Attached files

file filename
EX-31.2 - EX-31.2 - CH2M HILL COMPANIES LTDa11-13825_1ex31d2.htm
EX-32.1 - EX-32.1 - CH2M HILL COMPANIES LTDa11-13825_1ex32d1.htm
EX-31.1 - EX-31.1 - CH2M HILL COMPANIES LTDa11-13825_1ex31d1.htm
EXCEL - IDEA: XBRL DOCUMENT - CH2M HILL COMPANIES LTDFinancial_Report.xls
EX-32.2 - EX-32.2 - CH2M HILL COMPANIES LTDa11-13825_1ex32d2.htm

Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 


 

Form 10-Q

 

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

 

For the quarterly period ended June 30, 2011

 

OR

 

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

 

For the transition period from                  to                 

 

Commission File Number 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 x  No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§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 x  No o

 

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

 

Large accelerated filer x

 

Accelerated filer ¨

 

 

 

Non-accelerated filer o

 

Smaller reporting company o

(Do not check if a smaller reporting company)

 

 

 

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

 

The number of shares outstanding of the registrant’s common stock as of August 1, 2011 was 30,863,830.

 

 

 



Table of Contents

 

CH2M HILL COMPANIES, LTD.

 

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION

 

Item 1.

FINANCIAL STATEMENTS

 

 

Consolidated Balance Sheets as of June 30, 2011 and December 31, 2010 (unaudited)

3

 

Consolidated Statements of Income for the Three and Six Months Ended June 30, 2011 and 2010 (unaudited)

4

 

Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2011 and 2010 (unaudited)

5

 

Notes to Consolidated Financial Statements (unaudited)

6

Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

14

Item 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

21

Item 4.

CONTROLS AND PROCEDURES

21

PART II. OTHER INFORMATION

 

 

 

Item 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

22

Item 6.

EXHIBITS

22

SIGNATURES

23

 

2



Table of Contents

 

CH2M HILL COMPANIES, LTD.

 

Consolidated Balance Sheets

 

(Unaudited)

 

(In thousands, except share data)

 

 

 

June 30,
2011

 

December 31,
2010

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

246,512

 

$

290,405

 

Marketable securities

 

2,576

 

2,412

 

Receivables, net—

 

 

 

 

 

Client accounts

 

605,021

 

558,734

 

Unbilled revenue

 

384,378

 

389,353

 

Other

 

19,917

 

21,264

 

Deferred income taxes

 

72,768

 

62,007

 

Prepaid expenses and other current assets

 

52,070

 

44,498

 

Total current assets

 

1,383,242

 

1,368,673

 

Investments in unconsolidated affiliates

 

91,229

 

82,982

 

Property, plant and equipment, net

 

162,530

 

169,261

 

Goodwill

 

130,354

 

130,354

 

Intangible assets, net

 

46,910

 

51,048

 

Deferred income taxes

 

131,720

 

112,919

 

Employee benefit plan assets and other

 

69,227

 

51,843

 

Total assets

 

$

2,015,212

 

$

1,967,080

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Current portion of long-term debt

 

$

13,443

 

$

13,934

 

Accounts payable and accrued subcontractor costs

 

367,742

 

407,694

 

Billings in excess of revenue

 

281,045

 

237,053

 

Accrued payroll and employee related liabilities

 

309,084

 

291,713

 

Current income tax payable

 

5,854

 

20,010

 

Other accrued liabilities

 

136,732

 

163,396

 

Total current liabilities

 

1,113,900

 

1,133,800

 

Long-term employee related liabilities and other

 

255,963

 

255,425

 

Long-term debt

 

16,508

 

23,687

 

Total liabilities

 

1,386,371

 

1,412,912

 

Commitments and contingencies (Note 12)

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

Preferred stock, $0.01 par value, 50,000,000 shares authorized; none issued

 

 

 

Common stock, $0.01 par value, 100,000,000 shares authorized; 30,640,637 and 30,527,473 issued and outstanding at June 30, 2011 and December 31, 2010, respectively

 

306

 

305

 

Additional paid-in capital

 

 

 

Retained earnings

 

639,997

 

563,343

 

Accumulated other comprehensive loss

 

(20,069

)

(18,768

)

Total CH2M HILL common shareholders’ equity

 

620,234

 

544,880

 

Noncontrolling interests

 

8,607

 

9,288

 

Total equity

 

628,841

 

554,168

 

Total liabilities and shareholders’ equity

 

$

2,015,212

 

$

1,967,080

 

 

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

 

3



Table of Contents

 

CH2M HILL COMPANIES, LTD.

 

Consolidated Statements of Income

 

(Unaudited)

 

(In thousands, except share and per share data)

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2011

 

2010

 

2011

 

2010

 

Gross revenue

 

$

1,360,571

 

$

1,341,088

 

$

2,628,666

 

$

2,576,667

 

Equity in earnings of joint ventures and affiliated companies

 

14,000

 

20,610

 

26,067

 

34,986

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Direct cost of services and overhead

 

(1,094,941

)

(1,088,458

)

(2,122,877

)

(2,091,413

)

General and administrative

 

(217,586

)

(211,224

)

(427,523

)

(431,365

)

Operating income

 

62,044

 

62,016

 

104,333

 

88,875

 

Interest income (expense):

 

 

 

 

 

 

 

 

 

Interest income and other

 

177

 

538

 

584

 

776

 

Interest expense

 

(1,060

)

(1,192

)

(2,037

)

(2,545

)

Income before provision for income taxes

 

61,161

 

61,362

 

102,880

 

87,106

 

Provision for income taxes

 

(18,605

)

(19,709

)

(30,340

)

(25,845

)

Net income

 

42,556

 

41,653

 

72,540

 

61,261

 

Less: Income attributable to noncontrolling interests

 

(2,189

)

(9,921

)

(8,615

)

(15,197

)

Net income attributable to CH2M HILL

 

$

40,367

 

$

31,732

 

$

63,925

 

$

46,064

 

Net income attributable to CH2M HILL per common share:

 

 

 

 

 

 

 

 

 

Basic

 

$

1.31

 

$

1.00

 

$

2.08

 

$

1.46

 

Diluted

 

$

1.29

 

$

0.98

 

$

2.04

 

$

1.42

 

Weighted average number of common shares:

 

 

 

 

 

 

 

 

 

Basic

 

30,718,202

 

31,739,782

 

30,713,870

 

31,642,204

 

Diluted

 

31,293,520

 

32,407,735

 

31,326,592

 

32,356,194

 

 

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

 

4



Table of Contents

 

CH2M HILL COMPANIES, LTD.

 

Consolidated Statements of Cash Flows

 

(Unaudited)

 

(In thousands)

 

 

 

Six Months Ended
June 30,

 

 

 

2011

 

2010

 

Cash flows from operating activities:

 

 

 

 

 

Net income

 

$

72,540

 

$

61,261

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

24,762

 

31,833

 

Stock-based employee compensation expense

 

36,851

 

34,269

 

Loss on disposal of property, plant and equipment

 

195

 

918

 

Allowance for uncollectible accounts

 

6,573

 

1,531

 

Deferred income taxes

 

(29,758

)

(25,074

)

Unrealized gain on investments

 

 

(6,494

)

Undistributed earnings from unconsolidated affiliates

 

(26,067

)

(34,986

)

Distributions of income from unconsolidated affiliates

 

14,653

 

44,048

 

Change in assets and liabilities, net of businesses acquired:

 

 

 

 

 

Receivables and unbilled revenue

 

(53,916

)

66,782

 

Prepaid expenses and other

 

(25,320

)

(3,134

)

Accounts payable and accrued subcontractor costs

 

(37,577

)

(88,830

)

Billings in excess of revenue

 

45,806

 

(35,836

)

Employee related liabilities

 

36,089

 

(5,372

)

Other accrued liabilities

 

(12,986

)

10,231

 

Income taxes payable

 

(18,803

)

10,499

 

Long term employee related liabilities and other

 

4,615

 

(3,993

)

Net cash provided by operating activities

 

37,657

 

57,653

 

Cash flows from investing activities:

 

 

 

 

 

Capital expenditures

 

(13,499

)

(11,942

)

Acquisitions and earnout payments, net of cash acquired

 

(9,466

)

 

Investments in unconsolidated affiliates

 

(16,489

)

(26,542

)

Distributions of capital from unconsolidated affiliates

 

20,768

 

12,203

 

Purchases of investments

 

 

(37,079

)

Cash increase from consolidation of variable interest entities

 

 

32,651

 

Proceeds from sale of property, plant and equipment

 

591

 

1,335

 

Net cash used in investing activities

 

(18,095

)

(29,374

)

Cash flows from financing activities:

 

 

 

 

 

Borrowings on line of credit and long-term debt

 

31,729

 

329,616

 

Payments on line of credit and long-term debt

 

(39,423

)

(41,503

)

Repurchases and retirements of stock

 

(51,796

)

(62,738

)

Excess tax benefits from stock-based compensation

 

8,960

 

4,581

 

Net distributions to noncontrolling interests

 

(9,462

)

(21,022

)

Net cash (used in) provided by financing activities

 

(59,992

)

208,934

 

Effect of exchange rates on cash

 

(3,463

)

(1,249

)

(Decrease) increase in cash and cash equivalents

 

(43,893

)

235,964

 

Cash and cash equivalents, beginning of period

 

290,405

 

169,717

 

Cash and cash equivalents, end of period

 

$

246,512

 

$

405,681

 

Supplemental disclosures:

 

 

 

 

 

Cash paid for interest

 

$

1,321

 

$

1,935

 

Cash paid for income taxes

 

$

60,572

 

$

41,195

 

 

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

 

5


 


Table of Contents

 

CH2M HILL COMPANIES, LTD.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

June 30, 2011

 

(Unaudited)

 

(1)           SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

 

Summary of Business

 

CH2M HILL Companies, Ltd. and subsidiaries (“CH2M HILL”) is a project delivery firm founded in 1946. In the following text, the terms “we,” “our,” “our company,” and “us” may refer to CH2M HILL. We are a large employee-owned professional engineering services firm providing engineering, construction, consulting, design, design-build, procurement, operations and maintenance, program management and technical services to U.S. federal, state, municipal and local government agencies, national governments, as well as private industry, 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 with the instructions to Form 10-Q and Article 10 of Regulation S-X for 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 complete 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. Certain prior period amounts have been reclassified to conform to the current presentation.

 

In the opinion of CH2M HILL’s 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 31, 2010.

 

Revenue Recognition

 

We earn revenue from different types of contracts, including cost-plus, fixed-price and time-and-materials. 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 contracts. In making such estimates, judgments are required to evaluate potential variances in schedule, the cost of materials and labor, productivity, liability claims, contract disputes, or achievement of contract performance standards.

 

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 the amount can be estimated. Management evaluates when a change order is probable based upon its experience in negotiating change orders or the customer’s written approval of such changes. 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.

 

Performance incentive and award fee arrangements are included in total estimated contract revenue upon the achievement of some measure of contract performance in relation to agreed-upon targets. We adjust out project revenue estimate by the probable amounts of these performance incentives and award fee arrangements we expect to earn if we achieve the agreed-upon criteria.

 

We also perform operations and maintenance services. 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.

 

6



Table of Contents

 

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 off of 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 off of significant unobservable inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment.

 

Available-for-Sale Securities

 

Available-for-sale securities are carried at fair value, with unrecognized gains and losses reported in accumulated other comprehensive loss, net of taxes. Losses on available-for-sale securities are recognized when a loss is determined to be other than temporary or when realized. The fair value of available-for-sale securities is estimated using Level 1 inputs.

 

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 revenue recognized on contracts in process.

 

Shareholders’ Equity

 

The changes in shareholders’ equity for the six months ended June 30, 2011 are as follows (in thousands):

 

 

 

Shares

 

Amount

 

Shareholders’ equity, December 31, 2010

 

30,527

 

$

554,168

 

Net income attributable to CH2M HILL

 

 

63,925

 

Shares issued and to be issued in connection with stock-based compensation and employee benefit plans

 

849

 

64,526

 

Shares and share equivalents purchased, retired and cancelled

 

(735

)

(51,796

)

Other comprehensive loss

 

 

(1,135

)

Net income from noncontrolling interests

 

 

8,615

 

Net distributions to noncontrolling interests

 

 

(9,462

)

Shareholders’ equity, June 30, 2011

 

30,641

 

$

628,841

 

 

Stock-Based Compensation Plans

 

We measure the fair value of each stock option grant at the date of grant using a Black-Scholes option pricing model. The weighted-average grant date fair value of options granted during the three and six months ended June 30, 2011 was $7.38 and $7.39, respectively, compared to $6.19 and $6.29 for the same periods in the prior year.

 

We estimate the expected term of options granted by calculating the average of the vesting term and the contractual term of the option. We estimate the volatility of its common stock by using a weighted-average of historical volatility over the same period as the expected term of the option. We use the U.S. Treasury bill issues for the risk-free interest rate in the option valuation model with original maturities similar to the expected term of the options. We do not anticipate paying any cash dividends on our common stock in the foreseeable future and therefore use an expected dividend yield of zero in the option valuation model. We are required to estimate forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differ from those estimates. We use historical data to estimate option forfeitures and record stock-based compensation expense only for those awards that are expected to vest. The fair value of stock-based payment awards is amortized into stock-based compensation on a straight-line basis over the requisite service periods of the awards, which are generally the vesting periods.

 

7



Table of Contents

 

The total compensation cost recognized for share-based payments for stock options during the three and six months ended June 30, 2011 was $1.2 million and $2.3 million, respectively, compared to $1.3 million and $2.7 million for the three and six months ended June 30, 2010, respectively.

 

Recently Adopted Accounting Standards

 

In June 2009, the FASB issued Accounting Standards Update (ASU) 2009-17, Consolidations (Topic 810)—Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities, revising the existing guidance on the consolidation and disclosures of variable interest entities (“VIEs”) which was codified in Accounting Standards Codification (“ASC”) 810-10. Specifically, it changes how a reporting entity determines when an entity that is insufficiently capitalized or is not controlled through voting rights should be consolidated. The determination of whether a reporting entity is required to consolidate another entity is based on, among other things, the other entity’s purpose and design and the reporting entity’s ability to direct the activities of the other entity that most significantly impact the other entity’s economic performance. The guidance also requires additional disclosures about a company’s involvement with VIEs and requires an entity to continually assess any significant changes in risk exposure as well as an entity’s assessment of the primary beneficiary of the entity. ASC 810-10 became effective for us beginning January 1, 2010. For further discussion of the effect of the adoption, see Note 5.

 

In January 2011, the FASB issued ASU 2011-06, Fair Value Measurements and Disclosures (Topic 820)—Improving Disclosures about Fair Value Measurements. ASU 2011-06 requires expanded fair value disclosures about transfers into and out of Levels 1 and 2 fair value measurements and clarifies existing fair value disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value. ASU 2011-06 became effective for us beginning January 1, 2011. The adoption of this accounting standard update did not have a material impact on our financial position, results of operations, cash flows and disclosures.

 

Recently Issued Accounting Standards

 

In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income, which improves the comparability, consistency, and transparency of financial reporting and increases the prominence of items reported in other comprehensive income (“OCI”) by eliminating the option to present components of OCI as part of the statement of changes in shareholders’ equity. The amendments in this standard require that all nonowner changes in shareholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements.. The amendments in this standard do not change the items that must be reported in OCI, when an item of OCI must be reclassified to net income, or change the option for an entity to present components of OCI gross or net of the effect of income taxes. The amendments in ASU 2011-05 are effective for our interim and annual periods beginning after December 31, 2011 and are to be applied retrospectively. The adoption of the provisions of ASU 2011-05 is not expected to have a material impact on the company’s consolidated financial position or results of operations.

 

In May 2011, the FASB issued ASU 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS, which amends current guidance to result in common fair value measurement and disclosures between accounting principles generally accepted in the United States and International Financial Reporting Standards. They do not require additional fair value measurements and are not intended to establish valuations standards or affect valuation practices outside of financial reporting. The amendments change the wording used to describe fair value measurement requirements and disclosures, but often do not result in a change in the application of current guidance. The amendments in ASU 2011-04 are effective for our interim and annual periods beginning after December 31, 2011. The adoption of the provisions of ASU 2011-04 is not expected to have a material impact on the company’s consolidated financial position or results of operations.

 

(2) SEGMENT INFORMATION

 

In order to improve our competitiveness, client service, and financial strength, effective January 1, 2011, we have reorganized our reporting structure to allow our chief operating decision maker to manage strategic and operating decisions with regards to assessing performance and allocating resources more effectively. We believe this new organizational structure helps us deal with global economic and industry challenges, and better position us for a solid future. As a result, our Water business is reported with the Energy segment creating the Energy and Water segment. Additionally, our Industrial Systems business was divided based upon its operations and combined within our Environmental Services business and Water business and thus reflected in the Government, Environment and Nuclear (“GEN”) and Energy and Water segments, respectively. These changes were effective January 1, 2011. Prior period amounts have been adjusted to conform to current year presentation.

 

8



Table of Contents

 

Certain financial information relating to the three and six months ended June 30, 2011 and 2010 for each segment is provided below (in thousands):

 

Three Months Ended June 30, 2011

 

Energy and
Water

 

Government,
Environment
and Nuclear

 

Facilities and
Infrastructure

 

Corporate

 

Financial
Statement
Balances

 

Revenue from external customers

 

$

487,020

 

$

564,687

 

$

308,864

 

$

 

$

1,360,571

 

Equity in earnings of joint ventures and affiliated companies

 

1,781

 

9,053

 

3,166

 

 

14,000

 

Operating income (loss)

 

23,031

 

26,921

 

15,684

 

(3,592

)

62,044

 

 

Three Months Ended June 30, 2010

 

Energy and
Water

 

Government,
Environment
and Nuclear

 

Facilities and
Infrastructure

 

Corporate

 

Financial
Statement
Balances

 

Revenue from external customers

 

$

496,810

 

$

544,938

 

$

299,340

 

$

 

$

1,341,088

 

Equity in earnings (losses) of joint ventures and affiliated companies

 

986

 

15,344

 

4,280

 

 

20,610

 

Operating income (loss)

 

24,593

 

30,045

 

12,112

 

(4,734

)

62,016

 

 

Six Months Ended June 30, 2011

 

Energy and
Water

 

Government,
Environment
and Nuclear

 

Facilities and
Infrastructure

 

Corporate

 

Financial
Statement
Balances

 

Revenue from external customers

 

$

893,147

 

$

1,122,068

 

$

613,451

 

$

 

$

2,628,666

 

Equity in earnings of joint ventures and affiliated companies

 

3,360

 

16,751

 

5,956

 

 

26,067

 

Operating income (loss)

 

39,391

 

44,606

 

27,061

 

(6,725

)

104,333

 

 

Six Months Ended June 30, 2010

 

Energy and
Water

 

Government,
Environment
and Nuclear

 

Facilities and
Infrastructure

 

Corporate

 

Financial
Statement
Balances

 

Revenue from external customers

 

$

986,130

 

$

1,019,723

 

$

570,814

 

$

 

$

2,576,667

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity in earnings of joint ventures and affiliated companies

 

2,394

 

22,855

 

9,737

 

 

34,986

 

Operating income (loss)

 

26,040

 

46,914

 

24,057

 

(8,136

)

88,875

 

 

In addition to the operating segments, the Corporate category primarily includes corporate expenses which represent centralized management costs that are not allocable to individual operating segments and primarily include expenses associated with administrative functions such as executive management, corporate development and initiatives, tax and investor relations.

 

(3) COMPREHENSIVE INCOME

 

Comprehensive income includes foreign currency translation losses, benefit plan adjustments, and unrealized gains/losses on available-for-sale securities that have been reflected as a component of shareholders’ equity and have not impacted net income. The following table summarizes the components of comprehensive income for the three and six months ended June 30, 2011 and 2010 (in thousands):

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 

2011

 

2010

 

2011

 

2010

 

Net income attributable to CH2M HILL

 

$

40,367

 

$

31,732

 

$

63,925

 

$

46,064

 

Other comprehensive income attributable to CH2M HILL:

 

 

 

 

 

 

 

 

 

Foreign currency translation losses

 

(4,748

)

(3,445

)

(1,400

)

(3,795

)

Unrealized (loss) gain on available-for-sale equity investments and other, net of tax

 

(256

)

597

 

99

 

765

 

Comprehensive income attributable to CH2M HILL

 

$

35,363

 

$

28,884

 

$

62,624

 

$

43,034

 

 

9



Table of Contents

 

(4) EARNINGS PER SHARE

 

Basic earnings per share (“EPS”) excludes the dilutive effect of common stock equivalents and is computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted EPS includes the dilutive effect of common stock equivalents, which consist primarily of stock options, and is computed using the weighted-average number of common shares and common stock equivalents outstanding during the period.

 

The following table is a reconciliation of basic and diluted EPS for the three and six months ended June 30, 2011 and 2010 (in thousands):

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 

2011

 

2010

 

2011

 

2010

 

Numerator:

 

 

 

 

 

 

 

 

 

Net income attributable to CH2M HILL

 

$

40,367

 

$

31,732

 

$

63,925

 

$

46,064

 

Denominator:

 

 

 

 

 

 

 

 

 

Basic income per share—weighted average common shares outstanding

 

30,718

 

31,740

 

30,714

 

31,642

 

Dilutive effect of common stock equivalents

 

576

 

668

 

613

 

714

 

Diluted income per share—adjusted weighted-average common shares outstanding, assuming conversion of common stock equivalents

 

31,294

 

32,408

 

31,327

 

32,356

 

Basic net income attributable to CH2M HILL per common share

 

$

1.31

 

$

1.00

 

$

2.08

 

$

1.46

 

Diluted net income attributable to CH2M HILL per common share

 

$

1.29

 

$

0.98

 

$

2.04

 

$

1.42

 

 

(5) VARIABLE INTEREST ENTITIES AND EQUITY METHOD INVESTMENTS

 

Our company routinely enters into teaming arrangements to perform projects for its clients. Such arrangements are customary in the engineering and construction industry and generally are project specific. The arrangements facilitate the completion of contracts that are jointly contracted with our partners. These arrangements are formed to leverage the skills of the respective partners and include engineering, consulting, construction, design, design-build, program management and operations and maintenance contracts. 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.

 

We perform a qualitative assessment to determine whether our company is the primary beneficiary once an entity is identified as a variable interest entity (“VIE”). A qualitative assessment begins with an understanding of the nature of the risks in 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. Most of the VIEs with which our company is involved have relatively few variable interests and are primarily related to our equity investment, 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 VIEs 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.

 

Upon adoption of ASC 810-10, we consolidated certain VIEs that were previously unconsolidated. We determined that we were the primary beneficiary due to the ability to control the activities that most significantly impact the economic performance of the entity. These variable interest entities were previously not consolidated because no party absorbed the majority of the expected losses. Upon consolidation of these joint ventures, consolidated current assets increased by $35.8 million, primarily related to cash and cash equivalents and accounts receivable. Current liabilities increased by $27.6 million primarily related to accounts payable, accrued subcontractor costs and billings in excess of revenue.

 

As of June 30, 2011, total assets of VIEs that were consolidated were $73.1 million and total liabilities were $41.1 million.

 

As of June 30, 2011 and December 31, 2010, we recorded investments in unconsolidated affiliates of $91.2 million and $83.0 million, respectively. 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 income. In general, the equity investment in our unconsolidated affiliates is equal to our current equity investment plus those entities’ undistributed earnings. We provide

 

10


 


Table of Contents

 

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. Our company has significant variable interests in entities that are not consolidated.

 

As of June 30, 2011, the total assets of VIEs that were not consolidated were $283.3 million and total liabilities were $233.9 million. 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.

 

(6) GOODWILL AND INTANGIBLE ASSETS

 

Indefinite-lived intangible assets consist of the following (in thousands):

 

 

 

June 30, 2011

 

December 31, 2010

 

Goodwill

 

$

130,354

 

$

130,354

 

Tradename

 

20,326

 

20,326

 

 

 

$

150,680

 

$

150,680

 

 

Our finite-lived intangible assets consist of acquired customer relationships and are being amortized over their expected lives up to seven years.  The cost basis of customer relationships was $57.9 million at June 30, 2011 and December 31, 2010.  The net value of customer relationships was $26.6 million and $30.7 million at June 30, 2011 and December 31, 2010, respectively. The amortization expense reflected in the accompanying consolidated statements of income was $2.0 million and $2.5 million for the three months ended June 30, 2011 and 2010, respectively, and $4.1 million and $5.1 million for the six months ended June 30, 2011 and 2010, respectively. These intangible assets are expected to be fully amortized in 2014. The majority of goodwill, intangible assets and associated amortization expense are held in the Energy and Water segment.

 

(7) PROPERTY, PLANT AND EQUIPMENT

 

Property, plant and equipment consists of the following (in thousands):

 

 

 

June 30, 2011

 

December 31, 2010

 

 

 

 

 

 

 

Land

 

$

27,775

 

$

27,337

 

Buildings

 

81,416

 

80,183

 

Furniture and fixtures

 

17,341

 

16,902

 

Equipment

 

185,246

 

182,297

 

Leasehold improvements

 

70,658

 

67,690

 

 

 

382,436

 

374,409

 

Less: Accumulated depreciation

 

(219,906

)

(205,148

)

Property, plant and equipment, net

 

$

162,530

 

$

169,261

 

 

Depreciation expense reflected in the consolidated statements of income was $9.0 million and $13.1 million for the three months ended June 30, 2011 and 2010, respectively, and $20.6 million and $26.7 million for the six months ended June 30, 2011 and 2010, respectively. The majority of depreciation expense relates to property, plant and equipment held in the Energy and Water segment.

 

(8) FAIR VALUE OF FINANCIAL INSTRUMENTS

 

Cash and cash equivalents, receivables, unbilled revenue, accounts payable and billings in excess of revenue are carried at cost, which approximates fair value due to their short maturities. Fair value of securities classified as available-for-sale, which totaled $2.6 million and $2.4 million at June 30, 2011 and December 31, 2010, respectively, were valued based on Level 1 inputs whereby a readily determinable market value exists for the specific asset.

 

Fair value of long-term debt, including the current portion, is estimated based on Level 2 inputs. 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 (in thousands):

 

11



Table of Contents

 

 

 

June 30, 2011

 

December 31, 2010

 

 

 

Carrying
Amount

 

Fair
Value

 

Carrying
Amount

 

Fair
Value

 

 

 

 

 

 

 

 

 

 

 

Mortgage notes payable

 

$

14,513

 

$

11,934

 

$

15,253

 

$

12,403

 

Equipment financing

 

15,211

 

14,636

 

22,227

 

21,439

 

Shareholder notes payable

 

227

 

198

 

141

 

98

 

 

(9) EMPLOYEE BENEFIT PLAN ASSETS

 

We have investments that support deferred compensation arrangements and other employee benefit plans. These assets are recorded at fair market value primarily using Level 1 and Level 2 inputs. The assets are invested in various non-exchange traded mutual funds and a money market fund. As of June 30, 2011 and December 31, 2010, the fair market values of these assets were $65.0 million and $47.0 million, respectively.

 

(10) LINE OF CREDIT AND LONG TERM DEBT

 

On December 6, 2010, we entered into a Credit Agreement (the “Credit Agreement”) providing for an unsecured revolving credit facility in an amount of up to $600.0 million. Subject to certain conditions, at any time prior to the date that is thirty days before the maturity date of the Credit Agreement, we will be able to invite existing and new lenders to increase the size of the revolving credit facility by up to $100.0 million, for a maximum aggregate revolving credit facility of $700.0 million. The revolving credit facility has a subfacility for the issuance of standby letters of credit in a face amount up to $300.0 million and a subfacility of up to $300.0 million for multicurrency borrowings. Revolving loans under the Credit Agreement bear interest, at our option, at a rate equal to either (i) the base rate plus a margin based on our consolidated leverage ratio or (ii) the LIBOR rate, based on interest periods of one, two, three or six months, plus a margin based on our consolidated leverage ratio. The base rate is equal to the greater of (i) the Federal Funds Rate, as published from time to time by the Federal Reserve Bank of New York, plus 0.5%, (ii) the lender’s prime rate in effect from time to time, or (iii) the one-month LIBOR rate in effect from time to time, plus 1.0%. Our consolidated leverage ratio on any date is the ratio of our consolidated total funded debt to its consolidated earnings before interest, taxes, depreciation and amortization for the preceding four fiscal quarters. There were no outstanding borrowings on the Credit Agreement as of June 30, 2011. If we had borrowed under the Credit Agreement on June 30, 2011 the rate of interest charged on that balance would have been 1.75%. At June 30, 2011, issued and outstanding letters of credit of $101.8 million were reserved against the borrowing base of the Credit Agreement.

 

The Credit Agreement contains customary representations and warranties and conditions to borrowing. The Credit Agreement also includes customary affirmative and negative covenants, including covenants that limit or restrict our Company and its subsidiaries’ ability to incur indebtedness and other obligations, grant liens to secure their obligations, make investments, merge or consolidate, dispose of assets outside the ordinary course of business, enter into transactions with affiliates, and make certain kinds of payments, in each case subject to customary exceptions for a credit facility of this size and type. We are also required to comply with a minimum consolidated fixed charge coverage ratio and a maximum consolidated leverage ratio. As of June 30, 2011, we were in compliance with the covenants required by the Credit Agreement.

 

Our nonrecourse and other long-term debt consists of the following (in thousands):

 

 

 

June 30, 2011

 

December 31, 2010

 

Nonrecourse:

 

 

 

 

 

Mortgage payable in monthly installments to July 2020, secured by real estate, rents and leases. The note bears interest at 5.35%

 

$

11,936

 

$

12,430

 

Mortgage payable in monthly installments to December 2015, secured by real estate. The note bears interest at 6.59%

 

2,577

 

2,823

 

 

 

14,513

 

15,253

 

Other:

 

 

 

 

 

Equipment financing, due in monthly installments to December 2014, secured by equipment. These notes bear interest ranging from 6.00% to 8.00%

 

15,211

 

22,227

 

Shareholder notes payable

 

227

 

141

 

Total debt

 

29,951

 

37,621

 

Less current portion of debt

 

13,443

 

13,934

 

Total long-term portion of debt

 

$

16,508

 

$

23,687

 

 

12



Table of Contents

 

(11) PROVISION FOR INCOME TAXES

 

The effective tax rate for the three months ended June 30, 2011 was 31.5% compared to 38.3% for the same period in the prior year. The effective tax rate for the six months ended June 30, 2011 was 32.2% compared to 35.9% for the same period in the prior year. The effective tax rates in 2011 were lower in comparison to the effective rates in 2010 primarily due to significant increases in foreign operating income as well as domestic benefits from the research and experimentation credit. Our effective tax rate continues to be negatively impacted by the effect of state income taxes, non-deductible foreign net operating losses, the disallowed portion of executive compensation, and disallowed portions of meals and entertainment expenses.

 

Undistributed earnings of our foreign subsidiaries amounted to approximately $79.3 million at June 30, 2011. These earnings are considered to be permanently reinvested. Accordingly, no provision for U.S. federal and state income taxes or foreign withholding taxes has been made. If these earnings were repatriated as of June 30, 2011, approximately $17.0 million of income tax expense would be incurred.

 

As of June 30, 2011 and December 31, 2010, we had $19.5 million and $18.3 million, respectively, recorded as a liability for uncertain tax positions. We recognize interest and penalties related to unrecognized tax benefits in income tax expense. As of June 30, 2011 and December 31, 2010, we had approximately $3.3 million and $3.0 million, respectively, of accrued interest and penalties related to uncertain tax positions.

 

We file income tax returns in the U.S. federal and various state jurisdictions and non-U.S. 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 and Canada. With few exceptions, we are is no longer subject to income tax examinations by tax authorities for years before 2003.

 

(12) COMMITMENTS AND CONTINGENCIES

 

Our Company is party to various contractual guarantees and 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 U.S. 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 currently pending would not result in a material adverse effect on our results of operations or financial condition even if the final outcome is adverse to our company.

 

Many claims that are currently pending against us are covered by our professional liability insurance. 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.

 

We were notified that the U.S. Attorney’s Office for the Eastern District of Washington is investigating overtime practices in connection with the Department of Energy Hanford tank farms management contract which we transitioned to another contractor in 2008.  The US Attorney’s Office is reviewing our overtime practices for the period from July 2007 to September 2008 and has raised the possibility of civil and/or criminal charges against CH2M HILL for possible violations arising from our overtime practices on this project.  We are cooperating with the investigation and given the early stages of this inquiry are not yet in a position to quantify the possible impact of these potential charges.

 

13



Table of Contents

 

(13) SUBSEQUENT EVENTS

 

On July 29, 2011, we acquired Booz Allen Hamilton’s State and Local Government Transportation and Consulting business. The cost of the acquisition was $28.5 million adjusted to certain working capital requirements. The business acquired provides consulting and other professional services related primarily to transit and rail agencies in the United States.

 

Item 2.       MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion and analysis is intended to assist in providing an understanding of our financial condition, changes in financial condition and results of operations as a whole and for each of our operating segments.

 

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

 

Certain statements throughout Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this report are forward looking and thus reflect our current expectations and beliefs with respect to certain current and future events and financial performance. Such forward looking statements are and will be subject to many risks and uncertainties relating to our operations and business environment that may cause actual results to differ materially from any future results expressed or implied in such forward looking statements. 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 report are based upon information available to us on the date of this 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.

 

The Company’s actual results could differ materially from these forward looking statements due to numerous factors including, without limitation, the following: the continuance of, and funding for certain governmental regulation and enforcement programs which create demand for our services; our ability to attract and perform large, longer-term projects; our ability to insure against or otherwise cover the liability risks inherent in our business including environmental liabilities and professional engineering liabilities; our ability to manage the risks inherent in the government contracting business and the delivery of lump sum projects; our ability to manage the costs associated with our fixed price contracts; our ability to manage the risks inherent in international operations, including operations in war and conflict zones, our ability to identify and successfully integrate acquisitions; our ability to attract and retain professional personnel; changes in global business, economic, political and social conditions; intense competition in the global engineering, procurement and construction industry; civil unrest, security issues and other unforeseeable events in countries in which we do business; our failure to receive anticipated new contract awards; difficulties or delays incurred in the execution of contracts; and other risks and uncertainties set forth under Item 1A., Risk Factors in the Annual Report on Form 10-K for the year ended December 31, 2010, as well as other 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.

 

Overview

 

We are a large employee-owned professional engineering services firm providing engineering, construction, consulting, design, design-build, procurement, operations and maintenance, program management and technical services to U.S. federal, state, municipal and local government agencies, national governments, as well as private industry, around the world. Founded in 1946, we have approximately 23,000 employees in offices worldwide.

 

We provide services to a diverse customer base including the U.S. federal and foreign governments and governmental authorities, various U.S. federal government agencies, provincial, state and local municipal government, major oil and gas companies, refiners and pipeline operators, metal and mining, automotive, food and beverage and consumer products manufacturers, microelectronics, pharmaceuticals and biotechnology companies. We believe we provide our clients with innovative project delivery using cost-effective approaches and advanced technologies.

 

Our revenues are dependent upon our ability to attract and retain qualified and productive employees, identify business opportunities, allocate our labor resources to profitable markets, secure new contracts, execute existing contracts,

 

14



Table of Contents

 

and maintain existing client relationships. Moreover, as a professional services company, the quality of the work generated by our employees is integral to our revenue generation.

 

We continuously monitor acquisition and investment opportunities that will expand our portfolio of services, add value to the projects undertaken for clients, or enhance our capital strength. Mergers and acquisitions in our industry have resulted in a group of larger firms that offer a full complement of single-source services including studies, designs, engineering, construction, procurement, design-build operations, maintenance and in some instances, facility ownership. We have also seen movement towards longer-term contracts for the expanded array of services, e.g., 5 to 20 year contracts. These larger, longer, full-service contracts require us to have substantially greater financial capital than has historically been necessary to remain competitive. There can be no assurances that we can continue to be successful when competing against companies in our industry who have greater access to capital. We expect to continue to see consolidation of our competitors which may result in challenges for our business in the future.

 

On July 1, 2011, CH2M HILL changed its state of incorporation from Oregon to Delaware through a conversion under Oregon and Delaware law (the “Reincorporation”).  The Reincorporation did not result in any change in the business, physical location, management, assets, liabilities, and net worth of CH2M HILL.  In addition, the consolidated financial condition and results of operations of CH2M HILL immediately after consummation of the Reincorporation are the same as those of CH2M HILL immediately prior to the consummation of the Reincorporation.

 

Results of Operations

 

Revenue and Operating Income of our Reportable Segments

 

In order to improve our competitiveness, client service, and financial strength, effective January 1, 2011, we have reorganized our reporting structure to allow our chief operating decision maker to manage strategic and operating decisions with regards to assessing performance and allocating resources more effectively. We believe this new organizational structure helps us deal with global economic and industry challenges, and better position us for a solid future. As a result, our Water business is reported with the Energy segment creating the Energy and Water segment. Additionally, our Industrial Systems business was divided based upon its operations and combined within our Environmental Services business and Water business and thus reflected in the Government, Environment and Nuclear (“GEN”) and Energy and Water segments, respectively. These changes were effective January 1, 2011. Prior period amounts have been adjusted to conform to current year presentation.

 

The results of operations for the three and six months ended June 30, 2011 and 2010 by operating segment were as follows (in millions):

 

Three Months Ended June 30, 2011 and 2010

 

 

 

2011

 

2010

 

Change

 

 

 

Revenue

 

Equity
in
Earnings

 

Operating
Income
(Loss)

 

Revenue

 

Equity
in
Earnings

 

Operating
Income
(Loss)

 

Revenue

 

Equity
in
Earnings

 

Operating
Income
(Loss)

 

Energy and Water

 

$

487.0

 

$

1.8

 

$

23.0

 

$

496.8

 

$

1.0

 

$

24.6

 

$

(9.8

)

(2.0

)%

$

0.8

 

$

(1.6

)

(6.5

)%

Government, Environment and Nuclear

 

564.7

 

9.0

 

26.9

 

545.0

 

15.3

 

30.0

 

19.7

 

3.6

%

(6.3

)

(3.1

)

(10.3

)%

Facilities and Infrastructure

 

308.9

 

3.2

 

15.7

 

299.3

 

4.3

 

12.1

 

9.6

 

3.2

%

(1.1

)

3.6

 

29.8

%

Corporate

 

 

 

(3.6

)

 

 

(4.7

)

 

 

 

1.1

 

23.4

%

Total

 

$

1,360.6

 

$

14.0

 

$

62.0

 

$

1,341.1

 

$

20.6

 

$

62.0

 

$

19.5

 

1.5

%

$

(6.6

)

$

0.0

 

0

%

 

Six Months Ended June 30, 2011 and 2010

 

 

 

2011

 

2010

 

Change

 

 

 

Revenue

 

Equity
in
Earnings

 

Operating
Income
(Loss)

 

Revenue

 

Equity
in
Earnings

 

Operating
Income
(Loss)

 

Revenue

 

Equity in
Earnings

 

Operating
Income
(Loss)

 

Energy and Water

 

$

893.1

 

$

3.4

 

$

39.4

 

$

986.1

 

$

2.4

 

$

26.0

 

$

(93.0

)

(9.4

)%

$

1.0

 

$

13.4

 

51.5

%

Government, Environment and Nuclear

 

1,122.1

 

16.8

 

44.6

 

1,019.7

 

22.9

 

46.9

 

102.4

 

10.0

%

(6.1

)

(2.3

)

(4.9

)%

Facilities and Infrastructure

 

613.5

 

5.9

 

27.0

 

570.8

 

9.7

 

24.1

 

42.7

 

7.5

%

(3.8

)

2.9

 

12.0

%

Corporate

 

 

 

(6.7

)

 

 

(8.1

)

 

 

 

1.4

 

17.3

%

Total

 

$

2,628.7

 

$

26.1

 

$

104.3

 

$

2,576.6

 

$

35.0

 

$

88.9

 

$

52.1

 

2.0

%

$

(8.9

)

$

15.4

 

17.3

%

 

15



Table of Contents

 

Energy and Water

 

Revenue from our Energy and Water segment decreased for the three and six months ended June 30, 2011, compared to the same periods in the prior year by $9.8 million or 2.0%, and $93.0 million or 9.4%, respectively. The overall decrease in revenue is primarily attributable to the completion of several large power projects during 2010. The decrease is also attributable to a decrease in activity in the oil and gas business due primarily to constrained capital spending within the oil and gas industry and a highly competitive market. The decrease is partially offset by the increase in demand in our water consulting business in North America, the Middle East and Europe.

 

Operating income decreased for the three months ended June 30, 2011 compared to the same period in the prior year by $1.6 million or 6.5%. The decrease in operating income for the three months ended June 30, 2011 compared to the same period in the prior year is attributable to the decrease in revenues as discussed above. Operating income increased for the six months ended June 30, 2011 compared to the same period in the prior year by $13.4 million or 51.5%. Despite the decrease in revenue attributable to the oil and gas business, operating income increased in our energy and chemicals business due to stronger performance in the operations and maintenance services in addition to significantly lower overhead. Additionally, operating income increased due to the expiration of certain customer warranty obligations within certain of our power design build projects as well as improved performance on a water design build project in the northwest.

 

Government, Environment and Nuclear

 

Revenue from our Government, Environment and Nuclear segment increased for the three and six months ended June 30, 2011, compared to the same periods in 2010 by $19.7 million or 3.6%, and $102.4 million or 10.0%, respectively. The increase in revenue is primarily due to an increased volume of contracts in our nuclear market largely generated as a result of the American Recovery and Reinvestment Act (“ARRA”) to accelerate environmental cleanups. The increase is also attributable to new business in our environmental business. The increase is partially offset by reduced volumes in our domestic and international government design-build business in our government facilities and infrastructure business due to the effect of the current recession and contracting delays.

 

Operating income decreased for the three and six months ended June 30, 2011, compared to the same periods in the prior year by $3.1 million or 10.3% and $2.3 million or 4.9%, respectively. The overall decrease is primarily attributable to lower margins associated with the ARRA contracts as well as increased costs incurred on a U.S. government military base facilities project. The decrease is also attributable to lower equity in earnings period over period on a large nuclear project. The decrease is partially offset by award fees earned in our international government facilities and infrastructure business in addition to a favorable settlement on a contract claim in our environmental business.

 

Facilities and Infrastructure

 

Revenue from our Facilities and Infrastructure segment increased for the three and six months ended June 30, 2011, compared to the same periods in 2010 by $9.6 million or 3.2%, and $42.7 million or 7.5%, respectively. The increase in revenue is primarily attributable to higher volume in our industrial and advanced technology (“I&AT”) business due to increased capital spending in the sector. The increase in revenue is also attributable to increased volumes in our operations and management (“O&M”) business due to the transition of certain design-build-operate water projects into the operation phases of the projects. The increase is partially offset by reduced workload in our transportation consulting markets due to the current economic environment of available funding at the federal and state government levels.

 

Operating income increased for the three and six months ended June 30, 2011 compared to the same period in the prior year by $3.6 million or 29.8%, and $2.9 million or 12.0%, respectively. The increase is primarily attributable to the revenues discussed above related to our I&AT business. The increase is partially offset by a decrease in operating income related to a major project in London as a result of the completion of major parts of the project in 2011.

 

Corporate

 

The other category primarily includes corporate expenses which represent centralized management costs that are not allocable to individual operating segments and primarily includes expenses associated with administrative functions such as executive management, human resources, legal, treasury, accounting and tax, and general business development efforts. The decrease of $1.1 million and $1.4 million for the three and six months ended June 30, 2011, respectively, compared to the same periods in the prior year is due to our continued overhead cost reduction efforts.

 

Provision for Income Taxes

 

The effective tax rate for the three months ended June 30, 2011 was 31.5% compared to 38.3% for the same period in the prior year. The effective tax rate for the six months ended June 30, 2011 was 32.2% compared to 35.9% for the same

 

16



Table of Contents

 

period in the prior year. The effective tax rates in 2011 were lower in comparison to the effective rates in 2010 primarily due to significant increases in foreign operating income as well as domestic benefits from the research and experimentation credit. Our effective tax rate continues to be negatively impacted by the effect of state income taxes, non-deductible foreign net operating losses, the disallowed portion of executive compensation, and disallowed portions of meals and entertainment expenses.

 

Undistributed earnings of our foreign subsidiaries amounted to approximately $79.3 million at June 30, 2011. These earnings are considered to be permanently reinvested. Accordingly, no provision for U.S. federal and state income taxes or foreign withholding taxes has been made. If these earnings were repatriated as of June 30, 2011, approximately $17.0 million of income tax expense would be incurred.

 

As of June 30, 2011 and December 31, 2010, we had $19.5 million and $18.3 million, respectively, recorded as a liability for uncertain tax positions. We recognize interest and penalties related to unrecognized tax benefits in income tax expense. As of June 30, 2011 and December 31, 2010, we had approximately $3.3 million and $3.0 million, respectively, of accrued interest and penalties related to uncertain tax positions.

 

We file income tax returns in the U.S. federal and various state jurisdictions and non-U.S. 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 and Canada. With few exceptions, we are no longer subject to income tax examinations by tax authorities for years before 2003.

 

Liquidity and Capital Resources

 

Our primary sources of liquidity are cash flows from operations, borrowings under our revolving line of credit and other financing arrangements. Our primary uses of cash are to fund our working capital, acquisitions, capital expenditures and repurchases of stock presented each quarter by our internal market. During the six months ended June 30, 2011, we generated $37.7 million of cash from our operations compared to $57.7 million in the same period last year. The decrease in operating cash flow during the current period was partially attributable to an increase in income tax payments and cash bonus payments made in 2011. In addition, we experienced a decrease in collections on accounts receivable from customers, and distributions of income from unconsolidated affiliates in 2011 compared to 2010. The decrease in operating cash flow is partially offset by a reduction in cash payments for employee related liabilities due mainly to the timing of employee related tax payments.

 

We continuously monitor collection efforts and assess the allowance for doubtful accounts. Based on our assessment at June 30, 2011, we have deemed the allowance for doubtful accounts to be adequate; however, economic conditions may adversely impact some of our clients’ ability to pay our bills or the timeliness of their payments.

 

Cash used for investing activities was $18.1 million in the six months ended June 30, 2011 compared to $29.4 million used in investing activities for the same period in 2010. The majority of the decrease in cash used for our investing activities relates to the $37.1 million purchase of marketable securities during 2010 and cash used for our investments in affiliates which decreased by approximately $10.1 million. Additionally, we paid $9.5 million of acquisition holdback contingency costs during the six months ended June 30, 2011. These uses of cash were partially offset by the increase of cash upon the consolidation of variable interest entities that we previously accounted for as unconsolidated affiliates during 2010 as a result of the adoption of ASC 810.

 

We finance our operations, acquisitions and capital expenditures using a variety of capital vehicles. On December 6, 2010, we entered into a Credit Agreement (the “Credit Agreement”) providing for an unsecured revolving credit facility in an amount of up to $600.0 million. Subject to certain conditions, at any time prior to the date that is thirty days before the maturity date of the Credit Agreement, we will be able to invite existing and new lenders to increase the size of the revolving credit facility by up to $100.0 million, for a maximum aggregate revolving credit facility of $700.0 million. The revolving credit facility has a subfacility for the issuance of standby letters of credit in a face amount up to $300.0 million and a subfacility of up to $300.0 million for multicurrency borrowings. Revolving loans under the Credit Agreement bear interest, at our option, at a rate equal to either (i) the base rate plus a margin based on our consolidated leverage ratio or (ii) the LIBOR rate, based on interest periods of one, two, three or six months, plus a margin based on our consolidated leverage ratio. The base rate is equal to the greater of (i) the Federal Funds Rate, as published from time to time by the Federal Reserve Bank of New York, plus 0.5%, (ii) the lender’s prime rate in effect from time to time, or (iii) the one-month LIBOR rate in effect from time to time, plus 1.0%. Our consolidated leverage ratio on any date is the ratio of our consolidated total funded debt to its consolidated earnings before interest, taxes, depreciation and amortization for the preceding four fiscal quarters. There can be no assurance that the capacity under the new credit facility will be adequate to fund future operations or acquisitions we may pursue from time to time.

 

17



Table of Contents

 

Depending on the applicable terms and conditions on new debt or equity offerings compared to the opportunity cost of using our internally generated cash, we may either choose to finance new opportunities using leverage in the form of our Credit Agreement, or other debt. In some instances we may use a combination of one or more of these financing mechanisms. As of June 30, 2011, our total outstanding debt obligations were approximately $30.0 million. During the three months ended June 30, 2011, we borrowed $31.6 million against the Credit Agreement and repaid the outstanding balance before the period ended June 30, 2011. There was not an outstanding balance on the Credit Agreement as of June 30, 2011. The majority of the outstanding obligations relate to the issuance of notes payable and mortgages related to property, plant and equipment.

 

At June 30, 2011, issued and outstanding letters of credit of $101.8 million were reserved against the borrowing base of the Credit Agreement.

 

The net cash flow for financing activities significantly fluctuated for six months ended June 30, 2011 compared to the same period in the prior year. During the six months ended June 30, 2011, the net repayments of debt were approximately $7.7 million compared to net borrowings on the line of credit and long-term debt of $288.1 million during the six months ended June 30, 2010.During the six months ended June 30, 2011, we borrowed $31.6 million on the line of credit to for additional working capital and subsequently repaid the borrowing within the same period. During the six months ended June 30, 2010, we borrowed on the line of credit to purchase Scott Wilson Group plc, a design and engineering firm headquartered in the United Kingdom. We were subsequently outbid by another bidder and, in July 2010, repaid the borrowings related to this potential acquisition. Repurchases of stock were $51.8 million compared to $62.7 million for the same period in the prior year. Additionally, net distributions to noncontrolling interests decreased approximately $11.5 million for the six months ended June 30, 2011 compared to the six months ended June 30, 2010.

 

Off-Balance Sheet Arrangements

 

We have interests in multiple teaming arrangements, some of which are considered variable interest entities. These entities facilitate the completion of contracts that are jointly owned with our partners. These entities are formed to leverage the skills of the respective partners and include engineering, consulting, construction, design, program management and operations and maintenance contracts. Our risk of loss in these arrangements is usually shared with our partners. The liability of each partner usually is joint and several, which means that each joint venture partner may become liable for the entire risk of loss on the project.

 

There were no substantial changes to other off-balance sheet arrangements or contractual commitments in the six months ended June 30, 2011, when compared to the disclosures provided in our Annual Report on Form 10-K for the year ended December 31, 2010.

 

Aggregate Contractual Obligations

 

We are committed to provide support for various provisions in engineering and construction contracts. Letters of credit are available 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 also post surety bonds, which are contractual agreements issued by a surety, for the purpose of guaranteeing our performance on contracts. Bid bonds are also issued by a surety to protect owners against our failure to perform obligations arising from a successful bid. Bid bonds are subject to full or partial forfeiture if we fail to enter into contracts under terms provided on our bids.

 

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 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 of matters that are inherently uncertain. We base estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities as of the date of the financial statements that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

 

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 31, 2010.

 

18



Table of Contents

 

Revenue Recognition

 

We earn our revenue from different types of services under a variety of different types of contracts, including cost-plus, firm fixed-price and time-and-materials. In recognizing revenue, we evaluate each contractual arrangement to determine the appropriate authoritative literature to apply. We recognize revenue and profit for a majority of our 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 contract. In making such estimates, judgments are required to evaluate potential variances in schedule, the cost of materials and labor, productivity, liability claims, contract disputes and achievement of contract performance standards.

 

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 can be reliably estimated. 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.

 

We have a history of making reasonable estimates of the extent of progress towards completion, total contract revenue and total contract costs on our engineering and construction contracts. However, due to uncertainties inherent in the estimation process, it is possible that actual total contract revenue and completion costs may vary from estimates.

 

A portion of our contracts are operations and maintenance type contracts. Typically, these contracts may include fixed and variable components along with incentive fees. Revenue is recognized on operations and maintenance contracts on a straight-line basis over the life of the contract once we have an arrangement, delivery has occurred, the price is fixed or determinable and collectability is reasonably assured.

 

Income Taxes

 

In determining net income for financial statement purposes, we must make estimates and judgments in the calculation of tax assets and liabilities and in the determination of the recoverability of deferred tax assets. Deferred tax assets and liabilities arise from temporary differences between the tax return and the financial statement recognition of revenue and expenses.

 

We must assess the likelihood that we will be able to recover our deferred tax assets. If recovery is not likely, we increase our tax provision by recording a valuation allowance for the deferred tax assets that do not meet the more likely than not recognition criteria.

 

In addition, the calculation of our income tax benefits involves dealing with uncertainties in the application of complex tax regulations. For income tax benefits to be recognized, a tax position must be more likely than not to be sustained upon ultimate settlement.

 

Pension and Postretirement Employee Benefits

 

We have two frozen and one active noncontributory defined benefit pension plans, a medical benefit plan for retired employees and other benefit plans. The determination of pension plan expense and the requirements for funding our pension plans are based on a number of actuarial assumptions. These valuations include many assumptions, but the two most critical assumptions are the discount rate and the expected long-term rate of return on plan assets. For our medical benefit plan, which provides certain health care benefits to qualified retired employees, critical assumptions in determining the employee benefit expense are the discount rate applied to benefit obligations and the assumed health care cost trend rates used in the calculation of benefit obligations. We use judgment in selecting these assumptions each year because we have to consider not only current market conditions, but also make judgments about future market trends, changes in the interest rates and equity market performance. We also have to consider factors like the timing and amounts of expected contributions to the plans and benefit payments to plan participants.

 

The funded status of a benefit plan is measured as the difference between plan assets at fair value and the benefit obligation. We record an asset for overfunded plans and a liability for underfunded plans, with a corresponding entry recorded to accumulated other comprehensive loss, net of tax.

 

19



Table of Contents

 

Recently Adopted Accounting Standards

 

In June 2009, the FASB issued ASU 2010-17, Consolidations (Topic 810)—Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities, revising the existing guidance on the consolidation and disclosures of variable interest entities which was codified in ASC 810-10. Specifically, it changes how a reporting entity determines when an entity that is insufficiently capitalized or is not controlled through voting rights (or similar) should be consolidated. The determination of whether a reporting entity is required to consolidate another entity is based on, among other things, the other entity’s purpose and design and the reporting entity’s ability to direct the activities of the other entity that most significantly impact the other entity’s economic performance. The guidance also requires additional disclosures about a company’s involvement with VIEs and requires us to continually assess any significant changes in risk exposure as well as our assessment of the primary beneficiary of the entity. ASC 810-10 became effective for us beginning January 1, 2011. For further discussion of the effect of the adoption, see Note 5.

 

In January 2011, the FASB issued ASU 2011-06, Fair Value Measurements and Disclosures (Topic 820)—Improving Disclosures about Fair Value Measurements. ASU 2011-06 requires expanded fair value disclosures about transfers into and out of Levels 1 and 2 fair value measurements and clarifies existing fair value disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value. ASU 2011-06 became effective for us beginning January 1, 2011. The adoption of this accounting standard update did not have a material impact on our financial position, results of operations, cash flows and disclosures.

 

Recently Issued Accounting Standards

 

In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income, which improves the comparability, consistency, and transparency of financial reporting and increases the prominence of items reported in other comprehensive income (“OCI”) by eliminating the option to present components of OCI as part of the statement of changes in shareholders’ equity. The amendments in this standard require that all nonowner changes in shareholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The amendments in this standard do not change the items that must be reported in OCI, when an item of OCI must be reclassified to net income, or change the option for an entity to present components of OCI gross or net of the effect of income taxes. The amendments in ASU 2011-05 are effective for our interim and annual periods beginning after December 31, 2011 and are to be applied retrospectively. The adoption of the provisions of ASU 2011-05 is not expected to have a material impact on the company’s consolidated financial position or results of operations.

 

In May 2011, the FASB issued ASU 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS, which amends current guidance to result in common fair value measurement and disclosures between accounting principles generally accepted in the United States and International Financial Reporting Standards. The amendments explain how to measure fair value. They do not require additional fair value measurements and are not intended to establish valuations standards or affect valuation practices outside of financial reporting. The amendments change the wording used to describe fair value measurement requirements and disclosures, but often do not result in a change in the application of current guidance. The amendments in ASU 2011-04 are effective for our interim and annual periods beginning after December 31, 2011. The adoption of the provisions of ASU 2011-04 is not expected to have a material impact on the company’s consolidated financial position or results of operations.

 

Commitments and Contingencies

 

We are party to various contractual guarantees and 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 U.S. 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 currently pending would not result in a material adverse effect on our results of operations or financial condition even if the final outcome is adverse to our Company.

 

Many claims that are currently pending against us are covered by our professional liability insurance. Management estimates that the levels of insurance coverage (after retentions and deductibles) are generally adequate to cover our

 

20



Table of Contents

 

liabilities, if any, with regard to such claims. Any amounts that are probable of payment are accrued when such amounts are estimable.

 

We were notified that the U.S. Attorney’s Office for the Eastern District of Washington is investigating overtime practices in connection with the Department of Energy Hanford tank farms management contract which we transitioned to another contractor in 2008.  The US Attorney’s Office is reviewing our overtime practices for the period from July 2007 to September 2008 and has raised the possibility of civil and/or criminal charges against CH2M HILL for possible violations arising from our overtime practices on this project.  We are cooperating with the investigation and given the early stages of this inquiry are not yet in a position to quantify the possible impact of these potential charges.

 

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 are exposed to foreign currency exchange risks in the normal course of our business operations outside of the U.S. Our investments in foreign subsidiaries with a functional currency other than the U.S. dollar are generally considered long-term. From time to time we selectively manage these exposures through the use of derivative instruments to mitigate our market risk from these exposures. The objective of our risk management is to protect our cash flows related to sales of services from market fluctuations in current rates. A five percent change in foreign currency rates would not have a significant impact on our financial position, results of operations or cash flows.

 

Interest rates.  Our interest rate exposure is generally limited to our unsecured revolving credit agreement, purchase of interest bearing short-term investments and the holdback contingency balance outstanding related to our acquisition of VECO. As of June 30, 2011, there was not a balance on the unsecured revolving credit agreement but there was approximately $38.4 million outstanding on a holdback liability which requires us to pay interest on the outstanding balance at a variable interest rate. We have assessed the market risk exposure on these financial instruments and determined that any significant changes to the fair value of these instruments would not have a material impact on our consolidated results of operations, financial position or cash flows. Based upon the amount outstanding under the unsecured revolving credit agreement and the holdback contingency, a one percentage point change in the assumed interest rate would change our annual interest expense by approximately $0.4 million.

 

Item 4.  CONTROLS AND PROCEDURES

 

We carried out an evaluation as of the last day of the period covered by this Quarterly Report on Form 10-Q, 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 Securities Exchange Act of 1934, as amended (“Exchange Act”). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (a) are effective to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is timely recorded, processed, summarized and reported and (b) include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

 

There have been no changes in our internal control over financial reporting during the quarter ended June 30, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

21



Table of Contents

 

Part II. OTHER INFORMATION

 

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

 

Issuer Purchases of Equity Securities

 

The following table covers the purchases of our common shares by CH2M HILL during the period covered by this report.

 

Period

 

Total Number of
Shares Purchased

 

Average Price
Paid per Share

 

Total Number of Shares
Purchased as Part of Publicly
Announced Plans or Programs

 

Maximum Number of Shares
that May Yet Be Purchased
Under the Plans or Programs

 

April(a)

 

3,788

 

$

46.51

 

 

 

May

 

 

 

 

 

June(b)

 

264,491

 

50.43

 

 

 

Total

 

268,279

 

50.37

 

 

 

 


(a)                                  Shares purchased by CH2M HILL from terminated employees.

 

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

 

Item 6.  EXHIBITS

 

Index of Exhibits

 

3.1

 

Certificate of Incorporation of CH2M HILL Companies, Ltd. (filed as Exhibit 3.1 to CH2M HILL’s Form 8-K, on July 5, 2011 (Commission File No. 000-27261), and incorporated herein by reference)

 

 

 

3.2

 

Bylaws of CH2M HILL Companies, Ltd. (filed as Exhibit 3.2 to CH2M HILL’s Form 8-K/A (Amendment No. 1), on July 20, 2011 (Commission File No. 000-27261), and incorporated herein by reference)

 

 

 

*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)

 

 

 

**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

 

**                                  XBRL (eXtensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

 

22



Table of Contents

 

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.

 

 

 

/s/ MICHAEL A. LUCKI

 

Michael A. Lucki

 

Senior Vice President and Chief Financial Officer

 

(principal financial officer)

Date: August 9, 2011

 

 

23