~June A30, ~~Preferred~~2017 ~~Stock~~and December 30, 2016, accruals for potential estimated claim liabilities were $5.0 million and $8.9 million, respectively.

InCH2M-WG ~~connection~~Idaho, ~~with~~LLC ~~the~~(“CWI”), ~~issuance~~owned of50.5% ~~the~~by ~~Second~~CH2M ~~Lien~~HILL ~~Notes~~Constructors, ~~and~~Inc., ~~the~~a ~~Fourth~~wholly ~~Amendment,~~owned wesubsidiary ~~obtained~~of ~~consent~~CH2M ~~from~~HILL ~~our~~Companies, ~~Series A~~Ltd., ~~Preferred~~is ~~Stockholder~~a ~~with~~remediation ~~respect~~contractor tofor the ~~incurrence~~U.S. Department of Energy (“DOE”) at the ~~notes~~Idaho ~~and~~National ~~filed~~Laboratory asite. The ~~Certificate~~original ofremediation ~~Amendment~~contract was to ~~the~~run ~~Certificate~~from ofMay 2005 ~~Designation~~through ofSeptember 2012, ~~Series~~was Aextended ~~Preferred~~through ~~Stock~~September 2015, ~~which~~and ~~increases~~was ~~the~~extended ~~annual~~again ~~rate~~through atMarch 31, ~~which~~2016. CWI ~~dividends~~disagrees ~~accrue~~with onDOE ~~the~~regarding ~~Series A~~CWI’s ~~Preferred~~final ~~Stock~~fee ~~from~~for 5%the tobase 7%contract ~~beginning~~period ~~April~~from May 1,2005 ~~2017~~through September 2012. ~~Dividends~~In onDecember 2013, the ~~Series A~~DOE ~~Preferred~~issued ~~Stock~~a ~~are~~final ~~cumulative~~determination ~~and~~that ~~accrue~~was ~~quarterly~~approximately in$30.0 ~~arrears~~million onless than what CWI expected to receive in the ~~sum~~fee ofdetermination. On March 6, 2014, CWI filed a Certified Claim with the ~~original~~Contracting ~~issue~~Officer ~~price~~for a total fee owed of $6240.~~22 per~~1 ~~share~~million. The ~~plus~~Certified ~~all~~Claim ~~accumulated~~was ~~and~~rejected ~~unpaid~~through ~~accruing~~a ~~dividends,~~Contracting ~~regardless~~Officer’s ofFinal ~~whether~~Decision orin ~~not~~May 2014, ~~declared~~and byCWI filed its appeal to the Civilian Board of Contract Appeals on May 30, 2014. The ~~other~~trial ~~terms~~was ofheld ~~the~~from ~~Series~~April A12 through 28, ~~Preferred~~2016, ~~Stock~~and ~~set~~the ~~forth~~post-trial inbriefing ~~the~~phase ~~Certificate~~is ofnow ~~Designation,~~complete. We ~~and~~are ~~summarized~~awaiting inthe ~~our~~decision ~~Annual~~from ~~Report~~the Board. Based on ~~Form~~information ~~10-K~~presently ~~for~~known to management, we believe that the ~~year~~outcome ~~ended~~of ~~December 30,~~this ~~2016~~dispute will not have a material adverse effect on our financial condition, ~~remain~~cash ~~unchanged~~flows or results of operations.

In 2006, Halcrow Consulting Engineers & Architects, Ltd., Qatar Branch (“Halcrow”) entered into a Consulting Services Agreement with Qatari Diar Real Estate Investment Company (“QD”) to perform Pre and Post Contract Consultancy and Quantity Surveying Services for Lusail Development Primary Infrastructure, Marine, Earthworks, and Site Preparation Works (the “Project”) in Lusail, Qatar. The detailed design portion of the contract was extended from ten months to over seven years due primarily to employer delays and added scope, which were the responsibility of QD. On March 9, 2017, QD called Halcrow’s letter of credit for $6.7 million. On April 12, 2017, QD filed court proceedings in Qatari court (Qatari Civil and Commercial Court) against Halcrow. The claims asserted by QD for Halcrow’s alleged bridge design defects, cost of redesign, work to remedy the bridge defects, and loss of profit and reputation, together with a further claim for alleged breach of contract relating to as yet unspecified infrastructure works, are approximately $180.0 million. QD’s alternative damage amount for decennial liability under Qatari law (a form of strict liability) is approximately $127.0 million. We intend to vigorously defend against QD’s claims, and to assert counterclaims against QD, including without limitation counterclaims for Halcrow’s entitlement to certified receivables of $4.0 million, delay claims of a minimum of approximately $20.0 million, and the wrongful calling of the letter of credit of $6.7 million. We will also assert the defense that the Agreement contains a limitation of liability provision capping any negligence damages against Halcrow of approximately $10.0 million.

In 2012, CH2M HILL Australia Pty Limited entered into a 50/50 integrated joint venture with UGL Infrastructure Pty Limited (“UGL”), an Australian construction contractor (“CH2M-UGL JV” or “JV”). The JV entered into a Consortium Agreement with General Electric and GE Electrical International Inc (“Consortium”). The Consortium was awarded a contract by JKC Australia LNG Pty Limited (“JKC”) for the engineering, procurement, construction and commissioning of a 360 MW Combined Cycle Power Plant (the “Project”) for INPEX Operations Australia Pty Limited (“Inpex”) at Blaydin Point, Darwin, NT, Australia (the “Subcontract”). On January 24, 2017, the Consortium terminated the Subcontract because of JKC’s repudiatory breach. The Consortium also demobilized from the work site. The Consortium issued a termination letter which described JKC’s failure to properly administer the Subcontract. JKC has claimed that the Consortium’s termination was not valid. JKC claims the Consortium has abandoned the work and, as such, JKC has now purported to terminate the Subcontract. The Consortium and JKC are now in dispute over the termination. In connection with the parties’ primary dispute over the contract termination, on August 3, 2017, the Consortium filed a Request for Arbitration against JKC with the International Chamber of Commerce, seeking that JKC pay the Consortium for its repudiatory breach of the Subcontract based on the difference in the amount of the Consortium’s contract and the amount actually spent, which the Consortium alleges is likely to exceed $665.5 million. In the alternative, the Consortium also asserts that JKC owes for unresolved contract claims and change orders, in amounts in the hundreds of millions of dollars range to be determined through the arbitration. We expect the arbitration to be lengthy and at this time are unable to predict the timing of resolution or the outcome of disputes, which will depend on disputed issues of fact and law. The outcome could be materially adverse to our results of operations, cash flow and financial condition. The primary dispute over the termination is to be decided in an International Chamber of Commerce arbitration in Singapore.

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(16) Subsequent Events

On July 3, 2017, because of the closing of the acquisition of WS Atkins plc. by SNC-Lavalin Group Inc., both of whom were partners with CH2M in a joint venture through which we are executing a large Canadian nuclear project, we believe that we may no longer be the primary beneficiary of the joint venture, and we expect to deconsolidate the joint venture from our consolidated financial statements. As of June 30, 2017, total assets and liabilities of the consolidated joint venture were $225.1 million and $223.5 million, respectively, and the revenue of the consolidated joint venture for the three and six months ended June 30, 2017 was $155.3 million and $323.5 million, respectively. Net income attributable to CH2M will not be impacted as a result of the deconsolidation.

Proposed Acquisition by Jacobs Engineering

On August 1, 2017, we entered into an Agreement and Plan of Merger (“Merger Agreement”) with Jacobs Engineering Group Inc. (“Jacobs”) and Basketball Merger Sub Inc. (“Merger Sub”). The Merger Agreement provides for the merger of Merger Sub with and into CH2M, with CH2M continuing as the surviving company and a direct, wholly-owned subsidiary of Jacobs.

Each outstanding share of our common stock will be cancelled and converted in the merger into the right to receive, at the election of the holder thereof, (i) a combination of $52.85 in cash and 0.6677 shares of Jacobs common stock, (ii) $88.08 in cash or (iii) 1.6693 shares of Jacobs common stock. Each outstanding share of our preferred stock will be deemed converted into shares of our common stock in accordance with the Certificate of Designation for such preferred stock, and such shares will also be automatically converted into the right to receive, at the election of the holder thereof, the same merger consideration. Stockholder elections with respect to the form of merger consideration to be received in connection with the Merger Agreement will be subject to proration, such that the overall consideration to be paid by Jacobs in connection with the Merger will be 60% in the form of cash and 40% in the form of shares of Jacobs common stock.

The merger is subject to approval by our stockholders, performance by the parties of all their obligations under the Merger Agreement, regulatory approvals and the satisfaction of other customary closing conditions. We anticipate that the transaction will be consummated prior to the end of calendar 2017. However, we cannot predict with certainty whether and when any of the required closing conditions will be satisfied or if the merger will close.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis is intended to assist in understanding our financial condition, changes in financial condition and results of operations as a whole and for each of our operating segments and should be read in conjunction with our consolidated financial statements and notes thereto in our Annual Report on Form 10-K for the year ended December 30, 2016.

In the following text, the terms, “CH2M,” “the Company,” “we,” “our,” and “us” may refer to CH2M HILL Companies, Ltd.

Certain statements throughout Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this Quarterly Report are forward-looking within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”), and thus reflect our current expectations and beliefs with respect to certain current and future events and financial performance. Such forward-looking statements are continually 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. 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. All forward-looking statements in this Quarterly Report are based upon information available to us on the date of this Quarterly Report. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, except as required by applicable law.

Our actual results could differ materially from these forward-looking statements due to numerous factors including, the risks and uncertainties set forth under Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 30, 2016, and the risks and uncertainties set forth from time to time in the reports the Company files with the SEC. Consequently, forward-looking statements should not be regarded as representation or warranties by the Company that such matters will be realized.

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.

Proposed Acquisition by Jacobs Engineering

On August 1, 2017, we entered into the Merger Agreement with Jacobs. The Merger Agreement provides for the merger of Merger Sub with and into CH2M, with CH2M continuing as the surviving company and a direct, wholly-owned subsidiary of Jacobs.

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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 primarily ~~include~~included workforce reductions and facilities consolidations. ~~During~~For the ~~three~~six months ended ~~March~~June 3130, 2017, we incurred $13.1 million of costs for ~~these~~ restructuring activities related to the 2016 Restructuring Plan, which have been included in selling, general and administrative expense on the consolidated statements of operations. The restructuring activities under the 2016 Restructuring Plan were substantially complete in the first quarter of 2017, and, as such, no restructuring costs were incurred during the three months ended June 30, 2017. Overall, as of ~~March~~June 3130, 2017, we ~~have~~ incurred aggregate costs of $55.3 million in total restructuring charges under the 2016 Restructuring Plan~~. We completed the 2016 Restructuring Plan in the first quarter of 2017~~, and we expect aggregate annual cost savings of approximately $100.0 million.

Summary of Operations

In the first quarter of 2017, we implemented a new organizational structure to more fully align global operations with the Company’s client-centric strategy, resulting in three sectors: National Governments, Private, and State & Local Governments. Each of these sectors has been identified as a reportable operating segment. Additionally, the termination of the Australian fixed-price Power EPC contract resulted in the substantial completion and discontinuation of our former Power EPC operating segment. As a result, our fixed-price Power EPC business is no longer reported as a separate operating segment, and revenues and operating income from this former segment are no longer reflected within our consolidated results of continuing operations but rather reflected as a single, net amount of net income or loss from discontinued operations. Refer to Note 14 – Discontinued Operations for additional details regarding the results of operation and financial position of our discontinued operations.

25Certain financial information relating to the three and six months ended June 30, 2017 and June 24, 2016 for each segment is provided below. Prior year amounts have been revised to conform to the current year presentation. Costs for corporate selling, 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 is primarily based upon metrics that reflect the proportionate volume of project-related activity and employee labor costs within each segment.

Results of Operations for the three months ended June 30, 2017 and June 24, 2016

On a consolidated basis, our gross revenue decreased by $6.1 million, or 0.5%, and our consolidated operating income increased $86.7 million for the three months ended June 30, 2017 as compared to June 24, 2016. The following table summarizes our results of operation by segment for the three months ended June 30, 2017 as compared to the three months ended June 24, 2016:


	Three Months Ended
	June 30, 2017				June 24, 2016				Change
	Gross		Operating		Gross		Operating		Gross		Operating
($ in thousands)	Revenue		Income (Loss)		Revenue		Income (Loss)		Revenue		Income (Loss)
National Governments	$	481,484	$	14,903	$	482,186	$	7,011	$	(702)	$	7,892
Private		302,923		10,150		330,441		12,883		(27,518)		(2,733)
State & Local Governments		500,452		47,575		478,338		(33,945)		22,114		81,520
Total	$	1,284,859	$	72,628	$	1,290,965	$	(14,051)	$	(6,106)	$	86,679

National Governments

Our National Governments sector gross revenue was relatively flat for the three months ended June 30, 2017 as compared to the three months ended June 24, 2016, experiencing a slight decrease of $0.7 million, or 0.1%. Revenue on a domestic federal consulting project related to nuclear remediation increased approximately $36.0 million due to scope expansion and increased mobilization of staff. However, this was largely offset by comparatively lower volume of operations on a large Canadian nuclear project in a consolidated joint venture and the winding down of a large environmental and nuclear consulting project in the United Kingdom. Additionally, National Governments consulting revenue in the United Kingdom was negatively impacted by the effects of a weaker British Pound.

For the three months ended June 30, 2017 as compared to the three months ended June 24, 2016, National Governments operating income increased $7.9 million primarily as a result of the reduction in its selling, general and administrative costs due to significant efficiencies gained from the 2016 Restructuring Plan realized in the three months ended June 30, 2017 related to staffing

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~~from~~reductions, ~~this~~better ~~former~~client-alignment ~~segment~~and ~~are~~utilization noof ~~longer~~our ~~reflected~~workforce. Additionally, ~~within~~selling, ~~our~~general ~~consolidated~~and ~~results~~administrative ofcosts ~~continuing~~decreased ~~operations~~due ~~but~~to ~~rather~~reduced ~~reflected~~business asdevelopment acosts ~~single~~for the three months ended June 30, ~~net~~2017 ~~amount~~as ofcompared ~~net~~to ~~income~~the orthree ~~loss~~months ~~from~~ended ~~discontinued~~June 24, ~~operations. Refer~~2016 primarily related to ~~Note~~lower 14volumes –of ~~Discontinued~~United ~~Operations~~States ~~for~~federal ~~additional~~government ~~details~~procurements, ~~regarding~~which ~~the~~have ~~results~~been ofslower ~~operation~~to ~~and~~materialize ~~financial~~in ~~position~~2017 ofas ~~our~~compared ~~discontinued~~to ~~operations~~2016.

~~Certain~~On ~~financial~~July 3, ~~information~~2017, ~~relating~~because toof the ~~three~~closing ~~months~~of ~~ended~~the ~~March 31,~~acquisition ~~2017~~of ~~and~~WS ~~March 30~~Atkins plc. by SNC-Lavalin Group Inc., ~~2016~~both ~~for~~of ~~each~~whom ~~segment~~were ispartners ~~provided~~with ~~below. Prior~~CH2M ~~year~~in ~~amounts~~a ~~have~~joint ~~been~~venture ~~revised~~through towhich ~~conform~~we toare ~~the~~executing ~~current~~a ~~year~~large ~~presentation. Costs~~Canadian ~~for~~nuclear ~~corporate~~project ~~selling,~~within ~~general~~our ~~and~~National ~~administrative~~Governments ~~expenses~~sector, ~~restructuring~~we ~~costs~~believe ~~and~~that ~~amortization~~we ~~expense~~may ~~related~~no tolonger ~~intangible~~be ~~assets~~the ~~have~~primary ~~been~~beneficiary ~~allocated~~of tothe ~~each~~joint ~~segment~~venture, ~~based~~and onwe expect to deconsolidate the ~~estimated~~joint ~~benefits~~venture ~~provided~~from byour ~~corporate~~consolidated ~~functions~~financial statements. ~~This~~For ~~allocation~~the isthree ~~primarily~~months ~~based~~ended ~~upon~~June 30, ~~metrics~~2017 ~~that~~and ~~reflect~~June 24, 2016, revenue of the ~~proportionate~~consolidated ~~volume~~joint ofventure ~~project-related~~was ~~activity~~$155.3 million and ~~employee~~$171.1 million, ~~labor~~respectively. Operating ~~costs~~income ~~within~~of the consolidated joint venture was insignificant for each ~~segment~~of the three months ended June 30, 2017 and June 24, 2016.

~~Results of Operations for the three months ended March 31, 2017 and March 25, 2016~~Private

OnOur aPrivate ~~consolidated~~sector ~~basis,~~experienced ~~our~~a ~~gross revenue decreased by~~ $4627.65 million, or 48%, ~~and~~decrease ~~our~~in ~~consolidated~~revenue ~~operating income decreased $11.6 million, or 28%,~~ for the three months ended ~~March~~June 3130, 2017 as compared to ~~March~~the three months ended June 2524, 2016. ~~The~~ Revenue ~~following~~primarily ~~table~~declined ~~summarizes~~due ~~our~~to ~~results~~the decreased volume of ~~operation~~oil byand ~~segment~~gas ~~for~~activities on the ~~three~~North ~~months~~Slope ~~ended~~in ~~March~~Alaska, including approximately $28.5 31million related to a large oil and gas construction project which was substantially completed during the second quarter of 2016, ~~2017~~as well as ~~compared~~reduced volume related to a large oil and gas program management project in the ~~three~~Middle ~~months~~East. The ~~ended~~decline ~~March 25,~~in ~~2016:~~revenue from the continued challenges in the oil and gas industry were partially offset by increased volume within our electronics business in the industrial and advanced technology industry.

	Three Months Ended
	March 31, 2017				March 25, 2016				Change
	Gross		Operating		Gross		Operating		Gross		Operating
($ in thousands)	Revenue		Income (Loss)		Revenue		Income (Loss)		Revenue		Income (Loss)
National Governments	$	475,679	$	10,666	$	446,724	$	763	$	28,955	$	9,903
Private		289,280		9,271		348,097		14,496		(58,817)		(5,225)
State & Local Governments		475,474		9,514		492,189		25,763		(16,715)		(16,249)
Total	$	1,240,433	$	29,451	$	1,287,010	$	41,022	$	(46,577)	$	(11,571)

Private operating income decreased $2.7 million, or 21%, for the three months ended June 30, 2017 as compared to the three months ended June 24, 2016. The decrease in operating income was primarily related to the reduction in project volumes related to the oil and gas industry as discussed above. The decreased results from operations were partially offset by reduced selling, general and administrative costs in the three months ended June 30, 2017 as compared to the three months ended June 24, 2016 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.

State and Local Governments

Our State and Local Governments sector’s revenue increased $22.1 million, or 5%, in the three months ended June 30, 2017 as compared to the three months ended June 24, 2016. Revenue increased due to overall volume growth in our consulting business, primarily attributable to two rail transportation projects in the United Kingdom and Middle East as well as a water reclamation project in the Asia Pacific region. These increases in revenue were partially offset by the negative effects of a weaker British Pound related to our transportation consulting services in the United Kingdom as well as declining volumes of design-build projects in the United States.

State and Local Governments operating income increased $81.5 million for the three months ended June 30, 2017 as compared to the three months ended June 24, 2016. The increase was predominantly caused by cost growth resulting in changes in estimated costs of $60.0 million to complete a fixed-price Transportation contract to design and construct roadway improvements on an expressway in the southwestern United States in the three months ended June 24, 2016. We did not incur additional cost growth during the three months ended June 30, 2017. Refer to Note 2 – Changes in Project-Related Estimates of the Notes to Consolidated Financial Statements for additional detail. While management believes that it has recorded an appropriate provision to complete this project, our project team may determine that it will incur additional costs and losses to complete the project. 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. The remaining increase in operating income was primarily due to the growth in our consulting business discussed above as well as reduced selling, general and administrative costs due to efficiencies gained from the various restructuring plans related to better client-alignment and utilization of our workforce.

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Results of Operations for the six months ended June 30, 2017 and June 24, 2016

On a consolidated basis, our gross revenue decreased by $52.7 million, or 2%, and our consolidated operating income increased $75.1 million for the six months ended June 30, 2017 as compared to June 24, 2016. The following table summarizes our results of operation by segment for the six months ended June 30, 2017 as compared to the six months ended June 24, 2016:


	Six Months Ended
	June 30, 2017				June 24, 2016				Change
	Gross		Operating		Gross		Operating		Gross		Operating
($ in thousands)	Revenue		Income (Loss)		Revenue		Income (Loss)		Revenue		Income (Loss)
National Governments	$	957,163	$	25,569	$	928,909	$	7,774	$	28,254	$	17,795
Private		592,203		19,420		678,539		27,380		(86,336)		(7,960)
State & Local Governments		975,926		57,090		970,527		(8,183)		5,399		65,273
Total	$	2,525,292	$	102,079	$	2,577,975	$	26,971	$	(52,683)	$	75,108

National Governments

Our National Governments sector had a $2928.02 million, or 63%, increase in revenue for the ~~three~~six months ended ~~March~~June 3130, 2017 as compared to the ~~three~~six months ended ~~March~~June 2524, 2016. ~~Approximately~~Revenue on a domestic federal consulting project related to nuclear remediation increased approximately $2557.0 million primarily as a result of scope expansion and increased mobilization of staff. Additionally, approximately $9.0 million of the increase in revenue was caused by higher volumes of operations on a large Canadian nuclear project in a consolidated joint venture. WeThese ~~also~~increases ~~experienced~~in anrevenue ~~increase~~were inpartially ~~our~~offset ~~international~~by ~~consulting~~the ~~revenues~~winding ~~related~~down toof ~~various~~a ~~program~~large ~~management~~environmental ~~projects~~and ~~primarily~~nuclear consulting project in ~~our~~the United Kingdom ~~and Middle East markets~~. ~~Additionally~~Moreover, werevenue ~~experienced~~was ~~higher~~negatively ~~revenue~~impacted onby a ~~domestic~~weaker ~~federal~~British ~~project~~Pound ~~related~~on ~~to environmental threat and health safety~~ consulting asrevenue ain ~~result~~the ofUnited ~~increased mobilization of staff~~Kingdom.

For the ~~three~~six months ended ~~March~~June 3130, 2017 as compared to the ~~three~~six months ended ~~March~~June 2524, 2016, National Governments operating income increased $917.98 million as a result of the above described increases in revenues as well as the reduction in its selling, general and administrative costs due to ~~reduced business development costs and~~ significant efficiencies gained from the 2016 Restructuring Plan realized in the ~~three~~six months ended ~~March~~June 3130, 2017 related to staffing reductions, ~~and~~ better client-alignment and utilization of our workforce. Additionally, selling, general and administrative costs decreased due to reduced business development costs for the six months ended June 30, 2017 as compared to the six months ended June 24, 2016 primarily related to lower volumes of United States federal government procurements, which have been slower to materialize in 2017 as compared to 2016.

On July 3, 2017, because of the closing of the acquisition of WS Atkins plc. by SNC-Lavalin Group Inc., both of whom were partners with CH2M in a joint venture through which we are executing a large Canadian nuclear project within our National Governments sector, we believe that we may no longer be the primary beneficiary of the joint venture, and we expect to deconsolidate the joint venture from our consolidated financial statements. For the six months ended June 30, 2017 and June 24, 2016, revenue of the consolidated joint venture was $323.5 million and $314.4 million, respectively. Operating income of the consolidated joint venture was insignificant for each of the six months ended June 30, 2017 and June 24, 2016.

Private

Our Private sector experienced aan $5886.83 million, or 1713%, decrease in revenue for the ~~three~~six months ended ~~March~~June 3130, 2017 as compared to the ~~three~~six months ended ~~March~~June 2524, 2016. Revenue ~~decreased~~primarily ~~approximately~~declined ~~$27.9 million~~ due to the ~~winding-down~~decreased volume of oil and gas activities on the North Slope in Alaska, including approximately $42.2 million related to a large oil and gas construction project inwhich ~~Alaska~~was substantially completed during the ~~first~~second quarter of 2016,. This ~~which~~activity was not replaced with a similar ~~project~~volume in 2017 due to the continued market challenges within the oil and gas industry. Additionally, within our oil, gas and chemicals business, several large consulting projects in Latin America and the Middle East as well as multiple domestic operations and maintenance projects achieved substantial completion in 2016 or experienced reduced volume of activity or scope of services in 2017, resulting in a decrease in revenue of approximately $2438.41 million. The remaining decrease in revenue was caused by lower volumes of consulting services within our industrial and advanced technology business in Asia during the first ~~quarter~~half of 2017 as compared to the first ~~quarter~~half of 2016.

Private operating income decreased $58.20 million, or 3629%, for the ~~three~~six months ended ~~March~~June 3130, 2017 as compared to the ~~three~~six months ended ~~March~~June 2524, 2016. The decrease in operating income was primarily related to the reduction in project volumes related to the oil, gas, and ~~gas~~chemicals ~~industry~~business as discussed above. The decreased results from operations were partially offset by reduced selling, general and administrative costs in the ~~three~~six months ended ~~March 31~~June 30, 2017 as compared to the ~~three~~six months ended ~~March 25~~June 24, 2016 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.

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State and Local Governments

Our State and Local Governments sector’s revenue ~~decreased~~increased $165.74 million, or 31%, in the ~~three~~six months ended ~~March~~June 3130, 2017 as compared to the ~~three~~six months ended ~~March~~June 2524, 2016. Revenue ~~decreased~~increased ~~approximately $14.2 million~~ due to ~~the~~overall ~~substantial~~volume ~~completion~~growth ofin ~~two~~our ~~design-build-operate~~consulting ~~contracts~~business, ~~for~~primarily ~~water~~attributable ~~treatment~~to ~~facilities~~two rail transportation projects in the ~~western~~ United ~~States,~~Kingdom ~~which~~and ~~were~~Middle ~~not~~East ~~replaced~~as ~~with~~well ~~similar~~as ~~projects~~a water reclamation project in the Asia Pacific region. ~~The~~These ~~remaining~~increases ~~decrease~~ in revenue ~~was~~were ~~primarily~~partially ~~caused~~offset by the negative ~~currency~~ effects of ~~the~~a ~~strengthening~~weaker ofBritish ~~the~~Pound ~~U.S. dollar~~ related to our ~~international~~transportation ~~revenue,~~consulting services in the United Kingdom as well as the substantial completion of ~~which~~two ~~our~~design-build-operate ~~transportation~~contracts ~~related~~for ~~consulting~~water ~~business~~treatment facilities in the western United ~~Kingdom~~States, iswhich ~~most~~were ~~significantly~~not ~~impacted~~replaced with similar projects.

State and Local Governments operating income ~~decreased~~increased $1665.23 million for the ~~three~~six months ended ~~March~~June 3130, 2017 as compared to the ~~three~~six months ended ~~March~~June 2524, 2016. The ~~decrease~~increase was predominantly caused by cost growth resulting in changes in estimated costs ~~of $23.5 million~~ to complete a fixed-price Transportation contract to design and construct roadway improvements on an expressway in the southwestern United States of $60.0 million in the ~~three~~six months ended ~~March~~June 3124, 2016 as compared to $23.5 million in the six months ended June 30, 2017. Refer to Note 2 – Changes in Project-Related Estimates of the Notes to Consolidated Financial Statements for additional detail. While management believes that it has recorded an appropriate provision to complete this project, weour ~~may~~project ~~incur~~team ~~additional~~may ~~costs~~determine ~~and~~that ~~losses~~it ifwill ~~our~~incur ~~cost~~additional ~~estimation processes identify new~~ costs ~~not~~and ~~previously~~losses ~~included~~to incomplete ~~our~~the ~~total estimated loss~~project. 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. ~~This~~The ~~decrease~~remaining increase in operating income was ~~partially~~primarily ~~offset~~due byto ~~improved~~the ~~operating~~growth ~~margins~~in ~~and~~our ~~execution~~consulting ofbusiness ~~operations~~discussed ~~and~~above ~~maintenance and consulting contracts~~ as well as reduced selling, general and administrative costs due to efficiencies gained from the various restructuring plans related to better client-alignment and utilization of our workforce.

Income Taxes

After adjusting for the impact of ~~loss~~income attributable to noncontrolling interests, the effective tax rate related to continuing operations on the income attributable to CH2M for the three months ended ~~March~~June 30, 2017 was 26.9% compared to 52.7% on the loss for the same period in the prior year, and the effective tax rate related to continuing operations on the income attributable to CH2M for the six months ended June 3130, 2017 was 27.81% compared to 3616.10% on the ~~income~~loss for the same period in the prior year. The effective tax rate attributable to CH2M for the three months ended ~~March~~June 3130, 2017 was lower compared to the same period in the prior year and higher for the six months ended June 30, 2017 compared to the same period in the prior year primarily due to large losses in the prior period and the favorable impacts associated with ~~increased~~the ~~foreign~~release ~~earnings~~of asvaluation aallowances ~~result~~due ofto transfer pricing in the prior year period. In addition, the lower rate is partially attributable to the current year’s favorable impacts associated with increased foreign earnings and favorable investment results related to key employee life assets. Recent discussions regarding tax reform may result in changes to long-standing tax principles which could adversely affect our effective tax rate or result in higher cash tax liabilities. These discussions include a reduced corporate tax rate, repatriation of foreign earnings, cash, and cash equivalents, and cross border adjustability. Additionally, our effective tax rate continues to be negatively impacted by the effect of disallowed portions of meals and entertainment expenses.

Discontinued Operations

In connection with our 2014 Restructuring Plan, we elected to exit the fixed-price Power EPC business. 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. On January 24, 2017, the Consortium terminated its contract with its client ~~the general contractor~~, 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. The majority of the financial information presented in our discontinued operations in the consolidated financial statements for the ~~first~~three ~~quarters~~and ofsix months ended June 30, 2017 and June 24, 2016 relate to the Australian fixed-price Power EPC contract. Refer to Note 14 – Discontinued Operations of the Notes to Consolidated Financial Statements for additional detail regarding the results of operation and the financial position for the fixed-price Power EPC business.

Additionally, because the substantive engineering and construction operations ceased on January 24, 2017 as a result of the contract termination, we determined that we were no longer ~~controlled~~ the ~~operations~~primary beneficiary of the joint venture and deconsolidated the partnership from our consolidated financial statements. The negative book value of our 50% retained interest in the noncontrolling investment in the joint venture partnership as of January 24, 2017 was approximately $86.0 million, which was approximated by our evaluation of the potential future costs.

In connection with the contract termination, the Consortium, which includes the consolidated Australian joint venture partnership, expects to file arbitration claims against the Contractor during the first half of 2017. The Contractor has claimed that the 30

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~~Consortium’s~~partnership ~~termination~~from ~~was~~our ~~not~~consolidated ~~valid,~~financial ~~and we anticipate that the Contractor will file counter claims~~statements. ~~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.~~ ~~Due~~The tonegative abook ~~variety~~value of ~~issues, the joint venture partnership experienced project losses of $280.0 million in 2014, of which~~ our ~~portion~~50% ofretained ~~the~~interest ~~loss was $140.0 million, and $301.5 million~~ in ~~2016, of which our portion of~~ the ~~loss~~noncontrolling ~~was~~investment ~~$154.1 million. These contract losses were previously accrued and recognized~~ in the ~~periods when known and estimable. The~~ joint venture ~~has~~partnership demobilized from the site in the first quarter of 2017 and expects to continue to incur legal and other costs until the dispute is resolved. The Consortium continues to assess the expected future costs to close out the contract and terminate its current subcontractor obligations. 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~~January 24, ~~the~~2017 ~~joint~~was ~~venture’s performance on the project is secured by certain bonds totaling~~ approximately $5086.0 million~~, of which our portion is approximately $25~~.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. 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. These additional costs could be materially adverse to our results of operations, cash flow and financial condition in the future. Management believes the existing accruals will be sufficient for any known or expected costs which can be estimated at this time.

Due to a variety of issues, the joint venture partnership experienced project 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 previously accrued and recognized in the periods when known and estimable. The joint venture has demobilized from the site in the first quarter of 2017 and expects to continue to incur legal costs until the dispute is resolved. The Consortium continues to assess the expected future costs to close out the contract and terminate its current subcontractor obligations. 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, of which our portion is approximately $25.0 million, which could potentially be called by our client at some time in the future.

The Consortium and the Contractor are currently in dispute over the termination, materials and equipment used in the work, and the Contractor’s right to call the bonds issued on behalf of the individual Consortium members. In connection with the parties’ primary dispute over the contract termination, in August 2017, the Consortium filed a Request for Arbitration against the Contractor with the International Chamber of Commerce, seeking that the Contractor pay the Consortium for its claims based on the difference in the amount of the Consortium’s contract and the amount actually spent, which the Consortium alleges is likely to exceed $665.5 million). In the alternative, the Consortium also asserts that the Contractor owes for certain contract claims, in amounts to be determined through the arbitration. 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. The Contractor has claimed that the Consortium’s termination was not valid, and we anticipate 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. These additional costs could be materially adverse to our results of operations, cash flow and financial condition in the future. Management believes the existing accruals will be sufficient for any known or expected costs which can be estimated at this time.

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~~have been working capital, acquisitions, capital expenditures and purchases of stock in our internal market, and we expect our primary use of cash going forward will be working capital. 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 ~~March 31~~June 30, 2017 and December 30, 2016, cash held in foreign bank accounts totaled $7092.91 million and $108.7 million, respectively, of which $9.7 million as of December 30, 2016 related to an Australian fixed-price Power EPC joint venture which was deconsolidated in the first quarter of 2017.

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 ~~March~~June 3130, 2017 and December 30, 2016, cash and cash equivalents held in our consolidated joint ventures and reflected on the consolidated balance sheets totaled $4035.19 million and $46.6 million, respectively.

During the ~~three~~six months ended ~~March~~June 30, 2017, cash ~~used~~provided inby operations was $1033.90 million as compared to cash used in operations of $15112.34 million in the ~~three~~six months ended ~~March 25~~June 24, 2016. The $4145.45 million improvement in cash flows from operations in ~~three~~the six months ended ~~March~~June 30, 2017 as compared to the ~~three~~six months ended ~~March~~June 2524, 2016 primarily resulted from the $1599.25 million decrease in cash used from discontinued operations, ~~which~~combined ~~was~~with ~~partially offset by~~ a $546.67 million ~~decrease~~increase in ~~earnings~~net income from continuing operations.

For the ~~three~~six months ended ~~March 31~~June 30, 2017, changes in working capital components resulted in a $4282.64 million decrease to cash flow from operations, primarily as a result of reduced accounts payable and accrued subcontractor costs of $4631.20 million caused by lower volumes of subcontractor activity~~. Additionally,~~ ~~cash~~and ~~used~~changes toin ~~fund~~billings ~~accrued~~in ~~payroll~~excess ~~and~~of ~~employee~~revenue ~~related~~of ~~liabilities increased by~~ $19.3 ~~million~~ ~~due to the timing of our payroll cycles~~million. Additionally, ~~reducing~~other ~~our~~accrued ~~cash~~liabilities ~~generated~~decreased by ~~operations. Cash used from discontinued operations of~~ $1419.68 million ~~was~~ primarily ~~related~~due to ~~costs~~progress totoward ~~demobilize~~completion ~~from~~on the ~~Australian~~fixed-price ~~project~~Transportation ~~site as a result of the~~ contract ~~termination~~to asdesign ~~discussed~~and ~~above. These~~construct ~~changes~~roadway inimprovements ~~working~~on ~~capital were partially offset by~~ an ~~increase~~expressway in ~~collections on our receivables and unbilled revenue totaling $26.7 million. In~~ the ~~three~~southwestern ~~months~~United ~~ended March 31~~States, ~~2017,~~which wereduced ~~made payments of $12.6 million for restructuring costs related to~~ the ~~2016~~outstanding ~~Restructuring~~loss ~~Plan and 2014 Restructuring Plan.~~

~~Cash used in investing activities was $11.9 million for the three months ended March~~ 31, 2017 as compared to $42.1 million for the three months ended March 25, 2016. A significant factor contributing to change in cash used in investing activities was the $32.5 million decrease in capital expenditures in the three months ended March 31, 2017 as compared to the three months ended March 25, 2016 primarily as a result of the 2016 construction of employee housing units for oilfield workers in Alaska to support our oil and gas operations. 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 three months ended March 31, 2017, we received working capital repayments from our unconsolidated joint ventures of $0.5 million as compared to $2.6 million for the three months ended March 25, 2016. These repayments are offset by additional investments made in our unconsolidated joint

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~~ventures,~~provision ~~which~~on ~~were~~the $5project.~~7 million~~ Cash ~~and~~used from discontinued operations of $814.2 million ~~for~~was ~~the~~primarily ~~three~~related ~~months~~to ~~ended~~costs ~~March 31,~~to ~~2017and~~demobilize ~~March 25,~~from ~~2016,~~the ~~respectively. Additionally,~~Australian weproject ~~made~~site ~~investments~~as ina ~~our~~result ~~unconsolidated~~of ~~joint~~the ~~venture~~contract ~~related~~termination toas ~~our~~discussed ~~discontinued fixed-price Power EPC operations of $2~~above.~~6 million~~ In in the ~~three~~six months ended ~~March~~June 3130, 2017, aswe ~~compared~~made topayments of $016.21 million ~~of capital expenditures~~ for ~~our~~restructuring ~~fixed-price~~costs ~~Power~~related ~~EPC~~to ~~business~~the in2016 ~~the~~Restructuring ~~three~~Plan ~~months~~and ~~ended~~2014 ~~March 25,~~Restructuring ~~2016~~Plan.

Cash used in ~~financing~~investing activities was $228.78 million infor the ~~three~~six months ended ~~March~~June 3130, 2017 as compared to ~~cash provided by financing activities of~~ $6188.82 million for the ~~three~~six months ended ~~March~~June 2524, 2016. ~~The~~A significant factor contributing to change in ~~financing~~ cash ~~flows~~used ~~was~~in ~~primarily~~investing ~~caused~~activities bywas the ~~net borrowings on long-term debt of~~ $2058.34 million ~~for~~decrease in capital expenditures in the ~~three~~six months ended ~~March~~June 3130, 2017 as compared to ~~$83.6 million for~~ the ~~three~~six months ended ~~March~~June 2524, 2016, ~~which~~primarily ~~were~~as ~~largely~~a ~~driven~~result ~~from~~of the ~~negative~~2016 ~~operating~~construction ~~cash~~of ~~flows~~employee ~~and~~housing ~~investing~~units ~~cash~~for ~~flow~~oilfield ~~requirements~~workers asin ~~discussed~~Alaska ~~above. There~~to ~~was~~support aour ~~$14~~oil and gas operations.~~1 million~~ We ~~decrease~~periodically inmake ~~cash~~working ~~used~~capital inadvances ~~financing~~to ~~activities~~certain ~~related~~of our unconsolidated joint ventures; these advances are repaid to ~~repurchases~~us from the joint ventures in the normal course of ~~common~~the ~~stock~~joint ~~during~~venture activities. During the ~~three~~six months ended ~~March~~June 3130, 2017, we received working capital repayments from our unconsolidated joint ventures of $0.9 million as compared to $6.7 million for the ~~three~~six months ended ~~March~~June 2524, 2016. ~~Additionally,~~These ~~net~~repayments ~~cash~~are ~~provided~~offset by ~~financing~~additional ~~activities~~investments ~~from~~made ~~discontinued~~in ~~operations~~our ~~decreased~~unconsolidated joint ventures, which were $1413.49 million inand $12.3 million for the ~~three~~six months ended ~~March 31~~June 30, 2017 and asJune ~~compared~~24, to2016, ~~the~~respectively. Additionally, ~~three~~we ~~months~~made ~~ended~~investments ~~March 25,~~in ~~2016~~our ~~due~~unconsolidated joint venture related to ~~reduced~~our ~~contributions~~discontinued byfixed-price ~~the~~Power ~~noncontrolling~~EPC ~~interest~~operations ~~partner~~of $8.1 million in the ~~formerly~~six ~~consolidated~~months ~~Australian~~ended ~~joint~~June 30, ~~venture~~2017 ~~partnership~~ as acompared ~~result~~to $0.2 million of ~~the~~capital ~~contract~~expenditures ~~termination~~for ~~and~~our ~~demobilization of the~~ fixed-price Power EPC ~~project~~business in the ~~first~~six ~~quarter~~months ofended ~~2017~~June 24, 2016.

~~Line~~Cash used in financing activities was $19.0 million in the six months ended June 30, 2017 as compared to cash provided by financing activities of ~~Credit~~$159.9 million for the six months ended June 24, 2016. The change in financing cash flows was primarily caused by the net borrowings on long-term debt of $24.3 million for the six months ended June 30, 2017 as compared to $93.3 million for the six months ended June 24, 2016, which were largely driven from the negative operating cash flows and ~~Long~~investing cash flow requirements as discussed above. As the net proceeds of the Second Lien Notes were used to repay a portion of the outstanding revolving credit loans under our credit facility, the Second Lien Notes did not have a significant impact on our net borrowings on long-~~Term~~term ~~Debt~~debt. There ~~Agreements~~was a $33.7 million decrease in cash used in financing activities related to repurchases of common stock during the six months ended June 30, 2017 as compared to the six months ended June 24, 2016. Additionally, net cash provided by financing activities from discontinued operations decreased $44.1 million in the six months ended June 30, 2017 as compared to the six months ended June 24, 2016 due to reduced contributions by the noncontrolling interest partner in the formerly consolidated Australian joint venture partnership as a result of the contract termination and demobilization of the fixed-price Power EPC project in the first quarter of 2017.

OnRevolving ~~September 30, 2016, we entered into a Third Amendment to our Second Amended and Restated~~ Credit ~~Agreement (“Credit Agreement”). The Credit Agreement provides for a revolving credit facility of $925.0 million (“Credit~~ Facility”) which matures on March 28, 2019. Under the terms of the 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. Additionally, the Credit Agreement has a subfacility for the issuance of standby letters of credit up to $500.0 million, a subfacility of up to $300.0 million for multicurrency borrowings, and a subfacility of up to $50.0 million for swingline loans.

~~Certain~~On ~~terms~~April 28, ~~and~~2017, ~~conditions~~we ofentered into a Fourth Amendment to our Amended and Restated Credit Agreement as(“Credit Agreement”). The Fourth Amendment allowed for the issuance and sale of the Second Lien Notes, as discussed below, and lowered our maximum revolving credit facility to $875.0 million from $925.0 million. The credit facility matures on March 28, 312019 and includes a subfacility for the issuance of standby letters of credit up to $450.0 million, ~~2017~~a ~~are~~subfacility asof ~~follows~~up to $300.0 million for multicurrency borrowings, and a subfacility of up to $50.0 million for swingline loans. Other technical and operating changes to the Credit Agreement specifically achieved the following:

· ~~The~~Increased the maximum consolidated leverage ratio isto 34.00x ~~for~~from ~~2017 and beyond~~3.00x;

· ~~For~~Modified the ~~three~~definition ~~quarter~~of ~~period~~adjusted ~~ending~~EBITDA ~~March~~as ~~31,~~used ~~2017, the amount the Company was able to spend to repurchase its common stock~~ in ~~connection with its employee stock ownership program was limited to $75.0 million, and, thereafter, up to $100.0 million during a rolling four quarter period less~~ the ~~amount~~financial ofcovenant ~~any legally required repurchases of common stock held in benefit plans~~calculation;

· Required CH2M’s ~~ability~~ to ~~pay~~maintain, ~~cash dividends~~ on ~~preferred~~a ~~stock~~consolidated isbasis, ~~limited~~a ~~until~~maximum ~~no more than 10% of our~~ consolidated ~~adjusted~~first ~~EBITDA~~lien ~~consists~~leverage ofratio ~~the~~no ~~cash~~greater ~~and~~than ~~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~~3.00x;

· NoRequired ~~proceeds~~CH2M ~~from~~to ~~asset~~maintain ~~sales~~a ~~can~~minimum beconsolidated ~~used~~fixed tocharge ~~repurchase~~coverage ~~common~~ratio orno ~~preferred~~less ~~stock;~~than ~~and,~~1.50x;

· NoRestricts ~~large~~CH2M’s ~~acquisition~~ability ~~until~~to norepurchase ~~more~~its ~~than~~common ~~10%~~or ofpreferred ~~our~~stock, ~~consolidated~~pay ~~adjusted~~cash ~~EBITDA~~dividends ~~consists~~on ofor ~~the~~make ~~cash~~certain ~~and~~other ~~non-cash~~distributions ~~charges~~on ~~related~~its tocommon ~~restructuring~~or ~~charges~~preferred stock, and ~~project~~requires ~~costs~~compliance with the terms of the Second Lien Indenture, which also limits certain restricted payment and ~~losses~~participation in ~~any~~the ~~rolling~~employee ~~four~~stock ~~quarter~~ownership ~~period~~program as described below.

At ~~March~~June 3130, 2017, we had $~~507~~317.86 million in outstanding borrowings of the Credit Facility, compared to $487.0 million at December 30, 2016. The average rate of interest charged on that balance was 34.7033% as of ~~March~~June 3130, 2017. At ~~March~~June 3130, 2017 company-wide issued and outstanding letters of credit, and bank guarantee facilities of $~~130~~129.0 million were outstanding, compared to $134.2 million at December 30, 2016. Additionally, the obligations of CH2M and its subsidiaries that are either borrowers or guarantors under the Credit Facility are secured by first-priority security interests in substantially all of the domestic assets of CH2M and such subsidiaries. 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. Our remaining unused borrowing capacity under the Credit Facility was over $400.0 million as of June 30, 2017.

As of March 31, 2017, we were in compliance with the covenants required by the Credit Agreement. Management continually assesses it potential future compliance with the 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 of the Notes to Consolidated Financial Statements 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. In the context of our current debt structure and projected cash needs, there can be no assurance that the capacity under our Credit Facility 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.32

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~~Based~~As onof ~~first~~June ~~quarter~~30, ~~results~~2017, ofwe ~~operation~~were ~~and~~in ~~our~~compliance ~~current~~with ~~business~~the ~~outlook,~~covenants werequired ~~believe~~by ~~that~~the ~~our~~Credit ~~sources~~Agreement. Management ofcontinually ~~liquidity,~~assesses ~~including~~it ~~bank~~potential ~~facility~~future ~~credit~~compliance ~~capacity~~with ~~and~~the ~~issuances~~Credit ofAgreement ~~debt,~~covenants ~~equity~~based orupon ~~other~~estimates ~~securities,~~of ~~will~~future ~~satisfy~~earnings ~~our~~and ~~working~~cash ~~capital~~flows. If ~~needs,~~there ~~capital~~is ~~expenditures,~~an ~~investment~~expected ~~requirements,~~possibility ~~contractual~~of ~~obligations~~non-compliance, ~~commitments,~~we ~~principal~~will ~~and~~discuss ~~interest~~possibilities ~~payments~~with onthe ~~our~~Company’s ~~debt~~lenders ~~and~~or utilize other ~~liquidity~~means ~~requirements~~of ~~for~~capitalizing the ~~next~~Company 12to ~~months~~waive or remedy any non-compliance. ~~However,~~In wethe ~~cannot~~context beof ~~certain~~our ~~that~~current wedebt ~~will~~structure ~~generate~~and ~~improved~~projected cash ~~flows~~needs, orthere ~~that~~can ~~we will~~ be ~~able~~no toassurance ~~obtain~~that ~~additional~~the ~~financing~~capacity orunder ~~investment on satisfactory terms. In addition,~~ our ~~liquidity~~Credit isFacility ~~constrained~~will ~~due~~be adequate to ~~results~~fund offuture operations, ~~and~~to inrestructure ~~the event our liquidity is insufficient~~operations, weor ~~may~~to beallow ~~required~~the Company to ~~curtail~~repurchase ~~spending~~stock ~~and~~in ~~implement~~our ~~additional~~internal ~~cost~~market ~~saving~~in ~~measures~~any ~~and~~significant ~~restructuring~~amount ~~actions~~ or ~~enter~~at ~~into new financing arrangements~~all.

Based on second quarter results of operation 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 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.

Second Lien Indenture

On April 28, 2017, we entered into a Second Lien Indenture through which we issued Senior Second Lien Notes with an aggregate principal amount of $200.0 million at an annual interest rate of 10% (the “Second Lien Notes”). The Second Lien Notes mature on April 28, 2020, and interest is payable on May 1 and November 1 of each year, commencing on November 1, 2017. The net proceeds of the Second Lien Notes ~~are~~were ~~to be~~ used to repay a portion of the outstanding revolving credit loans under our ~~Credit~~credit ~~Facility~~facility. The Second Lien Notes are unsubordinated, senior obligations of CH2M and are secured by second-priority liens on substantially all of CH2M’s and certain CH2M subsidiaries’ domestic assets.

The Second Lien Indenture ~~also~~ contains financial covenants that require CH2M to maintain a consolidated leverage ratio no greater than 4.50x and restricts CH2M’s ability to repurchase its common or preferred stock, pay cash dividends on or make certain other distributions on its common or preferred stock. Specifically, while the Second Lien Notes are outstanding, the amount CH2M may spend to repurchase its common stock in connection with its employee stock ownership program, other than legally required repurchases of common stock held in benefit plans, which are not restricted, will be limited to an aggregate of $75.0 million during the term of the Second Lien Notes plus a cumulative amount equal to 50% of CH2M’s consolidated net income, or minus 100% of any net loss, from April 1, 2017 to the date on which any such repurchase is to be made. The amount available to make repurchases of our common stock shall also be reduced to the extent that CH2M makes legally required repurchases of common stock held in benefit plans in excess of $50.0 million in any period of four consecutive quarters and that CH2M makes certain payments on subordinated indebtedness in accordance with the terms of the Second Lien Indenture.


Redemption Period	Redemption Price
From April 28, 2017 (issue date) through April 28, 2018	110.0	%
From April 29, 2018 through April 28, 2019	103.0	%
From April 29, 2019 through October 28, 2019	101.5	%
From October 29, 2019 through April 28, 2020 (maturity date)	100.0	%

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~~Fourth~~Additionally, ~~Amendment~~certain toevents ~~Our~~of ~~Credit~~bankruptcy ~~Agreement~~or insolvency are events of default which shall result in the Second Lien Notes being due and payable immediately upon the occurrence of such events of default.

~~In connection with the issuance of the Second Lien Notes~~Furthermore, on April 28, 2017, we entered into ~~the~~an ~~Fourth~~Intercreditor ~~Amendment (“Fourth Amendment”) to our Credit~~ Agreement~~. The~~ ~~Fourth~~with ~~Amendment allows for~~ the ~~issuance~~agents ~~and sale~~ of the Second Lien Notes, asand ~~discussed above, lowers our maximum revolving credit facility to $875.0 million from $925.0 million, increases~~ the ~~maximum~~lenders ~~consolidated~~of ~~leverage ratio, as defined by~~ the Fourth Amendment, to ~~4.00x~~our ~~from~~Credit ~~3.00x,~~Agreement ~~and~~that ~~modifies~~states that the ~~definition~~liens ofon ~~adjusted~~common ~~EBIDTA~~collateral assecuring ~~used in~~ the ~~financial~~claims ~~covenant~~of ~~calculation. Additionally,~~ the ~~Fourth~~Credit ~~Amendment~~Agreement ~~requires~~have ~~that~~priority ~~CH2M maintain~~over, onand aare ~~consolidated~~senior ~~basis~~to, athe ~~maximum~~liens ~~consolidated~~on ~~first lien leverage ratio, as defined in~~ the ~~Fourth~~common ~~Amendment,~~collateral nosecuring ~~greater~~Second ~~than~~Lien 3Notes.~~00x~~ The assenior ~~well~~claims asare ~~maintain a minimum consolidated fixed charge coverage ratio, as~~ defined in the ~~Fourth~~Intercreditor ~~Amendment,~~Agreement noto ~~less~~include, ~~than~~among ~~1.50x. The~~other ~~Fourth~~things, ~~Amendment~~the ~~also~~principal ~~requires~~amount ~~that~~of ~~CH2M~~all ~~comply~~indebtedness ~~with~~incurred under the ~~terms~~Fourth ofAmendment ~~the~~to ~~Second~~our ~~Lien~~Credit ~~Indenture~~Agreement ~~limiting~~and certain ~~restricted~~additional ~~payment~~senior ~~and~~indebtedness ~~participation~~permitted inunder the ~~employee~~Intercreditor ~~stock ownership program as described above~~Agreement.

Intercreditor Agreement

Furthermore, on April 28, 2017 we entered into an Intercreditor Agreement with the agents of the Second Lien Notes and the lenders of the Fourth Amendment to our Credit Agreement that states that the liens on common collateral securing the claims of the Credit Agreement have priority over, and are senior to, the liens on the common collateral securing Second Lien Notes. The senior claims are defined in the Intercreditor Agreement to include, among other things, the principal amount of all indebtedness incurred under the Fourth Amendment and certain additional senior indebtedness permitted under the Intercreditor Agreement.

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~~In ~~our~~connection ~~agreement~~ with ~~Apollo,~~ the ~~maximum~~issuance ~~consolidated~~of ~~leverage~~the ~~ratio~~Second isLien ~~3.00x~~Notes ~~for 2016~~ and ~~beyond,~~the ~~consistent~~Fourth ~~with our Third~~ Amendment to our Third Amended and Restated Credit Agreement ~~(“Amended~~on ~~Credit Agreement”). As of March~~April 3128, 2017, weas ~~were~~discussed in ~~compliance~~Note 10 ~~with~~– ~~this~~Long-Term ~~covenant. Management~~Debt, we ~~continually~~obtained ~~assesses~~consent ~~its~~from ~~potential~~our ~~future~~Series A ~~compliance~~Preferred Stockholder with ~~the~~respect ~~consolidated~~to ~~leverage~~the ~~ratio~~incurrence ~~covenant based on estimates~~ of ~~future~~the ~~earnings~~notes and ~~cash~~filed ~~flows.~~a IfCertificate ~~there~~of isAmendment anto ~~expected~~the ~~possibility~~Certificate of ~~non-compliance,~~Designation weof ~~will~~Series ~~discuss~~A ~~possibilities~~Preferred ~~with~~Stock ~~Apollo~~which toincreases ~~modify~~ the ~~covenant~~annual ~~consistent~~rate ~~with~~at ~~discussions~~which ~~with~~dividends accrue on the ~~Company’s~~Series A ~~lenders~~Preferred orStock ~~utilize~~from ~~other~~5% ~~means~~to of7% ~~capitalizing~~beginning ~~the~~April 1, ~~Company~~2017. Dividends toon ~~anticipate~~the orSeries A ~~remedy~~Preferred ~~any~~Stock ~~non-compliance. The~~are ~~expected~~cumulative ~~cash~~and ~~outflows~~accrue ~~required~~quarterly toin ~~fund~~arrears on the ~~project~~sum ~~losses~~of ~~discussed~~the inoriginal ~~Note~~issue 2price –of ~~Changes~~$62.22 per inshare ~~Project-Related~~plus ~~Estimates~~all accumulated and ~~the~~unpaid ~~related~~accruing ~~impact~~dividends, onregardless ~~earnings~~of ~~will~~whether ~~put~~or anot ~~financial~~declared ~~strain~~by on the ~~Company~~Board. The ~~that~~other ~~may~~terms ~~require~~and anconditions ~~amendment~~of orthe ~~other~~Series A ~~remedies~~Preferred toStock beset ~~pursued~~forth byin ~~management~~the ifCertificate ~~certain~~of ~~earnings~~Designation, ~~estimates~~as orsummarized ~~cash~~in ~~flow~~our ~~improvement~~Annual ~~initiatives~~Report ~~are~~on ~~not~~Form ~~achieved~~10-K orfor ifthe ~~required~~year toended ~~facilitate~~December 30, ~~restructuring~~2016, ~~plans~~remain unchanged.

~~Additionally,~~Under ~~the~~our ~~Certificate~~agreement ofwith ~~Designations~~Apollo, ~~for~~ the ~~Series~~maximum Aconsolidated ~~Preferred~~leverage ~~Stock~~ratio ~~prohibits~~is ~~the~~4.00x ~~repurchase~~for by2017 ~~the~~and ~~Company~~beyond, ofconsistent ~~shares~~with ofthe ~~our~~Fourth ~~common~~Amendment ~~stock~~to inour ~~excess~~Amended ofand ~~negotiated~~Restated ~~pre-approved~~Credit ~~amounts~~Agreement. InAs of June 30, 2017, ~~the~~we ~~Company~~were isin ~~permitted~~compliance towith ~~repurchase~~this ~~shares~~covenant. Management ofcontinually ~~common~~assesses ~~stock~~its inpotential anfuture ~~amount~~compliance ~~determined~~with bythe aconsolidated ~~formula~~leverage ratio covenant based ~~upon~~on ~~our~~estimates of future earnings and cash ~~flow~~flows. If ~~from~~there ~~operations,~~is ~~minus~~an ~~capital~~expected ~~expenditures~~possibility of non-compliance, ~~for~~we ~~fiscal~~will ~~2016. Depending~~discuss ~~upon~~possibilities ~~our~~with ~~results~~Apollo ofto ~~operations~~modify ~~for~~the ~~fiscal~~covenant ~~year~~consistent ~~2016,~~with discussions with the Company’s ~~may~~lenders beor ~~limited~~utilize orother ~~altogether~~means ~~prohibited~~of incapitalizing ~~its~~the Company to anticipate or remedy any non-compliance.

31Additionally, the Certificate of Designations 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 2017, the Company is permitted to repurchase shares of common stock in an amount determined by a formula based upon our cash flow from operations, minus capital expenditures, for fiscal 2016. Depending upon our results of operations for fiscal year 2016, the Company may be limited or altogether prohibited in its ability to repurchase shares of common stock in the internal market unless it is able to obtain the consent of the holders of at least a majority of the Series A Preferred Stock. During January and March in 2017, the Company received from the Series A Preferred Stockholder consents permitting the Company to spend up to $100.0 million, in the aggregate, to make legally required repurchases of common stock and to repurchase common stock in the internal market in 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 if such an acknowledgment and consent is required.

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ability to repurchase shares of common stock in the internal market 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 related to the 2016 third quarter financial results. 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 if such an acknowledgment and consent is required.

In connection with the issuance of the Second Lien Notes and the Fourth Amendment as discussed above, we obtained consent from our Series A Preferred Stockholder with respect to the incurrence of the notes and filed a Certificate of Amendment to the Certificate of Designation of Series A Preferred Stock which increases the annual rate at which dividends accrue on the Series A Preferred Stock from 5% to 7% beginning April 1, 2017. Dividends on the Series A Preferred Stock are cumulative and accrue quarterly in arrears on the sum of the original issue price of $62.22 per share plus all accumulated and unpaid accruing dividends, regardless of whether or not declared by the Board. The other terms of the Series A Preferred Stock set forth in the Certificate of Designation, and summarized in our Annual Report on Form 10-K for the year ended December 30, 2016, remain unchanged.

For a summary of the terms and conditions of the Series A Preferred Stock, refer to our Annual Report on Form 10-K for the year ended December 30, 2016.

Internal Market Trades

CH2M’s common stock ~~typically~~has ~~trades~~historically traded on an internal market four times per year, though CH2M determines whether to participate in the internal market on a quarterly basis. ~~The next internal market trade date is expected to be in September of 2017.~~ Prior to each quarterly trade date, we ~~review~~have historically reviewed the outstanding orders and any resulting imbalance between sell orders and buy orders and ~~make~~decided ~~a determination~~ whether or not CH2M should participate in the internal market by buying shares. In making that determination, CH2M’s management and Board of Directors ~~consider~~have considered prevailing circumstances, including our financial condition and results of operations, our available cash and capital resources, including the limits that CH2M may spend on share repurchases and the borrowing capacity available pursuant to the terms of our existing unsecured revolving line of credit and other sources of liquidity, expected current and future needs for cash to fund our ~~operations, anticipated contingencies and other factors.~~

CH2M’s management and Board of Directors could determine to limit the amount of money expended by the Company to repurchase shares, or not to participate in the internal market, either of which would result in proration of sell orders that stockholders may place for trades on the next trade date. In addition, CH2M’s Board of Directors could determine to suspend trading on the internal market in order to provide time to evaluate the ability to adequately provide for proration and to conserve the Company’s cash reserves and available liquidity. Since the September 26, 2014 trade date, CH2M has limited the amount expended to repurchase shares. We expect that the amounts CH2M will be able to spend to repurchase shares for the September 2017 trade date and future trade dates will continue to be restricted, and CH2M’s management and Board of Directors anticipate that some sell orders will be only partially filled on such trade dates.34

~~For~~Table ~~more information~~ of ~~the risks associated with the internal market, please see the risk factors set forth in the Annual Report on Form 10-K for the year ended December 30, 2016.~~ Contents

operations, anticipated contingencies and other factors.

On August 1, 2017, we entered into the Merger Agreement with Jacobs. As a result of the Merger Agreement, CH2M has determined not to hold an internal market trade in September 2017 and beyond pending shareholder voting on the proposed Merger Agreement.

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 6 – Variable Interest Entities and Equity Method Investments of the consolidated financial statements.

There were no substantial changes to other off-balance sheet arrangements or contractual commitments in the three months ended ~~March~~June 3130, 2017, when compared to the disclosures provided in our Annual Report on Form 10-K for the year ended December 30, 2016.

Aggregate Contractual 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.

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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.

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. GAAP. 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 on 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.

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. Further detail and information regarding our critical accounting policies and estimates are included in our Annual Report on Form 10-K for the year ended December 30, 2016.

Recently Adopted Accounting Standards

See Note 1 – Summary of Business and Significant Accounting Policies of the Notes to Consolidated Financial Statements.

Commitments and Contingencies

See Note 15 – Commitments and Contingencies of the Notes to Consolidated Financial Statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

In the ordinary course of our operations we are exposed to certain market risks, primarily changes in foreign currency exchange rates and interest rates. This risk is monitored to limit the effect of foreign currency exchange rate and interest rate fluctuations on earnings and cash flows.

Foreign currency exchange rates. We operate in many countries around the world, and as a result, we are exposed to foreign currency exchange rate risk on transactions in numerous countries, particularly with respect to our operations in the United Kingdom and Canada. We are primarily subject to this risk on long term projects whereby the currency being paid by our client differs from the currency in which we incurred our costs, as well as intercompany trade balances among our entities with differing currencies. In order to mitigate this risk, we enter into derivative financial instruments. We do not enter into derivative transactions for speculative or trading purposes. All derivatives are carried at fair value in the consolidated balance sheets and changes in the fair value of the derivative instruments are recognized in earnings. These currency derivative instruments are carried on the balance sheet at fair value and are based upon Level 2 inputs including third party quotes. As of March 31, 2017, we had derivative liabilities of $0.8 million of forward foreign exchange contracts on world currencies with varying durations, none of which extend beyond one year.35

~~Interest~~Table ~~rates. Our interest rate exposure is primarily limited to our revolving credit facility. As~~ of March 31, 2017, the outstanding balance on the credit facility was $507.8 million. We have assessed the market risk exposure on this financial instrument and determined that any significant change to the fair value of this instrument would not have a material impact on our consolidated results of operations, financial position or cash flows. Based upon the amount outstanding under the credit facility, a one percentage point change in the assumed interest rate would change our annual interest expense by approximately $5.1 million.Contents

Foreign currency exchange rates. We operate in many countries around the world, and as a result, we are exposed to foreign currency exchange rate risk on transactions in numerous countries, particularly with respect to our operations in the United Kingdom and Canada. We are primarily subject to this risk on long term projects whereby the currency being paid by our client differs from the currency in which we incurred our costs, as well as intercompany trade balances among our entities with differing currencies. In order to mitigate this risk, we enter into derivative financial instruments. We do not enter into derivative transactions for speculative or trading purposes. All derivatives are carried at fair value in the consolidated balance sheets and changes in the fair value of the derivative instruments are recognized in earnings. These currency derivative instruments are carried on the balance sheet at fair value and are based upon Level 2 inputs including third party quotes. As of June 30, 2017, we had derivative liabilities of $2.0 million of forward foreign exchange contracts on world currencies with varying durations, none of which extend beyond one year.

Interest rates. Our interest rate exposure is primarily limited to our revolving credit facility. As of June 30, 2017, the outstanding balance on the credit facility was $317.6 million. We have assessed the market risk exposure on this financial instrument and determined that any significant change to the fair value of this instrument would not have a material impact on our consolidated results of operations, financial position or cash flows. Based upon the amount outstanding under the credit facility, a one percentage point change in the assumed interest rate would change our annual interest expense by approximately $3.2 million.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Within our Annual Report on ~~From~~Form 10-K (“Form 10-K”), Part II – Item 9A – Controls and Procedures for the year ended December 30, 2016, which was filed on March 7, 2017, we identified three internal control deficiencies that involve the development of project cost estimates for long-term contracts accounted for under the percentage-of-completion method. The material weakness resulted in misstated consolidated financial statements during 2015 that were corrected in the amended 2015 Form 10-K/A for the year ended December 25, 2015, which was filed on January 19, 2017.

33As of June 30, 2017, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rule 13a-15(e) of the Exchange Act. Based upon that evaluation, and as a result of the previously reported material weakness in the design of internal control over financial reporting, we concluded that our disclosure controls and procedures continue to be not effective to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is (a) timely recorded, processed, summarized, and reported and (b) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure until such as the material weakness is fully remediated. See the discussion of remediation activities below.

~~Table~~In light of ~~Contents~~the material weakness identified below, we performed additional analysis and other post-closing procedures to ensure our consolidated financial statements are prepared in accordance with GAAP and reflect our financial position and results of operations as of and for the quarter ended June 30, 2017. As a result, notwithstanding the material weakness, management concluded that the consolidated financial statements included in this Form 10-Q present fairly, in all material respects, our financial position, results of operations, and cash flows as of and for the periods presented.

resulted in misstated consolidated financial statements during 2015 that were corrected in the amended 2015 Form 10-K/A for the year ended December 25, 2015, which was filed on January 19, 2017.

As of March 31, 2017, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rule 13a-15(e) of the Exchange Act. Based upon that evaluation, and as a result of the previously reported material weakness in the design of internal control over financial reporting, we concluded that our disclosure controls and procedures continue to be not effective to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is (a) timely recorded, processed, summarized, and reported and (b) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure until such as the material weakness is fully remediated. See the discussion of remediation activities below.

In light of the material weakness identified below, we performed additional analysis and other post-closing procedures to ensure our consolidated financial statements are prepared in accordance with GAAP and reflect our financial position and results of operations as of and for the quarter ended March 31, 2017. As a result, notwithstanding the material weakness, management concluded that the consolidated financial statements included in this Form 10-Q present fairly, in all material respects, our financial position, results of operations, and cash flows as of and for the periods presented.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis.

Those internal control deficiencies and the status of management’s remediation action plans are summarized below.

Description of Internal Control Deficiencies that resulted in a Material Weakness

Process level control activities related to the processes used to develop project cost estimates for large fixed-firm price engineering, procurement and construction projects. The Company did not identify these basis of estimate process level control activities as key internal controls, and, as such, they were not designed to operate at the required level of rigor, precision and consistency, and include the retention of adequate documentation.

An internal control that ensures cost estimates on client projects that are not updated during the last month of the reporting period are evaluated for potential accounting implications. The existing control was not designed effectively as it did not sufficiently identify items requiring follow-up and how such items were to be resolved.

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A certification process whereby key management roles on client projects identified with inherently high risk of material change in the estimate of cost to complete a project did not operate effectively. This internal control as designed did not adequately identify items requiring follow-up and how such items were to be resolved, including the preparation and review of appropriate documentation of the resolution.

Remediation Efforts to Address the Material Weakness

Management has developed a plan with the oversight of the Audit Committee of the Board of Directors to remediate these internal control deficiencies, although remediation actions may evolve as the controls are implemented and tested for operating effectiveness:

Deficient control related to the inadequate design of process level controls dealing with the basis of estimate for large fixed-firm price engineering, procurement and construction projects

Developing process level controls that require preparation and documentation of the basis of estimate for major project cost components with significant financial reporting risks, e.g., schedule, labor, subcontractors, materials, change management, and risk register/contingency, and that those estimates and the supporting basis of estimate be evaluated for reasonableness during each reporting period.

· ~~Finalizing~~Finalized the development and ~~beginning~~implemented ~~to implement~~ a control that documents management’s quarterly evaluation of large fixed-firm price engineering, procurement and construction projects to determine whether any of these projects merit an independent evaluation of risk and their impact on the reliability of cost estimates.

· ~~Developing~~Delivering training ~~material~~ for personnel in key roles on responsibilities for these controls.

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Deficient control related to the evaluation of project cost estimates not updated in the last month of a reporting period

· ~~Finalizing~~Finalized the development and ~~beginning~~implemented ~~to implement~~ a control that systematically identifies client projects whose estimate of cost to complete have not been updated during the last month of the reporting period, and which includes a management review process that will result in the cost estimate being updated, or documented rationale why a revised estimate was not required.

· ~~Developing~~Delivering training ~~material~~ for personnel in key roles on responsibilities for this control.

Deficient control related to the certification process

· Revised the certification control to ensure that project management and corporate accounting identify items requiring follow-up and how such items are to be resolved, including adequate documentation of the resolution. WeThe ~~began implementation of the~~ revised ~~certification~~ control ~~during~~was ~~the~~fully ~~three~~implemented ~~months~~in ~~ended~~the ~~March~~second ~~31,~~quarter of 2017.

· ~~Developing~~Delivering training ~~material~~ for personnel in key roles on responsibilities for this control.

Changes in Internal Control over Financial Reporting

Other than the actions being taken to remediate the material weakness as described above, there have been no changes in our internal control over financial reporting during the three months ended ~~March 31~~June 30, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II. OTHER INFORMATION

Item 1. Legal Proceedings

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proceedings and legal actions are often difficult to predict, management believes that proceedings and legal actions that have not yet been terminated through settlement would not result in a material adverse effect on our results of operations or financial condition even if the final outcome is adverse to the Company.

CH2M-WG Idaho, LLC (“CWI”), owned 50.5% by CH2M HILL Constructors, Inc., a wholly owned subsidiary of CH2M HILL Companies, Ltd., is a remediation contractor for the U.S. Department of Energy (“DOE”) at the Idaho National Laboratory site. The original remediation contract was to run from May 2005 through September 2012, ~~and~~ was extended through September 2015., ~~CWI~~and ~~currently~~was ~~has~~extended aagain ~~disagreement~~through March 31, 2016. CWI disagrees with DOE ~~concerning~~regarding ~~what~~ CWI’s final fee ~~should be~~ for the base contract period from May 2005 through September 2012. In December 2013, the DOE issued a final determination that was approximately $30.0 million less than what CWI expected to receive in the fee determination. On March 6, 2014, CWI filed a Certified Claim with the Contracting Officer for a total fee owed of $40.1 million. The Certified Claim was rejected through a Contracting Officer’s Final Decision in May 2014, and CWI filed its appeal to the Civilian Board of Contract Appeals on May 30, 2014. The trial was held onfrom April 12 through 28, 2016, and the post-trial briefing phase is now complete. We are awaiting the decision from the Board. Based on information presently known to management, we believe that the outcome of this dispute will not have a material adverse effect on our financial condition, cash flows or results of operations.

In 2006, Halcrow Consulting Engineers & Architects, Ltd., Qatar Branch (“Halcrow”) entered into a Consulting Services Agreement with Qatari Diar Real Estate Investment Company (“QD”) to perform Pre and Post Contract Consultancy and Quantity Surveying Services for Lusail Development Primary Infrastructure, Marine, Earthworks, and Site Preparation Works (the “Project”) in Lusail, Qatar. The detailed design portion of the contract was extended from ten months to over seven years due primarily to employer delays and added scope, which were the responsibility of QD. On March 9, 2017, QD called Halcrow’s letter of credit for $6.7 million. On April 12, 2017, QD filed court proceedings in Qatari court (Qatari Civil and Commercial Court) against Halcrow. The claims asserted by QD for Halcrow’s alleged bridge design defects, cost of redesign, work to remedy the bridge defects, and loss of profit and reputation, together with a further claim for alleged breach of contract relating to as yet unspecified infrastructure works, are approximately $180.0 million. QD’s alternative damage amount for decennial liability under Qatari law (a form of strict liability) is approximately $127.0 million. We intend to vigorously defend against QD’s claims, and to assert counterclaims against QD, including without limitation counterclaims for Halcrow’s entitlement to certified receivables of $4.0 million, delay claims of a minimum of approximately $20.0 million, and the wrongful calling of the letter of credit of $6.7 million. We will also assert the defense that the Agreement contains a limitation of liability provision capping any negligence damages against Halcrow of approximately $10.0 million.

35In 2012, CH2M HILL Australia Pty Limited entered into a 50/50 integrated joint venture with UGL Infrastructure Pty Limited (“UGL”), an Australian construction contractor (“CH2M-UGL JV” or “JV”). The JV entered into a Consortium Agreement with General Electric and GE Electrical International Inc (“Consortium”). The Consortium was awarded a contract by JKC Australia LNG Pty Limited (“JKC”) for the engineering, procurement, construction and commissioning of a 360 MW Combined Cycle Power Plant (the “Project”) for INPEX Operations Australia Pty Limited (“Inpex”) at Blaydin Point, Darwin, NT, Australia (the “Subcontract”). On January 24, 2017, the Consortium terminated the Subcontract because of JKC’s repudiatory breach. The Consortium also demobilized from the work site. The Consortium issued a termination letter which described JKC’s failure to properly administer the Subcontract. JKC has claimed that the Consortium’s termination was not valid. JKC claims the Consortium has abandoned the work and, as such, JKC has now purported to terminate the Subcontract. The Consortium and JKC are now in dispute over the termination. In connection with the parties’ primary dispute over the contract termination, on August 3, 2017, the Consortium filed a Request for Arbitration against JKC with the International Chamber of Commerce, seeking that JKC pay the Consortium for its repudiatory breach of the Subcontract based on the difference in the amount of the Consortium’s contract and the amount actually spent, which the Consortium alleges is likely to exceed $665.5 million. In the alternative, the Consortium also asserts that JKC owes for unresolved contract claims and change orders, in amounts in the hundreds of millions of dollars range to be determined through the arbitration. We expect the arbitration to be lengthy and at this time are unable to predict the timing of resolution or the outcome of disputes, which will depend on disputed issues of fact and law. The outcome could be materially adverse to our results of operations, cash flow and financial condition. The primary dispute over the termination is to be decided in an International Chamber of Commerce arbitration in Singapore.

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Lusail, Qatar. The detailed design portion of the contract was extended from ten months to over seven years due primarily to employer delays and added scope, which were the responsibility of QD. On March 9, 2017, QD called Halcrow’s letter of credit for $6.7 million. On April 12, 2017, QD filed court proceedings in Qatari court (State of Qatar, Court of First Instance) against Halcrow. According to the court papers, QD’s claims are for (1) damages for loss and costs incurred resulting from the alleged negligent design of Bridges 8 and 9 on the Project (which bridge was designed by COWI – Halcrow’s subconsultant); and (2) compensation for alleged breach of contract relating to as yet unspecified infrastructure works. Further according to the court papers, the damages asserted by QD against Halcrow are as high as QAR 680.8 million, which is approximately $186.8 million. QD’s alternative damage amount for decennial liability under Qatari law (a form of strict liability) is for QAR 480.8 million, approximately $131.9 million. We intend to vigorously defend against QD’s claims, and to assert counterclaims against QD, including without limitation counterclaims for Halcrow’s entitlement to certified receivables of $4.0 million, delay claims of a minimum of approximately $20.0 million, and the wrongful calling of the letter of credit of $6.7 million. We will also assert the defense that the Agreement contains a limitation of liability provision capping any negligence damages against Halcrow at QAR 36.5 million, approximately $10.0 million.

Item 1A. Risk Factors

~~There~~The ~~have~~following ~~been~~risk nofactors ~~material~~update ~~changes~~and ~~from~~supplement the risk factors ~~previously~~set ~~disclosed~~forth in our Annual Report on Form 10-K for the year ended December 30, 2016.

Before making an investment decision with respect to our common stock, you should carefully consider these factors, in addition to the other risk factors set forth in our Annual Report Form 10-K for the year ended December 30, 2016, as well as the other financial and business disclosures contained in our current and periodic reports filed with the SEC.

Risks Related to Our Pending Acquisition by Jacobs

The announcement and pendency of the Merger Agreement with Jacobs may have an adverse impact on our business.

Our pending acquisition by Jacobs could have an adverse impact on our revenue in the near term. While we are attempting to address this risk through communications with our clients, current and prospective clients may be reluctant to move forward on projects with us due to potential uncertainty about the direction of our business. Additionally, we are subject to additional risks in connection with the announcement and pendency of the merger, including:

Potential adverse effects on our relationships with our current business partners, or those with which we are seeking to establish business relationships;

The restrictions imposed on our business and operations pursuant to certain covenants set forth in the Merger Agreement, which may prevent us from pursuing certain opportunities without Jacobs’ approval;

We may forego opportunities we might otherwise pursue absent the Merger Agreement;

Potential adverse effects on our ability to attract, recruit, retain and motivate current and prospective employees who may be uncertain about their future roles and relationships with us following the completion of the merger; and

The diversion of our employees’ and management’s attention due to activities related to the transactions contemplated by the Merger Agreement.

We intend to file a definitive proxy statement and other relevant materials in connection with the Merger Agreement and the merger. The definitive proxy statement will be sent or given to our stockholders. We urge our stockholders to read the proxy statement and the other relevant materials because they contain important information about the transaction, including, but not limited to, other risks relating to the transaction.

The failure of our pending acquisition by Jacobs to be completed may adversely impact our business.

Completion of our pending acquisition by Jacobs is subject to certain customary conditions, including, adoption of the Merger Agreement by CH2M stockholders, approval of the listing of the shares of Jacobs common stock to be issued in the Merger on the New York Stock Exchange, receipt of required antitrust approvals and effectiveness of Jacobs’ registration statement on Form S-4 registering the shares to be issued in connection with the Merger. There can be no assurance that these conditions to the completion of the transaction will be satisfied in a timely manner or at all. In addition, other factors, such as Jacobs’ ability to obtain the debt financing it needs to consummate the transaction, may affect when and whether the merger will occur. If the acquisition is not completed, we may suffer consequences that could adversely affect our business, results of operations and share price, including the following:

We could be required to pay a termination fee of up to approximately $85.5 million to Jacobs under certain circumstances as described in the Merger Agreement;

We could be required to reimburse Jacobs for its out-of-pocket transaction expenses, up to $15.0 million, in the event our stockholders fail to approve the transaction;

We would have incurred significant costs in connection with the acquisition that we would be unable to recover;

We may be subject to legal proceedings related to the acquisition;

The failure of the acquisition to be consummated may result in negative publicity and a negative impression of us in the investment community;

Any disruptions to our business resulting from the announcement and pendency of the acquisition, including any adverse changes in our relationships with our customers, suppliers and employees, may continue or intensify in the event the merger is not consummated;

We may not be able to take advantage of alternative business opportunities or effectively respond to competitive pressures; and,

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We may experience a departure of employees.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Sales of Unregistered Equity Securities

We did not issue any unregistered equity securities during the ~~three~~six months ended ~~March 31~~June 30, 2017.

Issuer Purchases of Equity Securities

The following table covers the purchases of our common shares by our company not previously reported during the ~~three~~six months ended ~~March 31~~June 30, 2017.

				Total Number of Shares	Maximum Number of Shares
	Total Number of	Average Price		Purchased as Part of Publicly	that May Yet Be Purchased
Period	Shares Purchased	Paid per Share		Announced Plans or Programs	Under the Plans or Programs
January (a)	915	$	46.83	—	—
April	—	$	—	—	—
February	—		—	—	—
May	—		—	—	—
March (b)	461,226		46.83	—	—
June (a)	353,467		50.69	—	—
Total	~~462~~353,~~141~~467	$	4650.8369	—	—

(a) Shares purchased by CH2M ~~from~~in ~~terminated~~the ~~employees~~Internal Market.

~~(b) Shares purchased by CH2M in the Internal Market.~~ 40

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Item 6. Exhibits

Exhibit Index

3.1		Certificate of Amendment to the Certificate of Designation of Series A Preferred Stock (filed as Exhibit 3.1 to CH2M’s Form 8‑K on May 3, 2017 (Commission File No. 000‑27261), and incorporated herein by reference)
3.2		Amendment to Restated Certificate of Incorporation (filed as Exhibit 3.1 to CH2M’s Form 8‑K on June 7, 2017 (Commission File No. 000‑27261), and incorporated herein by reference)
4.1		Indenture, dated as of April 28, 2017, relating to the 10% Senior Second Lien Notes due 2020, among CH2M HILL Companies, Ltd., the guarantors party thereto and Wilmington Trust, National Association, as trustee and second lien collateral agent (filed as Exhibit 4.1 to CH2M’s Form 8‑K on May 3, 2017 (Commission File No. 000‑27261), and incorporated herein by reference)
4.2		Form of 10% Senior Second Lien Note due 2020 (filed as Exhibit 4.2 to CH2M’s Form 8‑K on May 3, 2017 (Commission File No. 000‑27261), and incorporated herein by reference)
4.3		Intercreditor Agreement, dated as of April 28, 2017, by and among CH2M, the Guarantors, the First Lien Agent and the Second Lien Agent (filed as Exhibit 4.3 to CH2M’s Form 8‑K on May 3, 2017 (Commission File No. 000‑27261), and incorporated herein by reference)
10.1		Fourth Amendment, dated as of April 28, 2017, to Second Amended and Restated Credit Agreement dated as of March 28, 2014, by and among CH2M HILL Companies, Ltd. and certain of its subsidiaries, Wells Fargo Bank, National Association, and the other financial institutions party thereto as lenders (filed as Exhibit 10.1 to CH2M’s Form 8‑K on May 3, 2017 (Commission File No. 000‑27261), and incorporated herein by reference)
*10.2		CH2M HILL Companies, Ltd. Amended and Restated Long-Term Incentive Plan effective as of February 28, 2017
*10.3		CH2M HILL Companies, Ltd. Amended and Restated Restricted Stock Plan effective as of February 28, 2017
*31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
*31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
*32.1		Certification of Chief Executive Officer pursuant to the requirements set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. Section 1350)
*32.2		Certification of Chief Financial Officer pursuant to the requirements set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. Section 1350)
*99		Internal Market Rules, effective May 11, 2017
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB		XBRL Taxonomy Extension Labels Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

* Filed herewith

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SIGNATURES

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

	CH2M HILL Companies, Ltd.
Date: May 4, 2017	/s/ GARY L. MCARTHUR
Date: August 8, 2017	/s/ GARY L. MCARTHUR
	Gary L. McArthur
	Chief Financial Officer

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