CH2M CREDIT NOTES
The best outcome will result from openly airing the issues while pursuing operational improvement and equitable IOT
concurrent with seeking strategic business combination (merger) with one or more existing E&C concerns (at least one
being a public Corporation). A fixed share collar being the preferred structure. Setting us in this direction, an objective
review of past performance is required to weigh value destruction and management response as recalibrated
performance goals and investment expectation may be established and communicated.
Three fundamental forces drove value destruction, inverted the capital structure and challenged solvency/liquidity
beginning Dec 2011 through Dec 2014.
1. Large pension deficit relating to Nov 2011 Halcrow
acquisition - $375 million increase in liability ($150 realized
loss and $225 unrealized loss) and $122 million cash
contributions to db plans. The December 2014 unfunded
status (deficit) is $532 million/18% of total assets.
2. A failed venture into power announced April 2012
resulted in $140 million loss.
3. A $491 million cash drain relating to 2012 – 2014 IOT
redemptions.
The Company’s current strategy effectively punts $225 million
of unrealized pension losses and claims performance
improvement on suspending the associated loss recognition.
Whereas the higher road calls on the company to:

Quantify, communicate and address the value destruction
head-on

Affirm it’s financial accounts/policies/procedures

Identify any/all available performance improvement
and/or strategic measures

Track the progress toward restoration of lost value

Normalize balance sheet risk associated with pension
deficit (bring it back under industry bell curve).
Mounting Capital Challenges
Project Desc
Status
Northeast US Power
Complete
Europeean IUE
Risk
Australian JV
Risk
SW US Transportation
Risk
Western US Power
Complete
Total Project Losses
Restructuring
Total Project and Restructuring
Goodwill Impairment
Total
Contributions to db plans (Cas h)
OACI (Ne t of ~$70mm tax Benefi t)
Cum stock redemption (Ca sh)
Cum DB liability realized (Accrua l )
Total
Charge
64,400
17,800
140,000
92,300
42,900
357,400
87,900
445,300
73,312
518,612
1/2
>>
>>
>>
>>
>>
Total
On-going
0
9,000
140,000
92,300
0
241,300
87,900
329,200
73,312
402,512
Cum Pension
& Power
Cum Stock
Items
Redemption
140,000
140,000
140,000
122,782
122,782
225,000 >> 225,000
491,929 >> 491,929
150,000
150,000
1,508,323
1,392,223
122,782
225,000
491,929
150,000
637,782
491,929
Indeed EBITDA enjoys the appearance of benefit under current program, however unrealized losses of such size and
delayed acknowledgement/address of the underfunded status calls for increased scrutiny of Ch2m as business partner,
potential suitor/merger candidate, or employer of choice.
In this regard, review of public record can be quite revealing, with observations falling into three categories:
Financial health, market value and earnings quality observations
Management Response, Fiduciary and Other General Observations
Contingent and Reputational Risk Issues
These talking points then turn to operating initiatives that can enhance strategic outcome before addressing indicative
value and investment outlook.
Richard J. Reilly
DueDilly, LLC d/b/a Responsible Strategic Management
(917) 882-2880
CH2M CREDIT NOTES
Financial health, market value and earnings quality observations

Unfunded pension status of $532mm (18% of total assets at Dec ’14) outweighs that of any peer and requires
significant discount in relative value determination (calculated based on plan buy-out at 10% increase/1.1x plan
liabilities). Total unrealized losses in AOCI(L) (pension plus currency) represent $9 or 16% of current calculated share
value of $55.75

A Pension Comparison Worksheet is provided at the end of these discussion points.
Ch2 (discount)/premium on pension alone
Vs
SNC
(650.3)
=
(682.7)
Vs AECOM
(372.0)
=
(682.7)
Vs
WSP
(609.6)
=
(682.7)
Vs
KBR
46.8
=
(682.7)
Vs
JEC
(112.7)
=
(682.7)
Vs
FLR
(463.7)
=
(682.7)
Vs
UGL
(648.1)
=
(682.7)
Pension Position
US Non US
Plan Obligations
$187.5
$0.0
Plan Assets
$138.6
$0.0
Underfunded Status ($48.9)
$0.0
Total Assetts

(32.4)
(310.7)
(73.1)
(729.5)
(570.0)
(219.0)
(34.6)
2010
2011
Total
US
Non US Total
US
Non US
$187.5 $205.8 $926.4 $1,132.1 $245.1 $1,064.0
$138.6 $141.5 $624.0 $765.5 $162.7
$701.3
($48.9) ($64.3) ($302.4) ($366.6) ($82.4) ($362.7)
1,967.1
2,694.9
-2.5%
-13.6%
2012
Total
US
Non US
$1,309.0 $268.5 $1,236.5
$863.9 $196.1
$776.7
($445.1) ($72.4) ($459.8)
3,114.6
-14.3%
2014
Total
$1,505.0
$972.8
($532.2)
2,941.3
-18.1%
Declining asset efficiency highlights revenue vs asset impairment. A $73 million impairment came on weakened
2014 revenue. The combined sales growth/impairment necessary to charge to maintain ~2x TTM ratio is shown.
Sales Increase

less
less
less
less
less
less
less
Asset Impairment
Asset Impairment
Asset Efficency
$0
$50
$100
$150
$200
$250
$300
$350
$0
1.83
1.85
1.87
1.89
1.90
1.92
1.94
1.96
$50
1.87
1.88
1.90
1.92
1.94
1.95
1.97
1.99
$100
1.90
1.92
$150
1.93
1.95
1.94
1.95
1.97
1.97
1.99
2.01
1.99
2.01
2.03
2.03
2.04
2.06
$200
1.97
1.99
2.01
2.03
2.04
2.06
2.08
2.10
$250
2.01
2.03
2.05
2.06
2.08
2.10
2.12
2.14
$300
2.05
2.07
2.09
2.10
2.12
2.14
2.16
2.18
$350
2.09
2.11
2.13
2.15
2.17
2.18
2.20
2.22
$400
2.13
2.15
2.17
2.19
2.21
2.23
2.25
2.27
A remarkable revenue shift is demonstrated in growing unbilled accrual (on track to exceed client accounts), this
challenges both revenue and asset quality.
Richard J. Reilly
DueDilly, LLC d/b/a Responsible Strategic Management
(917) 882-2880
Page 2 of 29
CH2M CREDIT NOTES
Management Response, Fiduciary and Other General Observations

It is not unreasonable for parties to construe that the Halcrow deal and related due diligence was a hurried bid to
secure a late role on infrastructure 2012 Summer Games program (2010 bid for Scott Wilson PLC was lost to URS)

A formal report/opinion on the Halcrow Pension Scheme had not been delivered since 2008. It is understood that
Ch2 was not in agreement with Halcrow Pension Trustees re the assumptions on which plan obligations should be
calculated. And following the transaction, a former Halcrow executive joined valuation consultant EFCG.

An unsupported shift in cost basis identified in consolidated reporting underscores the pension dilemma. Noticeable
correction in direct expenses occurs in conjunction with Jacque Hinman’s defense of Halcrow acquisition published
April 2013 and again with lending group’s consultant’s inspection and continuing presence following the March 2014
amendment.

Annual segmented, estimated 2014 and Ex-Power financial data (2010 – 2019) offered in the February 2015 Investor
Presentation (IP) provides further insight:
o
A reconciliation request for the company; actual consolidated 2012 revenue of $6,160.6mm vs ex power
historical consolidated of $5,534.8mm vs segmented revenue of $4,951.3mm reveals a $583.5mm variance. This
methodology flows through the Income statement to reveal: $390mm Direct cost var, 193.9mm gross profit var,
464.1mm SG&A var and ($272.1)mm EBIT var for 2012.
o
$77mm unidentified charge in estimated 2014 approximates the restructuring and transportation losses
reported in first and second quarter 2015. This would have effectively eliminated equity at Dec 2014. It seems
the second quarter 2015 transportation loss was contemplated prior to the 2014 10k filing and fourth quarter
2015 shareholder call.
Variance
Statutory Consolidated less Power less Segments
2010
Consolidated Revenue
$177.2
Consolidated Income From JVs
Consolidated Direct Costs
Consolidated Gross Profit
$125.5
2012
$583.5
2013
$13.8
2014
Common Size
2010
2011
2012
2013
2014
$15.0
3.3%
2.3%
9.5%
0.2%
0.3%
$0.0
($0.1)
$0.5
$0.2
$0.0
0.0%
0.0%
0.0%
0.0%
0.0%
$121.9
$83.2
$390.1
$8.4
$1.9
2.2%
1.5%
6.3%
0.1%
0.0%
0.2%
$55.3
$42.2
$193.9
$5.6
$13.1
1.0%
0.8%
3.1%
0.1%
Consolidated SG&A
$291.9
$322.1
$464.1
$282.9
$340.6
5.4%
5.8%
7.5%
4.8%
6.3%
Consolidated EBIT
($239.1)
($284.0)
($272.1)
($278.6)
($327.5)
-4.4%
-5.1%
-4.4%
-4.7%
-6.0%
NCI
$0.1
$0.0
$0.0
$0.0
$0.0
0.0%
0.0%
0.0%
0.0%
0.0%
($40.6)
$1.8
$13.4
($5.8)
($338.3)
-0.7%
0.0%
0.2%
-0.1%
-6.2%
EBITDA
($279.8)
($282.2)
($258.7)
($284.4)
($665.8)
-5.2%
-5.1%
-4.2%
-4.8%
-12.3%
Project
$0.0
$0.0
$0.0
$0.0
$204.4
0.0%
0.0%
0.0%
0.0%
3.8%
Impairment
$0.0
$0.0
$0.0
$0.0
$73.3
0.0%
0.0%
0.0%
0.0%
1.4%
Restructuring
$0.0
$0.0
$0.0
$0.0
$70.4
0.0%
0.0%
0.0%
0.0%
1.3%
Air Ball- Further Impairment weighed?
$0.0
$0.0
$0.0
$0.0
0.0%
0.0%
0.0%
0.0%
-1.4%
-5.2%
-5.1%
-4.2%
-4.8%
-4.4%
Air Ball - Losses and Restructuring
Adj EBITDA - Corp Overhead rr
Richard J. Reilly
2011
($77.0)
($279.8)
($282.2)
($258.7)
($284.4)
($240.7)
As % of Statutory Revenue
-5.2%
-5.1%
-4.2%
-4.8%
-4.4%
As % of Segments Revenue
-5.6%
-5.4%
-5.2%
-5.3%
-4.6%
DueDilly, LLC d/b/a Responsible Strategic Management
(917) 882-2880
Page 3 of 29
CH2M CREDIT NOTES
o Consolidated gross profit margin in segment data is distorted by IP revenue variance in in year over year
comparison and requires adjustment (yellow highlights).
Segment
Direct Costs (Gross Profit Less EBITDA)
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Water
74.9%
72.3%
72.6%
73.9%
73.7%
75.0%
75.0%
75.0%
75.1%
75.1%
Environment & Nuclear
88.5%
86.7%
82.0%
81.2%
82.3%
83.1%
82.0%
82.0%
81.9%
81.9%
Transportation
73.3%
73.9%
78.7%
73.7%
78.6%
74.8%
72.1%
72.1%
71.9%
71.8%
Oil, Gas & Chemicals
83.8%
86.5%
86.6%
79.6%
78.2%
80.2%
78.6%
78.4%
78.8%
78.7%
Indust, Urban Environ
80.8%
77.5%
78.1%
78.5%
85.7%
77.5%
79.2%
79.3%
79.4%
80.8%
Direct Basis Segment
81.9%
80.7%
79.7%
77.5%
79.5%
78.5%
77.6%
77.5%
77.6%
77.8%
Direct Cost Segment
4,092.6
4,207.0
3,944.7
4,136.2
4,116.9
4,267.2
4,398.0
4,653.1
4,954.4
5,286.4
81.4%
80.4%
78.3%
77.5%
79.3%
78.5%
77.6%
77.5%
77.6%
77.8%
Direct Cost Basis Xpower
Direct Cost Xpower
$4,214.50 $4,290.20 $4,334.80 $4,144.60 $4,118.80 $4,267.17 $4,397.98 $4,653.03 $4,954.40 $5,286.40
Unknown Direct Component
$121.9
$83.2
$390.1
$8.4
$1.9
($0.0)
($0.0)
($0.1)
($0.0)
($0.0)
Direct Cost Change in Margin
$0.0
($65.0)
($24.8)
($104.0)
$105.2
($39.6)
($46.2)
($2.3)
$3.2
$10.6
Unknown Plus Change in Mar
$121.9
$18.2
$365.3
($95.6)
$107.1
($39.7)
($46.2)
($2.4)
$3.2
$10.6
Unknown Plus as % of Xpower
0.34%
6.60%
-1.79%
2.06%
-0.73%
-0.81%
-0.04%
0.05%
0.16%
Core Direct Cost Basis
80.0%
71.7%
79.2%
77.2%
79.2%
78.4%
77.6%
77.5%
77.6%
$161.2
$196.8
($184.2)
($154.6)
$242.6
$231.3
$331.8
$384.1
$413.1
5,338
5,535
5,351
5,196
5,439
5,670
6,002
6,386
6,799
change in revenue
Ex-Power Revenue
5,177

Ex-Power Direct Cost less Direct Cost on Segments identifies an unknown direct cost component.

Add change in margin component (as calculated with segment overhead) to derive Unknown plus Change
as % of Ex-Power and Core Direct Cost Basis that further support aforementioned 2013 Direct cost loading
(and reversal).

Prior to the direct cost correction occurring at the time of the Halcrow purchase defence (April
2013), approx $50 million direct cost reduction on year over year revenue declined is replaced by
regognition of DB pension losses.
Richard J. Reilly
DueDilly, LLC d/b/a Responsible Strategic Management
(917) 882-2880
Page 4 of 29
CH2M CREDIT NOTES
o Transportation, Oil & Gas and IUE segments appear to bear relatively heavier overhead and non-cash burden than
Water and Environment & Nuclear segments. Below are the carry contributions and reduction targets identified.
Aggressive reduction pursuits (the possibility the efficiency of Water and Environment and Nuclear segments may be
matched) would essentially double the target figures below. Is this achievable? Or do energy and water segments
somehow benefit?
o
Total segment overhead, segment overhead resulting from margin shift, segment overhead on new revenue and
core segment overhead are shown. Segment overhead resulting from margin shift (border highlight) is the
estimated management response ($ accrual) to mounting Halcrow DB deficit. Notice the margin decline/correction
shifts the year peak overhead appears from 2013 in total overhead to 2014 in core overhead. This shift is consistent
with appearance of consolidated direct margin loading and correction identified in consolidated direct expense
above.
Richard J. Reilly
DueDilly, LLC d/b/a Responsible Strategic Management
(917) 882-2880
Page 5 of 29
CH2M CREDIT NOTES
Contingent and Reputational Risk Issues

Government audit

Continuing government investigations

~$75mm cost surrounding LMI/Steadfast Insurance/Ch2m IUE cleanup row (current litigation - investigating
knowledge of sight condition)

Zurich (parent of Steadfast Insurance), who issues the surety behind a complex ($1.6 billion) Panama Canal contract
dispute between GUPC (Grupo Unidos por el Canal) and the Canal Authority, is again probing Ch2m’s knowledge of
site condition and at one point threatened to pull its bond had Ch2m assumed the work at the center of this dispute.
Ch2m acts as project consultant to the Canal Administration and ran the RFP that included disputed
representations.
Richard J. Reilly
DueDilly, LLC d/b/a Responsible Strategic Management
(917) 882-2880
Page 6 of 29
CH2M CREDIT NOTES
Improvement Strategies
Project Discipline; the best approach to sharpening discipline is through talent management and effectively leading in
this direction requires the company identify and equip staff who demonstrate the strongest ability to excel within the
changing culture. Strong change leaders are particularly important due to breadth of services and geography.
Staff Delivery Mix; process and quality improvement are best achieved together with positive change in the workplace
environment that leaves resources feeling effectively utilized performing at or above their pay grade. Staff utilization
and activity based costing (time entry) records can help identify which groups of resources are performing at what levels
so we understand how or where to employ uplifting strategy.
Shape/Style/Habit; Avoid characteristics associated with hourglass and diamond shaped organizations and make every
attempt to stick to pyramid shaped units/teams/organization. Hands-on management has advantages, but delivery
units cannot lose sight of the importance and economies in leveraging and developing staff. And in this spirit, senior
delivery personnel may be coached to avoid reaching too far down the work stack so capture economies of mix in
leveraging staff.
Seniors - BD and Backlog; Business development efforts and backlog are areas where seniors might welcome an invitation
to participate. These activities are the future of the enterprise as well as the birthplace of the project life cycle and
require particular client facing and administrative discipline to properly report and make the appropriate accounting
determination (expense vs. capitalization).
Richard J. Reilly
DueDilly, LLC d/b/a Responsible Strategic Management
(917) 882-2880
Page 7 of 29
CH2M CREDIT NOTES
Cash Flow, Capital Structure and Value Indication
TTM EBITDA of $324mm includes $403mm of extra ordinary items, with the risk of further project losses. Other quality
considerations include:

Earnings and asset quality (most notably relating to revenue, receivables, goodwill and deferred tax assets).

Inverted capital structure and solvency underscored by deferral of $73mm charges identified in the IP (presumably
representative of 1st and 2nd quarter transportation and restructuring charges). Certainly the company remains in
the zone of insolvency as determined by balance sheet test incorporating fair value.
Litigation and reputational risks are raised in part because clients could require bank LCs over other sureties to escape
risk of future litigation. Contingent
obligations reported Dec. 2014 are Contingent Obligations Reported Dec 2014
1 Year
1‑3 Years
4‑5 Years
Over 5 Years Committed
shown. As of June 2015 there is
Letters of credit
$71.8
$20.4
$35.1
$35.1
$162.4
Bank guarantees
$32.8
$2.5
$0.6
$1.0
$36.9
~$1.7 billion unsecured between
Long-term debt
$5.0
$6.4
$498.8
$2.8
$513.0
funded bank debt, LT employee
Interest payments
$9.0
$17.4
$16.9
$0.1
$43.4
related, payables and billings in
Operating lease obligations
$95.2
$144.0
$83.6
$124.8
$447.6
excess. Accrued Payroll and ST
Surety and bid bonds
$783.5
$527.6
$22.3
$0.1
$1,333.5
Total
$997.3
$718.3
$657.3
$163.9
$2,536.8
employee related push this figure
to ~$2.1 billion
In light of all, a ($100)mm – ($125)mm EBITDA adjustment is applied. This is consistent with maintaining asset efficiency
of ~2x, well below the ratio anticipated on Ch2m-Halcrow combination yielding revenues of $7 billion. Further
impairment may be recommended based on continuing evaluation of the $583mm 2012 revenue variance.
At 7.6 times multiple (per Jan 2015 NYU Stern study based on 56 global E&C business) and backing out a $682mm buyout, $532 on-going deficit and $425mm competitive pay-down we arrive at a range following range $840mm –$1,082
(average) mm - $1,285mm. (A $25mm increment increase/decrease in EBITDA translates to +/- $190mm of value.)
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
200.0
225.0
250.0
275.0
300.0
325.0
350.0
Competitive Pay-down
6.7
7
7.3
$ 915.0 $ 975.0 $ 1,035.0
$ 1,082.5 $ 1,150.0 $ 1,217.5
$ 1,250.0 $ 1,325.0 $ 1,400.0
$ 1,417.5 $ 1,500.0 $ 1,582.5
$ 1,585.0 $ 1,675.0 $ 1,765.0
$ 1,752.5 $ 1,850.0 $ 1,947.5
$ 1,920.0 $ 2,025.0 $ 2,130.0
7.6
$ 1,095.0
$ 1,285.0
$ 1,475.0
$ 1,665.0
$ 1,855.0
$ 2,045.0
$ 2,235.0
7.9
$ 1,155.0
$ 1,352.5
$ 1,550.0
$ 1,747.5
$ 1,945.0
$ 2,142.5
$ 2,340.0
8.2
$ 1,215.0
$ 1,420.0
$ 1,625.0
$ 1,830.0
$ 2,035.0
$ 2,240.0
$ 2,445.0
8.5
$ 1,275.0
$ 1,487.5
$ 1,700.0
$ 1,912.5
$ 2,125.0
$ 2,337.5
$ 2,550.0
200.0
225.0
250.0
275.0
300.0
325.0
350.0
On-going Deficit adj
6.7
7
$ 807.8 $ 867.8
$ 975.3 $ 1,042.8
$ 1,142.8 $ 1,217.8
$ 1,310.3 $ 1,392.8
$ 1,477.8 $ 1,567.8
$ 1,645.3 $ 1,742.8
$ 1,812.8 $ 1,917.8
7.3
$ 927.8
$ 1,110.3
$ 1,292.8
$ 1,475.3
$ 1,657.8
$ 1,840.3
$ 2,022.8
7.6
$ 987.8
$ 1,177.8
$ 1,367.8
$ 1,557.8
$ 1,747.8
$ 1,937.8
$ 2,127.8
7.9
$ 1,047.8
$ 1,245.3
$ 1,442.8
$ 1,640.3
$ 1,837.8
$ 2,035.3
$ 2,232.8
8.2
$ 1,107.8
$ 1,312.8
$ 1,517.8
$ 1,722.8
$ 1,927.8
$ 2,132.8
$ 2,337.8
8.5
$ 1,167.8
$ 1,380.3
$ 1,592.8
$ 1,805.3
$ 2,017.8
$ 2,230.3
$ 2,442.8
200.0
225.0
250.0
275.0
300.0
325.0
350.0
Buyout Adjusted
6.7
7
$ 657.3 $ 717.3
$ 824.8 $ 892.3
$ 992.3 $ 1,067.3
$ 1,159.8 $ 1,242.3
$ 1,327.3 $ 1,417.3
$ 1,494.8 $ 1,592.3
$ 1,662.3 $ 1,767.3
7.3
$ 777.3
$ 959.8
$ 1,142.3
$ 1,324.8
$ 1,507.3
$ 1,689.8
$ 1,872.3
7.6
$ 837.3
$ 1,027.3
$ 1,217.3
$ 1,407.3
$ 1,597.3
$ 1,787.3
$ 1,977.3
7.9
$ 897.3
$ 1,094.8
$ 1,292.3
$ 1,489.8
$ 1,687.3
$ 1,884.8
$ 2,082.3
8.2
$ 957.3
$ 1,162.3
$ 1,367.3
$ 1,572.3
$ 1,777.3
$ 1,982.3
$ 2,187.3
8.5
$ 1,017.3
$ 1,229.8
$ 1,442.3
$ 1,654.8
$ 1,867.3
$ 2,079.8
$ 2,292.3
Richard J. Reilly
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
200.0
225.0
250.0
275.0
300.0
325.0
350.0
Competitive Pay-down
6.7
7
$ 29.3 $ 31.2 $
$ 34.6 $ 36.8 $
$ 40.0 $ 42.4 $
$ 45.3 $ 48.0 $
$ 50.7 $ 53.6 $
$ 56.0 $ 59.2 $
$ 61.4 $ 64.8 $
7.3
33.1
38.9
44.8
50.6
56.4
62.3
68.1
$
$
$
$
$
$
$
7.6
35.0
41.1
47.2
53.2
59.3
65.4
71.5
$
$
$
$
$
$
$
7.9
36.9
43.3
49.6
55.9
62.2
68.5
74.8
$
$
$
$
$
$
$
8.2
38.9
45.4
52.0
58.5
65.1
71.6
78.2
$
$
$
$
$
$
$
8.5
40.8
47.6
54.4
61.2
68.0
74.8
81.5
200.0
225.0
250.0
275.0
300.0
325.0
350.0
On-going Deficit adj
6.7
7
$ 25.8 $ 27.8
$ 31.2 $ 33.3
$ 36.5 $ 38.9
$ 41.9 $ 44.5
$ 47.3 $ 50.1
$ 52.6 $ 55.7
$ 58.0 $ 61.3
$
$
$
$
$
$
$
7.3
29.7
35.5
41.3
47.2
53.0
58.9
64.7
$
$
$
$
$
$
$
7.6
31.6
37.7
43.7
49.8
55.9
62.0
68.0
$
$
$
$
$
$
$
7.9
33.5
39.8
46.1
52.5
58.8
65.1
71.4
$
$
$
$
$
$
$
8.2
35.4
42.0
48.5
55.1
61.7
68.2
74.8
$
$
$
$
$
$
$
8.5
37.3
44.1
50.9
57.7
64.5
71.3
78.1
200.0
225.0
250.0
275.0
300.0
325.0
350.0
Buyout Adjusted
6.7
7
$ 21.0 $ 22.9
$ 26.4 $ 28.5
$ 31.7 $ 34.1
$ 37.1 $ 39.7
$ 42.4 $ 45.3
$ 47.8 $ 50.9
$ 53.2 $ 56.5
$
$
$
$
$
$
$
7.3
24.9
30.7
36.5
42.4
48.2
54.0
59.9
$
$
$
$
$
$
$
7.6
26.8
32.9
38.9
45.0
51.1
57.2
63.2
$
$
$
$
$
$
$
7.9
28.7
35.0
41.3
47.6
54.0
60.3
66.6
$
$
$
$
$
$
$
8.2
30.6
37.2
43.7
50.3
56.8
63.4
69.9
$
$
$
$
$
$
$
8.5
32.5
39.3
46.1
52.9
59.7
66.5
73.3
DueDilly, LLC d/b/a Responsible Strategic Management
(917) 882-2880
Page 8 of 29
CH2M CREDIT NOTES
Investment Outlook
Indicative values can be compared to the cv Pfd investment; $300mm for approximate 23% equity future
stake/valuation implies $1,300mm - less premium you assign to $600 liquidation preference and significant
control.
Investment return, reinvestment opportunity and related economies appear most attractive in the near term.

Analysis of cv Pfd IRR suggests investor may be inclined to consider a near-term business combination and
perhaps weigh a haircut on its preference claim to retain skin in the game on a larger trade that is
immediately accretive, tackling the Combined cv Pfd Investment
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
50.0%
55.0%
pension deficit and capital structure Yr
.
$ 240.0 $ 250.0 $ 260.0 $ 270.0 $ 280.0 $ 290.0 $ 300.0 $ 310.0
challenges.
2
$ 408.0 $ 437.5 $ 468.0 $ 499.5 $ 532.0 $ 565.5 $ 600.0 $ 635.5

The medium term horizon for cv Pfd
performance is challenged by
earnings and asset quality issues
raised as well as the risks of further
project losses, actuarial/market
influence on pension deficit and
plan delivery (revenue side and
aggressive cost goals).

3
$ 489.6
4
$ 587.5
5
$ 705.0
Traunch 1
$ 200.0
20.0%
1
$ 240.0
2
$ 288.0
3
$ 345.6
4
$ 414.7
5
$ 497.7
Traunch 2 (one year)
$ 100.0
20.0%
2
120.0
3
144.0
4
172.8
5
207.4
$ 546.9 $ 608.4 $ 674.3 $ 744.8 $ 820.0 $ 900.0 $ 985.0
$ 683.6 $ 790.9 $ 910.3 $ 1,042.7 $ 1,189.0 $ 1,350.0 $ 1,526.8
$ 854.5 $ 1,028.2 $ 1,229.0 $ 1,459.8 $ 1,724.0 $ 2,025.0 $ 2,366.5
$
$
$
$
$
25.0%
250.0
312.5
390.6
488.3
610.4
25.0%
125.0
156.3
195.3
244.1
$
$
$
$
$
30.0%
260.0
338.0
439.4
571.2
742.6
30.0%
130.0
169.0
219.7
285.6
$
$
$
$
$
35.0%
270.0
364.5
492.1
664.3
896.8
40.0%
$ 280.0
$ 392.0
$ 548.8
$ 768.3
$ 1,075.6
45.0%
$ 290.0
$ 420.5
$ 609.7
$ 884.1
$ 1,281.9
35.0%
135.0
182.3
246.0
332.2
40.0%
140.0
196.0
274.4
384.2
45.0%
145.0
210.3
304.9
442.1
50.0%
55.0%
$ 300.0 $ 310.0
$ 450.0 $ 480.5
$ 675.0 $ 744.8
$ 1,012.5 $ 1,154.4
$ 1,518.8 $ 1,789.3
50.0%
150.0
225.0
337.5
506.3
55.0%
155.0
240.3
372.4
577.2
Acknowledgement of such exists in
form of cv price reset features that
may become effective after year 5
and significantly reduce cv premium; though the consolidating move and competitive landscape may
already be established before this time.
Richard J. Reilly
DueDilly, LLC d/b/a Responsible Strategic Management
(917) 882-2880
Page 9 of 29
CH2M CREDIT NOTES
Updates:
October 1, 2015; KBR, Inc. secures new revolver. It reads as if the company is also being encouraged to boost/raise
additional equity. KBR’s current pension deficit is 12% of total assets (vs ch2m at 18%). This new facility requires 3.5:1
debt to EBITDA on foundation of 1.2 bn equity (3.25 debt to equity). Ch2m effectively requires an additional $600
million in equity with $175 million of it paying down pension deficit to 12% to get to get to the same position KBR.
The KBR Credit Agreement contains customary covenants similar to the Prior Credit Agreement which include financial covenants
requiring maintenance of a ratio of consolidated debt to consolidated EBITDA of 3.5 to 1 and a minimum consolidated net worth of
$1.2 billion plus 50% of consolidated net income for each quarter ending on or after September 30, 2015, and 100% of any
increase in shareholders equity attributable to the sale of equity securities. The net worth covenant excludes the effects of changes
in foreign currency translation adjustments from Shareholders' Equity (as defined in the Credit Agreement) for periods after
January 1, 2015
November 3, 2015; Ch2m September 30, 2015 earnings release. Share price calculation has increases to $67.88 with
85% of “P” (TTM Income) being extraordinary with quality of remaining in question. Clearly management is trying to
manage shareholder sentiment as it continues to face limitation on IOT/share redemption and wrestle solvency. The
leverage ratio covenant returns to 3.0 x EBITDA at year end. Accounting liberties continue - expect KPMG to experience
some heartburn facing this audit. The current tact is the reduction of liability (billings in excess) more rapidly than
accrued revenue decline. Deferred tax asset continues to grow and has been added to chart (below) - related valuation
allowance will be important piece of earnings/balance sheet quality determination in coming audit. Bank debt has been
reduced disproportionately vs other unsecured creditors (payables and pension). This is significant change in cash
management policy and may put others at odds with lenders (lender liability or preference claim). Expect the $100mm
will be deployed here. Can argue increasing asset impairment estimate to $230 million from $150 million. Client
Accounts, Unbilled, Goodwill and Deferred Tax Asset in question as are earnings. Solvency is still questionable on fair
values.
Richard J. Reilly
DueDilly, LLC d/b/a Responsible Strategic Management
(917) 882-2880
Page 10 of 29
CH2M CREDIT NOTES
Deferred Tax Asset and Receivables have also been appended to the Asset Efficiency graphic to compliment the
benchmark analysis. Collective review of total revenue, the accrual component, receivables/receivables turn and
deferred tax asset in these charts highlight the accounts and earnings quality concern as the relationship with efficiency
ratio is examined.
December 17, 2015; Texas Authority declares Ch2m in default of loss transportation contract. Zurich NA is also the
surety provider on this contract, the same project I infer is related to $77mm unidentified charge in IP estimated 2014
financials from investor presentation that would seemingly demonstrate second quarter 2015 transportation loss was
contemplated prior to the 2014 10k filing and fourth quarter 2015 shareholder call. Technical insolvency continues.
Richard J. Reilly
DueDilly, LLC d/b/a Responsible Strategic Management
(917) 882-2880
Page 11 of 29
CH2M CREDIT NOTES
January 15, 2016; January 8, 2016 dated opinion re Halcrow’s December 31, 2014 accounts carrying going concern
doubt is filed with UK Gov’s Companies House.
Variance Analysis appearing on page 3 has been refined. The possibility $65 million 2014 cost (implied in the segment
and power carve analysis) were deferred remains in question; a material issue in light of $87.6 million net equity
reported fiscal 2014 and solvency test. $9.6 million allowed restructuring carryover (q1 ’15) plus $11 million and $42.6
million transportation losses (Q1 and Q2 ’15) represent $63.2 or 97.2% of this implied cost identified in management
prepared financials.
Variance
Statutory Consolidated less Power less Segments
2010
Consolidated Revenue
Consolidated Income From JVs
$177.2
2011
$125.5
2012
$583.5
2013
2014
$13.8
$15.0
Common Size
2010
2011
2012
2013
2014
3.3%
2.3%
9.5%
0.2%
0.3%
0.0%
$0.0
($0.1)
$0.5
$0.2
$0.0
0.0%
0.0%
0.0%
0.0%
Consolidated Direct Costs
$121.9
$83.2
$390.1
$8.4
$1.9
2.2%
1.5%
6.3%
0.1%
0.0%
Consolidated Gross Profit
$55.3
$42.2
$193.9
$5.6
$13.1
1.0%
0.8%
3.1%
0.1%
0.2%
Consolidated SG&A
$291.9
$322.1
$464.1
$282.9
$340.6
5.4%
5.8%
7.5%
4.8%
6.3%
Consolidated EBIT
($239.1)
($284.0)
($272.1)
($278.6)
($327.5)
-4.4%
-5.1%
-4.4%
-4.7%
-6.0%
NCI
$0.1
$0.0
$0.0
$0.0
$0.0
0.0%
0.0%
0.0%
0.0%
0.0%
($40.6)
($32.2)
$16.4
$13.2
($64.8)
-0.7%
-0.6%
0.3%
0.2%
-1.2%
EBITDA
($279.8)
($316.2)
($255.7)
($265.4)
($392.3)
-5.2%
-5.7%
-4.2%
-4.5%
-7.2%
Project
$0.0
$0.0
$0.0
$0.0
$204.4
0.0%
0.0%
0.0%
0.0%
3.8%
Impairment
$0.0
$0.0
$0.0
$0.0
$73.3
0.0%
0.0%
0.0%
0.0%
1.4%
Restructuring
$0.0
$0.0
$0.0
$0.0
$70.4
0.0%
0.0%
0.0%
0.0%
1.3%
Air Ball - Losses and Restructuring
Project Impairment rec.
$0.0
$0.0
$0.0
$0.0
($279.8)
($316.2)
($255.7)
($265.4)
($248.6)
As % of Statutory Revenue
-5.2%
-5.7%
-4.2%
-4.5%
-4.6%
As % of Segments Revenue
-5.6%
-6.1%
-5.2%
-5.0%
-4.8%
As % of Supported Revenue
-5.3%
-5.8%
-4.6%
-4.5%
-4.6%
Adj EBITDA - Corp Overhead rr
Richard J. Reilly
$204.4
0.0%
0.0%
0.0%
0.0%
3.8%
-5.2%
-5.7%
-4.2%
-4.5%
-4.6%
0.0%
0.0%
0.0%
0.0%
0.0%
DueDilly, LLC d/b/a Responsible Strategic Management
(917) 882-2880
Page 12 of 29
CH2M CREDIT NOTES
February 26, 2016; Ch2m announces intention to pursue capital structure alternatives.
Credit perspective turns to analysis of cash / non-cash impact on Changes in assets and liabilities.
Company comment absent, the observation is that the $583.5 million 2012 revenue gap represents the approximate
sum of i. $317.2 non-cash increase in long term employee related and other, ii. $22.0 addition to AOCI (both occurring
between Sep and Dec 2011) and iii. $244.2 2011 EBBT (per IP).
A non-cash gap is identified when comparing change in receivables and unbilled accounts reported per balance sheet vs
cash flow (inverted for comparative purposes). Allowance for uncollectable accounts per cash flow also appears. This is
the provision charged to expense; additional components of allowance include accounts written off and “other”.
Similar gap analysis is performed on asset and liabilities accounts affecting cash from Operations. Direct and SG&A as
percentage of gross revenue also appear.
Richard J. Reilly
DueDilly, LLC d/b/a Responsible Strategic Management
(917) 882-2880
Page 13 of 29
CH2M CREDIT NOTES
A representation of change in OACI and LT employee related balance sheet accounts appears atop the non-cash gap in
P&L and cash flow for comparative purposes.
March 24, 2016; Evercore Partners identified as Ch2m’s restructuring advisor.
April 22, 2016; financing and litigation update; April 11 closing of PE investment tranuch 2. Also, Ch2m’s response to LMI
crossclaim resulting from allegations in second amended Steadfast (Zurich) complaint is due before May 17. LMI asserts
contractual and equitable grounds for seeking indemnification relating to liability which may potentially result from
amended complaint citing acts, errors, or omissions, faulty performance and negligence.
May 5, 2016; the subjective nature of C&E financial accounting/reporting and working capital position top the list for
this update.
C&E accounting and the difficulty of restructuring programs in the industry are notorious. And in the case of Ch2m, one
must weigh the subjective aspects of accounting/reporting (with consideration to timing and valuation) of pension
obligations, deferred tax assets, and goodwill, and, as is pointed out in this document, their impact in weighing solvency
and value. Safe harbor provisions, the push for a Delaware Chancery forum for any future dispute, speculative grade
securities issuance and, most recently, renewed D&O indemnification all call for prudence in financial review and
weighing the quality of business judgement and decision making.
Richard J. Reilly
DueDilly, LLC d/b/a Responsible Strategic Management
(917) 882-2880
Page 14 of 29
CH2M CREDIT NOTES
While client accounts days sales have declined, unbilled revenue remains considerably off-side to the tune of approx.
$200 million. Quality remains in question
Payables remains $100 million off-side and billings in excess may reflect weariness of clients to provide credit support.
Offside working capital is shown in perspective with leverage. And the consolidated view previously shown (a trend line
added to the payables series.
Richard J. Reilly
DueDilly, LLC d/b/a Responsible Strategic Management
(917) 882-2880
Page 15 of 29
CH2M CREDIT NOTES
May 12, 2016; On May 6 we learned of an attempted cram-down restructuring of Halcrow pension scheme that was
defeated (individual consent required by UK pensions legislation) in Dec 2015. The ruling represents a £600m deficit
benchmark ($869 at 1.45 GBP:USD) vs 12/32/15 reported Non US underfunded status of $423m. This would suggest
significant balance sheet ramifications across goodwill, liability and equity accounts.
A third attempt to establish meaningful dialogue with independent leadership at the company was extended May 8.
Previous efforts were April 2015 and February 2016; this report was shared with PE and the company at the time of the
latter.
May 14, 2016; Fiduciary background study shared with independent director and member of Audit Committee.
June 1, 2016;
Notwithstanding the financial, materiality, disclosure and executive independence matters raised, the apparent
flight of confidence in management and stakeholder dissent from incumbent policy grows alarmingly. Even
published remarks of outside counsel re Halcrow financial condition and acquisition due diligence can be
construed as being pointed.
As it seemingly escaped him in responding to the above, Independent counsel to Audit Committee was reminded that
materiality was the topic that led a Feb 2016 review this financial analysis when clarification re $800 million revenue gap
identified between 2010-12 was specifically sought. And my own reconciliation of $580 million 2012 gap was offered
when request for clarification was declined. The company/committee have been afforded opportunity to
investigate/rebut evidence of apparent cost loading/earnings management occurring in key interims, elasticity that is
apparent in receivables accounting through the 2014 liquidity crisis and my questioning the growth of goodwill and
deferred tax assets basis through these periods (vs fair value assumptions) and, most recently, background evidence that
highlight unique personal relationships that exist between current and former executives/executive directors and a
nuclear watchdog that display remarkable correlation to key events from significant chapters of ch2m’s 2005 - present
history including executive turn, Panama Canal win and the Halcrow acquisition.
August 1, 2016;
Accounting quality and materiality issues were issues raised with Audit Committee Counsel, Chief Ethics Officer, Internal
Audit and General Counsel in February 2016 review of this credit critique. In particular, the following issues were
specifically raised:


$886 million unsupported revenue Gap in 2010 – 2012 statutory finaicials ($177m in 2010, $126M
2011 and $583M 2012) (see pages 3 and 13).
Asset quality concerns highlighting apparent weakness in accounts receivable, deferred tax asset and
goodwill accounts.
More recently, following end late May 2016 rehashing of these issues with the audit committee defense counsel and
immediately prior to June 6 form 8-k disclosure re additional charges, Ch2m and its audit professional took keen interest
this analysis.
And now, with continued warnings contained in second quarter 2016 financials, it is recommended prudent
stakeholders ought to consider the benefit of pursuing 291 Administration in Delaware Chancery as a means of
enforcing greater oversight/accountability. It is noted that this would likely precipitate a Chapter 11 petition, now more
so just an eventuality in the company’s quest to recapitalize.
Richard J. Reilly
DueDilly, LLC d/b/a Responsible Strategic Management
(917) 882-2880
Page 16 of 29
CH2M CREDIT NOTES
Solvency and accounting concerns
I maintain current and predecessor ch2m management has been papering over difficulty and disappointing financial
performance via merger and cookie jar reserve accounting for some time. And as a result of such shenanigans in having
overstating profitability, the company now is left wrestling solvency both on fair value as well as its ability to meet future
obligations as they come due.
Revenue overstatement aside, several of the balance sheet and liquidity concerns that exist today are Highlighted
below.
Note that available cash on hand at June 24 2016 was lower than in 2014 when the Company experienced technical
default and was forced to seek external financing. Credit availability of $85.2 million is, by the current 3 times
consolidated leverage ratio, supported by just $28.4 million cash flow (where TTM D&A and restructuring fees are ~ 3x
this amount alone). An opaque $105 million increase to Deferred Tax was booked in the most recent calendar quarter.
The company continues to carry, at least, $280 million of goodwill associated with Halcrow, whose 2014 and 2015
accounts carry a going concern qualification. All of the $200 million capital infused in 2015 and $100 million in 2016 has
been expended and the net working capital position is weakening and approaches 2014 crisis levels.
Accounts receivable gap:
$247.1 net use of cash appears on statement of cash
flows (Mar 2012 through Dec 2015).
o$260.2 million use - Receivables and unbilled
o$13.1 million source - Receivables allowance
$189.6 million use is demonstrated in net balance sheet
account increase (client and unbilled accounts).
$57.4 attributed to receivables reserve accounting Mar
2012 through Dec 2015. ($52.2 million Mar 2012 to date)
Note the gap is particularly apparent Mar 2014 – June 15
interim at the height of the liquidity crisis
Deferred tax asset gap: ($105mm prepaid exp was erroneously spread as DTA, initially; represented 3.5% of total assets)
$82.1 net use of cash appears on statement of cash flows (Mar 2016 through
Jun 2016).
$187.4 million is demonstrated in net balance sheet account increase.
$105.4 million gap (Mar 2016 through Jun 2016) warns that clarification of
tax accounting relating to NOL/deferred tax asset and associated valuation
allowance(s) is necessary.
$(10), – $18 and $(12)
variances occue in the 4rh
quarter of 2012 – 2014,
respectively. milion discrepancies between change in balance sheet account and amounts
represented in in the forth quarter since Halcrow acquisition in Dec 2011.
Richard J. Reilly
DueDilly, LLC d/b/a Responsible Strategic Management
(917) 882-2880
Page 17 of 29
CH2M CREDIT NOTES
Account turn
Sharp increases in client accounts, unbilled
revenue and billings in excess DSO
are
worrisome when compared to historic impact
of revenue decline and, together, suggest
deteriorating quality of revenue mix where,
again, client accounts and unbilled each
account for roughly ½ total revenue.
New Working Capital
The NWC position remains inverted and
has worsened in the first 2 quarters of
2016. Underperformance/weakness of
current assets quality is the
highlight
Asset Efficiency: ($105mm prepaid exp was erroneously spread as DTA, initially; represented 3.5% of total assets).
Recent Erosion of total asset efficiency is also
driven largely by remarkable increase in
deferred tax asset.
Continued depression of the ratio is also
attributed to low quality/high carrying value
of goodwill. Note that despite going concern
opinions on Halcrow, Ch2m has booked only
$74 million intangible impairment (Sep 2014)
since booking $376 million goodwill on the
2011 acquisition.
NOL/deferred tax asset, related valuation allowance and goodwill accounts deserve
particular scrutiny.
Richard J. Reilly
DueDilly, LLC d/b/a Responsible Strategic Management
(917) 882-2880
Page 18 of 29
CH2M CREDIT NOTES
August 15, 2016; Today, this report was submitted to UK pension restructuring consultant and former the head of
insolvency and Restructuring with the UK Pension Protection Fund, currently working for with Ch2m and the Halcrow
Pension Trustees toward an effective cram down that seeks to reduce, or effectively expunge, a portion of the
pensioners’ claim through the rarely used and controversial RAA statute that is without transparency. And within an
hour of sending the url to access, barristers/counselors from both Sackers and Hogan Lovells were also reading. Such
urgency: 1) increases confidence in this analysis and 2) presented a good opportunity to also seek clarification from
Hogan re whether it continues to represent JKC Australia LNG as well as Ch2m. Thus, this question was presented to the
C&E and Project Finance partner who was identified as leading the JKC engagement in 2012. If yes, perhaps conflict
counsel will be identified. JKC is the joint venture between JGC Corporation, KBR and Chiyoda Corporation associated
with the US $34 billion Ichthys LNG Project on which Ch2m realized an approx. $300 loss interest.
December 13, 2016; Ch2m is congratulated for granting retirees proxy access and announcing potential financial
restatement in which it is hoped wider acknowledgement of value erosion resulting from the Halcrow pension deficit
and related charges that existed in 2012 – current operating expense and G&A will be addressed. The potential shift of
transportation cost growth from 4th quarter 2015 to earlier periods that was disclosed would effectively increase TTM
“P” for the Sep 2016 price fix where $18mm pretax vs. $10mm tax-adjusted cost shift would represent approximately
$5.00 vs. $2.75 in share price. Comparatively, consider $230mm Halcrow associated goodwill that remains where a $165
Pretax
Assumed Tax Tax Adjusted Assumed 3Q 2016 Rec
- $230mm charge against SE would result
$
43,000
$
$
43,000 Net Income
in $5 to $7 loss in calculated share value
$
52,300 $
13,075 $
39,225 Power losses
(pre-tax basis). Without any such potential $
$
$
Goodwill Impairmwent
adjustment(s), or under the assumption
$
35,000 $
11,550 $
23,450 Restructuring
$ (221,250) $
(46,250) $
(175,000) (Gain) on sale/Restructuring of business
they offset, an approximate $33 formula
$
18,000 $
$
18,000 D&A
rd
share price is estimated. Note the 3 Q
$
10,700 $
$
10,700 Interest & Other
2015 net income to operating income
$
$
$
(21,625) Tax
reconciliation assumes $35m/$23.5m pre$
(62,250) $
(21,625) $
(62,250) 3Q 2016 Operating Income Guidance
tax and post- tax restructuring charge, respectively.
EffectiveDate
PricePer
M(1)
P(2)
SE(3)
CS(4)
Multiplier
Change in P
Price Calc
Board Valuation
ttm Net Income
TTM (Income) loss attributable to noncontrolling interests
TTM less P
Var
Power losses (after Tax)
Goodwill Impairmwent (after tax)
Restructuring (After Tax)
(Gain) on sale/Restructuring of business
D&A (after Tax)
Noted Exclusions from "P" Total
Richard J. Reilly
$
8/3/2015
55.75 $
1.20
110,060
713,723
31,270
7.8
$
8,746
$
55.77
$ 1,743,884.60
-278,744
131,625
-257,179
$
(179)
$
107,000
$
61,000
$
59,000
11/2/2015
67.87 $
1.20
153,652
728,232
31,918
7.8
$
43,592
$
67.87
$ 2,166,414.72
-14,736
40,070
-128,318
$
682
$
43,000
$
$
62,000
2/22/2016
62.89 $
1.20
139,622
686,890
31,702
7.8
$
(14,030)
$
62.89
$ 1,993,751.92
92,117
-11,714
-59,219
$
(219)
$
(1,000)
$
$
40,000
5/2/2016
60.91 $
1.20
131,724
684,531
31,482
7.8
$
(7,898)
$
60.91
$ 1,917,467.64
88,336
-6,852
-50,240
$
760
$
(2,000)
8/1/2016
52.23
1.20
110,648
693,619
33,111
7.8
$
(21,076)
$
52.23
$ 1,729,284.28
-81,488
84,652
-107,484
$
(484)
$
63,000
$
35,000 $
$
$
30,000 $
257,000 $
24,000 $
129,000 $
20,000 $
59,000 $
18,000 $
51,000 $
$
67.12%
87,900 $
66.60%
93,100 $
66.01%
60,600 $
68.63%
51,000 $
DueDilly, LLC d/b/a Responsible Strategic Management
11/16/2016
$
$
1.20
54,650
736,619
33,111
7.8
(55,998) $
37.70
$
11/16/2016
1.20
31,200
736,619
33,111
7.8
(79,448) $
31.07 $
1.20
900
736,619
33,111
7.8
(109,748)
22.50
$ 1,248,143.00 $ 1,028,651.00 $ 745,043.00
-88,759
-88,759
-88,759
146,012
146,012
146,012
2,603
26,053
56,353
$
3 $
3 $
3
$
107,500 $
107,500 $
53,750
28,000 $
$
16,000 $
107,000 $
64.97%
43,100
11/16/2016
46,900
(175,000)
18,000
(2,600)
100%
TTM Power
$70M
TTM Restrng
Adjustment
$
$
$
$
23,450
(175,000)
18,000
(26,050)
100%
TTM Power
$35M
TTM Restrng
Adjustment
$
$
$
$
46,900
(175,000)
18,000
(56,350)
50%
TTM Power
$70M
TTM Restrng
Adjustment
(917) 882-2880
Page 19 of 29
CH2M CREDIT NOTES
$33 BOD share price fix estimate reflects earnings quality concern and provides some consideration for sensitivity
surrounding adjustment for restructuring and project loss in so much as their recurring may, perhaps, be testimony to
core margin weakness resulting from how projects were bid and predisposition to rely on claims/change order revenue
on day 2 of the project lifecycle. Remarkable weakness in project performance across the broad portfolio confirmed in
Ch2m’s 2016 project management summit
Pension Position
2015
Adjusted 2015
also supports this contention and thus the
Non US
Total
US
Non US
Total
7.6x industry multiple approach has also
Plan Obligations
$1,174.6 $1,423.5
$248.9
$953.4 $1,202.3
been revisited. $383mm buy-out, $263 onPlan Assets
$751.9
$939.2
$187.3
$751.9
$939.2
going deficit and $160mm competitive payUnderfunded Status ($422.7) ($484.4)
($61.6) ($201.5) ($263.1)
down adjustments are derived from 2015
Total Assetts
2,861.3
2,861.3
pension disclosure adjusted for Halcrow
-16.9%
-9.2%
pension restructuring. A $250 million
deleveraging new equity component is also assumed. $205 - $220 Cash flow is consistent with earlier analysis as well as
average 2 and 3 year rolling 4 quarter TTM adjusted EBITDA. Core margin and earnings quality concerns warn of
downside or extended term to work through existing core weakness.
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
160.0
175.0
190.0
205.0
220.0
235.0
250.0
Sep 2016 Competitive Pay-down + $250 New Equity (on NT guidance)
6.7
7
7.3
7.6
7.9
8.2
8.5
$ 661.9 $ 709.9 $ 757.9 $ 805.9 $ 853.9 $ 901.9 $ 949.9
$ 762.4 $ 814.9 $ 867.4 $ 919.9 $ 972.4 $ 1,024.9 $ 1,077.4
$ 862.9 $ 919.9 $ 976.9 $ 1,033.9 $ 1,090.9 $ 1,147.9 $ 1,204.9
$ 963.4 $ 1,024.9 $ 1,086.4 $ 1,147.9 $ 1,209.4 $ 1,270.9 $ 1,332.4
$ 1,063.9 $ 1,129.9 $ 1,195.9 $ 1,261.9 $ 1,327.9 $ 1,393.9 $ 1,459.9
$ 1,164.4 $ 1,234.9 $ 1,305.4 $ 1,375.9 $ 1,446.4 $ 1,516.9 $ 1,587.4
$ 1,264.9 $ 1,339.9 $ 1,414.9 $ 1,489.9 $ 1,564.9 $ 1,639.9 $ 1,714.9
160.0
175.0
190.0
205.0
220.0
235.0
250.0
Sep 2016 On-going Deficit adj + $250 New Equity (on NT guidance)
6.7
7
7.3
7.6
7.9
8.2
8.5
$ 558.9 $ 606.9 $ 654.9 $ 702.9 $ 750.9 $ 798.9 $ 846.9
$ 659.4 $ 711.9 $ 764.4 $ 816.9 $ 869.4 $ 921.9 $ 974.4
$ 759.9 $ 816.9 $ 873.9 $ 930.9 $ 987.9 $ 1,044.9 $ 1,101.9
$ 860.4 $ 921.9 $ 983.4 $ 1,044.9 $ 1,106.4 $ 1,167.9 $ 1,229.4
$ 960.9 $ 1,026.9 $ 1,092.9 $ 1,158.9 $ 1,224.9 $ 1,290.9 $ 1,356.9
$ 1,061.4 $ 1,131.9 $ 1,202.4 $ 1,272.9 $ 1,343.4 $ 1,413.9 $ 1,484.4
$ 1,161.9 $ 1,236.9 $ 1,311.9 $ 1,386.9 $ 1,461.9 $ 1,536.9 $ 1,611.9
160.0
175.0
190.0
205.0
220.0
235.0
250.0
Sep 2016 Buyout Adjusted + $250 New Equity (on NT guidance)
6.7
7
7.3
7.6
7.9
8.2
$ 438.7 $ 486.7 $ 534.7 $ 582.7 $ 630.7 $ 678.7
$ 539.2 $ 591.7 $ 644.2 $ 696.7 $ 749.2 $ 801.7
$ 639.7 $ 696.7 $ 753.7 $ 810.7 $ 867.7 $ 924.7
$ 740.2 $ 801.7 $ 863.2 $ 924.7 $ 986.2 $ 1,047.7
$ 840.7 $ 906.7 $ 972.7 $ 1,038.7 $ 1,104.7 $ 1,170.7
$ 941.2 $ 1,011.7 $ 1,082.2 $ 1,152.7 $ 1,223.2 $ 1,293.7
$ 1,041.7 $ 1,116.7 $ 1,191.7 $ 1,266.7 $ 1,341.7 $ 1,416.7
8.5
$ 726.7
$ 854.2
$ 981.7
$ 1,109.2
$ 1,236.7
$ 1,364.2
$ 1,491.7
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
160.0
175.0
190.0
205.0
220.0
235.0
250.0
Sep 2016 Competitive Pay-down + $250 New Equity (on NT guidance)
6.7
7
7.3
7.6
7.9
8.2
8.5
$ 21.2 $ 22.7 $ 24.2 $ 25.8 $ 27.3 $ 28.8 $ 30.4
$ 24.4 $ 26.1 $ 27.7 $ 29.4 $ 31.1 $ 32.8 $ 34.5
$ 27.6 $ 29.4 $ 31.2 $ 33.1 $ 34.9 $ 36.7 $ 38.5
$ 30.8 $ 32.8 $ 34.7 $ 36.7 $ 38.7 $ 40.6 $ 42.6
$ 34.0 $ 36.1 $ 38.2 $ 40.4 $ 42.5 $ 44.6 $ 46.7
$ 37.2 $ 39.5 $ 41.7 $ 44.0 $ 46.3 $ 48.5 $ 50.8
$ 40.5 $ 42.8 $ 45.2 $ 47.6 $ 50.0 $ 52.4 $ 54.8
160.0
175.0
190.0
205.0
220.0
235.0
250.0
Sep 2016 On-going Deficit adj + $250 New Equity (on NT guidance)
6.7
7
7.3
7.6
7.9
8.2
$ 17.9 $ 19.4 $ 20.9 $ 22.5 $ 24.0 $ 25.5 $
$ 21.1 $ 22.8 $ 24.4 $ 26.1 $ 27.8 $ 29.5 $
$ 24.3 $ 26.1 $ 27.9 $ 29.8 $ 31.6 $ 33.4 $
$ 27.5 $ 29.5 $ 31.4 $ 33.4 $ 35.4 $ 37.3 $
$ 30.7 $ 32.8 $ 35.0 $ 37.1 $ 39.2 $ 41.3 $
$ 33.9 $ 36.2 $ 38.5 $ 40.7 $ 43.0 $ 45.2 $
$ 37.2 $ 39.6 $ 42.0 $ 44.4 $ 46.8 $ 49.1 $
8.5
27.1
31.2
35.2
39.3
43.4
47.5
51.5
160.0
175.0
190.0
205.0
220.0
235.0
250.0
Sep 2016 Buyout Adjusted + $250 New Equity (on NT guidance)
6.7
7
7.3
7.6
7.9
8.2
$ 14.0 $ 15.6 $ 17.1 $ 18.6 $ 20.2 $ 21.7 $
$ 17.2 $ 18.9 $ 20.6 $ 22.3 $ 24.0 $ 25.6 $
$ 20.5 $ 22.3 $ 24.1 $ 25.9 $ 27.7 $ 29.6 $
$ 23.7 $ 25.6 $ 27.6 $ 29.6 $ 31.5 $ 33.5 $
$ 26.9 $ 29.0 $ 31.1 $ 33.2 $ 35.3 $ 37.4 $
$ 30.1 $ 32.4 $ 34.6 $ 36.9 $ 39.1 $ 41.4 $
$ 33.3 $ 35.7 $ 38.1 $ 40.5 $ 42.9 $ 45.3 $
8.5
23.2
27.3
31.4
35.5
39.5
43.6
47.7
Discussion points shared recently include; The suggestion that a leadership committee may serve as a mechanism to
immediately deliver a path of confidence as well as provide a forum that can aid the search and selection process.
Concerns re earnings quality remain (level of unbilled revenue & client receivables, accounting for change claims and
insurance proceeds (sustainable operating revenue vs. unsustainable gains) and weakness in goodwill & deferred taxes
accounts remain are the key issues). The hope that Ch2m will soon mend fences shared with the surety community. And
anticipation that Apollo will seek a purchase price reset under contract indemnity provisions in connection with
restatement and continuing losses (presumably historical stock price and trades would also require adjustment).
Richard J. Reilly
DueDilly, LLC d/b/a Responsible Strategic Management
(917) 882-2880
Page 20 of 29
CH2M CREDIT NOTES
Most recently it was suggested that fiduciaries may find a strategic path to enhance shareholder liquidity/equity
participation and provide choice in the identification of strategic alternatives available to the company through a
courtship capital raising contest.
Proposed mechanism:





issue transferable/assignable equity or straight pfd subscription rights whereby shareholders may elect to
deliver rights to any party making an expression of goodwill and interest that can accumulate >5% pledge (or
another suitable threshold).
rights program to require BOD to launch succession plan, installing disinterested interim leadership (committee
suggested), and appoint an independent professional plan trustee to act on behalf beneficiaries who neglect to
exercise/reserve rights under such an offering.
uncommitted rights program, to not force cv pfd conversion, that allows up to $300 - $550mm to be written
(~27% and ~47% ownership interest having representative board participation), with proceeds over $300 or
$350mm available to redeem cv pfd or repurchase shares. The first $250 - $300mm shall be utilized to
deleverage and satisfy bank and trade creditors.
new 5% holders may participate in quarterly trade but agree not to trigger 382 change of control threshold
after some prescribed interim time period 5% holder(s) may tender for control of the Ch2m brand without
defense or penalty (offering cash and/or stock election).
Benefits of proposed:







avoids expensive court process and/or equitable challenge
provides strategic interests who court Ch2m opportunity to actively develop competitive advantage and
efficient acquisition plan(s)
the BOD embarks on path toward earning blanket release
bank and unsecured trade creditors would benefit
Ch2m shareholders would be provided opportunity to participate in the process of identifying and choosing the
future ownership and direction for the enterprise.
stimulates a competitive environment that focuses on strategic benefit and unlocking intrinsic value
is consistent with transactional rights/alternatives under Apollo agreement
December 26, 2016; Reflecting on the possibilities of restatement and Apollo seeking price adjustment brings us to the
question of whether Apollo might have benefitted from discussions with or services provided by former Ch2m
executives/directors. Antione Munfakh acknowledged that Apollo held some level of dialogue with Robert Card during
his tenure with SNC-Lavalin, and it has been suggested that Apollo might also have retained the services of Lucki
advisors in connection with their cv Pfd investment. The existence of such relationships may, in fact, be significant
insomuch as associated communications and deliverables might become discoverable were a dispute between Apollo
and the company and/or its stakeholders to arise. Also, there is reason to believe that the board has sought the services
of Russell Reynolds, whose previous cooperation with the lead director is noted. Services offering include; leadership
assessment, board effectiveness and executive/board search & succession.
Richard J. Reilly
DueDilly, LLC d/b/a Responsible Strategic Management
(917) 882-2880
Page 21 of 29
CH2M CREDIT NOTES
January 18, 2017 (AM);
If the September 10-Q is not available in connection with or without specific guidance with respect timing if its filing
provided on the scheduled January 20 SEC filing update to shareholders the probability material error or “Big R”
restatement is increased. In this circumstance it is noteworthy that shareholders would be presented the opportunity to
seek greater control in governance and presenting their own proposals for solicitation in so much as all Delaware
companies, under Section 211 of the Delaware General Corporation Law, are requires to hold an annual meeting
independent of whether it they are able to distribute current financials to shareholders, as management must prior to
any solicitation under 17 CFR 240.14a-3. Professional investors would not hesitate to capitalize on such an opportunity,
neither should ch2 shareholders.
The accounting, actuarial and ratings communities, including organizations such National Association of Corporate
Directors and the Financial Reporting Council, generally agree that, particularly in a time of crisis, when the chairman
and CEO are one and the same person, the Lead Director becomes an important part of the governance structure where
their responsibility would include;
 calling, setting the agenda for and chairing executive sessions of independent directors
 acting as an intermediary between the independent directors and the chairman/ CEO in discussing issues
 ensuring the appropriate and timely flow of information between company management and the independent
directors
 if necessary, intervening in order to maintain board and company stability and/or act a spokesperson or interim
CEO if management is involved in the problem.
 ensure the process of orderly succession
The independent members of this board must acknowledge evidence of chronic management disconnect and growing
call for intervention. The list includes;
 broad portfolio weakness; 2016 project management summit that closed with only general conjecture outlining
about $100-$150 million in core portfolio improvement.
 delayed realization and insufficient response to loss projects; lack of action/accountability across leadership.
 Vague and unsupported reporting of recovery claims/change orders on loss projects in shareholder calls which
are unsupported in financials and disputed by clients (and others).
 July 21 CTMRA letter to Ch2m that communicates gross inept
 inability to formulate and stick to business structure/plan that has rendered management incredible; constant
business/leadership reorg convolutes segmented financial disclosures and calls for scrutiny
 Demonstration of incompetence or contempt toward independent directors and/or employees and
shareholders in failing to acknowledge material accounting and financial issues associated with Halcrow
purchase (pension deficit, hidden cost, going concern doubt and goodwill impairment) after having sat on its
board.
 premature and unsupported statements re 2015 return to profitability following 2014 restructuring
 further inaccurate guidance re early January filing of September quarterly and a January trade date
January 18, 2017 (PM - post filing);
The Big “R” restatement is not a surprise nor is the new reference to “potential inquiry by the United States Securities
and Exchange Commission with respect to the proposed restatements or CH2M’s accounting practices” in the
Cautionary Note Regarding Forward Looking Statements. Foley and Larder’s recent interest in this report is suspected to
be associated with the latter.
Richard J. Reilly
DueDilly, LLC d/b/a Responsible Strategic Management
(917) 882-2880
Page 22 of 29
CH2M CREDIT NOTES
January 24, 2017; Observations re Q3 2016 and related filings
In addition to a $46mm tax benefit resulting from pension restructuring, there is a $32.4mm tax benefit in Q3 2016,
which, through the price formula, represents $315 million or $9.30 per share. If this benefit were driven by losses, how
much might be attributed to power and should the same be excluded from “P” but included in SE as are power losses?
(TTM Transport and Power charges, net of transport restatement above, amount to $296 million and are split 50/50).
Also, a $15mm gain/$31mm goodwill resulting from the acquiring of a controlling interest in one joint venture for
$2.1mm (net) are based on fair value re-measurement of the original equity method. Through the price formula, this
would represent $140mm or $4.40 per share. Together this amounts to $47.4mm of “P” / $13.61 per share price that
should be considered when weighing the quality of core operations/project portfolio performance. This highlights the
significance of accounting quality for shareholders and underscores why, due to the latitude that exists in establishing
fair value and deferred tax asset value, shareholders might seek enhanced disclosure in these areas.
In reconciling the Q3 ’16 the share price an $8mm accounting discrepancy in 2015 between 10-K/A restated and Q3
2015 financials is identified. The net variance in share price is attributed to a combination of tax benefit and gains
outlined above.
EffectiveDate
PricePer
11/16/2016
M(1)
P(2)
SE(3)
CS(4)
Multiplier
Change in P
Price Calc
Board Valuation
ttm Net Income
TTM (Income) loss attributable to noncontrolling interests
TTM less P
Var
Power losses (after Tax)
Goodwill Impairmwent (after tax)
Restructuring (After Tax)
(Gain) on sale/Restructuring of business
D&A (after Tax)
Noted Exclusions from "P" Total
$
1.20
54,650
736,619
33,111
7.8
(55,998) $
$
37.70 $
TTM (Income) loss attributable to noncontrolling interests
Reconciliation $37.1 - $46.83
P
SE
Net P
1.20
88,288
701,279
32,622
7.8
(22,360)
54,650
736,619
-27,067
-8,270
TTM Power
Remark
33,638
$15.9 actual vs $43 Net Income Guidance
Accounting Discrepancy; Cash Flows 10-KA vs 10-Q
-32,438 Non Pension Tax Benefit
-1,200 Other (gain?)
46.83
$ 1,248,143.00 $ 1,527,654.68
-88,759
-151,114
-62,355
146,012
143,294
-2,718
2,603
-96,108
$
3 $
(108) $
111
$
107,500 $
102,000 $ (5,500)
$
$
46,900 $
25,000 $ (21,900)
$
(175,000) $
(46,000) $ 129,000
$
18,000 $
15,000 $ (3,000)
$
(2,600) $
96,000
100%
ttm Net Income
11/16/2016
Restated
Actual
$
Largely attributed to Mopac cost growth ($66 vs $25)
Non-controling var
TTM Power Losses var
Restructuring Var
Pension Restructure - opposite approaches
Non-cash var
88,288 $ 701,279 $
-
3
-
$70M
TTM Restrng
Adjustment
Unbilled revenue remains at peak levels and has overtaken client accounts which has returned to an acceptable activity
level. Net working capital position improved as a result but the pattern suggests the influence of bank intervention.
Asset Efficiency highlights continuing weakness in goodwill and deferred tax accounts.
Re the Third Amendment to Credit Agreement; the collateral grab is worrisome and indicative of bank sentiment.
Richard J. Reilly
DueDilly, LLC d/b/a Responsible Strategic Management
(917) 882-2880
Page 23 of 29
CH2M CREDIT NOTES
48
Offside Working Capital; Unbilled Revenue
300000
200000
38
100000
28
0
18
-100000
Sum of Unbilled revenue Days Revenue
Sum of NWC Fix Bar
Sum of NWC Unbilled revenue Days Revenue
Sum of NWC
Unbilled revenue Days Revenue (Var)
Offside Working Capital; Payables
45
150
40
50
100
Net Working Capital
$300
35
50
-50
30
25
-150
Sum of Payables days outstanding (on direct cost)
Sum of NWC Fix Bar
Sum of NWC Payables days outstanding (on direct cost)
Sum of NWC
Payables days outstanding (on direct cost) (Var)
$(200)
Sum of Debt (Current + LT)
Sum of NWC Fix Bar
Sum of NWC Inversion Assets Less Liab
Sum of NWC Working Capital Inversuion Liability side
Revenue, Receivables and Debt
1,800
Halcrow
Acquisi tion
1,600
1,400
Austral ian
Power
Announced
Halcrow
Defended
Bank
Consultant
Benchmark
Most
Recent
Quarter
1,200
0
60.0
50.0
40.0
1,000
30.0
800
600
20.0
400
10.0
200
0
0.0
Gross Revenue
Client accounts
Unbilled revenue
Billin gs in excess of revenue
Other
Debt (Current + LTD)
Payables days outstanding (on direct cost)
Client accounts Days Revenue
Unbilled revenue Days Revenue
Other Days Revenue
Billin gs in Excess days Revenue
Deferred Income Tax Days revenue
3
Asset Efficency
2.5
1
0.9
0.8
0.7
2
0.6
1.5
0.5
0.4
1
0.3
0.2
0.5
0.1
0
0
Goodwill
Sum of CS | Deferred Tax (Current + LT)
Sales/Total Assets
Client accounts
Unbilled revenue
TTM Sales/Total Assets
Richard J. Reilly
DueDilly, LLC d/b/a Responsible Strategic Management
(917) 882-2880
Page 24 of 29
CH2M CREDIT NOTES
February 7, 2017; A quick study of comparative share value is worthwhile in light of merger speculation. Below, Atkins’
recent share price £14.68 is evaluated on its own TTM financials under the Ch2 price formula with an “M” factor of 1.21
identified (includes a £18.5 adjustment to “P” relating to 2017 goodwill impairment, less gains of £1.5 on pension
curtailment and £6.4 on disposal of property). Utilizing the same 1.21 in the most recent Ch2m calculation, excluding
both the $15m gain on fair value adjustment and $16.2 tax benefit attributed to Power losses from “P”, a $37.99 share
price results. A 0.2 reduction in “M”, 16.7% of 1.2 board discretionary and comparative factors, lends consideration to
Atkins’ stronger performance/condition; in this context, a $35.25 share price is determined. And in light of questions
surrounding Goodwill, Deferred Tax and Pension position the $33 estimate holds. Talk is not a surprise; a deal is
needed.
Atkins
Feb-17
M(1)
P(2)
SE(3)
CS(4)
Multiplier
Price Calc
£
£
£
Ch2m
Sep-16
1.21
135,600
185,600
99,687
7.8
14.68
1.20
88,288
701,279
32,622
7.8
$
Equitable
Adj
Like
Performance Performance
Comparison
Discount
Adjusted
0.01
(31,200)
46.83
1.21
57,088
701,279
32,622
7.8
$
37.99
-0.20
1.01
57,088
701,279
32,622
7.8
$
35.26
Market
February 20, 2017; Return On Shareholder Equity
ROE = net profit margin * asset turnover * equity multiplier
Declining Asset Efficency
Increasing leverage
Richard J. Reilly
DueDilly, LLC d/b/a Responsible Strategic Management
(917) 882-2880
Page 25 of 29
CH2M CREDIT NOTES
ROE = tax burden * interest burden * operating margin * asset efficiency * leverage ratio * return on assets
Flat EBIT/Sales highlights historic low margins
Tax burden (Net income/Pretax or EBT) highlights
importance of exploring tax considerations.
Mar ’13 Tax and operating expense anomaly is
consistent with Halcrow pension cost
concealment discussed earlier. $50mm is again
calculated;
EBT/sales drop & recovery of 0.23 (0.034 to
0.010 to 0.032) across Q1 and Q2 ’13 on average
revenue of $1.48bn is $34.5mm
ROE = pretax margin * asset efficiency * return on assets * (1-tax rate)
An additional $15.1 results from reduced
effective tax rate over same period.
Tax Gap (EBT/Sales vs. Net Income/Sales)
Deferred Tax Asset declined from 10.3% to 7.3%
of total assets on the Halcrow acquisition and
again from 7.9% to 5.8% between Jun ’13 and
June ’14. It has since risen to 14.6% of total
assets.
The shift in the asset base where current assets
move further from cash (growth of unbilled) and
toward the long term (deferred tax and
goodwill) is alarming.
Richard J. Reilly
DueDilly, LLC d/b/a Responsible Strategic Management
(917) 882-2880
Page 26 of 29
CH2M CREDIT NOTES
February 25, 2017; Comparison of July 2015 and Feb 2017 Forms 13-D shows Apollo’s holding has increased by 306,871
shares despite the subscription agreement providing that, prior to the 5th anniversary, the cumulative dividend is not to
be paid in cash or kind but added to the liquidation preference. It is noteworthy to mention that including an additional
306,871 shares in the second closing (4/11/16) would reduce the price of this traunch from $62.22 to $52.24, the August
1, 2016 calculated share price (whereas the May 2, 2016 share price effective at the time was $60.91). A $22.15 million
cum dividend to date is calculated which by 306,871 shares is $72.16 per. The origin of the additional shares is not clear.
Perhaps Apollo has participated in the quarterly trade or, alternatively, might this be a purchase price adjustment
associated with the 2016 restatement?
Investment
Apollo Shares Held
Investment/shares held
% ownership
share float
$
$
Quarterly trade Participation
7/27/2015
2/24/2017
Total Investment
200,000,000 $
300,000,000 $ 300,000,000 $
3,214,400.0
5,128,471.0
4,821,600.0
62.22 $
58.50 $
62.22 $
10.5%
17.0%
16.0%
30,613,333
30,167,476
30,167,476
Form 13-D
Reported
Investment
Apollo Shares Held
Investment/shares held
% ownership
share float
5/25/2015 Second Closing
7/27/2015
2/24/2017
$
200,000,000 $
300,000,000 $
3,214,400
5,128,471
$
62.22 $
58.50 $
10.5%
17.0%
30,613,333
30,167,476
Form 13-D
Reported
5%
start
end
days 360
Yrs
Investment
Annual compounding
Richard J. Reilly
Form 13-D
Reported
Form 13-D
Reported
Var
14,370,769
306,871.0
46.83
1.0%
30,167,476
Potential
Quarterly Trade
Participation
Variance
100,000,000
1,914,071
52.24
Aug 1/2015
Share Price?
Compounded Cum Dividend
Traunch 1
Traunch 2
Cum Dividend
5/27/2015
4/11/2016
2/26/2017
2/26/2017
629
315
1.75
0.88
$
200,000,000 $
100,000,000
$
17,845,833 $
4,343,750 $
22,189,583
DueDilly, LLC d/b/a Responsible Strategic Management
(917) 882-2880
Page 27 of 29
CH2M CREDIT NOTES
March 1, 2017;
This critique lead with the premise that a strategic business combination with one or more existing E&C concerns
presented the strongest prospect for Ch2’s future and recovery. And April 2015 Playbook highlighted the issue of
valuation presenting a fiduciary dilemma for its BOD; while it may serve shareholder desires, an inflated share price
limits strategic alternatives available as common shares are not a desirable currency and access and capital is impaired,
carrying the additional cost of priority. So one has to weigh, at what price might share liquidity, access to capital and
available strategic alternatives generate superior accretive growth opportunity? Also, what is the value of choice and
liquidity for former and current employee shareholders?
Speculation re Atkins has been noted previously, but an alternative prospect would be the possibility CIMIC/Hochtief
pushed the Ichthys contract termination to gain leverage and put themselves, perhaps together with SNC-Lavalin and/or
others, into a position to negotiate a global Ichthys settlement and target Ch2m in that process.
A deal is needed… And Moelis & Co (London) is most recent to join the list of professionals who find interested in this
critique.
As the importance of tax considerations grow evident, a closer look is deserved. Tax Gap represents cash paid for
income taxes less the P&L provision and Deferred Tax Asset Gap represents the change in deferred tax asset on balance
vs statement of cash flows. The cumulative Tax Gap since either Jan 2010 or Jun 14 bank intervention has grown to
$175mm (cum cash paid exceeds provision) and the Deferred Tax Asset Gap reveals net use in Dec 10, Dec 13 and Dec
15 and net source in Dec 12, Dec 14 and Sep 16. The Cum Gap area represents net use above and net source below the
horizontal axis, a $20mm swing.
A core DTA component that is significant in size, less volatile and on a growth trajectory is identified by netting the Cum
Tax Gap from the Deferred Tax Asset and it is suggested
an accounting for this core is warranted as it consists of
temporary differences that grow in age. In Nov 2016 a
conservative $70mm at risk Deferred Tax Asset
Component was identified and communicated; the above
affirms the same identifying weakness consisting of $50 $75 million core and $20mm swing.
Richard J. Reilly
DueDilly, LLC d/b/a Responsible Strategic Management
(917) 882-2880
Page 28 of 29
Richard J. Reilly
2014
1,820
1,783
(37.0)
8,194.4
4,970.6
3,223.8
-0.5%
2014
1,692
1,292
(400.8)
8,453.6
3,948.0
4,505.6
-4.7%
2014
1,505
Benefi t obl iga tion
Pl a n a s sets
973
Underfunded s ta tus
(532.2)
2,941.3
TA/Gros s Rev/Sal es:Ass ets
2,853.7
Tota l Li a bi l iti es
87.6
SE
Defi ci t:TA/As s et Shock/Shock:TA -18.1%
>>
Competitive Pension Paydown
(425.0)
Paydown
(107.2)
Deficit after Paydown
-3.6%
Deficit/Total Assets
(595.1)
-3.3%
Term
1,862
1,292
(570.0)
1.50
3,935.6
-1.5%
Term
2,002
1,783
(219.0)
2.63
3,004.8
-2.2%
(97.3)
JEC
-10%
1,692
1,162
(529.9)
12,695.2
(129.2)
FLR
-10%
1,820
1,605
(215.3)
21,531.6
(178.3)
(350.0)
(182.2)
-6.2%
Term
1,656
973
(682.7)
1.84
Ch2
-10%
1,505
876
(629.5)
5,413.5
1,859
1,441
(418.6)
12,494.9
6,387.9
6,107.0
-3.4%
2014
2014
167
149
(17.8)
4,041.4
2,439.9
1,601.5
-0.4%
2014
179
124
(55.2)
3,773.4
2,132.9
1,640.5
-1.5%
2014
234
225
(9.0)
7,642.2
5,110.4
2,531.8
-0.1%
5,502.5
5,963.0
(144.1)
-1.2%
2,045
1,441
(604.6)
1.21
Term
1,566.9
-0.4%
Term
184
149
(34.6)
0.61
1,701.3
-0.3%
Term
197
124
(73.1)
0.59
2,499.5
-0.3%
Term
257
225
(32.4)
0.82
1,859
1,297
(562.7)
15,153.7
-10%
JEC & UGL
(14.9)
UGL
-10%
167
134
(32.8)
2,458.5
(12.4)
WSP
-10%
179
111
(67.6)
2,215.6
(22.5)
SNC
-10%
234
202
(31.5)
6,289.2
2014
3,730
2,691
(1,039.2)
7,140.3
3,264.0
1,022.6
-14.6%
2014
2,225
1,718
(507.0)
4,199.0
3,264.0
935.0
-12.1%
2014
894
672
(221.3)
6,123.4
3,850.9
2,272.5
-3.6%
(269.1)
Ch2 & KBR
-10%
3,730
2,422
(1,308.3)
11,779.5
(171.8)
KBR
-10%
2,225
1,546
(678.8)
6,366.0
(67.2)
AECOM
-10%
894
605
(288.5)
15,804.3
(103.9)
-3.8%
Term
4,103
2,691
(1,412.2)
1.65
(50.7)
-4.1%
Term
2,448
1,718
(729.5)
1.52
(22.1)
-1.1%
Term
983
672
(310.7)
2.58
2014
3,325
2,756
(569.2)
11,135.7
7,824.3
3,311.4
-5.1%
2014
3,197
2,264
(933.0)
11,394.9
6,801.7
4,593.2
-8.2%
(275.6)
Ch2 & FLR
-10%
3,325
2,481
(844.8)
26,945.1
(226.4)
Ch2 & JEC
-10%
3,197
2,038
(1,159.4)
18,108.7
(119.8)
2,409.7
-2.5%
Term
3,658
2,756
(901.7)
2.42
3,340.4
-2.0%
Term
3,517
2,264
(1,252.7)
1.59
-1.1%
1,904.4
Ch2 & SNC
-10%
Term
1,739
1,913
1,078
1,198
(661.0) (715.1)
11,702.6 1.11
2014
1,672
1,122
(550.0)
6,982.7
5,293.6
1,689.1
-7.9%
2014
1,684
1,097
(587.4)
6,714.7
4,986.6
1,728.0
-8.7%
2014
2,399
1,645
(753.5)
9,065
6,704.6
2,360
-8.3%
Ch2 (discount)/premium on pension alone
Vs
SNC
(650.3)
=
(682.7)
Vs AECOM
(372.0)
=
(682.7)
Vs
WSP
(609.6)
=
(682.7)
Vs
KBR
46.8
=
(682.7)
Vs
JEC
(112.7)
=
(682.7)
Vs
FLR
(463.7)
=
(682.7)
Vs
UGL
(648.1)
=
(682.7)
>>
>>
>>
>>
>>
2014
1,739
1,198
(541.2)
10,583.5
7,964.1
2,619.4
-5.1%
1,366.7
-1.8%
less
less
less
less
less
less
less
(112.2)
Ch2 & UGL
-10%
1,672
1,010
(662.3)
7,872.0
(109.7)
(32.4)
(310.7)
(73.1)
(729.5)
(570.0)
(219.0)
(34.6)
971.8
-1.6%
Term
1,839
1,122
(717.3)
1.13
972.2
-1.6%
Ch2 & WSP
-10%
Term
1,684
1,852
987
1,097
(697.1)
(755.8)
7,629.0
1.14
(164.5)
Ch2 & AECOM
-10%
Term
2,399
2,638
1,481
1,645
(918.0)
(993.4)
21,217.8 2.34
CH2M CREDIT NOTES
DueDilly, LLC d/b/a Responsible Strategic Management
(917) 882-2880
Page 29 of 29